Michael Walwrath Transcript
Clint Betts
That's awesome. You started a production company where you focus on documentaries. What inspired you to do that and what have you learned from that? Maybe tell us a couple of the films that you've put out.
Michael Walwrath
Sure, yeah. Actually, this is one where I had even less to do with this than Moat. The company, Atlas Films, was started. One of my friends from growing up, an incredible person named Stephanie Soechtig. We were neighbors in the city right after college, and so we used to buy the cheapest bottle of wine we could. She'd gone to NYU and she worked for Barbara Walters and Bill O'Reilly and did a lot of TV production. We would sit around and drink really cheap wine and talk about how someday we'd make movies that mattered.
After the Right Media transaction, as we were going through and figuring out what was next, she and I started talking along with my wife, Michelle, about some of the issues that you could tackle with a long form documentary film. Stephanie’s sweet spot is going deep, deep, deep onto an issue and really understanding the complexity of it. We made a number of films.
The one that Michelle and I were the most actively involved in was a film called Fed Up, which we made, I believe, in 2014. We released it and it was just, at the time, a really deep exploration of what was going on with our food system and particularly the amount of added sugar and processed food and the links between that and metabolic disease and disorder and things like that. But we were pretty active in that one.
Really, it's another one where it looks a little better on the Wikipedia profile than it probably is. You get these fancy titles like executive producer, but what you really do is fund some projects and provide a little bit of input here and there and then you get to show up for all the fun stuff.
Clint Betts
Yeah, I remember Fed Up. That was a big documentary that was incredible.
Michael Walwrath
Yeah, really fun, amazing. I didn't know anything about how the whole world worked and I got to be part of the negotiation when we sold that, which is a whole another story that... I actually hung up on Harvey Weinstein.
Clint Betts
It's the funniest thing ever.
Michael Walwrath
Yeah, his company bought that film and he — without getting into a lot of detail — was a real jerk in the negotiation process. There was a point where we were on the phone with him and he was doing things that really were outside the lines. I just hung up on him and it actually completely changed the tone of the negotiations,because I think they figured out we weren't going to be bullied into doing something dumb.
Obviously, I didn't know him at all and I didn't know any of the stories or anything like that. It was a very interesting introduction to the culture of Hollywood.
Clint Betts
That should be the beginning of your Wikipedia page: you hung up on Harvey Weinstein. That is freaking cool. That's unbelievable.
Michael Walwrath
It was one of those moments where it was almost like the out of body thing and it was probably exactly the right thing to do. If I weren't so honest, I would tell you that it was all calculated and it was like we're going to show these guys that we don't care and that, if they want to do business with us, they're not going to treat us this way. But it was one of those moments where it was so outside the pale of what was happening and I just was like, "We're not doing this," and hit the red button on the phone. I was with Stephanie and I looked at her and I was like, "I think this is going to be okay," but I wasn't actually totally sure it was going to be okay.
Clint Betts
That's incredible. At what point do you get involved in Yext?
Michael Walwrath
That's actually one of the first things I did. I lied when I said I took six months off and did nothing. The first thing I did when I left Yahoo was I invested in Yext. The backstory there is that Howard Lerman who started Yext, amazing entrepreneur,and I had met while he worked for another company. He had sold a small company to another company. He was a customer of ours at Right Media.
He and I met and became friendly and he started Yext in 2007, I believe. It was a completely different business than it is today and he came to me and he asked me to invest and I said, "Yeah, I'd love to invest." I did the thing he had to do working at Yahoo, which is I went to Yahoo and said, "I'm going to invest in this thing. Do you have any problem?" And they blocked it.
Somebody in legal decided that there was enough competitive potential to some voiceover IP business that we had that they'd said, "No, you're not allowed to invest in the business." I actually missed the first round at Yext because I couldn't invest. And then as soon as I left Yahoo, I called Howard and I said, "Look, I really wanted to invest and now I can." And he said, "Okay, well "I'll figure out a way to get you in," and he had a shareholder who wanted to sell their stake.
We started, WGI Group bought that stake, and then we continued to invest in the next couple rounds. Around 2010, the company was going through a really significant pivot from being a marketing services business to a software business. He asked me, he said, "Look, why don't you lead this pivot round and we'll make you the chairman of the company and you can take a more active role."
I jumped at it. It was a perfect scenario because I didn't have to run the company. He was doing that, he was doing that really well, but I got to be in there. I got to go to the office whenever I wanted. I got to be in the environment. It was everything I wanted without actually having to be in charge.
Clint Betts
That's awesome. What's that business like right now?
Michael Walwrath
It's interesting right now. I became chairman of the company in 2010 or maybe early 2011 officially. We had a great run. We took the company public in 2017. The business had started as, really, a business managing the third party digital experience for location-based marketers. That's a bunch of words, but what it really means is if you have a bunch of locations it's really hard to manage all the information about all those locations manually and so you need a software platform to do it for you. That's how the business started and that was the big pivot.
Where it is today is a fully functional composable platform for all digital experiences. We can help companies build any digital experience across their own properties or across the external web using a platform and set of services built around composability, API connections, and AI. Again, just another series of buzzwords that means a lot to people who understand what the evolution of the digital experience is.
You said how is it today? We had a great couple of years as a public company and then we ran into a series of challenges that included realizing that probably the initial market wasn't as big as we had thought it was. Then the big one was we were highly concentrated in retail and hospitality, if you think about who has scaled physical location footprints, those companies.
In March of 2020, our business changed fundamentally because everything we did as a company was geared around the idea of driving people to visit stores. In March of 2020, for a very long period of time, that was not much of a priority for our customers. The company from, really, 2020 until through today has struggled. It's what happens when a high growth company sees significant growth deceleration and has to deal with these realities in the market dynamics and how the business is being executed.
We did something really important in 2018, which made us look very silly for a few years, which is that we made this massive investment in generative AI as the core of the future digital experience. We have this thesis that, and Howard really drove this with Marc Ferrentino and some other people at the business, that the digital experience of the future is going to be heavily informed by things like semantic and vector search and generative AI, large language models.
For two to three years we talked about this and nobody cared. We tried to get people excited about it and nobody cared. Last November, suddenly everybody cared because ChatGPT had set the world on fire. What we're dealing with now is turning a business around in the public markets and the worst software market we've seen in the last 15 years, while also trying to educate the market around what's going to happen when this generative AI wave breaks.
Clint Betts
What is your take on the current state of AI and its future?
Michael Walwrath
It's the future. I mean, it's the future in the way that the internet was the future. I think the reality is the way you'll know that it's the future is that we'll stop talking about it. To me, I think where we are with AI in general is we're in the late '90s phase in the internet when all you talked about was your internet strategy. You just look up 10 years later, no one talked about their internet strategy because everything had transformed and it was at the center of everything that you did.
I think we're at the phase now where we all talk about our AI strategy. We all talk about the importance of using it, the importance of embedding it in our products. I think, in five years, we won't actually talk about AI because it's just going to be assumed it's going to be part of the environment. If you're not using it, then you're left in the dust.
There weren't too many companies in 2010 who didn't have a web presence. I think that's where AI's headed and I think it's going to transform the way that we do business in some really positive and some really disruptive ways.
Clint Betts
What have you learned about leadership throughout your career, some really strong leadership lessons, both good and bad? What you've seen work, what you've seen haven't worked?
Michael Walwrath
Yeah. It's interesting. I was talking to somebody about this recently. Everything I learned at Right Media about being at the head of the pack charging up the mountain to build a really disruptive startup and attempt to get some scale, I had to unlearn at Yahoo. It's like when you're building a startup, all you want to be is big. You're just like, "I just want to be big. I want to get big," and then you get big and you realize, "Well, big is hard." Big is a different kind of hard than small. Small is hard, too. And so you have to learn how to manage being bigger.
I have a lot of friends who are startup entrepreneurs and they just do the same. They do it over and over again. They're so good at it and it's, "I'm going from zero to a hundred million, and I'm going to do that three or four times in my life. That's how I'm going to create wealth and satisfaction and opportunity and jobs and all the things."
I did it once and I had a great time doing it, but I didn't want to do it again. It wasn't until this opportunity presented itself that I realized that I was ready to exercise the learnings that I was forced to have when I was at Yahoo.
Clint Betts
Yeah. Tell us about what you're doing right now.
Michael Walwrath
Yeah. If you rewind about two years ago, what was happening was the bubble was beginning to burst. If you think about the software thing, 2008, 2009 coming out of the financial recession, everybody started investing huge amounts of money in the digital transformation. Basically, the software budget just grew every year. If you were selling software between 2009 and 2020, you knew that there was organic growth in your business every year because the companies were going to spend more money on software than they did last year. That's the environment we've been in.
In 2020, I think we had about a month where it felt like we're going to have a recession and then something unbelievable happened, which is basically the software budgets went to unlimited. If you look at any SaaS company from the middle of 2020 through the middle of 2021, what you saw is just this parabolic growth. It's because with what was happening with the pandemic and this push to everything had to become digital, everything had to become automated. The software budgets went to infinite and the growth showed it.
And then the other thing we've talked about a lot is that there was this recycling of capital happening, too. Because every software company was selling so much, they were also buying so much and hiring tons of people. The seat license growth was off the charts. As all of that transpired, we saw this just incredible software bubble.
About two years ago, it started to deflate. And around that same time it became clear that Yext problems were a lot bigger than just the pandemic. I think the biggest challenge we had at the board level was identifying that the pandemic wasn't the sole culprit for why our business wasn't growing as robustly as other software businesses were.
Howard and I had a bunch of talks and I think he, at that time, just felt like he had taken it probably further than he had ever intended to. He'd been the founder and CEO for 14 years and he was ready to do something else. He was ready to get back to entrepreneuring at an early stage. I did the only rational thing that a chairman could do, which is I hired a recruiting firm to go find a CEO, because the last thing on earth that I thought was going to happen was that I was going to do the job.
But in the meantime, what happened was someone had to put their hands on the wheel. I did that and I spent two and a half months with the team trying to figure out what was going on, mainly in service of trying to figure out what kind of a CEO I needed to hire. Did I need to hire a product-centric CEO or an operational CEO?
What I learned in that process was that there was a lot more that was going right than that was going wrong, but the things that were going wrong were incredibly destructive to how we needed to operate the business. There was a period in that where it became clear that, actually, I was well suited to taking on the role, and then went about coming to terms with the fact that I was going to break my vow that I made in 2010 about never operating again.
Clint Betts
That's the Dick Cheney move, man. Head the committee to find the person and then it just lands back on you.
Michael Walwrath
Yeah. It wasn't supposed to be that way, but it was one of those things where you saw it and it was like, man, there was a part of me that wished it was a product issue, because it just made it easier. I could hire a product CEO and be the chairman and be part of the turnaround without having to go through the pain of a public company, small cap turnaround, which honestly is particularly hard. It's hard in any scenario, but it's really hard when you're in a software recession like the one that we're in.
Clint Betts
Yeah, it's an incredible time to be selling software. That's for sure.
Michael Walwrath
Well, I mean 12 great years.
Clint Betts
Yeah, the greatest years ever. The greatest years ever. I mean, at some point it's got to come to this point.
Michael, I can't thank you enough for joining us. We end every interview the same way with the same question, which is at CEO.com, we believe the chances one gives are just as important as the chances one takes. When you hear that, who comes to mind as someone who gave you a chance?
Michael Walwrath
Yeah. I mean, there's a long list. The people who hired me at DoubleClick as a totally unqualified English major, Jonah and Noah Goodhart who wrote a check for a guy who was totally unqualified to build a business. I mean, shoot, the people who are sticking with me through this transition right now.
It's a funny way to think about it, but without the team who is willing to go through the fire of having to do this and doing this publicly and having every mistake that we make, and there are plenty of those, be examined in the public market —they're giving me a chance to lead them.
I think that we don't really think often in terms of the people who we are leading as giving us something, but that's what they're doing. And if they're not willing to do it, then who are we leading? I would say that more than anything else, as a CEO you are as good as the people who are willing to follow you. I think that may be the greatest gift that you can get.
Clint Betts
I love it. Michael, thank you so much for joining us. Really appreciate it. Thanks for taking the time.
Michael Walwrath
My pleasure. Thanks for having me.