
How one family built Qualtrics to an $8B exit - adventured
https://www.bloomberg.com/news/articles/2018-11-12/how-one-family-built-8-billion-startup-far-from-silicon-valley
======
artemonster
Can someone please genuinely explain the need of such software products to me?
I work in VLSI engineering and such things sound like a total superflous
bullshit-bingo to me (stats, dashboards, metrics, "value proposition",
"targeting", "customer segmentation") I suppose I think so because I am a
total layman in these fields. I'd greatly appreciate if someone could explain
- is this a thing that acutally helps with some processes and how?

~~~
mdorazio
Here's a real-world example from a client who uses Qualtrics heavily. At
regular intervals following vehicle purchase, an automotive manufacturer sends
surveys to vehicle owners asking about their perception of the quality of the
vehicle, issues that may have come up, features that were not explained
properly or don't work as expected, etc. We're talking hundreds of thousands
of surveys a year, each with 20+ branching questions. The surveys themselves
are built in Qualtrics (something that it is quite good at), managed by
Qualtrics (yes, survey management is a big deal), and the top-level data
analysis of the survey results is done in Qualtrics as well to determine if
there are problematic trends that need to be addressed, more issues than in
previous years, segments of customers who are for some reason perceiving
quality differently than others, opportunities to redesign or better market
things in the future, etc. This data is directly used to update products,
training, marketing, etc. at the company.

This is, in my opinion, the biggest use case for Qualtrics - customer
experience research based on surveys or data gathering methods managed from
within the platform. You can think of it as Survey Monkey on steroids with
some SPSS-lite data analysis functionality built in.

~~~
usaphp
> each with 20+ branching questions

I never understood , why would anyone waste their time answering 20+ questions
for free?

~~~
derek_frome
You'd be amazed. I was an account manager at Medallia (Qualtrics competitor,
also backed by Sequoia) and the response rates on 20-50 question surveys was
typically in the double digits. When you have hundreds of thousands of
customers in a month, you can generate super rich data through this process.

However, the industry as a whole has been coping with something they call
"survey fatigue" which is reflected in a lot of the comments here. There has
been a general backslide in survey response rates, though as of a few years
ago, it had mostly stabilized around a new normal that was still plenty good
for generating excellent data sets to understand the customer experience.

~~~
njarboe
The customer that fills out a survey must be a very select group of customer.
If the response rate is in the single digits of percent, what about the rest
of the people? Setting company policy on just this small fraction of customers
could be the path to failure.

~~~
covemarkets
correct, and that's why surveys need to be as scientific as possible in order
to avoid various biases that skew the results. hence qualtrics and not
surveymonkey for serious survey research.

~~~
njarboe
How does Qualtrics get people who refuse to answer surveys to do so? Come to
their door and offer big bucks and then weight those answers heavily?

~~~
covemarkets
I don't know, but the key is to properly account for the biases in responses
of those who do answer. Substantial percentages of people do answer surveys.
Don't make the mistake of thinking along the lines of "i would never answer
one, therefore nobody would"

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sjg007
Easy to setup programmable web forms and surveys for non-experts. Apparently
it is big business. One thing I think is interesting is that I'd heard of
SurveyMonkey before but never about qualtrics.. even here on hackernews. Maybe
because qualtrics was outside of the valley? Yet clearly a unicorn and a very
successful exit.

~~~
LrnByTeach
I am very happy to see this kind of success stories for multiple reasons.

1\. It gives a great morale boost so many other not so sexy US places outside
of silicon valley. YES big success possible outside of Silicon Valley.

2\. Now with this big SAP investment, UTAH will get considerable 'tech
employment' boost longer term instead of same old crowded Silicon valley & New
York (sky rocking housing prices)

3\. The way the company grew organically for long time instead of hitting VC
money from day one (another big company that did was Atlassian)

4\. a very rare father-son founder company and a family company (brother and
many of family members in big roles)

> both his parents held doctorates and his father lectured about market
> research at the University of Oregon. The Smiths moved to Utah around the
> time Ryan’s father opted to work at Brigham Young University, and in 2002,
> the pair started Qualtrics, originally targeting academics that needed to
> conduct field research.

~~~
fjp
Worth noting that their engineering org is in Seattle

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austenallred
Not 100% true. They have some engineering in Seattle but a ton in Utah too.

~~~
devmunchies
they have most in seattle and some in utah.

I engineered in both offices. VP of engineering and product are both in
Seattle and there are MORE engineers in seattle if talking absolutes.

~~~
fjp
When I was leaving I was under the impression that they were no longer hiring
new non-professional services devs in the Provo office

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gigatexal
I used the service in college. It was prettt powerful. I did some demand
estimation and some work for local businesses with it. I didn’t find it 8
billion dollars amazing but who knows it could be much better than other tools
out there — it was just free through my university.

Kudos to them for avoiding VC money for so long.

~~~
kelvin0
Please remember that Skype was bought by MS for 8.5 Billion (yes, crappy
Skype). Of course it was bought for it's prevalence and big existing
audience(i'm guessing). Certainly not for it's great UI/UX and Communication
capabilities (I hate Skype).

[https://www.wired.com/2011/05/microsoft-buys-
skype-2/](https://www.wired.com/2011/05/microsoft-buys-skype-2/)

So anything marginally better could certainly be worth much, much more (as in
this powerful Qualtrics products suite).

~~~
ejstronge
Skype was far better before the MS acquisition - there doesn’t seem to be a
comparable video platform anymore, considering that Skype offered amazing
video at a time when (U.S.) internet speeds were even slower than what they
are now.

~~~
ekianjo
Agree, Skype in MS era is just a shadow of what it was before. They completely
destroyed the user experience. I don't even know how you can break something
that working so well before, and not realize it.

~~~
kelvin0
My experience using Skype on all types of connections (Cable,Fibre) and broad
range of devices (High-End PCs) was always very bad (pre and post MS).

We've used it both personally and in business environment, and it was always
very difficult to get sound and/or image, connecting properly was always a
crap shoot and included 5-10 connect disconnect before finally getting audio
and video on both sides.

Very painful to use.

Glad some of you had better experiences.

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arthurofbabylon
Top bullet points that stood out to me:

• An insistent awareness that there are alternatives to the conventional
solutions.

• Going directly toward the biggest challenges, early on.

• An understanding that engineering strength is more valuable than money.

• Willingness to weasel into industries with hard-to-open doors.

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Phemist
Interesting news! When I was in uni, I made some money on the side writing
custom JS plug-ins for their survey engine. Through a lot of trial-and-error I
managed to reverse engineer some useful knowledge about the inner workings of
it (this lasted up till a major revamp of the survey engine around 5 years
ago). The community was quite vibrant, and their product was being used from
questionnaires in academic studies to marketing research to high-profile
class-action cases. I've always imagined this huge userbase as well as the
centralized organization of all this research data is quite valuable, so this
acquisition price doesn't strike me as out of place.

~~~
garysahota93
Haha, I did the same thing when I was in grad school! It's so interesting to
see how while we've gone on to do other things, they are still keeping their
eyes on their (well-deserved) prize.

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atomical
> After college, Ryan said he wanted adventure and went to South Korea to
> teach English. One of his early lessons in entrepreneurship came there.
> While most foreign tutors were scraping by on next to nothing, he decided to
> try private tutoring by putting flyers offering his teaching services in
> mail boxes.

It's illegal. That's why not all English teachers in Korea are doing it.

~~~
jxramos
Private tutoring is illegal?

~~~
rconti
Probably putting flyers in mailboxes without paying for postal service to do
so.

Now that I stop and think about it, it's likely illegal in the US, too.
Interfering with mail services might well be a federal crime. (or maybe not, I
really don't know).

~~~
atomical
It's illegal because it isn't fair.

[https://www.cato.org/publications/commentary/youll-never-
gue...](https://www.cato.org/publications/commentary/youll-never-guess-what-
south-korea-frowns-upon)

~~~
jxramos
Interesting, looks like its unconstitutional too...

""" ...that Draconian approach was the brainchild of Korea’s military leader,
Chun Doo Hwan, who took power in 1980 and almost immediately banned private
teaching (known as kwawoe). Chun’s goals were to equalize educational
opportunities for the poor and to relieve parents of the burden of paying for
education. The ban lived on until last month, when the Constitutional Court,
Korea’s highest court, ruled that it is unconstitutional because it “infringes
upon the basic rights of the people to educate their children.” """

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mettamage
I used this service as a psychology student, to my dismay if I may add. To the
dismay of other students, I'd always code up my own surveys :D

I wonder though, how is there space for: Qualtrics, Survey Monkey, Wufoo (back
in the day) and a lot of others that I presumably don't know about.

I feel most of these survey engines provide the same thing.

~~~
jbchoo
May I know what was your needs that required you to code your own survey?

~~~
ams6110
Guessing: privacy

~~~
froindt
I doubt this is the reason. Any academic studies which are going to be
published need Institutional Review Board (IRB) approval to ensure they won't
violate ethics guidelines. Qualtrics has done a lot of work to be the go-to
academic survey software and meets the privacy criteria required by most if
not all IRB's. Using Qualtrics for surveys a breeze to get through my
institution's IRB - all they cared about was the content of the questions.

It would have been a nightmare trying to do surveys on some home-brew web
server survey system. I saw something similar happen once (study needed real-
time tracking of user inputs to a degree which wasn't possible with other
systems), and it involved a physical security audit of the server as well as
university IT being involved. Project was delayed by a few months getting it
through IRB.

For what it's worth, I found Qualtrics to be a a flexible, extendable platform
for my unique survey needs. The study I was working on involved people
comparing 3d models. Even though an STL viewer wasn't provided by Qualtrics, I
was able to use an iframe to display the models in the survey.

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garysahota93
I remember using this tool when I was in grad school. They've come a long way
and are definitely a unicorn in every sense of the word. The fact that the
family owns >80% of the company just blows my mind.

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option_greek
As per Wikipedia:

>Qualtrics reported revenue of $190.6 million in 2016 and $289.9 million in
2017 representing year over year growth of 52%. In 2016, Qualtrics reported an
overall net loss of $12 million with free cash flow of $3.4 million. In 2017,
Qualtrics reported a $2.6 million net profit with free cash flow of $21.3
million

Is it normal for companies to be bought at 30x their revenue or am I missing
something obvious (may be the wikipedia stats are off) ?

Edit: 2018 revenue according to this article is $400mil. That would mean a
20x.

~~~
sigi45
I heard that what you have to pay for a company is something like what the
company will be able to make in 20-30 years.

Not sure if you couldn't build it your own for that kind of money.

~~~
codingdave
3 years was the standard for a long time. It still is the standard outside of
tech as far as I have heard. Tech gets different/higher valuations because of
the expected hockey-stick growth pattern, which makes future revenue non-
linear, so you pay a higher multiple if you have that level of growth.

Even so, Qualtrics got a really good exit here.

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csbellina
This might be the biggest Utah exit so far. Whenever all those "where are the
other silicon valleys?" articles come up, they never seem to bring up the
Wasatch Front, even though it probably has one of the most vibrant tech
entrepreneurship scenes in the country. I moved here from Boston a few years
ago and it has turned into one of the best decisions of my life.

~~~
twtw
> Whenever all those "where are the other silicon valleys?" articles come up,
> they never seem to bring up the Wasatch Front

Huh, interesting. This is exactly the opposite of my experience. I would have
said those articles _always_ bloviate about Silicon Slopes.

~~~
csbellina
Maybe in Utah, but in my experience, most stories of that vein are more likely
to list Austin or Denver, or even completely marginal markets like Atlanta or
Miami before they do Salt Lake City.

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alecco
I like the story.

But on the other hand it makes me feel like I'm looking at the equivalent of a
popular Instagram model. It's hard to not compare myself and feel
disappointed.

HN doesn't inspire me to do something with my life like it did 10 years ago.
Perhaps it's my fault.

~~~
paraschopra
If it helps with your inspiration, here's my story: I launched my company
(Wingify) on HN when I was 22 and bootstrapped for last 8 years. Today we're
not Qualtrics scale, but we're doing ~$20mn and have never made a loss in our
history.

My guess is that businesses like mine are more common than VC funded ones but
we only get to see VC funded ones because that's what the news covers.

~~~
umichguy
Awesome! Always good to hear stories like yours. Keep it going!

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lechiffre10
I'm currently reading a book called "Financial Shenanigans" and I'd highly
recommend it. It's about account shenanigans companies do to make their
business seem more profitable than it really is. Not sure if this applies here
but interestingly there's a section that discusses IPO's and how investors
should be very careful when companies decide to do an IPO through a M&A
(Merger and Acquisition) instead of the usual IPO because it circumvents a lot
of the SEC scrutiny that they'd normally be subject to in a normal IPO. Found
it interesting that SAP acquired Qualtrics a few days before their IPO.
Anyways just food for thought.

~~~
mikeyouse
I think what you're referring to is a reverse merger instead of an IPO -- This
is entirely different, just a standard merger transaction. Reverse mergers are
when a private company that is trying to go public (often with shaky
financials) "merges" with a company that is already public, usually on some
OTC board somewhere. This process avoids the scrutiny of the S1 / roadshow /
etc and allows a cheap and easy way to 'go public'. Typical mergers involve a
lot of due diligence from the acquiring company, they can still go wrong but
it's a much different proposition.

[https://en.wikipedia.org/wiki/Reverse_takeover](https://en.wikipedia.org/wiki/Reverse_takeover)

Many of the Chinese 'fraud-cap' companies were taken public in this way:
[https://www.nytimes.com/2011/07/24/business/global/reverse-m...](https://www.nytimes.com/2011/07/24/business/global/reverse-
mergers-give-chinese-firms-a-side-door-to-wall-st.html)

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devmunchies
its a little known fact that Qualtrics rejected an acquisition offer from
Suvrey Monkey back in the day for $500 million. A cool part of the story given
this exit.

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cleancogitate
how do businesses deal with sampling bias when they use these tools? In most
cases you can't compel customers to respond to a survey invitation, so there
will always be some potentially enormous bias in your survey results due to
the non random sample that has responded.

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readhn
"Not bad for a CEO who got paid $100,000 in salary last year."

humble CEOs build wholesome companies!!!

CEO in a company here is drawing total compensation $2.2mil ($400+K + stock
awards) Company is loosing $15mil/year for 10+ years already. Pathetic and
greedy IMO.

~~~
devmunchies
I've been to Ryan's house. he has a basketball court in his basement. I'm sure
he paid himself a lot more than $100k/yr as some point. (not saying he doesn't
have every right to)

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homero
Qualtrics is apparently huge. I got a survey from a survey company that didn't
even use their own software but used Qualtrics.

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so_tired
Patient capital is grrreaaatt

But how much of this is down to patient employees and (relative) lack of
alternative employers?

Could this be done in SV/Shenzhen/London where a good employee has multiple
offers. This worked out great for the employees here. But in many other cases
the founders get early rewards for building up a company, and are in no rush
to IPO or sell because they are cashflow -balanced.

~~~
claydiffrient
As a software engineer in the "Silicon Slopes," I can say that we get multiple
offers almost constantly for companies throughout the area. There is enough
tech here to keep people employed where they want to be making the money they
want to make.

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masonicb00m
It’s a great story. Congrats to Qualtrics!

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tyler109
Building a billion dollar startup OUTSIDE of Silicon Valley is possible? You
guys just crashed my entire belief system...

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bitxbit
This is a bubble price. Qualtrics is a nice service to roll out surveys but
$8B is a lot of money for something so niche.

~~~
sidlls
It's not the "rolling out surveys" part that's considered valuable, it's the
"data" part. These companies don't just drop a survey creation UI down and get
$8B. They collect data, lots of it, and provide services around that data. The
survey is just one mechanism they use to do that.

