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How one family built Qualtrics to an $8B exit (bloomberg.com)
367 points by adventured 4 months ago | hide | past | web | favorite | 143 comments

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?

I'm not so keen on the marketing fluff either, but there are definitely needs being met. The cases I'm most familiar with are in psychological research, which consists of having people fill in a lot of questionnaires (asking about mood, stress-levels, or testing cognitive skills). Qualtrics provides a service to easily build these questionnaires, send them out to respondents, and collect their response (and export the data for later analysis in packages like SPSS). With a little bit of extra work, you can even do highly interactive tasks like Stroop through Qualtrics. For the average psychologist this would simply be undoable without this type of software.

Similarly, class-action lawsuits often require sign-in through filling in some sort of questionnaire. Previously, these questionnaires would be handled through live phone interview, which is obviously very intensive for both the interviewee and interviewer. The questionnaires are often quite interactive, with different questions being asked dependent on answers to previous questions, or aggregates of previous questions. It would take skilled interviewers a while to learn to interview for any one questionnaire. Qualtrics (and similar survey software) makes this process much, much simpler.

You then also have your regular marketing research, the value of which can be debated... but it is obvious people are willing to pay for the creation and distribution of such questionnaires.

Beyond this, I'm sure there are a bunch of other applications of the software.

thank you, that was very informative. this is really hard to understand all of this, when on a landing page of the product you see only markitng BS :)

Ugh soo many companies do this now. They've since fixed it, but you used to be able to browse the entire HP Enterprise landing page and not be sure they actually sell computers.

I think it's also the case that for a lot of people, sadly, having certain tools legitimizes their jobs.

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.

>each with 20+ branching questions

I just recoiled in horror at the thought of my car company asking me to fill out a survey like this and mentally closed the window on it.

Imagine that your car has a few things that bother you, and you'd like the car company to know about it. A link to a survey appears in email, and you think: "Aha! Now I'll let them know for sure, I'll tell them all I think about it!". Now you have 20 question to vent off your frustration, and likely a large text field for "anything more you might like to add".

It'd be cathartic if Audi sent a questionnaire to my wife to ask her about the dashboard GUI. ("Only a German engineer could design such a thing.", which is a bit harsh: there are plenty of thermostat designers who could do worse.)

The fact that iOS 12 now supports 3rd party apps (==Google Maps) on CarPlay has been a life saver.

imo Audi/VW has the best dashboard GUI in the auto business bar BMW iDrive. Try using honda or toyota and you will see that it can be much much worse than audi, laggy and badly designed.

They have a nice LCD panel but they decided to not make it touch-enabled. So to enter a street address you're supposed to draw the characters with your finger Palm-Pilot-style on a crappy touchpad. It's absurd. That's on a 2018 model. I think they're fixing that in some of the 2019 models.

It's not the touchpad that annoys me, it's the fact that I generally seem to have to enter the address in the most non-intuitive order for it to find anything, e.g. first postcode, then street name, then street number.

First world problems, I guess.

They don't do this to annoy you but to allow you to keep your eyes on the road more frequently. You are supposed to draw the characters blindly, without looking at the touchpad. They carried out user tests that demonstrated that a real touchscreen captures the driver's attention to a much stronger degree than this system. It might look limiting and obsolete on first glance, but it reduces risks to life and health of all involved parties.

I've done this, multiple times, when the airline I frequently fly follows up after a flight. I've noticed that they're pretty good with their timing such that they'll expedite the survey trigger after a flight that had a delay or some other kind of issue. As someone who flies this particular airline a lot, it's nice being able to voice my exact issues in a nuanced manner while also singling out what worked well. I do this with hope and expectation that my voice will be heard and may influence future decisions.

Having owned a dozen cars, shopped for far more, desired features and options that the manufacturers don't give, and finally buying ONE car brand-new, I relished the opportunity to actually have my voice heard for once.

I get a survey every time I take my car to the dealer. I like it. Sometimes there are some chuckleheaded things a dealership does, or maybe they are very helpful, but either way, I can provide feedback to the manufacturer on my experience, and I like to think maybe they'll be able to change things for the better.

In a world where every other site tries to infer what I like or I want or what they think i want to see on my feed next, or put me in some marketing bucket, it's a breath of fresh air to just be asked what I like or don't like or may be interested in.

For academic research the value proposition seems more credible. But even there given the reproducibility crisis the methodology and tools need to be revisited, and perhaps these kind of lazy surveys and data analysis are part of the problem.

As for customers few companies if any in the world has customer service approaching 'entailing differences in customer perception', most are quite happy to have people wait on phones endlessly or fail to address glaring deficiencies in products or services.

With so much low hanging fruit waiting to be addressed in customer service this obsession with surveys and 'customer experience' seems to be driven by other forces ie continuing obsession with data and metrics by sections of the workforce as panacea and distraction from real changes. But great exit for the brothers, nice targeting, if there is a demand why shouldn't they benefit.

> each with 20+ branching questions

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

I just did that today, for a podcast I follow. I usually say "no" to popup surveys on web sites but if it's anybody I have any kind of business or consumer relationship with I'm usually more than happy to spend 10-15 minutes on a survey.


* Help products/companies I like to improve

* Help products/companies I dislike to get less bad

* Increase the chances that the product/company will skew towards my preferences

* Hope someone might answer my questions some day (reciprocal altruism)

* Basic decency, helpfulness

* In rare cases, curiosity as to what the questions will be

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.

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.

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.

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?

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"

Surveys often offer compensation, like an Amazon gift card, or at least participation in a drawing for one.

Why do we produce free content for YCombinator? People like to pontificate.

Why do people tweet for free? One reason is, because people love sharing their opinions with other people. A survey is one way of sharing our opinions.

You should have asked: why do people post here?

I give feedback all the time in the hope that in influences the direction of the company or project. Was just asked today for feedback on my Apple Watch. Gave it. Also sent in feedback to SketchFab today.

If you want a product to be better how else do you expect it to happen if you don't give feedback? It's certainly better than just waiting and hoping some random improvements appear.

I don't do all surveys or even most but more than 0.

People who are dissatisfied with something certainly would. Especially a large purchase.

Not always for free. I did it for a bike sharing company. I received a two free rides in exchange.

why would anyone share their thoughts opinions on sites like HN for free? Simple. People want to be heard, and sometimes people like to think they can change things for the better.

To be heard.

To be sure though; It is still quite a superfluous software product that is a more complex version of Google forms. The key is to be able to sell to enterprises with a shiny veneer.

EDIT: And that SAP is not buying the software per se. They're buying the customers and credibility.

There's a few things involved, and they're not all BS!

You want to build a couple new features. You have 60 person-hours at your disposal. Which one do your users want?

Build two quick prototypes and see which one people actually use more.

You need to convince people to give you money (aka "get customers"). You're not sure what the best way to convince them is. Try 3 different approaches (Landing page with tech details? Youtube ads with customer stories? etc) and see which one works before you spend all of your budget on something nobody uses.

Out of a thousand people walking down the street, only one _might_ be interested in what you do. How do you make sure you focus your efforts on that one person?

Or "we have a million f2p video game players. 99% of them will never spend a dime. 0.1% of them will buy a $100 package once. 0.01% of them will buy a $9.99 package three thousand times. When should we present this package to them? Will we sell more $100 packages if we ALSO have a $200 package? Will we sell more $100 packages to Jane Doe who takes the bus to college at 8:45 AM and plays for 34 minutes 5 days a week?" (obviously that one gets a bit more troublesome)

The above comes with some severe implications re: privacy, filter bubbles, etc. but it's not there for no reason. Though there's plenty of people who just want pretty charts for their own sake; having worked in analytics the toughest question is "we have these charts.. umm... so what now?"

So which parts of your example does Qualtrics provide/solve? Probably not the prototypes. Once I have these, logging/counting usage is simple. The decision is made with a one-page Excel sheet with the raw numbers. Where does Qualtrics come in? Perhaps it has similar data from competitors, so my decision making process does not require as much field-testing but then I'd have to worry about my findings being used to improve competitor's products as well?

Oh, I was addressing the more general question about the field of stats, dashboards, etc..

"Once I have these, logging/counting usage is simple. The decision is made with a one-page Excel sheet with the raw numbers."

I think a lot of people would get the data in to excel and not know what to do next. Also, implementing tracking of views, clicks, etc. is non-trivial for a lot of people. Or just a hassle.

> I think a lot of people would get the data in to excel and not know what to do next. Also, implementing tracking of views, clicks, etc. is non-trivial for a lot of people. Or just a hassle.

Really? In "enterprise" class companies? Managers who can't use Excel like this should be (and probably are) fired quickly and for tracking there are plenty of solutions any junior web developer can implement and report on.

> Managers who can't use Excel like this should be (and probably are) fired quickly

For not spending their time dealing with random excel files being thrown around full of raw figures? It's a common way businesses work but it's an absolute nightmare.

Dashboards mean a bunch of things, one is that people are all seeing the same figures. Another is that people aren't reimplementing the same analysis code (where you can easily get errors, because it's not necessarily going to be obvious how to do the stats on the results). And a very obvious one is the time it takes.

Give me an excel file full of raw numbers and sure, I can pull something together. I can even do it quickly. But I'll bet a boatload of cash I can't do it faster than I can open a link.

I could get another dev to spend the time doing it, but without knowing how much Qualtrics charges it's easy to view this as simply being cheaper.

Yeah, but those people can also do other things that are more important, and pay a company like qualtrics to handle this boring stuff for them.

I interpreted what was said as saying Qualtrics provides a solution that has more flexibility and functionality than Excel. Excel's limitations are much more apparent in "enterprise" class companies.

This is a hot take, but Qualtrics seems like one step lower than a full-blown CMS that collects the same data but doesn't manage web pages or content (this includes automated management and 'personalization' based on statistics you collect), e.g. Sitecore or Adobe Experience Manager, two big, leading CMS products.

>0.1% of them will buy a $100 package once. 0.01% of them will buy a $9.99 package three thousand times.

The first group is worth $1MM, the second $3MM. I think it's likely you'd be able to afford to create both packages, regardless of what time any of your players take the bus.

The point is to figure out how to offer the right package to the right people (I was responding to a question asking about targeting and segmentation) to maximize profits. It's not a question of affording to create them.

Mind you I'm not endorsing this approach. But it does make a lot of money.

How does your organization decide what the chip you’re designing does?

Often for chips it’s a B2B transaction so you can probably mobilize some of your go-to salespeople or sales engineers and ask them what customers are saying about next gen.

Now what if your customer base were 100x-1000x larger? You might need automated tools to ask your customers what they’re worried about, what issues they have, whether or not they like certain features, what what the relative make-up is of the customer base.

We all know customers don’t always tell reality so this becomes one data point in many in determining product direction.

Imagine if the true performance of your chips, instead of being something you can validate through simulation or measure in a lab, could only be measured in the brains of tens or hundreds of thousands of people.

For every chip you make, you have some expectation of how it will perform, which is its "value proposition."

You want to see if your chips are performing as you predict (fulfilling the value proposition) so you need to interact with a large number of the people whose brains are measuring the true performance of your chips. Since you're dealing with thousands of measurements, you summarize them using math. That's where "stats" come into play. A "metric" is any quantity that is supposed to reflect a measurement, but it usually refers to one specifically designed to be useful. For example, for your chips, the 99th percentile power draw experienced by your users might be a metric you use to guide your design process.

Imagine further that your chips perform differently for different groups of people. Figuring out the best way to divide people into groups to understand how your chips perform is "market segmentation." You probably care about some groups more than others, and depending on how well your chips perform for different groups, you may need to strategically change those priorities over time. That's "targeting."

Meanwhile, different versions of your chips are continually becoming available to people, and you want to detect as soon as possible if a new chip has an unexpected performance regression (or an unexpected improvement!) So you make the latest metrics available in a way that's quickly visually digestible, usually at the expense of all subtlety, but hey, your brain's executive function finds it gratifying. That's a "dashboard."

The Experience Economy https://stratechery.com/2018/the-experience-economy/ post on stratechery provides just that explanation.

It does depend a what level you are working at for example my main client is a major beverage supplier.

They have 200+ brands sold over about the same number of markets.

Its useful to provide high level dashboard summarising key metric.

We (a market research/consulting house) use it pretty heavily to survey engineers to ask what types of technology they're using. I'm sure academics use it similarly - put in a list of emails, program and send out surveys, collect data, analyze said data, create reports.

The alternative was some god awful platform without a WYSIWYG editor where you have to code surveys by hand, an enormous waste of time and very inflexible compared to Qualtrics.

It may be helpful to look at one of the academic fields underpinning their work. Take a look at Industrial/Organizational Psychology: https://en.wikipedia.org/wiki/Industrial_and_organizational_...

Qualtrics basically brings the concepts from that field down into SaaS products and makes them more approachable.

It helps in delivering a superior experience to customers which ultimately is one of the only things that really matters in business.

Where I went to graduate school, it seemed nearly every Psychology graduate student used Qualtrics to administer their surveys. When you are sending surveys to 100s-1000s of people, having a tool that manages the survey and helps with running the statistics and analysis is really helpful.

You have the advantage that you are building for a very small number of people who are a) very like yourselves, b) highly trained, and c) strongly motivated to figure out and help you understand what they want. Even so, I'm sure figuring out what your customers want isn't trivial. I imagine you put a lot of work into it. But that work can involve long discussion with customers. What if none of those things were true?

A more typical business is building for a wide variety of people from heterogeneous backgrounds and selling during relatively low-touch encounters. There if you want to know what is going on with customers you need ways to find out and ways to sift the data into useful forms. It's not an easy problem.

I consulted for one company in a consumer-focused service business. They were very energetic users of Net Promoter Score [1] surveys as their default measure. New product? Everybody gets the 1-question survey option after using it. They'd see how that compared to their other products and to competitors. If scores were too low, they'd dig in with other research tools to find out why; new product revisions would be made and measured similarly. It worked very well for them, in that it kept people focused on actual customer experience and not on the HiPPOs [2].

It was such a core part of their culture that they went for related tools internally. When they were changing their software development process, they used NPS scores and other internal surveys to see how it was working for their thousands of developers. To my surprise, I saw the executives taking the numbers very seriously, well aware of the limitations and risks with surveys. I expected to be kinda BS-ish, but I didn't see that at all.

As to your terms:

Value proposition is basically, "What's in this transaction for the customer?"

Customer segmentation is where you notice your customers respond differently to stimuli, so you divide them up into groups. For example, just yesterday we were talking about fancy LED Christmas lights. [3] One customer segment is general-audience consumers who want fancy light displays at the press of a remote. But our customer segment is people who like hacking things, the computer-skilled DIYer. So the value prop for the first segment is something like "make your Christmas tree interesting and different", while the value prop for the second is "this year, hack your Christmas tree!" There are other segments and other key value propositions, which is why there are more kinds of Chrismas lights on the market.

Targeting is just taking particular actions in terms of a particular customer segment. For example, if were making hackable Christmas lights, I wouldn't buy a superbowl ad. I'd use very targeted advertising to reach my computer-skilled DIY market. As well as content marketing, where I'd have somebody write good blog posts about exactly how to hack the lights, so that the posts would end up on HN, Slashdot, Reddit, etc.

Is that helpful?

[1] https://en.wikipedia.org/wiki/Net_Promoter

[2] https://www.bbc.com/news/business-39633499

[3] https://news.ycombinator.com/item?id=18428566

"analyzing every aspect of the customer experience to drive loyalty and referrals"

I guess as companies spend vast amounts to get visibility online (e.g. where Google and Facebook revenue comes from) they need to be able to measure what they are getting for all that money.

"data driven decision making"

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.

Qualtrics is pretty popular among their initial target audience mentioned in the article: academics. Among academic survey shops this product is the definite go-to.

I imagine, based on my own experience, the average tech worker thinks of surveys as small sets of questions used to easily and quickly collect a few data points. SurveyMonkey is fine for that. But for the types of real surveys that provide the data for serious research, Qualtrics is what you need. I've used it for government surveys, sociological, health/medical, etc., web and in-person, with lots of flow control, randomization, and all the other features needed to produce robust and accurate data.

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.

Sounds a bit like SAS. Not the family part but the part about starting from an academic background, plus high growth.


SAS is an interesting company, both for their revenue growth and their work culture.

>During the 1980s, SAS was one of Inc. Magazine's fastest growing companies in America from 1979 and 1985.[18][23] It grew more than ten percent per year from $10 million in revenues in 1980[6] to $1.1 billion by 2000.[23] In 2007, SAS revenue was $2.15 billion, and in 2013 its revenue was $3.02 billion. By the late 1990s, SAS was the largest privately held software company.

>SAS is well known for its workplace culture.[36][41] The company was used as a model for workplace perks at Google[3] and is taught as a case study in management seminars at Stanford.

The page about the SAS CEO, James Goodnight, is also interesting:


Worth noting that their engineering org is in Seattle

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

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.

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

Good for Utah.

I've heard some good things about the tech scene there, apart from Domo.

I used to work for Qualtrics. I think Qualtrics and maybe LucidChart was a rare exception to the rest of the tech scene in Utah, which is pretty much "build a slightly different version of something at already exists and sell the shit out of a subpar product".

Qualtrics has come a LONG way in terms of underlying product quality, but they themselves got by for a long time selling the shit out of a product that could barely deliver. The company is 50% salespeople.

Less than a year ago their APIs were going down every day because of the crappy pile of legacy PHP monolith they were built on. They have brought in some very smart engineering leaders to transition to a more modular and scalable core product, but there's a ways to go. Another thing that really sucked about the organization was that half the engineers are professional services engineers building custom, overpromised, one-off solutions for large customers. The vast majority are almost completely unmaintainable and they do a very poor job of leveraging previous work or having cookiecutters/shared libraries to accelerate custom development.

With all that said, I think their market opportunity is fucking gigantic and they are serious about curing the underlying inefficiencies of the organization. They are the leader of the field in a time when pretty much every C-suite is realizing they need customer & employee experience data to stay competitive.

More info to explain some of their marketing speak (Experience Management! Creating a category!): They are by far the leader in being able to create surveys for serious research. However, since so much of this segment is owned by academics, they can only charge so much. They want to stay deep in the academic market because millions of undergrads and grad students every year do their first market research with their student Qualtrics account. Those students go on to be the decision makers in fledgling analytics departments/teams at many companies.

They expanded into Customer Experience and Employee Experience products with the big enterprise deals and fat margins that come with them but were much worse at those things than specialized competitors. They then came up with the concept of "Experience Management" to tie the data together. This is actually pretty cool stuff - Ford was able to find which crappy conditions at their dealerships were driving lower sales, etc etc. The strategy was basically if we can offer a total package where we're pretty good at everything, we'll beat competitors that are excellent at one thing.

Total agreement on the market opportunity. I'm not technical in any way like most of the people commenting here. I run a small financial planning business and I'm paying "a lot" of money to Typeform and to Wufoo to gather client data. Both of them have their advantages and disadvantages but I'm ready to move on to something else if it fits my needs which aren't that complicated.

What are the disadvantages of Wufoo and Typeform? I've used both as a user before and I Wufoo as an admin. My needs were simple and they seemed to work for my use case. Just curious about your use case for which they don't work?

Qualtrics is HUGE in academia and enterprise. I hadn't heard of it either until I went to grad school and all the professors used it.

Lots of people think this way. These are not tech companies; they are enterprise sales organizations.

I think that is a pretty grim outlook on Qualtrics. They are definitively a tech company, as they provide a technology which is not only useful, but differentiated. If you believe that survey==web form, then yeah, it doesn't seem like a lot, but, if you think survey==research tool, with randomization, experiments, SPSS file export, recoding, loops, panel provider integration etc. and you don't want to write code because your job is to produce data not databases, then qualtrics seems like a very nice piece of software.

Sales cures all. No business has ever succeeded without sales. - Mark Cuban

That guy hit the lottery at the height of the tech boom and has done nothing since...

What do you mean by manufactured? The options he bought to protect his locked up Yahoo stock was probably one of the smarter decisions he has made

He did a little more than that. He had a pretty successful exit before broadcast.com.

Qualtrics looms large as a tech employer in Utah Valley, where they're based out of. I went to school in the area and almost ended up doing my first internship there.

Every scientific survey I’ve seen was on Qualitrics. SurveyMonkey seems to be used in informally polls like K12 student projects and group activities.

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.

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).


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

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.

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.

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.

Forcing all supernodes to route through MS owned datacenters?

...which unfortunately destroyed the full P2P nature.

Skype was far from crappy when MS bought it.

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.

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.

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.

> 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.

Private tutoring is illegal?

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).

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.” """

people usually put flyers on door knobs and door steps and other non-mail related avenues to residences. You also see the flyer tucked under the windshield wiper blade of vehicles parked in parking lots.


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.

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

in psych, "coding a survey" _can_ mean "tagging qualitative survey responses against a list of traits (called the codebook)" rather than "writing computer code to present a survey". GP may have meant that although Qualtrics provides tools for this process, it was easier to just do it by hand.

guess: doing away with very poor user-interfaces. Most survey systems are downright horrible.

Guessing: privacy

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.

The simple answer is that they (mostly) serve different markets

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.

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.

So bear in mind:

1) those are 2017 numbers, so if we assume they grew by the same amount, they’re over 400m this year, which makes it only 20x

2) the article mentions that SAP is paying a 75% premium over the IPO valuation, because the road show was going well, they felt like they had to do it.

3) a 10-12x revenue valuation is not unreasonable for publicly traded companies

So, they’re growing like crazy, IPO plans going great, Sap comes calling and qualtrics basically says “why should we sell? We did all the annoying IPO work, what are you going to offer us to make this worth our while?”

It’s basically the perfect negotiating position.

a 10-12x revenue valuation is not unreasonable for publicly traded companies

I know a lot of publicly traded "cloud" companies are in fact valued like this. I suspect very strong that this is because analysts thing that they have cracked a business model that is very easy to predict and expand rapidly: very low capex, very low-churn (earnings calls talking about "retention rates", NPSs), and easy to predict even high growth (ARR retention/expansion).

I think several early players like SFDC and Splunk have created this impression.

P/S > 3-4 had been pretty unusual up until recently. All companies are worth the discounted sum of their future cashflow, whatever that may be. To see P/Ss 10+ you are projecting both serious growth and very high margins. I wonder if one looked at the whole space if the 5 year projected earnings of all the companies together would make sense, or if we're collectively under-discounting risk (ie, sum total of all cloud SaaS companes far exceeding the reasonable TAM)

All that being said I think you entirely nailed the chain of events leading up to the acquisition.

MongoDB has a similar 20x ratio.

I won’t argue if this is warranted, but companies like this have:

- Very high gross margins once you take out fixed costs. (80+%) This implies massive profitability once you exceed fixed costs.

- Negative net churn. (Their existing accounts grow more than they lose) This implies if they got rid of their sales force, they could still grow.

- Their payback on sales investments is quick, usually less than a year. This allows them to heavily invest in topline growth.

When you do all this, the math works at 10X in a low interest rate environment, or if you project a very long growth period. Perhaps 20X is Fear Of Missing Out?

The stock market’s reaction to SAP (Knocking off 5 non in value) suggests that 8-10X is more reasonable.

It's not normal for stable companies to be bought at 20x their stable revenue.

However, if the revenue is $190m followed by $290m followed by $400m, then that shows that the expected future revenue (which matters for the valuation) likely is much larger than $400m, so it takes a much smaller, more reasonable multiplier to reach $8B.

M&A guy here and disclaimer, former SAP employee.

It's not normal, but you have to define what normal is. A few things worth noting (which are all speculative btw):

- SAP doesn't have a solid CX platform, but has tried to push this to the market for years because the demand is there

- SAP has arguable the strongest foothold in the top 2000 businesses in the world.

- SAP once organically grew their ERP products but decided somewhere around the late 2000's that it couldn't innovate any longer but know cloud/SaaS is the future, so their growth has been largely due to acquisition of cloud/SaaS providers. They want to continue to tell the street they're growing subscriptions and this is one way to do it.

- SAP sales is top tier (whether you like it or not). If their revenue is $400m they'll easily be able to sell 2x that in short order to their existing client base. This is what M&A guys often call "synergies". If you assume 30% eventual gross margins, then a potential ROI is foreseeable.

That all being said, if the market for this type of service isn't there at enterprise scale ($1B/yr revenue), then it's probably overpriced.

It's explained in the article

>Qualtrics had filed for an initial public offering in the U.S. and was planning to raise about $500 million. SAP CEO Bill McDermott preempted the IPO with an all-cash offer that was more than 75 percent higher than the company’s projected valuation. McDermott said in a conference call that SAP had to pay up because Qualtrics roadshow was going well

From the article:

> SAP CEO Bill McDermott preempted the IPO with an all-cash offer that was more than 75 percent higher than the company’s projected valuation. McDermott said in a conference call that SAP had to pay up because Qualtrics roadshow was going well.

Usually IPO will offer 10-20% of shares. So even if the price is slightly higher, it reflects the fact that majority of the shares are non floating. In this case 8 billion seems to be upfront cash deal. This actually seems to be a pretty bad deal for SAP.

I'm not very familiar with IPOs or buy-outs, but for going concerns it's usual to look at the price-earnings ratio rather than the price-revenue ratio.

Ford, for example, has revenue of $37.67B last quarter but net income of only $991M. With a market cap of $37.31B, that means a price to earnings ratio of 9.5.

Microsoft had less revenue, at $30.08B last quarter, but net income of $8.87B. It has a market cap many times that of Ford, at $841.08B both because it has so much higher earnings and because it has a PE ratio of 23.9, which implies that the market things those earnings will grow at a good clip.

Given $8bn valuation, I think Qualtrics is spending heavily on marketing which keeps their net profit low. I think their operating margin is near 50% (being a software company it is possible), which means about $200mm in operating income. If their growth rate is expected to remain at the same level (40%) for the next two years, $8bn valuation can be justified. It's hard to know whether this is the case, but seems likely.

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.

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.

It is a certain thing vs an uncertainty for one - aside from skill set differences you could get something better or you could burn several times it worth trying and failing to compete as a late mover.

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.

> 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.

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.

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.

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.

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

If you haven’t, you should checkout IndieHackers.com. It’s a community for makers who are building revenue-based businesses without taking massive funding rounds. Most are just getting going with some initial success. Their stories will probably feel more relatable and inspiring.

Well HN is just that, hacker news. The focus isn't on DIY and bootstrapping yourself. This is more a niche that IndieHackers and the like fill in.


But the bootstrapping community is filles with its own kind of people.

Not much overlap.

There are plenty of successful bootstrappers on HN, myself included.

Dozens of us!


Where do you talk?

I only tried IndieHackers and there were too much "hustlers" for my taste.

Ever since Business of Software forums died off, I've been looking for a replacement. As you say, when you go looking for them, all you will find are these 'hustler' filled places. In the early days, HN had a fair share of BoS refugees, but those have been overtaken by other crowds. Of course these are different times compared to 15 years ago, but I would think there would still be bootstrappers around?


What would it take to create a bootstrapper community that doesn't attract hustlers.

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.

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.


Many of the Chinese 'fraud-cap' companies were taken public in this way: https://www.nytimes.com/2011/07/24/business/global/reverse-m...

Qualtrics is an exception to the typical unprofitable unicorn. they've been cashflow positive for over a decade.

(I was a growth engineer and an admin for the Stripe instance, Their stripe account had lots of money flowing through and that was just for sub-5k deals.)

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.

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.

"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.

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)

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

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.

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.

It’s a great story. Congrats to Qualtrics!

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

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.

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.

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