a16z Podcast | Scaling Companies and Culture

SuccessFactors Timeline and Outcome

• Founded in 2001 as an early Software as a Service (SaaS) company focusing on enterprise human capital management.
• Went public in 2008 and was acquired by SAP in 2012.
• Generated a $3.5 billion outcome following 73 initial rejections from venture capitalists.

Founding Philosophy and Mindset

• Lars Dahlgaard believes the only viable reason to start a company is if the venture "must be done," rejecting the strategy of chasing market trends.
• Success requires a "perpetually learning mindset" where founders admit they do not know everything to avoid "running their head into the wall."
• Founders should avoid hiring friends or relying on personal networks for early customers, as this creates bias and fails to validate the business model.

Cultural Values: "No Assholes"

• The company established a strict "no assholes" value, defined as avoiding abusive behavior, lack of accountability, political maneuvering, and self-promotion at the team's expense.
• This value was enforced by copying the accused individual on all complaint emails, forcing the accuser and accused to resolve conflicts directly under management endorsement.
• The policy resulted in a self-selecting workforce where individuals unwilling to adapt or show introspection exited within weeks.
• Dahlgaard prioritized collective team trust over retaining a single "10X" engineer who violated cultural norms.

Operational Transparency and Data

• The leadership team tracked every month's and quarter's data rather than relying on long-term projections to prevent self-deception.
• The company banned employees from discussing IPOs or exit events, treating them as financing milestones rather than business goals.
• Internal motivation focused on customer impact and peer recognition (e.g., "baton passing" ceremonies) rather than vanity metrics like employee headcount or valuation.
• "Throwing things over the wall" between departments was eliminated in favor of fluid, honest communication flows across silos.

Board of Directors and External Feedback

• A board of directors is critical for providing objective advice and preventing CEO ego from obscuring operational decay.
• During the 2008 Q3 market crash, a board member insisted Dahlgaard return to the headquarters for layoffs; remaining in the field would have prevented him from properly managing the cultural impact of the event.
• Dahlgaard utilized executive coaching as a "safer" venue for anonymous 360-degree feedback than the boardroom, helping him confront blind spots.
• Founders must actively seek "truth to power" to avoid the trap of believing their own hype, which becomes increasingly dangerous as the company scales.

Leadership Evolution

• Dahlgaard initially struggled to admit fault due to a strong will, only learning to listen after suffering significant personal and professional setbacks.
• He shifted from a "war for talent" mentality to building a system where the collective power of a trusted team outperforms individual high-performers.
• He views the ability to leverage knowledge from a network of advisors and board members as a necessary muscle for scaling a business to massive size.