, inc. (CRM), Google Inc (GOOG), Netflix, Inc. (NFLX): An Interview With Ryan Smith

Page 1 of 3 (CRM)In the following interview, The Motley Fool talks with Qualtrics CEO Ryan Smith, one of Forbes‘ “Most Promising CEOs Under 35.” Smith’s online data collection and analysis platform has enjoyed meteoric growth and success in its quest to “help companies be right.”

Smith shares his insights on big data, the value of hard work, learning from the successes — and failures — of others, and of course why he wouldn’t sell his company for half a billion dollars.

A full transcript follows the video.

The Motley Fool’s chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in the brand-new free report: “The Motley Fool’s Top Stock for 2013.” Just click here to access the report and find out the name of this under-the-radar company.

Brendan Byrnes: Hi folks, I’m Brendan Byrnes and I’m joined today by Ryan Smith. Ryan is the CEO of Qualtrics, also recently No. 2 on the Forbes list of CEOs under 35, and you recently turned down $500 million for Qualtrics. First of all, thanks so much for your time.

Ryan Smith: Thanks for having me out.

Brendan: I was wondering if maybe you could give us a quick elevator pitch of what Qualtrics does, exactly.

Smith: We’ve created a cloud-based platform that helps organizations gather insight, anywhere from the Voice of the Customer programs to any type of data collection that could happen within the organization, on the employee side or testing products. Basically, we’re helping companies be right.

Brendan: How did you realize there was such a big market? You’re growing rapidly. How fast are you growing, first of all, and how did you realize there was such a big market for your products?

Smith: We’ve had triple-digit growth pretty much every year. We’re acquiring about 600 enterprise customers a quarter, which is pretty hard to digest, but we’re doing a pretty good job at it.

I think that the market’s changed. I think the market’s changing as work coming in as well, primarily from organizations that want to be data-driven. It’s absolutely critical to compete right now. I think organizations that master it are going to be the ones that win.

As they start seeing the effects, that they don’t have to guess anymore, that they can capture this data and make decisions on it and be right, you’re going to start seeing that becoming even more and more popular. I think the market’s definitely growing.

Brendan: You started out with mostly business schools, transforming into companies. Could you give us an example of what companies would use, specifically, your data for?

Smith: Yeah. We started out in academia. We only focused on business schools. We had 1,300 universities and now, in about 2007-08, we really started shifting toward the corporate market as well and we have over 5,000 enterprise.

You could have a retailer, Bonobos for example, who was testing and doing research on how to build a better-fitting shirt. Or you’ll have large airlines or cruise ships running all of their Voice of the Customer, the customer satisfaction.

The goal is that all the data that’s being collected within the organization is in one spot, which is very powerful because it’s very difficult if it’s fragmented or it’s sitting in four or five different locations or formats, to be part of the data initiative within the org, or integrate back into, inc. (NYSE:CRM), or other systems like that.

We’re seeing everything come together into one platform, and trying to get the organizations to talk to each other because it’s really important to use this data to make those decisions.

Brendan: You recently received $70 million in capital from Accel Partners and also Sequoia Capital, but you’ve been profitable for a while and you’ve said you didn’t necessarily need the money, so why partner with them?

Smith: We didn’t. We didn’t need the money. We’ve been profitable. We have 200 employees and we’ve been doing very well in acquiring our customer base. The challenge is, as we look ahead, we really believe in this “nail it before you scale it” philosophy, and I feel like we’ve done a really good job of nailing it, and really want to scale it.

We want to open up international, which is what we’re doing pretty much this month. We’re growing at a level where we’ve tripled our workforce in the last three years. We doubled this year. We hired 60 employees last quarter.

There’s challenges and opportunities that are going to open up, where we want some of the brightest minds around us. I think we’ve done a phenomenal job at partnering with Accel and Sequoia, and we haven’t been disappointed up to this point, and we’re really excited for the future.

We really view them as partners. If you look through our deal, and how this whole process went about, we wanted to partner. We didn’t want someone that could just write a check. We wanted someone that was going to be there with us, to help us when we needed it.

Opening up internationally is a great example with that. I think they’ve both been heavily involved in either connecting us with other portfolio companies that have done it, or really just being on the ground with us.

Brendan: As I mentioned earlier, you turned down the $500 million for the company. Why did you do that, and how difficult of a decision was that?

Smith: When you build a company to keep, or you build a company with a long-term vision, and you’re profitable, and you bootstrap, you’re going to get a lot of offers. Those are going to continue to come. I think that’s part of it.

But we’ve been, historically, a single-product company. We’re building on our entire platform and we’re launching new products. Most of our revenue was U.S.-based. You start looking at it and saying, “Wow, this is a billion or multibillion dollar opportunity.” I’ve been around enough to know that those are rare.

Aside from the money, I think we’re doing something great. We’re changing the way people do research, and we’re changing the way that data’s being collected and digested and turned into insights within the organization.

Watching that, it’s bigger than money. It’s actually pretty fascinating.

Brendan: With this big opportunity — you mentioned multibillion dollar opportunity — people notice that. The big companies notice that, but yet you have some big companies also, that are your customers, like Microsoft Corporation (NASDAQ:MSFT).

What are some competitive advantages that Qualtrics has that can maybe fend off if one of these deep-pocketed giants — maybe Google Inc (NASDAQ:GOOG), say — want to come in and try to do the same kind of things you’re doing? How do you fend that off?

Smith: This is the million-dollar quest. The billion-dollar question.

Look, I think this is what we focus on. This is what we do. This is who we are. Now, organizations have always tried to do this but, I think, No. 1 is we develop great products that are phenomenal. We’ve got great customer experience and support within our org.

But, look. I don’t spend a lot of time focusing on them. We’re busy focused on what Qualtrics is going to do, and how we’re going to dominate, and everything that we’re going to come up with. That will take care of themselves. I can’t spend much time worried about what Google’s going to do.

Brendan: One of the things we’re big on at The Motley Fool is how culture plays into the performance of a company. When you look back, some of the biggest winners of the past couple of years — companies like Whole Foods Market, Inc. (NASDAQ:WFM)Netflix, Inc. (NASDAQ:NFLX),, inc. (NYSE:CRM) — are also coincidentally the highest-rated on

We don’t think that’s a coincidence. Could you talk about how Qualtrics’ culture plays into your strategy and also, especially with such a fast-growing company, how you bring so many people in at the same time and still preserve that culture?

Page 1 of 3