The Twenty Minute VCDavid Schneider: Why the Worst VCs are "Seagull VCs" & VC Value Add - Is it Real? | E1200
CHAPTERS
Seagull VCs and the only three reasons enterprises buy software
David opens with a blunt framework for why companies buy: to make money, save money, or reduce risk (avoid the "front page of the newspaper"). He also introduces the idea of “seagull VCs” who show up, create distraction, and leave—setting up later discussion on board value-add.
- •Enterprise buying motivations: make money, save money, reduce risk
- •Security spend often maps to reputational/risk avoidance
- •Definition of “seagull VCs” and the distraction they create
- •Board members should have relevant, firsthand operating experience
Operator highlights: Data Domain from $0 to IPO to hostile acquisition; ServiceNow to $5B
David recounts the two operating chapters he’s most proud of: scaling Data Domain from zero revenue through IPO and acquisition, and growing ServiceNow from ~$80–90M to ~$5B in revenue. The segment establishes his perspective as a go-to-market leader who has lived through hypergrowth and scale.
- •Joined Data Domain at $0 revenue; reached IPO and ~$1B scale
- •Acquired by EMC after a competitive, hostile process
- •Joined ServiceNow around ~$80–90M; left at ~$5B revenue
- •Long operating tenure informs his investing and board approach
Inside the Data Domain hostile deal: bidding war tactics and value creation
David describes how NetApp’s signed agreement was disrupted by EMC’s aggressive hostile bid, including public ads and direct outreach tactics. He details how the highest bid won, why the asset was undervalued, and how growth accelerated post-acquisition.
- •EMC launches hostile bid while Data Domain is under definitive agreement with NetApp
- •Aggressive tactics: WSJ ads, trucks around the office, persistent pressure
- •Valuation context: ~$2B for ~550M revenue, ~75–80% margins, ~80% growth
- •Post-acquisition execution: drove to $1B then $2B revenue inside EMC
Hindsight lessons: finding the right use case and winning with simple integration
David explains that the first version of Data Domain’s product was essentially a paid beta, and early learning came from customer conversations. The key pivot was positioning around recovery speed (not “backup”), plus making the product easy to adopt without forcing ecosystem changes.
- •Early product wasn’t fully right; rapid customer-driven iteration mattered
- •Reframing value from “backup” to “fast recovery” unlocked demand
- •Nail initial use cases where you can win consistently
- •Integration matters: plug into existing workflows instead of forcing change
- •Simplicity often beats complexity in enterprise adoption
Tool integration and budget reality: add vs. remove a line item + creating urgency
Harry probes whether products must replace budget lines to succeed; David argues every new solution must clearly justify what it replaces or how it improves outcomes. He then moves into sales discipline: joint value discussions, avoiding end-of-quarter slips, and forecasting reliability as a leadership bar.
- •New tools must answer: what do we replace, and why is this better?
- •Three buying reasons applied directly to budget approvals
- •Creating urgency requires proving value vs. competing internal priorities
- •ServiceNow’s “value prompter” and joint value discussions
- •CRO standard: call the number 90–180 days out with tight accuracy
Competition as a feature: win where spend already exists and rivals are “dead already”
David reframes competition as inevitable in worthwhile enterprise categories, and often an advantage when incumbents are complacent. He uses ServiceNow’s battles with legacy vendors (BMC, HP Software) during the cloud transition to show how focus and GTM intensity can “decimate” a market.
- •In good markets, competition is normal—especially in enterprise
- •Easier to unlock known budget than create a brand-new spend category
- •Cloud transitions can make incumbents structurally disadvantaged
- •GTM intensity + clarity of purpose can rapidly take share
- •Not all competitors are equal; assess their incentives and trajectory
Building a killer GTM team: ICP clarity, playbooks, and hiring hungry “misfit toys”
David outlines how to reboot or maintain sales momentum: define the ICP, codify stories and objections, and train with clear playbooks. He emphasizes recruiting people with something to prove and a willingness to work hard, and shares his favorite interview prompt to uncover grit.
- •Start with ICP: who you sell to and what pains you solve
- •Codify narratives: customer stories, transformation outcomes, objection handling
- •Training + onboarding systematize performance (playbooks)
- •Hire for hunger: “chip on shoulder,” best days ahead, “misfit toys” culture
- •Interview question: “What are you proud of that you had to work hard for?”
Leadership transparency and empowering the edge: bottom-up ideas become new products
David argues people can sense the truth, so leaders should address issues head-on while empowering those closest to customers and problems. He tells the story of an SE-driven HR use case at ServiceNow that became a massive product line by listening, prototyping, validating, and then building.
- •Transparency builds trust; avoid artificial morale management
- •Reverse the pyramid: empower people closest to customer and tech
- •Practical empowerment: let frontline leaders run discovery and demos
- •HR use-case story: customer listening → proof of value → productization
- •Innovation often comes from field signals, not top-down roadmaps
ServiceNow hypergrowth mechanics: hiring 150 fast, pricing changes, and speed of decisions
David explains the operational math of scaling: capacity planning, aggressive hiring, and creating the conditions for rapid ramp. He also highlights decisive leadership—moving fast, accepting imperfect decisions, and the discipline required to prepare for an IPO.
- •Capacity gap: 16 reps couldn’t support $100M new business goal
- •Hired ~150 people in <90 days and still hit the number
- •Market pull + pent-up demand enabled rapid ramp
- •Pricing reset: reduced discounting and effectively raised street price
- •Speed as advantage: fast decisions beat perfect decisions made too late
Hiring dilemmas: when internal promotion beats external ‘senior’ hires
David shares a key mistake: bringing in an external senior GTM leader who was culturally misaligned with ServiceNow’s high-commitment forecasting and execution standards. He advocates for mentoring internal talent and promoting high-potential leaders who have the energy and will to grow into the role.
- •Biggest wrong decision category: people/hiring
- •Cultural mismatch: tolerance for missing numbers vs. execution culture
- •CRO’s core promise: credibility with CEO/CFO on future quarters
- •Founder/CEO advice: back internal leaders and coach what they don’t yet know
- •Bias toward developing people to their potential instead of swapping them out
Market size and timing: why Gartner got it wrong and how markets expand
Harry presses on market sizing after Gartner capped ITSM at $1B during ServiceNow’s IPO process. David explains why markets grow when technology gets easier (on-prem to cloud, consumerization), and how he validates timing by testing founder narratives through external diligence.
- •ServiceNow IPO context: went public around $18/share; now vastly larger
- •Gartner’s market cap thesis failed; market expanded far beyond estimates
- •Markets grow when solutions become easier and more accessible
- •Timing risk: being too early is real and hard to detect pre-investment
- •Validate “why now” via external reference calls and research
Diligence as a sales skill: discovery, probing, and getting past the first answer
David connects his sales background to investing: the best diligence comes from conversational discovery and layered questioning. He emphasizes that truth often appears after the second or third question and that silence can be a powerful tool to encourage candor.
- •Sales discovery maps directly to investment referencing and diligence
- •Ask how customers justify purchase internally and what budget it displaces
- •Probe beyond first answer; deeper questions surface real constraints
- •Comfort with silence improves the quality of information
- •Diligence is about motivation and decision mechanics, not just statements
Segmentation mistakes and the multi-product play: avoid low-end traps, follow customers instead
David recounts ServiceNow Express as a down-market misstep—hard to simplify, costly to support, and strategically distracting. He contrasts this with successful expansion driven by existing customers using the platform in new departments, then productizing those proven behaviors and building new business units.
- •Down-market attempt (ServiceNow Express) created support burden and unhappy customers
- •Mistake visibility: clear in ~6 months, decision to exit took ~18 months
- •Strategic lesson: let low-end competitors fight; stay focused on core where you win
- •Right expansion signal: customers already using product in new ways
- •Multi-product execution: business units + new personas + new selling motions
Running boards and creating real VC value-add: controlling agendas and avoiding “seagull” behavior
David expands on what makes boards helpful versus distracting. He advocates management-led agendas, disciplined pre-reads, and focusing discussions on a small set of green/red priorities—plus choosing board members with relevant operating experience instead of résumé board-collectors.
- •“Seagull VC” pattern: show up, create work, distract, leave
- •Operator’s defense: control the board agenda and the conversation scope
- •Use a simple operating review: top 3 greens and top 3 reds
- •Pre-wire board members; don’t surprise them, demand pre-read compliance
- •Select board members for relevant experience and real execution history
Great board members and quick-fire lessons: feedback, culture, and fear of failure as a driver
David names board members he most enjoys working with and explains what makes them effective (wisdom, practical thinking, responsiveness, customer obsession). In quick-fire, he shares leadership beliefs about people, the value of real-time feedback, and a formative lesson from Slootman on repairing trust and building culture.
- •Board standouts: Doug Leone (wise, demanding/patient, connector), Mike Volpi (operator mindset), Aneel Bhusri (customer discovery discipline)
- •Travel leadership lesson: maximize time with customers and employees; invest in relationships
- •Feedback should be frequent, direct, and treated as a gift
- •Culture lesson: fix issues person-to-person; avoid trust-destroying email escalations
- •Personal driver: fear of failure fuels preparation; convert worry into learning cycles
