In 1995, 19-year-old Adam Pisoni left college and moved to Los Angeles to launch a web-design startup, Cnation. Full of what he calls “naïve optimism” and the belief that nothing was impossible, Pisoni threw his life into the business, working 100-hour weeks. The company reached 30 employees and $2 million in sales, designing websites for startups and big-name clients such as Honda and
Closing Cnation was “devastating,” Pisoni says today. “It felt like the loss of a family member and sent most of us into a depression that took some time to get out of.”
Confidence had played an important role in spurring Pisoni to launch Cnation. He says having confidence in a company’s mission is critical for a founder—it’s impossible to get through the trials and tribulations of a startup without it. But after Cnation, he became more skeptical of his outlook for success. This combination of confidence and doubt led him, 11 years later, to carry Yammer, a company he co-founded and helped lead, to a $1.2 billion exit.
Pisoni was born on Long Island and moved to Phoenix when he was four. He dropped out of high school in his junior year, after he felt that he wasn’t learning, and enrolled directly in Scottsdale College. During his first year there, he decided he wanted to start a business.
After launching a few short-lived ventures, including a real estate website, he started Cnation. When it failed, he moved to Mammoth Lakes, a mountain town not far from Yosemite National Park, and worked at a snowboard shop for three years.
In 2004, he got pulled back into the tech world, becoming director of web engineering at Shopzilla, an e-commerce company. In 2007, he joined Geni, a genealogy website founded by David Sacks, an early
Over the next year, it became obvious within the tech industry that social media was going to make the jump from the consumer world into corporations. Sacks told Pisoni about his idea for Yammer—a
Yammer was early to market, but the competition was fierce from the start. Within a week of Yammer’s launch, three competitors entered the market. After a year, there were 20 more.
When growth didn’t come immediately to Yammer, Pisoni’s confidence kept the team steady. “One of the challenges of leadership in a situation with uncertainty is that there’s a set of emotions as a leader that you can’t share with people on the team,” says Zack Parker, former senior director of engineering at Yammer. “You can never be visibly worried. Adam did a phenomenal job of being the anchor around which the positive culture of Yammer could build.”
Max Ventilla, a serial entrepreneur and founder of education startup AltSchool, says there are two types of confidence. Some people are “constantly self-confident,” a trait often found in first-time entrepreneurs. “There’s a power to that,” says Ventilla, although it can also leave you blind to certain risks and pitfalls. The other type of confidence is an “iterative growth-mindset approach. The odds are stacked against me now, but my organization is going to keep getting better and succeed.”
Pisoni falls into the latter camp—he has strong confidence, but he also has self-doubt and is a realist. Pisoni explains, “I think there’s a cognitive dissonance that an entrepreneur has to hold in their head—irrational belief in the outlook of success with a
By the time he was leading Yammer, Pisoni had become humbler and more skeptical of any given initiative’s success. For every product feature or sales strategy Yammer pursued, Pisoni and the team took a contrarian, hypothesis-driven approach. They viewed each effort as an experiment. Pisoni still holds this mentality: “In everything we do, we have to assume we could be wrong. If we jump into things thinking we’ll generally be right, we might move forward for too long without changing.”
This approach allowed Yammer to shift directions quickly when necessary. In 2010, David Sacks moved the company from Los Angeles to San Francisco to expand its access to talent. Although the move was good for the startup, the Yammer rank and file initially felt like outsiders in the new location. Many Silicon Valley companies were packed with people who had attended Stanford and Ivy League schools and came from wealthy backgrounds, but Yammer had a different makeup. In addition to Pisoni, both Zack Parker and vice president of engineering Kris Gale had dropped out of high school. “In our naïve opinion at the time,” says Gale, “we were responding to a culture of entitlement. We had something to prove—that we can do this and we can do it as well as anyone around us.”
The team brought its traditions to San Francisco. They had a ritual of “shipping the product”—releasing software updates and new features—on Friday nights. When it started, Pisoni chose a song to signal the release, “The Final Countdown” by 1980’s rock band Europe. “It became an event and created this momentum,” says Parker. “People would practically not go out on Friday night, they’d stay at the office. They wanted to wait for the deploy.”
After the move to San Francisco, Pisoni and Sacks started pushing harder on the gas. Instead of planning for user-base growth of 2X, they started envisioning growth of 10X. They focused not just on building product adoption, but on encouraging their clients to develop a more collaborative, transparent, and agile way of working.
A few years after its launch, Yammer had surpassed small and mid-sized competitors and found itself competing against some of the biggest tech companies in the country. Pisoni believed it was a market where only one or two players could survive. Even though Yammer had just raised another $85 million on top of its earlier $57 million in venture capital, Pisoni knew they could run out of money. Salesforce and
About every six months, a large company would approach Yammer to discuss acquiring it. When Microsoft came calling, Pisoni and Sacks didn’t take the company seriously. But it gave a convincing argument about how it cared about Yammer’s mission. So Pisoni, Sacks, and Yammer CFO Mark Woolway agreed to talk.
Pisoni says the motivation to consider selling was a combination of fear of failure and a belief that Microsoft could accelerate Yammer’s progress. Yammer’s business wasn’t profitable, but given its trajectory, Pisoni thought it was financially sustainable. His larger fear was that the market was changing, and once a bigger company such as Microsoft entered, Yammer could have been squeezed out. “It was more like, let’s start talking to them, go through the motions, see how it feels when we try it on, if we like them,” Pisoni says. “And then one day you sort of are committed to it, and realize it could happen.”
Microsoft offered to buy Yammer for $1.2 billion, a huge premium for a 4-year-old startup that had 2011 sales of maybe $25 million, around 250 employees, and no profits. “It seemed on some level too good to be true,” says Pisoni.
But by mid-2012, Microsoft and Yammer had agreed to the deal, and all that remained were signatures. Pisoni was in New York to give a talk, and before he got on a plane back to California, Sacks called and told him to postpone his flight. The deal was almost ready to close, and Sacks needed Pisoni to be available at a moment’s notice to sign.
Pisoni told his hotel he needed to stay another night. They didn’t have a regular room available, but they were doing business with Yammer and wanted to please Pisoni, so they gave him a $5,000-per-night suite. A day passed, and the paperwork wasn’t ready. The hotel moved Pisoni to an even bigger suite that had an enormous deck, where Pisoni waited as the evening wore on.
Around 3:00 AM, he told the hotel he needed one more night. They were having an event in the big suite the next day, so this time they moved him to a tiny, “broom closet room,” in Pisoni’s words. The next afternoon, he decided to step out and visit the Empire State Building, which was across the street. At the ticket desk, they told him it was $35 to enter, and $45 to go to the top. “I’m like, $45? That’s crazy, $35 is fine. Which is funny, because we were about to close this billion-dollar deal,” he says.
He was on line to go in when Sacks called him and said it was time. Pisoni went back to the hotel and faxed a signed copy of the paperwork. Shortly after, he received an email with Microsoft CEO Steve Ballmer’s signature. “So I was just sitting alone in this little hotel room, and the deal had been done. I opened the mini fridge, and there was a little bottle of Johnnie Black. I poured myself a little glass, and I toasted, and then I took a drink.”
Back on the West Coast, Sacks invited several of the founding team members to his house for dinner, including Kris Gale and Zack Parker. They were all sitting down at his dining table, when Sacks broke the news.
Despite the big payday to come, no one’s first response was elation. They had become extremely attached to the company. And they had not yet proved that they could build a successful, sustainable business. “No one at the table wanted to do it,” says Parker today. Gale has a similar account. “It was heartbreaking at the time. We were so invested in the Yammer vision and we believed in what we were going to achieve long term so deeply that we were all pretty bummed. I think my first words to Adam were something like, ‘So this is it?’”
But Pisoni’s reaction was different. Gale explains, “He was just like, okay, this is the next challenge. Let’s keep going. He may have been a step ahead of us on that.”
On June 25th 2012, Microsoft announced that it would acquire Yammer for $1.2 billion in cash. At the time, Pisoni felt like he was letting people down. “I was left with a lot of guilt, feeling like I had betrayed people’s dreams, even if it was the right thing,” he says. The project of building Yammer was incomplete, and employees feared that Microsoft didn’t understand its mission and culture.
But Pisoni, who stayed at Microsoft as an executive until the end of 2014, believes it was the right move to sell. Whether Microsoft got its money’s worth is another question. According to RBC equity research analyst Ross MacMillan, Yammer “probably never achieved the adoption they thought it would achieve 4-5 years ago.” But he also adds, “They never wrote it down” or declared it an impaired asset, an accounting practice that would indicate Yammer is worth significantly less than what Microsoft paid for it.
Since the acquisition, a competing communication platform, Slack, has gained a more fervent following and a higher valuation, $3.8 billion. Nonetheless, Pisoni still believes Yammer was a good buy for Microsoft. He says the user base is still growing, although that growth has likely slowed as the tech giant focuses more on integrating Yammer features into other Microsoft products. Yammer also helped Microsoft modernize its software development approach with processes such as rapid iteration and A/B testing for validating the success of new features.
After leaving Microsoft in 2014, Pisoni spent a year researching U.S. education in preparation for his current startup. It’s called Abl (pronounced “able”) Schools. It is building software that facilitates staffing and scheduling for school administrators. Coordinating learning for hundreds or thousands of students is a complex logistical problem, and the operating model for schools hasn’t changed in centuries. When a school wants to implement a new approach such as teacher teams or block scheduling, managing the scheduling changes is extremely difficult and time-consuming. Abl’s software enables a school to visualize what its schedule and resources would look like under a new instructional approach.
In January, Abl closed $4.5 million in funding. “Our path will be hard,” Pisoni wrote recently in a post on Medium. “We will need the confidence to work closely with our schools and partners to try bold new ideas, but we’ll also need the humility to realize we’re often wrong.”
Follow Jeff on Twitter @JeffKauflin.
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