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Seven years into the life of his company, Fred Luddy faced a question all great founders eventually ask themselves.

Fred and Doug Leone tell the story.

Fred Luddy
Founder, ServiceNow

I had received endless calls from other firms. But Sequoia took a different approach, and wrote a thought-provoking email that made me want to meet them.

Doug Leone
Sequoia

We knew we liked the company, and our partner Pat Grady somehow got Fred’s attention, and was able to get us a meeting.

Fred Luddy

When I first met with Doug and Pat, I was taken aback by what they said about how they help companies. In fact, they immediately referred someone to help us solve our hosting issues. I knew we wanted them as partners.

Doug Leone

We asked Fred what valuation he wanted and we hit the bid. Zero negotiations. We had never seen references where a piece of software spread through organizations like this. At our first board meeting they beat plan by 70 percent. Second board meeting, everybody’s clapping — another huge quarter. But all of a sudden Pat Grady and I got very concerned, because it was clear the internal workings of the company weren't keeping up with these tailwinds in the market.

Fred Luddy

Doug and Pat looked at the operational metrics and realized we couldn’t keep up with the revenue growth over time. We just didn’t have the team in place. And furthermore, I’d begun to feel I didn’t have the right skill set to be CEO. I’m a programmer — that’s what I’m passionate about. The company had grown to the point that I felt like I was being ineffective.

Doug Leone

So what do you do? You have a high-performing company that’s beating plan like crazy. You have a wonderful and special founder. Everyone’s cheering. And I remember taking Fred aside in private and saying, “Look, we’re actually concerned about these things.” Fred was at first surprised, but we were able to clearly explain what would happen in a few quarters if we did nothing.

Fred Luddy

After a board meeting Doug came to me and said, “Fred, we’re going to stand behind you no matter what. But you need to decide whether you want to be a CEO or a product guy.” It was exactly the right thing to counsel me on, and it was something I’d struggled with for months. But I really didn’t have an answer.

Doug Leone

Pat and I decided to bring Fred up to meet some of the great CEOs and VPs here in the valley — real high-performers at huge, growing companies — to see what their organizations were like, and to help him figure out what he wanted his role to be at ServiceNow. We were prepared to back him in any decision he made, but we asked him to please make a decision.

Fred Luddy

They took me all around the Bay Area to talk to the head of product at Palo Alto Networks, and the CFO of Polycom, the CEO of Network Appliance, the VP Engineering at Google, and two or three other executives…And it was totally enlightening.

Fred Luddy

I turned to Doug and said, “Doug, my God, we have no one like these people in our building. And furthermore, I’m not like Jeff Miller at Documentum, or Dan Warmenhoven at NetApp. I’m going to be the product guy. I don’t have the skills to be CEO — and furthermore, I have no desire to even acquire them. We need a CEO.”

Doug Leone

That’s an incredibly tough decision for any founder. But it was one that only Fred could make. We could help him think it through, but it had to be the founder’s choice.

Fred Luddy

It was a seminal moment for the company and, for me, the most liberating thing that’s happened in my entire career. But Pat and Doug never pushed me one way or the other. They were clearly going to stand behind me either way, and fortunately, I made the right choice.

Doug Leone

Fred and I led the CEO search and it was important that Fred choose his business partner. We recruited Frank Slootman and he brought his complete team from Data Domain and in a period of six months we had a complete set of executives who had worked together. Fred had found his business partner.

After leading a delicate search to find his new partner and CEO, Fred became ServiceNow’s Chief Product Officer in 2011. In June 2012 ServiceNow went public on the New York Stock Exchange, where it trades under the memorable ticker symbol NOW with a market cap of $12 billion.

ServiceNow
ServiceNow offers cloud-based services that automate enterprise IT operations.
Milestones
  • Founded 2003
  • Partnered 2009
Team
  • Fred Luddy
  • Frank Slootman