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With more than 300 operations in 35 countries, - Technology companies have certainly been more than the rage the last two decades now.

Really since Y2K and the tech bubble burst, so to speak, tech companies have had a love-hate relationship with investors in some cases, and certainly those that create news headlines.

And of course now the tech-fueled AI, artificial intelligence discussion, seems to be reaching even further.

Welcome again to the most widely watched and the longest running source of Carolina business, policy, and public affairs seen across North and South Carolina for more than three decades.

North Carolina's Triangle is a serial producer of tech companies, and our guest with his company is no exception to that.

In a moment, we are joined again by Pendo Co-Founder and Chief Executive Officer, Todd Olson.

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Providing the foundation on which our communities improve and grow.

(energetic music) On this edition of "Carolina Business Review" an executive profile, featuring Todd Olson, CEO and co-founder of Pendo.

(energetic music) - Hello and welcome again to our program.

Thank you for watching and supporting.

Happy spring.

Joining us now is somebody that knows a little something about technology.

And I'd be a little flippant about that, but he is the co-founder and chief executive officer of Pendo.

We welcome to the program, Todd Olson.

Todd, welcome.

Thank you again for joining us.

Good to see you.

- Good to see you as well, Chris.

Great to be here.

- Todd, I know AI is something that has broken, now, out into the public lexicon in the conscious about artificial intelligence.

There's a lot of consternation about it.

There are some that are very excited about it, but either way, this is not, while this is a public dialogue for sure, this is not new.

What's important to know about AI now that it's kind of broken out into what's being talked about?

- Well, first off, you're right, it's not new.

And people have been developing AI technology for years, and there've been AI startups and tech companies for years.

I think what is new is that the advancements in the technology have grown significantly in the last five years.

And then, by releasing technologies like ChatGPT, now the public can touch and feel the power of that very, very directly, I think for the first time.

And I think people have been blown away and just surprised by its capabilities, and we're seeing now a groundswell of technologies and just incredible rapid innovation led by some of the largest tech companies in the world.

So I do think it's very, very exciting.

I think it's going to have a major impact on the economy, on companies.

But look, I think there's true concerns.

I think, obviously, one of the biggest concerns that I hear, and I think is is interesting in within the public debate, is how does it affect jobs?

How does it affect the future professions?

And we've seen this with other technologies.

You know, the concept of job retraining.

When we have some level of technology revolution in certain markets that makes certain functions simply obsolete.

I think AI will have that level of impact on the economy.

I think the second big piece is around privacy and security.

And then there's a lot within that framework.

Everything from regulatory issues, you know, how's AI gonna affect different countries if different countries have different, say, positions towards this technology?

And then just, you know, this technology in bad actors' hands is a little scary.

We've already seen a lot of security being the result of what we call human engineering, like impersonating people, things like that.

AI just makes it much easier to impersonate, to fake, and it will lead to probably some scarier things that occur here in the future.

- But you know, you're more than a casual observer in this industry, and I'm talking about technology in general.

So, do you worry about it?

Do you think the acceleration or the velocity around what AI's gonna do and, as you call the bad actors, I'm worried about X.

Or are you not worried about X?

- Look, I'm a tech optimist and I'm an optimist in general.

I think it's hard to start companies and not be optimistic.

So do I worry?

No.

Honestly, I think what it is is an incredible opportunity.

And I see all these disruptive technologies as simply opportunity.

So every challenge I cited, there's gonna be a company that solves that challenge.

There's gonna be a solution to that challenge.

Like, I am confident that when presented with problems, that if you look in the course of history, we've found ways to rise to those challenges, and come up with novel solutions to them.

So yeah, I think there's gonna be new security companies that are really, really good at detecting things that are generated by AI.

I think there's gonna be companies that are pioneers and how we think about privacy of our data.

And we've already seen privacy, the conversation around privacy did not really exist, say 10, 20 years ago.

And now it's fundamentally different the way we think about our data, and what data is ours, and how protected it is, and how we have to give consent to these things.

And I think we're gonna see more and more innovation there.

I think the concept of a lot of jobs having some kind of co-pilot, you know, using...

I realize it's a Microsoft product, but I like that term, to be someone alongside us helping us do our jobs, whether they're doctors, or lawyers, or like, the reality is that everyone in every role that I've ever met, there's something that's part of their job that's sort of rote and mundane.

And if we create automation, it's only gonna be additive to the economy.

So, no, I'm an optimist.

- Congratulations.

So you've got annual reoccurring revenues of over 200 million now.

You've got a positive cash flow quarter.

You've got 75 of the top 100 companies that use your product.

And the good news goes on for you.

So taking not just AI, but taking where technology is now, the wind that you have at your back, where are you headed for the next three years, five years?

What's the plan?

- Well look, I think companies like us, we're very growth focused.

So it's continuing to focus on where we can drive high growth.

From a technology perspective, yes, we are incorporating AI into our products.

So we announced last May kind of Pendo's AI strategy, and we started releasing technologies against that.

I think you'll see us release new AI products this year, probably at least two, maybe even three products.

And some of it is, like, one of the interesting things is like, there's a lot of conversation around AI.

AI needs data for training.

And I don't know if you, I think all of us saw the most recent Reddit IPO.

Just very recently, very successful.

And it's interesting, Reddit's been around for a very long time, but what has gotten people excited about this company is that they're actually licensing their data to companies like Google to train AI models, which is a very, very different business opportunity and growth opportunity for them.

So, super interesting.

And then Pendo has a very similar opportunity in that, I don't know that we're gonna necessarily license it to third parties, we won't do that, but leveraging ourselves to drive generative applications.

So for example, we know when people get stuck in software applications, we know when people are getting frustrated.

Like, can we start predicting how to help those users accomplish their tasks, get them doing what the software wants them to do.

So I think, you know, our whole vision is we need, like, we see a world where software's easier to use, and software's affecting all of our lives.

And I don't care if, again, you're a doctor or you're a banker, or you're using your bank, you're gonna be interacting now with an app far more than you're interacting with a human.

And a lot of it's frustrating, it's hard to use.

So like, if Pendo can leverage this technology to start anticipating that, or providing insights to teams, like, "Hey, if you just fix this three or four things customers will be able to check out better through that."

I mean, huge opportunities for that.

And right now people use products like ours, you kind of have to be a little more sophisticated in like, how to know what questions to ask.

I see a world where you can be far less sophisticated and we'll just basically tell you what areas need to focus on.

And that will have, I think, a huge impact for our customers and a huge impact for those industries.

- I don't want to keep wearing you out about AI, but I do wanna do this last question about this.

And I'm not telling you anything Todd.

It's already hyper competitive in technology as it is in this suite of software products and experiences that you have.

It's already, it takes all your energy.

Does AI, and does a dialogue around, and I'm gonna still call it the fear of AI, that's broadly that most people have a fear of AI, if they do, does that bring unwanted, maybe not right to say it, but does it bring unhelpful, not helpful attention and scrutiny to an industry when Apple is under a DOJ investigation around their store.

You know, even even Microsoft back in the 1990s was DOJ.

And all of these things, does it bring unneeded attention to an industry that's already pretty competitive?

- Well, it certainly brings attention to it.

And whether it's needed or not isn't necessarily for me to decide, per se.

I think, look, I don't mind attention.

And we're fully transparent with what we do with our data, how we leverage it, and I think it will stand the test of scrutiny when looked upon.

And I actually would rather be scrutinized and be transparent to help increase confidence in the technology.

Because that's when it's actually gonna really stick.

It's gonna stick when people are confident.

And it's interesting, 'cause what makes the headlines around AI is all, of course, typically makes click-baity headlines, which is all the negative applications.

Like, oh, it hallucinates.

And you know, I saw some airline accidentally got some discount that was unexpected.

Yeah, look, it's imperfect, as all technologies are imperfect.

But like we, we've seen this before.

It will get better.

It will get a lot better.

And those imperfections will start becoming fewer and fewer.

And again, I think scrutiny's a healthy thing, and when our customers hear about what we're doing AI, yeah, some of the larger companies, frankly, are scared.

They're like, we have customers, they're allowed to turn off AI, like within their use of Pendo, just because their company's not comfortable with it yet.

You know what?

That's okay.

You know, we provide the capability to turn it off.

You don't wanna use it, turn it off.

But I think over time our goal is to help partner with those larger organizations to be more transparent about how we're using it to help 'em understand how this is ultimately net positive for their business.

So I see it as a classic, you know, sort of evolution of this technology, and it'll take time to get to some of those late adopters so they start taking advantage of it as well.

- Early last year when there was more than just whispers, but people started talking about, well, it's gonna be a possible recession.

How is this economy gonna slow down?

When is it gonna pull out?

Is it gonna be a soft landing?

Et cetera, et cetera.

By and large tech companies were the first outta the gate when it came to announcing furloughs and layoffs.

And it was in some cases very large, tens of thousands.

And I know you know this.

The question I have though, Todd, is were those layoffs, are the furloughs in the tech industry, more about productivity increases in those companies?

Or are they right-sizing based on where they wanna be with revenue and the amount of employees per revenue?

- Yeah, it's the latter, not the former.

And it is even a little more nuanced than just purely revenue.

I think it's, it's right size to growth.

You know, a lot of us, we essentially built capacity to grow faster.

And it's a classic trough.

You have to hire ahead of how you want to grow.

So you build this model, you say you want to grow certain percentages.

And when those percentages shift based on buying environments, like it is the right thing to do to sort of right-size that company to what the opportunity is.

And I think that's what we've seen.

I think the other thing that you didn't mention within that is in 2021 with interest rates basically near zero, the cost of capital was very, very, very cheap.

So I could, even if I wanted to carry more headcount, I could just go out and raise money because it was basically, basically it's free.

So when money's free, you tend to invest more aggressively in the hopes that you are going to attain growth.

Now when money's not free, you start getting much more judicious of right sizing to what the growth opportunity actually is.

And that's what you saw for tech companies.

Instead of them going for, you know, very, very, very high growth, they started looking at what they thought the market would give them in terms of growth opportunities, and then they right sized their business to realize that opportunity.

And us included.

You know, I think all of us when we started the last few years, we started adjusting, and I think we started adjusting even as early as 2022.

And in 2022 we sort of saw some adjustments and we started rightsizing first our hiring plan.

So like, let's not grow as aggressively as we had in prior years.

And then yeah, we had to make some adjustments as well based on I guess what the market's giving you.

And it's also interesting that now we're seeing, you know, one of the classic terms we like to use is, you know, 20 is the new 30 with respect to growth rates.

So like the fastest growing companies were 30% plus, now 20% plus are the fastest growing companies.

But that economics, you know, essentially all result in, again, a general right sizing in the market.

- You know, you so eloquently talked about the cost of capital and the cost of money within an organization, and that does increase the cost to operate for you and others who use money.

So as you model out, as you look at the next year, you look at the next five years, whatever happens in presidential politics, how do you model where Pendo should be?

How do you get to where the puck is?

And considering that the cost of capital is higher, and do you think it's going to drop?

Or even if it doesn't drop, can you operate at a very healthy ROI?

- Yeah, look at our size and scale at a company around, you already cited at $200 million, or over $200 million.

You also cited the fact that we're now generating cash.

And look, if you had told me years ago that we'd be generating cash by now, like, you know, no, it would've been imprudent for me to do it a couple years ago because we were growing so quickly and that was the focus.

But now, because the cost of capital is high, what you see us doing is like, look, we're fine with the capital we have.

We don't actually need to raise more capital to achieve our plans.

So the way we look at our plans now is like, with the capital that we have, we're still investing and we're still growing, but we're gonna moderate that growth based on the capital that we have at the company because we don't want to go out and raise more capital.

Now if the markets improve, and the cost of capital reduces, and we think that we see an opportunity to grow a little more aggressively or faster, could we go out and raise capital?

Yeah.

But that's something that we will do that when the market adjusts, and when we see that opportunity open up.

Right now we don't see it.

And we're not forecasting to see it, regardless of what happens in presidential politics.

So like, our belief is we plan on operating the business based on the current macro environment.

And our assumption is it will not improve.

We don't need it to improve to continue achieving our goals.

Now if it does improve, you'll probably see us lift our goals and probably go a little more aggressively.

That's what any, I think, well-run business would do.

But right now I think the wise choice is a sort of assumed things are gonna be sort of status quo.

And look, we're achieving success in this environment.

It may be a little slower than, say 2021, in terms of like, IT purchasing.

But people are still buying software, they're still investing in technology.

We think it's actually a very positive market to operate in.

I think look, with unemployment being as low as it is, sort of hard to say that we're in a recession, and I think we like, it's kinda hard...

I mean, I think as long as unemployment maintains there, I think the economy's gonna be relatively healthy.

And that that's sort of what we're forecasting going forward.

- How do you fill the roles that you need?

Is it still a challenge, or do you have plenty of candidates to choose from now?

- Look, hiring people is always a challenge in tech.

So, if general unemployment across our economy is low, tech is only lower than that.

So, but having said that, it is easier than it was say two years ago.

And so what that means is, you know, we have the opportunity to be a little choosier.

Take a little more time.

And we have actually been going through a nice hiring sprint, so to speak, in the last few months.

And we're very, very pleased the quality of candidates that we're meeting.

And I think we've hired very, very well in the last quarter or so.

So look, it's always challenging.

I think it is easier now.

And we also haven't seen probably the wage inflation in tech that we saw as intense as it was in say, prior parts of the economy back in 2020, 2021.

The wage inflation was just crazy.

So that's something we also had to factor into all of our financial plans.

And that, we think, is sort of tempered down just a tad.

- You don't seem at all rattled about if the economy goes stronger or not, that you're prepped for it.

I would ask you the same question around presidential politics, not the outcome, not who you like, not any of that.

Are there contingency plans?

Do there need to be contingency plans?

Whomever wins the White House, so if there is a new administration or not, is there some challenge to the tech industry given some of the things that we talked about at the top of the program?

- Look, I think generally, regardless of who wins, I think the economy, I think tech's gonna be fine.

I think one of the fascinating things is somehow one of the few, say issues, of both Democrats and Republicans agree on is they both seem to be sort of anti-big tech.

(laughing) So like, I don't see a lot of difference in opinions across the aisle lot, and like people's perceptions around tech, and so maybe that's a positive thing, or at least a consistent thing.

Look, you actually referred to the Apple DOJ case.

I think what happens with the DOJ is probably one of the most interesting things.

The DOJ has been much more aggressive in terms of antitrust.

They have blocked certain acquisitions.

I think it'll be really interesting to see what happens going forward because there's a number of companies that something's going to have to happen to them.

There's gonna need to get liquidity to come back and cycle back to those investors, to cycle back to their limited partners.

And if the DJ blocks that from occurring, it's sort of an unnatural thing to occur.

That's probably not good for the economy long term.

Like what we don't want is a number of zombie companies that shouldn't be independent companies that are being forced to be independent companies because the government's not letting them be part of sort of the natural outcome that they would be part of.

And like, you know...

So when the IPO markets open up, are we gonna have, I mean, what's that actually... Look, not all these companies can be public companies, so what the heck's gonna happen to 'em?

Like, they probably should...

There there should be more M&A.

So that's the thing I pay most close attention to.

And that's the thing that maybe I personally have more strong opinions about politically, is I think we're gonna have to get to more rational M&A environment to basically settle out all of these companies that were created that something has to happen to them.

- So speaking of M&A, and I don't wanna use the term exit, because I know as early investors in tech companies, they have an exit strategy.

I don't wanna say that with you, I want to say what's the next possibility of a capital structure for Pendo?

Would it be an M&A on the private side?

Would it be an IPO?

Where do you see your growth, and where do you think the spirit of Pendo would be best fulfilled?

- Look, I think I've been fairly clear about this you know, throughout the company's history.

Like, my goal and my management team's goal is to hopefully grow this to be a public company.

You know, if and when the markets, the markets will open.

It's not an if, it's really a when.

So when the market's open, we're hoping that we can present a company that is very favorable to public investors.

I mean, I think that's the best next, you know, essentially financial milestone for Pendo.

Now look, it's not the only one, and we will entertain everything.

I have a fiduciary responsibility for my investors to look at any and all alternatives.

So, you know, I mean, could it be a private, M&A transaction, or even private?

I mean all of these things are certainly on the table, but no, I think if you ask me what my hope and my goals are, yeah, we're looking towards the IPO markets.

I spend a lot of time with public investors.

We know our numbers.

And frankly our market opportunity is huge.

And we are, honestly, at the very early days,.

I mean, you know, when you have a $10 billion opportunity and we're 200 million, there's just a lot of work to be done.

Like, I have a lot of energy.

I feel like in many ways we're just getting started.

So it would be awesome that if we can, you know, achieve a lot of those goals as the public company.

So I think that will be, you know, I think we have the capability of being a successful one.

But we'll see.

There's a lot of work to do to get there.

And yeah, you certainly never know, but we'll certainly try very hard.

- Yeah, and in less than a minute, is there anything that scares you about have to having to be a publicly reporting company when you get to do things the way you want to, in large part?

- Well look, I don't get to do things exactly the way it to.

- Well, I'm sure not quite.

- But look, I think... Look, certainly you have to be cognizant of activist shareholders and their impact on your business.

I think there's always this balance between short and long term goals.

And sometimes you can see management teams get too myopically focused on the short term and lose sight of the long term.

And so I think it's that balancing act that we have to be very careful.

But I think we also have to be very communicative.

So, yeah.

- I'm sorry to interrupt you.

It ran out.

I mean, that was a half an hour, Todd.

That's what happens.

That's how quickly it moves.

You're a good sport for coming back on.

I thought we may have ran you off to begin with, but it's nice to have you on the program.

- I enjoyed it.

This was fun.

- Thank you.

Come back.

For those of you that are watching, if you'd like to watch a replay or you'd like to share this program, you can pretty easily.

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Until then, we hope your weekend is good.

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Goodnight.

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