Keith Krach: The making of a technology leader
Keith Krach, of DocuSign fame, talks about his long career as a technology leader. Part one covers the early years, from his first jobs at GM to making his mark in Silicon Valley.
Keith Krach, the former chairman and CEO of DocuSign, an electronic signature software maker, has a favorite saying: "Make no little plans. They have no magic to stir men's souls." Krach's career as a technology leader testifies to his penchant for thinking big.
Prior to taking DocuSign from a startup to a technology leader, Krach co-founded B2B trading network Ariba, a pioneer in using the internet to help companies buy and sell goods. In January, Krach was nominated to be the undersecretary of state for economic growth, energy and the environment by President Donald Trump.
In part one of this multipart interview with SearchCIO contributor George Lawton, Krach describes his early career -- from his first jobs at General Motors, where he was identified as an up-and-comer, to making his mark in Silicon Valley. The period includes a disastrous stint at a software startup, the sale of his own startup for a cool $500 million and a period of reflection, when he gave himself 100 goals to complete, including learning how to type.
You've had a couple of different careers and a knack for finding yourself in leadership roles. How did you get started?
Keith Krach: I've been very fortunate. I started working early -- as a 12-year-old welder in my dad's five-person machine shop. I got a real love for manufacturing there. Later, my dad was eager for me to get an engineering degree so I could help him grow the business. When I went off to Purdue, General Motors came to campus offering full-ride scholarships to just two students. I was amazed when they selected me. After Purdue, they even sent me to Harvard Business School -- my dad started calling them 'Generous Motors.'
My first job with GM was a great experience. I was production foreman on a chassis line, second shift, in Detroit. I had 30 of the biggest, toughest-looking guys ever working for me -- it was a little scary. I went from there to an internship at the [General Motors] New York Treasurer's office, which supported the GM board of directors.
GM's New York Treasurer's office, which was closed in 2014, was described in one article I read as the 'nerve center' of the company, where promising employees were sent.
Krach: Yes. Back then, General Motors identified certain people as 'hi-pots'-- high potentials. And they wanted to keep moving us around the company. [At the time] I worked for Rick Wagoner, who ended up being the chairman and CEO of GM. So, I got to experience everything from the very bottom to the very top.
This was before you went to Harvard Business School?
Krach: Yes. When I finished business school, I worked at the General Motors Technical Center because I had written a paper at Harvard on the utilization of robotics in the Japanese automotive industry. This was back in 1980, when robots were really high-tech.
My executive sponsor said, 'We have the most sophisticated robot technology in the world at the research labs. But we aren't sure what we're going to do with it, or what your role should be.' I wound up spearheading the creation of a joint venture with Fujitsu FANUC robotics in Japan, and we called it GMF Robotics.
It was a 50-50 deal that ended up becoming the largest manufacturer of industrial robots in the world. We became the leader because we were laser-focused on solving problems on the factory floor. That was a great experience. I spent a total of 10 years at General Motors [and] was a named a vice president at age 26.
You were the youngest vice president at GM, according to your bio. But you left the automotive industry behind.
Krach: I liked the robotics industry because we were pioneers, and it was high-tech. We were selling a lot of robots to disk drive manufacturers in Silicon Valley. So, I thought, 'Why not try something different from the GM mothership?'
Everybody thought I was crazy, because people used to work at GM forever. I probably had as good a shot as anybody at someday becoming CEO. But that's a long trail. So, I took a flier and came out to Silicon Valley. And the first company I went to, I got smacked to the face with a two-by-four.
How did that happen?
Krach: I joined [the now-defunct] Qronos software as the No. 2 person. On my second day on the job, I was asked to say something misleading at an upcoming board meeting. My response was, 'I absolutely will not. That would be a lie.' Right then, I got a sinking feeling in the pit of my stomach, and I knew I'd probably made the biggest mistake of my life. I hadn't burned any bridges back in Detroit, so I could have quit right away and gone back -- maybe I should have. But I just couldn't bear the thought of it.
So, this was the second day ... and yet you stayed on for another nine months?
Krach: Yes -- it was a mistake. If I had to do it all over again, I would've left that day. Although, in that nine months, I probably learned as much as I had in any role in my career.
Krach: Growing up in Ohio, going to Purdue, General Motors, everybody had a strong set of values and integrity. It was so close to my face, I didn't even see it, and I just took it for granted. I assumed everybody was that way.
I was in a real bind. On the one hand, I wasn't living my values every day. And on the other hand, I had never really quit anything without the mission being done. I was absolutely torn, and I hated going to work. I remember my best friend saying, 'Krach, if you have your enthusiasm, you're an A or an A+. If you don't, you're like a D-minus. You're a D-minus right now.'
It finally came to a head. It happened when I was at the hospital for the birth of my first son. I got a call: 'Hey, you've got to come in. We've got the IBM guys here.' IBM was a big investor. They had invested about $30 million in the company. But I said, 'No way. My team is totally prepared, and they can handle it. I'm not missing my son's birth.' And I quit. Now, I have two kids, a California mortgage, and I don't really know a lot of people in Silicon Valley. It was time to scramble.
Cutting losses, inventing a 'category king'
So, you quit before the mission was done?
Krach: Yes, I did. But there was no way to turn that one into a win. So, I thought, 'All right, why not practice what they taught at Harvard Business School? Put together a business plan for myself and cover the five P's in marketing—product, price, promotion, place and people.'
I wrote a gazillion letters, because there was no email back then. The headhunters, the Harvard Business School alums, the Purdue alums -- I left no stone unturned. Finally, I ran across someone I'd never met before. He was an HBS grad and a VC [venture capitalist]. He told me, 'I know these three Ph.D. scientists from the IBM Research Labs. They're developing some interesting mechanical computer-aided engineering software -- some kind of automation. Why don't you go check it out? You're out of the automotive industry -- they'd be big target customers.'
I checked it out and saw what they were doing. I figured if they could actually build this product, it would change the way mechanical engineering is done. They were looking for a business guy to lead it, and I said, 'How long do you think it'll take to develop the product?' They told me, 'Six months.' I said, 'OK, I'll join.'
It ended up taking two-and-a-half years to get our product done. That was another valuable lesson. In software development, it's like a law of physics. Estimate how long you think it's going to take to get done and how much money it's going to cost, and you can usually count on it being about '2x + n.' Double whatever it is and add something. It actually applies to most big, complicated projects that involve teams of people.
So, that's the first rule of software development?
Krach: Yes -- double and then add something more. But I didn't know that law of physics back then. Ironically, it gave us a lot of time to prepare our market. One thing that I had learned back in the GMF Robotics days is the advantage of creating a category because the objective is to be the category king -- particularly in the software business. The category king gets 80% of the market resources and 80% of the market cap.
But we had to balance that against how fast we were burning through cash. We had some VCs who invested in us, but we tapped them out. We got to the point where we were on the verge of running out of money. We were working hard to raise more, but we kept getting turned down by potential investors.
We had real geniuses on our team, but we hadn't proven ourselves. So, I said, 'Let's go to Japan.' Back then, Japanese companies were doing a lot of investing in Silicon Valley. We found a great company called Kubota; they're like the John Deere of Japan. Our original plan was to ask for just enough to get by -- $1 million. We gave them a three-year business plan.
They looked at it and pushed it back across the table. They said, 'We don't do three-year business plans. We do 20-year business plans.' I said, 'That's good, we like that.' We ended up asking for $10 million and got it. It was $3 million in equity, another $2 million to start a joint venture in Japan, $3 million customer deal, $2 million nonrecurring engineering, and we kept the company alive.
What's does nonrecurring engineering mean?
Krach: That means that they paid us time and material for some things that they wanted specifically for Kubota. So, it was like a one-time expense. It wasn't a product we would sell, although we actually did incorporate some of that functionality into our product.
When the product did come out, we created a new category based upon a new technology. Instead of finite element analysis, it was geometric element analysis, and we created a category called mechanical design synthesis. The company was a bit of a slow start, but it came on really strong, because the value proposition was great. Up until that time, you needed Ph.D.s to do that level of structural analysis, mechanical analysis and thermal analysis. Our technology simplified it to the point where regular design engineers could use it, and it would integrate into their CAD [computer-aided design] systems.
The company you started was Rasna. What became of it?
Krach: We were all set to take it public in 1995 with Morgan Stanley. We had partners like Autodesk and Parametric Technologies. One day, we had a meeting with Parametric's CEO, Steve Walske, and COO, Dick Harris. I was talking about doing a deep partnership. They said, 'Let's do a deep partnership.' Then, they said, 'Really deep.'
I was wondering where they were going with this, but I said, 'OK, really deep.' Finally, they said, 'I don't think you understand. We want to buy you. Let's just do it. You don't need bankers for this.' I got out of that room, and the first thing I thought was, 'We'd better get some bankers.' They did buy us. By the time everything wrapped up, it was about a $500 million deal. It was probably the best acquisition they have ever done.
At that point, they wanted me to go back to Boston and be their EVP [executive vice president] of strategy. But, by that time, I had fallen in love with the pace of Silicon Valley. Suddenly, I could afford to do whatever I wanted, so I took six months off and set 100 goals for myself.
Wait a minute. You'd been working on growing this, and you had just sold it -- and then walked away?
Krach: They bought me out, so I didn't stay.
So, your mission was accomplished.
Krach: The mission was accomplished. The shareholders saw a great return on investment, and the employees got a great return, too.
I called my mom back in Ohio to tell her about it. Usually, whenever I called my mom, my dad would pick up on the second phone upstairs in their bedroom. I could always hear him clicking in. So, I said, 'Hey, ma, we just sold the company, and I don't think I have to work anymore.' My mom said, 'I guess this means you're moving back to Rocky River, Ohio.'
Then, I heard my dad say, 'Elda, I don't think he is ever coming back.' It was a bittersweet moment. My dad and I used to talk about my going to college and then coming back to help him grow the business. And I would have loved to spend more time with my dad, but after GM and Rasna, I was really on a different path.
So, you took six months off.
Krach: I had my 100 goals. I broke them out by family, physical, intellectual, spiritual and friends. I took each one of my three children, at that point, on an individual vacation.
What inspired you to do 100 goals?
Krach: I had read Stephen Covey's book and decided to write down all my goals. I'm a fanatical goal setter, and I knew I just couldn't lay around the house or go golfing every day. But I wasn't ready to go back to work at a company full time, either. I decided it was a great time to sharpen the saw.
Believe it or not, one of my goals was to learn to type. I had never learned before. I always had friends in high school and college who helped type my papers. At General Motors, I used the typing pool at first, and then I got a secretary. But in the era of the PC, everybody started typing for themselves. It was really kind of funny. I went out and bought the Mavis Beacon Teaches Typing software. I also learned how to scuba dive and other things like that.
When I finished all 100 goals, I popped my head up, and Bob Kagle, an old General Motors guy who was now a VC starting Benchmark Capital, said, 'Hey, why don't you come on and be a VC?' I told him I wasn't sure I was ready to do that. I thought maybe I would be a VC when I retired. He persisted, 'Why don't you become our first entrepreneur in residence?'
That sounded like a lot of fun, so I joined them. I sat in on the partner's meetings and learned about venture capital. And that's when I saw a big opportunity to pull together some of the old Rasna team and build a business on the internet, which was gaining traction commercially.
Editor's note: In part two of this extended interview, Keith Krach recounts how Ariba got off the ground.
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