He Built A $2 Billion Business By Helping Companies Unlock Their Full Revenue Potential

In the heart of Silicon Valley, amidst the tech boom of the ’80s, Chris Cabrera’s journey unfolded. Born in Boston to a first-generation Colombian father, Chris moved to California with his family, eventually finding his way into the vibrant entrepreneurial landscape.

In this blog post, we delve into the insightful and inspiring interview with Chris Cabrera, tracing his path from a first-generation immigrant’s son to the CEO of a groundbreaking tech company.

Listen to the full podcast episode and review the transcript here.

Early Years and Entrepreneurial Roots

Chris’s upbringing was deeply influenced by his father, an immigrant entrepreneur navigating the challenging terrain of business. He went to high school in North California, and while he doesn’t consider himself a native, he’s lived in the state for a long time.

Despite working for his father for years, Chris observed the hardships of bootstrapping and decided to pursue a formal business education. Enrolling in USC’s Entrepreneur Program, Chris honed his skills during a pivotal time in Silicon Valley, surrounded by the rise of technology giants like Apple.

The Reluctant Founder

Armed with a solid education, Chris felt a calling to entrepreneurship but opted for patience. Rather than rushing into creating a company, he chose to wait for the right circumstances. He keenly observed leaders, learning valuable lessons on what to do and what to avoid.

Chris’ time at SGI and Callidus Software, where he witnessed both successes and failures, laid the foundation for his future endeavors. He learned how to embrace sales and business development and to understand how to get customers to buy products.

Most importantly, Chris learned how to build something that people would want to use. He remembers joining Callidus when it had yet to start earning revenues, and he signed up to run the sales and business development. He was part of the journey right up to the point when it ended up going public.

Chris looks back at his stint at Callidus, which was sometime in the late 1990s to early 2000s. At the time, the company was selling on-premise software or CDs with software on it, which was very expensive. Companies also had to have the hardware to install it.

The high cost precluded software companies from selling to the masses, but then Salesforce came along as the first pioneer in the world of SaaS. Chris reached out to Steve Cakebread, the CFO at Salesforce, to purchase his products, but he suggested Chris come back with a SaaS version.

The Birth of Xactly

The inception of Xactly was not a planned venture but a response to a changing landscape. Faced with resistance to adapting to SaaS from his then-employer, Chris found himself unemployed at Christmas in 2004. At the time, he was one of the top officers of the public company.

The CFO of Salesforce, a potential customer, encouraged him to start a SaaS company, leading Chris to take the leap. Xactly was born with a focus on automating compensation, introducing cloud-based solutions, and pioneering SaaS in the commission space.

Chris recalls how he was passionate about servicing the landscape, having developed products worth millions of dollars that only very large companies could afford. He was inspired by Marc Benioff and his views on the democratization of software, which really resonated with him.

Marc was all about developing solutions suitable for companies of every size. Chris was convinced that the SaaS model would allow companies to rent software instead of having to buy it.

He could enter into deals worth tens of thousands of dollars per month versus millions of dollars and a far broader clientele.

Chris started off by automating the compensation structure. He reasoned that they could eliminate the erroneous process of calculating commissions in Excel and spreadsheets.

Ensuring that sales reps know exactly how much they can make in real time, even before they close a deal, can incentivize them to work harder.

At the time, no other company in the commission space was using SaaS software, and Chris’s concept meant that companies could rent this software for a much lower cost.

Chris founded Xactly in March 2005. Ironically, the company that fired Chris ended up changing its name to Callidus Cloud.

Navigating the Public Realm

Xactly’s journey to becoming a public company wasn’t without challenges. Chris recalls the intense pre-IPO period, flying around in private jets to meet investors. His first fundraising efforts yielded $100M, and later, he went on to raise a series B and C.

Chris also remembers raising another $100M at the IPO, though he points out that VCs have a much bigger pool of funds now. Going public in a different era, with a $70 million run rate, brought its own set of experiences.

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Reflecting on that time, Chris shares the realization that being a public CEO wasn’t aligned with his strengths and passion for customer interaction. He also realizes that he would never have taken the company public in today’s world unless it was doing $300M and profitable.

Transition to Private Equity

After going public, Xactly transitioned into private equity hands with Vista Equity Partners in a $600M deal. This move allowed the company to focus on long-term growth, profitability, and strategic acquisitions.

Chris emphasizes the positive impact of Vista Equity Partners in reshaping Xactly into a well-balanced and profitable entity. He reveals how he had a wonderful experience and completed five acquisitions. The company is now valued at over $200M with a 30% EBITDA margin.

Acquisitions and Integration

Xactly’s inorganic growth was fueled by acquisitions, a strategy fraught with challenges. Chris explains how the objective behind their acquisitions was to build out the product.

They did not buy out large companies, but they focused on acquiring technologies that allowed them to build their product roadmap.

As a result, Xactly was no longer just selling compensation planning. Now, it expanded into ancillary products on both sides of the actual process of doing compensation. One of the companies they bought did sales forecasting, which allowed them to broaden their product portfolio.

Chris highlights the importance of people, location, leadership continuity, and due diligence on the technology in successful integrations. Acknowledging a few missteps, he emphasizes the critical role of culture in post-acquisition success.

The Unicorn Fallacy

Chris’s latest venture is not within the tech space but in publishing, where he addresses a pervasive issue – the Unicorn Fallacy. The book urges entrepreneurs to ditch the growth-at-all-costs mentality and focus on building sustainable businesses.

Chris advocates for a balanced approach, where both growth and profitability coexist, steering clear of the pitfalls of overvaluation. He looks back at the time when he first came to Silicon Valley and witnessed a lot of technology companies that were considered unicorns.

As a young entrepreneur, Chris was fascinated with the concept of building a unicorn with more than billion-dollar evaluations and $20M revenues. However, as time went on, he noted that the unicorns with the crazy evaluations were facing existential crises since their stock prices were too low.

Their employees were well aware that the companies would never grow to the evaluation again. Soon enough, the companies had to go through recapitalizations or folded. Chris realized that the key was to maintain healthy growth and EBITDA margins.

Keeping your eye on the ball of not spending too much is an important lesson he learned through the private equity experience. Chris also advises entrepreneurs to choose their investors carefully since they are going to be long-term partners.

Stepping Down as CEO

After a remarkable 19-year journey at the helm of Xactly, Chris decided to step down as CEO. The decision, influenced by personal considerations and a desire for new challenges, marked the end of an era.

Chris leaves Xactly in the capable hands of Arnab Mishra, a successor he has groomed and a commitment to stay actively involved as a board member.

Conclusion

Chris Cabrera’s story is a testament to resilience, adaptability, and a commitment to building meaningful businesses.

From the early days in Silicon Valley to navigating the complexities of going public and transitioning to private equity, Chris’s journey provides valuable insights for aspiring entrepreneurs.

As he embarks on new endeavors, Chris leaves behind a legacy of leadership, innovation, and a reminder that true success lies in the balance between growth and sustainability.

Listen to the full podcast episode to know more, including:

• Chris Cabrera’s decision to wait for the right time and circumstances before starting Xactly showcases the importance of patience in entrepreneurial journeys.
• The shift from public to private hands with Vista Equity Partners emphasized the significance of balancing growth and profitability for long-term success.
• People Matter: Successful acquisitions hinge on retaining key personnel, leadership continuity, and cultural alignment to ensure a smooth integration process.
• In his book, Chris advocates for a shift away from the growth-at-all-costs mentality, urging entrepreneurs to focus on building sustainable businesses rather than chasing unicorn valuations.
• Chris’s nearly two-decade tenure as Xactly’s CEO and his distinction as one of the longest-tenured SaaS CEOs highlight the value of dedication and continuity in leadership.
• Stepping down as CEO reflects Chris’s desire to explore new horizons, emphasizing the importance of diversifying one’s experiences and skills throughout a career.
• The intertwining of family values within the company, with Chris’s children working at Xactly, highlights the importance of a familial and supportive culture in fostering success.

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