Growing from conception to “unicorn” to “one of 2017’s most exciting IPOs” in less than a decade, Cloudera has cemented its position as an enterprise Big Data titan. But driving rapid innovation in machine learning, advanced analytics, and delivery models can make for challenging business processes if a startup is not legally prepared.
Enter David Middler. The veteran software legal executive joined Cloudera as Chief Legal Officer in 2014 after taking Ariba public and later serving as General Counsel during Ariba’s sale to SAP. SandHill.com asked Middler for the legal best practices he deployed to support Cloudera during its fast-growth years and through the IPO process.
SandHill.com: When, during Cloudera’s growth trajectory, did you join the company as Chief Legal Officer? Are there specific milestones that a startup should watch for when deciding to bring in a senior lawyer to its executive team?
David Middler: Cloudera has successfully managed its rapid growth from its early days as a venture-backed startup. That period can be very difficult for start-ups because there is no set playbook that works for all companies. During this rapid growth time, management can be confronted with issues they have never seen before – rapid expansion in customer-base, increasing sophistication in the customer profile and their expectations, new geographies, IP protection complexity, securities and governance issues, etc.
Cloudera too was confronted with operational and legal complexity. I joined at the front-end of that period, about four years ago. At that time, as one example, we were working on a large strategic investment with Intel and it was clear to our executive team that we should have an attorney on board who had done these types of transactions before at this scale and with this level of complexity. Again, there is no playbook for this and it takes experience and insight to judge the timing. Cloudera was fortunate to have an executive team that had successfully built and led companies through similar periods before, and they correctly judged the right time to hire a chief legal counsel.
SandHill.com: Since your team negotiates all the commercial deals, what has Cloudera’s pattern of business model innovation meant for you as you have grown the legal department?
DM: Truly disruptive companies like Cloudera have to be nimble, creative and flexible, yet they always need to understand the risks associated with these innovations and how to address them within the current legal and regulatory environment.
For example, we pioneered a hybrid open source software (HOSS) delivery model, that can be deployed on-premises or in the cloud. Nobody had done this before. We were early evangelists for this model – which took a lot of marketing work as well as deal structure education with our customers. These are complex issues, and they are made more complex when you consider that our customers often operate in highly regulated industries and they all focus on data protection, privacy issues for their own customers and security.
Thus, we have a very high standard for hiring Cloudera attorneys and deal negotiators. We only hire people who can intelligently explain our solutions to our users and who want to learn and innovate as much as our developers want to learn and innovate. Our people in the legal department are just as passionate about our innovations as are our developers and end-users.
SandHill.com: What can a software startup do to get their legal house in order as it grows from the founding team to a small company and beyond? And what do you look for when you hire outside legal experts?
DM: First, focus on your people. It all starts with the quality of the people who deliver our solutions and who interact with our customers. We not only hire the best people, but we also spend a considerable amount of time and energy making sure that the people we hire are properly trained, mentored and given the tools needed to be successful.
Second, don’t be afraid to challenge the status quo. I encourage my team to challenge themselves always – they should question something if they think it can be done better in a different way.
Third, focus on your customers. Our customers are doing things with our solutions that only a few years ago was impossible. Their success drives our success.
We ask for the same level of excellence from our outside advisors that we ask for from our own people. Some of our attorneys, in fact, once worked for the firms we use today. We have been fortunate that the law firms we partner with understand Cloudera’s drive to be the best at what we do. They are fast, responsive, creative and always available to help us in our drive to be successful.
SandHill.com: What can you say about your recent experience with Cloudera’s IPO vs. your earlier experience with Ariba’s IPO and sale to SAP?
DM: Cloudera had more years operating at scale by the time of its IPO than we had at Ariba. The companies were different in that respect, but similar in that they were both great companies delivering tremendous value to their customers. I was very fortunate at Cloudera that I inherited a commercial/legal team that was (and still is) the best in the business.
The only concern I had when I got here was that it was a small team. They were handling a tremendous volume of work for the size of the team. We have since right-sized that team and also built a world-class, in-house corporate and M&A team, as well as added IP strength and international legal talent. We have grown the legal team to support Cloudera’s commercial operations – in other words, we follow the deals around the globe.
We also began preparing for our IPO well in advance, by making key hires and by implementing processes, procedures, and policies that put us in a position to transition smoothly to becoming a public company. This preparation and focus made our IPO process a joy to work on. As the Chief Legal Officer, by the time we filed our prospectus, I had the confidence that we were running a sound, conservative and well-executed legal process wherever we operated.
SandHill.com: Now that Cloudera is public, what new legal challenges do you expect?
DM: As mentioned, we always focus on professional growth and people training. We constantly collaborate with our team to ensure they understand every facet of our business. They need to be as smart on these subjects as delivery engineers and sales professionals. The legal team is on the frontline with our customers every day, and they represent the face of Cloudera to our customers. We have focused on their development and their progression as lawyers and contract professionals.
In addition, we have worked tirelessly on our internal processes, systems and compliance. The protection of our shareholders is always our primary concern. We constantly train all our employees on what it means to be a public company and what the expectations are for them and their conduct in this regard. That will never change. And this is what has made us so successful as a company today.
Clare Christopher is editor of SandHill.com.