Transcript

Don’t stop learning: How Cornerstone kept scaling, w/Adam Miller

The very best founders I know are brilliant at building systems. They connect teams, they remove bottlenecks, and they eliminate single points of failure. And yet When it comes to their own wealth. Most are running a disconnected stack. A tax accountant here and a state attorney there, a wealth manager who doesn't talk to either one of them.

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Hey folks, Jeff Berman here. I am thrilled to share some of the new names who will be joining us at this year's Masters of Scale summit. This may be our biggest stage yet. Reed Hastings, Meredith Whitaker, Van Jones, Amjad Masad, and more. Will be there with us October 20th through 22nd in San Francisco. If you're building something great, or you want to build something great, We want you there with us too.

Join us at masters of scale dot com slash apply twenty six. That's mastersofscom slash apply. Twenty six. In two thousand five

The company Had a near death experience. I had hired uh Boutique Investment Bank in LA. got called into a meeting with them and I went to the office and uh

Main guy there says Adam. You know what? It hasn't worked out as planned and We're not gonna be able to do this anymore.

And I thought Oh shit. We're screwed. This was back when Adam Miller was CEO of Cornerstone. That's the educational technology company he founded in nineteen ninety nine.

They had already weathered one dot com burst. Now after years of growth. They were running out of money. Again. I got one of our existing investors to put up some money.

But He said it'll only do it. If we raise a milyen dollar. And then I went to every single person we knew. I had raised.

Three hundred and fifty thousand. I was a hundred and fifty short. And then I got fifty. And then I was a hundred short. And I just

Could not get the last hundred. The gravity of the situation really hit Adam when he got a call from his co-founder and CFO. Perry Wallach. It's over.

We're done. Payroll is due tomorrow. And we miss payroll. And I'm like, oh Crap.

And I was sitting at lunch, I was totally depressed. My friends were like, What is wrong with you? I told him. And they're like How badly do you need this money? Mike.

I n I really need the money. And they said, All right. You can call this guy, but only call him. If you really need the money. You have no other alternative.

These guys had a little bit of a gambling problem. And I call'em up. And he has me come to his office. Yeah.

This was a midtown Manhattan. One room Office. He wasn't at a company. This was definitively not a bank.

This guy was A loan shark. He didn't give a crap about the company, but he was asking all these questions about me. And he said Yeah, you know what? I think you're good for it.

And we often talk about investing in the person, but this was really this is different. Right. Is is this guy gonna head head out of town or is he gonna show back up and do I have to break his kneecaps to get what I need? So I go this guy. Sign the deal. It was

The highest interest rate you would ever pay on money. He wire some money. We pay payroll. And then like three days later we paid the guy back. Adam Miller never had to borrow money from a loan shark again.

This wasn't the only time this company faced a near death experience. It took a lot of scrappy solutions to build cornerstone into a multi-billion dollar business. Adam's story is a master class on how to not only survive, but to scale in the face of near disaster. He shows that persistence combined with calculated risk taking builds a resilient business that can weather the myriad unexpected challenges every company. Inevitably faces.

You gotta have incredible talent at every position. There are fires burning when you're going out. Can you believe it? And then you go back to this is totally gonna be amazing. There are so many easy ways. So I have no idea what to do. Sorry, we made a mistake. But you have to time it right. Oops. It just seems absolutely nutball. Ten years later and be like, well that's just how you do it. We haven't made it just how you do it. This Is masters of scale.

I'm Jeff Berman. Your host. Adam Miller founded Cornerstone on Demand in nineteen ninety nine. The initial idea was to provide busy people with remote learning options that could further their careers. At first

They did that by mailing out discs that customers would load onto their computers. Netflix one point out. But for education. Sounds like ancient history, right? But cornerstone evolved alongside the internet, as pretty much everyone got online.

They became a global leader in on demand education and training with huge clients such as Dell, Walgreens, and thousands more. Today. Cornerstone has roughly one hundred twenty five million users across over one hundred and eighty countries. After more than two decades leaving the company. Adams sold Cornerstone for five point two billion dollars in twenty twenty one.

He has since turned to philanthropy. Focused on solutions to the world's most intractable problems. From gun safety to climate change. And that work relates back to the problem solving roots of his company cornerstone. Let's return to the nineteen nineties.

When Adam Miller was a business school student and law student. With an idea to make adult education more accessible. Through home computers. Interestingly, adults have the least access to education. Because they often are working nine to five or more.

And training can be really expensive. A lot of people can't afford it. The original name of the company was Cyber U. Back in the day of cyber everything. The idea was really premised on leveraging the technology to help people learn things. It was self paced.

It was easy to access and it wasn't expensive. And you started as a direct consumer business, right? You were doing a B to C company? Cyber U was intended to be at the time what they called a minimity. We're gonna sit between the cellars of education. Like universities.

And the buyers of education who would be adults. The idea we came up with was using CD Roms. To train adults at concepts that were difficult for adults to understand. Like Wall Street.

Gotcha. So this is almost like the origins of Netflix where it's like we'll send you Exactly. Yeah. Exactly. Really pre-web. By ninety nine. The consumer internet had

Exploded. And there was a lot of opportunity out there. But bandwidth still was not very good. So I was watching what was happening with the cable modems and D SL In thought

I'll start the company when We're about two years away. F full broadband in the home. That seemed to be the right time to start a company, get it going.

Build the business. And Over a two year period, you would have product that could be delivered over the end of the year. You're basically looking for the wave that's coming and you want to catch that wave that's coming in. Right. Okay. So I was working at an investment bank at the time. So I went to tell my boss

That I was starting this company. And I had seen that anybody who had left the firm was immediately escorted by security guards out of the building.

Because Investment banks have confidential information. And so they're very concerned about people having access to the information and taking it with them. So it's like being perp walked basically out of the building. The second You resign. Yeah.

So I'm fully prepared for it. And I go to my boss and I say I'm weaving. Why are you leaving? I'm gonna start a company.

He says Oh, we all knew you were gonna do that. How much time do you need and how much money are you trying to raise? Wow. And so

I tell him. I probably need a couple of months to do the business plan. And I probably need a few hundred thousand dollars.

And he said. Okay, great. We'll give it to you. Wow. So no security guard showed up.

I never left the office. I wrote the business plan while finishing up work. In my initial Capital. came from everybody I work for.

Every single person in my chain of command. Invested in the company? And The analysts who work for me. Also put in five thousand bucks.

Wow. That's quite a vote of confidence. It was incredible. But it was very, very misleading for me. Because that start was so incredibly easy. And that was the end of it being easy.

Adam left day to day office life to build his company. He had financial backing. But no staff working alongside him. I was literally home alone. In this one bedroom apartment.

trying to get this company off the ground. And so I came up with this pattern where Every day I would go to Staples. And buy something.

I usually only buy one thing. It made me feel like I was Starting a company. Like I was doing something business related. You ever go into staples? Uh sure. It's like a business store. Yeah.

So I went there to buy business stuff. Yeah. I didn't even know what I was supposed to be buying. It didn't matter. It didn't matter. It gave me purpose, it gave me something to do every day. But it didn't take long for Adam to realize he needed more than a daily dose of post-it notes and binder clips to build his business. It was time to start hiring a team.

We're hiring predominantly for Potential? Not for experience. Because nobody had experience doing B to B software. So we had to hire for potential.

And that I think served us very well. We had people that We're able to scale with the company. Because they were curious. They kept learning. These were high potential people that were ambitious.

And willing to take chances. And take feedback. We hired web developers. To build a website We hired a team of students.

From U CLA and USC. who sat at these folding tables with folding chair in this one bedroom office. On Ocean Park. And

They would surf the web looking for any online training that was out there. With the goal that we would Tabulate. and simplify the ability to search for online courses.

That was the original consumer idea. Marketplace for education. Marketplace for education. Exactly. What today would be like you to me. Or Coursera. But back then nothing like that existed. As a pioneer in online education, Adam's company soon piqued the interest of AOL.

This was the year two thousand, and AOL was still the biggest fish in the internet service provider pond. Імадні the clout of Google and Amazon. Combined. AOL invited Adam to enter a competition. Cornerstone could become a partner in a new AOL learning center.

It was an opportunity to reach miljans of new customers. But there was a catch. If they won. Adam would have to pay AOL to seal the deal. Our general counsel at the time, Steve Simon.

And I were sitting in a room In San Francisco. With a great view. Of the bridge. We're in this big conference room.

And the people from AOL came in the room. Threw down the contract. And said, We've been talking about this long enough. You have two hours to sign and walked out of the room. Wow.

Now they had already been notorious for doing things like this. But it's one thing to hear about it. It's another thing to be in the room. Especially when it could be the make or break for the company. It was absolutely the make or break for the company. And I remember piecing the room. Looking at the bridge.

And I turned to Steve and I said, You know what? This just doesn't feel right. What didn't feel right. It was too expensive, the way they were treating us. Risking the entire company on this one deal.

I thought This is just not the right move. and we left. We never said goodbye to anybody because nobody was in the room. We don't know where they were. We just left. Two weeks after we walked out of that conference room.

The internet bubble started to crumble. And About a month later it burst. And had we signed that deal, we definitely would have been out of business.

That would have been the end of the company. So I remember we went to Big Dean's, which is A bar. On the beach by the Santa Monica Pier. And we sat there all day thinking about okay.

What do we do now? The AOL deal was off the table. And we didn't really have any Business Customers it's time.

And we didn't have any capital. We had the same few hundred thousand dollars that we started with, but we were burning it. Yeah. There's very little money left. So we started begging for money.

And this was the beginning of seven years of begging for money, friends, family. VCs. Strategics corporations Anybody that would meet with me. And so went back and forth, flying back and forth, maxing out credit cards.

Any way to get money. There were an enormous number of nosed. And It does impact your confidence. Right? If you're reject it over and over and over and over again.

While slogging through years of constantly seeking and failing to land investment, Adam found success on another front. Who's building great relationships with a few very large organizations? They wanted a better way to train and develop their workforces. These weren't their paying customers yet. But they were providing invaluable insights as Adam's team refined its offerings.

These were the big banks, the big insurance companies. They would tell us something and two weeks later. We had built it. Here you go. Here it is. We would go to these meetings.

In New York. I'd fly back to LA. I would draw on cocktail napkins what the screen should look like. I've handed to the developers. And they would build it. I mean, I'm struck that your customers were really defining your product roadmap for you. They were handing it to you. They were designing the product.

We're thinking we have like twenty people. And they have Twenty thousand, fifty thousand, seventy five thousand people. They're never gonna buy from us. But actually

What started to happen after many months of doing this is we go to these meetings. And they would say wow, you guys really listen. And then they would start to say, we could really use this. And they would say Who

Can we get this? And we were terrible at sales. We didn't understand. That they were literally saying that they would potentially buy it. Please let us let us pay you for it. I remember the first time somebody said We're doing an RFP Can you

Fill it out. And come back to us. We had no idea what an RFP was. It's a request for proposal. that a business will give to a different business to solicit

Products and services. We didn't understand how that worked. There was no chat GBT to ask. You had to figure it out yourself. In 2001, Adams' business was gaining serious momentum.

They brought e-learning and efficient HR management to the corporate world, attracting big name Fortune 500 clients, including Wall Street Banks. We had developed this great pipeline of financial services firms On the east coast. Mostly in New York.

That we're gonna be the turning point for our company. And then nine eleven happened. And our entire pipeline.

Went away. I got frantic call from our investors and advisors who were all In New York. They all said You gotta go into hibernation mode.

Cut the staff. I mean we had barely any staff. Cut the staff. You don't have enough money to keep going. You're gonna go out of business.

On September Fourteenth. I watched the West Wing that night. So the West Wing was this old show. Martin Sheen was the president. This was one of these shows where he had a huge decision to make. It was in a church trying to figure out what to do.

And he made this Big decision that went against what everybody had advised him to do. I know the episode he's talking about, and it does have one of the greatest pep talks you've ever heard. Or one of the president's oldest friends convinces him not to shy away from hard problems. Adam was inspired.

He still believed fiercely in cornerstone's mission. Even if the world had been turned upside down. He refused to give up. On the fifteenth I walked into the office and I said We're hiring.

I thought Look, there's only two scenarios here. There's a scenario where The world comes to an end, these markets don't come back. We're not gonna win any of these deals and we're gonna go out of business.

No matter what. Whether we whether we hibernate or not. Whether we hibernate or not. Yeah. Yeah. Actually, we're gonna close some of these deals. And if we don't have the staff

We're not gonna be able to perform on the deals. And they'll fire us and we'll go out of business. So I'd rather go out of business. Trying. Then not try.

Let's burn the boats. Let's do this. We're going ahead. We had four deals that we were working on at the time. That we're all close to signature. We ended up closing three of those deals. Adam's decision to hire during crises, defying the urge to hibernate, paid off.

Coming up, I talk with Adam about surviving market crashes, IPOs, and pandemics. Flash. The recurring dream. He could not shake. When you've built substantial wealth through your business, it's often tied up in a single equity position.

The upside is real, but so is the risk, and knowing when to act isn't always obvious. Creative planning works with business owners to build a strategy around concentrated equity. When to diversify, how to manage tax risk, and how to protect what you've spent years building. Creative planning where wealth works together. Learn more at creative planning dot com slash masters of scale.

Hey listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show because every Friday we release a second Rapid Response exclusively in the Rapid Response feed. The guests and topics are just as compelling and timely for From Ford CEO to NASA's administrator to the lessons from The Devil Wears Prada. It takes about 10 seconds to find, just search rapid response wherever you listen to podcasts and hit follow to make sure you never miss an episode. I hope to see you there. Humans will never be more intelligent than AI. There can be two types of companies.

Those were great at AI and those that went out of business because they weren't. How do we build a future? That is human centered. I'm Rana El Calyubi. And on my podcast Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone. Every week, I sit down with the pioneers shaping our future. And we take you behind the scenes of the AI that's transforming our lives.

Find pioneers of AI wherever you tune in. Welcome back to Masters of Scale. We're exploring the story of how Adam Miller built cornerstone into a multi-billion dollar business. You can find this full interview and more. at the Masters of Scale YouTube channel.

Mm. By two thousand five, Adam was taking a slow and steady approach to scale. We were doing sixty percent growth a year, so every two years you're Almost triple. Pretty good.

It was pretty good. But were growing very linearly at first. Because we couldn't forward invest, we had no capital. So the business became very efficient. We were essentially operating a breakeven. From the very beginning. And we basically were building the company off of sales.

So every time we sold, we'd hire another person. Every deal we did we'd hire more people. If the revenue became working capital, why did you end up raising venture? We were able to Continue to build the business.

simply by hiring where we absolutely had to hire. But it was also inefficient. We knew we could grow faster. We knew we could sell more And ultimately we're in arms race.

With some pretty big companies. And so we needed the money, not to mention the corporate viability issue that we had perpetually. Right? We had no capital. Our balance sheet was terrible. We finally raise venture capital.

Bessemer led the round, Byron Dieter. led the round. It was his first true cloud deal. And We ultimately became his first unicorn. Fueled by that infusion of money, things started to scale in a huge way.

Six figure deals became seven figure deals. Adam kept costs in check. Retention of clients was high. Everything was moving up and to the right. But then

In the spring of two thousand eight. Bear Stearns goes under. Yeah. And then A little bit after that. Lehman Brothers goes down.

And you have the financial crisis. Looks like the world's gonna end. Now we still had capital, so we weren't running out of money. But we had a board meeting. At the board meeting.

We go over our projections or forecast and they're like No no no. Do you understand what's going on with the world? We want to see a financial forecast assuming zero sales. Like, what are you talking about? We're selling every day.

They said we don't care. We want worst case scenario, assume zero sales. Responsible board inquiry. So we have another board meeting a few days later. And they say okay, this is the forecast we want to use.

You're running out of money. We said, We're not running out of money. We're doing fine. But if the world's ending, we are. They said you need to go raise money. You're telling me I have to go do it from

Other V C firms Even though you guys could invest. And they said yes. I said, Explain to me how that makes sense. They said You're our best performing portfolio company, so you're the only one that could raise money from other people.

We need to save our money for the other companies. I'm like All right, now I know why people don't like VC sometimes. You might

Remember the Sequoia had put out this Very famous. Brief. Yep. It was one of these early social media posts that went viral. Talking about

what to do in a downturn. Winter's coming. Winter is coming, how to manage a recession. And it was cut your people. Prepare for the worst.

Take action early. Do it in full, don't do it piecemeal. If you weren't in the business world then, you may not appreciate how dire everything felt during the crash in 2008. Sequoia, one of the biggest and best known venture capital firms in the world, was not alone in warning that the sky was falling. That viral brief Adam mentioned from Sequoia was called R I P.

Good times. You can find it online and we're linking to it in the show notes. It is full of ominous predictions and gruesome bar graphs. There's literally a slide that just says Death Spiral.

It has a skull and crossbones on it. This is the mood of the market when Adam's being told by his board that he has to go raise more money. So who is he supposed to go ask for that money? If you can believe it. Sequoia.

The very firm that is proclaiming winter isn't coming. It's already here. And I thought, Well, they're definitely gonna cancel the meeting. And the meeting never got canceled. I went to the meeting. And I said

Why are we even having this meeting? You just put out this Manifesto about how to cut everything. Why would you possibly invest right now? And they said in our experience Mm.

The best companies grow in good times and bad. Sequoia was right. And it was a critical learning experience for Adam. We ended up growing sixty percent that year. And we never used a dollar of the money.

But you had it. But we had it. And if the first job of CEO is make sure you don't run out of money. you had a board that was really protecting you there. And believing in you, notwithstanding they're not investing in that moment.

And it You know, prove the point, raise money when you can, yeah when you need it. Yeah. So Take us through going public and then what happens from there. I had always wanted to go public.

Because when I was a kid My dad taught me how to read The stock charts. Back then it was in the newspaper. This is the breakfast table in Jersey with dad looking at the news. And he would teach me like how to invest and how the stock market worked.

And I always wanted a four Letter symbol. On the Nasdaq. Because Microsoft and all the other companies that were On the Nasdaq.

All had four letters. And that was always my dream. And so when the time came to be able to take the company public I was super excited. This was kind of a dream. That was about to be fulfilled.

But we were in a race at the time. There had already been a couple of public companies In our space. We were on the smaller side of those four. And I knew that only one of them was going to be able to go public.

And the rest of them would probably get acquired or merged. I also believe that you had to have a top tier offering. So you need a top bank. And we got Goldman Sachs. To lead the round.

To lead the IPO. And We ended up going public in March of twenty eleven.

Adam finally got his four stock exchange letters C S O D. A lifelong dream checked off the bucket list. After going public, Cornerstone on demand expanded into the HR space. They broke into the public sector, selling to federal and local governments, schools and hospitals. All the while.

Adam approached his own job as CEO just like a cornerstone client. He was constantly trying to learn new things. I didn't stop learning after grad school. I kept going, I kept reading, I kept trying to learn from people. Even after we were a public company.

You get to go to these Conferences with other public company CEOs. And I would be taking extensive notes and sometimes the bankers would come up to me and say Adam, you're the only one taking notes.

But I was really paying attention to what was going on, trying to learn from my peers. Trying to learn from Experts that were out there. Always thinking about how can we do better. By two thousand seventeen, Adam started to have a recurring dream.

One that might sound familiar to any world weary CEOs out there. It was a dream about his own retirement party. I would Get on stage. We would have

My favorite band come out and play. Easy D C And I would do a guitar solo. Now keep in mind I don't know how to play guitar. Because it was a dream.

So I would play solo with Angus. Drop the mic. And leave. And that was it. I was done. That was

Thinking about this dream that kept happening over and over again. And I started to also believe I'm twenty years in If I'm ever gonna do anything else. twenty years is gonna be the right time.

To step off. So I realized twenty twenty I was gonna Be done. And for my swan song, I thought I'm gonna

show that we have truly dominated the industry. by acquiring our biggest competitor. Our biggest competitor was a company called Saba. Software. But this was yet another example of really bad timing.

We announced an all cash deal where we had taken on a lot of debt. to make an acquisition Pre market. When the market opens Covid hit Wall Street.

This was February of twenty twenty. And Literally. We open way down.

Because Overnight. Wall Street had become obsessed. With Financial viability.

and how much leverage a company had. Specifically what was their debt to Equity ratio. And it didn't matter that you were in a business that should thrive in a pandemic. But it didn't matter. Did not matter. So

We got crushed that day. And then I became convinced That We needed to prep For what could happen.

With the pandemic? And so I did this three day test. At the beginning of March We're gonna shut the office down worldwide for three days. Just to see what would happen.

Did people need monitors? Did people get locked out of their accounts? In the whole management team thought I was crazy. Like what are you doing? You're closing the office for three days. We had offices in twenty five countries. And

We did it. Wednesday There were some issues. And on Thursday we fix those issues. And Friday everybody was still home.

And on Sunday There was a government Announced Work from home. Order.

I think we're gonna call this episode The World Might Be Ending, but Cornerstone Isn't. Something like that. Exactly. This is every single time. Every time. Mm-hmm. As the world shut down and more and more companies shifted toward remote work, Adam's EdTech products were ready to serve new customers. And amid the chaos of the early pandemic, Adam, who had navigated crises in nineteen ninety nine, two thousand one, and two thousand eight, found his most significant success yet. Cornerstone acquired Saba Software in April twenty twenty.

Then in twenty twenty one. He decided to sell the company. For more than five point two billion dollars. The only disappointing news

Well A C D C did not play his retirement party. Our tagline was educating the world. When we started the company that was completely absurd. But

When I sold the company, we had delivered two billion courses. So we kinda did. Educate the world. It's an incredible journey. When you reflect on it. What's the biggest takeaway for you?

Perseverance. You gotta persevere. If you're passionate about something And really believe in it. It's not always gonna be easy.

When we went public, it looked like we were an overnight success, but we had been at it for many, many, many years. But the other piece of that is you better really be passionate about what you're doing. Because it's not all gonna be good days. And you gotta remember why you're there.

Thanks for being here. Thank you for having me. From a lonely entrepreneur whose daily highlight was a trip to Staples to the CEO of a multi-billion dollar business, Adam Miller scaled his company by making decisive moves and bucking conventional wisdom in Cornerstone's existential moments. Whether it was the dot com crash, a country shaken by a terrorist attack. Or global financial crisis.

Adam faced some of the most dire external challenges SEO could imagine encountering. Історії шоссе сам тайм. You've to throw out your best laid plans and make bold Counterintuitive pivots. To scale.

I'm Jeff Berman. Thank you for listening. Masters of Scale is a Wait What original. Our executive producer is Eve Trow. Our senior producer and resident West Wing expert is Trisha Bobita.

The production team includes Tucker Legerski, Masha Makatanina, and Brandon Klein. Special thanks to Juliette Lueney, who produced this episode, our senior talent executive, Stephanie Stern. Mixing and Mastering by Aaron Bastanelli and Brian Pew. Original music by Ryan Holiday. Our head of podcasts is the Tal Malad.

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