David Schneider on Scaling ServiceNow and Being a Useful Investor

Harry Stebbings asks Coatue general partner David Schneider about his operating career. Schneider says he spent nearly nine years at Data Domain, joining before revenue and staying through an IPO, acquisition and growth to roughly $1 billion in revenue. He later joined ServiceNow at about $80 million in revenue and left when it reached roughly $5 billion.

He recalls Data Domain agreeing to be acquired by NetApp in 2009 before EMC launched a competing hostile bid. EMC advertised publicly and continued working over a holiday weekend, eventually winning. Schneider estimates the price rose from roughly $1.7–$1.8 billion to $2.2 billion; the figures are his recollection.

The first Data Domain product was effectively a paid beta, he says. Customer conversations revealed that the important outcome was not simply backup but how quickly data could be recovered. Integrating into customers’ existing backup systems also reduced friction; he took away the importance of a precise use case and simple adoption.

When enterprise buyers consider a new tool, Schneider says they ask what spending it replaces or how it improves their situation. He groups purchases into three motivations: making money, saving money or reducing risk. A seller must connect the product to one of those outcomes rather than assume a new budget will appear.

Stebbings asks why deals slip into the next quarter. Schneider says a proposal competes with other customer priorities, even if those are not direct competitors. At ServiceNow, teams developed a joint value case so a customer could explain the proposed investment internally. He wanted revenue forecasts 90–180 days ahead within roughly 3%, because reliable forecasts support hiring and resource allocation.

Schneider does not avoid competition: in enterprise software he often found it easier to replace known spending than create an entirely new category. He recalls ServiceNow competing with established vendors as customers moved to the cloud and argues incumbents were not sufficiently focused on customers. That is his competitive assessment, not an independent evaluation of those firms.

His sales playbook begins with a clear target customer, the customer’s problem and stories from existing users. Train sellers on whom to approach, likely objections and how to respond, then recruit people who care deeply about the opportunity. He looks for people who have overcome difficulty and asks candidates what they are proud of having worked hard to achieve.

On transparency, Schneider believes employees usually know when something is wrong, so leaders should address strengths and weaknesses directly. He wants a strategic direction from leadership but ideas from people closest to customers and technology. Stebbings asks how to make empowerment practical, rather than merely praising it.

He recalls a sales engineer exploring whether ServiceNow’s ticketing system could address an HR use case. The team demonstrated a proof of value, tested interest with several customers and brought the idea to engineering. Schneider estimates it later became a roughly billion-dollar product; the interview does not provide an audited product revenue figure or period.

Schneider says he did not foresee ServiceNow’s eventual scale. He praises founder Fred Luddy’s customer focus and experience in the problem domain. Even while the company had technical debt, Schneider believed the team needed to continue serving demand and improve the infrastructure in parallel.

Speed of decisions matters, he says, because waiting for a perfect answer can mean the situation has changed. But feedback taught him to gather at least two points of data: he recalls moving too quickly on an external senior go-to-market hire who did not fit the company’s culture. His account is a lesson about judgment, not a claim every rapid hire fails.

Schneider is sympathetic to promoting internal leaders. At Data Domain he narrowly missed an early revenue goal and worried that Frank Slootman might replace him; the next year, he says, the team exceeded its target substantially. He credits Slootman with backing his drive and supplementing gaps through mentoring and coaching.

Stebbings argues that fewer young people are willing to work and sacrifice as they once did. Schneider disagrees, saying committed employees need not all want to be founders. He describes go-to-market work as helping engineers’ creations reach customers and wants to develop leaders rather than automatically replace them.

At ServiceNow, Schneider recalls inheriting 16 sales representatives with less than $30 million in estimated capacity against a $100 million new-business goal. He says he hired roughly 150 people in 90 days and reached the goal, aided by market demand, customer enthusiasm and a pricing change. The capacity, hiring and revenue figures are his recollections.

He says the team reduced discounts and roughly doubled its street price early on. Customer response at a user conference gave him confidence that the product delivered substantial value. He also recalls that hitting key revenue targets and demonstrating pipeline visibility were important to the company’s IPO plans.

During the IPO process he says Gartner estimated the relevant IT service-management market would be capped around $1 billion, a view he believes underestimated the eventual opportunity. As an investor, he still considers market size important but argues that making difficult technology easier can expand the addressable market. This is his interpretation, not proof that every market will expand.

Timing matters as well: a good idea can arrive before customers feel enough pain to change. Schneider validates a founder’s “why now” through conversations with outside parties. His sales background helps him ask follow-up questions about the problem, internal buying process and what spending a solution might replace.

He urges salespeople to listen, tolerate silence and probe beyond the first answer. Asking a second or third question can reveal more about a customer’s motivation than a long product pitch. Stebbings agrees that comfortable silence is an important interviewing skill.

One ServiceNow mistake was a lower-priced product, ServiceNow Express, built in response to smaller competitors. Schneider says the enterprise-oriented team failed to make it simple enough, leaving unhappy customers and support burdens. The team saw signs within about six months but took roughly a year and a half to exit the effort.

By contrast, several successful expansions began when existing customers used the platform for purposes beyond IT. ServiceNow productized those uses in areas including customer service, security and HR, after establishing strength in its core market. Schneider says new business units and a different sales model were needed to reach new buyers.

The company tied a quarterly bonus pool to net new annual contract value, which he describes as new business minus churn, aligning employees around both acquisition and retention. It then launched four new product lines around 2015–16, aiming for each to reach $100 million in three years. These were targets and his account of internal metrics, not a complete audited outcome for each line.

Schneider says sales representatives and sales engineers owned the customer lifecycle from initial sale through expansion and renewal. He eliminated a standalone customer-success group at ServiceNow because, in his assessment, its tasks belonged in support, sales or paid professional services. He says the company had renewal rates above 98%, so his decision was specific to that context.

He later reintroduced some customer-success resources in narrower paid forms. Schneider remains skeptical of adding a team without knowing what it does, how outcomes are measured and how staffing becomes more efficient. This is a management view based on his experience, not evidence that customer-success teams cannot be valuable elsewhere.

Stebbings raises the view that the best founders do not need investor help. Schneider disagrees: he distinguishes being founder-friendly from being founder-helpful, including giving difficult feedback. He sees the investor’s job as coaching and advising rather than taking over the founder’s work, a position aligned with his own role at Coatue.

Moving from operator to investor required a beginner’s mindset, he says. He had to earn credibility without the staff and recognition that came with an executive role. Many people advised him not to make the switch, but he chose it deliberately and says his first deal came after about two months, perhaps too quickly.

Asked about growth-stage entry prices and compressed public-market multiples, Schneider says each deal needs its own underwriting. A central risk is that growth slows sooner than expected, even after investors discount management’s forecast. He presents his operating help as a way to support portfolio companies, not as a guarantee of returns.

Businesses can plateau if their revenue comes mainly from young technology companies vulnerable to funding cycles, he argues. He looks for diverse customers, quality of revenue and evidence through a renewal cycle: did customers expand, shrink or leave? He is particularly attentive to whether a second product is welcomed.

Long contracts can delay formal renewal feedback, but Schneider says expansion within the contract can still reveal adoption. At ServiceNow he recalls customer contract value often rising 20–40% after implementation as more people used the product. That is his historical account, not a benchmark promised to other companies.

For companies whose valuations outran their growth, he sees several possible paths: some may reaccelerate, some may return cash or sell assets, and others may use remaining capital for a new product. These are scenarios, not predictions about specific businesses. He also believes very large revenue businesses often need a second or third act.

Schneider says some 2021 investments were probably too expensive, while price concerns also caused him to miss earlier rounds of companies that kept improving. He looks at founder, team, market and execution when deciding whether a high price is justified. Hindsight cannot remove the risk in the original decision.

He says founders sometimes choose investors for the help they can provide as board members. At growth stage he typically seeks a $75 million check for a board seat, sometimes $50 million, and thinks in dollars invested rather than a fixed ownership percentage. He says the team often underwrites a five-to-ten-times outcome, with different risk and return expectations for later-stage companies; these are targets, not promised returns.

Coatue may invest across rounds but does not participate automatically if a price no longer offers the risk-adjusted return it wants. Schneider says the team typically learns much more about a company’s weaknesses in the first three to six months after investing. Assumptions can also change as markets change.

He tries to speak directly with founders when declining deals and invites some to keep in touch. His network can help with introductions even outside the portfolio. He recalls walking away from one highly priced 2021 deal and accepting a smaller position than desired in another, which created tension because he could not offer the time the founder wanted.

Schneider calls the least helpful board members “seagulls”: they arrive, create distracting work and leave. He advises management teams to set the agenda, present three things working and three needing attention, and ask for help on the latter. Board members should read materials and prepare rather than surprise the team.

Stebbings suggests a short call with each board member before a meeting to resolve some concerns in advance. Schneider agrees that some issues can be handled privately and others belong in the boardroom. When choosing directors, he recommends examining relevant hands-on experience as well as prior board seats.

He praises Doug Leone for practical judgment, responsiveness and framing questions rather than dictating answers. He also values Mike Volpi’s operating perspective and Anil Bhusri’s advice to speak with many customers before building. Stebbings recommends spending time in customer support to hear problems directly.

For a new board member, Schneider suggests identifying a distinctive strength and applying it to the company’s needs. He cautions against comparing a young founder directly with a veteran executive at the end of a long career; he instead remembers what experienced leaders were like at earlier stages.

He says he chose Coatue because its leadership wanted to innovate in how it serves investments and recruited operators to contribute. That is his explanation for joining and reflects his commercial interest in the firm. In the quick-fire round, he emphasizes motivated people, using travel time to meet customers and employees, and earning respect rather than merely seeking to be liked.

Schneider believes feedback should be timely and direct. He recalls sending an angry email to engineers at Data Domain when a customer deployment failed, expecting Slootman’s support. Instead, Slootman told him to speak with the engineers and work on the problem together; Schneider apologized, and says the team resolved it within days.

He credits ServiceNow CEO Bill McDermott with enterprise sales skill, clear storytelling and executive relationships that help with large buying decisions. Schneider also describes a fear of disappointing others that drives him to prepare. He tries to turn that anxiety into learning: review the last quarter, decide what to change and focus on the next one.