Building a $10 Billion Dollar Company with Karl Alomar, Former COO of Digital Ocean

As an entrepreneur, if you want something, and you can map out the journey, there’s no reason why you can’t make it happen.

On today’s episode, host Roland Frasier sits down with Karl Alomar, Managing Partner at M13. Karl has achieved massive success as an entrepreneur, and his journey is inspiring. He’s a strong believer in the mantra nothing ventured, nothing gained. “The stuff outside the box is what creates great businesses,” he says. “I admire the founders who have the guts to go out and make the world different.”

He says there’s a difference between ideas that sound crazy (and really are) and ideas that sound crazy, but when you think about them logically, there’s a journey to get you there.

Karl’s Diverse Entrepreneurial Experience

Karl’s entrepreneurial journey began in the late 90’s when he started a video networking company. He exited in 2000 when they were on the downswing of value. His background was actually in engineering, but that degree wasn’t helping him much in the business world, so he decided to go to business school and get an MBA.

He says he would do it all over again. The first 3-6 months of the MBA program is basics, and things started making sense to him that he’d previously faked his way through. He could hardly read a financial statement properly with his first business. He says he built that business with “guts and glory” and really didn’t understand much of what was going on. By the time he finished his business degree, he got really good at fundamentals. 

He started a company called China Export Finance. His first engineering job involved doing projects in Asia, China in particular. And he grew up in Europe, so he was used to different cultures. “Different markets are very different,” he says. “You have to understand the customers.”

He partnered with a friend in London who really understood the sourcing problem and illustrated it for him. Once they had the framework, he flew to Shanghai and sourced a handful of local talent. He wanted to create an entity that felt really open. He found a great Chinese business partner who helped him set up the Shanghai office and create a localized feel so the customers were comfortable. 

After China Export, he made a few small investments, then accepted the COO position at Digital Ocean in 2013. They had just launched a few months earlier. When he came in, they were at $50k/month. When he left, they were doing $250M a year. 

How He Orchestrated that Significant Growth 

Karl says there are two parts of growth: things that drive it and things that allow you to manage it and keep up with it. Essentially: growing and scaling. He says that failure is usually more of a lack of ability to manage it. It’s a scale challenge, not a growth challenge.

Right out of the gate, Digital Ocean built a machine that was organically building on it. They had a simple model, clean offering, relationship with community, and great content. It was an incredible recipe for creating an engine that would build on itself. The formula was built to create a perpetual engine that would grow. One of the key learnings he says he’d pass on is that it’s never too early to figure out how you’re going to grow your organization.

“Think about what you want to get done, and think about mapping out the journey of how you get there,” he says. “Is it a logical journey? It may not make sense by the standards and expectations of the current market, but how is the market changing? What are the key components and how do they connect, and is each one realistic? If you can figure those out, there’s no reason you can’t go out there and make it happen.”

Karl says there are two positions you need as you grow. When you grow so much that you can’t touch everyone, you need a Head of Talent. It’s not about hiring; it’s about optimizing the performance of your organization. This person is focused 100% on culture, energy, and productivity. They’re incredibly valuable and will lift your delivery and performance 20%. He doesn’t like HR as a word. “Humans aren’t resources; they’re talent,” he says. 

Technical Program Manager is the second position. When Karl hired this person, the organization of their work and allocation of their resources was uplifted, leading to a 20% increase in their organization. This person is someone in the middle coordinating traffic. Both of these positions are essential once you have 20-50 people working for you.

How Is Investing Different From Leading a Company?

“Go try something you haven’t tried before,” Karl says, “and you’ll find a bunch of weaknesses.” His tendency as an entrepreneur has always been innovation. He’s always been inspired by founders and the guts they have to do the things they do. As an investor, he’ll never be at the table every day executing with these people. He says you have to believe that you’re aligned with the founders you’re working with and you share a vision. They’ll address problems in a way you feel confident will result in positive outcomes. You have to believe in your team’s ability. It wasn’t a hard adjustment for him to step back; he just had to recognize it.

Three years into his investment with M13, he feels like a really proficient investor. When deciding whether or not an investment is a good fit for him, he says it goes beyond just liking the people at the company. Does he like the way they think? Could he work with them? What is their core business model? How is the industry changing? How is the world changing? Does the team have a logical process for staying in step with that?

He also looks at the big picture, the overall opportunity. And he’s learned to be very cautious of the white hot opportunity everyone’s in love with, the flavor of the day. It’s very short-lived. He tries to focus on fundamentals. Does the data support the vision? What does the business model look like at scale? “Dig in a few layers deeper to make sure you’re not making silly mistakes,” he says. “Get to know the founders better. Is there scalability? Does your initial good impression stand?”

If so, then you’re good to go. 



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