Utah Jazz owner Ryan Smith built Qualtrics into a $1 billion in revenue business from his basement—by asking customers about their opinions

Smith is the owner of the NBA’s Utah Jazz, purchasing it from the Miller family in 2020 for a reported price tag of $1.66 billion. But his first major business endeavor actually happened in 2002. He cofounded Qualtrics, an experience management software company, with his brother and father, a professor, in their Utah family home.

“I think that if you would have told me 20 years ago that we’d be approaching a billion dollars in revenue, have 26 offices around the world, then we would sell and then go public, I would have said you’re crazy,” said Smith, 43, who was the CEO for 18 years, but now serves as executive chair and director.

Qualtrics announced on Jan. 26 in its Q4 earning report total revenue of $1.1 billion for 2021, up 41% year over year. The company now has almost 17,000 customers. The number of million-plus customers increased 93%, year over year in Q4 totaling 143. Looking back, Smith says starting this business was uncharted territory for his family. 

“Everything was kind of stacked against us,” he said. “I mean, we were in Utah. We were in a basement. We had no venture capital.” Smith was a student at Brigham Young University, and his father was recovering from cancer. The family still decided to go forward with the plan, although unsure of the outcome, he said. “But we were going to do it together,” Smith said. “And we were going to operate on a set of principles.”

Ryan Smith, executive chair and director, Qualtrics (far right) in the basement of his Utah family home in the early days of the company. / Courtesy of Qualtrics

“Disrupting ourselves” and being flexible has led to innovation and longevity, he told me. “If you look back over 20 years, Qualtrics has been probably five to seven different tech companies over that time,” he said. “We changed out the board. We changed our leadership teams. We went from a company that was bootstrapped to a company that was VC funded to a company that was purchased to a company that was spun out,” Smith said. 

Qualtrics, headquartered is in Provo, Utah, was acquired by SAP in 2019. The tech giant then spun it off and took it public in January 2021. It now trades under the ticker XM. The company recently announced two new board members: Omar Johnson, a former marketing executive at Beats by Dre and Apple and the founder of ØPUS United, and Ritu Bhargava, chief product officer for SAP Customer Experience.

‘Are you powering all of Vegas?’

In the early days, Qualtrics’ first product was a survey tool for academic research. But starting in academia was “a bad business move, if you thought about it from a venture capital standpoint,” Smith explained. “You had faculty members who had a lot of time to play on your product, but they didn’t have any money,” he said. “And they were really demanding to support. I would fly to New York to go meet with two faculty members at Columbia University.” However, being scrappy eventually paid off, he said. 

 “[The company] morphed into us leading and creating a category around experience management.” Smith said. “Three years ago, when we went on the road meeting with investors, I think that people didn’t even know what experience management was. They were trying to get their heads around it.” But now you hear reports about how “experience is the new currency,” he said. The Qualtrics XM software platform helps companies collect and analyze data about the interactions they have with customers and employees on any chosen topic. And then enables them to take action to improve their experiences. 

Morgan Stanley upgraded Qualtrics stock to overweight in December, writing that “Market leadership in the fast-growing experience management space should drive durable growth.” Also in December, an analyst at Goldman Sachs (a Qualtrics’ client), added the stock to Goldman’s Conviction List. About 85% of the Fortune 100 use its products, according to Qualtrics, including American Express, Walt Disney, and Coca-Cola. 

Without naming names, Smith told me a story about how the company was front and center during one of his friend’s trips to Las Vegas. “This past weekend, a friend called me and said, ‘Hey, are you powering all of Vegas?” Smith began. “And I said, what do you mean? He said, ‘Well, I got off my flight, the airline asked me was there anything we missed? I got my rental car and the company asked me about my experience. The hotel asked me, did we miss anything? I went to a venue for a sporting event, and they asked me if everything was good. Every single one of those inquiries was running through Qualtrics [tech].’”

When it comes to employers, “especially through the pandemic, one of the areas that we’ve seen absolutely explode is every company trying to figure out how to listen to their employees to understand what they’re going through, and what the company’s getting right and [getting wrong],” Smith said. That includes using Qualtrics to gauge employee sentiment on COVID-19 vaccine mandates, and also to track, understand and comply with local and federal laws, he said. 

In the NBA, the company’s products are used on a daily basis for everything from taking food orders to understanding how the players are feeling, Smith said. For example, asking, “’Do you have any [COVID-19] symptoms?’” he explained. “And that’s just a quick text messages that’s coming through Qualtrics.”

A strategic partnership

In 2020, Zig Serafin became CEO at Qualtrics. Serafin joined the company in 2016 as COO. He was formerly a president at SAP and had a 17-year career at Microsoft. 

“I remember going around Silicon Valley as one of the hottest companies in tech, interviewing a slew of COOs at the time,” Smith told me. “Every one of them asked me, point blank, ‘Well, what is your job? And what is my job?’ Zig was the only person who didn’t ask me that. He just said, ‘Look, it’s all going to change anyway and I just want to be on the right team,’” Smith recalled. “There was really no ego involved,” he said. 

It was “super fortunate” there was a consensus among leadership back in 2016 that it was time to find “the next great leader of this company,” Smith said. “For the first year and a half, Zig, as COO, and I just operated two in the box,” Smith explained. “He basically had been the CEO with me throughout the process. He just didn’t have the title of co-CEO. It’s been incredible. It’s been one of the coolest experiences I’ve ever been a part of. We’re such good friends.”

“What Ryan and I have been doing for the last five years is unique,” Serafin told me. “Because we, frankly, have been able to wear multiple hats. We’ve been able to partner closely together as owners and sort of accountable stewards of this business.” He added, “We leverage each other’s strengths. We build on a common mission, a common vision that we have.” 

The company now has nearly 5,000 employees worldwide. Qualtrics uses its own tools to gauge employee experience and also values TACOS. But not the meaty treat you’re thinking of. 

“A lot of what we do when we come to work and partner together starts with the heart of the culture of the company,” Serafin explained. “We have an acronym that we use called TACOS. It basically defines the core values behind our culture—transparency, all in, customer obsessed, operating as one team, and being scrappy.”

TACOS came about organically from “people describing the culture of our company,” Smith said. “What we did was develop TACOS as a reminder of how we started, what we care about, and aspire to not move away from it.” I asked Smith the meaning of scrappy. “If you didn’t have resources, or you didn’t have money, how would you accomplish it?” he said. “Some of the greatest breakthroughs in Qualtrics history were done out of necessity.”

Looking ahead

Going forward, Qualtrics wants to help companies get “unstructured” customer opinion through social media, emails, support calls, chats and product reviews powered by A.I. to gauge emotion and sentiment. For that purpose, the company acquired Clarabridge, a provider of omnichannel conversational analytics, in a stock transaction valued at $1.125 billion in 2021. Longtime customer Barclays recently added the technology for unstructured customer feedback for their retail bank, Serafin said on the Q4 earnings call.

Qualtrics expects total revenue in FY22 of $1.402 billion to $1.406 billion, representing 31% growth year-over-year at the midpoint, Serafin said. “I think what we’re going continue to see is a continued massive shift in the way that companies they’re listening to their customers and their employees and the way that they’re taking action,” he said.

I asked Smith what he anticipates for the year ahead. “I’m involved in the NBA,” he said. “I’m involved in sports and tech. And I wake up every morning wanting to go into Qualtrics, and that’s pretty powerful.” And while he wouldn’t change a thing about his company’s basement origin story, it’s safe to say that if Qualtrics was collecting data, the “experience” from the owner’s suite is definitely a welcome upgrade.