Fred Luddy's Remarkable Comeback

Building ServiceNow Into a $150+ Billion Company

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Fred Luddy, Founder of ServiceNow

Fred Luddy - ServiceNow

Imagine losing $35 million overnight and less than a year later, just before your 50th birthday, starting a company that would one day be worth more than $150 billion.

That folks, has been Fred Luddy’s journey.

It’s remarkable. Unbelievable. Unfathomable.

Yet most people, myself included, had never heard his story before.

When I heard about him a couple of months ago, I knew I had to share it.

Let’s get to it.

Early Days

Fred Luddy grew up in New Castle, Indiana and, like many world-class founders we’ve studied so far on Just Go Grind, he wasn’t all that interested in school.

That’s not to say he didn’t like learning.

But the subjects he was learning about in school weren’t for him.

What did capture his attention?

When I was 16 years old, which was in the early ’70s, I had a part-time job as a purchasing guy at American Standard. They bought a high-end computer, and I walked into the data center where the Hewlett-Packard computer was and never wanted to leave. I was a moth drawn to the flame. Something pulled me in and made me believe that I wanted to be part of this data-processing community. I’ve been that way ever since.

Fred Luddy

With the help of programming guides, Fred learned to program and got a job only ten days later.

He soon learned the power software had to improve people’s lives after writing an order-entry program for another employee at the company:

There is no better experience than giving someone a piece of technology that lets them do something they never thought they could do.

Fred Luddy

While Fred eventually wound up at Indiana University for college, his obsession with programming took over.

He flunked out.

Programming was much more interesting to him than attending classes.

After a programming job moved him to Montreal for a few years, Fred left to go to Silicon Valley, working for the Amdahl Corporation:

From there I ended up in Silicon Valley in 1976, before it was known as Silicon Valley. I went to work for the Amdahl Corporation. They built mainframes and I built a couple of software products for the hardware company.

They became very successful in terms of the amount of revenue they generated and notoriety gained for the company. They were in the area of mainframe performance.

I thoroughly enjoyed the company, and it was a wonderful experience. It was probably the most formative part of my career. There were a lot of very bright people from both a technical and a business perspective. Those people really gave me a phenomenal education to help me through the next 15 to 20 years of my career.

Fred Luddy

More than a decade later, Fred was ready for a change and moved again, this time to Los Angeles:

I then went to work for a software company called Boole and Babbage as a consultant. I worked on mount products that they sold, which were also reasonably successful in the mainframe area.

At some point in 1988, I got disillusioned. I decided to quit my job and moved to Los Angeles to play beach volleyball. I found out a few things. I learned that I was short, slow and not a good athlete.

Beach volleyball quickly went by the wayside and I started a software company called Enterprise Software Associates. It was a cataclysmic failure.

Fred Luddy

That cataclysmic failure resulted, in part, from his co-founder.

I have advice for any entrepreneur, which is if you’re starting a company and you have a partner, you should first find out if your partner is a convicted felon for fraud. I forgot to do that.

I got talked into going into business with a man who did not have a good reputation. It was a very painful part of my career and a very expensive lesson.

We racked up the normal amount of debt, which I had to pay as an individual over three or four year period after the company folded. I became disillusioned with people in general. Fortunately I met up with John Moores, the founder of BMC. He pulled me into Peregrine. My career had an upturn from there.

Fred Luddy

While Fred’s career had an upturn after joining Peregrine, the ending would put him back at ground zero.

Starting ServiceNow

Fred became the Peregrine Systems CTO in 1990, at a time when the company was doing $4.5 million in revenue.

More than a decade later, in 2002, Peregrine was worth more than $4 billion with $500 million in revenue.

Only one problem.

Massive financial fraud.

The company filed for federal bankruptcy protection and wiped out $4 billion in shareholder equity.

It was brutal for Fred, who described the experience:

I was at peregrine for about 13 years and during that time we had an IPO and the company's stock became worth a lot of money.

I was 40 some years old and it used to be that function key five refreshed the Yahoo stock page and I’d watch my net worth go up by hitting f5.

Well I got up one morning and had a cup of coffee and then I hit f5 and it had gone to zero… I had a net worth of 35 million… that was a hell of a morning. Then I found out later it got worse, that the company was involved in fraud.

11 people went to prison. I got sued. I had to pay a lot of money to defend myself in a lawsuit but it was the best financial thing that ever happened to me because it got me off my butt that was comfortable at Peregrine.

I didn't like my job that much there and I just decided that's it, I'm gonna start a new deal and the time is now, let's take advantage of it.

Fred Luddy

A few weeks before his 50th birthday, in November 2003, Fred started ServiceNow:

I couldn't wait because there was something psychologically that said I couldn't start a company at 50.

Fred Luddy

What was the idea for Fred’s Company?

To make a simple platform for creating workflows at companies, with a user-friendly interface that the average person could easily navigate, all delivered over the internet without needing to manually download software.

This was 2003.

The company’s initial name was Glidesoft, Inc.

Software-as-a-service wasn’t exactly the phenomenon it is today, but Fred knew the internet was a game-changer:

I would like to tell you I had a brilliant business plan which I executed perfectly, but nothing could be further from the truth. I just knew that the internet delivery of applications was very simple to use and was going to be a huge wave. was becoming very popular, and things like myYahoo! and iGoogle were starting to appear.

Fred Luddy

Fred programmed by himself for the first 6-9 months, fueled by, as he would later say, “25 pounds of Starbucks French Roast.”

His strategy early on was simple:

The real strategy behind the company was to build some software that somebody wanted that hopefully they would pay me so I could build more software. That was the entire strategy.

Fred Luddy


It reminds me of a quote I keep on my computer’s home screen from the biography of Thomas Edison:

Having one's own shop, working on projects of one’s own choosing, making enough money today so one could do the same tomorrow: These were the modest goals of Thomas Edison when he struck out on his own as full-time inventor and manufacturer. The grand goal was nothing other than enjoying the autonomy of entrepreneur and forestalling a return to the servitude of employee.

Edmund Morris

Initially, Fred completely bootstrapped the company, getting help from a couple of guys who volunteered their time on nights and weekends in the early days.

It took Fred 18 months to build the product and get to market, putting in the work to find the initial twelve customers by early 2005:

I made phone calls and literally drove up and down the coast of San Diego County to talk small businesses into using our product.

Fred Luddy

But Fred wasn’t charging those customers anything to use the product.

What did he want instead?


And it was much needed.

The initial response to the product was lukewarm.

But those customers gave Fred valuable feedback he used to make improvements.

With a finished product and free customers, Fred set out to create a real company.

Building a Real Company

In July 2005, Fred raised a $2.5 million round of funding for ServiceNow led by JMI Equity.

He hired five people including his younger brother who became the company’s first sales rep.

Fred needed the help.

It was time to start selling ServiceNow’s software and Fred wasn’t exactly a sales guy:

I never dated much when I was younger because I was always afraid of “no.” If I asked you to have dinner and you'd say “no” I'd be crushed and probably wouldn't be able to come out of my closet for a week…

Well, that was why we actually had to hire some salespeople who had the the nerve to ask for an order.

Fred Luddy

The first contract they sold was to a company called WageWorks:

It was a very small deal. Our very first contract was with a company called WageWorks in San Francisco. It was for $2,600 a year. It took only three months to generate real revenue, so we were ecstatic. We could not have been happier.

Fred Luddy

While Fred sold the initial twelve customers to test his product by driving around to different businesses, the team had to find more scalable ways to grow, starting by selling over the phone:

We did start out very inefficiently selling direct. We used the telephone, and we were primarily trying to close deals over the phone. We would visit some potential clients. Each deal we earned became larger than the one before.

Fred Luddy

Fred was still figuring out exactly who his customers were at this point and that expansion to bigger deals happened organically:

Unfortunately, we didn’t have a grand plan or scheme. We worked hard, but I think a lot of it has to do with luck.

We first sold to WageWorks, and the guy who bought us there went to work at He recommended buy our product, and they bought at $35,000 a year.

It just started to proliferate and spider out from there. We had more and more customers at increasingly higher price points.

Fred Luddy

They moved from serving mid-market customers to the global 2000.

Companies with large IT organizations and many employees found ServiceNow far more appealing than any other customer.

Fred mentioned how they wasted a year on mid-market customers before figuring this out.

That’s just the way it goes sometimes though.

Those enterprise customers, which included the likes of Qualcomm and Hyatt, led to impressive recurring revenue growth in only a few years:

The first year we did $850,000, the second year we were at $5 million, and in the third year we were $13 million. We finished the fourth year at $28 million.

Fred Luddy

To get to this point, Fred of course built a team around him, pulling from the network he’d built up over his career:

A lot of the people we have hired are people I knew from other companies and who I worked with. We have also hired people who have worked for some of our customers. At first I hired about four or five people who were friends and very close colleagues from Peregrine.

Then we hired some people from a number of different technology companies to grow out the different areas of our business such as support, operations, sales, and marketing.

Most of the people whom we hired, who became the core of the company, were people I had known for five to ten years. Another bonus is that the people I originally hired have reached out into their networks, and that’s how we found our second wave of employees. We have been adding more and more employees ever since.

Fred Luddy

And that revenue growth didn’t go unnoticed.

In late 2009, Sequoia Capital led a $41.4 Series D investment in ServiceNow.

By early 2010, the ServiceNow had 350 enterprise customers.

Around that time, Fred shared his thoughts on the competition ServiceNow faced and how it had evolved:

When we started our competition was either home-grown databases such as Excel and Access or SMB solutions such as TrackIt, which was sold by Intuit.

Today our competition is primarily BMC, Hewlett-Packard, Computer Associates, and IBM. In all of those cases their products are very old technologies. We call them Soviet-era technologies. They were built in the 1980s or early 1990s, and they look like Soviet-era technology. They have the feel of a Soviet military airplane. It’s unappealing to anyone who uses Facebook at night. These people come back to work and wonder why they have to deal with that.

We are competing with established corporations that have significant relationships with their customers.

We are showing our prospects and customers something that we think is several orders of magnitude different from what our competition is selling, and our competition has reacted.

I think of the quote from [Mahatma] Gandhi that says “first they ignore you, then they laugh at you, then you fight them, and then you win.

Our competition first ignored us, and they laughed at us, saying that we were just a cute little thing for small companies. Then they started to find out that we were taking a lot of their customers, and so they started fighting.

When they adjusted, they did the things we wanted them to do the most. They took their client/server products and hosted them at a data center so that they could call it a Software-as-a-Service solution. It was nothing more than a client/server ASP solution. Prospects see through that instantly.

We think it is wonderful because our competition has validated our market approach. If you look at our competition and our revenue, our revenue is probably equal to the daily pretax revenue of the Hewlett-Packard Corporation. We are clearly buzzing around their ears.

Nonetheless, I think these companies have taken notice of us, which is good for the marketplace in general. We have introduced a new way of doing things that has broken up the oligopoly.

Fred Luddy

The ServiceNow team had grown to 135 by March 2010.

When Fred was asked in an interview how big the total available market was for ServiceNow at this time, even he underestimated just how big the company could become:

The service desk market is $1.2 billion to $2 billion a year. However, we have a much broader vision.

Based on our customer feedback, we believe that there is a need for enterprise resource planning (ERP) for IT. If you look at most large IT organizations, they will have 40 to 50 different processes to manage their operational areas, their application development area, their application portfolio, and demand management. We believe that should all be offered under a single portfolio. We can offer all of that, not just the service desk.

Application portfolio management, performance management, capacity planning, budgeting, and financial aspect cost management can all be done in a single system of records.

Upper management in the IT organization as well as the people turning the wrenches at the lower levels should all have an idea of what should be done, when it should be done, who it should be done by, who approved it to be done, how much it will cost, and what risks there are associated with doing it.

Even though we are in the service desk market, which is a $1.2 billion to $2 billion marketplace, we really believe that our approachable marketplace is probably a lot closer to $4 billion to $6 billion a year.

Fred Luddy

To get there, Fred enlisted the help of an executive who ended up being the perfect person to take ServiceNow to the next level.

Frank Slootman

When Fred raised the Series D from Sequoia Capital, ServiceNow didn’t need the money.

What they needed was Sequoia’s expertise.

And they got it in Doug Leone, the Sequoia Managing Partner who joined ServiceNow’s board.

At the very first board meeting, Doug asked Fred if he wanted to be the CEO or the product guy, a decision he’d have to make very soon.

Even though Fred built the company to more than a hundred million in revenue, he knew the decision he had to make:

I built the company with my brother and my sister and a lot of people who had never run a large company and so I told Doug I'm not really sure what I want.

So he arranged a tour of Silicon Valley to meet CEOs of large and small companies companies like Polycom and companies like Palo Alto Networks and at the end of the day I looked at him and I said I haven't got the skills to do this and I have less desire to do this than I have skills and so I decided to become the product guy.

For our company, and for me personally, and everybody has to take this according to their skills and their passions, their desires, the thing that propelled this company was my decision to get a CEO.

We hired the best CEO possible, Frank Slootman, who brought in the best CFO, Mike Scarpelli, who brought in the best sales guy, David Schneider, and it really was that transition going from a scrappy startup company with a significant amount of cash and revenue to becoming a company of operational excellence.

Fred Luddy

After the Frank Slootman hire, Fred became the Chief Product Officer.

The foundation was built and Frank focused on building out the sales team as well as implementing processes and procedures to allow ServiceNow to scale, becoming a very large company.

Frank, who had taken his last company, Data Domain, public and later sold it to EMC for $2.1 billion, was primed to take ServiceNow Public as well.

Before doing so, ServiceNow came to a crossroads.

It was late 2011.

ServiceNow has 500 employees, is growing fast, and is doing $130 million in revenue.

Then VMware offered $2.5 billion for the company.

Fred and much of the board wanted to sell.

But Doug Leone thought ServiceNow was primed for even more growth and could be a $10 billion company:

We thought ServiceNow had a great product-market fit, a great leadership team. They're also in a winner-take-all market—you cannot name the number two company to Salesforce.

Doug Leone

Rejecting the offer, ServiceNow went public 6 months later and was only just getting started.

Going Public & A Decade of Growth

After going public in June 2012 and raising more than $200 million, ServiceNow went on a spending spree, continuing to accelerate growth:

Armed with cash from the offering, as well as the ability to issue new shares, Slootman began buying companies to acquire new underlying technology and—much like Salesforce, Microsoft and just about every major technology player—to invest in artificial intelligence.

ServiceNow began growing even faster. It had essentially become a one-stop shop for CIOs, centralizing and automating many common IT help-desk tasks like tracking incidents, recovering passwords, requesting equipment, setting up new user accounts, troubleshooting and managing IT systems and responses through simply designed service portals.


A year later, Fred mentioned part of how he grew ServiceNow to this point:

I don’t know if you read the Jobs biography, there were a couple of interesting things in their, number one when he met Dr. Land they had both agreed that everything that was going to be invented had already been invented.

The other thing that they pretty much agreed on are what Jobs said, and a quote that I've used for years, is that “Good artists copy and great artists steal,” and I've been a thief all my life.

Fred Luddy

By December 2014, ServiceNow had grown from 275 employees when Frank Slootman started, to 2,200.

After $1.39 billion in revenue and a $12.34 billion market cap in 2016, a change came the following year.

Just as Fred had stepped out of the CEO role to allow Frank Slootman to take the reigns for ServiceNow’s next phase of growth in 2011, Frank moved on in 2017 with John Donahoe, the former CEO of eBay, becoming ServiceNow’s CEO.

His tenure was short-lived.

After two years, John left ServiceNow for his dream job as CEO of Nike, with current ServiceNow CEO Bill McDermott starting in 2019.

But in 2018, during John’s short tenure, ServiceNow was ranked No. 1 on the Forbes Most Innovative Companies list.

At the time ServiceNow had grown to become a $30 billion company.

In a Forbes feature about Fred Luddy and how he built ServiceNow up until that point, they described the two keys to their innovation:

The special sauce—the thing that gives ServiceNow the fat "innovation premium" that drives our ranking—comes from two product traits with the potential to scale: simplicity and customizability.

ServiceNow's IT tools don't require the IT department to set them up. Once running, they offer a single collection center for requests, data points and checklists, all of which can in turn be analyzed by algorithms to predict needs, flag concerns and measure efficiency.

Even in a business where renewal rates are commonly at least 90%, ServiceNow stands out at 98%. "They have cemented themselves as the number one IT partner for the biggest companies in the world, and they don't get fired," says Alex Zukin, an analyst at Piper Jaffray. All those traits point to a future beyond just IT services.


In the present day, ServiceNow boasts an impressive market capitalization nearing $160 billion.

With a revenue surge of almost 24% year-over-year, the company amassed nearly $9 billion in revenue in 2023 alone.

Fred Luddy, the visionary behind the company, still holds a prominent position on its board of directors, a testament to his enduring influence since its inception over two decades ago.

Reflecting on his journey, one might ponder the $35 million fortune he once lost before embarking on the ServiceNow venture. Yet, it's unlikely that such setbacks occupy much of his thoughts nowadays.

According to Forbes, Luddy's net worth now stands at an estimated $1.2 billion, underscoring the remarkable success of his second entrepreneurial endeavor. Truly, a remarkable achievement by any measure.

Fred Luddy’s Wisdom

In each edition of the Just Go Grind newsletter, I like to include a few more quotes at the end from my research into the founder who is featured, sharing their wisdom.

I think when people are able to find a passion, a deep passion that they're reasonably good at and they can make some money at, it's almost unfair. Every day I've woken up since I've been 17 years old I've wanted to write some code and pretty much I've fulfilled that dream and I really enjoy being a programmer.

Fred Luddy

On the lack of innovation in enterprise technology companies in 2014:

My belief is that most organizations become very myopic on their current product. So let's take a look at Blackberry. Blackberry probably thought for the longest time, “we have the business market wrapped up, we got eighty five percent saturation, that's a fufu gadget over there we're not going to worry about it so let's make the Blackberry better. We'll copy a couple of ideas.”

But they didn't. They were looking at their current strengths. What they weren't looking at is what are the market expectations going to be, what does the market want, not what does Blackberry want to bring to the market. I know that's what happened to our competition. Their calendars are stuck in 1997.

Fred Luddy

On programming for customers:

We don't want to make it easier to program, we want to eliminate the need to do a lot of programming. We want people to be able to do programming without thinking they're doing programming.

Fred Luddy

Money's a great thing but it's not the thing. What drives people like Mark Zuckerberg and Steve Jobs isn't the money deal it's actually making a ding in the universe and changing things for the better.

Fred Luddy

Thanks for reading!



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