Listen to Google’s first investor

Listen to Google’s first investor
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First Published: Thu, Dec 04 2008. 02 58 PM IST

Updated: Thu, Dec 04 2008. 02 58 PM IST
We bring you part 2 of our conversation with Ram Shriram of Sherpalo Ventures. In this episode,
he talks about his involvement with Google and his “Book of Mistakes” which he calls “Ram’s Book of Mistakes” and also why he invests in consumer facing companies. Here is Ram.
Ram: The Google success of course- I can’t say anything other than that I was an advisor; not the person executing on the ground. It was a different role
than at Netscape. So in this case, I was sort of the old man, trying to go through life stories and say don’t do this or do this or this is how you deal with PR. This is how you deal with competition. Let us focus on the users’ role or let’s hire only the best- you know, those sorts of things.
So taking the mistakes and the learning and trying to adapt that to a different time so that you know, this young company, with another big opportunity in front of it was not doomed to repeat some of the same mistakes at Netscape. That’s why I have my book of mistakes, which I clearly share with the companies that I work with.
Kamla: We’ll come to your book of mistakes- Ram’s book of mistakes. What prompted you to look at Google and say- okay, here is the company I want to bet my fortunes on?
Ram: What you know, sort of got me interested in them was simply the fact that at Netscape, I could see that the two big applications that the users cared about, on the internet, were essentially mail and search. So if you look at your time spent on the Net, you’re mostly doing those two things 80% of the time. The other 20% of the time, you could be doing other things. But this is where you spend the majority of your time. And that’s why it was a really big opportunity and it was one that was being ignored. It wasn’t like the opportunity was such a wide open “new opportunity” because there were lots of companies that were doing search at the time. There were 5 or 6 companies so it was counter intuitive. In fact, no body wanted to invest in Search. Everywhere I went, people said no we’re not interested, it doesn’t make any sense cos you know, there is Yahoo and Lycos and Infoseek and everybody else that’s doing Search.
Kamla: And Excite?
Ram: And Excite. So I said, well look. Their quantum leap in user experience that was achieved and in relevance of searches themselves on a small index inside the Stanford network was a big eye opener. And so I said, let’s just see what happens. But nobody was at that time was interested in innovating in and search. It was felt that the market had matured and the winners had already been picked. And as we now know, that’s never true in any market. Mature markets represent as much of an opportunity as completely new markets.
Kamla: Does it feel like Déjà vu when you look at the browser wars of today? And what is different about today’s browser war?
Ram: Well, I think you know, today’s browser war could be over done. In that, I think there are multiple choices in browsers- you’ve got Safari, you’ve got Google Chrome which is a new comer. You have got Firefox which is from a lot of my old friends from Netscape and which is open source by the way. That’s one of the only ones of these and of course Chrome is open source as well and we’ve got Internet Explorer which has got the bulk of the market share.
So it’s good to have choice in front of the users and its good to have competition.
Kamla: Let me switch to something that interests your consumers. You’re very focused on consumers. Tell us why you’re so focused on consumers in terms of your investments. I think your investment strategies are also focused on consumer facing companies.
Ram: Absolutely. A very accurate statement. I spent the first 10-15 years of my career focused on corporate customers. Because when you are selling software, you are selling it to enterprises. When you are selling networking gear, before that you’re selling to enterprises. The consumer opportunity came about when IP became pervasive. When they were enough PCs and all the PCs were networked and they were all out there. The opportunity to download software. In fact Netscape was the innovator in coming up with the new way of distribution, which is download Netscape directly on the web. That was first time anybody had tried it and it was a new innovation. So today, if something were to succeed, it can succeed quite rapidly. You know, you build your field of dreams and if the users come, that is half the battle. And then the second part of it is how you monetise it. So you have the sense of instant thrill from having created something that lots of users like. There is this website that is doing aggregating personal and financial information called Mint.com- no relation to Mint, the newspaper. This guy did his PhD at Princeton, left Princeton, came out to the Valley and holed himself up in an apartment. And over a period of 8 months, essentially created this whole website with a very pleasing new eye and a whole good experience and then he put it out there. Basically this has become the new Quicken as an example. So I think the opportunity to be able to realise quickly and validate quickly, the fruits of your labour is what the consumer opportunity provides you. The other advantage is I love companies that touch tons of people. It makes a material difference in the lives of those people. And I think to the extent that is there that it’s great. And I think the other advantage with consumer businesses is you have the ability to actually both impact and influence people. I think there are many facets to touching consumers that are valuable beyond just the sort of financial reward of it.
Kamla: What should a technology led company look out for when it is in a consumer space?
Ram: Well, first of all, every company that’s in the consumer space still needs to have real technology. So I am interested in only in companies that have defensible technology that I prefer to invest in. Occasionally, you may find a company that’s more of a business model innovator than a technology innovator. eBay is an example of a business model innovation, which was this whole notion of reverse auction around physical goods. But generally, most of the companies even in the web consumer commerce and/or in commerce-commerce space are technology companies. Amazon is a technology company. Google is a technology company. Yahoo is Technology Company. What do I look for. I look for that defensible technology and I look for some view of that market space that they are trying to a business in. Being in it for so long I have some intuitive knowledge of what areas inherently might succeed or fail. Then you extrapolate on that. Of course you also do a lot of research, market research and other sorts of test before you decide that this makes sense but it starts with having a great team.
Kamla: What are the challenges that a company faces when it grows big? How do you think it can scale talent, acquire, grow and retain competence?
Ram: For a company to grow big you first need an early DNA that is set by the founders of the company. So it could be about their work ethic, their quality of the hiring that they do, how high a standard they set in terms of the quality of the website, the user experience and all of those things. And then the early people they hire will have the same DNA as the founders and then they all go out and hire other smart people and that is how you built from strength to strength as it were Afterwards what matters is the management team that you have in place and how you build a sort of goals that you can execute against. And by goals I am talking about your objectives and key results for each employee. It may sound like it is very task oriented but infact it is very valuable because if everyone in the bowels of the organisation as a company gets larger has a sense of what their objectives are and what the tactics are that they need to follow to meet their objectives . And how that bubbles up into their manager. And how that bubbles up from their manager in to their division and how that bubbles up from their division up to the top of the company. And at the very top the CEO may have goals such as so much in terms of net margins, so much top line growth and revenue and this is the value of the company that the shareholders should see in the next coming year or two. That may be their goals but down below there needs to be a set of objectives and key results that guide everybody in the management chain all the way down to the individual contributor. And that is what Intel did way back when they were a young company. And to this day it is one of the best models to follow. To some degree learning from what they built in terms of process for success, is quite valuable.
Kamla: While you were describing it the analogy that came into my mind was the standard operating procedures, strategy and tactics. How in defence forces for instance say the military you have a strategy and the foot soldiers execute on the tactics. But sometimes what happens is because it is a top down organisation their could be some foot soldier who is really brilliant but might not get an opportunity to reach up to the commander ant and say hey you know what I have seen something different in the field out there that you sitting in your tent cannot see. How do tech companies accommodate for such people?
Ram: The military analogy makes sense. However I wasn’t thinking of the military analogy because it doesn’t really work well with the technological companies because you can stifle creativity when you do that. I was thinking more in terms of the objectives and key results, not necessarily to pigeon-hole every employee to a sand box. But rather to give them a sense of what their guidelines and goals are and that may only consume 60 or 70 or 80 % of their time and the other 20% of their time, they can have their other creative pursuits within their area of knowledge then, they may come up with new ideas, maybe even boobstrap a new product or a feature or a solution that they can then take up to their management and say, hey, this makes good sense of this company.
So this is what Google does. It allows every employee to innovate, at an individual level, in their free time- in their 20% time as it were. And some of those 20% time projects make it in the mainstream 80% projects and some frankly, do not. So again, the 80-20 rule follows. So I think, that is a great way to think about it. But, you do need to unleash creativity by not hamstringing or putting an employee in a narrow compartment and saying, this is all you need to do and this is all you need to focus on.
So that’s not what I was referring to when I said objectives and key results. But you do need the discipline of having those objectives and key results because if you said, its completely open; you can do anything you want and not necessarily hold them to product schedules and delivery schedules and execution time tables, then what you have is sort of a free-for-all which can lead to chaos. So what I am advocating is controlled chaos and not unbridled chaos.
Kamla: Let’s switch to your “Ram’s Book of Mistakes” What are the key lessons from your “Book of Mistakes”?
Ram: The first key lesson is throughout your career, you will be making mistakes. So if you begin to think that you will not make mistakes, right there- it’s a failing. So in other words, it is good to have an ego but keep your ego in check. By keeping it in check, you’re going to be able to listen. And when you listen, you learn. And when you learn, you act, with the better judgment. That is at the simplest level for one of the learnings.
A lot of mistakes that go on in the life of the company have to do with people judgments. The hardest thing is people judgments. And you know, we know this through our personal lives where people change. And when you are hiring into an organisation, you want to hire the right people for that stage of the company, to be able to take the company to the next stage of growth.
And if they can continue to scale and grow with you - great. If they cannot, then they will have a place in the organisation where they may belong or they may not have a place in the organisation. But making those early decisions on hiring, whether it is for the first few engineers that you want to hire or it is for the first few managers that you bring into the company, whether it’s the first head of Sales or Business Development that you bring
in, the first VP of engineering that you bring in, the first server engineer, the first user experience engineer, the first CEO that you hire-in fact that’s a big decision. So in the early life of a young company, those decisions have a multiplier effect on the future of the company. Those same decisions, when a company is much bigger are less painful to the existence of that company. In other words, they don’t have quite the impact they do when the company is young. So if you make a bad decision in the CEO hire in the early life of a company that could be a mortal blow to that company. Whereas when you make that mistake when a company is large, yes it could still have a negative impact on the company, but you can rectify it and the company might be able to recover.
Kamla: Who are some of the good people that you have known who have been kind of force multipliers for you?
Ram: Force multiplier is a great Colin Powell term. It is definitely a true statement in business. I’ve been fortunate to work with number of great people among them- Jim Jim Barksdale and Jim Clarke; the two people at Netscape. Both the people I learned a lot from- one on the management side, the other on the creativity side. Clarke of course, is a professor at Stanford and has three successful companies to his credit. Jeff Bezos is incredibly smart and capable entrepreneur and still one of the most successful companies in the web. You know, learning from Larry, Sergei and Eric and the whole- you know several other management teams that I’ve brought in and then I worked with, at Google, from the early days have all been learning experiences. And building a company of that size and scale is just you know, chockfull of examples of learning that go on everyday.
It is easy to focus just on your successes.
I did learn through the failures. The failures of Aduleus way back in the 1980s, the failure of other companies like Sytech for example was sold successfully still could have been an independent company. It was the largest networking company; larger than 3Com at the time but yet it had a more chequered existence as compared to 3com. And the reason was, it had to be sold because the opportunity had shifted to Ethernet and this company was under different market space . Why did they not move to the new markets? Those kinds of learning, ensuring that there is no hubris in the company as it succeeds is really really important because the moment you start to get comfortable in your success, as Andy Grove says, only the paranoids survive, the time to really worry about staying successful is when you’re on top.
Kamla: You’ve mentioned that success is a crap shot so is it a crap shot when it comes to personal success versus compared to success for a company?
Ram: Let me give you some context for this. You need to work hard, you need to work smart and you need to do all the right things and then, you need a little bit of luck. Preparation means opportunity. So you can’t get lucky because I can’t say I got lucky at Netscape, I got lucky at Amazon, I got lucky at Google; it doesn’t happen that way. You typically will need to be discriminating enough to find the right opportunity. When I went to Netscape, I had three or four other opportunities that I could have gone to. There was a security company that I could have gone to. I could have gone to a big enterprise software company when I had an opportunity. I could have gone to a young enterprise startup, which was different than Netscape that I could have gone to. I could have gone into a networking company because networking was all the rage at the time. And yet, I chose Netscape.
Kamla: Why?
Ram: I chose it because I felt that there was a new opportunity there at the time. However, I could not tell you how big that opportunity is. I could not tell you when I invested in Google how big that opportunity would be, because you don’t have a crystal ball that necessarily says this is what the future is. And even if you did have the crystal ball that told you that this is the future there is many a slip between the cup and the lip. In other words, there are tremendous numbers of execution challenges even if the market was as big as advertised. Today people talk of Search being a $ 50-100 billion market but-well, when you go two and a half years without revenue and you raised a little bit of money and you’re waiting to figure out how to monetise, you are not thinking of how big the market is, you’re thinking of “what am I going to need to do to execute tomorrow morning when I wake up so that I can bring some revenue in as we are burning cash.”
That is not necessarily the same as saying I know it’s going to be a runaway success because you don’t know these things when you’re investing initially. So all you do is you work really hard at building that execution once you feel you have picked the right market space. So as career learning and as a sort of learning from a company building stand point, I would say luck plays a small role. If you put all your eggs in the luck basket, then you should just go play the lottery.
Kamla: So in that way, it is not a lottery, it’s not a roll of the dice.
Ram: Definitely not. It does help to have a little bit of luck going in your way. Just as I say lightning doesn’t strike repeatedly, luck doesn’t come all the time either. You know, frequently, you end up in resting in the wrong space for example. Then you learn and you figure out what to do. Or, you invest in the right space but the company doesn’t grow as big. An example of that was what we did with Plaxo. It was great space, we were doing mobile sync, we had the best sync product in the market, but the fact is-social networking grew all around us and we didn’t realise that we could have easily been the premier social networking company. So the opportunity was capped because the company that grew around us did social networking better than the company that owned the address book. So the address book company got subsumed into the bigger market. So the exit for that business wasn’t as large as it could have been.
You were listening to Ram Shriram for Sherpalo Ventures. Tune back in for part 3 of the conversation where he talks about Sherpalo and the investment opportunities he sees in India. This is Kamla Bhatt and this interview is brought to you in association with Live Mint Radio. And as always, thank you for tuning in.
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First Published: Thu, Dec 04 2008. 02 58 PM IST