We bring you Part-3 of our interview with Ram Shriram of Sherpalo Ventures, and board member of Google.
Kamla: Let us switch to Sherpalo. How did you get to choose the name because when I first heard the name, I thought it was Sher Palo- you know that is, nurture a tiger.
Ram: Yes, it could be that and I think it certainly works well in India for that reason so “sher” and “palo” – to nurture pet tigers but really it was not so profound as that. When we did come up with a name, basically it was the only available domain name without having to pay for it. And since I started in Paulo Alto in January of 2000, I thought let’s just call it “sherpa” and “Paulo Alto”. So instead of saying, “Sherpa-in-Palo Altoo.com” which would have been too long a name, we just sort of abbreviated it to Sherpalo.
Kamla: So that is why youlabel yourself as a mentor capitalist and not a as venture capitalist. Describe what is the difference between the two labels and what is it that you do differently with your companies?
Ram: Let me explain that in mountain climbing terms. I go up tall mountains with heavy payload down my back where the oxygen is low and where there is lot less food, meaning lot less money to go. So we invest in companies. But we are not known for just being financiers as much. We are basically able to help the company with all of the early challenges because there are very few people that have been entrepreneurs before they became venture capitalists. And when you live that life and when you know what it is to be an entrepreneur both, successfully and having failed and I’ve done both; I think, it’s a much more sort of telling experience for the person building that business.
So I have lived the life of the entrepreneur and so I know the pain they are feeling. I know the daily ups and downs they go through. You know, they have their highs and lows sometimes within a matter of hours, in a day. And helping them through that with hiring with the early customer wins, making sure that the right capital structure for that business is set from the get go. Also making sure that they are able to have a right sort of feedback on product direction and what sort of triage they need to go through in terms of features because you know in the early days. There is going to be very few resources; a lot of resource constraints so you can’t do everything that you want to do. You want to do a few things really well because you want to come out with a product that is fully baked even though it may be lacking in a few features or whatever, rather than the one that’s all achieving but not doing anything too well.
There are plenty of companies who have had failures because they tried to aim too big and didn’t do a good enough job on even one piece o it that they could have owned.
So take the first beachhead before you try to take the whole slide.
Kamla: Let me switch to India. You’re investing in India but you’re not investing alone. You’re co-investing with Kleiner Perkins. Why have you adopted this kind of strategy and what are the opportunities that you’re looking for in the next 12-15 months?
Ram: Well, Sandeep (Murthy is based in India) and I pick the companies that we want to invest in and Kleiner is a partner with us in those investments generally. There are other investments we have made with others and there are investments that we have made that have not invested in. For example, Pranav studio is an investment that we’ve made with the bunch of other people, the Ambanis and Mahindras and so forth.
Why Kleiner? I think they’ve got a long track record in this business in the States. We want to take some of their best practises in building companies and being a young company being able to take that to the Indian market and that has worked well for us. We have Ajit Nazare from Kleiner who is quite active, working with Sandeep and I on the India stuff. We are able to tap into the infrastructure, for resumes for hiring, for additional networks of capital that we need access to, deep access to capital and so forth. But it all starts with picking the market sectors and picking the best team in those sectors and I think we have by far got an amazing portfolio in India.
Kamla: So where are you looking to invest?
Ram: Just recently started an effort and look at Cleantech, and alternative energy. It is a different need set of needs in India compared to here where we are in the early stages of looking at a few investments in that space and we continue to look at the investments on the web, in software. It is still very early, we are probably, in cricket terms, we are in the first innings of the five day test match and you know we are still playing the first batsman. The reason I say that is the Indian market on the internet, for the consumer internet is still completely controlled by the fact that there is still very few web users and that’s because of access issues. And till the access opens up in a much grander way, like what has happened in china, the size of the market will be limited because of that. And that will change over the course of the next 5-10 years and so I’m long on the India market because I think the opportunity over the long term is clearly there as long as the infrastructure continues to improve.
Of course, we’re all hoping that it would improve faster, sooner, quicker as more Indians consumers get PCs and they get freer and greater internet access, more and more applications will become available. In addition of course, the mobile phone is the PC in India. A lot of applications success over the next ten years will come over the mobile phone not in China but somewhere in the world, outside U. There will be a big innovation in the mobile that would be a huge scale success along the lines of the big successes we have here on the- in terms of web services.
Kamla: You travel frequently between here and India and this is with reference to innovation. When you are here in the valley, what kind of picture do you see when you go to India or China or other countries. The landscape there is so different, the scale of innovation, the kinds of innovation, the fact that you mentioned that a mobile phone company outside of the US is going to come. Is mobile the next frontier because you started the company 15-20 years back -- 802.1 you said.
Ram: Well the mobile company we started 20 years back, Adulus was more in using mobile infrastructure so they were more in taking mobile manager, newly unlicensed spectrum to allow for data conversations to occur over unlicensed spectrum. The mobile opportunity I’m talking about now is more for data services on the mobile phone itself as smart phones do. You know the browser applications will predominate over time in a lot of developing countries; India and china and so forth. You know not a lot of the population will have smart phones, so lot of those applications will be sort of hybrid- text sms plus using offline or voice communication even as a hybrid. You’re going to see an interesting set of applications that are either carrier independent or offered by carriers as services will just significantly improve per activity but again using the phone as the PC as the centre piece.
Kamla: The reason I asked you about the innovation question was because you were one of the people that C K Prahlad talked to for his new book on the new house of innovation, how innovation is going to be moving forward. That is the reason I asked because you are travelling so extensively, you get to see on the ground. You get to see the reality. This is not by reading the newspaper or an article on the web. Should you be concerned if you are in the valley that the pace of innovation has probably slowed down or is not at a very different space?
Ram: No I disagree; I know there was a reason we got to talking about the pace of innovation slowing. I disagree with that book I think the pace of innovation. (Judy Estrin) Yes who I worked for and she is an extremely smart woman. So you know it is possibly slowed in some sectors she maybe referring to the networking industry for example where the pace of innovation is slowed. So maybe on the infrastructure side there is less innovation now but even there I think there is a fair lot of innovation going on in high end switching and so forth. But really the innovation at the application layer is only accelerating as best as I can tell and infact if you look at one billion downloads of applications on the new iphone at store and that’s faster than the one billion iTunes songs that were downloaded back when you know they introduced iTunes for the first time. It tells you that not only is the pace of innovation accelerating but even consumers are going crazy over and they are consuming it as fast as they are innovating and they are willing to try. So it is a flat world for innovation so it can come out of anywhere. It can come out of India, China anywhere. And their cost to access the global market is significantly lower, the threshold that they can come up with a product and it can instantly available to the global audience on the web and that’s the beauty of being able to innovate anywhere. So I don’t think the pace of innovation at the application layer is slowing at all. The innovation in Google chrome the new browser, was possible because of lots of advances in java script to make it far more performance intensive in terms of the ability to make sure that individual tabs can run without crashing the whole browser and making sure the security holes are plugged. All those little things are innovations and that’s going to quicken the pace of innovation now from competitors. Everyone at this thinks it’s a broadly used product you know you got one billion people out there using the net so every innovation gets instantly noticed and it’s going to evoke a quick reaction from others to innovate maybe even faster if they want to stay ahead of the game.
Kamla: What about the 5.6 billion that is still got to get access if one billion people as you say. The population of the world is I believe 6.6 billion. How are you preparing yourself to tackle those opportunities?
Ram: If you look at the growth on the internet over the last 12-18 months, half a billion people have come online and I would say a substantial number of them I don’t have exact stands but substantial number of that half a billion new internet users have come from the emerging markets, developing world, eastern Europe, Russia, Brazil, Latin America, South America not necessarily from western Europe, United States or Japan, those markets have pretty much saturation compared to in terms of internet usage. So there they focused on continuing to enhance the speeds of which people can access the last mile. In these other markets its all new internet users getting on the net for the first time and then of course you’ve got the older age population getting on the net for the first time and they are getting on our parents for example looking at u tube and reading and consuming their news directly online whether they are reading the Times of India of the New York Times they are doing that online now. Previously you know for six decades they were reading the physical newspaper and that’s a big change for them. They are reading blogs; they are listening to their favourite Caryatid or Hindustani music online.
Kamla: Are you describing your mother?
Ram: Yes, I think this is a big change that you didn’t have. Infact in some sense they are more net savvy because they are just pure consumers, they are not being critical of a product or a design or a feature. They are just using it and consuming it as rapidly as it is coming out. So that is causing more people to innovate because even if they are not making money they are so happy they have lots of users. So we have a situation now where you have lots of companies, young companies with plenty of users but no revenue and this the first time I have seen this phenomenon, where companies can have large numbers of users you have a company for example like Meebo, which has I think some twenty or thirty million uniques, doesn’t have much revenue to speak of but provides very useful service. And there are many many examples just like that you can go through.
Kamla: So what do you make of this? What do you make of the fact that there are companies with millions of users but no money? What does it mean for you as a venture capitalist? Where do you are the opportunities for these companies? How are they going to monetise?
Ram: Generally when there is a lot of usage and it hasn’t yet being monetised, is generally the case that it ultimately can be monetised.
Kamla: But how?
Ram: Well it will happen through the true and tried methods-better adds, text adds, perhaps some new form of you know pre- role or post role video adds and so forth. But there will be some ways to monetise; it may not necessarily garner the higher CPMs. Look at social networks. There is advertising on them. It’s not necessarily the highest value advertising that you could find but its monetisable. Everything that is out there that’s traffic at some level even if it is pennies on the dollars-can be monetised. But it isn’t even that I think the value to the consumer is immense that there are so many people using it. It also tells you how the entertainment medium has shifted from the amount of mindshare that the net is getting. If you look at the young kids of today, when they come home from school they are spending more of their time online. Not only are they online, but they are multi tasking online and are doing multiple things at once. Listening to their iTunes on their iPhone, having multiple instant messaging conversations, looking at a YouTube video and trying to do homework at the same time. We had a hard time just single tasking when we were going through colleges. And this is the generation that does multi tasking and that’s why you see so much consumption on the net.
Kamla: It looks like your family provides you with that great test bed. At one end you have your mother and on the other end you have your two kids. So, I guess you get to see how pure consumers are behaving.
Ram: Absolutely! Infact the best due diligence to do for company is to use your own children to figure out if they will eat the dog food.
Kamla: So what has surprised you about the way your mother uses the internet for instance?
Ram: I am amazed that some of the things that she uses and things that she bookmarks. She wakes up in the morning and the first thing she does is go to The New York Times page. She says I get more good news out of the New York Times and now they have gotten rid of Times Select so you look at the Friedman articles, Maureen Dowd, and Frank Rich Nicholas Kristol and all of those great writers. I think if you talk to Tom Freidman he will tell you what is more important to me I want you know 20 million people reading my column rather than trying to monetise it for 12 dollars a month. Now obviously it is a different issue for his employer at the Times for who needs to make an economic living out of it that they can ultimately pay to the great journalist that they hire. So we need to find a way out. Those that have sort of done review and you know in the publishing industry, in the printing industry, in the newspaper industry, as we know is not going to be there anymore its just not true. It’s not like Kindle is going to kill print books. Its not like radio got killed with the advent of television and the same thing newspapers aren’t going to get killed with the advent of internet. It will hurt them and they will need to restructure and there will be a new way and may be the new way will be a hybrid. And I think the transition from one to the other may be painful, in the interim it may cause some pain because you know we are used to.
Kamla: What was a seminal moment in your life?
Ram: I guess the most seminal moment going early way back was my father died when I was 3 years old. I was raised by my grandparents and my mother went back and got a degree. What that does is adversity has a way of making you hungrier to stay focused and to do well by your parents and your loved ones. Because everything that they are spending on you both in terms of time and money and effort. You want to have for their safety, to make them happy pay off. That is what I was focused on in my early life, in my early childhood life that shaped me as a person then. And then the values they instil in you take forward through life and that I think makes a material difference. So adversity then forces you to have a steely determination to succeed and you get hungry for that success and that yearning that you feel is something that’s unique to anybody that faces adversity.
Kamla: What goals do you yet have to achieve?
Ram: I think as I look at the next decade ahead I am looking to see what forms of good I can do. How best I can leverage to success that I can fortune to have so that I can impact more people with it. So, social entrepreneurship comes to top of mind but it is not something that I want to seek publicity for or focus on. You want to do these things as quietly and as selflessly as possible. Everything else in life that you do in the business world has a direct reward for a direct effort and here the reward will be the journey. So it is a journey that is a new area for me and I am looking forward to it. As I age I hope to get new wisdom and new humility to sensually figure out ways in which I can help K through K12 education for example and I am still learning in this area both here and in India.
Kamla: Have you become calmer over the years?
Ram: Definitely, you’re seeing much different personality than you would have seen 5-10 years ago where the ability to tolerating competence was much lower than it is now.
Kamla: Why is that? Why is the ability higher now than it was before?
Ram: Well, I think what it is, is you learn that different people are made differently and they have different ways to reach to their goals. Some people reach their limits of what they can produce and create and that doesn’t necessarily make them bad. It is just that they may not be right for that role in that instance. So you figure out different way to deal with them and they may not be the part of that business but they still are good people. In your early life as you are looking to build your businesses, you are so focused on the outcome. Not that I am not now, I am still focused on good outcomes but you can be focused on good outcomes without breaking lines and I think it gets you there with far less pain than it does when you have to break glass to get it to happen.
Kamla: Ram, thank you so much for your conversation today.
Ram: Thank you and it has been a pleasure to be on your show
You were listening to Ram Shriram of Sherpalo ventures and a board member of Google. This is Kamla Bhatt and this interview is brought to you in association with LiveMintRadio... If you missed you may want to tune in and listen to part 1 and part 2 of our conversation with Ram. This is Kamla Bhatt and as always thank you for tuning in.