September 30, 2015 – BV Jagadeesh joined Navin this week to talk about his journey as a serial entrepreneur and as an investor. He was a co-founder and CTO at Exodus Communications in 1993 that was the progenitor of the modern hosting and data center service provider. In addition, he was CEO at NetScaler, which was a pioneer in application delivery and remains an important part of Citrix’s product portfolio. He currently serves as an active investor and advisor to entrepreneurs through his firm KAAJ Ventures. Some of his investments include Nutanix and Yodlee.
BV Jagadeesh on bootstrapping as a consultant while working on a startup:
We were completely unknown in Silicon Valley and there was nobody who was willing to fund us, right? For any of our ideas at that point of time. As a result, we had to pretty much survive on our own. So that’s what led us to start the consulting company to earn our bread. And we did not take any salaries for almost two and a half years and the profit we made out of that is what we invested back into starting Exodus.
At the time, it was taking 6-8 months to get an Internet connection. So rather than connecting the companies directly, they started offering Internet service from an already-connected data center:
I think the biggest lesson and the biggest thing that you take away from a lesson like this is, if you look at every successful company, there is a moment of this definition of this opportunity that entrepreneurs figure out how to convert, rather than others who get stuck with that. I think would be the biggest difference between a real entrepreneur who wants to keep moving forward without getting stuck. You just keep moving forward and discover yourself. In fact, that’s what led us even before we realized, we had 50 to 75 customers who decided to host their servers within the Exodus premises.
BV Jagadeesh on listening to the customer while innovating on your vision:
But the key point here is you don’t learn everything from the customer. That means you don’t ask the customer what you should build, because ultimately, you as visionary, you need to change the behavior of the customer using your technology which solves the problem. But there’s always that 5 to 10 to 15% of the changes. How does this fit in the ecosystem? How do some of these functionalities, the last 5%, are the usability of it? That’s where you have to be listening to the customer to adapt those changes and the underlying technology that you have built. How have you applied to that market fit?
BV Jagadeesh on taking the long view:
Don’t look at things from a short-term perspective. I’ve seen a lot of entrepreneurs who think right from day one how they can build some technology and then sell it off and make some quick bucks. If you go that path, very likely you won’t go anywhere. I think if you’re going to quit your job, especially a high paying job, and you’re going to attempt to start a company, do something big. And do everything possible to create an independent entity by itself. If along the way you get an acquisition offer, you can always evaluate that and figure out if that is right exit, but don’t do your company thinking, “I am going to exit.” I think you’ll be setting on the wrong path if that is your starting point.
Navin: My guest today is B.V. Jagadeesh co founder of Exodus Communications that pioneered the concept of Internet data centers, CEO of NetScaler that was acquired by Citrix, and managing partner at KAAJ Ventures. I have known Jagadeesh for over 15 years and I have worked with him on several companies. Jagadeesh, welcome to the podcast.
Jagadeesh: Thank you for having me.
Navin: I would love to start with your story and the journey you’ve had until today and the key milestones that might provide insights to other founders and CEOs.
Jagadeesh: I came to the US in 1982, and I’ve always been, ever since I was doing my engineering, somehow, I always felt that I should start a company of my own at some point of time. It took a while to settle down in this new country, and ’93 is when I met with my partner, K.B. Chandrasekhar. Which is what led to the start of Fouress which is the initial consulting kind of a company, and then we started this Exodus concept.
And so both of us struggled the first one and a half, two years. We were completely unknown in Silicon Valley and there was nobody who was willing to fund us, right? For any of our ideas at that point of time. As a result, we had to pretty much survive on our own. So that’s what led us to start the consulting company to earn our bread. And we did not take any salaries for almost two and a half years and the profit we made out of that is what we invested back into starting Exodus.
And this is at a time when the Internet was just beginning to happen. The browser was just then announced in the market. And we felt this was a great opportunity to get into a business like this. And we focused, at that time, primarily on offering Internet-related solutions and services to businesses only.
Serving the needs for the businesses is what led to the discovery of this whole data center concept. And it was kind of interesting and every company will have these moments where you take a challenge, and how do you translate that challenge into an opportunity. If you go back and look at 1995 at the time when every company in Silicon Valley wanted to get connectivity into the Internet. We used to get purchase orders to deliver this Internet connection to these companies, but we couldn’t execute on that because Pacific Bell, which was the main carrier that provided the underlined connectivity, they ran out of fiber.
Jagadeesh: Even if you place an order with Pacific Bell to get a T1 connection from your office to the central office, would take six to eight months. So, every other Internet service provider at that time who was struggling to generate cash from the purchase orders that they got. We looked at that as an opportunity and then we went back to these customers and said, “Hey, why do you want to get connected to the Internet? You want to have email, you want to put your company on the web, right?” So let me do this, because I’m an Internet service provider, I am already connected. And let me give you connections into me and then host your email service and your web, so the same server that you’re going to host at your site, why don’t you host that at the Exodus site. And almost instantly, within 24 hours, you now have the Internet connection. And through dial up modems, people can dial in and retrieve their emails.
I think the biggest lesson and the biggest thing that you take away from a lesson like this is, if you look at every successful company, there is a moment of this definition of this opportunity that entrepreneurs figure out how to convert, rather than others who get stuck with that. I think would be the biggest difference between a real entrepreneur who wants to keep moving forward without getting stuck. You just keep moving forward and discover yourself. In fact, that’s what led us even before we realized, we had 50 to 75 customers who decided to host their servers within the Exodus premises. And that is the time when we got the first round of funding which is back in 1996; us not being known in the market we ended up giving almost like 50% of the company.
Navin: I think my take would be the key learning you had was persistence, focus, and getting a product-market fit early on, so that the solution you provide to your customers is a painkiller and not a vitamin.
Jagadeesh: Absolutely. This is where companies that succeed versus companies that don’t succeed are the ones who figure out that it is not just the technology or the initial product, but taking that product and fitting that into the market by listening to the customers and fine tuning that last 5%, 10% as quickly as possible.
Navin: Got it. So given that you’ve switched roles, you act as an investor today, you act as a mentor for entrepreneurs. How do you think the environment is different today from the ’90s to 2000s, 15 to 20 years later? And what would be your advice, as a single guiding principle, that they should follow as they start new companies?
Jagadeesh: As entrepreneurial environment it’s not very different. But the difference today is number one, there are a lot more types of investors. So you have angel investors, you have incubators, you have series A investors. There’s a whole slew of investors and money that’s available that you can access to. But more than anything, I think this 20, 30 years of successful entrepreneurial companies that have been born, especially in this area, I think that has resulted in lot more mentors who can guide these entrepreneurs earlier on, so that the mistakes that the early entrepreneurs who build companies in the ’90s and 2000s, who can guide today’s generation of entrepreneurs. So that you don’t make the mistakes that we made. Make new mistakes, and you will make new mistakes. It’s not like you will not make new mistakes. You will make new mistakes but don’t make those mistakes.
Navin: Got it. So you talk about mentors. Have there been mentors who influenced you and had impact on your journey?
Jagadeesh: Absolutely. If you look at our history, Kanwal Rekhi who was one of the very first successful Indian entrepreneurs and CEOs, who built the company called Excelan, who took the company public in early ’90s. Somehow he got interested in us in the ’95, ’96 time frame and he was actually the great mentor, especially to me and to Chandra as well. Because just like any other entrepreneur, we were doing 10 different things, and he’s the one who brought us this whole focus, right? Get rid of things that are non-producing that are not impactful from a market growth prospective. Just bring it down to a few things that you can do well.
Yes doesn’t take you anywhere. You have to figure out how to say “no” because for you to say “no” that means you have to think a hundred times as to why you are saying “no” to what, and that’s very important.
Navin: I think my learning has been focus is critical because startups die from digestion not starvation.
They try to do too many things, and what I tell entrepreneurs today, and you and I have worked on many companies, and we are in sync on that, is focus on one thing and become the king of hill of that and then move in to other areas.
Navin: So let’s switch gears and talk about leadership. You’re seen as a great leader in the industry today. Can you share a leadership moment or two that was foundational to how you hire and build things today.
Jagadeesh: Absolutely. I believe, the single most aspect of inspiring your people as to why they should continue to work in your company or why somebody should come and join you. And building of a company is all about people. At the end of the day, everything else you can buy, but the skills, and the smartness, and the values of the people that you work and how you set those values within the organization.
As an example, NetScaler was actually built to solve the entire Internet growth that the market was seeing in ’99 and 2000. Bringing in a technological innovation that would dramatically reduce the infrastructure. Unfortunately, after the 2000, 2001 crash in the market, the need for a solution or a technology like this literally just went away. In fact, I still remember in 2000, 2001 when I was talking to the CIO, CTO at Charles Schwab and I was presenting the NetScaler solution to the CIO, CTO and talking about how we can reduce the number of servers using this TCP optimization technology. And the CTO pulled out a chart showing me the traffic trend that was expected that was internally built.
He said, “I’ve already built my infrastructure for the 2001 need.” And then he pulled out another chart, this is post October, November crash in 2000. He showed me another chart where the traffic demand had literally fallen off the cliff.
Navin: Wow. Makes sense.
Jagadeesh: So here you are in a situation where you have a product that is expected to address if the Internet has grown the way it was. And his reaction was “Mr. Jagadeesh, I have built this whole infrastructure, I have already done all the investment, and if your product can reduce this number of servers, and I already have thousands of these servers that I have built. If you want, you can actually take some of these servers and do something with it. I don’t need these servers. What do you do?” I think that is when translating this idea that we had out of the technology that we had and gathering the team and rallying up the team to pivot the company and come up with a product that was more appropriate for the market based on security and optimization and all the other capabilities that we brought into the product.
I think that one year retaining the people and motivating them, telling them why it’s important to work. I think that’s what demonstrates the leadership qualities.
Navin: I think, in my world view, what I have learned is, I completely agree with you and may feel this strong heartedly belief like people make products. Products don’t make people. Similarly, we believe markets make people.
So what I am hearing here is you guys were able to at NetScaler learn from the customer, have the culture of the customer being the king, morph your product so that it becomes the painkiller for them, i.e. a must have, rather than a nice to have.
Jagadeesh: But the key point here is you don’t learn everything from the customer. That means you don’t ask the customer what you should build, because ultimately, you as visionary, you need to change the behavior of the customer using your technology which solves the problem. But there’s always that 5 to 10 to 15% of the changes. How does this fit in the ecosystem? How do some of these functionalities, the last 5%, are the usability of it? That’s where you have to be listening to the customer to adapt those changes and the underlying technology that you have built. How have you applied to that market fit?
Navin: So I think moving from leadership you’ve had a lot of experience of building companies, being a mentor, being an investor. How does one build a winning culture today?
Jagadeesh: So I think the number one thing is you have to be level headed. Success cannot get into your head. Because you may be successful today, for whatever reason, and first of all, you’re not successful only because of yourself. You’re successful because of the team that you have and the contribution that so many people made to make you successful. And if that gets into your head, and if you think you can replicate the same success the next time, you’re dead wrong.
So keeping yourself level headed and focusing on this whole notion that we had actually evangelized within the NetScaler community is customer acquisition and customer retention. So building that culture…In fact, I was there yesterday for the 10th year anniversary of the NetScaler Citrix acquisition.
Jagadeesh: And it’s fascinating that the VP Engineering who stood up and gave a talk. How he remembered this culture that we had built of this customer acquisition and customer retention. Even after 10 years, because the philosophy that we had evangelized was most entrepreneurs, they jump up and down to win the customers. But there’s very little emphasis to ensure that this customer is continually happy, because the benefits of making a customer continually happy is not only he comes back to buy more products from you, but he also becomes an evangelist for you, especially in the early days.
So I think to create that culture within the organization, other aspects, which is not just the product building aspect of it, but the product support aspect of it, the product management aspect of it. All the other aspects of the company also need to be listening to the customers. So I think, in my opinion, customers who are treated well, who are well taken care of, and using whatever methodologies that a company adapts, like this customer acquisition, customer retention kind of a philosophy is what leads to building an incredible initial success and continued success for your company.
Navin: So I think in today’s market and this perspective could relate to what happened with you at Exodus. When you mentioned in the early days, it was hard for you to get funding, right? You can have one person who can keep raising money in a company and you’re sitting there as an entrepreneur and saying, “What’s wrong with me? I’ve had meetings for the past 90 days and no VC is moving forward.” So in the struggle cases, I am sure you have had companies which have gone like a rocket. And then some other companies which take time to get there. So what’s the advice you give to these entrepreneurs because it can be disheartening?
Jagadeesh: Absolutely, and the biggest challenge of not having the money is that you cannot hire people. So there are multiple ways of how you address this. Either you figure out if there is a way of, within the same business line, perhaps maybe having a consulting kind of revenue to feed this idea that you have at least from a sustainability perspective.
Number two is… Luckily, for today’s entrepreneurs there’s a lot of these angel forums or high net worth individuals and other platforms like the TIE angels and so on and so forth, that are available, which you should take advantage of.
So I think if you look at, step one is, if you cannot raise money at all from the venture capitalist, how do you survive? Can you do some sort of consulting in the same area, rather than digressing too much or convincing these angel forums and angel investors to raise enough money? And there are lots of entrepreneurs today who manage to raise anywhere between $2 to $3 million from these angel investors.
Navin: Yep, makes sense, right? And I think that’s really good advice for entrepreneurs to not get disheartened, and I think the examples you have been giving apply to enterprise focused companies because in consumers with very little money…
Jagadeesh: You can do wonders.
Navin: You can do wonders, and if it doesn’t work you can shut down and move on to the next idea.
Navin: So switching gears back to you. What would you say is the accomplishment that you’re most proud of and that you want to be known for? Because everybody has a brand, so over the last 20 years you created Exodus, you were the CEO of NetScaler, you’ve been the CEO of other companies, and you are mentoring actively, and even teaching at Santa Clara University, right? What do you want to be known for?
Jagadeesh: I think if I can be known as a good person who with no agenda can help entrepreneurs to create companies to solve problems. My goal, moving forward, is not only I help create companies that are from a capitalistic perspective, completely profit-centric. Also to help create the social entrepreneurship kind of companies. Companies that can solve some huge problems in the world which could be water issues, or energy issues, or waste management issues.
Navin: Very interesting. Very noble thing you want to be known for. So in parting, what is your advice to entrepreneurs?
Jagadeesh: Don’t look at things from a short-term perspective. I’ve seen a lot of entrepreneurs who think right from day one how they can build some technology and then sell it off and make some quick bucks. If you go that path, very likely you won’t go anywhere. I think if you’re going to quit your job, especially a high paying job, and you’re going to attempt to start a company, do something big. And do everything possible to create an independent entity by itself. If along the way you get an acquisition offer, you can always evaluate that and figure out if that is right exit, but don’t do your company thinking, “I am going to exit.” I think you’ll be setting on the wrong path if that is your starting point.
Navin: This has been very, very enlightening, and I am sure our listeners are going to gain a lot from this conversation. Jagadeesh, I know you’re busy, so really appreciate you taking the time and being part of this podcast series.
Jagadeesh: Thank you.