Podcasts

People Make Products

September 2, 2015 – Welcome to the first episode of the Chat with Champions podcast. In this episode, we turn the tables and put our host into the interviewee’s chair. We ask Mayfield’s Navin Chaddha to share his history of entrepreneurship, and what lessons he’s learned along the way.

The interview starts with a rundown of Navin’s time as a serial entrepreneur. Navin founded three startups and brought them to successful exits before becoming a venture investor.

Although Navin was just a graduate student when he started the first company, he already had some ideas about teams:

Early on in my life, I used to be a cricket fanatic, and I am still a cricket fanatic today. I used to play cricket as the captain of my school team, and learned a lot about teams and culture. Today when I look at companies, my earnest belief is companies are all about people. As people make products, products don’t make people.

Next, we talk about some of Navin’s observations and lessons that he’s learned over the years. We reference Navin’s post, Rules of the Road for the Era of Simplicity, Mobile and the Social Web.

Navin on Silicon Valley:

Silicon Valley is a great place, where you have access to talent, you have access to universities like Stanford and Berkeley. You have access to established companies. You have access to serial entrepreneurs and executives, whom you can recruit and learn from.

And then, there’s an established ecosystem of IT companies, who not only are great partners, but eventual acquirers. So I think in a nutshell, the Silicon Valley, or the Bay Area, is a unique place in the world, where within a 20 to 30 mile radius, you’re able to get all these basic ingredients, which are really, really important in building companies of tomorrow.

Finally, we talk about the overall state of the market, unicorns, and Navin’s advice for people starting companies today.

Navin on successful entrepreneurs:

These are some of the common characteristics I would say we have seen with successful entrepreneurs.

First, I would say they have some kind of an X factor. They have product obsession to solve real customer pain points. They have a vision to change the world, and are able to articulate it really well. They have hunger and determination to walk through any wall. They have high EQ and self-awareness, and above all, they have the ability to hire great people.

It was great to set the stage for this podcast series by getting Navin’s story. We’ll be releasing new episodes of the podcast every few weeks, each featuring a different interview.

To get notified when we release the next episode, just sign up with your email at the form on the right.

Thanks for joining us.


 

Transcript

Interviewer: Navin, we’d love to hear the story of your journey. This podcast is about entrepreneurial journeys, startup journeys. Some of the key milestones? We’d love to give insights to other folks that are listening to this. So can you tell us a little bit about your story and how you got started?

Navin Chaddha: Absolutely, John. I grew up in India, went to IIT Delhi, graduated from IIT Delhi, and came to Stanford University for my Master’s and PhD in Electrical Engineering and Computer Science.

Based on my PhD work at Stanford, I started my first company in 1995, called VXtreme, which delivered a platform to enable streaming video over the Internet. The company was acquired in July of ’97 by Microsoft, to become the foundation for Windows Media.

Before moving to Microsoft, I started my second company, iBEAM Broadcasting, which was a video content delivery network, Akamai for video.

At Microsoft, I was one of the youngest execs, initially focused on Windows Media, and then was responsible for all their offerings in the cable, telecom, ISP and wireless arena, and also led investments in companies like Rhythms Netconnections, Qwest Communications, and Akamai Technologies.

In 1999, I left Microsoft to start my third company, Rivio, which was providing back office applications as a SaaS service. The company grew rapidly and was acquired in 2001 by CPA.com, a leading CPA portal, and I ran the combined companies till the beginning of 2003.

In 2003, I joined Mobius Venture Capital, as an entrepreneur in residence, to focus on my fourth company, and one thing led to the other, and I became a venture capitalist in 2004.

Over the past 11 years, I have partnered with over 40 entrepreneurs. Thirteen of them have taken their companies for an IPO, and another fifteen have been acquired during that time period.

So that’s in a nutshell, my journey, my story.

Interviewer: Yes, serial entrepreneur to successful Sand Hill Road venture capitalist. Navin, I’m curious. Let’s go back to the start. In your twenties, you started your first company, the web was just starting their video. It was certainly audacious. And, bandwidth might not have even been there at the time for most people.

Can you talk a little bit about starting that first company, and you know, how was the climate different for a first time founder right out of Stanford?

Navin Chaddha: First of all, it was a lot of fun starting a company in the early twenties. We took the work we had done at Stanford, and commercialized it. As I mentioned earlier, the focus was on delivering video over the internet.

What was different in 1995, from where we are today, first of all, not many students did startups in 1995. Secondly, the first thing we were advised by mentors and VC’s was to team up with experienced business people. We were asked questions like, “How big will the internet get? Will people watch video on the internet? How will video get monetized?”

Some of these things are taken for a given today, but the market and the climate was very different, and there was a lot of skepticism 20 years back.

Interviewer: I’m curious how you approached being a leader. I was a grad student once, you were a grad student. Being put into that role as a company founder, and a company leader, you’re really responsible for, not only the execution parts, but the culture parts of building a team, shaping a company.

How did you approach that? How did you figure out how to do that?

Navin Chaddha: Yeah. Early on in my life, I used to be a cricket fanatic, and I am still a cricket fanatic today. I used to play cricket as the captain of my school team, and learned a lot about teams and culture.

Today when I look at companies, my earnest belief is companies are all about people. As people make products, products don’t make people. It all starts with a great sense of mission and purpose, with a vision of what you want to do. It requires a common set of values among the different team members.

Overall, I believe in surrounding myself with excellence. I like betting on people who are rock stars, extremely hungry, have high integrity, and above all, are team players. So those are some of the ways I approach building teams, and building culture in a company.

Interviewer: Well that’s great when it goes well. When you can assemble that A team around you, and build that healthy culture. What happens when it doesn’t go as well? When you do hit a snag? Can you tell us a little bit about your journey?

I’m sure you’ve had both successes and failures in your careers, both as an entrepreneur and an investor. What do you do when times are tough, Navin?

Navin Chaddha: I think it’s a struggle when times are tough. But one needs to learn from their failures and struggle, and make new mistakes, and not make the same mistakes you made earlier.

My first two companies as an entrepreneur were quick successes. My third company, however, Rivio, got caught in the downturn in 2001. At that time, conventional wisdom was, you could build companies to an IPO in two to three years. That was the normal way in 1999-2000.

As a result, our burn rate was very high. But actually we realized that small businesses are laggards, and the product we provided wasn’t a painkiller, it was more a vitamin. We were providing back office applications as a SaaS platform for small businesses, and they had many other pain points, rather than focusing on running their business online.

My biggest learning from Rivio was to ensure startups provide painkillers and not vitamins, and control their burn rate till they get the product/market fit. And that’s what I try to tell entrepreneurs today when I partner with them.

Interviewer: You talked a little bit about building your team. What about the team of the CEO, and the founder? That includes mentors, advisers. How have you gathered those kinds of folks over your career?

Navin Chaddha: So I believe it’s extremely important to have mentors and advisers. It’s the same. What you need to do with a team, you need to surround yourself with excellence when it comes to mentors also.

I believe in learning from experts who have wisdom and experience. I’ve been extremely lucky to have great mentors during my professional career. It all started back in 93-94 at Stanford, where I teamed up with my professor, Anoop Gupta, and started my first company, VXtreme in 1995.

Then I teamed up with Dr. Rob Wilmot, who used to be a very active angel investor in the mid ’90s, and he acted as the chairman of VXtreme and helped me understand business, and what it takes to scale as a leader. He and I went on to do two other startups after VXtreme.

And then finally, in the venture business, I was lucky to get Yogen Dalal, who is a partner emeritus at Mayfield, as a mentor during my formative years in venture capital. So I really enjoy being mentored by other, and believe in mentoring and advising entrepreneurs, and giving back what I got over the years from others, to new people along the way.

Interviewer: Do you feel like the concentration of entrepreneurs, investors, experts of all stripes, is that one piece of the story of the success of Silicon Valley? It seems like there’s a lot of folks concentrated in a small area, and you’ve benefited from that network in your career.

Navin Chaddha: Absolutely right. What I would say, it’s not only me, but Silicon Valley is a great place, where you have access to talent, you have access to universities like Stanford and Berkeley. You have access to established companies. You have access to serial entrepreneurs and executives, whom you can recruit and learn from.

And then, there’s an established ecosystem of IT companies, who not only are great partners, but eventual acquirers. So I think in a nutshell, the Silicon Area, or the Bay Area, is a unique place in the world, where within a 20 to 30 mile radius, you’re able to get all these basic ingredients, which are really, really important in building companies of tomorrow.

Interviewer: I’m curious about the shift from entrepreneur to investor. You were a serial entrepreneur. That’s got to be both gratifying and an adrenaline rush, a lot of different emotions and achievements you had. And then you switched over to the other side of the table.

Can you talk a little bit about that? I mean, do you miss being an entrepreneur? Or, how is being an investor different than being an entrepreneur?

Navin Chaddha: Yeah, I think my switch to an entrepreneur to a venture capitalist happened by accident. I joined Mobius Venture Capital as an EIR, back in 2003, to start my fourth company, and one thing led to the other, and I became a VC in 2004.

To your question, do I miss running companies, or being an entrepreneur? Not at all! Actually, today I love partnering with other entrepreneurs who want to change the world, and help mentor and advise them to become future industry leaders. So I really enjoy what I do, and believe we are blessed to be VC’s, because we get to work with so many interesting people.

Interviewer: You don’t miss all the late nights and the plane flights and the making sure that you have enough to make payroll this next month and things like that?

Navin Chaddha: I think on the latter, on the payroll front, I leave it up to the entrepreneurs. But honestly, I just love teaming up with the entrepreneurs and helping them in any which way, whether it’s including travel or staying up at night, because that’s the fun part of being a VC.

Interviewer: Well, you have blog post that I really liked, and we’ll link to it in the show notes. You’ve referred to a couple of your observations already, but in the blog post you call them the rules of the road, and these are some of the observations that you’ve had over your career, advice for entrepreneurs.

Some of them, I’ve heard from other folks, some of them were very insightful to me and kind of new to me. Would you mind giving us one or two of those that you really feel are from the heart, or personal, or from your own personal experience?

Navin Chaddha: Absolutely. I think there are a couple of them, or actually three of them, that I strongly believe in for startups and entrepreneurs. The first one, which I mentioned earlier, is to make sure the product or the service you provide, is a painkiller and not a vitamin. And find your product/market fit early.

Secondly, you need to surround yourself with excellence and hire great people. If you hire B people, they’ll go hire C people, and soon you’ll be at the end of the alphabet.

And third, focus on everything and anything you do, because I believe strongly, startups die of indigestion, not starvation.

So I would say those are the two or three things I try to keep in mind when I partner with entrepreneurs today.

Interviewer: Your pain pill observation, I’ve heard that saying before. I think it’s harder when you’re in the middle in it than from the outside. But do you have an example of a company that you’ve either . . . it has a great pain pill, something that people really need, rather than something people want? Or maybe a company that started and then had to shift to the need?

As I said, I sometimes think it’s more easily . . . from the outside you can tell if the company’s on the right track, than maybe from the inside.

Navin Chaddha: Yeah, I think it’s really being inside the tornado, and I think you need to be focused on customers to really understand what’s their key pain point, and try to provide solutions, or products to solve those problems.

I think along my journey of having been a serial entrepreneur, and having invested in over 40 companies personally, I think a lot of companies pivot from their initial product market focus. And my strong belief is, if you bet on A+ people, they might find a market which is a vitamin initially, but they’ll quickly pivot to find a market and offer a product which is a painkiller for their customers.

As an example, one of my portfolio companies, Gigya, is a good example of this stuff. Similarly, Docker, which is a very successful company today in the container space had a very famous pivot. They started as a platform as a service (PAAS) provider, and quickly realized that for developers, it wasn’t the key pain point, and they morphed into providing Linux containers and a Runtime environment, which is ubiquitous today.

So there are many, many examples of companies that have learned along the way, not only myself, but seeing others. You need to bet on A+ people, because they’ll figure it out along the way.

Interviewer: So people seem like they’re the key in your investment philosophy. Is that a fair statement?

Navin Chaddha: Absolutely right. Like, we believe in betting on the jockey, and not on the racetrack, which is people are everything. They make products. Products don’t make people.

Interviewer: Talk about focus for a second. That’s one of your rules of the road, to be focused. At some stage a company needs a portfolio of products, but what stage is that? How does a company get focus, or how does it know how much is too much?

Navin Chaddha: Yeah, I think, let’s look at some successful companies recently, right? Like Google started as a search engine, and for the first, I would say like, 6 to 7 years, did nothing but search, and established itself as the de facto leader, and then focused on monetization.

Once they did that, they started branching out into other adjacent areas, whether it was providing maps, providing email, providing a browser, providing Android. So I think it’s extremely critical for companies in their formative, for the first 4 to 5 years, on focus on one problem, solve it really well, and become the king of the hill.

And another recent example is Facebook. They started as a social network, focused on students, then expanded into mainstream consumers. And have pretty much done that, and along the way, have acquired companies, like WhatsApp and Instagram to extend their offerings. But it was, when they had the product/market fit, and hundreds of millions of users in their core offering, did they expand into new areas.

And that’s what I mean. Focus.

Interviewer: Well, let’s take the conversation up level a bit, and talk about the industry as a whole. We have seen a lot of shifts in the last, call it 5 to 10 years or more. Cloud, mobile, so software to find infrastructure, social mobile . . . it’s a very different world than it was a few years ago, and people are buying things differently as well.

Can you talk a little bit about the customer, the buying center, and how different customer archetypes have emerged. Maybe start with the . . . in the enterprise space, the B2B space. How have customers and buying changed in that space?

Navin Chaddha: Absolutely right. If you look at, for enterprises, if you go back 20 years, or even go back 10 years, the primary buyer of technology used to be IT departments where the CIO was the head.

Fast forward to today. There are many new buying centers which have emerged. Some of them, which are top of mind for me, include the CMO, or the Chief Marketing Officer, who’s supposed to even buy technology at a spend greater than what CIO’s do by 2020.

There’s a rise of the Chief Information Security Officer, who has visibility to the board and the CEO level. The Chief Data Officer is becoming a key buyer of big data and analytics technologies. There’s emergence of DevOps in the enterprise, where the DevOps Manager or the DevOps Engineer is a key buyer.

And finally, line of business executives in areas such as HR and Sales are also buying technologies. So the world is much broader as it comes to buyers of technology today than they used to be 15 to 20 years back. And this progression is just going to continue over the next 5 to 10 years.

Interviewer: Sounds like you’re saying the buyer is much more closely connected to the business drivers these days. As you look at founding teams, if they’re composed only of technical co-founders, do they have what it takes to find these business buyers? Or how important is it to make that connection?

Navin Chaddha: Yeah, so I would say the good founding teams have a combination of engineering talent, and also product management or product marketing talent, who can help them sift through the different buyers, and really nail their product/market fit, and help identify who the real customer for their product is, and be able to package their product or service in a way that the buyer is willing to consume it and pay for it.

Interviewer: Now how does that translate over to the consumer side? Sometimes it feels like the consumer side is ahead of the enterprise side these days.

Navin Chaddha: Absolutely right. So we see prevalence of new technologies in consumer first, and they bleed into the enterprise. Social networking is a good example. It started in the consumer sector, but is becoming extremely important in the enterprise today.

The themes which are exciting us in the consumer internet today include the on-demand economy, where people are crowdsourcing and sharing resources. Marketplaces for products and services, especially around mobile. Networks around social messaging and many verticals. Consumerization of health, internet of things, and connected devices. And finally, there are also opportunities in verticals, such as financial services and education, which are bleeding in, into the B to B market also.

Interviewer: Some of these changes, do you think that we are at the beginning, the middle, or the end of some of those transformations you just talked about.

Navin Chaddha: I think we are just at the beginning, and we are going to see a lot of innovation in both the consumer and the enterprise sector over the next 10 to 20 years. So I think we are just at the beginning and the cusp of an exciting journey ahead of us.

Interviewer: If I was an infrastructure person, say coming out of one of these large companies, or a startup, HP, IBM, Intel, EMC, etc. Where would you advise me are the hot spots to look at on the infrastructure space, and the enterprise technology space?

Navin Chaddha: Absolutely right. So, I think, first of all, software is redefining everything in the enterprise space, especially the infrastructure space. What VMware did for servers, there is need for similar stuff in storage, networking, and security.

There’s opportunities in mobile infrastructure, where mobile, with smartphones and tablets, is the client device, and there’s need for infrastructure software, to solve some of the problems mobile is creating.

Cloud is the new backend infrastructure for IT. There’s need for technologies for private clouds and hybrid clouds. With the evolution of big data, there’s need for analytics infrastructure.

And finally, there’s need for technologies in the software defined data centers, where containers is the hot new technology.

So I think those will be the four or five areas where, if I’m coming from an enterprise infrastructure background, I should be focusing on as an entrepreneur. And make sure you focus on painkillers and not vitamins.

Interviewer: Let’s talk about valuations for a minute. These days, there’s a lot of talk about unicorns, companies that are worth at least a billion dollars in the private market. And now we have decacorns . . . ten billion.

Navin Chaddha: Yup, we do.

Interviewer: How are you looking at valuations for those late stage companies. Do they make sense? Are we in a bubble? I hate to use the “B word,” but what’s your thoughts right now of where we are?

Navin Chaddha: I think overall what I would say, we are in extremely exciting times, where innovation is flourishing. Enterprises, or businesses, are flushed with cash, and they’re spending money on technology. Consumer sentiment is strong, and spending is robust. This is what creates opportunities for both companies which are focused on consumer and B to B markets.

However, my belief is, the valuations, especially for middle and late stage companies, is very high. You mentioned private unicorns. There are actually more private unicorns above a billion dollars in valuation, than there are public companies over a billion dollar in market cap, that have been created in the last three to four years.

So, my feeling is, one needs to be cautious about the valuations, and be extremely prudent on what valuations an entrepreneur should be willing to raise money, because it all comes back in the future, and could hurt you.

And similarly, the investors coming in, into these new rounds, need to be mindful, that at the end, if they invest over a billion, how many of these companies which have valuations over a billion dollars, can be trading at multi-billion dollars over the next three to four years in public markets.

Interviewer: Let’s say you get to product/market fit. You’re doing well, it’s time for a growth phase. There has been some recent conversation, in some of the public conversations, about capital efficiency. Like, when do you know when to push on the gas, versus conserve your funds?

Navin Chaddha: So I think to me, there are two things which are extremely critical, and I mentioned them during this podcast. The first thing is, make sure your product is a must-have, and not a nice-to.

And the second thing is, make sure, not only do you have a product/market fit, but a repeatable business model.

Once you have those things in place, get the money and start scaling.

Interviewer: It sounds easy when you explain it like that!

Navin Chaddha: It’s not easy, right? It’s focus, it’s everything.

Interviewer: Now that you’re an investor on that side of the table, you talk to a lot of entrepreneur, both first time, serial entrepreneurs. What do you see in common, as a trait of successful entrepreneurs, and do you see some of your earlier, younger self in the people you talk to these days?

Navin Chaddha: I would say, having been an entrepreneur myself, and having partnered with over 40 entrepreneurs myself, and then Mayfield having partnered with over 500 entrepreneurs over the last 45 years, these are some of the common characteristics I would say we have seen with successful entrepreneurs.

First, I would say they have some kind of an X factor. They have product obsession to solve real customer pain points. They have a vision to change the world, and are able to articulate it really well. They have hunger and determination to walk through any wall. They have high EQ and self-awareness, and above all, they have the ability to hire great people.

So I would say those are the five or six things I have seen with successful entrepreneurs over the years.

Interviewer: And, you have any other foundational advice for me, about starting a company in 2015?

Navin Chaddha: Yeah, absolutely. What I would say is: Think big. Think different. And jump in. Because till you take risks, you’ll never succeed.

Interviewer: That’s great. That’s actually very inspiring, Navin. You’re launching this podcast series, Navin, to talk with a number of startup founders, executives, folks in your network about really what it takes to be a champion, and their journeys,  . . .

Navin Chaddha: Absolutely.

Interviewer: So, tell me what are some of the things you’re looking for, and should people expect to hear in this podcast series.

Navin Chaddha: Yes, so first of all, the podcast series I’m hosting is with entrepreneurs, for other entrepreneurs. What I want to do is, bring out the stories of these entrepreneurs, their leadership moments, how do they build culture, their struggles, who have been their mentors over the years, what’s their viewpoint on entrepreneurship today, how they have built brands and sustainable companies.

So what I want to do is, bring some of the softer characteristics of successful entrepreneurs, who have taken companies to significant M&A exits or IPO’s, and have them as inspirational and virtual mentors for the other entrepreneurs, especially who are doing it for the first time.

Interviewer: It almost sounds like we get to be a fly on the wall of some of the conversations that you’ll be having everyday.

Navin Chaddha: I’m really looking forward to it, because the people we’re going to be bringing on to the podcast are really, really good people.

Interviewer: Thanks for being with us here today, and sharing some of your journey.

Navin Chaddha: Absolutely. And John thanks a lot for agreeing to produce this show with me.

Interviewer: Looking forward to it!

Navin Chaddha: Thank you very much.