Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
First Indian on NASDAQ: Kanwal Rekhi
1 Playsin 11 hours
When every networking engineer in Silicon Valley said TCP/IP was wrong for Ethernet, one IIT graduate from India ignored the consensus, built the internet's physical backbone, and still got passed over for CEO twice because of his ethnicity.
Kanwal Rekhi, co-founder of TiE and the first Indian founder to list a venture-backed company on NASDAQ, joins host Akshay Datt to unpack the contrarian bets, the ruthless founder-evaluation framework, and his central provocation for the Indian startup ecosystem: India does not need more unicorns, it needs 10 million entrepreneurs. Born in what is now Pakistan in 1945, Kanwal Rekhi arrived in the US in 1967 as part of India's first IIT emigrant wave, survived three layoffs, and co-founded Excelan, the first company to commercialise Ethernet and TCP/IP, taking it public on NASDAQ in 1987 with $22M in revenue and 70-90% gross margins. He later served as EVP and CTO at Novell when it reached $12 billion in market cap as the world's second-largest software company, before co-founding TiE, today the world's largest entrepreneur network.
In this conversation with host Akshay Datt, Rekhi reveals why he ignores TAM entirely when evaluating founders, how one pricing decision transformed Excelan from a near-failing startup into a near-90% gross margin business, and why the Indian startup ecosystem is building for the wrong 40% of the country. He also traces how his decision to open-source Unix at Novell seeded the ecosystem that scaled Infosys, TCS, and Wipro, and describes how Silicon Valley Quad backs first-time founders with $3M seed rounds and deep mentorship.
👉How Kanwal Rekhi built the internet's physical backbone by betting on TCP/IP for Ethernet when every competing company went the other direction, a contrarian call he credits as much to preparation as to luck.
👉Why Kanwal ignores TAM and business plans entirely when evaluating seed-stage founders, and how he filters investments using 10 character-based traits including intellectual honesty, fairness in equity distribution, and revenue-per-employee instinct.
👉How bundling hardware, software, cables, and a 100% money-back guarantee into a single $14,995 box, priced against Digital's $30,000 comparable solution, transformed Excelan from a struggling startup into a 90% gross margin business almost overnight.
👉Why the Y2K crisis was not a lucky break for India's IT industry but a structural inevitability, and how Kanwal's own decision to open-source Unix at Novell directly enabled the ecosystem that scaled Infosys, TCS, and Wipro into global companies.
👉What Silicon Valley Quad's model of $3-3.5M seed rounds for first-time founders actually looks like in practice, why the syndicate targets 25-30% equity, and how the math of 75% failure rates and 40-50x return targets makes the whole model work. 00:00 - Arriving in America with $8
00:08:36 - Three Layoffs, Silicon Valley Move
00:12:26 - The TCP/IP Bet Everyone Missed
00:21:42 - 100 VC Rejections, One Yes
00:33:12 - $22M IPO: First Indian on NASDAQ
00:39:21 - Novell, Unix, and CEO Denied Twice
00:48:14 - How India's IT Industry Got Lucky
00:53:11 - TiE: 500 Founders Showed Up
01:07:01 - Silicon Valley Quad's Seed Funding Model
01:10:37 - The Founder Traits That Predict Failure
#KanwalRekhi #FounderThesis #AkshayDatt #TiE #Excelan #SiliconValleyQuad #IndianStartups #SeedFunding #VentureCapital #IndianEntrepreneur #StartupIndia #NASDAQFounder #IITFounder #StartupFunding #FounderMindset #IndiaStartupEcosystem #AngelInvesting #startupmentor
Disclaimer: The views expressed are those of the speaker, not necessarily the channel
Recommended
Transcript
Kanwal Rekhi's Early Journey
00:00:00
Speaker
Kanwal Rekhi is the Indian origin founder of TIE, the world's largest entrepreneur network. He also runs Silicon Valley Quad, the first Indian origin founder to list in the NASDAQ in the US by building the hardware that makes the internet work. Kanwal, welcome to the Founder Thesis podcast.
00:00:16
Speaker
um You know, I first heard your name when I started reading the business newspapers like the Economic Times and all this was Way back in 1999, I was preparing for mba entrance exam and they advise you to brush up your general awareness. And that's when I started reading business papers. And that was when ah the first time I came across your name. So really, it's a it's pretty ah iconic at the moment for me to be interviewing someone whom i remember as a young, very young, young man. I used to read about in newspapers when I was still like some
00:00:51
Speaker
be basically just had finished my teenage years. So, ah Super, to have you here. um I want to kind of decode your journey for the younger generation who may not fully appreciate and understand ah the journey that you have been through because it's a very, very different era.
00:01:09
Speaker
ah in Why don't you tell us a bit about ah the journey of ah becoming an entrepreneur, going to US, a little bit of the context on what the world was like at that time?
00:01:23
Speaker
So when I went to US in 1967, India had just done through a famine in 1966. The other generation doesn't even know that, right? yeah the yeah the India had done through a famine, US was supplying wheat,
00:01:40
Speaker
Yeah, to keep India from starving. You know, they were a public law for 80 under which was sold to India in rupees.
00:01:51
Speaker
Yeah, but India didn't have dollars. And ah the image of India was very bad. Yeah, yes. Starving country, third world, third rate.
00:02:03
Speaker
Yeah, and the shop branding was a land of snake charmers and land of patterns. so it' So when we arrived in the US, yeah that was the bad trap. Nice people who cannot feed themselves. yeah How smart are they, right?
00:02:22
Speaker
so So you have to keep your head down. yeah You can't fight. yeah You argue, right? To yep if but to large extent, have we ourselves were not too proud of India we had at the time, right?
00:02:40
Speaker
So early on, you know, the goal was yeah just to survive, just to get But very quickly, we dis disturbed we were really good students, better than them.
00:02:54
Speaker
And when we started to better than them, yeah the professors would think we are cheating oh rather than we are smart.
00:03:06
Speaker
yeah Yeah, that was a presentation right away. Yeah. that yeah And yeah yeah this professor stood right behind me for whole hour and I asked the test and he says, if you're cheating, you're very good at
00:03:20
Speaker
You know, he didn't figure out how was I cheating, right? But, you know, people like me gone to IITs. We thought we were the best of the best, right? And, know,
00:03:32
Speaker
So it took several years, several years at university, especially in the beginning to change their minds, because the whole slew of Indians and just let me, you know, but doing really well. My IIT is mostly right.
00:03:46
Speaker
We went around that time. and yeah And by 70s, there was a realization in the industry also that we are smart.
00:03:57
Speaker
our Our software works. Our designs work. yeah So there was yeah there was a drudging respect. But then it became a single-dimensional.
00:04:10
Speaker
yeah we are good studies. We have it yeah some mathematical gene which gives us special ability. You've gone for a master's to the U.S.? Yeah, yeah. That was the easiest thing to do. yeah yeah We finished the bachelor's at IED and went straight after that one. Easiest thing to pass. So go to university, do your master's.
00:04:30
Speaker
and that is joke yeah That is your platform to work from, right? If you show up, yeah nobody would hire you. Nobody would hire you because Indian education was totally distounded.
00:04:43
Speaker
Right? So, oh, yeah, Indian data, yeah, nice. Yeah. But, yeah. Yeah. So the, the, the American masters, you know, became the basis of, of, uh, getting jobs,
Pioneering Computing Technology
00:04:55
Speaker
right?
00:04:55
Speaker
I finished my masters in 69 and took a job as a, yeah, a larger designer a for a temporary, yeah. Yeah.
00:05:06
Speaker
Yeah. Larger is the, yeah, the things, yeah, the, yeah, the whole, yeah, is the building plot of computers, right?
00:05:15
Speaker
69, 70, 71 were tough years in US. Vietnam War was winding down. we we had put a man on the moon with no follow-up.
00:05:27
Speaker
yeaham yeah NASA was a building player of engineers. NASA contractors were building player of engineers. And so... Yeah, all of a sudden there was a glut of engineers.
00:05:40
Speaker
yeah And the mini-computer industry, yeah know which had emerged in late 60s, was also consolidated in companies. By mini-computer, you mean the regular desktop PC?
00:05:54
Speaker
No, no, no, no. A desktop is it it a totally different genre. Mini-templators are like digital, you know, VATS machines. We had mainframes, IBM mainframes, which were, yeah, bed machines in the air-tangition room on the raised floor, right?
00:06:11
Speaker
Yeah, with the bed drives. That's what IBM was selling, the mainframes. Mini-templators were sort of, yeah, yeah. much smaller. yeah Like the Apple Macintosh would be a... Apple Macintosh would be a desktop.
00:06:24
Speaker
yeah So it's trip le me let me let me yeah define. The mini computers were ah still a size of the refrigerator. Oh, okay. Yeah, yeah and had the big disk drive, had the tape.
00:06:37
Speaker
yeah but But they were yeah like one-tenth the price of mainframes. Mainframes would be five billion dollars. yeah Mini computers would be half a billion dollars. Okay. Yeah. And so many computers industry had emerged.
00:06:50
Speaker
Yeah. Yeah. Mostly for scientific computing. Mostly, yeah. At universities, at, you know, at the enterprise. And yeah yeah, this is three units days here. Digital emerged as a winner. There were 30, 40 companies.
00:07:08
Speaker
And the digital emerges as winner. Data general, yeah yeah, appeared as a number two. And others were shutting down. So I went through, man, man, man, three job losses. Yeah, within two years after I finished my master's.
00:07:23
Speaker
And I was on the East Coast, yeah at New Jersey first and then then Florida. And I had to move to California.
00:07:34
Speaker
yeah There was yeah this new valley, Santa Clara Valley, later to be known as Silicon Valley. But starting, yeah there were lots of startups there. Intel, digital, Intel, AMD, national.
00:07:49
Speaker
is hey yeah hp was there. HP was there, established up the instrumentation. And HP was yeah also emerged as a survivor in the be of business.
00:08:01
Speaker
A lot of Defence Town tractors. A lot of Defence Town tractors. So, moved off to Sunnyvale, which is the southern end of the city Tunbari. And had a job.
00:08:13
Speaker
Everybody was a Defence Town tractor. And ah did really well. Did really well. Logic programming? Yeah, logic. Back then, you know, the real men did the hardware.
00:08:28
Speaker
Software was ah so for but for women. Oh, wow. Okay. Yeah, yeah, yeah. I've heard about this. Yes. The real man did hardware. ah Okay.
00:08:39
Speaker
And, yeah, so, yeah yeah, I mean, the hardware was still the change, right? Yeah. So, they so The chips yeah started out as as a building lots very small bits, and dates, odd dates, not dates.
00:08:54
Speaker
Then they started become MSI, four-bit functions. and then ape yeah Then started to have the LSIs. And that's when the early MITRO processes appeared, 4004, 8008, eventually around 77, 78.
00:09:10
Speaker
idiot and g eight d yeah that was let's say around seventy seven seventy eight So, the chips are better and better and more and more powerful.
Building a Networking Company
00:09:22
Speaker
and ah these These are all like, say, the I remember my first PC had a 486 in it. so So, these are precursors of the 486. 486 is in 90s.
00:09:34
Speaker
Right. yeah So, these that you're talking about are essentially like precursors or they're different? Early, small, very popular, microprocessors.
00:09:45
Speaker
Okay. <unk> 88Z80 were powerful enough to start building small business machines. yeah And by late 70s, 78, 79, early, Apple started around that time, by the way. yeah ah a small yeah There was a business computer company called Alto's Computer.
00:10:06
Speaker
So many computers have made half a million dollars. So now these computers one-tenth the price, $50,000.
00:10:16
Speaker
You know, a single yeah user, it would run a spreadsheet, it would do word processor, your computer with a monitor. A monitor is mostly the alphanumerate, not graphics.
00:10:31
Speaker
Okay. Yeah. And so Z80, there was an engineer who worked for me. i had done really well. yeah He left to do a startup and he did the jump piece Altos computers.
00:10:45
Speaker
And, you know, which basically was a big blow to me because I, you know, I saw this dad, you know, smart guy, but not an IITian, right?
00:10:56
Speaker
And ah he had declared to go leave and become an entrepreneur. entrepreneur And I had, yeah, moved up they at the technical rents, senior staff, and you're blah, blah, blah, right?
00:11:10
Speaker
But they wouldn't consider me for the management, even of the technical people. so So, yeah, there was a glass ceiling. The Indians are techies. yeah They are not managerial material.
00:11:22
Speaker
So when asked my bosses, you they said, no, no, yeah yeah yeah you guys are not... managers, who would vote for you? Indians, you know. The fear is white does not vote for Indians, right?
00:11:39
Speaker
Right. So eventually in 1981, David the altars, who had done the alttos started to wear thin on me.
00:11:52
Speaker
yeah And I said, why can't I be entrepreneur like David? you know i I was David's boss, I trained him. If he can't do it, why can't I yeah be an entrepreneur?
00:12:03
Speaker
So eventually 1981, I decided to leave and go try my hand. 1981 the year the world changed. The IBM data introduced. nineteen eighty one was the year the world changed the the the ibm pc are introduced Yeah.
00:12:21
Speaker
And what was the price of IBM PC? Like you half a million dollars and then $2,000. Yeah, $2,000 to $3,000. Wow. Okay. That's ah again a 10x reduction.
00:12:31
Speaker
Yeah. da linnix that's a yeah And single user desktop. yeah you And now these machines had a graphic monitors other than the alphanumerate monitors.
00:12:42
Speaker
Yeah. So you could do all sorts of things. yeah your power Processes were not very powerful, but they were very powerful for the time. right Your memory, yeah.
00:12:53
Speaker
so its ah So let me give you another perspective. Half a metabyte of memory in 60s was $5 million. dollars Wow.
00:13:04
Speaker
Wow. Okay. i made her That same half a metabyte of memory by mid-70s was $50,000. Yeah.
00:13:15
Speaker
yeah A hundred times reduction in price. Hmm. It went from magnetic to the semi-tender, right? And yeah so when the PCs were announced, yeah know they would have 64kb of memory in them.
00:13:31
Speaker
And yeah and ah original PC had a battery limit of 640,000 bytes of And so memory processor, yeah monitor was but these thousand dollarss And the Apple had announced the Apple to but Apple II was aimed at hobbyists.
00:13:56
Speaker
Home, hobbyist, you know, it had all sorts of fun applications. IBM PC was aimed at businesses. A desktop, you know, and it caught fire. 100,000 a month was shipping right away.
00:14:11
Speaker
Almost right away. You're talking of IBM or Apple? IBM. okay Okay. The ip Apple was shipping, 100,000 a month Apple was shipping at that time, maybe 10,000 a month. Okay. Yeah. yeah yeah But Apple was a small company, hobbyist.
00:14:29
Speaker
Your business wouldn't touch it. IBM was the yeah business, your mainframes, right? So IBM machine dropped imagination and put a letter out it.
00:14:41
Speaker
So, you know, 100,000 months, going to half a million months, going to million and months, you know, going to at one time 10 million a month. Wow. Yeah. So it was a straight up, right?
00:14:53
Speaker
So so but that happened in 1970, 1981.
00:14:58
Speaker
yeah know am I am already doing something on my own and that yeah also it hit me. These desktop machines in the offices cannot be standalone machines. They will have to connect to the mini computers and mainframes that people already have.
00:15:16
Speaker
That's where the data is. That's where the action is, right? Yeah. And you can do your spreadsheet and all that, but corporate data is back there. So we said, yeah, we will do the networking. We'll provide the networking to connect all these machines to each other, for your PCs to your mini computer.
00:15:33
Speaker
And also there was another genre of machines emerging. As micro processors are becoming more and more powerful, super mitros started to emerge. The desktop machine was single user, a draft-it machine. Super mitros processors are much more powerful processors.
00:15:54
Speaker
yeah and so yeah back and to run the applications. And yeah in most cases, those supermitters use units as the operating system.
00:16:08
Speaker
Okay. yeah And this is where the I want to tell you a story as of the of the Indians. We have our applications running on mini-computers and mainframes. And these super-mitro-processors went from yeah and around $50,000, very powerful machine, yeah doing the work of a mini-computer, which was half a million dollars.
00:16:31
Speaker
Okay. Yeah, so people have to move to them. But the applications and software is on the mainframe and that's where the Indian entrepreneurs start to emerge. Hey, I can migrate your mainframe application to these units.
00:16:45
Speaker
yeah Yeah, give me the app because I have your source stored. Yeah, I will figure out how to move your source to, yeah through and I'll give you a working application.
00:16:55
Speaker
And that was the early TCS, earlyfo early early Wipro. Yeah, T-computers also, maybe. Yeah, yeah ah there were a whole bunch of them, right? Yeah, very simple job yeah of my directing the your proven applications.
00:17:12
Speaker
you know They had a well-determined proven application to move to the supermarkets. And yep was a little bit of a drusgery. yeah yeah yeah yeah Yeah, it wasn't a creative word, but it it was very, very productive for Americans.
00:17:27
Speaker
So, yeah India's coming to draw over that business. So we did the networking to connect your PCs to your super micro to your mini-temperature to your mainstream. Did you have ah some sort of customer conversations that, yes, I need this? Or was it all in that field?
00:17:49
Speaker
was all intuition, gut. that The customers don't have this issue yet. They say all these machines will have to talk to each other.
00:17:59
Speaker
Right? And yeah all these machines will have to talk to each other. yeah it does it you know It's a mess. It's a mess. yeah yeah People are starting to drumble. Hey, I got my data here and I got my application there. I got my desktop here.
00:18:12
Speaker
So you're hearing all that, right? But, you know, and also the hundreds of thousands of these yeah desktops are being installed. And the boss has a machine and he cannot look at the type data, right?
00:18:25
Speaker
So the the things are moving very rapidly. and And here was the magic. I was a hardware wizard in early 70s. I knew how to do hardware like magic.
00:18:36
Speaker
By late some of these people had to wait for the chips. yes yeah yeah yeah They couldn't do they they don't build the design from scratch.
00:18:48
Speaker
They had to have these modules. yep and ah So the and around that time, Intel, Xerots, and Digital jointly announced the standard for Ethernet.
00:19:00
Speaker
That they have this Ethernet standard, which will be way to connect computers to each other. And chips will be available in three to five years.
00:19:13
Speaker
oh Oh, okay. but yeah For Ethernet. I picked up this path of Ethernet and I said, oh I can implement this in two weeks. And you know I started, yeah.
00:19:26
Speaker
What does it mean when you say I can implement it? Is this a hardware thing that you can build a hardware? You can implement using off-the-shelf chips. Instead of chips, I have a board-level solution. Mm.
00:19:39
Speaker
Okay. Okay. Okay. I have a board layer of pressure and I can build the Ethernet functionality using off-the-shelf chips. But you still need that port, ah the hardware port that was available? No, man. That's the port we're going to supply. We're going to supply the port for all sorts of computers.
00:19:56
Speaker
Okay. We'll have a board which will plug into IBM, a PC to write Ethernet port. We'll have the board which will go to Super Micro and we have a port. We'll have apply that for many computers. We'll do for the bainton and then you can turn those ports on a cable.
00:20:12
Speaker
Okay. So this would look like a, like say today you have modems. So this would look something like that. These were Ethernet networking modems. Okay. Got it. Got it. And and it you were making them in the US only?
00:20:27
Speaker
Oh yeah. i be that's That's where the action was. There's no place else here. What was being done, right? But it was a very yeah big deal because I was able to build all those, you know, computer boards within months.
00:20:41
Speaker
So you to connect your PC to your supermigrant or your mainframe. And that became the basis of our startup.
Challenges in Venture Capital and IPO Success
00:20:48
Speaker
And, yeah, people are waiting for the chips to become available, which are three to five years out.
00:20:55
Speaker
Hmm. Okay. and clear yeah And so, yeah i yeah i started yeah, we started to sell them. And and be ah ah one question here, like, ah did you need seed funding for this? Because you would not have had much capital of your own.
00:21:13
Speaker
what did Prototypes were done with with our own money. There were four of us, we said put $10,000. And yeah prototypes were done with our own money. And these other guys were Indians or?
00:21:26
Speaker
Yeah, we all four. All four of us were Indians. Yeah, it was me, Dr. Indramon Singh, who was a IOT, Kharapur guy, and yeah Yale PhD, and Dr. Jain, he was a Bits Pilani guy, Dolby Atlas, one Bits Pilani, and you c a CMU PhD.
00:21:47
Speaker
Actually, there were four, one dropped out yeah before we started, so there were three of us. And we put 10,000 dollars each. yeah So Inder was the CEO in the original team, even though it was my IK, my plan.
00:22:03
Speaker
yeah a Yeah, if you read the book, my book, Inder was from Doon Stool, very polished English speaker. I went to Hindi medium stools.
00:22:15
Speaker
yeah my yeah Even yeah as late as yeah late 70s, my English was still not very good. And you put up Inder as you see here in front.
00:22:26
Speaker
and that But i yeah the design had to be done, with but which was me. So I sat on the top-end board and did designs and and isn't the prototypes.
00:22:37
Speaker
so the hardware got done very quickly. and ah But then you disturb very quickly. The hardware is not enough. You need software. You need air protocols. You need applications.
00:22:51
Speaker
And, know, There yeah was a real genius because I looked around and there was a public domain software available that that was used by us department Department of Defense yeah and it was available for ARPANET.
00:23:11
Speaker
ARPANET was a Department of Defense network. build on slow modems. yeah yeah and yeah Not the high speed ah network that we are building. and we always Just to give you the idea, of speed idea, modems are 300 bits a second. 300 bits.
00:23:29
Speaker
Ethernet was 10 million bits a second. Okay. Yeah. So yeah when you connect with un-Ethernet, stuff was instantaneous. Just your internet now, right? High speed internet versus, know.
00:23:41
Speaker
And so... So these protocols are available for the slow long-haul wide-area networks. the Department Defense. And this you talk about TCP IP, that protocol on which the internet is built. ARPANET was essentially the precursor to the internet.
00:24:00
Speaker
Yeah, ARPANET was, ARPANET started back in 88, one component at a time. You know, when said TCP IP, the TCP IP is transmission control product of, you know, which internet stood up yeah two points end-to-end.
00:24:18
Speaker
Internet is two networks to each other. So there's a network in India, there's a network in the US, stuff has to be routed between them. Internet protocols route from this network to that network to that network.
00:24:31
Speaker
and But the end-to-end connection is controlled by TCP, transmission of a file or a data, reliable file transfer from one point to the other point.
00:24:43
Speaker
That means if there's a bit drop, some error, there's error recovery built in to retransmit. Hey, I didn't get that byte. This has error. So send me it in.
00:24:54
Speaker
So TCP ensures a complete reliable transfer. so So it was built for a very unreliable network at a slow speed, TCP. But I adopted it. I said, you know, I can put that on my Ethernet and my my users will have an instant solution.
00:25:14
Speaker
know, they could do file transfers, they could do remote loadings into computers. yeah And the conventional wisdom was, know, TCP IP is very ill-suited for Ethernet.
00:25:27
Speaker
It's designed for slow, error-prone network. Ethernet is a high-speed, reliable network. Yeah, so, yeah, you're trying to, is' the there's a mismatch. And my logic was, you know,
00:25:41
Speaker
Yeah, it's designed for slow yeah network, it's designed for error per network, but if there are no errors, yeah there'd be no retransmissions. And yeah yeah yeah the TCP IP has no inherent limit on speed, you know and and I you know believe that it could be just as fast as anything else.
00:26:02
Speaker
and So I was the only person who bet on TCP IP and Ethernet. um Everybody and went with the others and that turned out a very bit lucky break for me.
00:26:14
Speaker
So now we have a solution. We to we we don't have to tell the customers what we are sending you. I i grew advertise to them, hey, I can help you to connect your PC to your back office yeah and do file transfers, everything you need to do.
00:26:30
Speaker
We'll give you everything you need. yeah So I was sending technology, I was sending the solution. Right. Yeah. And it it turned out to be a big hit very quickly.
00:26:46
Speaker
And ah did you raise VC money for this or this was good? Yeah, I should have mentioned that. So we got 100 no's, you know, when we first went looking for money.
00:26:58
Speaker
Yeah, Indians, they are trying to be entrepreneurs. Yeah, yeah,
Merger with Novell and Industry Impact
00:27:03
Speaker
yeah. Show me who has done it before. a passion you know yeah So yeah yeah there is a step decision. But amazingly, you know, the beauty of BC is one says, ooh, Indians are smart people. yeah Yeah, but nobody's been funded. Why not? and Maybe it's time to try one.
00:27:22
Speaker
and Maybe it's time to try one. and And he gave us a very fair offer. and this was And are taught to. And, you know, and yeah So yeah we got $2 million dollars for a half the company, which we thought was very fair at the time. $2 million is a substantial amount for that era.
00:27:47
Speaker
Yeah, substantial amount for that era. And yeah, so, and yeah, and not that we had any choice. Valuation was very fair. It was a market valuation, you know, hidden streas.
00:27:59
Speaker
Yeah, John Bartz made 100 times his money yeah on and that investment and he lived to brag that he discovered Indians in the valley. yeah but By the time we went public yeah and and later in the 90s, Indians were becoming big deal, right?
00:28:17
Speaker
We went public in 1987, five years after we started. yeah mostlyly because the ah and We had ups and downs in that period. yeah if you my book so yeah but One one ah question first. You needed that money for setting up manufacturing? we You're essentially selling hardware and There's no outsourcing at the time.
00:28:42
Speaker
There's no outsourcing here to manufacture yourself. You there's no, you know, you have to have a salespeople, marketing people, you know, service and support people. Yeah. Yeah. So you need the money, know, to be able to ah buy the inventory, build the boards, you know, ship it, to let money, there's a capital, what type of requirements, you know, and, know,
00:29:06
Speaker
Yeah. Okay. So, yeah. And, yeah, the more you sell, the more inventory you need to buy. yeah so yeah, typically, ah you buy inventory today,
00:29:17
Speaker
Yeah, you buy them yourself board. Yeah, we have assembled in 90 days and another two months of to let. There's a five of stuff in float, right? Yeah. You spend five months at a row and then you let.
00:29:30
Speaker
So all that has to be financed, right? And were you the only player selling this solution or you had competitors? Yeah, they were competition. They were competition. Yeah, yeah. yeah they and Five, six players.
00:29:43
Speaker
But none of them had as complete a solution as we did. Your PC to your mini-templator to your SuperMitro, you know, to your mainstream.
00:29:54
Speaker
Yeah, that was one thing. And and and ours was a really reliable, fast solution. And... So, you know, we out-competed everybody.
00:30:07
Speaker
But and there was there is another point I want to make. yeah Indra was the CEO. I was the VP of Engineering. Naveena was the VP of Software. But Indra turned out to be not very good.
00:30:20
Speaker
He was ah supposed to be selling and marketing and finance management. You know, he came from Dugum School. He came from a very rich family, Tete Dars, Sivindars.
00:30:31
Speaker
He wasn't used to doing work by hand. yeah ah He became one of those hands-off CEOs. You don't have a hands-off CEO, you know, we got in trouble.
00:30:42
Speaker
no Nobody was buying from us even though we had a very good solution because we are we weren't martyring and selling them properly. So in the I fired by the board and that's when I became the interim CEO.
00:30:56
Speaker
yeah So yeah there's a chapter in the board on meeting of a CEO. yeah and yeah I took over and I turned the ship around very quickly. know, within three to four months after I took over, you know, the company was shipping a lot and was becoming profitable.
00:31:14
Speaker
And this was pure sales aggression? That turnaround happened or like whatever what made that? The martyring campaign to let the world know we have a solution. You know, they they I have always remembered this old radio campaign from 50s. Sardar Dutiliya Esprolizya.
00:31:33
Speaker
Yeah, but that used to be radio ad. And so I, you know, I use you that similar type of message for your networking headaches. Yeah, we we had the excellent solution for you.
00:31:46
Speaker
oh nice. Okay. you remember Okay. Yeah, monitoring campaign, which was very pointed. If you have this problem, if you have a need to connect your PC to your baton machines, yeah, we are the people.
00:32:03
Speaker
and And that was millions of pieces had been sold. know just the So he said, you know they did we do any marketing? He says, matter says yeah, yeah well but all those purchase hours we were doing. laid forneath Right, right. Okay. So, 87, you went for an IPO. What was the revenue by that time?
00:32:30
Speaker
That year, we had done $22 million dollars in revenue and we had made $3 million dollars in profits. Wow. Okay. That's a very profitable business. but Very profitable business because you have the yeah we had value priced, the product yeah product, you know, value priced, mean yeah, temporary solutions from IBM and digital were twice as yet expensive, three times as yeah as expensive.
00:32:54
Speaker
So we are delivering the same value for those people. But as a startup, you know, we don't have the brand. yeah So we cannot charge you the same amount they were charging. But yeah, was 70, 80% more than business.
00:33:06
Speaker
Mostly software, yeah. Hardware was essential component, but software, yeah you know, yeah a price yeah prices are high, costs of software is low to deliver, right?
00:33:22
Speaker
But how were you pricing, were you pricing it as separately for hardware, separately for software, or you were just selling? but so All right.
00:33:33
Speaker
So, yeah, and I'll give you so when Indra was the CEO, the hardware was priced, the boards were priced around $2,000. The cost of manufacturing, the board was $300.
00:33:46
Speaker
And, ah yeah, our goal was to be able to sell them at $800. at hundred us And so we price them at $2,000 and everybody got discount. 20%, 30% discount like that.
00:33:58
Speaker
And if you bought 100 boards, you got 60% discount, you got $800. But software in the price at $60 per copy, whether you're PC or whether you're on the mainframe.
00:34:15
Speaker
And yeah, so so they were unbundled, you bought from us and then you had go buy And that transceiver, a modem from somebody else. Yeah, so you just had to buy.
00:34:26
Speaker
So when in there, I fired, I took over, I bundled everything. I bundled connection or a MiniW connection or a main phone connection, everything you need. Hardware, software, screws, wire, everything you need in a box, right?
00:34:41
Speaker
And I priced them as a solution point. and And I did research, you know, this is yeah this is ade i have one of the the things that I did. I looked at the prices IBM was charging. I looked at the prices digital was charging.
00:34:56
Speaker
Digital had a comparable solution, not using TCP, IP, using.NET, price at $30,000.
00:35:03
Speaker
And I said, sales price is $2,060. Doesn't make sense, does it? yeah So I bundled everything into a box and I priced it at $14,995.
00:35:15
Speaker
Half the price of digital. I said, I don't have a digital brand, but I have the same functionality and same value for the test work. yeah yeah So all of sudden, know my margins and that those prices it's yeah stopped.
00:35:31
Speaker
so so So, I thought about the value price and you know, you look at the value that you're delivering to the customer, what is the alternative? Yeah, yeah, yeah. Your customer has a choice, you you can pay $30,000 for digital to buy, know, this will be the digital brand or you can buy 14.
00:35:50
Speaker
And I made and also offer money-back guarantee if this stuff doesn't work.
00:35:57
Speaker
$14,995 money back guarantee. You can ship it back to meat and nutrition's house if stuff doesn't work. Yeah. And yeah, but we made sure the stuff would work, right? And so that turned out to be, yeah, the test here, 90% type of margins now.
00:36:13
Speaker
And yeah, we offered, yeah, wonderful service to the customers. Yeah. And so we had a very large customer base. Yeah.
00:36:25
Speaker
Didn't you ah face any pushback? like so People would know that you're last week this was 2060, this week it's 15,000. Last week, 2060 was not the same. You had bought a board, you bought a separate soccer, you went and bought yourself patron, you bought tables and wires from somebody else.
00:36:45
Speaker
You're the differentiated product. go you say would We offer you customized product with 100% money-back guarantee. ah Okay. Okay. Got it.
00:36:56
Speaker
Okay. And by the way, $14,994 for mini-temporal, right? for super-mectar-temporal, $1,995. right And PC, $4,995. So, the remote vitals is $304. that era thousand nine nine five and for pc four thousand nine nine ninety five so yeah okay the remember by trust is three hundred four dollars So now I priced for the desktop, the desktop expectation, I priced for the SuperMitro for the SuperMitro expectation, and I priced for the benefit of your, but my tasks were same for all of those products, right? Okay.
00:37:33
Speaker
Even the PC was super profitable, right? ah Yeah, yeah, yeah. Okay, okay. Okay. So you went public. How much did you raise in that? So what was the valuation?
00:37:46
Speaker
Yeah. So, so we, ah we were valued at the IPO. Yeah. Yeah. Roughly about 125, 130 dollars 15 million dollars.
00:37:59
Speaker
and we raise about fifteen million dollars Okay. i is That was the IPO are offering, but stock shot up 50%, not 50% at the opening price. By the time the day was over, yeah it was up only 25%, which was pretty ideally priced IPO.
00:38:20
Speaker
yeah You can easily multiply those numbers by a factor of 10 in today's dollars. Hmm. Okay. And I think pretty soon after the IPO, you went in for a merger.
00:38:34
Speaker
um Why not continue independently, expand into more product categories? ah Because the the space was growing, right? and
00:38:44
Speaker
Well, yeah. so So what we had was very good. Both Microsoft and Novell needed that. ah Just tell us about Nobel. I don't think many people would have heard the name of Nobel.
00:38:59
Speaker
so so So let me also give you a pretext. 1987, October, the market trashed. star muted trash yeah yeah you Start Start market went from $2,700 debts down to $600 in debts.
00:39:15
Speaker
in that's down to sit and and in thats Wow. Yeah, big, big multi-trash. i think this is called Black Friday or something. Yeah, Black Friday, the famous Black Friday.
00:39:27
Speaker
and Okay. and Our start went from $18 to $4. And what caused this crash? This sectoral, like? You know, priority.
00:39:38
Speaker
Yeah, very quickly recovered. bank fit tower Yeah. It didn't stay down there. It went down 27 down to 400. Then it drove down to 1,400, 1,500 within three to four months.
00:39:53
Speaker
But it shoot people up. It shoot people up, right? And so, but we were very tough now. We had solutions that both Microsoft and Novell needed. Novell was offering networking for PCs, just to share files among If you have 10 PCs in your office, yeah you buy a novel server, yeah you can share files between those PCs. So it it was designed for small businesses yu yeah yeah who had no mainframes, no mini-temperors, no URIs machine.
00:40:29
Speaker
So enterprises were yeah not able to use Novell. Look at us, it says, you know, I tend, we can help them data into enterprises. And what was Novell's market cap?
00:40:41
Speaker
Like how much bigger was it? Novell was three times as big as viewer. Okay. yeah no matter what Novell was three times as big as viewer. They were slightly more profitable than viewer.
00:40:53
Speaker
yeah But they are, they, so, and I, Microsoft, Yeah, also, yeah, wanted networking by that time. So, yeah, we were talking to Microsoft as a partner. And, yeah, Microsoft said, we let you flat.
00:41:08
Speaker
Yeah, whatever the market price is, we'll pay you that. And I said, yeah, not very interested. Novel said, we'll give you 50% premium. you Whatever your start price is today, we'll give you 50% more than to your shareholders.
00:41:21
Speaker
so So we were back to $18 a share, yeah which was the highest price on the first day of the start market when we went ipo you know do and But also you we realized that Novell will grow very rapidly because Novell solution all a sudden will become very attractive to enterprises.
00:41:44
Speaker
So from my perspective, Novell was a very good fit. And Novell offered me yeah a number two position in the company, yeah a board position. our Our board was very happy because all of sudden, we got 50% premium on our start overnight.
00:42:00
Speaker
And everybody was happy. a I was very happy. And we didn't sell for cash. We set sold for Novell start. Okay. Yeah. And that turned out to be very smart decision. A year later, Novell start had done up tenfold.
00:42:15
Speaker
Wow. So saying like a multi-billion dollar valuation. Yeah, a year later, right? so lu yeah and And that's what I said, you know, John Barsh sold little too early and he only made 100 times his money. But if he had held it in six months, you know he would have made another 10 times his money.
00:42:37
Speaker
ah Wow. Yeah. So it was a merger made in heaven. Hmm. yeah So employees were happy, Novel was happy, I was happy.
Indian IT Sector's Global Rise
00:42:48
Speaker
And so, you know, at the end, there there's this chapter in the book, Novel's echelon Merzah was made in heaven and then turned out to be hell. yeah but Why did it turn out to be hell?
00:43:03
Speaker
The Novel was based in Utah.
00:43:08
Speaker
yeah There was resentment in the ranch. that the telephonia dice are taking over. And so the inter internal part part it's came into play.
00:43:23
Speaker
i was I was effectively running Nobel. Ray Nora was 68 at the time. yeah and And this is now, I am 47, 48.
00:43:35
Speaker
forty seven forty eight I am running company. I went and bought units from AT&T. So Nobel owned units. yeah And that was under me.
00:43:48
Speaker
Unix was little bit compatible to NetWear. My thought was... but What exactly? and yeah Unix the operating system? Yes.
00:43:59
Speaker
I bought Unix. I owned on this And I went and did a deal and bought that from them. Was it Unix open source?
00:44:11
Speaker
No, no, no, UNIT was never open source. UNIT was owned by P&D. Okay, okay. UNIT was open source because of me later. Oh, okay. Yeah, I put it ah out in the public domain to yeah to to set up some bit with Microsoft.
00:44:29
Speaker
So we own units and my thought was we we we will have all the baton servers, unit servers for applications, novel servers for file private and print servers.
00:44:40
Speaker
yeah And we'll be a very temporary company. But Yuleta people were very tempted towards units. yeah so So for them, yeah it was like, we brought the enemy into the into the house.
00:44:56
Speaker
I definitely had bought down in paradise. So I left. I left around that. And I didn't get the promotion to become CEO because of that fight. So I left in 1995.
00:45:07
Speaker
and i yeah And what was your stock worth by the time you left? it was worth a lot of money. Yeah. Okay. What was Novel's market capitalization by then? Novel's market capitalization at its speed was $12 billion. dollars Wow.
00:45:24
Speaker
$12 billion in market capital at that time would be worth $50-60 billion dollars by now. that Okay. Yeah, have five times and and that number.
00:45:35
Speaker
So,
00:45:37
Speaker
You know, the IDOT passed over a certain time. yeah yeah I didn't mention, Athlon did very well. We very profitable. Company was going to go public just before the IPO.
00:45:52
Speaker
Like a month before the IPO, they brought in a white CEO.
00:45:57
Speaker
because there was a fear that an Indian CEO may not play well on Start Montage. There were no Indians using Wall Street. And as so of i I bought into the logic. you know One of the board members said, hey, should we take the w risk of a failed IPO?
00:46:18
Speaker
and be you Are you so proud to lose all your net worth? Do you want to be rich or do you want to be CEO? I want to be rich and i and CEO, but you have to choose. So I stepped aside. We brought a CEO in.
00:46:34
Speaker
And then he turned out to be not very good. He was fired six months after the IPO. And I became the CEO again, seven times. This time, you know, for tips, yeah I was the one who did the Duval merger.
00:46:46
Speaker
But when Novel... decide, Ray Noder, was 68 when we we merged and he was 72 and he was retiring and I was 100% sure that was my job to have.
00:47:00
Speaker
I didn't get it. Yeah, and dan yeah and e very large, very, yeah we were number two software company after Microsoft. Wow, okay. Yeah, yeah. And so, so and basically the enterprise server market you were dominating because of Unix.
00:47:17
Speaker
yeah Yeah, both Unix and Netware. Netware, okay. Yeah, so joe yeah you know I'm doing everything right, yeah but I didn't get the job. yeah So I decided to move on yeah in 1995.
00:47:32
Speaker
and Why did you make Unix open source? So insiders didn't love it. Yeah, Microsoft was it Nobel's enemy at that time. By that time, they were doing the Microsoft Windows NT.
00:47:47
Speaker
For servers. Yeah, we put this one out yeah to
00:47:54
Speaker
and yeah ah provide competition to Microsoft. Yeah, and because the insiders didn't love it. Yeah. So, yeah you know yeah, yeah, yeah, how do you, yeah.
00:48:06
Speaker
So, and I was going to leave anyway, you know, so nobody, there was no objection. industry loved it. So, so we made, you the units, you know, sort of public domain stuff.
00:48:17
Speaker
Yeah, and, and, and by that time, Berkeley units, you know, had evolved enough to become their Levitz and they, they, they,
00:48:30
Speaker
you know, they we either do after Berkeley or UC Berkeley and sue them and infringement of our rights a yeah or say, it's fine, yeah yeah yeah you yeah know, you don't have made it public.
00:48:44
Speaker
So yeah it it it was a variety of reasons. And that turned out to be very good decision, by the way, right? You need to be the universe of you know it yeah All the mini-computers disappeared.
00:48:59
Speaker
IBM mainframe yeah became Unix machine. yeah idea So, turning back to the India side story. live but yeah How would that be a good business decision if Unix became universally adopted? The entire people don't like it.
00:49:15
Speaker
Yeah, yeah and and and they want to shut down the units internally. Okay. Yeah, yeah. And so why... presgen you Died if you hadn't made it open source. So it was good for Unix, but wouldn't have made any difference to Novel that Unix is Univ.
00:49:32
Speaker
ah butna But no, but Novel was very happy because all of a sudden, we have turned this dot, loose on Microsoft. Ah, okay. yeah And Microsoft is their enemy. Got it, got it, got it. Okay, okay. Yeah, I understand.
00:49:46
Speaker
yeah So, Novel was very happy because we took to an asset we had that we don't love and and turned that into Microsoft. our our as enemy microsoft Right. Okay.
00:49:58
Speaker
Okay. and yeah i mean And I was living anyway, right? So, yeah, it's a little bit of mellow about these things, right? I said, the yeah city decision, you know, we ought to be yeah putting all of our energy behind the units and not compete.
00:50:12
Speaker
But I didn't get a job, right? I didn't really see a job. And then you see, yeah, it being there yeah one way or the other. yeah but This is your parting gift to the world when you were leaving Nobel. yeah I do want to tell you what happened in the United industry.
00:50:31
Speaker
So, the IT&IT industry had made their mark, migrating the mainframe and mini-computer applications to units. So, they had become experts in the mainframe and mini-computer applications.
00:50:44
Speaker
From mid-90s, around the time, you have the units have become a sort of yeah public element, live in Novel, there was this unholy fear of Y2K problem.
00:50:56
Speaker
Yes. You remember right? The planes will fall off the sky. And these applications, which have a two-digit year, 99 will go to 1900 instead 1000. So...
00:51:10
Speaker
in andal right yeah there but so That was when Infosys really became Infosys. That's the thing I was going to say. It was a lucky break. All of the Americans want all those applications modified.
00:51:23
Speaker
The Indians had just become expert on those applications. which They had just migrated them from mainstream to units. said, we can do this. and And massive amount of work came to the Indians.
00:51:36
Speaker
Infosys, B-Protototot, TCS, making sure all those applications were fixed for the that 2-digit to 4-digit. And between and two thousand you know indians were victoriaia and the powerhouse, yeah yeah you know, fit in those applications.
00:51:57
Speaker
And they then they never looked bad, right? So they were the first lucky break team, you know, because ah yeah the super mitros, yeah yeah and they yeah they did that work to moderate the applications, the certain team, you know, when they had to fix those applications.
00:52:15
Speaker
Hmm. So this is ah how your second inning starts. Both. I mean, you have like a double parallel second inning of a VC investor and of founder of Thai. ah Just take me through either of
Mentoring Entrepreneurs and Venture Capital
00:52:30
Speaker
those two journeys. We can start with first, whichever you'd like.
00:52:32
Speaker
but So what happened in 92, I'm still at Nobel, I'm still very busy. yeah yeah We meet, yeah that yeah eight, nine, ten of us in San Antonio Valley who are doing well.
00:52:45
Speaker
We meet yeah this ah yeah this bureaucrat from India, Mr. Vitor. He was head of the yeah Department of Electronics at the time. came to tell us India is liberalizing, yeah we should come to India, set up our businesses in India.
00:53:01
Speaker
And he missed his flight. And we were waiting for him to meet with him. And a sudden we were talking to each other. And for the first time, were all busy doing our businesses and here's a meeting.
00:53:18
Speaker
And very quickly realized that we all had very similar journeys. We all had, nobody believed in us. was very lonely journey. yeah yeah We all had been passed over for this promotion and that promotion.
00:53:34
Speaker
So somebody suggested, you know, we we ought to form a dinner club and, yeah, and, and, and, and very quickly they realized, you know, the need is that how do we encourage and inspire and help our youngsters to become entrepreneurs? Yeah.
00:53:53
Speaker
We didn't have any mentors. We didn't have any believers in us. now but Yeah. Yeah. Why don't we become the, the mentors and believers? And, yeah, yeah. So that, that was the genesis of Thai.
00:54:06
Speaker
And so yeah it was it was not an investment club. It was club to encourage, inspire our people to be entrepreneurs. And so, you know, job-seater. This is 92, 93.
00:54:20
Speaker
We held a workshop for entrepreneurs in Silicon Valley in March of 93. Yeah, we expected 100 people to show up. 500 people showed up. five hundred people showed up And say, oh my dad. yeah yeah So yeah this is the old Victor Hero.
00:54:34
Speaker
Then the idea whose time has termed. Nobody can stop the idea time with termed. The idea of Indian vitamin entrepreneur had termed. And so when we offered this workshop, yeah people came in droves.
00:54:50
Speaker
And so once many people tell me, all of sudden you're certain, you don't want to waste anybody's time yeah because yeah you offered it to them. And yeah so we spend our air time and energy to make sure the seminar was very successful.
00:55:05
Speaker
and And then yeah what next after the seminar, well, we will have monthly meetings. And one thing led to a to the life of its own.
00:55:18
Speaker
yeah it It was yeah yeah pulling us. yeah yeah We weren't pushing time. Demand is coming from the entrepreneurs. They are trying for them. And all of a sudden, we have a large number of entrepreneurs starting where they need money.
00:55:36
Speaker
VCs are still not giving them money. So so since somebody said, hey, we should do some investing of our own. And yeah, so we started to invest our own Hotmail.
00:55:52
Speaker
Very quickly went public, that was acquired by Microsoft in 95. So you were an angel investor in Hotmail? No, I was not an angel investor. If you read my book, you know, there's a story that Hotmail, I was trying to put the money and while I'm still dithering about putting the money, they were acquired by Microsoft for four weeks.
00:56:12
Speaker
Okay, okay. Yeah. yeah If I ah put my money, I would have made 20 times on money and my in my business. Right? So, yeah.
00:56:23
Speaker
So, this started to happen. I put money in six, seven companies. Exodus was one of them. Exodus was the primary company in the internet. Okay. Yeah. and They pioneered the internet data center business.
00:56:36
Speaker
and And that turned out be a massive, massive hit. You know, Exodus was worth $30 billion. dollars Okay. Yeah, and i yeah at the peak, my investment was worth thousand heads.
00:56:51
Speaker
Yeah. and well ah god yeahh and But then they trashed and burned, you know, the dot-ton trash, right? Okay, the.com crash. So so the yeah the trash and burn, actually, that was a bit, you know. They couldn't survive that? like but They survive. All the customers were in trouble.
00:57:11
Speaker
know, they had massive infrastructure. They borrowed tons of money to build that infrastructure. They had 50 data centers and all of a sudden you have to pay the interest on those loans and revenue disappeared.
00:57:27
Speaker
So yeah, so I tell the story, I so tried to sell as fast as I could. And yeah i my return on Exodus was 86 times my my money.
00:57:42
Speaker
And I felt i found like a stupid idiot because at one time it was a thousand ads. Yeah. What's there in life? I said, you know, 86 time wasn't that bad.
00:57:54
Speaker
Yeah, yeah, yeah, absolutely. Yeah. But it's not thousand ads, right? Yeah, yeah, yeah. it's up So the investments happen not because we set out to be VCs. Investment happened because there was a need and VCs were still not investing.
00:58:10
Speaker
Hmm. So I pulled into a couple dozen companies I invested. And all of a sudden, you're doing well by doing good.
00:58:22
Speaker
hu yeahp yeah so yeah So even though I was yeah was an entrepreneur entrepreneur, I was not an investor, I destroyed very quickly my yeah small amount of investment with my advice. Entrepreneurs have a much better chance, such as seven, eight, nine companies did really well right away for me.
00:58:41
Speaker
So, that stays there. This is our angel invested. I didn't become VC till 2005. The 2005, one of my, you know, the the original investors in Epsilon,
00:58:59
Speaker
Yeah, son of one of those investors came to see me. He says, know, it why don't we partner and grow investors India? Yeah, if yeah. And yeah, I stressed my head, you know, I had not invested in India. I wasn't thinking bring that from.
00:59:15
Speaker
And he said he'll do all the work. So two of us started inventors to invest in India. We came, we set up a fund, transborrow fund, and we have hired couple of people here in India, yeah you know and in Bandalore.
00:59:32
Speaker
And yeah, we did maybe 30 investments and in India, US. And some of them did very, very well. The investment was still active or... Inventors, the last change on Indian side, got older. Inventors now is back to the U.S. The Indian partners started their own fund at Athera.
00:59:53
Speaker
Okay. At Thera, you have Samir and Paradol and Ritwit. And they were our partners. And, you know, the last, but they shut down the Mauritius route, right?
01:00:06
Speaker
yeah So now, it's a bit of a burden, you know. I'm dead in world. Yeah, yeah, yeah. I don't want to travel as much here. Yep. ever Lots of things.
01:00:17
Speaker
yeah But Inventus in the U.S. is still doing. My nephew and John Dodory are still doing it. I am still involved. yeah But not as active. I'm 80 years old now, right?
01:00:29
Speaker
And so... So I went back to my roots of doing angel investing. We started this in terms of Ciliterun Valley. But me, yeah Raju Reddy, B.V. Jaradish.
01:00:42
Speaker
B.V. Jaradish was the founder of Atsudas. Okay. And Raju Rennie was the founder of CIRA, I had planted two Albitangkris I had invested in the 90s. they what Very small people, very good people.
01:00:54
Speaker
So those two and me and my daughter, four of us, I said it turned very toward doing the angel investing. This is like a syndicate or is it a fund? It's a syndicate.
01:01:05
Speaker
Okay. We have done about 30 investments. Okay. And what are the thesis? This is, you know, angel investing. So we are doing our own money to invest and we are giving 250 here, 250 there to earn, not enough cash.
01:01:23
Speaker
So for our joint forces, we'll put a million dollars into a see This is seed level investing. And of sudden, you know, a I said, you know, there are people who will write our deals. We opened it up to others.
01:01:34
Speaker
And instead of now, yeah, 30 people partnered with a member of our syndicate. So instead of putting a million now, we are putting three million a deal. A 3 million way seed level investment, dirt money for 18 to 24 months.
01:01:51
Speaker
So entrepreneur has a runway to, you know, yeah, yeah, that's somewhere, right? Prove is your business rather than spend his time raising money. and We loved it because you know now we can get better deals in some, maybe only waypoint 3, so we have better deal flow.
01:02:09
Speaker
and i And the our syndicate partners loved it because yeah yeah they're writing our deals without paying us any fee and carry.
01:02:18
Speaker
president Win, win, win all the way around. Entrepreneurs loved it because he did that substantial seed see investment yeah to pursue his dream. so and Access to a large pool of like seasoned entrepreneurs who can open doors.
01:02:33
Speaker
Yeah, open doors, mentor them, right? Yeah, yeah, yeah. yeah And so by doing that way, you know, the, the, our role was not to build a, our role was to get you VC ready.
01:02:49
Speaker
yeah You know, you develop technology, you know, you have a substantial story to tell, not to be VC exactly. And we are doing really well. We are doing really well there. yeah yeah In that, yeah we have this company Kheyal in Bombay as one of the company. be What time is it? Into elder care, I believe.
01:03:10
Speaker
But here that yeah, were seed investors in them. Old one doing the warehouse. no did't result and and Now putting a layer of software and we are making them, you know, more warehouses with the yeah of theehouse yeah It's not not a hardware automation.
01:03:30
Speaker
is So, you know, a supplier can trade is inventory all over the country and in distributed warehouses. yeah This local warehouse is part of this network.
01:03:40
Speaker
yeah And so... The guy has a warehouse, you know, the tenant, that bit guys, so we, you know, make him visible on our network and they are, he can, that, you know, the way a flip card is a customer, you know, using our warehouses.
01:03:58
Speaker
Yeah, we have a, we have a company called SySpace. Yeah, SySpace, I think it's based in Bangalore. Yeah, SySpace does the,
01:04:11
Speaker
the AI-based research automation. yeah There are 60,000 to 70,000 research papers are uploaded every day or every week, some large number, there are millions of out there.
01:04:22
Speaker
You cannot keep track of the research in your field. So yeah we read yeah we read all the papers. If you are a scientist in your specialty, give me all the research which has been published.
01:04:36
Speaker
now We can give you very quickly. So, yeah you started with the universities, you know, now you're farmers and, you know, yeah we have businesses. You're doing really well, really river well.
01:04:48
Speaker
Yeah. And, yeah, we have a company here Bangalore called 10XR. Yeah, 10XR is helping the a chip company, system companies, chip companies, provide a lab in the cloud for customers to test the chips.
01:05:06
Speaker
Okay. yeah yeah Yeah. If you are a chip company out of Korea, we'll build a lab for you in the cloud, customers from Europe and America can play with that chip.
01:05:17
Speaker
You see robots in our lab, know, and yeah. It's very hard to so send your chip to 100 customers. You know, expensive all over the world.
01:05:29
Speaker
So, lab in the cloud, you that actually is done reasonably well. o And so we we have roughly about 30 companies. So, we we have very simple formula.
01:05:40
Speaker
Yeah, raw first investment seed level, yeah, yeah, that's you, BC really, and hopefully, yeah, hopefully we made 40 or 50 times our money.
01:05:56
Speaker
So seed investing is like very high mortality rate. i mean Very high mortality rate. How are you... ah ah like Like you said, you've had all good investments so far. now yeah So the two things, yeah you need to now have a pattern recognition to pick potential winners.
01:06:19
Speaker
Right. yeah So I want to understand that pattern recognition from you. don't tempt that to combat you and Saturn has become a very deep, deeply engaged mentor in the entrepreneur.
01:06:32
Speaker
In the early phases, I have been early phases entrepreneur, founder myself, I've worked with over 200 properties. Raju has done the same thing, built a property to large Sierra Atlantic, and he has done over 100 investment. B.V. Jabdish built that from very early, and he has done maybe 100 investments.
01:06:52
Speaker
And my daughter now is a learning, area it's she has done about 10 investment. So it's not the money, it's the value added money. yeah so so so So how do you... Wait, so yeah maybe before I tell you the parentation, we also have an underpinning of math.
01:07:11
Speaker
We said 75% of the company will fail.
01:07:16
Speaker
Yeah. Even with our help and all that. Yeah, because you have high mortality. And the 25% that will succeed, yeah, ought to pay us 40 to 50 years. Yeah, and that forces a discipline of good valuation up front.
01:07:31
Speaker
We are giving you 2 to 3 million dollars, 125 to 30% of the company.
01:07:38
Speaker
Are you still able to get these deals? Because today, notmers don buy that nobody does seed investments. Who is doing seed investments? They give it to fifty okay and it's all you of winning, right?
01:07:55
Speaker
we' given you very high chance of winning right ah So, yeah, because you're coming in pre-PMF and very few VCs touch pre-PMF businesses. Yeah, yeah, yeah and he is ah yeah. We have to make a raw entrepreneur with an idea.
01:08:11
Speaker
ah ah Yeah, true, true, true. Even a VC who claims to be early stage investor does not invest at idea stage, unless it's a serial founder or something like that.
01:08:24
Speaker
Yeah, very, very few. Okay, I understand. good And we are coming in with a substantial amount of money for you. We are a substantial amount of advice for you. You have to work on entrepreneurs, they love it. Others of them, we free you up on spending half your time raising money.
01:08:41
Speaker
Yeah, yeah, yeah. so yeah So, yeah, there's no deal for shortage. There's no deal for shortage. Yeah, yeah. If you don't write our terms, yeah, you don't get the deal you want.
01:08:54
Speaker
yeah yeah we We are in flexible diabetes. We need to have winners which will pay us 40 to 40 years. Knowing full value, sacrifice of the companies will fail. Other of our model doesn't work.
01:09:05
Speaker
Right. Okay. Makes sense. Okay. yeah yeah Super high risk with a super high return is the goal. So we, Raju, Bibi, have worked with large number entrepreneurs.
01:09:19
Speaker
I can never tell the entrepreneur who will win. But I am very good at telling the entrepreneur who is not going to win. Oh, wow. Okay, that's interesting.
01:09:31
Speaker
With 90% confidence, I can tell you this is not going to win. Okay. The job is to beat out the yeah potential losers, but he has reached himself of potential winners.
01:09:43
Speaker
And we still don't know. yeah I'm still saying 75% of them will fail. But what ah you you didn't tell me those patterns.
Entrepreneurial Values and Seed Investing
01:09:51
Speaker
What are those patterns of people who will not win?
01:09:55
Speaker
yeah So there is a paper. yeah If you do the search on the internet, yeah the entrepreneurial traits that I look for. yeah You'll find a paper. yeah I and S.J. Parlaz wrote a paper, entrepreneurial traits.
01:10:08
Speaker
So I'll tell you the couple of them. The entrepreneur, I mean, in the humility is very big. Yeah. If the entrepreneur is arrogant, yeah, he's out. yeah Okay. yeah Humility. Yeah. yeah yeah The atrochimility, you know, the dais defend their ideas rather than say, yeah, and this is where it is.
01:10:28
Speaker
The intellectual honesty is a very big one. Yeah. And see where the DAOs own their failures. My last company failed, you know, if I died as my last company failed because ah our product was the VP of the union did a poor job.
01:10:43
Speaker
My last company failed because the my investors stopped funding me. My last company failed because my customers went away from me. You know, the DAOs is blaming others you know if i Yeah, I like the entrepreneurs. You know, I was sharp enough to it ah make sure that VP of engineering wasn't falling behind.
01:11:04
Speaker
i wasn't keeping up with my investors and and they were unhappy with me or my customers who were getting frustrated. The guy who owns his failures. Yeah, yeah i mean, that to me very big.
01:11:15
Speaker
That is intellectual honesty, like if you can own your failures. Yeah, if you don't, that's why you don't blame me. Yeah. got yeah yeah yeah Yeah. Yeah. So b I have about 10, 12 of those points.
01:11:31
Speaker
the Yeah. The fairness. Yeah. the It's a very high pressure environment. Very high pressure environment. The people who you brought are taking the same risk that you are taking. You own most of the company.
01:11:44
Speaker
Yeah. Yeah. If youre yeah you give 1% to your VP of engineering, 1% to your VP of marketing, you've been an unfair. like So, yeah they yeah yeah the fairness, these guys are in tranches with me earlier.
01:11:59
Speaker
yeah They need to have substantial ownership. I may own half the company, but yeah my VP of monitoring owns 5 or 10 percent. My VP of engineering owns 5 or 10 percent.
01:12:12
Speaker
So, I need to have a team in the building which has a substantial state. yeah and yeah So, they the yeah Fairness is a very big part of building the company.
01:12:23
Speaker
I need to be able to attract and retain top-notch people. I need to hire people who are smarter than me to determine what for me, right?
01:12:34
Speaker
So, the did there are eight, nine, ten, head i didnt i have yeah yeah yeah if I spend few minutes, I can come up with more. Fairness, I gave you, a good sense of economics.
01:12:47
Speaker
good sense of economics. yeah yeah The unit economics of the new business. married yup Yeah. One of things we tell our entrepreneurs, zero in on unit economics.
01:12:59
Speaker
we Define the metrics yeah know that will help you strengthen your business. yeah I was a company yesterday, one of our company yesterday in Hyderabad.
01:13:11
Speaker
Yeah, and so he says, if you are software company, what is the one one metric that that ai you should track? And I told him, revenue per employee.
01:13:23
Speaker
Revenue per employee. Okay. In software companies, your main expense is payroll. Yeah, yeah. Yeah, and for me to be able to pay my people well, I need to make sure I'm tracking, you know, how much I'm making per person.
01:13:40
Speaker
And my goal is to make sure yeah the the revenue per employee is a matrix, and that starts to measure the efficiency of the template. And I draw that number. If I made $100,000 per employee, I pay somebody $5,000, $30,000, and should have expenses per gram money, and should make 20% profit.
01:13:58
Speaker
lier predominia which it may predict yeah percent profit So, yeah so be we be be we are very good. All of us have built a place. All of us have attended a place public.
01:14:12
Speaker
so yeah So, it's not the just the money we give you. We give you a value added money. yeah So you told me you're 80 now, right? Something like that. Yes. What keeps you going?
01:14:28
Speaker
what's what's What's your drive today? My goal is to live to be 102. Why 102?
01:14:36
Speaker
I want to live to be it to be around in 2047. When India's 100th anniversary of independence. Wow. I was born in 1945.
01:14:48
Speaker
Oh, wow. Wow. Okay. Pre-independence. Yeah. Yeah. And I've seen, you know, my book is all about that. My book is my life journey and journey of India.
01:15:03
Speaker
Yeah, rise up Indian Americans, rise up India. Yeah, what's behind it? Yeah, and I use myself as an example, my my events in my life as an example, events in India. I told you about the yeah the units, yeah the Y2K.
01:15:20
Speaker
yeah Yeah, you need to work hard. yeah You need to yeah do all that, but you need to also have lucky breaks. Hmm. Yeah, that's the other part.
01:15:32
Speaker
Entrepreneur has to be very aware that best of efforts yeah are not enough. You need the Lattie Bates. And I defined Lattie Bates are You better be home when the lady left decides to not at your door.
01:15:52
Speaker
Yeah. Prepare. Yeah. Right. Yeah. If lady left decides to speak in your face, no amount of what will save you. Right. ah you Yeah. So, yeah yeah. I talk about humility in the building. Yeah. Yeah. Yeah.
01:16:07
Speaker
then you don't pay ti for lucky bridge Yeah, yeah, yeah it' so true, so true, so true. Yeah, yeah, yeah. ah Okay, amazing. um Okay, I want to understand a bit more about what exactly is Thai. Is Thai like a NASCOM? like a Or is it like networking, network of body?
01:16:30
Speaker
and So let me give you the Thai theory. NASCOM is a chamber of thermos. Hmm. The Chamber of Commerce is when the players sum together in the industry and hey this is your shared interest, let's lobby the government to get what we need, yeah let's promote our industry, right?
01:16:51
Speaker
na The next step is the Chamber of Commerce, the CIA is the Chamber of Commerce, where businesses plead for their cause, right?
01:17:03
Speaker
When we started out Thai, it was that realization we had lonely journey. Nobody got any help. yeah You know, in India, the
01:17:16
Speaker
Your family yeah it provides you the mentorship. Your grandfather who started the business, he's 80 and he's not in Jersey.
01:17:29
Speaker
He's mentoring the grandson, but father is running the business. like The mentoring runs in the business. That's how the family business happens in India, right? If your family was not in business, you have no help, right? Hmm.
01:17:43
Speaker
I started out as a way to pay forward. We had done well. I got free IIT education. You know, that launched me. You know, I have an obligation to go back and help.
01:17:57
Speaker
So, you know, India's free, independent country. Yeah, we need to help build India. So we started the position, Thai, as a freedom movement. An economic freedom movement.
01:18:11
Speaker
yeah am We talk about political freedom and we need to talk about it. And a freedom movement will happen when we have millions of entrepreneurs. These millions of entrepreneurs are going to need advice, help, mentoring.
01:18:25
Speaker
Thai became an open forum to do all
TIE's Mission and Future Vision
01:18:30
Speaker
that. if if they do you know All Thai chapters are independent of each other. They are all local chapters, Thai chapters in Mumbai,
01:18:38
Speaker
yeah does all you but yeah We have shared roles, shared branding, shared everything. with you yeah But je yeah how do we harness lot of successful people, bring them together to mentor that generation of entrepreneurs?
01:18:52
Speaker
And it's it's a very much a of a noble, spiritual thing to be said. So yeah, we are, TIE Charter members are successful people who are ready, able, and willing to help ah Thai channel members are diverse. Net diverse, Thai associate members are net tators.
01:19:18
Speaker
oh and but how How is it facilitated for like... Now so now now coming back to the fundamentals, we're not going to be able to make you an entrepreneur.
01:19:30
Speaker
We don't provide you forum. It's up to you to get what you want. Find a potential mentor, convince him to become your mentor. Okay. If we tell each other members, it's your obligation they had to mentor somebody.
01:19:44
Speaker
You don't have to mentor XYZ. Find the one way that plits with you. ah yeah yeah so So it's like a nuclear reactor. We build them together.
01:19:57
Speaker
yeah yeah But but we we are not here to help anybody. We are here to provide you form. You as a entrepreneur have to convince that you're worthy of somebody's time and energy.
01:20:09
Speaker
Okay. yeah So you're basically giving access, both sides? ah Access is the fundamental. yeah it be yeah I am very available. I am very available.
01:20:21
Speaker
So first thing was, you will not become a yeah you will not shut the door. you Thou shalt turn the phone call of an entrepreneur.
01:20:30
Speaker
You want to say no. Right. yeah Yeah. So the farmer has proven to be, yeah so did the thing was, you need to inspire, yes spark, inspire, agitate. yeah yeah know guys You're not going to make an entrepreneur. You still have to work hard. you yeah But here is a forum.
01:20:50
Speaker
yeah The entrepreneurs feel not an oddball. The families, yeah yeah your mother and father yeah think you're yeah you're wasting time. yeah yeah You should be sat down and doing something you productive, right?
01:21:03
Speaker
So this becomes a place where you become where people don't think you're an oddball. Is Thai still relevant in today's India? Because there are so many... Thai is very relevant in today's India.
01:21:17
Speaker
Yeah, very relevant in today's India. yeah you You have a lot of Charleston out there. yeah they Lots of VCs. They are no business being a VC. They have no experience in startup.
01:21:30
Speaker
and they they yeah yeah They have the MBA here which doesn't prepare... you ya But we have a lot of winners who are i emerging. They ought to do that.
01:21:43
Speaker
and so So one of the guys' role right now is how can we create 10 million anti entrepreneurs by 2047? How can we create a million entrepreneurs by 2030? How do we create entrepreneurs in second, third, fourth year cities?
01:21:57
Speaker
How do we create entrepreneurs better wages and have uplift the village from being in stone age to coming to modern age using technology. Yeah. so So I'm wearing this shirt. Can you read that, Loder?
01:22:12
Speaker
Yes, rest. Yeah. It's a rural entrepreneurship center in Mizanabad. The goal is to tell a guy from third tier city, fourth tier city village Don't do your BTAT.
01:22:28
Speaker
Go back to your village. Solve the problem using modern technology. if We have an entrepreneur in this village near Zambabas. He went to IID Bombay. Okay. He went to the village and he realized all the tools the farmers use in the village are primitive.
01:22:45
Speaker
So he he started to redesign the tools. of sudden, those tools are improving the product productivity of farmers by a factor of two. 70,000 farmers are using his tools now and in Telangora.
01:22:57
Speaker
So when I talk about entrepreneurs, I don't mean Unitrons. I mean 10 million entrepreneurs. India will be built by entrepreneurs. india they're not as ah India will not achieve its potential. Not 200,000, not Unitrons, not the government policy.
01:23:12
Speaker
How do we get?
Investing in People and India's Potential
01:23:14
Speaker
We are the new freedom fighters. we have been hotty we are the new freedom fighters india it was India is perceived as potential.
01:23:24
Speaker
You know, first we'll be number three economy, right? Are we in number three? Should we try number two? Or should we try to dove back to be number one that we were in 1800 when the British took over India? So there's a spiritual element.
01:23:42
Speaker
yeah know so So when you ask me if Thay is still relevant, you do you tell me. Hmm. Yeah, yeah, yeah, yeah. Okay. I understand the vision. One last thing I want to ask you. ah See, most investors have, like they spend a lot of time in tracking market opportunities and, you know, the TAM, the total addressable market.
01:24:04
Speaker
Don't worry about TAM, a matter of jewelry at all. So why is that? Like, like ah you know, the... ah it will That's what I'm going to tell you. I bet on people. My bet is on a person, not on a camp, not in a marketer, which is not on a business camp.
01:24:22
Speaker
In rapidly changing the world, technology is changing every day. Marketer is changing every day. Competition emerges all the time.
01:24:33
Speaker
The only constant is a person. Once I convince myself, this person is entrepreneurial, is a potential winner, I and he will figure it out together. yeah I'll be on the track.
01:24:47
Speaker
yeah and ah yeah um ah yeah Let's put some money in there. and Let's test this idea. you know, India is a very large potential market. yeah India is very undeveloped market. Just to give you yeah the ah Why is an American 30 times more productive? 30 times than an Aboriginal.
01:25:11
Speaker
Indian but a per capita income is $2,500. American per capita income is $7,000. So I see India as a land of our opportunities, left and right.
01:25:23
Speaker
Yeah, can be dead some entrepreneurs. Yeah, yeah. But in this, local problems using latest technology to solve the local issues.
01:25:35
Speaker
Yeah. And yeah, this guy, I just told you about the father and son. Yeah. He already has a five-year-old revenue. Wow.
01:25:46
Speaker
Okay. Hmm. Yeah, so so and he hasn't done out of yeah this immediate area around Nizamabad, Semi-Town environment. yeah and and the And when he was talking to me, he said, you know, with a little bit of tapering, he can easily get to 50 to drop.
01:26:03
Speaker
ah And now thinking about yeah tools which are used batteries to you know improve productivity even further. Solar cells recharge those batteries in the villages.
01:26:14
Speaker
yeah so So he's not dreaming, how do I make this? my His father was the way he started. 10 times more productive. ah You cannot solve India's problems by it's just staying in metros.
01:26:31
Speaker
Yeah, true, true, so true. yeah Yeah, so 60% of India lives ah away from metros, right? um
Influencing Policy and Entrepreneur Selection
01:26:40
Speaker
yeah and so So when I talk about 10 million entrepreneurs, I'm talking about the entrepreneurial solution to the India's problems rather than German's solution to India problems.
01:26:51
Speaker
ah yeah We have lots of smart people. how do we provide them some capital? you know And so TAI is a movement which has two ah aspects, you helping entrepreneurs, but it's also sort of turning the dominant change policies.
01:27:05
Speaker
yeah we ah We are the ones who have changed the FVCA foreign venture capital laws in India, foreign venture capital asset laws. you know We went to the development in 1999, 2000 and tell them, hey, you need to let the venture travel happen.
01:27:21
Speaker
yeah Before that, and everyone now to be a we were the ones who went and helped the tight-term policy change. Okay. Okay. Okay. So ah what's the best way for someone who wants to pitch ah to Silicon Valley Quad?
01:27:39
Speaker
Yeah, yeah there there's a website where you can submit a plan. yeah it ah If you are able to reach me, yeah yes, it's bad. We are doing lots of things. It hits my fancy. we have rule.
01:27:53
Speaker
yeah it it hits my fancy ra so we have a rule yeah We are not a fund. So we don't have a partner's ability tell censuss to do a deal.
01:28:05
Speaker
If I start to see it be like light, I want to do it. All the partners will support. If Raju Reddy loves an entrepreneur, we will support.
01:28:16
Speaker
So part of the thesis of City Training by Quad is you're trying to harness my nose, my dot. Hmm. yeah rajus nose Raju knows Raju's taught. yeah We are not here to term of a term minimum.
01:28:30
Speaker
Yeah. it Yeah. Multiplier. Yeah. What is that? Yeah. Yeah. So our goal is to yeah let term world be term world. Raju be Raju. Red be we be we.
01:28:41
Speaker
so So yeah. yeah You term and pitch. yeah but yeah if Yeah. If I light you, I'll touch you a little bit more and then I'll put you in front of the other three to see if you can term on those two.
01:28:53
Speaker
Yeah, we do on average a deal every two to three months. Okay. Six deals a year is our draw. So sixty you must be like doing one out of every three, four hundred deals that you receive, right?
01:29:08
Speaker
Yeah, one out of 100. Okay. yeah but What's in the future of the beast, right? Where we are playing, yeah i mean yeah Tom, Dayton, Harry wants to be an entrepreneur, right? Yeah, yeah, That's the problem with Seepsage. Yeah, yeah.
01:29:26
Speaker
Very hard to find the winners. Yeah. yeah ah so we We have to shift through the cars number these very quickly. of all right amazing amazing thank you so much for your time Kaval it was a real pleasure speaking to you