Lessons for Venturepreneurs
"Don't be afraid to tread new ground, but do a
sanity test," says Sabeer Bhatia, co-founder and CEO of Hotmail, the
world's number one free web-based email server. "At the core of
entrepreneurship lies the
solve a problem, and that's really how Hotmail was born."
The problem Bhatia wanted to solve, was how to
access personal information, contacts and communications from anywhere in the
world. Finding a technological solution was one part of the problem, but the big
questions facing Sabeer Bhatia, and Apple colleague Jack Smith, were whether
their idea would
help others, whether there was a market, and whether they could
raise enough venture capital to support the idea.
The pair finally secured US$300,000 and
launched Hotmail in 1996. The Hotmail crusade was "To revolutionize and
democratize communications." People who went to work for Hotmail didn't join a
company, they joined
the crusade. They wished to build something that had never
been built in return for zero salary or benefits – only a small equity stake in
the company that can be exchanged for cash only if and when the company achieves
success and reaches a liquidity event.
Within six months Hotmail had 100,000 registered
users and 20 million clients within 22 months. At that point, Microsoft offered
to buy the company. Bhatia refused the offer, until Microsoft came back with an
offer of double the original amount. Hotmail was sold for US$400 million.
Bhatia has a sense of optimism and
passion for his
work. He provides lessons in seeing further and clearer and the role of
Sabeer Bhatia's advice for young
entrepreneurs is to find an idea they are passionate about, write a
business plan, and get the plan critiqued by someone with related experience
to make sure it passes "the sanity test".
Staying Beneath the
Radar of Their Competitors
Hotmail, the first web-based free e-mail
server, was built around a simple idea.
Sabeer Bhatia and Jack Smith, the
founders of Hotmail, realized that before long the same idea would occur to
many other people.
They had to
raise venture capital
without revealing the real idea of their business.
"I turned over every
stone looking for money. Anyone who would listen, I'd talk to. I pitched
friends, colleagues, classmates, partners, anyone, anywhere, anytime. I
pitched a Texas multimillionaire, an oil magnate, a real estate person, and
even a venture capitalist who funded gas stations," says Sabeer Bhatia. But
he would only reveal the big idea after he was certain he wasn't being
rejected for some irrelevant reason: "All potential investors got the same
pitch – for Java Soft, another program we'd played with. If the person I
started to sell started spouting reasons that I believed were silly ones for
rejecting us, they never got to hear about the real idea. Eventually only 4
people knew about our real plan."1