Ramu Sunkara On Selling His First Business For $150 Million And Now Taking On Google, Apple Or Amazon

Ramu Sunkara is the cofounder and CEO of Alan AI which has pioneered Spoken Language Understanding for enterprises to build, deploy, and manage voice experiences in their apps and IoT devices. Prior to this he cofounded Qik which was acquired for $150 million by Microsoft.

In this episode you will learn:

• Building a brilliant founding team
• Choosing the best investors to fund your startup
• The ingredients of a successful startup that can weather the storms

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About Ramu Sunkara:

Connect with Ramu Sunkara:

• Linkedin
• Crunchbase
• Twitter

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FULL TRANSCRIPTION OF THE INTERVIEW:

Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a full-cycle entrepreneur, someone that has done it! Has been there, done it, and now he’s doing it again. I think that without further ado, I’d like to welcome our guest, Ramu Sunkara, welcome to the show.

Ramu Sunkara: Thank you, Alejandro, for having me on the show. I’m looking forward to sharing my journey with other people on your show.

Alejandro: Originally born in Hyderabad, so how was life growing up there, Ramu.

Ramu Sunkara: When we went to school in India, it was like growing up in a middle-class family, and most of the time, education was paid by the government. I was lucky enough to get into a good, prestigious school called Indian Institute of Technology, Madras. That’s where I went and completed my undergraduate there.

Alejandro: What I’ve heard is that there’s a lot of social pressure around pursuing the best studies, the best education. Why is that the case in India?

Ramu Sunkara: In India, when we grew up, there were only two choices when we were good in some kind of science or math. It was either become an engineer or a doctor. So, I didn’t like becoming a doctor, so I chose a path of becoming an engineer, so I went to a school called IIT, Madras. It is a pleasure that society looks at you like successful means in education is that you get into one of these programs. I was lucky enough to get into IIT. That gave me the self-confidence like, yeah, we can do things.

Alejandro: And definitely, you did. In this case, you had a big influence from your father. Your father was an engineer, and he was working for the same company for 35 years. What kind of influence or inspiration did you get from his own journey?

Ramu Sunkara: My father was one of the motivators for me. He worked hard. That’s the first generation which transitioned from being a farming community to taking a job in the industrial world. He advanced up the ladder in the same company and retired after 35 years. Through his journey, whenever he used to meet with entrepreneurs who were doing things very unique and successful by themselves, he used to take me to them whenever he met them, and that was a big motivation for me seeing how these people had built this self-confidence and wherewithal to go ahead and build a company on their own. That was my dream all the time. I kept nurturing it and kept trying new things. That’s when I realized that you had to be ready for a change. Whenever I had a good opportunity to change, I took it and jumped with both my feet. An example is like when I left India, I was an engineer, but suddenly I realized that computer science and software engineering would be a good field. I had no background in it, but I went ahead and jumped into computer science at the University of Wisconsin-Madison. 

Alejandro: Why the U.S., Ramu? Why not stay in India? What made you think that the U.S. was where your next chapter should be?

Ramu Sunkara: I think every time you get presented with opportunities in our life, at that time when we’re growing up, the education in the U.S. was the best you could get. Also, the schools in those days were giving you what they call a teaching assistantship, and it’s to fund your grad studies. That’s also, I would say, like a free education, without any paying of money out of my pocket, and my dad didn’t give me much money to study a Master’s, but this gave me a full-rights scholarship. So, I said, “This looks like a good opportunity for me. Not only is the education good, but also, I don’t have to pay anything out of my pocket. That made me jump the ship and go to the University of Wisconsin at Madison.

Alejandro: Then, after being here, and I’m sure it was a culture shock for you to see the U.S., and the American Dream, and all that stuff that people talk about. You started going into companies here; you started working at a company called Digital Equipment Corporation, and that was the segue into Oracle. Oracle, for you, was a big pillar. You were there for ten years, so tell us about the experience.

Ramu Sunkara: Yeah. I think the first company I worked for, Digital Equipment Corporation, doesn’t exist anymore. That told me that unless you change, you won’t be there in the future. It was very hard for that company. I learned a lot from that, how to be a [6:27] engineer in building products. Then, I worked for Oracle for ten years. I was lucky in trying to pick the problems to solve for that company. Not only that but building three different products for that company. I also learned how Software as a Business needs to mature in the world and change with times. So I could change myself about three times in the company. First, I built the product for them to work on these Linux Clusters. That is a database that goes up and down on a cluster. Then, the second product was trying to look at what business application will come on because of the internet. We built a [7:13] type of products there. Then, my last stay at Oracle was building collaboration products in real-time, like all the Zoom, WhatsApp, those types of messaging products we also built at Oracle. That gave me the impetus to “Okay. I can adapt to change quickly.” That’s when I started to become an entrepreneur and left Oracle in 2006 to start my own journey in building a startup.

Alejandro: You were at Oracle for ten years. You had the 9 to 5; you had the nice paycheck. Entrepreneurship was something new. Was it maybe a little bit scary to all of a sudden give you notice and go into the unknown?

Ramu Sunkara: In hindsight, I was enamored with the dream of working for myself and becoming entrepreneurial. It was scary. I left Oracle on the day I got married to my wife. I’m going to do this thing sometime in my life, so I just left, and went and parked myself in my garage in my home, and started thinking of what problem to solve. It was a scary experience to start with because, at Oracle, you get a really good office and paychecks. Not only that, the company has been in the business of finding new technology, so you get a lot of respect in the industry. If you go to the present, I’m Sunkara, the person from Oracle. And boom! All of that is gone. Now, here I am as an entrepreneur in my own garage working with this weird idea called video. I worked very hard, and it took me 18 months to regroup myself.

Alejandro: I hear you. So, what happened next?

Ramu Sunkara: I was ready to look into the future of what could happen next, and video was on the horizon. Then we said, “How about doing video.” At this time, America didn’t have an iPhone. We said, “Let’s do a video on a phone.” The initial team I had with that startup was a little bit hesitant because cellphone and video were not known yet in those days, and cellphone didn’t have any smartphone capability. Nokia was the leader in this cell telephone. We decided, “Okay. Let’s take a plunge. We’ll try to figure out what we can do on a cellphone with video, and that is when we started the company called Qik. I worked in my garage and went ahead and figured out a way to raise funding, got a few rounds done, and got it going.

Alejandro: What about the founding team? How did you put the founding team together?

Ramu Sunkara: The founding team – we were lucky. The people whom I knew for years joined me. Oscar was heading marketing. Nick was heading technology and engineering, and I was doing both fundraising and strategy and helping us stay on course. The initial team is very important because the startup journey is not a walk in the park. It’s fraught with a lot of unknowns, and at the same time, a lot of changes in the market, but the founding team that I formed Qik, I was lucky to partner with them and get the journey going. Later, we also got lucky when Bhaskar, one of our early investors, also joined the team full-time. That trial really helped to sail the ship to a dry destination. 

Alejandro: And quite a good destination with a good outcome. We’ll get to that in just a little bit, but one of the things that definitely happened that really tested the team was right around the Series B when the whole economy was coming to a screeching halt, and your fundraising efforts, too. What happened there?

Ramu Sunkara: Yeah. I think when we first pioneered the capability to do a live video from a cellphone, we were the darling in Silicon Valley. We won every single award given to a mobile company in 2008 and 2009. Then, we raised a Series A just in a weekend. We raised Series A of 10 million dollars in a weekend by just showing them the product, and people said, “Wow,” and those people wrote a check for us. Then, with that ease of raising funding, we started expanding the company. In 2009, there was a financial crisis in North America. Here is a company which is flying high, and the product was growing rapidly, and we didn’t have any business model on top of the product. Suddenly, financial markets collapsed, and all the venture funds who were excited to do a Series B quickly for the company, who were giving term sheets, just walked away from us in 2008-2009. One after another, they walked away from their interest in the company. That was very hard for the next nine months. We just barely survived. Barely survived means we were almost bankrupt every month. We begged and borrowed to keep the company going and kept the product mature more and more, and we had to layoff almost two-thirds of the people. But kept the core team together and made progress. That is what got us to the next step.

Alejandro: And this for you, I’m sure it was quite a tough part of the journey, but typically, those are the events that lead to the biggest breakthroughs and lessons that one learns. So, I guess what lessons were there for you to learn during those dark nine months?

Ramu Sunkara: Two lessons which I learned were: first, I think your founding team gets tested a lot, and that time test of this intense pressure and lack of money and the market looking back at you stood the time of test for us. Then, the second thing is as a business, you need to figure out how to make money. You shouldn’t get carried away by what the world is – be a little bit naïve just to let the growth happen without any monetization on top of it or anything inside. So we’re incurring tons of cost and data centers, and things like that. But we didn’t have any business model, and also, the use case, which we had, was not monetizable. Nowadays, live stream is monetizable. In those days, it was not. We didn’t have an idea how to monetize a service that was given to mobile users. Also, the timing of the cellphone was also not right. In North America, we didn’t have any iPhone or Android kind of devices in those days. The distribution was also very limited. The second lesson is, you should have a good team, but also market-timing should help you to take off and build the right business model. We got one right. We didn’t get the timing part right, but somehow, we weathered the storm for nine months.

Alejandro: What would you say was the turning point because nine months, those days, I’m sure could have been like a lifetime, so what would you say was the turning point?

Ramu Sunkara: The turning point was in Apple launching iPhone, and Apple created the App Store marketplace. We could launch the Qik series before there were FaceTime and Apple. That became the #2 paid app in a very short while, and boom! Then also, the App Store has a monetization model. We could charge for the app downloads, and that’s when we were getting a few tens of thousands of dollars in revenue immediately. So revenue flying was also spinning in 2010 for us. The turning point was, the market timing was perfect, and the product was there. That’s when I would say we got lucky in terms of getting the revenue flying and spinning for a short while.                             

Alejandro: Ramu, before we talk about Skype and the acquisition of Skype, you had great investors. You had raised close to 15 million right before the acquisition happened. Who were some of the investors that you had involved? 

Ramu Sunkara: The investors of Qik were early founders of Oracle, as well as people like Ben Horowitz, Marc Andreessen, and Marc Benioff. They did my Series A. Later, we had a few early-stage venture funds who wanted to participate in the journey. We were lucky enough to get them on board in the Series B and Series C timeframe. That’s where we raised 16 million dollars in funding for the company.

Alejandro: Very cool. Just to recap this, what ended up being the business model. Now that it was flying with the app store and everything, what ended up being the business model of Qik?

Ramu Sunkara: The business of charging for app downloads initially kind of worked from the Apple App Store, but pretty soon, Apple released FaceTime as a free product on their platform, so that business model didn’t fly too long. Then, we realized that the people who benefit from video were the mobile operators and the handset vendors, all the Android-based handset vendors, and the operators. We figured out a plan by which the operator can sell on a [17:38] placed Qik indirectly using per install as well as they used to pay an RA fee to get the service available on their network. Like T-Mobile, Sprint, Verizon, AT&T. These operators were paying us indirectly for having the service launched as part of their broadband initiatives.

Alejandro: Very cool. Let’s talk about the acquisition. Tell us about that moment when Skype knocked on the door, and how did you guys go about fulfilling and completing that acquisition?

Ramu Sunkara: Skype was the dominant player on PC laptop computers to do peer-to-peer video chat and voice calls. Of course, by the time they realized that mobile is the future, they were looking for the right partner that would round up their strategy for mobile. At that time, Skype was working with some of those mobile operators, which were operating Qik. They immediately realized that “Hey, this company called Qik already has gotten to Sprint, T-Mobile, and soon getting into Verizon, and soon they will have a network effect of all their mobile devices using this series called Qik.” That’s the best way to complement what they had on PCs with mobile. Verizon told them that they saw the Qik product and really liked how it was built, and stuff like that, to Skype. Skype came running to us, and the whole initial term sheet and closure happened in a very short while; in three or four weeks, they acquired the company.

Alejandro: Wow.

Ramu Sunkara: Initially, we thought Skype is such a big entity, and we probably cannot withstand their competition. So we said it’s a good fit for Qik and the team to bring that technology to the market through the Skype umbrella, as well as, it would complement what Skype already had being mobile and desktop solution would be complete for Skype.

Read More: Brad Hargreaves On Selling His Business For $400 Million And Now Raising $100 Million To Make Living With Others A Joy

Alejandro: What were the terms of the acquisition? How big was the acquisition?

Ramu Sunkara: Skype acquired the entire company for $150 million in cash, and we transitioned the entire team over to Skype after that acquisition. 

Alejandro: That’s really unbelievable. I know that you had the opportunity, as well, to do some fun plans with your parents. I’m sure that was very fulfilling for you.

Ramu Sunkara: Yeah. I think one of the things which I could do after we got the things done, and we were lucky enough to have some funds. We took our parents on paid trips with us, and they could see some parts of the world with us. It was a good celebration with them. Also, we could show them parts of the world that they hadn’t seen before. It was awesome, and it was also emotional for us.

Alejandro: I can imagine. Now, part of the integration and now being in this next chapter with Skype, one of the things that you saw was that there’s no reason to be scared of larger competitors. In this case, it was really clear and apparent to you. Obviously, now, we’ll talk about it in just a little bit, but you’re taking on a bunch of giants once again, but what was that breakthrough moment where you really got, and you were present to the fact that there was no need to be scared of competing against larger players?

Ramu Sunkara: I think this is like hindsight. When we got acquired by Skype, we were a small company and focused on solving one problem providing a good video experience on mobile devices to have video conversations. We thought Skype was a huge organization with lots of resources to it and a huge install base of a few hundreds of millions of users, and they can easily move into mobile, and they could just kill us instantly. I was so scared that this could happen quickly and when Skype went to mobile. But what I learned secretly after the acquisition and going inside Skype and working there for some time, we realized that even though the company was so large, much larger than Qik was, the large company usually has lots of problems when a new market opens up. The number one problem is, they have a huge install base; they can’t move there quickly. Number two is, the technology and infrastructure they have is also dated because it has evolved in a different marketplace. Now, we’re getting into a new market segment; it’s nearly impossible for them. That’s the reason why they do acquisitions too. Number three is, the team is not hungry enough to go dominate a new segment. Whereas a startup has all three benefits. That is when I decided, “Okay, I don’t think we should be so scared of the competition. What we should be scared about is what’s the daily work we do by ourselves to help us succeed far more than the competition. I firmly believe that a small team, which is focused and executes daily in a systemic manner end up, of course, with the self-confidence will definitely outdo the competition without worrying too much about the competition. Of course, the market-timing should also help you in bringing this innovation to market. That’s what I’m seeing right now as well.

Alejandro: Then, talking about what came after because Skype would end up being acquired by Microsoft, so you would again see the whole acquisition process. Now, you were able to have access to that full cycle of how a company goes from nothing, being literally in your garage, to being under the umbrella of one of the biggest companies in the world. Now that you were exposed to that, and that you knew how to kill it, how to cook it, it was like why would you want to do it for somebody else. Especially once an entrepreneur, always an entrepreneur. Tell us about that moment where you knew that it was time to go at it again.

Ramu Sunkara: Yeah. I think once we joined this large organization after we joined Skype, Skype got acquired by Microsoft subsequently, and Microsoft is a fantastic company. But the urge to innovate and create something that in the future you can think of, it’s harder with a bigger company because they have such a huge install base and existing people have to agree to it and things like that. So, it’s much harder. We decided, “We will take a step and figure out what the future is that we can create, and we’ll enjoy creating it.” That led us to leave Microsoft later and start our new venture, which is Alan AI right now.

Alejandro: So, tell us about Alan AI. How did you come across the problem, and how did you go about bringing it to life?

Ramu Sunkara: A path to Alan AI – what we’re doing at Alan is not a straight line. We were initially building a product for meetings. Then, as we were building a product for meetings, we added voice commands to the product. Our users really liked the voice commands we added to the meeting application we created. We then realized, “We can enable simple voice commands in any application.” Just to give you some perspective, when people use mobile applications today, they need to spend time to get familiar with the functionality of these apps as well as the interface of these apps. And every app is different. Most of us give up using them. Right?

Alejandro: Yeah.

Ramu Sunkara: That’s why 99.9% of mobile applications end up dead. That’s when we saw that there was an opportunity to make all these parts much simpler with voice. That gave us the vision to build out our platform.

Alejandro: Yeah, I know. I was just going to say, tell us about it because we’ve been talking about team and the importance of really putting together a solid team that can weather the storm. In this case, especially based on what you had experienced with your previous company, Qik, what did you do differently, or how did you go about reassembling that initial team?

Ramu Sunkara: The initial team, of course, it should be complementary skill sets in the initial team, and also people who can muster the storm, as I described in my journey with Qik. It was not a straight line there too. We just went a couple of times. Very hard. Initially in the talent, this is where I made sure my co-founder, Andrea, and I, we worked together at Qik, and he has the tenacity, pursuance, and the vision to execute, and he’s also a visionary looking to the future. With him, I could pair up. The one thing we did this time was, the entire founding team is in the same office, the same room. That was not the case with my previous startup, Qik. Some of us were in the U.S., and some of us were in Moscow, Russia. This time, we made sure the founding team is all in the U.S. at the same place. Our reason with Alan is like we want to make every application very simple. You should be able to just open any application; ask it what do you want; it understands exactly what you said and does what you’ve asked. This is the fundamental technology we developed, and we’re bringing to the market right now.

Alejandro: Very cool. For the people that are listening, what ended up being the business model of Alan?

Ramu Sunkara: We are getting good at option right now with Alan in the marketplace. We have several thousands of people signing up and bringing up inapt voices on their applications with themselves. We charge to do this. We plan to offer the service for a number of concurrent users in each application on a paid basis. If you’re an app user concurrently like 100 users, you pay one price; 1,000 users or 10,000 users or 1 million users, we charge them in different price tiers. We’re also learning which monetization model will stick well for us, and we’re going to experiment with that in the next year. That’s where we are. I know we’ll focus more on how did we get an option and get the delightful experience for a few thousands of these applications in the stores.

Alejandro: This is your second rodeo, and we’ve talked about team and surrounding yourself by the right people. But from your last journey, I’m sure that you learned quite a bit about surrounding yourself by the right investors. Obviously, in this case, you guys are at an early stage now as you’re thinking about assembling that team, as well, of investors. What have you learned about investors, and, let’s say, for this journey, who do you think are going to be the ones that you are definitely going to want to bring here as part of it?

Ramu Sunkara: I think that’s a very good question from a capitalization of the company point of view. It’s not only the company’s founding team. The investors, how to get the interior part of this business to flower up. Investors, from our perspective to the people who are coming in, not just with capital, but also with the right motivation to create this business. Why would the world be better, #1, because of this team? Not just making money. I personally think voice makes computing expand the next 10x because it’s easy for anyone to talk to these software products. That’s one: they should be fully believing their vision. The second thing is, they should also have had experiences of building game-changing companies in the past. There are so many companies that they’re opportunity-inversed in it. But we want to see someone who has taken it all the way from ground zero to the next billion-dollar revenue streams. That’s the kind of trade we want to see with them.

Alejandro: Got it. This whole space of being able to use voice, it’s really taken off. You’ve seen the Alexa’s, Google – it’s really unbelievable. But in this case, what you guys are doing is allowing anyone to pull their phone out of their pocket to give a command to the phone, and basically for that application that needs to be giving them what they need, everything right on the spot instead of having to familiarize yourself with the nonsense of apps that sometimes you even give up on. In the scenario in which you were to go to sleep tonight, and you were to wake up in a world five years later where the vision of Alan is fully realized, what would that world look like?

Ramu Sunkara: I think that’s a very good question. Just like in the last ten years, we have seen the mobile landscape take off, and all of us are accustomed with the touch and type experiences. Five years from now, touch and type will be the legacy experience. We will be using just voice; just like we’re having this conversation on this broadcast, we’ll be able to converse with intelligent applications. They’ll talk back to you and assist you to complete whatever you’re doing without even touching the application. This will be not only making a lot more people use the software products; it will improve the engagement and improvement of the current products. It will also make the world safer. For example, it’s not safe to use any of these software products when you’re driving. It will make people more productive. When people are going, and they’re picking things, for example, all those delivery systems are helping people pick up things, so they can just use the voice system and pick up things much faster and do probably two to three times more what they can do today. The world will be much more expanded with a lot more people using technology with voice. The world will be safer, productive, and all will be delivered by just having the ability of having a conversational experience with any software that we touch today.

Alejandro: That’s amazing. Well, I can’t wait because I’m tired of getting familiarized with new apps that it’s just time-sunk. I’m sure that many of the people that are listening are going to be excited when they see Alan fully realized to its best capabilities, and you guys are well on your way, Ramu. What an incredible journey. I’m sure that now if after all of the lessons and the successes, failures, everything that comes in the ups and downs of building a business, there’s one question that I typically ask the guests that come on the show, and that is if you had the chance, Ramu, to go back in time and perhaps have a chat with your younger self, with that younger Ramu that was about to put in the notice in Oracle before launching the first business. Knowing what you know now, if you could go back in time, what would be the one piece of business advice that you would give to the younger Ramu, and why, before launching a business given what you know now?

Ramu Sunkara: Very good question. One piece of advice I would give myself is, make sure you pick the right partners to do the job. It’s not an easy journey. It’s by no means a straight line. This journey has to be done with the right set of people to succeed. And, of course, be prepared. The second thing I would give myself as advice is, one has to be prepared. This is like a marathon. It’s not like a sprint. You need to keep on working toward the end goal, but the stamina you need is much longer than just six months or one year. Those are the two pieces of advice I would give myself: pick the right team and have the stamina to run the long run.

Alejandro: I love it. So, Ramu, for the folks that are listening, what is the best way for them to reach out and say hi?

Ramu Sunkara: They can send me an email: ra**@al**.app – my social media profile is on LinkedIn and also updated, so they can reach either place to me.

Alejandro: Fantastic. What’s the LinkedIn handle.

Ramu Sunkara: Yeah. My LinkedIn profile is my first name and last name. They can easily find me. And my Twitter handle is @ramu. I don’t use Twitter that much. LinkedIn is good.

Alejandro: Fantastic. Well, Ramu, thank you so much for being on the DealMakers show today.

Ramu Sunkara: Thank you, Alejandro, for having me. It was good talking to you.

 

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If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at al*******@pa**************.com.

 

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