Shishir Mehrotra is the CEO and Co-Founder of Coda which creates online documents and the utility of applications into a single new canvas. The company has raised over $60 million from investors like NEA, Kleiner Perkins, Khosla Ventures, Greylock, and General Catalyst. Prior to this, he served as Vice President of Product and Engineering at Youtube.
In this episode you will learn:
- How large organizations such as Google work
- The questions Shishir asks entrepreneurs before funding their startups
- Shishirs #1 piece of advice for aspiring startup founders
- The weird place that he does his best thinking
For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
ACCESS THE PITCH DECK TEMPLATE
About Shishir Mehrotra:
Shishir Mehrotra is the co-founder and CEO of Coda. Shishir was formerly an executive at YouTube, overseeing the product management, engineering and design teams.
Over his 6 years tenure, he helped grow YouTube to the world’s largest video destination, one of Google’s largest and fastest growing businesses, and the platform of choice for a new generation of video creators.
Prior to joining Google, Shishir Mehrotra spent 6 years at Microsoft where he held leadership roles in the Windows, Office, and SQL Server divisions.
Before Microsoft, Shishir Mehrotra was the founding CEO of Centrata (acquired by Lontra), a Kleiner-Perkins funded startup focused on data center management technologies.
Shishir Mehrotra is an MIT graduate, with dual degrees in Computer Science and Mathematics.
Shishir Mehrotra was awarded the Technology Review’s TR35 (“35 innovators under 35”) award in 2012.
Shishir Mehrotra has been an advisor to Spotify since 2015 and joined the board in June 2017.
Connect with Shishir Mehrotra:
* * *
FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone and welcome to the DealMakers show. I’m very excited about the guest that we have today. We’re going to be talking about big, big companies and about some of the big lessons learned from those companies, but also about entrepreneurship. So without further ado, let’s welcome our guest today, Shishir Mehrotra. Welcome to the show today.
Shishir Mehrotra: Thank you, Alejandro.
Alejandro: Originally, you were born in Buffalo. How was life growing up in Buffalo?
Shishir Mehrotra: My parents were both grad students, and so they moved from India. I was born soon after that, and we only spent about nine months in Buffalo, so I have very little memories of Buffalo. We moved to Virginia pretty soon after that.
Alejandro: They found a beautiful place, Virginia, to grow up.
Shishir Mehrotra: It is. Yeah. My father is an academic. Actually, both of my parents are academics. So I grew up in university life, the campus of the University of Virginia. Then Perdue University up in Indiana. Then he got a position at NASA in a little town called York Town in Southeast Virginia. That’s where most of my childhood was.
Alejandro: That’s amazing. So how did you start to develop this love for computers and mathematics?
Shishir Mehrotra: Interesting. So both of my parents are computer scientists, so we always had computers around the house. I was one of the few kids that had a Sun Workstation at home, which was pretty unheard-of at the time. I ended up building things for fun. My mom was running a business, and so I would end up building things for her as well. Although interestingly, like many kids, I thought whatever my parents did, that’s exactly what I don’t want to do. So I was pretty convinced. I went through basically every other career possible, and there was a phase where I thought I was going to be a lawyer. Then I was sure I was going to be a doctor. My first job was to be a soccer referee. So I had a future in athletics at some point. Then when I went to college, I was deciding on my major, and for some reason, at that moment I thought, “You know. This computer thing is actually sounding more interesting to me than I thought.” I called my dad, and I said, “I’m thinking about declaring to major in computer science.” Interestingly, he was very upset about it. He said, “No, no. You can’t do that.” In fact, he was stronger about it. He said, “If you do that, I’m not paying for college.” I said, “Really? Why?” He said he had a simple rule. He said, “I’m paying a lot of money.” I went to MIT. It’s a pretty expensive school. He said, “I’m paying a lot of money for you to go to college, and I’m not having you learn some topic where all the topics are new.” Basically, he thought of computer science as a vocational profession. So he said, “You have to major in a subject where the books are at least 50 years old.” He made me major in math. I ended up getting both degrees in math and a computer science degree. But from his perspective, I’m a math major who happened to do computer science.
Alejandro: That’s amazing. So basically, we’re talking ’96 to 2000. 2000 is when you graduated. Here you are. Your parents are in academia. It seems like probably the easier path is going to work for someone else, but then you go out, and you launch your first company. Is that right?
Shishir Mehrotra: Yeah. That’s right. So my family is super academic. My father’s a professor. My grandfather, grandmother, aunt all of them were professors. I joined what was the obvious thing to do; I joined the grad school at MIT and was working toward go get your Master’s. Go get your Ph.D. I had this friend, [05:06]. David had an idea. At first, he described it to me as a good research thesis. So we went and convinced a couple of professors to sponsor us and started working on this idea. But he actually had a completely different thing in mind. He said, “Why don’t we apply to this business model competition. MIT had a competition that at the time was called the 50K Entrepreneurship Competition. It’s now called the 100K because it’s 20 years of inflation. We ended up submitting this idea that was really a pretty academic geeky idea. This was right after do you remember the company Akamai? It had just come out and was founded by a bunch of MIT professors and grad students. We had a research idea that was based on a similar idea of how to do distributed computing with no coordination so you could distribute data across a network without having to have a central coordinator. At the time, the industry people all called this the peer-to-peer (P2P) generation. That was where the original idea focused. We submitted it to this business plan competition even though we were mostly working on it as a grad thesis. That turned out to be more interesting than we thought. We ended up being runners-up in the competition, got a lot of different attention, and before we knew it, we were entrepreneurs so not really directly planned.
Alejandro: Wow. Were your parents happy about that?
Shishir Mehrotra: Initially, no. MIT had an interesting program where you technically go on sabbatical for I think they give you seven years or ten years or something like that. For a long time, I had to tell my parents that I’m still in grad school. I’m just on sabbatical. I really had no intention of going back. The company was fairly interesting. The person who led the first financing was a pretty well-known venture capitalist, Vinod Khosla. That kind of helped with my parents as well – a prominent person that’s funding the company.
Alejandro: This was the time Vinod was at Kleiner?
Shishir Mehrotra: Vinod was at Kleiner. Vinod had an interesting model at the time. He basically funded one major company a year. Centrata was his 2000 investment. At the time, Vinod had this idea he’d been working on for a large utility computing platform, which in today’s speak is probably closest to what Amazon has built with Amazon Web Services, or you can look at Microsoft Azure, and the Google Cloud. He saw our business plan, and that’s what sparked him. I had aligned, somewhere in the opening paragraph, it said, “We’re entering this generation of Utility Computing where anybody can buy the computing resources they need in a similar way to how they buy water and electricity. We think the start of that is the set of algorithms we’d been working on for how to distribute data and processing across networks and machines. That got him interested in the project. This is back in 2000. It’s interesting. Whenever you start a company, you think you have this unique idea, and then all of the sudden all these people emerge that are working on similar things. So there were a bunch of companies in that same space. Probably the most famous was a company called LoudCloud that was founded by Marc Andreessen and Ben Horowitz that eventually became something called Opsware. They were one of our top competitors. All of us were way ahead of our time. This was the time when we were all trying to build utility computing but without virtual machines. You couldn’t actually move computing across machines yet. So I think this was a classic case of a great idea, terrible timing. All those companies either went bankrupt or had mediocre exits. But I got to learn a lot in the process.
Alejandro: Got it. Let me ask you this. What ended up being the outcome of this business?
Shishir Mehrotra: It’s an interesting story. Our first client for Centrata was this company, Quest Communications, which was a big Telco. This was back with AT&T had been broken up into lots of Telcos. Since then, it’s all been brought back together. The Quest covered the Southwest region based out of Denver. Our first deal, as they were running a big hosting operation where they rented out a data center, data center space, racks, computers, storage, and so on to people, and we built the software to manage that. The first deal with them is actually a super fun story how we got the deal, which we can get to later if you like. But it as a 12-million-dollar deal, which for a company of 10 to 15 people was an enormous amount of money. One of the things that I didn’t realize at the time was we’re super proud of it and managed to raise another round of financing based on it and so on. One of the things I didn’t realize is that when your first customer pays you 10 or 12 million dollars, they basically own you. So I got an apartment in Denver. I was going down there two days a week and attending staff meetings at Quest. Basically, the company became a consulting company. Every deal we did was a multi-million-dollar deal. They bought our software, but they were really buying us as services from us, which at the time didn’t seem like a terrible thing because we were bringing in a lot of revenue, but from a company growth perspective, it meant that you scaled like a consulting business and from an investment evaluation perspective it meant you were valued by the consulting business. So basically, the company ended up getting sold to another consulting business, and they got sold to another consulting business. Some part in the process, I lost track, but that was the outcome.
Alejandro: How much money was raised in total for this business before the transaction?
Shishir Mehrotra: Something like 40 million dollars.
Alejandro: 40 million. That’s a lot of money for building a consulting business.
Shishir Mehrotra: It is. Yeah. You have to remember that this was before SaaS existed. So your ability to build software and deploy it to people at scale didn’t really happen. You would build a piece of software, and then you would not only have to deploy it, you’d be like we didn’t solve servers. You’d show up and from hardware to software to consulting to migration to all of that was done by one company. So even if you had a pretty interesting piece of software, the deployment of that was pretty intense. I think once Salesforce started to make that model clearer, I think we’ve seen a very different generation of enterprise software businesses.
Alejandro: Got it. Now what we understand is that you go and invest for a wheel that is turning on its own rather than what it used to be before, maybe back then where you’re investing for more people to turn the wheel faster.
Shishir Mehrotra: That’s right. As we get to talking about Coda, so I can talk more about my observations on this market, but at the time, what you were actually buying from these big enterprise software companies wasn’t a packaged piece of software. If you go look at how people deployed SAP or Oracle or so on, every single deployment was completely different. When SaaS came along, it meant that I’m adopting one model that works across different companies, and that part of the value proposition was that it wasn’t significantly customized just to you. In fact, I think we’re tilting back now with the whole market moving back towards people customizing software and what we call the Maker Generation. But at the time, we were sort of in the opposite world, and people had these big consulting businesses.
Alejandro: We’ll talk about Coda in a bit, but before we get there, there are two stages in your professional career that obviously were big ones and that have probably shaped the professional that you are today or the entrepreneur that you are today. You had the chance to work at two of the most respected companies when it comes to tech in the world. One is Microsoft, and the other one is Google. But your first one was Microsoft. How was that switch for you from here you are an entrepreneur, and all the sudden you’ve got to go work for someone else?
Shishir Mehrotra: It’s probably worth pointing out the order wasn’t obvious. Centrata was gradually becoming a consulting company. I wasn’t enjoying it as much. So I had decided to move on. The board was super supportive. I ended up staying on the board for years afterward. My primary investors, Kleiner Perkins, [13:56] and so on were also very supportive, and they said, “Okay, fine. If you’re not going to work on Centrata, why don’t you work on something else in the Kleiner portfolio?” I said, “Okay. Where would you like me to go?” They said, “Well, we have this really interesting small company called Google. Why don’t you go talk to them?” So I went over to talk to Google and actually if things had played out a little bit differently I probably would have joined Google first, and I don’t know if I would have ever ended up at Microsoft. I’m a pretty active investor now. I think I make reasonable bets, but at the time, I’ll say I underestimated Google’s potential, and I ended up turning them down.
Alejandro: That was 2002? Right?
Shishir Mehrotra: Yeah.
Shishir Mehrotra: Late 2001 to early 2002.
Alejandro: So we’re talking about Google at probably 50 cents a share versus over a thousand like $1,200 a share today.
Shishir Mehrotra: I don’t know in share price.
Shishir Mehrotra: My wife remembers well the amount in that process. Yeah, in terms of company stage, this was before AdWords. There were three product managers in the company. Their names were Susan, Saeed, and Marissa. Jonathan Rosenberg wanted me to come be the fourth. It would have been a great journey. Obviously, I ended back at Google years later. I think everything in life happens for a good reason, and I ended up with a lot of learning in that experience. The reason I ended up at Microsoft was I had this old boss who had been an intern at Microsoft while I was in college, and I had this old boss that was working on this project that I was just really excited about. He called me up, and he said, “Hey, we’re going to do this thing. We are going to turn Office into a platform for business applications. It was interesting because Centrata had become a big business application. That’s what we were building, the enterprise application for managing data centers. I was just watching how this industry was evolving. It seemed like everywhere I turned, people were building up these business applications, but what they were really competing with were documents and spreadsheets. That was really the heart of we walked into Quest with this big 12-million-dollar deal and what we migrated them off of was a big giant spreadsheet. For me, this was really obvious opportunities if Microsoft could go turn Office into a platform for business applications, then this would be quite a huge opportunity. So I got pitched this as I ended up joining this team. Interestingly, my skip-level boss in this project was a guy named Satya Nadella, who now runs Microsoft, of course. This was much earlier in Satya’s career as well. I showed up at Microsoft to go work on turning Office into a business platform. Little did I know and one of my lessons of running you said I’ve gotten to work on big companies and small companies. Actually, I’d describe it as I’ve gotten to work on both big companies, small companies, and small companies within big companies. This was a small company within a big company, and the project got killed within nine months, which is one of my early learnings of how things work at some of these larger places. But I ended up switching to a couple of different teams at Microsoft. After moving on from Office, I worked on Windows, and then I worked on SQL Server. I ended up having a great career out of it.
Alejandro: So were you able to work on some of those projects directly with Satya Nadella?
Shishir Mehrotra: Yes. That first project, we worked very closely, although that one ended up not working. The next one I worked on, I ended up working on a project called 1FS, which I’m not sure how much your listeners will be familiar with this project, but it was one of the hot projects at Microsoft back in 2003-2004. It was meant to be the new backbone for a new version of Windows. I think when Bill Gates and Steve Ballmer get interviewed and get asked about some of their biggest mistakes or regrets, they almost always end up talking about this project. It was a pretty fantastic failure. We ended up building a new file system for Windows that didn’t end up shipping but had this interesting side effect of bringing together an amazing group of people. I like to describe it sort of similarly to there are a number of great projects in history which although the project didn’t succeed, it ended up bringing people together that were very high caliber and end up staying together. Actually, a lot of my co-founder here at Coda, we went to school together, but then worked together on 1FS, my head of engineering here worked on 1FS. I ended up having a great run with that. Then I worked on SQL Server, which is the database business. SQL Server is one of the, I think, underappreciated Microsoft successes. I mean, this was an industry Microsoft had no business in this industry. Microsoft was a climbing computing company, built Windows and Office. The company Oracle had already run away with the database market. It was sort of no place for Microsoft. This group of people turned this into a really huge business for Microsoft and became the heart of what is now the Azure strategy for Microsoft. I ended up running what was called program management, what most other companies call product management for that database business.
Alejandro: What a great run on Microsoft. We’re talking about going through your seventh year. You worked for like six years and a little bit longer than that, but why did you decide to go to Google to like the biggest competitor?
Shishir Mehrotra: To be clear, Google wasn’t the biggest competitor at the time. At the time, in fact, Microsoft was very focused on Oracle Linux. Google was probably heavily underestimated. It started with a personal story. While all the rest of my career was happening, on the personal side, I ended up marrying my college sweetheart, Anjuli. She’s a physician, so I had to convince her to move out to Seattle and do her residency. Then I convinced her to stay and do her fellowship there. Basically, she was running out of school to go to. So she said, “All right. You need to pick a place to live.” Her statement was, “I can be a doctor anywhere, but you have to pick one place because I don’t want to move around.” I said, “Well if I’m going to be in the tech industry, and I have to pick one place to live, I’m going to pick Silicon Valley.” That started the process, and I started coming down every week. I’d come down for a day and just meet people. When I had gone to Microsoft, all of my advisors had told me, “Go to Microsoft. You started this company. Go learn some of the basics of leadership, product management, business, organization, and so on. Then come back and start another company. I was pretty sure I was going to start a company again. I was coming down to the Valley. I had my list of ideas, and I was pitching different co-founders and venture capitalists and so on. Then the guy who had tried to hire me at Google six years earlier, Jonathan Rosenberg was very persistent. So Jonathan had called me and said, “I hear you’re thinking about leaving Microsoft. Why don’t you come join Google?” My first reaction was, “Well, that’s not really what I have in mind. I’ve been working at this big company for a while. There are a lot of amazing things I’ve learned, but I’m ready to go back to starting something.” Jonathan gave me what turned out to be it didn’t seem very believable at the time, but what was a pretty true pitch. He said, “No, no. Google is not really that big.” You know, Google in 2007 “Google is basically where Microsoft was in the mid-’90s. We have so much more room to grow, and there are so many more businesses to be built. You should come and talk to us.” That actually did turn out to be quite true. So I showed up and met a bunch of the different people at Google. I spent time with all the different great leaders that have been accumulated there. Initially, I still felt like it wasn’t the right place to go. Then something interesting happened. I ended up in Jonathan’s office at the end of the day. Sergei and Larry started to pitch me all the different things they were working on. Chrome was not out yet, and Android wasn’t out yet, but I was seeing where they were headed with these things. Jonathan made the statement to me at the end of the day. He said, “What do you think?” I said, “Well, it’s interesting, but it still feels like a big company to me. I think I’m going to go work on one of my startup ideas.” He said, “No, you’re not getting it. We’ve got all these new things coming, but even in our core business we’re nowhere near where we could be, and we have all these advertisers, but all the ad money still gets spent on television advertisements, and nobody even watches television advertisements.” Interestingly enough, that statement, for me, I didn’t know anything about advertising. I had never bought or sold an ad in my lifetime. So for me, that was completely surprising. I said, “What do you mean? All the ad money goes to television? Why is that?” I ended up getting on a plane after this interview. I have this weird habit that I often do some of my best thinking on planes. Actually, there was a period in my career where I would intentionally accept speaking engagements and so on in places far away just so I would get quiet plane time. Then the airplane industry added WIFI to planes and completely ruined it. So I get on this plane. I take out a sheet of paper, and this was February 2008. This was a week or two after the Super Bowl. The Patriots had just lost to the Giants in one of the most epic Super Bowl matches ever. I had hosted the Super Bowl party. I was sitting there thinking about this, and I said, “I don’t understand. He said that all the money gets spent on television ads and nobody even watches television ads, but I just hosted a Super Bowl party and all the people showed up, and while the game was on people were talking. When the ads came on, everybody stayed quiet and watched the ads, and sometimes, they’d make me rewind and watch the ads again. So there’s something different about the Super Bowl.” I ended up taking this sheet of paper, and I wrote down, and the title was What would it take to make television feel like the Super Bowl every day? I got home. It was late. My wife was already asleep, so I put it away. I woke up the next morning. I wrote Jonathan, and I said, “Hey, you said something in the middle of your conversation. You probably don’t remember, but it stuck with me. I ended up writing something about that, about what I think I would do if I were focused on improving advertising. I’m going to send it to you, and if you’re interested I’m sure you’ve already thought about it, but if you’re interested, feel free to go work on this. I don’t think Im coming to Google, but maybe you can help fix television.” He happened to be up, and he called me back right away, and he said the heart of the idea was what ended up becoming in the advertising space known as TrueView, so that’s primarily the ad form that drives YouTube. It’s the skippable ad format. The core idea was really simple. It was why don’t you make it so that ads are skippable and only charge advertisers when the ad isn’t skipped. That way, you get a signal on whether the ad is any good. It kind of works just like AdWords. In my mind, it’s so obvious for Google to go do this because it’s so in keeping with the Google ethos on advertising. Jonathan said, “Actually, you may be surprised to hear this, but we actually don’t have anybody working on this. Why don’t you come and do it? You can think about it like a startup and that way you can achieve your entrepreneurial objectives, and you can go work on this fun, new idea and learn a new market.” So that’s how Jonathan convinced me to join Google.
Alejandro: That’s amazing. And then the rest is history because you were one of the leaders as well, driving YouTube. Is that right?
Shishir Mehrotra: Yeah. It’s a long story of how that ended up happening, but basically, I started working on a project in what was then called Interactive Television. That ended up becoming Google TV and then Chromecast. That’s now the Google Home team. But pretty soon afterward, we reorganized things a bit. I was working for a woman named Susan Majeski who actually now runs YouTube, an interesting circle. Eric Schmidt was running Google at the time and asked Susan, “I need someone to apply their skills to help figure out how to turn this acquisition, this company YouTube into a productive business. So Susan turned to me and said, “When you joined, you had written this paper, and the current path you’re on is going to be a very long way to execute on this new ad strategy. Why don’t you go try it at YouTube?” So she encouraged me to go over there, and that turned into I spent about six years working on YouTube. We spent the first couple of years working primarily on the business side. In terms of context for your listeners, it’s easy to forget this, but in 2008, YouTube was a laughing stock of the industry. I still remember my first meeting with our CFO, Patrick Pichette is the new CFO for Google. I showed up, and Patrick said, “I don’t understand this business at all.” He had three charts in front of him. The first chart showed how much money we were losing per year. It was hundreds of millions of dollars. It was a lot of money we were losing per year. I mean, they had just bought the company for 1.6 billion dollars, and we were still losing hundreds of millions of dollars per year. The second chart showed how much money we lost per view. Every single time somebody loaded YouTube and watched a video, we were losing money. Even that number was big. A third chart showed how views were growing. It’s like the only chart that looked positive where views were growing like a freaking rocket ship. So he looked at it and said, “This is like the worst business on the planet. You’re losing a bunch of money. You lose money on every single view, and views are growing like crazy. Like this is never going to end. Why don’t we sell this?” So his question in this review was, “Who else is an interested buyer in YouTube? Do you think they’d still be interested?” I think it was sort of half-joking and ended up, obviously not happening, but it was a way of putting us on notice. You’ve got to turn this thing into a real business. Everyone around us thought that YouTube was Google’s first bad mistake. Everything Google had touched up till then had been complete gold. Maybe this is the first one that’s not going to work. So we spent the first two years primarily working on that. How do we turn this into a real business? We ended up rethinking how we thought about traffic, how we thought about partnerships, how we thought about advertising, and so on. Then about 2010, that turned, and it became more obvious that YouTube is actually a pretty good business. Then we ended up spending the next four years on really turning it into growing users and turning it into more of what I thought the real promise of YouTube was, and that was to turn it into the next generation of video.
Alejandro: Really cool. So at what point does the idea of Coda really come to mind because you leave Google in May 2014, and in June you’re already up and running with Coda. What was the incubation process of Coda?
Shishir Mehrotra: It’s an interesting story because YouTube I had this old boss who used to describe to me that every business goes through three phases. First, you’re a joke, and nobody believes in you. Then you’re a threat, and everybody’s scared of you. And then you’re obvious, and everybody just assumes that what you’re going to do is going to work. I like to describe my YouTube journey was I got to go through all three phases. When I got to YouTube, we were a complete joke, and nobody really believed in us and thought we were a big mistake. Then we became a threat. There’s a really interesting period where everything we tried, everybody else out there was trying to mimic or was coming after it and so on. Basically, when we get to 2012, 2013, 2014, we switched into obvious mode. I think it’s the mode that YouTube operates in now where it’s just taken for granted that YouTube is great property and a big business and it’s going to keep growing and scaling. The tone of the types of people that I think are appropriate to work on businesses at that stage are very different, and it’s a different type of fund. Because what happened at that stage, at the time when it was in the joke and threat phase, we could do one small thing. We were doing so much wrong; if we got one thing right, everybody wanted to talk about it. It was like every YouTube success story was talked about everywhere. You can probably see it now that fortunately, most of the scrutiny on YouTube tends to be poking at things that are not going well. That was starting to change the tone; the tone of the business was changing. It was changing also inside of Google, and so towards the end of 2013, I got my itch to go do something different. We went and talked to my boss, and I said, “We’re running YouTube in this kind of interesting way where basically myself and a guy named Robert Kinsel had divided up responsibility for day-to-day ownership of YouTube. I was running the part engineering user experience sides, and Robert ran sales content and marketing. I went to Sawler, and I said, “I’d like to think about doing something different. I’ve been at this for a while. Let’s think about restructuring this. Maybe we could find a different way to do this.”Sawler was also ready to step aside. In that process, Larry asked Susan to come over and take over and to restructure YouTube. So as part of that process, I said, “That sounds great. I’m going to go work on something else.” At the time, I thought I would end up doing something else at Google. I actually spent four or five months as an advisor to YouTube, helping out the Google team, and working on what I thought was going to be another, you know, next stack at Google. Then I had this friend, this guy Alex who ended up being my co-founder at Coda. Alex and I have a lot of history together. He and I went to college together. He’s actually one of the early engineers on Centrata. He was only a freshman in college, but we ended up convincing him to drop out of college, to come help us out. He thankfully ended up going back and getting his degree, so his mom still talks to me. Alex and I have a career where he worked with me on Microsoft, and then he started a company which ended up getting bought by Google. He briefly worked on YouTube as well. He had left and was starting a company, and thankfully, that company wasn’t going particularly well. So he had asked me for some advice. “I’ve started another thing. What should I work on?” I had some free time on my hands, and so I was helping him brainstorm ideas. I had a list of ideas that I thought were interesting. I told him, “Look. I don’t think I’m going to start a company. I’m running a large division. I’ve gotten quite used to dealing with problems at a different scale. But I’m happy to help. I’m happy to invest. I’m happy to advise. I’m happy to help you construct a team, whatever it might be, especially if you do any ideas on this list. So originally, I was not intending to start this company. Basically, one day one of us wrote on the board this statement that what if applications could be completely different, and what if the next document platform allowed you to build docs that were as powerful as apps? When that statement got written and go framed, it just stuck with me. I always like to tell people I have people come to me all the time and say, “I want to start a company.” I always ask them two questions. I said, “Do you have an idea that you can’t imagine not working on, and do you have a person or teammate that you can’t imagine not working with?” Usually, I ask them that as a way to discourage them. I think a lot of people start companies for the wrong reasons. Usually, one of those two answers is, “No.” They’ll say, “Well, I have this person I want to work with.” And I’ll say, “Okay, what do you want to work on?” And they’ll say, “Well, I don’t know yet.” I’ll say, “That’s probably not so good.” Or they’ll say it the other way around, “I’ve got this idea.” I’d say, “Okay, who have you convinced to work with you?” And they say, “I haven’t managed to convince even one person yet.” And so I’ll say, “Well, that’s probably not good either.” But I found myself in the interesting situation where I didn’t think starting a company was the right thing for me. So I had a really high bar for doing it, but I had this idea that I just couldn’t get out of my head. I could picture this product. I knew it should exist. And I had this person that I could work with who was like perfect, and so I kind of ended up in this situation where I’d been giving this advice to so many people that when you answer these two questions, “Yes,” you have to start a company. I found myself saying, “Oh, I probably should do this.” So that’s how Coda got started.
Alejandro: I think thinking about Coda and really getting this thing out to the world, you’re like really heavy on I would say like a product guy as well. So how were you thinking about product/market fit and what needed to happen for you guys to understand that you had hit the nerve? What did it take to hit that nerve?
Shishir Mehrotra: It’s a good question. Maybe I’ll take a step back from this. I think that most great businesses start with a simple thesis, and I think if you just go back through history and sometimes, the thesis may be far from obvious. For YouTube, the thesis was that online video is going to do to cable what cable did to broadcast. If you go back the first time I made that statement maybe I’ll just give you a couple of examples. Like Gmail, the thesis was you should never have to delete email. Chrome, the thesis was that the web can be ten times as fast as people expect. And every one of these businesses had a one-eye nugget of an idea that propelled the rest of the products. For YouTube, interestingly, we made the statement. I think the first time I made that statement was I gave this talk in 2009. I was at a conference in New York, and I was only a few months into the job, but I was asked to give a talk how to think about YouTube. At the time, people thought about YouTube as mostly compared to a social network, so we were thought of as our primary competitors were Myspace and Flicker, which may sound crazy now. So I gave the speech, and I said, “Online video’s going to do to cable what cable did to broadcast, and we’re going to go from three channels to 300 channels to 3 million channels. Now when I make that statement, people think that’s kind of obvious. That’s exactly what YouTube has become, but at the time, that was really far from obvious. People looked at me like I was nuts. “You should be talking about Myspace and Flicker. Why are you talking about ESPN and Disney? That doesn’t seem like the right place to be.” So similarly, for Coda, we needed to make sure in my mind, I was only interested in starting a business if I could identify the thesis very crisply and if I could picture why that was going to happen. So Coda really comes out of two primary observations of the world. One is that we think the world runs on docs, not apps. That everywhere we look, every team we look at, every household, every person, we’ll ask them what they use to run their lives. They’ll name x, y, z pieces of software, and here’s this inventory tracker, and here’s this to-do list thing, and here’s this task-management thing, or CRM tool, or so on. But if you actually watch what they do all day, they’re in documents and spreadsheets. This observation, you can probably tell from my previous record, something had been with me for 20 years, and this is one of the main things I learned out of Centrata was that for every enterprise application out there every person running on an enterprise application, they’re literally 99 people doing the same thing with a spreadsheet. So this was observation #1 of Coda. Then observation #2 of Coda is that those tools, those documents, spreadsheets, and so on haven’t fundamentally changed in 40 years. If you were to go back we have this running joke at the company that if Austin Powers were to pop out of his freezing chamber and show up in the world today, he wouldn’t know what clothes to wear or what music to listen to, but he would absolutely know how to work a document, a spreadsheet, and a presentation because none of the metaphors have changed in almost 40 years. From our perspective, you put those two things together, and it’s a little bit crazy. We’ve got this set of tools, documents, spreadsheets, presentations that we’re using to run our lives, to run our teams, to run our companies that we spend all day in front of, and the metaphors in these products haven’t changed in 40 years. Every other product around us is completely different. So when we started Coda, this was the heart of the thesis is that we think that anybody should be able to make a doc as powerful as an app. To put it back in the same terminology, if you think about the YouTube statement is: online video’s going to do to cable what cable did to broadcast in that process of what YouTube did was it created a completely different generation of makers. It allowed a set of people out there who previously would have to be a video maker in the 1980s, 1990s, early 2000s you had to live in LA. You had to find a way to work your way up at a studio. Like this was the path. YouTube came out and embraced that anybody can go and create video. I think that same phenomenon is happening in every industry. We’re seeing what Etsy is doing to products. It’s allowing anybody to turn their crafts into a business. Or even in the gaming industry where you get why people pull out things like Fortnite, Minecraft. What they’re learning is “I can shape the world around me.” So, that’s the heart of the thesis. The Coda is I call it the Maker’s Generation that makers are going to reshape software in much the same way that YouTube reshaped video. So that was really the impetus. Now if you start developing the product, you keep that in mind. You say, “All right. The real test here is” we use this phrase a lot for Coda: you can build a doc as powerful as an app. The real test here is on both sides of that. Can we build something that feels as familiar as a doc, and yet allows you to build something that’s as powerful as an app? To be honest, it took us probably three years before I felt like we had an NVP that was anywhere close to meeting that promise.
Alejandro: Right. Wow. How did you guys end up monetizing this, or how are you thinking about monetization?
Shishir Mehrotra: The product is currently free. This is part of my philosophy for building products like these is, pick your top risk. What is the real risk of this thesis, this idea, that these set of makers can turn their docs into apps? Take that top risk and make sure you put that first. So in my mind, we did something pretty non-traditional. I ran the company for the first three years in stealth mode. So we didn’t tell anybody what we were working on. A lot of that was because I wanted the company to have complete focus on the products that don’t get distracted by the press, or my investors, or so on. Let’s just focus in on what does it take to make a new type of document where people can build docs as powerful as apps? So we focused entirely on that. Now we launched our first beta about a year ago. Then we finally launched Coda 1.0 just two months ago. So we’re pretty early in our process. At this point, it seems obvious that we’re onto something. We now have tens of thousands of users all over the world; 5,000 different businesses run on Coda. So there are lots of different evidence now that we’re at that point, but it shouldn’t be taken for granted how much work went into, and how much failure along the way to have people try every part of the product and give us feedback. In the next phase, we’ll work on how we turn that from a product into a business. Thankfully, in this market, I don’t think that’s actually the biggest risk. I think that we’re a product that our users tell us is very valuable to them, and they’re quite willing to pay for it. But our first question is, can you build something for people that is as familiar as a document and as powerful as an application?
Alejandro: Got it. One of the things that I saw that I was really impressed is even though you guys are early in getting this out there and scaling and growing I think that you guys have really done incredibly well on the financing side because how much capital have you guys raised to date?
Shishir Mehrotra: We’ve raised about 60 million dollars.
Alejandro: 60 million, and from unbelievable people. At the end of the day, it’s who you are surrounded by. We’re talking about NEA, Greylock, with Reid Hoffman himself, General Catalyst, Khosla Ventures, Kleiner Perkins. How did you get these people involved, Shishir?
Shishir Mehrotra: I get asked about this a lot, and I’m happy to tell my story. I’m not totally sure how repeatable it is.
Alejandro: Let’s hear it because this is like literally, I want to create a movie and you go to Hollywood, and you get like the Steven Spielbergs of the world just being there with you. It’s unbelievable.
Shishir Mehrotra: I think there are a few elements to this. I think, probably, the first observation is that like any other relationship, relationships are built over long periods of time. Just about everybody who invests in the company is someone who I’ve worked with or helped or co-invested with or so on over the years. I think one big piece of it is when you come around, and you’re ready to start your company, and you have a new idea, having some background with the investors is super helpful. I think that’s probably the first piece of it. If I think about why my own investment criteria when people ask me for investment, I generally ask three questions. I say, “Is this a team that doesn’t know how not to succeed in a space where winning matters.” And the third criteria is, “Do they have a secret that is a good enough secret to start with?” Inevitably the secret they start with isn’t the one that’s going to matter eventually. But is it good enough to get started? I think in our case, as we were starting the company, it helped that I had some relationships already in place with people and just about everybody had done something in the past. I think the early team had a lot of credibility. It started businesses, had built products, and in unexpected places, things from scratch, scaling things that were already at scale, and the space where winning matters. I think this is a space where there’s little doubt that it’s a big opportunity. If you can really shape how people think about documents or applications we’re at the intersection of the two. That’s a massive space and massive opportunity ignoring just the business potential, just a human potential of how many people you can touch and how much impact you can have. There’s the idea of reframing it around this Maker Generation around this idea that software, is it going through a revival? Kind of the same statement when I talked about for YouTube that online video’s going to do to cable what cable did to broadcast. It didn’t seem at all obvious to people, but now it’s really obvious for that generation. Same thing here in software. It’s like now when I talk about the Maker Generation software, and people have applied lots of different labels to it, I think for the most part people nod along with me and say, “Okay. That does seem obvious. But when we were starting, it wasn’t quite obvious.” I think we did a good job telling that story. The third piece of it is like a good secret to start with I mean, I think the heart of that was where you could just picture the product. Interestingly, the original pitch deck for Coda the company started with the name Krypton by the way. That was our code name. I have a weird superhero obsession, so it’s framed around Superman. The original pitch was basically a product spec. It was 69 slides of Mox. This is what I pictured this product could feel like. I think the investors at that stage mostly looked at it and said, “Okay. Here’s this credible person who seems to have managed to create reasonable outcomes in unlikely spaces. He’s got a pretty convincing story about why this market is already big and why it’s going to be much, much larger. He seems to be able to picture a way to get through it that is interesting.” I think you put those things together and the company was quite fundable. I ended up being able to raise money somewhat easily for the company.
Alejandro: Got it. So I want to ask you this then. Typically, when I have guests on the show, I ask them a very similar question, and I guess, in this case, the question I have for you is, you’ve come around building products and building companies. It’s a really interesting journey, and I’m sure you’ve learned a lot. If I had to ask you the question of what would you do if you had the chance to speak with your younger self, what would you tell your younger self if you had the change to give yourself one piece of business advice before launching a business, what would that piece of advice be and why, Shishir?
Shishir Mehrotra: That’s a very deep question. One piece of advice. Two come to mind. One I’ve already talked about, so I’ll sort of skip past that, but one I would generally tell people is, be crisp on your thesis. What is your unique observation of the world that when reduced to its purest form is an inevitability that you can bet on? If I put that one aside, and if I had to answer that question super honestly, I think that most entrepreneurs I do a speaker series here as well where I host. I have people come by and talk to the company, and I often ask a question like that as well, and I’d say most entrepreneurs if they’re being truly honest about what it takes to be successful and where their mistakes generally tend to happen, it tends not to be strategy, fundraising, products; it tends to be people. If I had to give advice to myself or to new entrepreneurs and so on, that focus on people is really important, and it manifests itself in all sorts of ways. It means investing in relationships that you may not think matter yet. It’s sort of the golden rule and making sure that you invest in relationships that helping others succeed will end up coming around in unexpected ways. It means surrounding yourself with amazing people at all times and dealing with situations where you’re not surrounded by amazing people very quickly. If I depict basically every part of my career, if I had to pick a mistake to focus in on, it was almost always a hiring mistake or a firing mistake of not dealing with the problem fast enough. So that’s probably where I would focus.
Alejandro: I hear you. Without a doubt, relationships is one of the things I come across quite a bit with the people I speak with, so I agree that building those early-on, without even knowing they’re going to lead to anything. It’s all about relationships. So I’m fully right there with you, Shishir. So for the people that are listening, what is the best way to reach out and say hi to you?
Shishir Mehrotra: You can just email me. I’m easy to find. I’m firstname.lastname@example.org or if it’s more of a personal request, I’m at email@example.com
Alejandro: Amazing. Well, Shishir, thank you so much for being on the DealMakers show.
Shishir Mehrotra: Okay. Thank you very much.
* * *
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 firstname.lastname@example.org.