By Angel Mehta, Managing Director, Sterling-Hoffman Executive Search
Angel Mehta: There has been some buzz about the application of instant messaging within corporate environments for a while now, but why don't we start with a synopsis of the business problem that Vayusphere is solving for customers?
Pushpendra Mohta: There are environments in which the cost of delayed response is high…for example, the financial industry or the service provider industry where events that effect revenue need to be responded to by distributed employees immediately. What we do is use instant messaging in very interesting ways to reduce those costs of delayed response. Applications can find people, interrupt them, capture responses from them, and feed the responses back into the process. In a nutshell, that's it.
Angel Mehta: Give me an example of a scenario that you're referring to when you talk about environments where the cost of delayed response is high.
Pushpendra Mohta: So in the telecom environment, if the network is down, there is a cost related to the down time in that you are not generating revenue when your network is down. You want to be able to find the right set of employees - right away - who can respond to the problem and get the network back online - and do it immediately. The problem is, employees tend to be distributed and the challenge for an enterprise is finding the most qualified, available person and alerting them to the fact that they need to immediately respond to the problem.
What we do is use instant messaging to be able to track these people - employees, in this case - and notify them instantly about what's going on. It gives them an opportunity to close the loop by providing a response. A similar example in the financial industry would be say, the Euro moving against the dollar, and you've got to take a hedging position against it because your revenues are dollar denominated. You want to be able to find the right corporate treasurer who immediately provides a response to this event. So it's just basically about reducing minutes to seconds in the response time.
Angel Mehta: Or rather, reducing response time to minutes and seconds…I assume that the target buyer is whoever owns or is responsible for service levels. But if you were to take a survey or a census of that market, how many do you think would say today that some sort of instant response application is at the top of their agenda as far as IT projects go?
Pushpendra Mohta: I think it's increasingly on the minds of people who are trying to eliminate costs and trying to eliminate lost revenue opportunities at the same time. It's not everyone, but certainly it's on the top of the minds of people in two huge markets: financial services and the service provider sector. These are the early adopters in the Instant Messaging market.
Angel Mehta: So when you approach potential customers today, how much of the sales process is educating versus simply differentiating Vayusphere from its competitors?
Pushpendra Mohta: The problem that what we're trying solve is an age-old problem - it's nothing new. We are trying to take time out of a particular business process. So that's part of the ROI requirement of selling. The education process is typically around the use of instant messaging as a technology choice to solve this problem, so there's a bit of education involved there because instant messaging traditionally has been looked upon as a person-to-person chat application. What we are doing is enabling it to do application-to-people messaging as well as people-to-application messaging so there's a bit of evangelizing involved in demonstrating the true value of presence and awareness integration in enterprise messaging.
Angel Mehta: Why don't you tell me a little bit about how Vayusphere positions itself against other best of breed players that have similar offerings? On what basis do you win or lose in a shoot out?
Pushpendra Mohta: There are basically three broad product offerings in the instant messaging space. There's commercial, secure, people-to-people communication which is typically the domain of people such as Microsoft, IBM or open source based companies such as Jabber. Then there is the management of consumer instant messaging, which is the ability to archive log and provide compliance solutions when consumer instant messaging like MSN, AOL or Yahoo is being used inside the enterprise and that's companies such as IM Logic and FaceTime. The third layer is integrating instant messaging into business processes and workflow. It's the ability to integrate the use of instant messaging inside applications, inside mission critical applications, inside the enterprise - and that's the area in which Vayusphere predominantly plays. This is what will deliver the real returns on the Instant Messaging investment. In this space we have the leadership position.
Angel Mehta: So what are some of the applications that you're integrated with right now?
Pushpendra Mohta: There are trading applications…call centre applications…and there are trouble-ticketing and urgent messaging applications.
Angel Mehta: But any major vendors specifically that you've integrated with?
Pushpendra Mohta: Sure. Remedy from BMC, Computer Associates Service Desk, Siebel. We have toolkits that allow for integration into just about any application.
Angel Mehta: Isn't it a relatively simple task for larger enterprise software players to just build in IM functionality into their existing applications?
Pushpendra Mohta: What we are doing is creating the equivalent of an application server for instant messaging. Traditionally, instant messaging is about people-to-people communication. What we provide is a framework and a platform for application-to-people and people-to-application messaging. For the same reason an application software vendor is not going to build an application server, they aren't going to build one for IM either. If you use voice telephony in your applications, you don't go build a PBX. There's a level of complexity that you don't want to get involved with. Also, the Vayusphere product is pretty IM neutral so we support 8 different instant messaging protocols and we keep up with changes in the protocols.
Angel Mehta: Vayusphere was founded during your time at Benchmark Capital as an EIR (entrepreneur in residence)… tell me a bit about what the EIR experience was like? What were some of the ideas you toyed with beyond Instant Messaging?
Pushpendra Mohta: Sure. Let me back up for a second in how I actually ended up at Benchmark. I had come to the U.S. in '87 as a graduate student by the University of California in San Diego. Then around '89, I had the opportunity to join a group of people at the university that were essentially building California's Internet. It was one of the original Internet service providers, internet service for the state of California, the universities, the commercial institutions.
I left my PhD program behind to join this group of people to create a company called, "CERFnet". We grew that business over time and then strategically decided that the best revenue opportunity for this business was to partner up with a telecom provider. In '96, we sold it to Teleport Communications Group who was then the largest competitive local exchange carrier in the country. And in the couple of years there, I created a new business unit for Teleport in the data space; they were predominately a voice and fiber company before they acquired CERFnet. Then ultimately AT&T acquired both Teleport and CERFnet in '98 so I spent two years at AT&T launching the Web hosting business and the global IP backbone business which are now among the fastest growing revenue segments. Eventually I just had this desire to get back to my entrepreneurial roots…and that's when Andy Rachleff at Benchmark invited me to join them as an EIR in early 2000.
The whole EIR thing… I think it's now become a fashionable title… Basically to me, the EIR is a place to hang your hat while you think of what you're going to do next. The context and the surroundings play an important role in order to provide you with a structured way of doing that. It's a place surrounded by not only the investment professionals at the VC firm, but also essentially the foot traffic, if you will, who come through the venture firm every day. Interesting, capable, innovative people coming in and presenting ideas all day long. So it's an opportunity to essentially reset whatever expectations you might have had about what you were going to do and research some new ideas. I did not go to Benchmark Capital with a preconceived notion of what the next big thing might be otherwise it would have been very easy for me to fall back into telecom. One of two things can happen when you are an EIR, you join a team that the VC is interested in, or you develop your own idea. I did the latter. We were able to convince Marc Andreessen, co-founder of Netscape and Opsware to invest and join our board as well.
Angel Mehta: How has Vayusphere deviated from it's original plan or changed - from a strategy or structural perspective - since it's founding?
Pushpendra Mohta: Vayusphere today is the same company only in name. When we first started in 2000 the main thing Vayusphere was going to do was to offer its services as a hosted service provider. In retrospect, we over-estimated what would happen in the wireless messaging space in the short-term. So when Vayusphere first started, it was going to offer a set of reliable hosted messaging services - connecting applications to people with a strong emphasis on wireless and mobility. A couple of things happened along the way. In the first 12 to 18 months of Vayusphere's history it became clear that (1) it was too early to offer seamless wireless services to U.S. wireless networks - who were just not investing aggressively enough to deploy data services. And (2) the investor appetite to invest in service provider companies just sort of vanished.
For both of those reasons - the market was too early and the absence of capital - we had to change paths. Of course, this was in the aftermath of the market correction… the dotcom crash… where service providers were losing their shirts.
So investor appetite disappeared, and we had the choice of either calling it quits or taking whatever intellectual capital we had created and re-starting the company. The most difficult time at Vayusphere was the first 18 months. Over the last 18 months, we turned the company around, bought it back from original investors, and converted it from being a service provider business to a pure enterprise software business, which was a big change from where we had started.
We're now at the point where we are shipping product to Fortune 500 customers - yet we're back to being a seed-stage company from the perspective of capitalization. We're early stage with regards to capitalization, but later stage with regards to product.
Angel Mehta: Do you remember any instances over the last few years where Vayusphere profited from purely coincidental events?
Pushpendra Mohta: Luck favors the prepared mind. If you're prepared to take opportunities as they arise you have to be constantly in that frame of mind. I don't recall any thing that came out of left field that we weren't prepared for - when we saw traction, we were prepared to take advantage of it.
Angel Mehta: One of the common questions I get from a lot of first-time CEOs or entrepreneurs is how much time to spend on figuring out whether any given decision is right or wrong before you make it. In other words, how much energy do you spend in the analysis phase? How do you know whether anything you're doing is right or wrong?
Pushpendra Mohta: You don't ever know if something you are doing is right or wrong. I think you want to take into account the information available to you - I mean, it would be foolish not to. Do you want to eliminate some risk from the process? Yes. But you don't want to sweat over it endlessly. You don't want to get into analysis/paralysis situation, but prudently you take into account what facts are available to you and based on the information and assets available to you you play your best card. The hand might change over time and then you change your strategy - just as long as at any given time you know what you have, what you're holding.
Leading a start-up company requires tremendous resolve, because you're dealing with ambiguity. You need to get your people comfortable with ambiguity, and you need to get comfortable with it yourself.
Pushpendra Mohta founded Vayusphere in July 2000 while he was an entrepreneur in residence at Benchmark Capital. Push spent many years as a senior Internet executive at AT&T and the Teleport Communications Group (TCG), following the acquisition of his first company, CERFnet, a national ISP, by TCG and its subsequent merger with AT&T. Feedback on the interview can be sent to: pushp@vayusphere.com
Angel Mehta is Managing Director at Sterling-Hoffman, a retained executive search firm focused on VP Sales, VP Marketing, and CEO searches for enterprise software companies. He can be reached for feedback at: amehta@sterlinghoffman.net
