FF 012 Acquired by Microsoft for $200m with Javier Soltero @ Microsoft

Summary Notes


In this episode of the 20 minutes vc, host Tariff Stebings interviews Javier Soltero, corporate vice president of Outlook at Microsoft and co-founder of the acquired mobile email app Accompli. Soltero shares his journey from a software developer at Netscape to becoming an entrepreneur, detailing his ventures like Hyperic, which he started with a $1 buyout of a failing company's product. He discusses the importance of product-market fit, categorizing products as vitamins, painkillers, or Viagra, and emphasizes the significance of building products that enable users to do the previously impossible. Soltero also reflects on the fundraising process and the strategic decision behind selling Accompli to Microsoft for $200 million, highlighting the opportunity to scale and reach a wider market. Throughout the conversation, he underscores the value of investor relationships that challenge entrepreneurs to exceed their perceived limits and the profound impact startups can have on individuals' lives.

Summary Notes

Javier Soltero's Career Background

  • Javier Soltero began his career as a software developer at Netscape.
  • He transitioned from software development to entrepreneurship.
  • Soltero co-founded Hyperic after buying out a product for a dollar from a failing company he previously worked at.
  • Hyperic was sold to VMware in 2009 through a merger with SpringSource.
  • Post-acquisition, Soltero served as CTO at VMware, specializing in SaaS and application services.
  • He later became an entrepreneur in residence at Redpoint Ventures, which led to the founding of Accompli.

"I started off as a software developer. My first job out of university was at Netscape, which is kind of interesting given where I work now."

This quote establishes Javier Soltero's starting point in the tech industry at Netscape, highlighting the interesting link to his current position at Microsoft.

"I wound up coming up with this ridiculous idea to partner up with four other engineers...and buy out the product that we had built for a dollar."

Soltero reflects on the unconventional beginning of his entrepreneurial journey with Hyperic, emphasizing the bold and risky decision to buy out a product from a failing company.

"We were at the time when we sold it in 2009, close to 10 million in revenue, thousands of customers deeply, deeply adopted open source product and pioneer in some new business model elements."

This quote provides insight into the success of Hyperic before its acquisition by VMware, noting significant revenue, customer base, and innovation in business models.

First Startup Failure and Learnings

  • Javier's first startup experience was with Covalent, backed by top-tier investors but ultimately failed.
  • The failure was attributed to the application of old business rules to a new market.
  • The takeaway was that even with experienced executives and substantial funding, a startup could fail if the approach is not adapted to market demands.
  • This experience influenced the bootstrapped approach for Hyperic before raising venture capital.

"They were following old rules. So new market or new game? Old rules. They were doing a sort of typical top down sales approach...And you couldn't do that then, you can't do it now."

The quote highlights the mismatch between traditional sales strategies and the evolving market, which was a key factor in Covalent's failure.

"That's why we ended up bootstrapping Hyperic, actually, for two years before we raised money, ultimately from Excel and Benchmark, who were great investors and helped us take this thing to ultimately a $420,000,000 acquisition by VMware."

Soltero explains the strategic decision to bootstrap Hyperic as a response to the lessons learned from Covalent's failure, leading to a successful exit.

What Makes a Great Investor

  • A great investor inspires entrepreneurs to exceed their own expectations.
  • They provide more than just capital, offering guidance towards building a large, enduring company and product.
  • Javier Soltero's experience with investors like Peter Fenton from Excel and later Benchmark is cited as an example of such a relationship.

"A good investor is one that really pushes you and inspires you to achieve more than what you think you can deliver."

This quote defines the role of a great investor as not just a source of funds but as a motivator and mentor for achieving greater success.

"Peter just was very good at sort of reminding me that the real goal, the real sort of winning opportunity for a technology company and a startup is to build a great, large, enduring company and product."

Soltero credits Peter Fenton for reinforcing the ultimate objective of creating a significant and lasting impact in the tech industry through a startup.## Early Entrepreneurial Challenges

  • Javier Soltero reflects on the challenges he faced transitioning from a lifestyle business owner to meeting the expectations of investors.
  • He acknowledges the difficulties of delivering on investor expectations, especially during the challenging times of the 2008 financial crisis.
  • Javier suggests that many entrepreneurs today have not fully internalized the lessons from such economic downturns.

"I realized that what we were trying to do and what our investors were expecting of us for all the right reasons was a lot more than what I thought I could easily deliver."

This quote highlights the gap between Javier's initial expectations and the reality of investor demands, emphasizing the learning curve he experienced.

"We thrived through the 2008 financial crisis. That was a really challenging time for me and something that I think has sadly not been internalized enough, frankly, by most entrepreneurs today."

Javier reflects on the resilience required during the 2008 financial crisis and implies that current entrepreneurs might not be as prepared for similar challenges.

Bootstrapping and Managing Burn Rate

  • Javier discusses the transition from bootstrapping to receiving venture capital and the importance of managing spending and burn rate.
  • He stresses the virtue of scarcity in business management and the focus on winning customers as a survival strategy.
  • Javier expresses caution and responsibility in financial commitments, maintaining a conservative approach throughout his entrepreneurial journey.

"And you become very, very good at sort of managing around scarcity, and it's very clarifying, frankly."

This quote emphasizes the clarity and focus that scarcity brings to business management, particularly in terms of prioritizing spending.

"And I was glad I was able to preserve that basically all the way through that journey and have it still had a complex."

Javier expresses satisfaction in maintaining his cautious financial approach, which he views as a complex but necessary mindset.

Venture Investment and Responsibility

  • Javier comments on the casual attitude towards venture investment and the gravity of being entrusted with a significant amount of money.
  • He conveys a sense of responsibility and respect for the funds received, contrasting with the 'sporting' nature of entrepreneurship often portrayed.
  • Javier's experience during the economic downturn reinforces the importance of prudent financial management.

"And you really just kind of have to really respect that."

The quote encapsulates Javier's view on the responsibility that comes with receiving venture capital, emphasizing the importance of respecting the investment.

"I'm certain that most people that are building companies nowadays would have a very hard time in such a sudden and drastic adjustment to the way people look at cash and capital and borrowing rates and whatnot."

Javier expresses concern that many current entrepreneurs may struggle with financial management in the face of an economic crisis, given the easy capital environment.

Product-Market Fit

  • Javier discusses the challenge of achieving product-market fit, drawing on his experiences with Hyperic and Accompli.
  • He contrasts the approaches needed for an infrastructure management product versus an end-user application.
  • Javier shares insights into the importance of understanding the market and the problem being solved.

"I guess it's safe to say that I had a firsthand experience with the absence of products in this category."

Javier recounts his direct experience with the lack of suitable web infrastructure management tools, which informed his approach to Hyperic.

"I wanted to find an otherwise simple, straightforward way of identifying or describing the problem that we were going to solve."

This quote reveals Javier's strategy for Accompli, focusing on a clear and simple definition of the problem to ensure product-market fit.## Types of Products

  • Javier Soltero categorizes products into three types: vitamin products, painkiller products, and Viagra products.
  • Vitamin products offer long-term, indirect benefits and are not immediately essential.
  • Painkiller products provide immediate relief from pain but may lead to churn if the pain subsides.
  • Viagra products enable users to do things previously thought impossible and are the most desirable type of product to create.

"Vitamin products are products for whom the major benefits of using it are not felt immediately." "Painkiller products fall under a class of product that, as the name implies, they take away pain." "Viagra products are the simplest products. They help you do things you previously thought were not possible."

The quotes explain the characteristics of each product type. Vitamin products are compared to good hygiene items, painkiller products are tied to the user's pain tolerance, and Viagra products are described as transformative.

Meeting Investors and Fundraising for Accompli

  • Javier Soltero met lead investor Satish Dharmaraj through previous connections.
  • The fundraising process for Accompli was straightforward and grounded.
  • Satish and Javier quickly agreed on the necessity and investment required for Accompli.
  • Accompli generated significant buzz, attracting proactive investment interest.

"So I had met Satish Dharmaraj, who was our lead investor many years ago when I was CEO of Hyperic." "The fundraising process was in many ways very simple." "Satish and I agreed that ostensibly a $5 million investment was probably what it would take to go build out the product."

The quotes detail Javier's relationship with Satish, the simplicity of the fundraising process for Accompli, and the agreed-upon initial investment needed to develop and market the product.

Approach to Building a Company and Raising Money

  • Javier Soltero prefers to tackle hard problems when building companies.
  • He views fundraising as an important but not the sole skill of a great entrepreneur.
  • Discussions with investors should focus on company growth challenges rather than financial terms.
  • Venture capital is seen as a limited and somewhat collusive market.

"If I'm going to go build a company, I'm picking something very hard on purpose." "The best conversations with potential investors are really more about the challenges and the big questions that are left to be answered." "Venture capital is not a true market in the sense that it's a very limited number of players often colluding."

The quotes reveal Javier's philosophy on entrepreneurship, which emphasizes the importance of selecting challenging problems and focusing on substantial conversations with investors about company growth over financial specifics. He also criticizes the venture capital market's structure.

Acquisition by Microsoft

  • Accompli was acquired by Microsoft for $200 million.
  • The deal was considered beneficial for both companies.
  • The reasons for selling to Microsoft were not fully discussed due to an incomplete transcript.

"It was a very good deal for both companies."

This quote implies that the acquisition was mutually advantageous, although further details or reasons for the sale are not provided within the given transcript excerpt.## Transition from Consumer App to Enterprise Business

  • Acompli had already secured millions in sales, a pipeline, and customers in Europe and the US.
  • The enterprise service was being shaped through close collaboration with these customers.
  • Javier Soltero was familiar with and excited about the enterprise side of the business.
  • Vendor credibility and trustworthiness with sensitive data were key challenges.
  • A significant investment and intellectual effort were needed to establish credibility.

At the time, we were very fortunate to already have multiple millions of dollars of sales, pipeline and customers, actually two in Europe, one in the UK and two in the US, who were working with us very closely to really sign up and craft what would become the accompli enterprise service.

This quote explains the early success and customer engagement Acompli had in transitioning from a consumer app to an enterprise business solution.

It was very interesting to see how eager people were to have this problem be solved and then sort of be reminded of the importance of vendor credibility and the difficulty that you had to walk through to establish yourself as somebody who can really be trusted with this kind of data, trusted with this kind of responsibility.

Javier Soltero highlights the eagerness of customers for solutions and the challenges in establishing a credible and trustworthy enterprise service.

Microsoft Acquisition and Scaling

  • Microsoft presented an opportunity to leverage their credibility and reach.
  • The acquisition allowed Acompli to deliver their product at an unprecedented scale.
  • The deal was seen as a win for all parties involved: Microsoft, investors, employees, and Javier Soltero himself.
  • Luck played a role in the success of the negotiation and acquisition.

And so you size that up and you say, yeah, I mean, clearly the opportunity to do this on behalf of Microsoft, especially in a situation where what was important for me at the time was that everybody won.

Javier Soltero describes the acquisition by Microsoft as a mutually beneficial opportunity where all parties involved gained something valuable.

Challenges in the App Market

  • Popularity and high ratings do not guarantee awareness in the App Store market.
  • App Stores are flawed vehicles for product delivery and discovery.
  • Accompli faced challenges in market awareness and go-to-market strategies.
  • Microsoft's proposition addressed these challenges effectively.

And yet really, in the app world, you have to carry your own water in order for the world to know who you are. The App Store world makes that in many ways very difficult because it's really two marketplaces that are the sole vehicles for delivery of your product out to its intended audience.

Javier Soltero discusses the difficulties of gaining visibility in the App Store market despite having a popular and well-engineered product.

Quick Fire Round: Personal Preferences and Reflections

  • Favorite book: "100 Years of Solitude" for its unique storytelling.
  • No significant purchase under $100 to mention.
  • Favorite newsletter or blog: "Wait But Why" for its brilliant writing.
  • When thinking of a successful founder, Mark Zuckerberg comes to mind.
  • Career highlight: A touching message from a former employee expressing gratitude for the life-changing opportunity.

Favorite book? 100 years of solitude by Gabriel Garcia Marcus. Because it's just an amazingly contrived, often humorous, mostly sad story told in the most ridiculous way possible.

Javier Soltero shares his favorite book, highlighting its storytelling style and emotional depth.

Successful founder, I think Mark Zuckerberg probably is the only guy that I can really quickly pinpoint that has seemed to nail every single thing along the way. And kudos to him.

Soltero identifies Mark Zuckerberg as an exemplar of a successful founder due to his consistent achievements.

Outlook Mobile and Strategic Direction

  • Javier Soltero is now in charge of strategic direction for all Outlook products.
  • The goal for the next five years is to make email an enjoyable and modern tool.
  • The aim is to transform the perception and functionality of email for users.

So over the next five years, we're here to make email awesome and really take this incredibly powerful and pervasive medium that we often sort of complain about and hate and really turn it into something that people genuinely love and feel like it has adapted into the modern age and so forth.

Javier Soltero outlines his vision for the future of Outlook Mobile and email, aiming to improve the user experience and modernize email communication.

Show Outro and Acknowledgments

  • Harry Stebbings thanks Javier Soltero for joining the show.
  • Listeners are invited to follow the show on Twitter and visit the website for more resources.
  • The show expresses appreciation for ongoing listener support.

Thank you very much, Harry. It was really fun.

Javier Soltero expresses his enjoyment of the interview with Harry Stebbings.

And if you loved today's show and would like to hear more from the 20 minutes vc, you can follow us on Twitter at 20 minutes vc.

Harry Stebbings provides information on how listeners can follow the show and access additional content.

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