More significant companies are being formed outside USA, in India and China: Moritz

July 29, 2015 06:58 pm | Updated November 16, 2021 05:22 pm IST - BENGALURU

Sir Michael Moritz. Photo Courtesy: Wikipedia.

Sir Michael Moritz. Photo Courtesy: Wikipedia.

An entrepreneur asked this technical question to Sir Michael Moritz, chairman of the venture capital firm Sequoia Capital during his interaction with >start-ups in Bengaluru last week . “Do you have a view on how application infrastructure management would change with the advent of intelligent robots, especially in public cloud?”

Mr. Moritz who has invested in Silicon Valley's most famous public companies, including Google, LinkedIn and Yahoo quipped, "That is a question that is far too intelligent for me. But we actually employ few intelligent people at Sequoia and I would be happy to refer you to one of them who can answer that question with a degree of acuity that I can only pretend to." The audience, mainly Indian product start-up founders, who had come to listen to Mr. Moritz on a Saturday afternoon burst into laughter.

The billionaire venture capitalist wanted to make a point that entrepreneurs and investors should not get fixated on fashionable buzz phrases and jargon's when they are explaining their business. When other entrepreneur asked him about the future of artificial intelligence and if it was the right time to start a company in this field. He said that he would have a tough time dealing with abstract thoughts like artificial intelligence, "because I don't really understand what it means," said Mr.Moritz whose firm has backed Chinese drone maker-DJI. "I don't mean to be rude, for artificial intelligence doesn't describe a business, if you then said do you believe in the future of drones, I would emphatically say yes, robotisation, I would emphatically say yes. I think that is an expression of artificial intelligence," said Mr.Moritz, an early historian of Apple, who knew young Steve Jobs.

Mr. Moritz who wore a blue and green polo shirt and khaki pants, was of the view that technology has to be described as straight forward business problem that solves a particular need. "For me when you are describing an investment, you have to ask the question, what it does for someone."

Here are the top eight insights that Mr. Moritz shared during an interaction with Indian software product start-ups:

More significant companies being formed outside US, in India, China

When I started at Sequoia which was about 30 years ago, we had made an investment in one or two companies that had Indian immigrates in Silicon Valley, California as part of their founding team. We never invested in India. We never thought or dreamt of investing in India. We weren't really aware any of the predated, back office kind of companies serving US. We got our lesson about India from a gentleman named Romesh Wadhwani who started a company in the Silicon Valley called Aspect Development and he was the first person who opened our eyes about India, probably in 1987, talking about assembling engineering team in India. The reality of India that time being regulations and bureaucracy. Then things evolved, we started investing in whole series of companies in California, among their founding team somebody was educated at the engineering institution in India. And then we opened up business here probably about 12 years ago and gradually have been developing the business and we have been in Japan, with the premise being the Sequoia business, if you put it in one sentence. It is about participating at a very early stage in companies that will become important technology companies. We were able to do that 30 years ago in America, but the world is changing, we still have a wonderful terrific business in America, but more and more significant kind of companies are being formed outside United States, principally in China, then India and Europe. And we also think there are going to be more and more ways in which these companies would collaborate and compete across geographies and we want to be in the heart and in middle of that. Today we have probably three offices in India. We invest from a very early stage to pre public rounds.

Money chasing dot com bets would result in blood bath, carcasses strewn across the road

All these little companies are chasing a limited market. It is better than five years ago, I can understand that, there is going to be tremendous amount of waste of money, none of us in this room can change that, it is just one of the facts of life and it is rudimentary Darwinism at work.

Innovation in the financial market segment is a big opportunity

Fantastic opportunity, when we started Sequoia we never thought of investing in the financial arena. It seemed outside of our purview. Because banks were such painful customers. But now we have got around 25 investments different aspects of financial markets and systems that is a whole massive universe that embraces any number of institutions and applications. You look at big companies like JP Morgan, HSBC, Wells Fargo, big banks in the West. Those are incredible business franchises that would be around for a very long time. They are like these large animals that live for a long time, but on their backs and around their bodies are mosquitoes and fleas, biting away here and there with all sort of different ideas whether it is an idea of moving money very quickly or implementing easy to use software system. In India Prizm Payment (a Sequoia portfolio firm) was acquired by Japanese firm (Hitachi).

Do entrepreneurs require to have personality traits like that of Steve Jobs?

Most of the people don't say what dignity he (Mr. Jobs) conducted himself throughout his terrible set of illnesses. But he obviously was an extremely difficult man, a brilliant character, enormously inventive, unlike many other entrepreneurs, he was part poetically mystic and part a ruthless character who would strip the skin off your back and tear your eyelashes out. Johny Ive's who I think was his closest friend for many years, was perplexed by this complexity of Steve (Jobs) as anybody else, cherished his inventiveness, his intelligence, his wit, his kindnesses, and the way in which he ably treated demoralized people. I have no idea how somebody develops a character like that. But name another person who successfully started same company twice. Name another person who came up with successive products, way back with Apple II, then the iPod, then the iPhone, then the iPad. Andy Grove (American businessman) I think was a big fan of Steve (Jobs), put it well, 'most people in their life time would dream about coming up with one of the products, can you imagine being able to do it on multiple occasions, Steve (Jobs) did it, he was a perfectionist, he was a man who sought competitors everywhere and wanted to destroy them all, but the thing he was really competing with was his own innate personal sense of perfection and that is what drove him. I am sure when he introduced a brand new Apple product in his famous key note speeches, despite telling everyone how great, it was, he knew all of its short comings and would be thinking of more of perfect incarnation of that product.

People who achieve greatness in any field is due to their obsessiveness

I have just written a book with Alex Ferguson, former manager of Manchester United Football Club. We were talking about obsession. And when we talked about what makes a really great soccer player? Hearing about Cristiano Ronaldo, Eric Cantona, Bryan Hughes, Paul Scholes and Lional Messi, I began to think Ghosh all these characters at a very young age shared traits with the company founders. It was their obsession at the age when they were old enough to play football. Most of them came from poor background and they were not particularly well educated. They were obsessed with one thing in life and that is to play professional football. I think the success of founders is their one thing or couple of things that they concentrate on. I think it is your obsession. If you look at most of the successful companies in the world, the founder had been obsessed about the pursuit that he or she went into to form the company. Elon Musk (chief executive of Tesla Motors) had been interested in space exploration and automobiles since he was a young teenager. Bill Gates (Microsoft cofounder) largely obsessed with possibilities of personal computing software since he was 11 or 12 years old. Steve Jobs who we just talked about, again born in the era where he became obsessed with the possibilities of single board computers. Larry Page (Google cofounder) completely fixated, utterly obsessed with his work at Stanford as a Phd student on figuring out ways to find out things on the internet. And all of these people doesn't matter whether it is Cristiano Ronaldo or Larry Page were fantastic at locking off distractions and shutting off basically rest of their lives to allow them to concentrate on furthering their obsession. These founders that I mentioned are turning their obsessions into products. I think it is the same with artists and musicians. People who achieve greatness in any field is due to their obsessiveness.

Is there hype around technologies like Internet of things or real businesses are coming out

If you say Internet of things (IoT), all of us don't know what the hell it means. But I would ask you, if you want to classify Uber, I know people say it is a cab service, to me it is an Internet of things, it has got computing in driver's pocket, on his dashboard and to some extent on the car. What we are talking about is putting computing power, computing capacity even with people or places or on machines that haven't been computerised before. Dropcam (known for its Wi-Fi video streaming cameras) to me is Internet of things, you got frigging drop cams in business settings, people's homes monitoring their children is Internet of things. GoPro the drones (manufactures and markets high-definition action cameras, often used in extreme-action videography) is Internet of things. All these health monitors, watches, sensors on clothes, the data gets uploaded somewhere and all these Wi-Fi connected bathroom scales that are selling like hotcakes. I think it a reality when you take away the buzz word, then ask this yourself Gosh! What is computing connecting today that it did not connect 10 years ago. It is thriving and profitable.

Allowing VCs to turn a services company into product firm not a good idea

I would be very hesitant. If you really have a good idea about a product and you know what the product the company should develop, you are very confident and have got great conviction that is what you should do. But don't expect an investment firm to come up with a product idea, because I guarantee you it would be really bad, especially if it is me.

Common pitfalls among Indian founders

Oh I would turn around and say there are plenty of virtues in Indian founders. We always found them enormously persistent, extremely hardworking, able to do a lot with little. Sometimes, it is not a criticism, it is a reality, sometimes more of a challenge for them is to take their idea into a market that they don't know very well. Just as we had that problem bringing companies here and ensuring it appeal to people who like Bollywood movies rather than what we watch at home. I would concentrate very much on the virtues, Indian founders, with eyes and ears wide open and if you construct a company where some of your cofounders are in other markets, then the world is your oyster.

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