Sabeer Bhatia, co-founder of Hotmail, said that he was rejected by 18 VCs, before he could secure $300,000 for Hotmail. Bhatia, who made the world’s first free web-based email service, also said that “it is not a disservice to fail or not to even try crazy ideas”.
In a chat with Raj Shamani, Bhatia talked in detail about selling Hotmail (now Microsoft Outlook) to Microsoft, VC mindset in India, government ecosystem towards for startups and how to handle failures among other things.
Talking about the journey of Hotmail, Bhatia said he was rejected by 18 VCs, before he could secure $300,000 from the 19th VC, Drape Facer, who understood his idea. “With those 3 million dollars, we launched Hotmail on July 4, 1996, and within three months we got 3 lakh subscribers then it means that the cost of acquisition for lakhs of dollars is only one dollar,” he said, adding “We got 5 million subscribers in one year.”
Divulging the what worked in favour he said, “We had a tag line at the end of every email. This email is sent to you from free-by-free email provider hotmail.com. Get your own hotmail.com. I did a little PR. I wore a suit and tie I met as many journalists as I could. In those days, print was big and print to online was the big thing so I went around talking to a bunch of journalists hired a PR firm and they introduced their contacts and went and told everyone.”
On Indian VCs
Talking about VCs, Bhatia said VCs (venture capital) in India have a mindset of PEs (private equity). VCs have a mindset that today money is not being made but someday it will be made, they work on instinct.
“After 30 years, I have just come to know that there are two types of VCs, all the VCs that are there in India are not VCs,” he said. “VCs in India have a PE mindset. They have to make money because they have never started a viral company, they just keep counting the money, they just know how to count the money. Bean counters. Elon Musk calls them bean counters.”
“There are other VCs who work on instinct. Don’t know what is going on that one day it will be a very big company and we will keep funding no problem, it is growth or not growth, that mindset is VC mindset, true venture is venture,” he added.
Citing example of TikTok he said the popular social media platform loses $4-5 billion every year but its valuation is $250 billion. “Why is there only growth like this? There is thought that it will become one day, no, not just growth. They have the data of the world,” Bhatia added.
Ecosystem for startups
The Hotmail co-founder cited example of Uber and shed light on the governance difference in the US and India. “The law here, the understanding that people have, is not startup friendly, that should be changed in India,” he said.
Look at the US, Uber broke every taxi cab regulation on the planet. But in the US, the government looks the other way because it was generating employment and there is a new idea to try, one day it can become big, so the governments there, the local governments, the cities, are conducive towards startups, he added.
Bhatia also said that most Indian startups are not first movers they are operating on someone else’s original idea. “We will run it by taking the VC’s money and when the VC is closed, we will also close it or sell it. But all the big businesses around the world, most of them have some innovations, which are very outstanding,” he said, adding “copying is not innovation”.
“I am telling you again and again that innovation which happens in Silicon Valley is not a business at all, it is the mindset difference,” said Bhatia, adding “In Silicon Valley, 99 out of 100 companies fail, it is not a disservice to fail or not to try, and even try crazy ideas. Look how many crazy ideas Elon Musk tries. Boring company Neurolink Control This thing, if it works, it will change the world.”