October 3, 2023

Never Underestimate The Founder Mojo!

Never Underestimate The Founder Mojo!

Entrepreneurs come in many hues and shades. But the ones who create history, the ones we remember, are the visionary founders. These are leaders who have a very unique visualisation for the future in whatever space they are working in, and show the way to make it a reality. Take Elon Musk, the audacious, world-changing founder and CEO of Tesla and SpaceX. Or wunderkid-turned-tech-titan Mark Zuckerberg, who created Facebook, a social networking site that is a global force to be reckoned with.

When they start out on their mission, they look like impractical fools. But they prove you wrong and, in a flash, a new industry is created, or a new business model is born! Now, the path to becoming great and achieving scale might appear simple-apply the ‘same store model’ and just replicate. The oft-repeated mantra at the time seemed to be, “Hire the best from the market, raise a lot of money and most important of all, bring a seasoned CEO on board.” But every so often, the dream shatters. We are probably going to see it play out with Uber today. What exactly is it that goes wrong when the founder leaves? Is this not a relay race as it is portrayed to be?

In our quest to find out what it is about a founder that cannot be replicated, AnuPartha met with K B Chandrasekhar, co-founder and former CEO of the erstwhile Exodus Communications. The entire Exodus journey is a masterclass in entrepreneurship and there cannot be a case more fitting to understand the unique value of a founder-CEO. There is so much to learn from it for today’s aspiring Silicon Valley entrepreneurs-both in terms of what to do, and some what not to do too!

Here is a little history of the Exodus journey to put things into context. Founded in 1994 by a couple of Indian immigrants with meagre financial resources, Exodus appeared to have a slim-to-none chance of making it big. Yet, despite all odds, they went on to amass $50 million in revenue after going public in 1998 to the awe and surprise of the everyone! At its peak, Exodus Communications was the face of Web hosting to the wider business world, even reaching a point where over 50% of all global internet traffic went through Exodus servers! But in a bid to grow rapidly, post IPO, Exodus’s new management leveraged the company’s balance sheet dramatically to invest in capacity creation. Unfortunately for the company, it was soon hit by the dot-com crash that changed the business landscape dramatically. The company was soon left with no option but to file for Chapter 11 bankruptcy in 2001. We explored this story through the lens of their founder-CEO.

Early years and move to the US

Raised in a conservative middle-class, joint family in Tamil Nadu, little did Chandra know that the life of an entrepreneur lay ahead. Academically, Chandra earned a Bachelors in electronics from Anna University and followed it up with a stint at Wipro, then still in its early years.

In 1992, he grabbed an opportunity to move to the US where he would be responsible for business development, marketing, and software consulting services at his next company, Rolta. Two years into the new role, Chandra felt stymied by the slow pace of action at the company. With as little as $5,000 in his bank balance, Chandra decided to embark on his first entrepreneurial venture, by himself, from his bedroom office. He had no Ivy League or IIT pedigree to fall back on, no real work experience in the US, and barely any financial resources-still he felt no fear.

“Starting from scratch was not a scary thing for me. I would always ask myself, ‘What is the worst that could happen?’ and would go ahead. So, I was always willing to try new things.”

In the years that followed, Chandra would go on to live the Exodus experience, one that was to become the most defining of his career.

Building the Exodus vision

The Exodus story began in 1994, soon after Chandra met with B V Jagadeesh in the San Fransisco Bay Area. He convinced him to quit his job at a tech major, and join him on his entrepreneurial journey as his cofounder. Initially called Fouress Inc. and conceived as a Network Consulting business, the founders bet every penny they had on it, and with a little bit of luck, and their trademark smarts, the company became profitable very quickly.

That year was a pivotal one for the technology industry, with the spectacular launch of the Netscape browser, and the World Wide Web! Chandra understood, before most other people, the power of the emerging Internet and together with it, the market for internet services. That is when Chandra and Jagadeesh swiftly pivoted the business to the Web-hosting market as Exodus Communications, bet their entire future on it, and ended up creating and owning an entirely new Industry category-the Internet Data Center.

“At the exact same time, the dot-com companies started to emerge. Hotmail, Mapquest, Yahoo and the others were formed, and began to grow rapidly. We started to become the de-facto standard for hosting those companies’ servers.”

Exodus grew on the promise of the internet boom and accepted the growing pains as a welcome challenge. Chandra recalls a time in 1995 when he believed they took some missteps about when the venture capital would eventually come. It didn’t, and they ended up burning cash very quickly. Chandra and Jagadeesh had been self-funding the company, but time was running out – salaries had to be paid, and their office was over-heating because servers were stacked on tables. They then had a chance meeting with the legendary Silicon Valley angel investor and mentor, Kanwal Rekhi, who saw their passion and will to do whatever it would take, and offered them a bailout amount of $200,000, virtually on the spot!

Interestingly, at the time, Kanwal Rekhi had told Chandra in his characteristic, no-nonsense manner: “You have great vision and lots of great ideas, Chandra, but you would benefit greatly from being a little more focused. I will give you the money, and my support, on the condition that you agree to leave the CEO duties to someone else!”

Chandra was so driven to make the company succeed, that he instantly accepted Kanwal’s condition! Yet he set himself the challenge that he would prove just how good of a CEO he could be. And he did just that!! While on his early rounds of venture fund-raising, Chandra would commit to the VCs, as agreed with Kanwal, that he would hire a new CEO to replace himself. But by the time he was on his third round of fund-raise within the year, his investors were setting him a pre-condition that he would NOT step down as CEO! Having had no silver spoon or a pedigreed path to success, Chandra emerged as the toast of the Indian entrepreneurial community in Silicon Valley.

Chandra the CEO

Chandra was the archetypal founder-CEO. He had a vision for his company and the enthusiasm and passion to do whatever it took to get there. He took big bets on which market segment to focus the nascent company on. Contrary to the wisdom of the time, he chose to go after the emerging, but exploding, Internet Centric companies as customers, like Netscape, Hotmail, Yahoo and GeoCities, instead of larger enterprises. This gamble paid off, and how!

He knew how to dramatically leverage and convert unexpected opportunities that the market presented him. When there was an unusual power shutdown in the area, he took out a large advertisement in the local papers about how Exodus was the only place that was up when the whole city was down! That single advertisement caused such a flood of business his way, that there were long lines of vehicles, with computer servers in them, waiting outside his data center to sign up!

He quickly learnt how to bring on the best people he could find to help him succeed and scale-whatever it took! He built a powerful, entrepreneurial work culture. He and his team worked hard to build a very happy base of customers. Within a short time, they scaled-in revenues, in data center footprint, and in the range of innovative products and value-added-services they offered their customers.

Within a matter of a couple of years, Exodus emerged as the behind-the-scenes player in high-tech, and powered the backend of mammoth clients like Oracle Corp, CBS SportsLine and Hewlett-Packard.

A turn of fortunes for Exodus

Despite a few ups and downs, Exodus’s garage to tech-titan story was inspirational throughout Silicon Valley. In 1998, they set their sights on taking the company public. On Mar 19, 1998, Exodus had a spectacular stock offering on the Nasdaq, and the stock soon tripled in value within just a couple of months.

Like many founders of his time, Chandra had reached a point when he had to decide whether handing over the CEO reins was in the best interest of his company. It’s marketcap was reflective of the meteoric rise the company had achieved under his leadership, and Exodus was poised to become a major hosting provider to serve the expanding number of enterprises with Internet-critical operations. It was a tough call. Chandra had a founder’s heart and an infectious passion for growing his company. However, conventional wisdom of that time dictated that it’s best to bring in a more experienced ‘professional’ CEO to take over the reins to bring in big-company leadership skills, accountability, delegation and process-orientation.

“You have to be willing to take chances. You can’t move at a tortoise speed when the market is moving at a horse’s speed.”

Chandra eventually stepped down as CEO. The board brought in a big-name executive from IBM & Apple to lead the company post its IPO, although Chandra stayed on in a limited role for about a year post that to ensure a smooth transition. But without the founder-CEO at the helm, the company was not the same anymore – it was like a body without a soul.

In the three years that followed, a series of very quick changes ensued. The new team decided to grow the company’s infrastructure asset base dramatically to prepare for the anticipated growth, and ended up raising a mountain of debt financing from banks and the public markets to do so. When the dotcom crash came soon after, and revenues fell, the company was left with too much debt it could not service. There was no option but for them to file for Chapter 11 Bankruptcy protection. Post the Chapter 11 restructuring, Exodus was bought by Cable and Wireless in 2002, then changed hands a few more times, and today lives on as CenturyLink’s private cloud hosting business; but the old Exodus magic is now long gone.

But for the over-leveraging that killed the company, Exodus could well have revived itself post the dot-com crash, and survived & grown, in probably the same way as did many others that had met with a similar crash of revenues at that time - Yahoo, EBay, Priceline, or the biggest success of them all, Amazon!

Hindsight 20:20

The post mortems of the fortunes of Exodus were many, but with the benefit of hindsight, we can’t help but wonder if the course of history would have been different had Chandra remained the CEO post IPO. After all, in today’s times, the ‘founder mentality’ is considered a strategic asset for companies. The core belief these days is that the founders are the soul of a company, and a founder CEO is in the best position to lead their company, especially a technology company, from its depths to new heights.

“My biggest mistake was not ensuring that the Exodus business model was stable enough to withstand the downturn.”

He recalls that Exodus was flourishing in a time when there were many variables in a market that was moving extremely fast. “Even one misstep could have resulted in severe repercussions,” he says, recollecting that inaction was just not an option for anyone at the time.

Although the denouement of the company was emotionally devastating, Chandra recovered with the support of his family and friends, and by getting back up and on to work. However, he points out that he has no regrets, as the decisions that he took were what was best for the company and himself, given the information and the circumstances at that time. “The only thing you can be certain of is uncertainty,” he says reflectively, “so you give it your best, and you must recognize that ultimately, effort is the only capital.”

“Nothing is impossible. Once you have that attitude you are going to figure out a way to work through your situation.”

To the young entrepreneurs and founders of today, Chandra has simple words of advice: “Dream big and believe it will change the world. Surround yourself by passionate people, and don’t be afraid to fail, or you will never start!”

Post Exodus, Chandra went on to found Jamcracker, a Cloud Management & Cloud Governance Platform; has since also invested in over a dozen other startups; and is passionately involved in a variety of social and philanthropic initiatives around the world.

Passion. That is what entrepreneurs start with, and that is what brings us back to contemplating the secret, magical ingredient that founders possess in their DNA. At the end of the day, to them, it’s more than just a job. In fact, it is never a job at all. It is a burning need to want to change the world, and do what it takes to get there.

“Being an entrepreneur is not for the faint of heart. Almost nobody does it for the money. Money can be made in so many other ways. It is to fulfil a hunger that comes from inside. It has to be in your DNA.”

Success and failure are part of the ups and downs of life, and irresistible though it may seem, choosing the magnetic allure of entrepreneurship is not for everyone. There are those like Chandra who take risks and jump into everything they do with intense passion and an almost irrational exuberance. To them, the alternative just isn’t an option. But it is precisely because of people like them, that as a culture, we love and celebrate entrepreneurs. After all, no matter the outcome, we live vicariously through their experiences, we seize the moment to take control of our destiny, and create something that previously only existed in a dream.

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