The Sure Shot Entrepreneur

Lessons from >100 angel investments

Episode Summary

Gokul Rajaram shares specific characteristics he looks for in entrepreneurs who range from former coworkers to founders he never met in-person. He describes his unique journey in the Silicon Valley leading product development at Juno, Google, Facebook, Square and Doordash.

Episode Notes

Gokul Rajaram shares specific characteristics he looks for in entrepreneurs who range from former coworkers to founders he never met in-person. He describes his unique journey in the Silicon Valley leading product development at Juno, Google, Facebook, Square and Doordash. 


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Episode Transcription

Gokul Rajaram  0:00  

This person Max is going to do whatever it takes. He's just cannot eat sleep or breathe unless he's just thinking about the problem all the time. He even forced him to not force even got me and our board member Roelof at Sequoia to brainstorm about how to grow this program. And just, that's the kind of person he is. And so I knew that when he told me he was planning to leave square, a few months out that I wanted to invest in his company, whatever the company is.


Gopi Rangan  0:15  

You are listening to the short shot entrepreneur. A podcast for founders with ambitious ideas, venture capital investors, and other early believers tell you relatable, insightful and authentic stories to help you realize your vision. Gokul Rajaram is the head of products at Caviar, a division at Doordash. He has held leadership roles at Google, Facebook, Square and has led the launch of many important products. Gokul is considered the godfather of AdSense which revolutionized the ad-tech industry. He's a successful entrepreneur, corporate executive board member and an angel investor. In this episode Gokul and I discuss his journey in the Silicon Valley, how an MBA helped him and his experience as an angel investor, you will learn the specific things that Google looks for in an entrepreneur when he makes angel investments. You will also see an insider view into the expectations of an angel investor, what he expects to achieve through his angel investments. Gokul, welcome to the short shot entrepreneur. Tell us about yourself.


Gokul Rajaram  1:49  

Thanks, Gopi. It's great to be here. Well, it's the classic story of an engineer turned Product Manager turned a business executive Started out. I started out I got my undergrad education in India where I got a bachelor's degree in computer science. More than two decades ago. I then came to the United States to get a graduate degree in Computer Science went to UT Austin. And I have to say that going to a state school, which has a good football team was a great way for me to get acclimatized to the US to college, and to American culture broadly. I am very grateful that I went to UT Austin has a great football team. And so, I wear my Longhorns hat more proudly than anything else out there. I met lots of Longhorns fans over the years. But after UT Austin after I got my computer science degree, I was faced with an interesting challenge, which maybe we'll talk about later, but ended up with me, going into the software industry, becoming a software engineer, got my MBA after two years. Again, we can talk about the reasons for why I went for an MBA and what I recommended the MBA fund got many From the Sloan School at MIT, and then moved to the valley immediately after that, ended up getting a job at Google leading product for a young product and not yet launched product, which became known as Google AdSense. I was lucky enough to work on it had grown over the years and then left to start my company with my brother, which got acquired by Facebook. And so I ended up leading ads at Facebook for three, three and a half years. And from there move to Square and ended up leading first a point of sale team. And then Caviar, which is a delivery service that Square acquired. I was a GM for caviar for a few years. And then Caviar was acquired by doordash from square as part of that move to Doordash, about seven months ago, and have been at Doordash. So I joke that I've only worked at companies that are private. So I've worked at Google and his private, Facebook and his private square has private now Doordash when it's private, and typically I've been employee between 500 to 1000 at a company Google, I was at employ 600 or 700, Facebook calls around 7-800 square around 600, etc. So that's, that's seems to be the sweet spot for me.


Gopi Rangan  4:09  

You have this knack of finding opportunities at companies that will before you join them before they go IPO. And you did that with Google with Facebook and square. Tell us about that experience. Maybe you can also touch on the MBA part of it and how that helped you.


Gokul Rajaram  4:27  

Yeah, crazily enough, even the first job after my Master's in computer science. I ended up joining a pre IPO company. And this is at a time where I didn't even know what an IPO was really, very clearly. And the reason I joined the company is the same as the reason I joined Google Facebook Square etc is two things. One, I was excited by the mission of the company. The first company, I joined Juno had the mission of making the internet free. So it was a free email service back then people pay for AOL, and access to the internet email, and this company Juno had the mission of making The Internet free and accessible, and that really resonated with me. And the same with Google's mission, Facebook's mission Square vision. And the second one is the leadership, the CEO in every company, I've had the chance, even when I was an engineer, working at Juno had a chance during the recruitment process to actually meet the CEO, and the leader of the company, and I was really impressed by and really felt a personal connection with them, and felt that they are the right leader for this company, and that I can learn a lot working with them whether it was Charles or Juno, Larry at at Google back then mark, and Sheryl at Facebook, and then Jack Dorsey at Twitter at at square, all four of them just epitomise the mission, in a way I thought was really compelling. So the mission and the leader, the two reasons I've always chosen companies, and somehow it's led me to pre IPO companies, strangely enough. The MBA question is a good one. And I've basically come to the realization after spending years that the right time to do the right reason to do the MBA and I think the only into the MBA is if you want to change your career. If you want a different career direction than what you're going down, and if that career path is not that new career path that you desire is not available within your current company. So at Juno, for example, I wanted to I knew that I wanted to go into more of product management style role. But ironically, Juno didn't have product managers in fact, that he's an even newer Product Manager, just because I got to do a Juno's, they didn't have the product manager role. I ended up talking to customers, myself as an engineer, and the tech lead ended up doing mock ups didn't clear design function. So I ended up doing the mocks, they had a design function that was for high fidelity designs, but who would do the sketches so I ended up doing actually the sketches of what the product should be, ended up writing the requirement documents, talking to customers and so on. I realized I enjoyed that part of the process much more than I did just building the product. And this led me to say, Well, what what is this role is the role like this I did some research turns out there was a role called product management. And Juno didn't want to have product managers for various philosophical reasons. And the only way I could make that change was by changing companies, which is hard. I always say that you change companies, it's hard to change companies and change tracks or career paths at the same time, can do one or the other. So Juno, there was no opportunity to do that. So I decided to go to business school in order to become Product Manager. And I've seen this happen many times investment bankers or consultants might go to business school to become a product manager or vice versa engineers go to school to become bankers, or venture capitalists or something else. I think that's the number one reason and I think the really the only reason to change career paths if you wanted to go to business school, if you want to change your career track. And you can't do it in a company.


Unknown Speaker  7:46  

you described many things here, what you look for in a company when you joined, and you see a common thread between many different companies who join the mission of the company and the leadership and both of them impressed you. And you also talked about the MBA experience and what can be the best way to use the MBA experience. It's mainly for transitioning from one area to another area in your career. You also became a very active angel investor, you invested in more than hundred companies. How did that come about?


Unknown Speaker  8:14  

With angel investing? I think almost every angel investor I've talked about, has started with one common theme, which is the people that they work with. So in my case, also, it was basically based on a person in this case, there was a guy, Satya Patel, who worked for me at Google. And in early 2017, late 2016, so 2006 2007 about 14 years 13 years ago, he left Google to become a venture capitalists at battery ventures. I kind of knew vaguely what what bad venture capitalists it, obviously I saw it, I knew it, but I didn't really pay much attention until Satya left Google which I thought was a great company and he became a venture capitalist. I was like Satya, "Why are you doing this? Why are you going to be a VC?" Satya is ofcourse now an amazingly successful VC at one of the top seed investors in the valley as part of a firm called Homebrew with co founder Hunter. Satya told me Gokul. I like working in Google. :"What I really like is working across a bunch of different problems. I've got different spaces with different entrepreneurs." And he said, "Well, you know, why don't you try it?" I said, Well, I don't know. I am really busy. He's like, well, "we're leaving our investment in a company called World Golf Tour". It was a virtual golfing game. "Why don't you look at it if you're interested in this thing". And I said, Well, that seems interesting. And so just working with battery and Satya to basically look at this company World Golf tour. And even though I don't play golf, I'm an avid golf watcher. So I love watching golf. I don't have the time to go to the golf course I hit balls occasionally. It is a great entrepreneur, really like the company really like the product itself. And because Satya and battery were investing and eating there aren't decided you don't let me make an investment and at the very least, I'll get to learn more about the article. Have company formation and and stay close. And that's that's what happened. I ended up doing it and even though ultimately the company wasn't a massive success, it returned some small multiple on our money a few years later, was bought by another company. It was bought by Top Golf i remember correctly. It really just got me excited about helping entrepreneurs being involved in early stages of a company formation supporting them. And it's all started with Satya. So, Satya is to either credit or to blame from him becoming an angel investor.


Gopi Rangan  10:32  

I didn't know that watching golf can be a sport. I have to try that out someday. This is very interesting. When you make these angel investments, what I hear is that you're looking to connect with people that are building interesting things. So that kind of sparks some ideas in you and you keep your mind fresh. But what kind of people do you like to invest in? Are the people like you are the people who are very different from you? What do you look for


Unknown Speaker  10:59  

Question. What kind of people do I like to invest in? I think I look for two characteristics of founders. One I use I think Paul Graham came up with this term. I like this a lot. It's called "relentlessly resourceful". Relentlessly resourceful means the founder will do anything possible. to surmount an obstacle, they will never give up. They're going to figure out how to move heaven and earth to get around the problem. Grit is another way to look at it, or just never give up, walk through walls, to whatever it takes. So that determination to just break through walls, they're just hell bent on achieving success, You cannot stop them. You almost feel like you have a gravitational pull towards them when you meet them. And they describe what they've gone through. So you want to, for example, assess this by asking them for examples of tough problems they face in their life, and how they overcome it. It could be in life could be in their career, it could be personal, and you want to see, have they been really receptive Have they use whatever they can to do that, obviously, I don't know. Another way is to see them in action if you work with them. So I look for relentlessly resourceful people. The second thing I look for is founder market fit. By this I mean, the the founder has a unique non obvious insight about the market, non obvious is very important. It can't be something that you are I have just read in TechCrunch, or some blog. And we sell the container market, which is in computer technology infrastructure is is x big, and here's the player that that's not an insight. But if you say the container market is prone to disruption is because this is the weakness in the market. And this is the existing players can be disrupted by this specific need, which customers have within our within our meeting, but it's going to be very tiny today can be much bigger. And here's how I noticed because I was a buyer of these products are a user of these products before. That's an interesting insight that not only people have a specific who've actually encountered this problem in their work or in their life can come up. That's why I think the best way to start a company is not by sitting in a room and iterating and going off ideas with other people bouncing ideas off, but actually to just just work and live life and keep an eye open for problems that you encounter in work or life. And then see, hey, is there an interesting product or company here that can can tackle this problem?


Gopi Rangan  13:27  

Can you pick maybe one or two examples and show how you test for these two things? How entrepreneurs are relentlessly resourceful, and how you look for that founder market fit? What comes through in those conversations?


Unknown Speaker  13:42  

Yeah, let me let me take an example a company called Indigo Faire, it's called Faire fair within an E at the end. So Indigo Faire, the founder was Max Rhodes. Max was a product manager at square. He was instrumental in launching many of the top products. That's cool. And was involved in many, many of the products. But at the at the last part of his career at square, he worked for me on caviar. And he was a product manager on caviar for the consumer product consumer side of caviar as a product lead for it. And Max is someone who literally, when given an outcome or a metric to hit, he will figure out what it takes to hit the metric. For example, we said we need to figure out how to scale user acquisition without spending money on traditional channels. He figured out how to build a referral program and just scaled it so fast so quickly, that we almost almost fell down. We couldn't we couldn't support the volume, we couldn't support that scale. And that's the kind of person that Max is. Every person who's managed him knows that given an outcome given an objective, this person Max is going to do whatever it takes. He's just cannot eat sleep or breathe unless he's just thinking about the problem all the time. He even forced in an art force even got me and board member Roelof at Sequoia to brainstorm about how to how to grow this program. And just, that's the kind of person he is. And so I knew that when he told me he was planning to leave square, a few months out, that I wanted to invest in his company, whatever the company is, and it made sure that he I gave him opportunities, you know, when someone's wanting to leave the company. My philosophy on that is that you don't just say, Well, what what is it get to take I get to you obviously ask them that question, what is what will it take to get you to stay here, but if their mind is made up, you want to support them. And so I said, Max, what can I do to support you? He said, Well, I want a bunch of experiences, different kinds of experiences, besides just product, General Manager, style experience, etc. And so, you know, we gave him those experiences in the last six, nine months at caviar, but he was kind of the GM of our new corporate business unit that we were starting up. He did a great job there. And I think it gave him some good experience. It was good for him and for Caviar. So when he left, so that was a legendary where, you know, we knew I knew from experience that he was the kind of person. But I'll tell you about founder market fit with Max. When he left the first six to nine months after leaving square, he basically left and he was basically brainstorming a bunch of ideas, exactly the wrong way to go. But in my opinion, he was brainstorming, there was an auto insurance idea that he had another idea around, you know, something in the dental space. You know, it's basically heard about the problem for someone else. And I think he was exploring it. It was all very academic. And I think that's why I'm very happy. He didn't start a company on any of those things, any of those things. What happened at the end is that he realized he was running a business all through square. He had graduated from Yale many years ago before Square, and he was running the business he was he started an umbrella company. It would build these custom umbrellas, really high quality umbrellas. I don't know how he got into that. But he was running this company as a side side business side, all through square and the big challenge he faces is an umbrella maker was that it was very hard for him to find, beyond his own website, retail stores to stock this umbrella. And how does he go and sell to retail stores? It's very hard. He's done. He has a job at squeezed is making umbrellas. How did you find retailers? And how do retailers find him? Very hard. He knew he has a good quality product needs to get connected retailers. So he thought, Hey, you know, maybe like me, I have this pain point. Why don't I work on something? Is there enough other people have this pain point of them being manufacturers or being able to reach retailers? And the more he dug deeper into it, he learned Yes, there's tons of manufacturers were able to connect with retailers. They would love to have the products talk to retailers. They're not connected to them. And then, because he had been at square, he was able to connect to retailers, local retailers and the retailers had exact same problem, which is they don't know which products to stock. They don't know how to get access to products. And they basically are worried that if they stock a product the reason the fundamental reason retailers would not stock Max's product. Because what if it doesn't sell? What if it doesn't sell, then they're stuck with inventory that basically they can't sell. And they have to write it off. It's you know, for small retailers, it's very painful to do that impossible in your business. So the only stock, the same old, same old versus trying, trying, you know, some new products, which could be good for sales. So that's the problem. He tried to he said, You know, I'm going to solve this because I feel I've faced it myself for years. And that was the original Faire, or Indigo Faire, which became Faire later. And so that's a great example of founder market fit is solving a problem, you felt deeply. And he didn't realize he had this problem. He was just taking it as granted. It's when he really said I'm going to start a company. And he was doing some all these other ideas. I realized, you know what, I have this problem, crazy problem, painful problem. I should solve this problem.


Unknown Speaker  18:46  

This is very interesting. The part that you mentioned where he went through an academic exercise after he decided that he wanted to start a company, and he went through a lot of ideas in researching those ideas eventually landed on something that he was already passionate about. And that's a great fit for a founder where the founder already knows the space enough to know that there is some possibility for a creative solution. So that I resonate with that. And I see that quite often with startups. But you have made more than 100 angel investments. Are they all teams with people that worked with you in the past? Or do you also invest in companies that you haven't met the founders? You haven't had a strong relationship with them?


Gokul Rajaram  19:28  

No, I think they're absolutely impossible, because without with that many investments, there's no way that I could have invested only in founders that work for me or work with me. Let me see. Yes, I think a good company there is a company called email HMLAG H. And the reason I got to know this company, was when I joined square after about a few months of getting on boarded to square and settling down. I basically would go and talk to different teams at square and and the risk team or the payments team. Well, you know, we basically do these checks. One of the big challenges that most payment companies have is how do you when somebody applies for a payments account - How do you make sure they are not a fraudulent? You know, they're not just a fraudster who's setting up an account to get access to, you know, a card reader to basically then defraud customers or whatever the case may be. And so fraud and risk and making sure we know identity of a person so that they can't sign up with many different identities very, very important. And email addresses a very easy way for people to kind of defraud you and you can create lots of email address a very easy vector. And so email age, I mean, one of the tools that the square payments and an onboarding team was raving about was a company called email edge, which was a tool which allows you to send an email, you get an email so someone applies for square and square will send an email address to email, age. Email age returns a risk score for that email, and letting the address code. It tells you hey, you know whether or not the how, what is the degree of risk on a zero to 100 scale off about the scale exactly what if it's very risky, or a risky, low risk, etc. They were almost complaining about the product because they were like, it's such a good product. But it's almost a lock in product. Because the more data you're sending to them, the more they're getting smarter. Because all the companies that they worked with, they were apparently working all the companies had, the reason they were able to do this is because they built a database of email addresses and risk profiles from all the customers. So in some ways, it's a self perpetuating data network, database, which email address and this goes, which is all being fed by their customers. And so, in order to access a database, you have to also give back your risk score. So squared had to give back, you know, what did I learn about this email address was risky, or not any signals that we captured, and so email age was over time able to build this great defensible asset. And so I heard about this and I was thinking that's interesting. And then just a few weeks later, son independently Felicis Ventures, which is a venture capital firm, emailed me saying. Hey, we're leading around in this fun company called email age. Would you like to join? There's some space for angels, like, hang on Emailage? Ah, you mean the email risk company? They were like, yeah, it's like, oh my gosh, you know, this is a company that used by square. And so it was, you know, there, I didn't even meet the founder, but the product and the customer love for it was so strong. And I did get to meet the founder after I committed. I mean, after I had this, I obviously always meet the founder. But I knew that the product was amazing. And that is a reflection on the founder that built a product, they've got a company like Square, which is a very conservative company in terms of adopting something that's in the payments flow. That's a pretty high bar there. But still, they were using it had been using it and so kudos to Ray for billing me. You know, that's another example of where, you know, that's the opposite example, I didn't know the founder at all, but because I had unique insight into the into the founder market, which has evidence by the product itself, it was a post product company or pre product company. And and basically I invested in them.


Unknown Speaker  23:08  

Or you, you're talking about something that's very unusual. Often we hear that, especially at angel investment stages, when there's really not much to show. It's the charm of the entrepreneur that wows investors and others also other early believers. But here in this case, you never met the entrepreneur until you mentally formed the conviction on this. It's the product and the solution, the objective view on what it can do. That really impressed you.


Gokul Rajaram  23:38  

Yes, exactly.


Unknown Speaker  23:39  

That's not the usual story we hear with angel investments. It's very,


Gokul Rajaram  23:44  

It's different stages, you know, different stages.


Gopi Rangan  23:47  

How's the portfolio doing? You've made 100 angel investments, what expectations do you set for entrepreneurs, when you make those investments Do you expect to generate huge returns? Is that a motivation, in addition to other things you mentioned


Gokul Rajaram  23:58  

For me the motivation is threefold. I think everyone does angel investing for different reasons. But I think if it's done only for financial reasons, I don't think it's, you know, it's the right frame of mind, I think you won't be a great angel investor because angel investment, there's a lot of work needed and, and it's also been part of a community. And if it's, if you're to focus on financial returns, entrepreneurs get turned off by that. So I do it for three reasons. Financial is the last one making good returns, but it's the last one. The first one really is around, giving back to the community and being part of the community, I want to be part of the entrepreneurial community. I want to that's what I really enjoy doing. And this is my way to give back to the entrepreneurs I know I support and I want to keep doing that regardless of I made investments that I am almost certain that the company will maybe will not be a massive outcome or anything else like that. But I know the entrepreneur I want to support them, and for various reasons and and I will do that. So that's the number one thing being giving back. Being part of the entrepreneur ecosystem being logged onto a company second one is learning. For me learning matters a lot. Every company I've worked with every founder I work with, I try to see what can I learn from them that I can bring back into my day job. But I do work at Doordash, for example, and I do see a lot of things that can benefit every company I've been at that can benefit from my angel investments and from companies I've worked with so and then financial returns. And so I think every one of us who's doing angel investing has to think about what really matters and why are they in it but financial investing or returns as the number one thing is the wrong thing. I think it's probably the number two number three things but something like learning giving back etc is probably the top thing you should focus on.


Gopi Rangan  25:41  

How are you doing on all those metrics with your portfolio?


Gokul Rajaram  25:46  

I think being an active angel investor has essentially been I feel I looked at my ... Y Combinator has a has a ranking of angel investors and reading aged investors other and the rich will be divided combinator, startup some of mine, I've made a bunch of investment YC companies. And so someone read it out to me and I was quite happy to see the comments that people had made. So it makes me feel that I am contributing and I am a valuable member of the value added member I should say, of the entrepreneur community. On the second front learnings I feel I, I feel that my job, my ability to do my job well has been massively increased and improved as a result of this and I have brought tons of insights back to my job and and my company has is out of it. I feel that's probably the strongest of all, on the financial front isn't very well, I think the obviously the older cohorts I think of angel investing cohorts as as annual cohorts. So I'll track it as one of the all the angel investments I made in say 2010 2011 2012 2013 each year separately, and look at the cohort together. It's too hard to look at one company as a cohort overall, each of the cohorts overall has outperformed my benchmark is city, you know, s&p 500 are one of the stock benchmarks. And it has massively outperformed those benchmarks. Of course, liquidity, you know, many times things are on paper. So the older cohorts have had liquidity and have performed from an actual realized return, the younger quarter have performed but are still much of it ison paper. So we'll see how it goes when it actually comes to returning.


Gopi Rangan  27:24  

Oh, that's really nice to hear. As an angel investor, you take the highest risk in the journey of supporting an entrepreneur. So this is this is one of the most important roles that the startup ecosystem values. So you're doing a fantastic service to the community by actively playing a role as an angel investor. Let me try to summarize what we talked about now and then we'll move to the next part of it. You started with how you started as an engineer, became a product manager and then became an executive. And along the way you had your own startups stints. It was very clear in the beginning that you you made it clear that you are a Longhorn fan and you're a forever life Longhorn fan. But you also went through an MBA experience, which helped you transition your career from engineering to more into deeper into product management, and especially opening opportunities at companies like Google, Facebook, and later at Square. The examples that you gave, which starting with Juno, how mission was very important, and the leadership is also very important. The two are the qualities that you look for in any company before you consider joining them. That's a great metric to have. I really like the two filters that you use when you look for angel investments you mentioned, relentlessly resourceful. And the second is founder market fit. The examples that you gave through Indigo fare and Emailage showed those type of things that you look for and what what goes on in those conversations. That brings to front all the qualities that will help you form a conviction. You did mention watching golf as a sport, I had to resist the urge to pull your leg on that one. But I am going to spend some time to understand is how interesting that is. But it's nice to see that you, you, you make something out of everything where you you are looking for interesting things outside what you normally do. And the towards the end, you mentioned the three qualities you look for when you're the metrics that you set for yourself with your own Angel portfolio, how you can contribute to the community, how you can learn and how you can generate financial returns. And it was very clear that financial returns is not the main motivation. But we can certainly talk more for a longer time. But I want to switch to the next segment where I asked you about community leadership. Is there a nonprofit organization that you're passionate about? And why?


Unknown Speaker  29:55  

Yes, so I contribute to many one that I we've gotten involved with Volunteering and also contribute as an organization called Second Harvest of Silicon Valley. Second Harvest, supported both through giving, as well as through volunteering. Its work is about making sure that people have access to the most basic need. If you look at Maslow's hierarchy, most basic thing which is food, it is one of the largest food banks in the nation, and serves food provides food to more than a quarter of a million people every month. Due to COVID, now their work is even more important as people who have lost their jobs become homeless, etc. And so more than half the people that serve our kids and seniors, I've been very impressed with their mission, with their execution, and overall hope to be involved in over over time. I've developed an appreciation of food banks across the country and the critical role they play.


Unknown Speaker  30:51  

You would think that Silicon Valley, which is one of the most prosperous places in the world, would take care of everyone around us. But, it is sad to see a lot of homelessness and a lot of people struggling for food. It's great that you, you support this organization. Gokul, thank you so much for your time. A lot of insights in this episode. It's always great to talk to you and learn from your experience.


Gokul Rajaram  31:16  

Gopi like I said, it's I just talking to you as a treat, and I'm excited to be part of this podcast and thank you very much for having me here.


Gopi Rangan  31:27  

Thank you for listening to the sure shot entrepreneur. I hope you enjoyed listening to real life stories about early believers supporting ambitious entrepreneurs. Please subscribe to the podcast and post a review. Your comments will help other entrepreneurs find this podcast. I look forward to catching you at the next episode.