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Sridhar Vembu: Silicon Valley’s Unknown Indian

Posted on Tuesday, Jan 22nd 2008

Marc Benioff is afraid of him. Mike Moritz wants to invest in him.

Chances are, you have never heard of Sridhar Vembu, founder and CEO of AdventNet, the company behind newly launched productivity suite, Zoho.

Sridhar is a low-profile guy if there ever was one. He is also cheap as hell. Now, if you know anything about being an entrepreneur, you know that frugality is a virtue. A tremendous virtue.

Sridhar has stretched this virtue to extreme limits, and added layers and layers of creativity upon it.

The result? A100% bootstrapped $40 Million a year business that sends $1 Million to the bank every month in profits.

Doing what, you are wondering.

Selling network management tools, to be precise. But doing so with a unique twist. Sridhar has 600 people in Chennai, India, and 8 in Silicon Valley. Imagine what that does to the cost structure?

Not only that, in India, Sridhar’s operation does not hire engineers with high-flying IIT degrees, thereby squeezing the cost-advantage. No. “We hire young professionals whom others disregard. We don’t look at colleges, degrees or grades. Not everyone in India comes from a socio-economic background to get the opportunity to go to a top ranking engineering school, but many are really smart regardless. We even go to poor high-schools, and hire those kids who are bright, but are not going to college due to pressure to start making money right away. They need to support their families. We train them, and in 9 months, they produce at the level of college grads. Their resumes are not as marketable, but I tell you, these kids can code just as well as the rest. Often, better.”

So, with that rather unique workforce of 600 engineers, Sridhar has built not only an excellent cash-cow network tools business, he has recently launched Zoho, which is getting a lot of buzz in the Web 2.0 community.

Why?

Well, Zoho does everything that you would do with Microsoft Office. It also has a hosted Customer Relationship Management (CRM) service that is free for very small companies, and only costs $10 per user per month for larger ones. It competes with Salesforce.com, which charges $65 per user per month.

Marc Benioff, CEO of Salesforce.com, has made an acquisition offer. Marc is nervous, since Salesforce.com’s SG&A costs are high, eating up most of his earnings. Can he afford to compete, if Zoho undercuts him at such a dramatic scale?

Sridhar has turned Benioff down.

Many VCs wants to invest. Sridhar’s situation is one that every entrepreneur dreams of. You don’t need money. VCs are chasing you.

Freedom is delicious, and Sridhar knows it.

Sridhar Vembu has a very exciting opportunity ahead of him. What the Chinese have done in manufacturing, the Indians ought to do in software: undercut the American and European companies drastically.

So far, Sridhar is the only Indian entrepreneur who has been able to execute on this premise. He has a big vision, and so far, has executed flawlessly.

Watch this guy!

[Read my interview with Sridhar Vembu, an entrepreneurship case study worth understanding.]

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Sridhar Vembu has truly given us a product company to speak of in India, where all you get to hear about nowadays are the service biggies and a bunch of ‘me-too’ Web2.0 startups.

However, I believe that there is this one more Indian startup in the Enterprise 2.0 sphere that you’ll be hearing of soon.

Wait and watch…

Shyam Kumar Wednesday, January 23, 2008 at 4:20 AM PT

I had the privilege of knowing about Zoho for quite some time now. Even before the Googlw Docs days. In fact, I was of the opinion that Google had actually mooched off the idea from Zoho.
I have also heard a podcast interview of Sridhar Vembhu. Truly inspiring and humble person !!

Raseel Wednesday, January 23, 2008 at 1:16 PM PT

I agree that frugality is a virtue for an entrepreneur, but I am not so sure about the tendency to reject investments from professional investors. VCs clearly bring a lot more to the table than just capital. There are valid reasons for calling such capital “smart money” in the industry. I wonder whether Zoho might actually benefit from an affiliation with a top-tier VC firm to get to the next level of growth and success even if they don’t immediately need the extra cash. Given their position, they should be able to do this without relinquishing control.
Sridhar has been successful thus far, but having a set of seasoned professional with skin in the game to turn to for advice on strategic issues will prove invaluable.

Sudarshan Dharmapuri Wednesday, January 23, 2008 at 1:58 PM PT

Sudarshan,

I don’t know your experience in this business, but I can tell you, in Sridhar’s shoes, I would not take outside funding.

Sramana

Sramana Mitra Wednesday, January 23, 2008 at 5:41 PM PT

Sudarshan, I agree with Sramana. While VCs not only bring funds to the startup, they take two things that are very dear to every entrepreneur: ownership and control.

What do you thing the VCs demands would be? “Increase your fees! $ 10/month is cheap, you (we, in other words) could make more money”

Or what about having to share your revenue with people you did not absolutely need in the first place?

If anyone can get an idea off the ground and make it to $ 1 million a month, they should just relax.

That’s in the event that the ride is still smooth though… if a hungry competitors appear from the woodwork in masses, capital might be needed.

But as any business person should know, success breeds imitators so while growing the start-up a specific counter-attack plan should be in place.

Jean Biri Thursday, January 24, 2008 at 1:34 AM PT

The fundamental issue here is whether an entrepreneur should be focused on a) maximizing his/her share of the pie or b) growing the size of the pie. Sridhar’s approach and your arguments seem to support the former objective.

Here’s my assessment of the situation — Either growth opportunities don’t exist beyond what they are able to finance from their operating cash flow and they really don’t need outside financing OR there are perfectly valid growth opportunities that are going unfunded because of their reluctance to open the doors for outside investors. I will let you decide which one is worse.

The emphasis on short term profitability may end up hurting longer term growth prospects. At the end of the day, the founders will have to decide whether they want to build a “lifestyle” business that can be handed down to their offspring or create a truly world class company that can compete on a global scale with the likes of Microsoft and SFDC.

Sudarshan Dharmapuri Friday, January 25, 2008 at 1:00 PM PT

Sudarshan,

Good points. I am happy to see that this “case study” is catalyzing the right questions.

One thing I can tell you, Sridhar doesn’t have a “lifestyle” business. At these kinds of sizes, you don’t usually have “lifestyle” businesses. And I know for a fact that Sridhar lives a very modest life.

A good comparable that you should look at is Webex. Subrah Iyer bootstrapped the company for a while, and took VC money way later. I would say Webex became a worldclass innovation, before being sold to Cisco for over $3 Billion.

The decision to take outside money remains open for a company like Sridhar’s. There is no need to rush into this decision.

Sramana Mitra Friday, January 25, 2008 at 1:21 PM PT

[…] particular piece was preceded by my Sridhar Vembu story, in which I showed readers an example of an entrepreneur who has been creative in seeking solutions […]

India’s Labor Arbitrage Strategy - Sramana Mitra on Strategy Monday, March 3, 2008 at 12:20 PM PT

Great entrepreneur. Keep up the good work.
Mr. Sridhar must never sell the company. Just keep it growing and encourage others.

Parag Belan Sunday, April 13, 2008 at 12:18 AM PT

[…] Salesforce for Google Apps, it leverages the Force.com Platform and Google’s open APIs. Sridhar Vembu, CEO of Adventnet, whose company also competes with both Salesforce.com and Google wit… yesterday wrote a scathing review of this move where he challenged Salesforce.com’s […]

Why is Salesforce.com’s S&M Expense so High? - Sramana Mitra on Strategy Tuesday, April 15, 2008 at 9:42 AM PT

I am truly grateful to Sridhar Vembu for
giving my grandson John the opportunity
to learn software applications in the Advent Net
development Center in Chennai.

Ingrid Stogniew

Ingrid Stogniew Thursday, April 23, 2009 at 2:46 PM PT

[…] One of the best non-business software products out there is Zoho by AdventNet, which is run by Sridhar Vembu with 600+ people in Chennai, […]

Are Indian Software Developers “Code Donkeys”? | Thought Clusters Tuesday, June 30, 2009 at 7:21 AM PT

[…] intrigued me the most is the story of how the founder, Sridhar Vembu, runs the company.  I have not met the guy personally but would love to some day, because he is […]

Zoho, an unassuming success story « Data Driven with a Human Touch Sunday, August 23, 2009 at 7:23 AM PT

one more person is doing same kind of venture in VLSI from small village in north karnataka india.
its good to see technology is penetrating in rural areas and even poor people can dream to became techie’s…
link:
http://www.deccanherald.com/content/39950/talking-revolution.html

Gururaj Thursday, December 10, 2009 at 11:29 PM PT

Iam (S.Raman ,teacher of Mr. Sridhar vembu for plus two maths) very proud of the founder and CEO of AdventNet. I have seen many of my students are good emploees of dream companies in India and abroad. But Mr.Sridhar vembu is a wonderful employer for more than 600 people in chennai. He has achieved his goal in uplifting the standard of life of middle class people. God bless you and your family members.

S.Raman Saturday, February 6, 2010 at 3:37 AM PT

His plans are amazing.. Being an Indian. He ROCKS around the globe!

Jones Tuesday, February 9, 2010 at 2:50 PM PT

[…] on the subject of cloud computing but our meeting with Raju Vegesna, chief evangelist for Zoho and Sridhar Vembu, the firm’s founder and CEO was very refreshing and led to some very interesting thoughts and […]

Zoho CEO predicts the end of offline software « Marketing & Innovation Tuesday, June 1, 2010 at 9:41 PM PT

[…] on the subject of cloud computing but our meeting with Raju Vegesna, chief evangelist for Zoho and Sridhar Vembu, the firm’s founder and CEO was very refreshing and led to some very interesting thoughts and […]

Zoho CEO predicts the end of offline software Thursday, July 6, 2017 at 10:15 PM PT

[…] on the subject of cloud computing but our meeting with Raju Vegesna, chief evangelist for Zoho and Sridhar Vembu, the firm’s founder and CEO was very refreshing and led to some very interesting thoughts and […]

Zoho CEO predicts the end of offline software Thursday, July 6, 2017 at 10:15 PM PT