SM: During that timeframe, what did you think were the bright flashing lights of OpenSource?
JR: It was all about hope and belief. That is why in the fall of 2003 I decided to go for it. I asked my wife for six months to chase this idea. I knew I could get a job somewhere else. I wanted to know if we could do some radical things. I spent hundreds of hours on the web. You are writing what business will be like in 10 years.
I started looking at business two ways. There is the traditional way, which is to hire engineers, get product managers, write your MRD, and because you are the smartest people on earth you build it in secret and launch it with an expensive sales force. I started to question that process. Does that manufacturing process really result in the highest quality, most innovative software on the planet?
SM: When you said you started questioning this, was it a question you were posing to yourself or were you starting to poke people to gather momentum as well?
JR: It was a big debate at the time, but mostly it was conflict within myself. I think entrepreneurs need to have blind ambition. If you are not blind you are not going to do it. At times for me it was really looking at this industry I had been in for three years, and the multiple companies I had worked at who were all within the same tier in the software space. A lot of people will get an engineering degree and work at a lot of different companies in different types of positions. That is interesting, but I focused on one piece of the stack, which was the revenue stream of the company.
I have always felt that the way senior executives treat their customers and run their business, the business processes that they implement and the unique things they do which allow them to get high margin business are all about the way they manage their customers and revenue stream. When it came to OpenSource, at least in 2003, the question was if OpenSource applied to anything other than operating systems, programming languages and databases. The mentality was that geeks were not going to be interested in things which solved business problems.
SM: So in the 2003 and 2004, there were no OpenSource applications?
JR: There were lots of little projects, but not a single startup had been funded by a top tier VC. I made up my mind in 2003 and wrote a business plan that said that I believe if we wrote great software, and we put it on the web with an OpenSource license thus giving it away free, that we would know two things. First, we would know if the software was any good. If you can’t give it away nobody is going to buy it. Second, I would know whether I was wasting my time or not.
Around the same time MySQL started getting some traction. I convinced two strong engineers at E.piphany to join me. We all resigned together and the three started Sugar CRM on April 10 2004 without any angel money or VC money. It was the three of us, each in his own house with headphones on, writing and designing code and posting it up on SourceForge.net. We did that for three months.
SM: What was the architecture of your software? Did you originally start out to do a CRM application?
JR: Absolutely. The idea was to build what we believed to be the beginnings of a new generation of CRM. We built it on a language that nobody owns, which was PHP. It was also cross platform, and hopefully the three of us had learned something over the course of our careers so we wrote the initial 1.0. We wanted to get to a critical mass of features as fast as possible. We had all worked together in the past, and we all worked at this full time. We all pulled 100-hour weeks. We were laser focused when we did this. We wanted to put code up there and write the application.
SugarCRM took off and people started downloading it from all over the world. We started seeing 40-50 downloads per day.
SM: What were they downloading?
JR: Our entire code base.
SM: You did everything in a single code base?
JR: It was modular, but we wrote it all from scratch. In most OpenSource projects people take other people’s code. We wrote ours entirely on our own. We did not take anybody else’s code, so that made it unique. We chose to give away everything we wrote from scratch. Meanwhile we had mortgage payments and three pregnant wives. We had no income, and we were giving away everything we were working on.