Episode 148 / December 19, 2021

Sabeer Bhatia on building Hotmail, acquisition from Microsoft and the journey ahead

31 min

Episode 148 / December 19, 2021

Sabeer Bhatia on building Hotmail, acquisition from Microsoft and the journey ahead

31 min
Listen on

4.03 billion people!

That’s the most recent reported number of email users worldwide. No platform even comes close to the potential reach of email. The latest Facebook statistics give them over 2.8 billion monthly active users.

As of today there are almost 1 billion and 700 thousand active users of Gmail, being of the most popular email service providers. But it was launched on 1 April 2004. Prior to Gmail, the tech trend of that era was Hotmail, and if you had a Hotmail account, that was something worth showing-off.

Founded in 1996, by the guest of our today’s episode Sabeer Bhatia and his co-founder Jack Smith, Hotmail was the world’s first web-based email when it launched.

Back then, they sold it two years later to Microsoft for an estimated $400m. Since then Sabeer, became the face of tech entrepreneurship, and has been inspiring generations.

Recently last year, in 2020, he’s back with an idea, which might lead to another tech revolution, named ShowReel. Consider this as a short-video version of Linkedin, where your profile, all your posts, and feed will have just videos.

During the episode, Sabeer talks about his vision with Hotmail, what are his current plans with Showreel, what all founders can learn from his entrepreneurship journey and much more.

Notes –

01:02 – Right timing as an entrepreneur

03:06 – What led to Hotmail’s acquisition?

09:55 – His journey as an entrepreneur & investor post-acquisition

11:27 – Problem statements being solved by ShowReel

17:21 – His opinion about Web 3.0

23:47 – “Only crazy entrepreneurs change the world.”


Read the full transcript here


Siddhartha Ahluwalia 00:00

Hi, This is Siddhartha Ahluwalia. Welcome to the 100x entrepreneur Podcast. Today, I have with me Sabeer Bhatia, founder of Hotmail, which was acquired by Microsoft for 500 million. It was one of the largest technical acquisitions of that time. Sabeer had last year begin his entrepreneurial quest, again, with Show Reel. Welcome Sabeer to the podcast.


Sabeer Bhatia 00:24

Thank you.


Siddhartha Ahluwalia 00:27

Sabeer, In this podcast, we love to discuss your entrepreneurial journey in the last three decades. So, I believe, you know, and the biggest contributor to Hotmail success, along with the innovation that you build was the timing, being at the right place at the right time with a cutting edge technology for that time. How do entrepreneurs get a sense of timing in their life? Because sometimes they are ahead, sometimes they are behind. Right, just the right timing and the right market?


Sabeer Bhatia 01:07

so that’s a very difficult question, obviously, because it is a combination of where the technology is, how much it has evolved. And a little bit of gut instinct about what the future can be coupled with luck, play no luck. I’ve seen so many companies that were kind of ahead of their time. And five years later, or 10 years later, not those companies, but other companies that were doing exactly the same thing, just because bandwidth became more available, just blossom that became massive companies that are in the billions of dollars. And sometimes it’s even the market has to mature. You know, for example, I would not have predicted the growth of Flipkart and Amazon in India, because, like every other naysayer, I also felt that the last mile delivery problem was a very difficult one in India, where, you could not trust people with packages, and those things could get lost. But look how Flipkart and Amazon have solved that problem. And, gone on to create multibillion dollar companies in India. So I think timing, the state of infrastructure, internet bandwidth, all these play a role in determining the success of a startup.


Siddhartha Ahluwalia 02:53

So let’s say if we go back 25 years, right? When you build Hotmail, what was the premise that, you know, that led to acquisition? What were you building? What was the scale that was achieved? And was the technology ahead of a time when you were working on it?


Sabeer Bhatia 03:13

Yeah, at that time, it was very simple. we solved a problem. And the problem was getting access to email from any browser in the whole world. what we did is made email available on the web. And it was the early days of the Internet, we had achieved, like, we had caught about 10 million subscribers, when the total size of the internet population was about maybe 30 or 40 million, and everything was just growing, you know, the internet population, Hotmail growth, and that’s where we were.


Siddhartha Ahluwalia 03:58

And before Hotmail came, the Internet was not on web, basically the email was the client was not on web.


Sabeer Bhatia 04:08

That’s right. There was specific clients that like Outlook And Eudora in those days. Netscape had its own Navigator client, which you use to access email. So you had to configure it to a particular server at the backend, and you download the email in that client. It was not web. It was not web based. We really brought email to the web.


Siddhartha Ahluwalia 04:41

And you made it accessible across multiple browsers?


Sabeer Bhatia 04:46

Yeah, all browsers, any form of web because it was HTML based. That’s why we made it available on on the web.


Siddhartha Ahluwalia 04:59

Is very difficult for entrepreneurs to hold their nerve during acquisitions. I have been through that phase multiple times, right? Three,four acquisition offers for me, they were much smaller. And in your case, when Microsoft and Bill Gates were in front of you, how were you able to hold your nerve, and both were successful $500 million acquisition, which was very large. For that time, I think, in today’s economy, that could somewhere be between 5 to $10 billion of that worth.


Sabeer Bhatia 05:36

it’s a part of it is you have to believe in what you’re doing. You have to believe that you have value. And, there is a little bit of understanding how high your the acquirer will go with their offer. So I think it’s a combination of personal instinct. And, belief in how big your user base is and how much you’re scaling, and how badly the person who’s acquiring you wants what you’re doing. So, it’s a combination of all of it. today, of course, everything is much better established. Because you have a baseline for acquisition, where you know, that there is a certain value per subscriber, whether that is $40, or $100, or $200, depends on how much data you have on the end subscriber.


Siddhartha Ahluwalia 06:56

And at that time, did you have any plan B read, if acquisition didnt workout?


Sabeer Bhatia 07:05

Plan B was to continue growing the company the way it was. And to continue to add subscribers and go on our independent path, we were very fortunate that our investors gave us more funding so that we could last another two years, without having to worry about running out of capital, if you will.


Siddhartha Ahluwalia 07:35

And you were the first free email client also if I’m right?


Sabeer Bhatia 07:40

yes, we were the first free web based email service. There was another company called Juno that tried to provide full internet service, and email and everything, but their costs were way too high. And they were not able to scale as much as we were.


Siddhartha Ahluwalia 08:02

And you also called the father of email. Because you live in the era where you know, the Gmail will build on top of you. And today, even people are very proud of their Hotmail addresses.


Sabeer Bhatia 08:17

Yeah, no, I should not be called the father of email, because email existed way back since 1968-69. I think, yeah. But perhaps web based email was our creation. And today, pretty much the whole world uses email through the web.


Siddhartha Ahluwalia 08:40

So if I’m right, you know, please help me correct. You know, if you fall for access in the internet economy, you can create tremendous amounts of value, is the statement Correct?


Sabeer Bhatia 08:56

You can create tremendous amount of value if you build anything on the internet or on the mobile devices that is useful to a large section of the people. It doesn’t matter what it is that you build, if it is, whether it is search, or it is, you know, email or it’s, you know, chat, or it’s like a Snapchat, whatever, as long as people find it useful. You have a user base, once you’ve got a user base, monetization is not should not be the primary goal. primary goal should be to find a large enough user base.


Siddhartha Ahluwalia 09:41

How has your journey been in the in the last two and a half decades, post acquisition of Hotmail?


Sabeer Bhatia 09:52

it’s been interesting, ups and downs have, tried my hand at a few things. I’ve invested in it in a number of companies. I’ve seen some companies do very well. And what fascinates me is that the beauty of the internet is like a moving train, you can get on anytime. And, of course, when you want to get onto this moving train, again, you have to be aware of what the state of art at that point in time is. And that’s what I found with, of course, Hotmail and now surely, at the end of the day, you know, you’ve got to solve some problem. And first, the problem that we solved with Hotmail was ubiquitous access, to your personal email. And with showreel, what I’m really saying is, video is going to be the future of communication, and use of video, for more socially, useful, I should say, purposes, rather than use of video for entertainment, which itself is a whole category, but that’s been very well taken care of the YouTubes, and TikTok of the world.


Siddhartha Ahluwalia 11:28

can you tell us more about showreel when was the app launched, which market is serving, and was the primary use case that you’re trying to solve to begin with?


Sabeer Bhatia 11:37

it’s a one to many video conversation app, if you will. And through conversations, you can get people’s opinions on different things. It’s obviously through conversations, we help people build professional profiles of their own, we help people build personal profiles of their own. And if people have startup ideas, we help people build a startup pitch. I mean, you’ve been an entrepreneur and you know that a startup pitch is critical and key to getting kind of funding so that your idea can you know, take wings and for the pitch, the kind of questions that you need to answer are pretty much similar, you know, found the question that venture capitalist asks you are very similar. And, you know, that’s what showreel enables people to build profiles that are useful to other people all and express their their thought processes through video.


Siddhartha Ahluwalia 13:04

And how did you figure out that this is the right problem to solve and you are launching in India instead of US, this is the right market, India the right market for showreel to begin with?


Sabeer Bhatia 13:19

if you look at what the pandemic did, it rendered a billion people unemployed. And I think given India size, the largest percentage of the unemployed people happen to be in India, probably like 200 or 300 million. And it made sense that, the problem is more acute over there. Luckily for us, in the United States, the government came in with a massive stimulus package. So, the unemployed people are also living on government, provided aid. So, the the pandemic hasn’t hit people as badly over here as it has people in India. So, just made sense. And India is also a very interesting market, because it has more smartphones, it has than the entire US population. So, the best bang for your buck to launch something of this soul is really India.


Siddhartha Ahluwalia 14:37

you have been a technology innovator for the last three decades, what have been the biggest technology shifts that you have observed that created trillion dollars of wealth during these and some of which you are also part of as an investor or advisor.


Sabeer Bhatia 14:56

So, there are obviously the mobile devices has been huge that has opened up a market of a few billion, 4 or 5 billion smartphones around the world. Then there is the entire artificial intelligence driven set of companies that are changing small basic decisions that humans make. They’re all being now data driven, and more intelligent. And based on data. I’ve obviously seen how the transportation industry has been completely upended by the likes of Uber, right? Fantastic simple idea, yet, just the whole industry is upside down. And there is there obviously, enormous progress that is made in the underlying technologies for cloud based companies, whether it is moving massive amounts of data. And, the need for data is just expanding, globally, and not every company can be a data company. So it has to fall back on some sort of a cloud, to store all of its data, rather than building data centres on their own. So it’s just interesting ways of thinking about things, then, of course, there’s the whole electric car revolution, pretty much every car company now is looking to go electric in the next 10 years, or, if not sooner. And Tesla’s shown that it’s going to be a trillion dollars in market cap, because it has more data than anybody else. So I think in all of this game, ultimately, the companies that will win are the ones that are going to be sitting on the most amount of data.


Siddhartha Ahluwalia 17:08

And are you also looking at web 3.0, which, which can bring around massive amounts of value and production, and then a wealth for entrepreneurs?


Sabeer Bhatia 17:21

You know, web 3.0 is just I think, faster, better version of web 2.0. You know, it’s like 5g connectivity, and, very high speed data transfers. But essentially, it’ll just make the experience of the end subscriber richer, which is all good. But I think there has to be some underlying problem that entrepreneurs need to find to solve. And if they can do that, then scale comes relatively easily just given that there are 5 billion smartphones on the planet today.


Siddhartha Ahluwalia 18:04

So you had a massive, success at that point in time. And since then, has it been a pressure for you have external expectations or even internal expectations to create that kind of an outcome since Hotmail?


Sabeer Bhatia 18:22

So I don’t look at my life as, like pressure. But I love the journey of the first. You know, it was a Cinderella story, the whole heart man journey. And so now, it’s, for me, it’s the journey that is more important than the outcome. So I am still looking for, and part of the showreel experience has been, I’m kind of in a way, living that same journey again, you know, in the very early phases, and that’s what is interesting, it’s not so much the outcome that I’m worried about whatever the outcome may be, but the journey is very, very important to me.


Siddhartha Ahluwalia 19:22

if you have to go back in time, right? What are your biggest five key learnings that you have to summarise for entrepreneurs who are listening to a podcast from your Hotmail journey?


Sabeer Bhatia 19:34

Okay, so number one is very important is find out what problem you’re solving. If you don’t have a problem, then you don’t have a company. Make sure that you do enough tests and you instinctively know that the problem you’re solving is a large enough problem for a lot of, is not a local problem. Localised, one company two company problem, or one person two problem or is a problem that can make a difference to a billion people or so, or at least 10s of millions, if not hundreds of millions of people. Three very important, make sure you find the right team to work with, you have to have a team of individuals who believe in what they’re doing that is more important, rather than a team of individuals who join you, because they want to get rich. that’s a recipe for disaster. And what I’ve seen is great entrepreneurs have a long term vision, and they are patient, they are not there to make a quick dollar, tomorrow day after or, you know, quickly. I mean, a great example is Jeff Bezos 17 years, he kept, Amazon unprofitable, but had a vision that lets, the harder the problem, the better off we are, you know, if it needs, building massive warehouses for distribution, let’s do it, let’s solve the problem, because we’re not solving the problem only for tomorrow, but we’re solving the problem for 10 years down the road. And that kind of vision has enabled him to become the most valuable company on the planet. I mean, simply, you know, I tip my hat off to him, because he kept at it for decades. And that’s the kind of vision you need, in order to succeed in the long run.


Siddhartha Ahluwalia 21:46

entrepreneurs just have one shot, or like, they can take one bet. And coming back to the question of, you know, timing, and being in the right market, but companies like Apple, Microsoft, Google, Facebook, you know, they can take multiple bets. So for example, you know, they do multiple acquisitions, and few of which workout, right? So how can entrepreneur become better at, but, choosing the right bet to take.


Sabeer Bhatia 22:17

It’s, like I said, it’s something inside of you has to click, and you have to see a vision. You know, I mean, the greatest companies are not the ones that kind of follow somebody else, or it’s been done in the US before we let’s just do it over here. Those are like copycat models. The greatest companies are the ones that I don’t know come from within, from your in, from your core, from your subconscious self, where you think you believe that, you know, this is where the world is headed. And you can predict it to go there even before it gets there. I mean, example is Tesla. You know, he saw a market. I mean, Can you imagine, if somebody came out and said, you know, that I’m going to change the way we drive cars and completely new car, and they will be these electric charging stations. And he like, there’s so much infrastructure already in place. You know, you think that there was that it will not kind of has no chance to succeed. But, you know, he spent $50 million and didn’t have a car. Doesn’t matter. Get going? Yeah. So the greatest companies come from, like, at least one person having a phenomenal vision. And believing in it.


Siddhartha Ahluwalia 23:50

And believing in it for for a very long period of time. People in business, Elon Musk for a whole decade.


Sabeer Bhatia 23:59

Yeah, there you go. There you go. I mean, people have to be crazy. Only crazy entrepreneurs change the world.


Siddhartha Ahluwalia 24:06

in your journey post Hotmail, how did you get your edge up and kept learning you could have led a very comfortable life, maybe become a full time VC and just cut cheques, right, but, but you kept on, you know, your entrepreneurial spirit, you know, pushing envelopes every time.


Sabeer Bhatia 24:32

It’s who I am. It’s in my DNA. I didn’t want to be a cushy, like, Exec. And you know, who leads a kind of retired life. I mean, no disrespect to them. They have wonderful lives. I just like the excitement of being challenged. The excitement of thinking about solutions and thinking about problems and going ahead and solving them. I mean, at the end end of the day success is more than just about living the life. It’s also living a life that has touched other people’s lives and positively left the world a better place. I mean, that’s kind of the large vision. And some of us are lucky enough to get great ideas that just change the world. And others have ideas and that make an impact in a smaller way. But as long as you can make human life better for any number of people, that should be the driving motivation to becoming an entrepreneur,


Siddhartha Ahluwalia 25:46

as an entrepreneur, you will have also made some mistakes, right? During Hotmail, and post Hotmail, if you could just reminisce, what are some of the mistakes, which could help other entrepreneurs?


Sabeer Bhatia 25:58

everybody, every entrepreneur makes different mistakes, they’re not all the same. For me, the mistakes were, I didn’t find the right people to work with. That was my number one mistake, I’m too trusting, I think everybody has the same reason for being with you that anybody else that you have that is to improve the lives of a lot of other people, and you figured out how to make money later on. So that was one huge mistake. Second is, test an idea out quickly, to see if it will succeed or not. And you’ve got to keep making changes, don’t be wedded to one way of doing things. You know, you’re gonna keep making modifications as you go. Because you’re trying to strike oil, but you don’t know where oil is. So if you’re digging in one row, and you don’t find oil doesn’t matter, try something else. You know, I think that ability to be flexible, which is there in startups is the reason why startups succeed. And always be listening. You know, don’t just be wedded to your way of doing things. I think the greatest experiences that startup entrepreneurs have to be great listeners. You know, rather than finding a market for a solution, they have to go and ask the market and find a solution for the market.


Siddhartha Ahluwalia 27:43

That does, that’s a great analogue, right, rather than just being wedded to your well. an entrepreneur, just keep digging that well, right. And that’s one of the reasons of many, many, graveyards of failed startups. Your goal is to find oil and not to dig the same Well, that’s a wonderful analogy.


Sabeer Bhatia 28:07

Exactly, your goal is to find oil. And you as long as you have your ears open and listen, and be humble. I think one of the greatest things that entrepreneurship has taught me is to be humble. That is, that keep listening. You know, you will if you keep trying, you will find the right problem to solve. And you may not get it at first, first try, you might not get it in your 10th try. But some of the greatest entrepreneur like Hershey’s tried making different forms of chocolate. You know, chocolate was there for before he came, but he identified that that shape of that Hershey that teardrop chocolate was his winning success. You know, reason behind his success and that’s what launched him as a company and as a brand. So you know, as with so many other great entrepreneurs, they keep trying and keep modifying what you’re doing. Till you hit upon just the right model.


Siddhartha Ahluwalia 29:22

Thank you so much, it’s been wonderful to have, you it’s a fanboy moment for me to host you on the podcast. You know, I started my entrepreneurial journey, listening to your stories reading about you on Wikipedia, You started in BITS Pilani, then you went to US? There’s not that you are in US. You are given a silver spoon. And that’s how you started. It’s a fantastic inspiration, your journey to entrepreneurs in my generation and a visionary no show you will create a similar kind of impact or even larger than Hotmail created.


Sabeer Bhatia 30:00

Thank you. Thank you for your very kind words Good luck to you and good luck to everybody



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