Rajat Bhargava - Co-founder & Senior Vice President Strategic Planning and Integration of Interliant Inc.
[Originally published 9/20/99]
Rajat Bhargava is certainly not your average 26-year-old. After graduating from MIT in 1994 with a degree in Electrical Engineering and Computer Science, Bhargava founded net.Genesis, an Internet software company in Cambridge, Massachusetts specializing in statistical analysis tools for Web sites. In three and a half years as President and CEO, Bhargava grew the company to over fifty employees and firmly established net.Genesis as an early player in the Web tools market. In 1997, Bhargava co-founded recently-IPO'd Interliant Inc. (formerly Sage Networks), a Web hosting and services company also in Cambridge. Trading under the symbol INIT since July 8, 1999, Interliant's market cap has fluctuated between approximately $600 million and $1 billion.
Did you always plan on becoming an entrepreneur?
No, I didn't always. But after a couple of years in college, I did. After a few summer internships at Intel, I figured out that if I wanted to have a great impact and a lot of responsibility that I needed to have a business of my own.
While you were starting net.Genesis and Interliant, what were the biggest challenges that you faced? How did you overcome them?
I think the greatest challenges are generally people issues - how to hire and recruit people and create a culture that people want to be a part of. I don't think that you really solve any of those issues. All you can expect to do is make progress towards them. There's really no magic. It just takes a lot of hard work by the whole team.
What has been the most surprising aspect of being an entrepreneur?
I guess the most surprising aspect has been how hard the startup process is. Everyone walks in with certain feelings or impressions of what the process requires, but it always turns out to be much harder than you imagine. But if you knew how difficult it is going in, I'm not sure that anyone would actually do it. You don't always want to know how much you don't know.
How should entrepreneurs think about equity distribution to founders, employees, and investors?
There isn't one right way to think about equity in a startup. The parameters to think through are the market value of the company at an exit, the investment necessary, and to a great degree the level of people required. You also need to honestly think through where you personally want to be at the exit. For example, do you want to make $1M, $10M, $100M or $1B? All of those parameters need to drive your thinking. Right now, for venture-backed startups with potential market caps in the hundreds of millions, I would suggest thinking about it in thirds - a third for the founders, a third for the management team that you will hire (i.e. the option pool/ESOP), and a third for the first round investors. This generally works when you're raising between $2-5M in the first round. It will break down below and above that since you will either give away too much equity or the venture folks will find the valuation too rich. Obviously, this is only a guide and depending upon the team, investors, etc. you can adjust it to make more sense for the particular situation.
In your opinion, what personal attributes do successful entrepreneurs have in common?
Drive for success is one common theme. I bet each individual also has some fear for failure that keeps them motivated. I think the most successful entrepreneurs are full of contradictions. On the one hand, they are focused on their vision and very stubborn. But these people also listen, accept a lot of input, and work closely with their teams. They know when to move quickly and make decisions and when to sit back and perform more analysis to fully understand the broader issues and the implications of their decisions.
Any final words of advice for aspiring entrepreneurs?
I think people should definitely try it. People coming out of great schools will always have something to fall back on. If you're a really bright person, you'll always be able to get a job so you might as well try it. You have a safety net if things don't go well.
Rajat Bhargava is certainly not your average 26-year-old. After graduating from MIT in 1994 with a degree in Electrical Engineering and Computer Science, Bhargava founded net.Genesis, an Internet software company in Cambridge, Massachusetts specializing in statistical analysis tools for Web sites. In three and a half years as President and CEO, Bhargava grew the company to over fifty employees and firmly established net.Genesis as an early player in the Web tools market. In 1997, Bhargava co-founded recently-IPO'd Interliant Inc. (formerly Sage Networks), a Web hosting and services company also in Cambridge. Trading under the symbol INIT since July 8, 1999, Interliant's market cap has fluctuated between approximately $600 million and $1 billion.
Did you always plan on becoming an entrepreneur?
No, I didn't always. But after a couple of years in college, I did. After a few summer internships at Intel, I figured out that if I wanted to have a great impact and a lot of responsibility that I needed to have a business of my own.
While you were starting net.Genesis and Interliant, what were the biggest challenges that you faced? How did you overcome them?
I think the greatest challenges are generally people issues - how to hire and recruit people and create a culture that people want to be a part of. I don't think that you really solve any of those issues. All you can expect to do is make progress towards them. There's really no magic. It just takes a lot of hard work by the whole team.
What has been the most surprising aspect of being an entrepreneur?
I guess the most surprising aspect has been how hard the startup process is. Everyone walks in with certain feelings or impressions of what the process requires, but it always turns out to be much harder than you imagine. But if you knew how difficult it is going in, I'm not sure that anyone would actually do it. You don't always want to know how much you don't know.
How should entrepreneurs think about equity distribution to founders, employees, and investors?
There isn't one right way to think about equity in a startup. The parameters to think through are the market value of the company at an exit, the investment necessary, and to a great degree the level of people required. You also need to honestly think through where you personally want to be at the exit. For example, do you want to make $1M, $10M, $100M or $1B? All of those parameters need to drive your thinking. Right now, for venture-backed startups with potential market caps in the hundreds of millions, I would suggest thinking about it in thirds - a third for the founders, a third for the management team that you will hire (i.e. the option pool/ESOP), and a third for the first round investors. This generally works when you're raising between $2-5M in the first round. It will break down below and above that since you will either give away too much equity or the venture folks will find the valuation too rich. Obviously, this is only a guide and depending upon the team, investors, etc. you can adjust it to make more sense for the particular situation.
In your opinion, what personal attributes do successful entrepreneurs have in common?
Drive for success is one common theme. I bet each individual also has some fear for failure that keeps them motivated. I think the most successful entrepreneurs are full of contradictions. On the one hand, they are focused on their vision and very stubborn. But these people also listen, accept a lot of input, and work closely with their teams. They know when to move quickly and make decisions and when to sit back and perform more analysis to fully understand the broader issues and the implications of their decisions.
Any final words of advice for aspiring entrepreneurs?
I think people should definitely try it. People coming out of great schools will always have something to fall back on. If you're a really bright person, you'll always be able to get a job so you might as well try it. You have a safety net if things don't go well.
posted by gnp at 3:27 PM
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