James Riley
August 14, 2017

Zoho’s Raj Sabhlok on the bubble

Podcast

Zoho’s Raj Sabhlok on the bubble

Raj Sabhlok: 'Focus on building products that matter and that people will pay money for'

Cloud-based business software maker Zoho Corporation stands apart from its Silicon Valley-based tech industry peers, culturally and geographically.

At a time when toxic Silicon Valley culture is under an increasingly intense spotlight, Zoho is quite happy with this odd-man-out status.

The 20-year-old company, employs about 5,000 staff across the world and sells software into 196 countries. It is privately-held, has never taken venture capital, and is not chasing an IPO.

Zoho Corp is geographically separate from its peers, based in suburban Pleasanton, about 40 kilometres east of the bay area, away from the valley proper and from the tech sector’s new hub in downtown San Francisco.

The New York Times revelations published six weeks ago about sexual harassment in the tech sector – and in particular some bad behaviour among VCs – has reverberated around the world and led to a level of introspection not seen in years.

Zoho Corporation President Raj Sabhlok was in Sydney recently as part of a swing through the region, and for the launch of radical overhaul of the pricing model for the company’s products.

He doesn’t want to generalise about the industry, but says it is true that the poor behaviour is becoming more commonplace.

In this podcast Mr Sabhlok talks about running a global software company built on disruptive models. And he discusses the pressures that a bubble market puts on the industry and the unexpected behaviours it produces.

Of course it is an issue of culture, he says, and is the unfortunate consequence of the current tech bubble. We are talking about bad behaviour emerging as a result of culture that have developed under bubble pressure.

The bad behaviour “has grown out of these cultures that have emerged through the over-stimulation going on in the valley,” he says.

“We are arguably in a bubble-time in the Bay Area in tech. It is much like we saw in the early 2000’s frankly,” Mr Sabhlok said.

“If you look at any number of metrics and measures, whether you talk about stock prices or home values in Silicon Valley or rents …things of that nature, they are all at epic highs. They are frankly just not sustainable,” he said.

The valuations fuel a kind of market behaviour: “Most of these companies take on venture capital, they try to move as fast as possible, and not just through tech development, but through sales and marketing and really hyping [the business].”

“And so a lot of the things that happen in these bubbles get out of whack.” The sexual harassment issues is like a by-product that “has grown out of all these cultures that have emerged through the over-stimulation going on in the valley.”

It is an interesting view from a quintessential industry insider. Mr Sabhlok literally grew up in Silicon Valley as the son of technical engineers in first generation computer companies.

He studied Mathematics at the University of California Santa Cruz, and set sail into the tech industry. He followed this with an MBA from Duke University before landing at Zoho Corporation as president more than seven years ago.

This is a very different company compared to Silicon Valley peers. Self-funded. Never taken VC, not chasing VC. Not chasing an IPO. Hiring opportunistically, and not hiring from the same pools of SF and the valley.

“When Zoho was started we had a vision of building a very sound company with solid financials and to frankly grow the company to become as large as we could grow it.

Software does not take a lot of upfront capital. Mr Sabhlok says the focus has always been on building quality product – building product that customers want to buy and are happy with.

“If you’re playing with your own money, you kind of gain that discipline to build products that matter and products that people will pay money for,” he said.

“And if they do [buy your product], you get to eat. And if they don’t, then you’d better find another line of work.”

“And so I think that discipline, right from the start, made Zoho a very different company.”

“We were always going to be very product-focused, very customer-centric [right from the start],” Mr Sabhlok said. “[These are] some of the things that really escapes some of these venture-backed companies that are playing in a bubble.”

“One of the benefits of being a private company is that we can be a bit of an enigma,” he said.

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