In Mountain View (CA), we talked with entrepreneur Milind about the business model of CloudOn. Furthermore, Milind shares his learnings and advice for young entrepreneurs.
The transcript of the interview is provided below.

INTRODUCTION

Martin: This time we are in Mountain View in Cloudon office with Milind. Milind, who are you and what do you do?

Milind: I’m the founder and CEO of Cloudon.

Milind: Just a little bit about my background, I have been in the Valley for 25 years, I’ve been here for a long time. Fortunately for me, I got my first years about my entrepreneurship about 20 years back in a company called Atom Network. Atom was the first broadband service provider in the US. I joined the product team very early on, the company did extremely well. We were at one point looking to acquire either Yahoo or Excite. We acquired Excite. It was the right company at the right place and it gave me good taste of what does it take to be in an early stage startup and that has the potential of huge impact.

Soon after that, I ended up joining a company called Epinions. Epinions was literary the first user-generated content site. This was at the peak of the bubble. And I ran product there. Once again, incredible rush in being able to have that impact and give people a voice to be able to share their opinions. A little early for the market for that time. The company eventually did go public and did well, but I had left well before then.

Then finally, my third startup was a company called P-Cube, which was an Israeli startup, in the networking space. That company ended up staying the longest, it was selling into the service providers, with the whole vision that the future of the internet was meant to be richer from the user and content stand point and how do you leverage the network to make that possible.

The company was acquired by Cisco, I stayed at Cisco for 4 – 5 years and at some point have the itch that it was time to leave the big company and go do something myself.

In all the previous 3 companies, I was always part of the management team, having a fair amount of influence, but never where I was the head of the table.

At some point I realized that I still have the energy and the craziness to go start something, I decided to start. This was in 2009. End of 2009 I left Cisco and I partnered with a couple of my co-founders who are based in Israel. We said, let’s go tackle the next frontier. We wanted clearly to get away from that working.

As we look at the space then, we definitely felt that the intersection of Cloud and mobile was going to generate a fair amount of disruption. We were coming at it without a lot of experience in this space, but with the believe that we know what it takes to identify the problem.

The first year was very difficult, I have to say. It was to some extent, the technology looking for a problem and which is always, in one of the lessons, not the best way to start a company, but you know. But we have some good technology and we went down to a certain path. Fortunately for us, the iPad launched during that first year. So when we started the company, we had no anticipation of the tablet market. We definitely knew that the smart phones will going to become a default computing device in everybody’s hand. But the tablet clearly change the landscape.

So we jump on the tablet bandwagon fairly quickly and I have to say the rest is history because we’ve had phenomenal last 3 years.

The goal of the company, maybe first started in kind of went down this path. We are claimed to think, initially, was very much about providing access to Microsoft Office on the iPad. So this was January 5, 2012 when we launched. We had no anticipation, we had developed an app that provided access to Dropbox and then if you wanted to edit your office document, we gave you access to Microsoft Office.

And in the first 12 hours, it became the number 1 app on App Store. Which took us by surprise because our goals were a couple of thousand people in the first month, maybe hundred thousand in one year. We did 100 thousand in the first 36 hours. So we were addressing a major pain point that users had. They wanted to use their tablets as a productivity device.

Until then, the iPad was a phenomenal consumption device. Every app was much more on gaming, or entertainment, or consumption. There really wasn’t anything around productivity. I think, the closest productivity app one could consider would be email. But email was consuming email, not necessarily a productivity.

We had been in a discussion with a lot of large US enterprises. Maybe iPad came out, they all gave us the same use case, which was we wanted this to be a great productivity device, this is a game changer device in the enterprise and we want to make it productivity. And when you asked, what do you mean by productivity, the answer was we would love to able to work with Office documents, Word files, Excel files, Power Point files. So our first step was really about providing access to Office with Dropbox as the storage back-end.

When we saw the success we had in the US, initially, it made sense what we’re going after. There was a massive pain point, but we didn’t know whether we just got lucky. We launched, we initiate to just launch in the US, and so we launched in the Canadian market and the same thing happen, which was first day, number 1 app on the App Store, no marketing, no promotion, just completely word of mouth.

After that, we launched this is the UK and exactly the same thing happened. It was perfectly the same in the US, Canada, the UK and in every market that we launched, within the first 12 to 48 hours, it would become the number 1 app on the App Store. And not in productivity or business, but overall App Store. So this would be us, and there would be 9 games.

At that point we realized that the market or the users had spoken, they were looking to truly be productive on their iPads. And there were a lot of requests for iPhone, a lot of request for Android.

So this was early 2012, we made a conscious decision as a company, saying that there’s an opportunity to redefine mobile productivity. When we thought about what does mobile productivity mean, it’s really about redefining how do people create content, share content, work with content, in ways that they’ve never done before.

So we were ambitious, some people think I’m crazy, to literally take on the incumbents and the establishment in redefining the future of productivity. So, that’s the short story of who I am and where we are in this journey.

Martin: Great! Milind you said that when you entered the market, you didn’t have any clue about how the market was working. How did you set your journey for learning and understanding how the market really worked?

Milind: We had some clue. I’ll give credit to my Head of Product, Jay was my co-founder who was adamant about serving the needs of the users. We have heard from various enterprises of what they wanted. They wanted the ability for their employees to be able to work with Office documents on the iPad. That was the problem taken that was provided.

One can say that there are multiple ways to tackle this problem. The way we did it is, we decided to virtualized Microsoft Office and make it available to these users. But the insight or the point my co-founder Jay made was, nobody’s buying an iPad to get a Windows experience. If they’re buying an iPad, the want an iOS experience. So the big challenge for us was, how do you take a Windows app and make it as iOS like as possible.

Martin: Like Apple Beautiful.

Milind: Exactly. So it was like taking that square peg and try to put it into a round hole, because it’s an app that was developed for a PC, for a mouse based and  a keyboard. It wasn’t developed for a gesture-based experience.

That was, I would say the insights that we have, which was it’s all about the user experience. If we get the right user experience, people will use it. I think that is what we got right. Like when we first did it, we nailed the user experience. When we try to hide as much as Windows or that traditional Microsoft Office experience from users to give them the ability to just work with their documents. Looking back, we did that just perfectly.

Martin: Great!

BUSINESS MODEL

Martin: Milind, let’s talk about the business model. Is it still the case that CloudOn only helps people creating, sharing Microsoft Office products on several devices or is there some other point in terms of productivity included?

Milind: So for us, the focus is very much around the documents that the users have. Like there are, when we look at the productivity ecosystem in the PC generation, over a billion users are using Microsoft Office. Trillions of artifacts getting created on an annual basis around the world. These are Word files, Excel files, Power Point files. And so for us, it wasn’t about let’s go create a new different type of experience. It was very much about let’s embrace the Office format. Fortunately for us, the European Union in 2007, forced Microsoft to open the Office format and so it’s an open published format.

Martin: But only for the EU or?

Milind: On worldwide basis. So this enabled us to recognize that Office is the gold standard for productivity on the PC. From that standpoint, how do we leverage that format and work with. We don’t want to change people’s behavior. This is where I think many companies get it wrong.

User’s behavior is very difficult to change. So one really needs to embrace that and then extend from there. We’re not trying to get users to say, let’s go abandon all your Office documents and come learn a new tool that is mobile first.

We’ve always said, it is important to embrace the legacy world, but to provide a path into the future. So from the business model perspective, we are huge believers that it’s an end user market. Eventually, the problem that we’re trying to solve in productivity, it’s an enterprise use case. But when we think about the enterprise, we say that the enterprise is changing today. End users are deciding which application to use, how to use it, how to pay for it.

For us, we made a conscious decision very early on to follow a freemium model. The freemium model is based on providing kind of a free service to bulk of our users, if we can get less than 10% to convert into paying users, that would be a really good model.

But with the expectation that overtime, and this is a multiyear journey, we would want to cater to teams of users and eventually to the enterprise IT administrative. Because eventually this is an enterprise use case. But as an enterprise use case that is driven by the end user. And we’ve got lots of inbound request from a lot of large US enterprises wanting to have an enterprise version of CloudOn. So far, we’ve been very end user focus to say, let’s build CloudOn, CloudOn Pro, which is much more end user focus, with a clear road map to eventually get to a team’s product and eventually an enterprise product.

Martin: Great!

CORPORATE STRATEGY

Martin: Milind, in terms of corporate strategy, as I perceived your business model is highly depended on Microsoft products, because you’re building an additional layer on that. How do you respond to question like what happens if Microsoft would be doing something similar?

Milind: This has been the question that has been posed consistently during the initial years when we were successful is, eventually Microsoft is going to release Office on iOS or Android and what happens to CloudOn?

We’ve always assumed that this is going to be the case. We had never assumed that, from our perspective, if you look at the productivity market today, you’ve got 3 very large, well established companies, Microsoft, Google and Apple who have their own productivity suits. When we look at them, each one of them started off with their roots catering to a PC model. Looking at it very much from a PC mouse-based paradigm, they’ve tried to make it mobile, they’ve tried to make it gesture friendly, but it’s still is a PC experience. It’s very much a menu driven experience.

If you look at Microsoft Office on the iPad, it’s done extremely well, extremely well. But it’s still a familiar experience. And we think about the future, we say that it has to be for everybody to truly create or re-imagine or redefine the future of the document.

It has to be a mobile first or even precisely a gesture first experience. The days of menus are over, it should all be based on the fingertip. You shouldn’t say, if I want to insert a chart or insert an object, you pick a menu and you go down to a different menu item and pick that. You should be able to draw it with the finger.

From our standpoint, we’ve always felt that the gesture first or mobile experience is the key.

What’s the other key aspect which is important is, the ability to be compatible with Office. Office is, as I said earlier, the gold standard in enterprise for productivity. If I look at Google Docs, if I look at iWork from Apple, they’ve created their own silos, which is their application, their format, their storage. We approached our strategy by saying, let’s embrace the Office format. We will also embrace other formats like the ODF format from the Document Foundation.

We will embrace other formats instead of finding our own proprietary format. But really focus on the user experience and then focus on innovating in areas that non of the incumbents have innovated. Which is about how do you truly make it a social document, how do you make it a living document, how do you make it truly workable on an iPhone, or an Android phone with the 4″ phone factor. We want to make people as productive on those devices as they are on their PCs. It’s a non trivial problem to solve. But we are well on our way to solving it.

Martin: What are your thoughts on adding other platforms, as you describe you have 3 major players currently working in this online document market. What keeps you from sticking only with Microsoft Office program, what are the thoughts on entering new markets like Google and iWork?

Milind: So for us, what we are doing is, we are embracing the Office format just because there’s 1 billion people in the enterprise who are currently using Office. But we are building our own native, all 3 capabilities.

From our standpoint, we will integrate the Google Drive, we will integrate with Microsoft’s OneDrive, we will integrate with iCloud. We are approaching this more like a Switzerland approach, which is we are truly storage agnostic, willing to integrate to Dropbox and Dropbox is a really strong partner of ours, with Box, which is another strong partner. So we’ll integrate with multiple storage providers. We will try to integrate with other silos, and truly create value for the end user.

Because today when we talk to our end users, they value us for our open approach, they value us for the fact that they can continue to use Google Drive and OneDrive and Dropbox and Box and not have to be forced. Because if you’re on Google Docs, you have to use Google Drive, if you are on iWork you have to use iCloud, if you’re on Microsoft Office you have to use OneDrive.

So we approached it saying, we want to be a truly platform agnostic or a technology agnostic from that standpoint. Similar to what Dropbox did when they built their initial cloud storage. They said, we will embrace Windows, Mac OS, Android and hence they’ve been incredibly successful.

MARKET DEVELOPMENT

Martin: From my point of view, one of the major market trends has been from the PC device based Operating System to a now going to the Cloud. What other trends did you identify in the market?

Milind: So clearly mobile is a huge tsunami that’s kind of happening which we’re riding. The consumerization of IT, which is the true, I would say before, and I’ve been around the block for all these years, where IT would tell you exactly what to use, what you can’t use, they control the device. So if I had a PC from the company, they would tell me which application could run on it, how it would work. Those days are over to some extent.

We call it as the consumer enterprise, because the enterprise still exist but the end users who are consumers are making their own choice. They are deciding which applications they want. And also the enterprise is no longer confined to the borders of the enterprise. It’s  truly a borderless enterprise because I could be collaborating, let’s say, I’m a finance person and I’m working on a spreadsheet, I could be collaborating with my auditor who is in a different company, I’m working with some other services. So it’s becoming a much more of an open environment and anybody coming new into this, has to be able to embrace that.

This is where I believe the incumbents are at the disadvantage. Old large incumbents are catering to a world that worked 20 years ago, that world has completely changed now. The question is, are they going to be able to adapt or will new comers like Dropbox, CloudOn, Box, others, coming and grab market share.

ADVICE TO ENTREPRENEURS

Martin: Milind, you have seen so many things in your formal startups and this startup. What are your major learnings over the years that you can share with other first time entrepreneurs, so they make less errors?

Milind: You know, I look back on my career, and I have learned a lot. They have the hard way, I wish I had some guidance earlier on. When we started CloudOn, it was very important to me to really define what was the goal that we were setting out as co-founders. Are we looking to go solve a problem and sell it to the first buyer, are we looking to go change the world? And there’s no right answer, it very much depends on the entrepreneurs themselves. There’s some people, and I’ve seen this, who are looking to make a quick dollar. They’ll start a company with the ability that we want to flip it. They know exactly who’s the buyer. That’s great. They know exactly what is their pain point.

In our situation, we were much more dreamers/thinkers of saying we wanted to go change the world, we want to redefine the future of productivity. So understanding the goal is critical. Because one thing that I have learned is, with how much of a planning, how much of a thinking that one does, the path is not a straight path. It is a path with gazillion of obstacles and will keep on changing on a daily basis. So if you know what the goal is, you can walk towards that goal. That’s important.

I would say for any kind of first time entrepreneurs, entrepreneurship is a team sport. It’s not an individual sport. People might look at individuals and say, typically there’s always the face of the company but behind that face, there is a team. The team, whether it’s a team of co-founders, or the initial team of people that you built, is the most important. Because again, given it’s not a straight path, you need the versatility, you need the ability to zig-zag depending on the obstacles you come across. Having the right team that has the right risk profile, that’s not going to get afraid if the first obstacle comes up, that has the right dedication. It’s the most difficult sport, or the most difficult work you are ever going to do, but it’s also the most fun.

So it’s not for everybody. Like I sit here in the Valley and I see that because for every one successful company sprung  hundred would be entrepreneurs and then they all realize it’s really difficult to get a distribution.

I always say that, if entrepreneurship is easy, you find a lot more success. It’s extremely challenging and so I would say that having the right team, because this is not a sprint. I’m sure you’ve heard this before. It’s a marathon, so having the right team that can help base, that can help create the right energy, is by far the most important.

It’s not about the idea, and I hate saying this to people. We have zigged and zagged as a company before. You hear about these companies like Facebook, and other companies, they’ve started off with one idea and then they morphed into another idea.

What’s important beyond the team I would say is, playing in the big market. For example, we are playing in the market of productivity. Productivity is a hundred billion dollar opportunity. We may not get it right the first time. But it’s a big enough market that if we keep on digging, we will find gold or we find kind of, we solve that problem that we are trying to solve.

So, if you end up picking a very niche area, it becomes difficult to change direction because you’re tied down. All depends on what the goal is. So our goal was, we wanted to change the world, we wanted to have huge impacts, so we picked a bigger market to play.

And then finally, and this maybe goes to the earlier team aspect, there’s a certain aspect of perseverance. All the grey hairs out here are tied to perseverance, because there are more people who will say it’s not possible, there are more people who will be doubters, who will be naysayers of why something cannot be done. You look at any example of all the successful companies that are out there today, they all face their obstacles, they all face their people who doubted that they would ever be successful, but they persevere and they eventually became successful.

So that’s why I say, I would come back to summarize this to say, the key is having the right team, playing in the right space that’s big enough where one can change, and then just having the stamina and the perseverance. Do not give up, it’s the best job that if you got the stomach for it, it’s absolutely the best job in the planet, but it’ not the easiest, it’s not for everybody. I would encourage you live once, you might as well may have the biggest impact you can have with your life.

Martin: I think this is a very good summary and closing. Thank you very much Milind, for your time.

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