Splashtop Interview: Understanding the business model
In San Jose we talked with entrepreneur Mark Lee about the business model of Splashtop. Furthermore, Mark shares his learnings and advice for young entrepreneurs.
The transcript of the interview is provided below.
Martin: Hi, today we are in San Jose with Splashtop and Mark. Mark, who are you and what do you do?
Mark: I’m the co-founder and CEO of Splashtop and what we do is delivering cross device experience from any device to any device. You can share your screen from your iOS device to your computer and vice versa, or Android. Any devices people have, where nowadays people care a lot of devices and they want to be able to effectively share applications, content and screens across these devices. We enable that.
Martin: Ok, great. What did you do before you started this company?
Mark: This is actually my second startup. So, I started, after graduating from college, I worked for Intel for 7 years. And then in 2000, I left Intel and started my first company. I sold that company in 2004 and, it was a public company that bought us, I stayed on for two years, as part of the golden handcuff and in 2006 I started Splashtop. It was continuing the entrepreneur drive and I would, a bunch of college buddies. So, both startups I started with three other college friends.
Martin: Founding team stayed the same?
Mark: It has been the same, yes. Exactly the same. We have too much fun together.
Martin: That’s great. How did you come up with the idea of Splashtop?
Mark: Well, because of my Intel background, I started really focused on the PC world. And then, because of my background in Asia, we started about how do you marrying hardware, because Taiwan, China has been very strong in manufacturing hardware, but then very weak on software, so how do you marrying software and hardware together to create a solutions. So, my last startup, we did embedding for our servers. And HP, Dell, IBM were all customers. So, we embed our software into all these ODM in Taiwan, Quanta, FoxCom, building server motherboard, and then shipping them to IBM, HP, Dell, as a solutions. And then we exited it. Then we started thinking ok, server market is 10 million units a year, but PC market is 300 million units a year. So we wanted to create, embed a software for PC, and what we came up with, our company name, before Splashtop in 2006 was called DeviceVM, so our vision and goal was to embed our software inside 300 million PC. And what is that software? Well, VM model was really big in servers, but we thought actually you should have a hypervisor inside every PC, too, and you can dual-boot Windows plus Linux. So, but then, Linux is Linux, what’s a killer app. We think it’s a five second boot-up browser OS. So, we’ve enabled every PC to boot up in 5 seconds, with a browser OS, with a super lightweight Linux open source Cournot, with a Firefox based browsers. And people don’t have to wait for Windows to boot, take a minute, two minutes to boot up. Instantly, they can start browsing the web. And then we can enable switching between the browser OS Windows if you need Windows, for various applications as well. So that was the idea behind that business.
And also if, looking at the whole internet, Google is making so much money driving the eyeballs, search eyeball, advertising eyeballs. The hypothesis behind that venture, behind DeviceVM was if every time people hit the power key of a PC, you’re controlling the eyeball, that company is going to be worth a lot. You can give away the browser OS for free, but make money through advertisement and search, because that’s when people, they start experience the computer. So that’s how we started.
Martin: It changed, obviously.
Mark: It changed, exactly. Everyone today have iPhones, iPads, Android devices, by 2009, 2010, we saw all these smartphones, tablet begin to emerge, we were thinking wow, we’re going to hit the wall. Despite we have HP, Dell, Lenovo, Acer, Asus, Sony etc, all shipping our DeviceVM browser OS side by side to Windows. Over a hundred million of PC were shipping per year with our product. But we knew people don’t need it anymore soon, if they want to get online very quickly they will use their smartphone or iPad, or tablet. So we knew we have to shift. So we pivoted in 2010 and introduced, renamed our company to Splashtop too and focused on mobile remote access.
Martin: Then the next question would be how did you then come up with the now, current idea of Splashtop? Because it’s quite different from the old one.
Mark: Sure. Startup process thinking is always trying to figure out if you can have certain core competitive advantage. And so, it could repeat itself through, I guess now I’m 14 years into my entrepreneurship, I mean first startup, six years, and this startup over eight years. So, always thinking about what our teams core expertise, skill sets advantage that we can create. And when we thought about ok, well, we were really close to all these Asian manufacturing OEMs, we created a fast boot browser OS, we’re really good at firmware, we scaled up our engineering team in Asia to hundred and something people, building this whole platform. But then, as we moved to mobile, actually what will be leveraging that foundation of strength, what can we do on the mobile side. So that’s when we look at the market and say hey, a lot of these mobile device, these are iOS, these are Android, but how do you enable across device experience. Still, there’s so many investments in application and content on the PC side, on the Windows side, so we want to breach that. And that’s kind of how we started thinking this new pivot. And we’re launching on iPad in the first year, in 2010, June of 2010, our app was the number 1 best-selling app on iPad in the US for 28 days out of the 30 days, so it was beating Angry Birds. It’s just showing that when you have a new platform, iPad, iOS, there’s a lack of application. So, a lot of people say hey, use Splashtop, all your Windows apps and data instantly show on iPad. So, there’s instantly we got feedback that there’s a lot of demand and interest, and we grew from there.
Martin: Mark, let’s talk about your business model and start with the product portfolio that you currently have.
Mark: Ok, sure. In 2010, the remote desktop for the consumers on iPad, that’s very quickly we grew millions of users through words of mouth. People never had thought remote desktop experience can be so fast and fluid, you can stream video, you can stream games, the whole experience is just night and days from what they had before from BNC or RDP and other solutions. So, but then it was a selling app on app store. It was generating good money, but then we felt we got to figure recurring model out of it. So, we started thinking around ok, what would people pay, and also justify it should be a subscription based. What we came up was ok well, we need to set up relay cloud around the world to support people to cross network. So, a lot of time people at Starbucks, on the 3G, 4G network, they want to remote access their home or office computers. And the most reliable way to deliver that is through a relay cloud. So, we set around the world leveraging AWS, that’s one beauty of all these cloud services available or infrastructure available. Very quickly use seven plus data center AWS and setup relay infrastructure, so you can seamlessly cross firewalls across internet. And that is a subscription service. So, today we have 18 million users now, and probably about almost 10% of them are subscriber to our cross network relay infrastructure, we call it bridging cloud, so bridge across any network.
Then very quickly, so that became our subscription model for consumer market. Then we got a lot of user feedback from businesses, saying hey, our employee love your product, BYOD was a big trend, has been the big trend, our executives are using iPad using your product, but we need some level of auto-trails, we need to see who is accessing what at any given time. We have a pool of employees using a product, but we need more control way to add, delete users, if the employee left, we want to effectively delete that account. So, we introduced a Splashtop Business that has a management console in a cloud.
Then, some enterprise says, what, management console in a cloud is great, but it doesn’t fit our compliance needs, we need even more secure way, including we don’t want people, everyone to create a Splashtop ID. We want to leverage our existing active directory, our existing user domain, user account and password policies. So, then they ask for integration with active directory. So, then we evolve our product and added active directory support and on premise options. So it’s kind of evolution of this product line.
Martin: Let’s start talking about corporate strategy market. You said that, or at least you touched on the point a little bit. What are the core competencies of your company?
Mark: Sure. I see couple key core technology competencies of our team. One is we are very good at optimizing for device level of performance. So, what we in early I mentioned as we started DeviceVM, we have a lot of our embedded software engineer who optimize the Linux Cournot that boots up, actually, the Linux took 1 second to boot. The browser actually is bigger than the Cournot. The Firefox browser actually takes 2-3 seconds to launch. So, the whole experience is 5 seconds. And then we establish WiFi network and start surfing the web. We always have very good core technology expertise, and that’s why our remote desktop solution, I will swing you to Splashtop, the performance is so good, people can do remote 3D gaming, because of the work with Intel, Nvidia, AMD, different chip player to leverage your hardware accelerations. We have a lot of good expertise around media compression technologies and adaptive to different 3G, 4G network technologies.
So, those are different key core skill sets our team has built up, and also we have a lot of strong relationship with device makers, that’s always been our core strength. So, today, our product is also bundle with Asus, Acer, Lenovo, HP and different OEMs. When they ship out PC, they have our streamer, I mean, shipping along their computers. So, people just need to download our app on the mobile device, instantly can access their computer. So, those are our key strengths we see.
Martin: So, basically, you have three core competencies, one thing would be you have very narrow relationships with device manufacturers, then you have this kind of very interesting technology that have solved some problems, and then you have some partnerships with, on the seller side, as well.
Mark: Yes. And also, through the years, we’ve actually become very good at managing AWS cloud services. So we know how to scale our backend infrastructure very quickly. For example, we drop our relay instances inside some part of a cloud very quickly. So we’re looking at ability to really bridge across devices in a very fast, seamlessly way, leveraging our cloud infrastructure everywhere. There’s a distributor architectures that’s actually we have invented.
So for our classroom product, for example, inside a classroom, you want to stream the screen to 40 students. If all the relay need to go through the Amazon cloud, you could actually come just the school upstream and downstream pipe, just one classroom, so we enable a very seamless local relay, every clients could become a relay of itself. So that actually, inside the classroom, there’s amount of traffic meaning to go up is very limited, it’s all rounding inside the classroom. So, there’s a lot of different intelligence and technology in play to deliver the right experience and best experience for the users.
Martin: And minimizing AWS cost.
Mark: That’s right as well.
Martin: Let’s talk about the market development. You said that you’re covered a lot of different devices. What trends do you see in terms of device usage and what is the implication for your development team?
Mark: Well, I think that explosion of devices, and now we’re also talking about internet of things, and wearables and everything. There’s just, it’s introducing a lot of challenge for software company to, you need to address so many different possibilities. But then, they also introduce so much opportunity for entrepreneurs, because there’s a lot of emergence of new usage model, new possibilities. And so, it’s actually more around a challenge for our executive team sitting down and brainstorming, “Ok, we have all these core technology, we’re going to, what are some top usage model we can focus around to address on pain point and generate a lot of revenue to continue our growth”. So, it’s actually creating a lot of great opportunity, that’s kind of what we see with this explosion of devices.
Martin: And the integration of new device, is it quite costly for you to do or is it just tweaking little bit?
Mark: It varies in a sense that, if the device is running Android, obviously, we have people who are very knowledgeable of different, I mean, the latest Android platform, Google adds some new stuff, and also… But the device, we had to really at its screen size is target usage model. I mean, Amazon Fire TV is Android device, but it’s indented to connect to a big screen TV. So the user experience there, and then, on a tablet, Android tablet or phone, you have a touch experience. But then, on an Android TV, or connected TV, you’re using the remote control. Fortunately, they have a joystick, too, so we’re enabling, for example, your computer game redirected through the Fire TV to show on your TV. So your computer becomes a console, almost, through your Fire TV. We can, we’re working on enabling that for Chromecast, so there’s different but then what’s input method. Our app was designed for touch, but now here, we had to remap it for different type of input devices, whether it’s a joystick or remote control. So, how do you optimize that overall user experience. It’s a key efforts and that can be big.
Martin: Are there any devices that you’re not currently serving because the market for those devices is much too small, or too difficult to build an application to, or something like that?
Mark: We talked about Google glass a bit, and we haven’t spent time on that. It’s still a thousands of dollars device, so obviously the number of people who can afford it is still very limited. And the development platform there is quite different. Obviously, if it were just on Android, our app can be running on it very quickly.
For example, Epson, Epson launched Android glass, the projector company of Japan, and our app runs on it. We can bring all your computer screens, or, actually, iOS screen, too. We can air play iOS device screen to the Epson Android device. So we can, a lot of our core technology is to enable any screen to any screen, so that’s kind of what we invest around.
Martin: Ok, great.
ADVICE TO ENTREPRENEURS
Martin: Mark, we always try to share some knowledge with other first time entrepreneurs. What will be your advice to best or one of your good friends who was asking you for starting a company?
Mark: One, I would say, it’s from my experience, build a team of good friends that you trust and work closely. Because, I’ve been fortunate, these are my college buddies I’ve known for a while, and we had a good exit in the first startup, and we’re working together. Because it’s like a marriage, you’re seeing them day in and day out, and this has lasted a long time, from school days, too. So, because you’ll be spending so much time and you need so much support from each other, so I kind of view having a good core team that you can work well together is very fundamental. And make it fun, too. Because otherwise, there’s going to be up and downs, and people together you can achieve something great.
Then, the second one is, once you have a good team, I would, and assuming you guys are so passionate about solving specific problem together, then just jump in and do it, because from my 14+ years of experience, we had to pivot. My first startup, I pivoted two times before I sold in 2004. So, there’s always that pivoting. Today, Splashtop has started as DeviceVM. We did the, a lot of people have known us as instant OS, browser OS solutions. Until 2010, that we had huge success. We created pressure on Microsoft that they started saying Win 7 is going to boot fast. Moving, so making Windows lighter, and because the OEMs are demanding it, or user are demanding it. Then, you have Chrome OS today, actually we’re pre date the Chrome OS by several years, too. So, we think, and then we pivoted to Splashtop. As we moved to consumer market, then we also pivoted our business model to subscription based model from that selling an app. Then we also begin to expend the business market and enterprise market, and building our channel partners. And for our most recent product, Splashtop Classroom, we see huge demands in education for, because schools are buying a lot of iPads, Chromebooks, etc. They all, it puts education, student engagements, by every student, instead of looking at the projector, everyone has their own devices right in front of them. So, we see that technology is changing at every vertical, in a fast way, and there’s so much opportunities. Once you dive in, you can navigate and begin to address different market needs and problems.
Martin: Mark, thank you very much for your time. And if you want to start a company, first thing, check out the market, whether the market size is large, whether you can become profitable over there, and second thing is, is it really something that you are very passionate about? Because you need to learn fast and adapt your business model. Thank you very much.
Mark: Great, thank you.