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April 13, 1999


Why did Bhatia walk away from Bill Gates? You have had email, but now is the time for e-commerce, Hotmail founder tells Rediff.Why did Bhatia walk away from Bill Gates? You have had email, but now is the time for e-commerce, Hotmail founder tells Rediff. Arthur J Pais in New York

A little more than a year after he sold his company Hotmail to Bill Gates' Microsoft Corporation, 30-year old Sabeer Bhatia has said goodbye to Gates to start yet another company.

Email this story to a friend. There's no firm idea for a company yet, Bhatia says. He will only reveal this much: Along with a few friends from Stanford University, where he earned a masters degree in electrical engineering, he is working on a plan for an e-commerce company.

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"There's a lot of potential and excitement in the e-commerce space," he says. "I've got a slew of raw ideas."

The raw idea he had for a free email company led to the foundation of Hotmail over four years ago. But soon he would stun the industry by selling his start-up company, one of the most visible success stories in America, to Bill Gates.

After overseeing the merger of his company with Microsoft's online network about a year ago, Bhatia became the new general manager of strategic business development for

Right now he has just a "small office in Fremont (in California) and a scratch pad."

Not that Bhatia is phoning up his friends or family for investment. At the end of 1997, he sold his company for about $390 million in Microsoft stock and kept more than $75 million of that. And since then Microsoft stock more than doubled, his holdings are worth substantially more today.

Microsoft has sought to minimise the impact of Bhatia's departure, claiming the parting was amicable. "People go elsewhere and we hate to see that, but we try very hard to keep people challenged and keep them here," says Tom Pilla, a Microsoft spokesman.

For Bhatia, clearly there are not enough challenges at Microsoft. He is excited to talk about his new venture, though he does not want to divulge many details, and about his satisfaction and frustration at Microsoft?

Microsoft is not a "two-person company", Bhatia adds. Though he is proud of the performance of Hotmail under Bill Gates' regime, Bhatia says he felt the insatiable urge to do something uniquely his own.

"Also I did not want to be embarrassed by the Silicon Valley cliché 'What have you done for me lately?' Hotmail is still my greatest achievement to date," he continues, "But I am not the kind of person to sit back and rest on my laurels. I still have a burning desire and passion to challenge the way things are done and innovate in areas where I find opportunity. It is this passion to innovate coupled with the rush and excitement that I get from creating new companies from scratch that have caused me to take yet another plunge into the exciting world of entrepreneurship."

He has a definite timetable. "I am hoping that our new products are ready for primetime by the end of this year. There are a number of technological, marketing and branding challenges that will have to be overcome for this new venture to become successful," he says.

He left Microsoft partly because he thought it was not fair to think of the new project on Microsoft's time.

A file photo of Bhatia in Bombay boutique
Was it a difficult decision to leave Microsoft?

"I did not really agonise on the decision to start a new venture as the e-commerce space is really exploding with creative ideas and tremendous opportunities."

What was his biggest satisfaction and disappointment at Microsoft?

"The biggest satisfaction is that Hotmail is now well integrated into the core of the Microsoft Network. It has crossed the 40 million subscriber mark and continues to grow at over 200,000 new subscribers daily under the auspices of Microsoft."

"There were really no disappointments at Microsoft. The only drawback for me was that I am a start-up kind of guy who enjoys a high-energy, fast paced dynamic environment that Microsoft was unable to provide me. It is because Microsoft is not a two-person company and so probably does not have the edge of being a high-energy, fast paced start-up."

The risk-taker

Sabeer Bhatia likes to joke about his gambling instincts.

"The best piece of advice someone gave to me was that the biggest risk in life is not to take a risk at all," he often tells his friends.

He was 27 when he decided he was not going to work for others. He says he was making "obscene money" working for others but he wanted to make much more than that by working for himself.

Before Hotmail was launched, Bhatia worked for Apple Computer, and then a start-up company, FirePower Systems. Jack Smith, his founding partner at Hotmail, was his colleague and buddy at the two firms.

The idea for a free email company did not come out of the blue, Bhatia explains.

For over a year Smith and Bhatia toyed with the idea of a Web based database server and tried to interest venture capitalists in their first venture, JavaSoft.

However, realising that the response was lukewarm, Bhatia and Smith were looking for another idea when they hit upon a Web based email server rather than a database server.

He feared that had he continued working for others, he might not have had the guts to start something of his own. So, with Jack Smith, he decided to chase what many people in the Silicon Valley thought was a crazy idea, a free email service.

Together, the two men raised about $300,000 for their venture.

While soon other free email services jumped in, Hotmail remained at the top because it was markedly different from competitors. One didn't need to download software and install it in the computer to access the email.

It was so revolutionary that in less than two years of founding it, Bill Gates, whose Microsoft had its own email service, bought Hotmail.

While it took America Online over six years to build up its customer base, Hotmail grabbed over 11 million subscribers in just two years.

"Our strength was that we solved the problem that other companies created," he had said in an earlier interview. "We did not restrict people to access their email from just the computer on which the software was installed."

"And because we were not restrictive, there was global access for Hotmail accountholders. They could do it as easily in India as here in California or any other country in the world."

Selling his company to Microsoft was yet another gamble for Bhatia. And getting out of Microsoft and planning yet another venture is another daring step.

Chandigarh born Bhatia came to America as a student to study at Caltech and Stanford. Back home he had graduated from the Birla Institute of Technology in Pilani.

"In the long run, it boils down to a simple fact," he says. "How much of faith does one have in oneself."

A file photo of Bhatia in Bombay's Jogger's Park
Bhatia says he is not particularly a religious person. "I was raised a Hindu and in a way, yes, I am a Hindu but I don't believe blindly in destiny. I try to make my own destiny."

Bhatia is one of the most eligible bachelors in Silicon Valley. But he says that may change soon.

"I am going to make an effort to match my personal prosperity with that of my professional life. To that end I am still searching for a life-partner to share in my future joys and sorrows."


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