Ben Kuo: For the readers who aren't familiar with SIPphone, tell us a little bit about the company?
Michael Robertson: Sure. SIPphone is now a couple of years old, and we recently closed a six million dollar financing round. What we're excited about is SIP is a strong analogy to MP3. What I mean by that is SIP is to voice over IP what MP3 was to digital music—an open standard, where everything works together in terms of hardware and software. It's not controlled by one company, and is a great thing to build an industry around. We started it about two years ago, and put SIP in the name to emphasize we're standards based. The way I think of our business is that we offer a dial tone service. Whether someone wants to use the Gizmo software or other piece of software, or a router or adapter or even a Wi-Fi phone, when you need to talk to someone it needs to connect to a directory. That directory can route their calls, take voicemail, they need a directory. We also make soft clients—but we didn't want to make a software client.
What happened is a couple of years ago along came Skype. Skype made a good job of creating good, clean software that was able to cleanly traverse over firewalls and routers, and really exploded. I was disappointed that SIP clients out there weren't as good. So we had to build a SIP client to prove you can make a terrific standards-based client that can compete with the proprietary guys, and that had the same audio quality, could traverse NATs and firewalls, but also be standards based. What I mean by standards based is not just that it uses SIP. Skype uses proprietary ways to transfers calls and voice, and we use open standards. More than that is I want the voice over IP world to be more like email, where you have one address you can use to contact anyone in the world. Right now, using any software, you can reach Hotmail, Comcast, AOL—and it just works. That's how I want voice over IP to work. Contrast that to the way that instant messaging currently works. You need give accounts, one on AOL, another on Skype, another on MSN – and none of these connect to each other. It's a big mess. We are avoiding that mess by using open standards, and have a policy that we will connect to anyone through peer or federation agreements. That's our policy over at SIPphone. We already connect today to hundreds of voice networks, competitors, and are working together. When they see a call for SIPphone, they pass it to us, and when we see a call for them, we pass it to them. It's all seamless to the consumer.
BK: Is there any space in here with Skype, Vonage, and others pretty dominant in Voice over IP?
MR: We already have a half a million users, and area a pretty elite company when it comes to voice over IP. There's lots of small guys, of course, and the only ones that matter to us are Yahoo, Skype, MSN, and AOL. Those are the guys we watch closely. We're not yet at the level of those four, but we will be quickly. Why we think people like Skype will be passed is that we're open. We're SIP based, and you are now seeing dual mode phones that are coming out. For example, the recent D-Link phone is SIP based. SIP-based means they can connect to our users out of the box, something you can't do with skype. You don't see any hardware made for Skype, and the phone they do have you have to plug into a PC. That's not a separate, standalone phone. Skype has a big problem because they've built their system on a proprietary protocol instead of SIP. People today look at the situation and say Skype has a big lead. I remind them that when I started MP3.com, Real had 80 percent market share. RealPlayer was shipping with every PC, and people asked how MP3.com could ever reach the Real market. This year, and it's eight years later, Real is largely irrelevant in the digital format contest, and MP3 has become the defacto worldwide standard, in face of monstrous competition from Microsoft and Real, and also Apple's AAC. That's the same fate that will befall Skype. Skype will not go away, but ultimately we have an advantage because there are hardware guys building devices to push SIP forward, plus great software clients, and things like Asterisk, the open source PBX. Asterisk is gaining lots of momentum, and works perfectly with SIP but not Skype. People deploying Asterisk are using the Gizmo project software to answer those calls.
BK: What is the interoperability you have with Google, I believe you had some deal with them?
MR: Yes, a year and a half ago we talked with Google. Our vision of the world is that everyone interoperates. Google got excited, and that's what they believed too. Google Talk agreed to federate with us, and our users can do IM and exchange presence information with us. People can instant message to us from Google, using standards. In this case, with IM it's using XMPP and the Jabber protocol. However, on the voice side, Google Talk decided to do their own thing, using Libjingle, not the SIP standard, so we don't currently exchange voice traffic between Gizmo and Google Talk. We hope to get there in the future.
BK: Let's talk a little bit about your businesses. You seem to be turning out startups at a pretty rapid rate. What's your idea behind that?
MR: What I think about, is I have two sons—and what they will think about their father and what he did. I think they are going to say “you had it so easy Dad” and “Your businesses are so obvious.” And they are so obvious. It's not hard to figure out my business strategy—I am focusing on industries that can be completely digitized. Music is a perfect example—you can move it around, make playlists, play files. There's no question all music is going online. Software, with Linspire and click and run – all software is going to be delivered online. Phone calls—no doubt they will all be delivered on the internet. These are undeniable truths. You can argue how quickly it will happen, but getting back to my kids—I'm sure they will say it's so obvious. When they are adults, they will not be able to say that it wasn't obvious that all voice calls will be on the Internet, that calling would not be free, or that instant messaging and email is free. Though it might have been revolutionary, they will say that it should have been pretty obvious to anyone looking around. That cuts to the core—I like businesses that are purely digital, which can really change the whole economic structure. What I mean by pure digital is things you can digitize and shoot around on the Internet, such as news, music, videos, and phone calls. You can't shoot a pair of shoes, or a loaf of bread, or physical goods like that. If you can digitize it by moving to the Internet, it's going to happen. And with that change, it knocks out old incumbents and makes new room at the table for new leaders. You get a seat at the table with adults and make some money during that transition period. The businesses I do are pretty obvious to me because they are all about digitizing an industry that previously was more offline, and moving those industries 100 percent online.
BK: A few years ago, after the Internet boom, companies were having a tough time starting and finding funding. How have you found starting up a number of companies during that time?
MR: There's no question—three years, four years ago if you mentioned you had a consumer business to venture capitalists, they wouldn't talk to you. Fortunately I made more than $100M on MP3.com, and I could write checks on my own checkbook. I didn't have to raise capital. Though I do have a policy of taking capital if it's at a fair rate and doesn't burden the company too much.
BK: Is that why you took venture capital for SIPphone?
MR: Anytime you can raise capital at a raise a fair price, take it. Capital helps you move faster, and helps you realize your vision more quickly. A smart businessman will raise capital if it's at a fair price.
BK: You've had lots of experience with successful startups. What's most important advice you'd give an entrepreneur?
MR: I would say there are probably two things. Number one is you have to, almost by definition, be different. You have to zig when everyone else is zagging. Thinking about this—life is a bell curve. You've got about half the people in the middle, a bunch of people on the bad side, a small bunch on the way bad side, and an equal number on the way good side. Entrepreneurs want to be on the way good side of the curve. By definition that is a small number of people. An entrepreneur has to not go along with the crowd. If everyone is doing it, that's wrong—by definition. By wrong, I mean it can't be a successful business, because everyone can't be a hugely successful business. Entrepreneurs have to not fear being different. People will disagree with you. For example, when I started MP3.com, I received a huge amount of criticism, and people criticized every decision I made. When I named the company MP3.com, people told me that was such an awful name—like naming a company Betamax.com, where a new thing will come along and you will be the old relic, and no one will use you. MP3 had nothing to do with the audio format, it had everything to do with the functionality that consumers were able to get from it. They don't care about the audio compression algorithms—consumers care about being able to click on a file and hear music. They want click save, or download, or whatever. Another thing we did way back when is we accepted all music—any band got free hosting. At the time, everyone said to only take the good stuff. Someone you think is crap might be good, and something I think is crap you might think is good. It's just disk space. I gave them unlimited storage and unlimited bandwidth for free. At the time, they told me I was crazy. They said that disk was expensive, bandwidth was expensive, and I was going to go bankrupt. Now everyone is offering free storage, and there are thousands of sites. I believed that the price of bandwidth was going down, down, down, that the price of storage was going down, down, down, and that it would continue to go down and be an irrelevant, immaterial component of the business. At the time, even all the experts thought I was crazy, and wrong, and it wouldn't work. So if you're an entrepreneur, persevere and just go prove it.
That's the second thing. As an entrepreneur, stop talking about it, go do it! Put away that business plan. Launch that first version, even if it's missing features and breaks sometime. Start hearing from customers, start figuring out how to get revenue, and figure out what consumers are interested in. I ignore business plans with projected data. The only thing that matters in my world is actual data. Actual traffic—not what you think—but what are they paying for, how much are they paying, what are the margins. Actual data is one thousand times more valuable than projected data. Even from the smart guys, the MBAs, the analysts. I'm frustrated by companies that talk about vaporware. If you don't have a URL, I don't want to talk about it. I don't want to read about your vaporware plans in the paper. You have to be different, and you have to move and move quickly.
BK: Thanks for the interview!