how i did it Sami Shalabi

A Beautiful Mind

Sami Shalabi made history by becoming the first Jordanian to sell his company to web giant Google. The young entrepreneur is still making history, adding to his cachet of inventions and patents every so often. He did it all through capitalizing on his strongest asset – his mind. As told to oula Farawati.

I started my journey in Amman, where I was a student at the New English School. I was doing well and was into computers, but at that time (1993), I hadn’t heard of the Internet. I applied to the Massachusetts Institute of Technology (MIT), because everyone was telling me it was a great school. When I got the MIT application, I wrote the essays multiple times and filled all boxes as required. But one box was difficult to fill, or understand in the first place. It said: email. I had no idea what email was. I went to the encyclopedia; found nothing. I asked all my friends and no one knew what it was, and I had to leave that box blank. I was lucky to have been accepted into MIT on a full scholarship. I still didn’t know what email was, but at MIT I was introduced to the magical world of the Internet, and finally figured it out. It blew me away, and that was pre-Internet, pre-browser, pre everything. I went to MIT intending to be a mechanical engineer like my father, but I fell in love with this world of network computing and then I discovered the web. At that time, I was one of the few people at MIT to have a website in those days. I realized then that this medium, the Internet, can give you access to all sorts of information that was otherwise very hard to get and it was in real time. We were reading research papers from other universities without having to talk to anybody. I realized there was a big business in the Internet world. I actually did many websites for different departments at MIT. And then someone paid me an obscene amount of money to build a website that explained how the web worked. While I was a student I got an internship at Lotus. At the time, the most popular product was something called Lotus Note which

allowed companies to have what we now call intranets, but at the time it was proprietary and they were looking for ways to move the infrastructure they have to the Internet. I was very lucky to get a job at the group that was trying to get Notes onto the web. And this is where I learned about the corporate world and I understood what it meant to build software professionally. I was a sophomore then and it amazed me how a big corporation like Lotus would hire a 19 year old to write core pieces of its infrastructure. At that time I wrote the very first web mail application for Lotus. After getting my Masters in computer graphics, I went back to work at Lotus where I focused on a product called Lotus QuickPlace which created a segment called Teamware. The environment there was all about innovation, and redefining the rules. I was a fresh graduate and the youngest guy on the team, and this is when I got my first patent in 1999. One of the things I noticed was how the innovative process worked, and because I kept exposing myself to different domains I realized that an idea that didn’t fit in one area could be applied elsewhere and succeed. My idea allowed people to upload a new look and feel to any website without talking to the system administrators. At the time, it was a big thing - the concept of “themeing” that you see on sites like wordpress today, where one could create a collaborative space and have a user-tailored experience. In a corporate setting, a company would buy this product from Lotus and brand it to become theirs. The last product I did at Lotus was called Lotus Connection for which I was the lead server architect. For that project I took an unconventional approach to building the

product, which received a lot of resistance but eventually it led to the beginning of Web 2.0. Bootstrapping it In almost everything I was involved in, our first theory was completely and utterly wrong. If you work in a cocoon and don’t get timely feedback from people, you won’t be able to build a great product. Today at Google, we are on a two-week schedule of delivery and I am trying to make it even shorter, because it is very important to iterate, to go through the iterative loop of design, test, push, feedback, and redo it all over again. Once I got my US greencard in 2005, I hooked up with a Lotus colleague named Mussie Shore – the best product designer I've ever met – and we were exploring ideas. We were both interested in this transformational thing that was happening with mobile devices and that was pre-iPhone. We looked at the numbers and saw that text messaging and instant messaging were going through the roof. People were connecting and communicating in ways that we hadn’t seen before. However, if you looked at how people communicated it was still one-to-one communication. And we thought that we could make this better. So we started with the idea of how we might allow people to share things they care about with the people they care for. We called the company Zingku. We came up with lots of crazy ideas. For example one was a service that provides book names with a short bio and an option to buy the book via sms. This is the beauty of the web, we didn’t have the data, we collected it from Amazon and Google and Wikipedia and so on, and we aggregated it and then through the cloud we optimized it for search. Over a year we amassed
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a whole collection of applications and what was interesting is that we made a bet that the barriers between mobile carriers would disappear. Our principle was not to reinvent any wheels. If someone else had developed a solution for a problem that we faced, we used it. It allowed us to build an entire service on almost no money. We spent $2,500 total to build the products. We worked nights and weekends. We were both self-funded and we decided we didn’t want to spend any money. Our biggest expenditure was coffee and we spent a lot of money at Starbucks. As a business, you need to keep your hand very tight. We were doing demos on a $400 server and the text messaging gateway used the cheapest phone plan I could find. We were working from home and Starbucks, and were using Skype to talk to each other to keep costs down. We were very stingy and it worked well for us. We used open source software. We couldn’t bootstrap for a long time though. We knew that if we wanted to go full-time on this project, we had to get VC funding. So to improve our position, there were a couple of ingredients that we needed. Most investors in first startups know that the idea will likely change. Young companies need a team to do the zigzagging to help the company survive the start-up phase. In order to improve our valuation, we needed to validate what we were doing, so we had a prototype of the product and we tested it at Ithaca College – a local university – to see if it was working and the indicators were very positive. We had a few patentable ideas and we were able to spin out new applications in weeks because the infrastructure was good, and that's when we were ready to go look for money. Fundraising, in the US, is a six-month process, four months if you’re on the right track. We weren’t looking for angel investors because this business needed money and we managed to raise about a million dollars from a VC in Boston called Flagship Ventures. At that time convertible debt did not exist. when it rained … The million dollars paralyzed us for a few months. We wanted to spend a tiny bit of the million but still spend enough to grow the business. Our product was ready but it took us six months to get it approved by the carriers, who had never seen anything like it. At that time you could do only two things with text messages: ring tones and wallpaper. Then, Web 2.0 peeked, and you couldn't look
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sideways without finding 50 competitors and it got really crowded. So we had to iterate again. We decided to re-define our route. We refined the assumptions, looked at the metrics and we discovered that there was this segment no one was looking at: musicians. They were using it very creatively to promote themselves, so we took our service and repositioned it to cater to musicians and that is when things really started to take off. We did an email campaign as a test and the conversion rate (the proportion of people who signed up for the service, usually around 0.5 percent) was 10 percent, which was unheard of. Suddenly the indicators for the business started to look good. The market was disrupted, labels were not making as much money through music sales anymore. We were partnering with manufacturers and people could buy products through mobiles, or the web. We signed two of the largest musicians from Africa who could fill up stadiums of fans,

Friend Connect. It was the first connect product of its time. It was a very novel idea, even before Facebook and Twitter had their Connect products. We didn’t know if a third party social (commenting, sharing, liking, etc.) was even possible and it took us months to make it successful. At Google, I still feel entrepreneurial. At big companies, you declare your authority. Actually, one of the principles we keep reminding ourselves of is to ask for forgiveness, not permission. So the way we run the Friend Connect team is the same way we run the startups: we create goals for everyone.

The Sami Shalabi Pointers
Sami Shalabi and fellow entrepreneur Habib Haddad founded YallaStartup, an online portal for the entrepreneurial community to share ideas and receive feedback. Through it, he’s gained the title "entrepreneurs' doctor" for his ability to immediately diagnose any "disfunctionality" at any startup and propose the right cure. Here are 10 entrepreneurial guidelines he recommends:

It is always important to review your assumptions as your environment changes
and they did amazing marketing for us. They would promote us in their concerts and say “if you want my ringtone text this number” and we could see our charts shoot up sharply. We had a market and a product and we were getting a call a week from potential acquirers. Then, one day, Google knocked on the door. They were looking for people who did innovative and interesting things on mobile, and were interested in us. They said our platform had good engineering behind it, which was important for them. It was a thorough process, but we chose Google because it was great place to work and had a very strong brand. The transition was really interesting, since we had a lot of freedom around how to proceed. We could continue building our product, or come up with something new. It is always important to review your assumptions as your environment changes. It helps you take advantage of the situation. At Google, we were thinking about how we might change the world. We wanted to start something that would make the web more social. That is when we created Google

Keep exposing yourself to new settings Get out of your comfort zone. Start with the theory and fine-tune it based on the feedback as quickly as possible. That gets you to the point where your product is actually what people want. You need to figure out the pain point, get the user what he needs, and then start monetizing. Investors invest in teams, not ideas. Keep talking to people in your industry even if they are competitors. When you divide equity, put everybody including yourself on a vested schedule no matter how well you know them.º Make sure you have some patentable ideas because this will make it harder for others to compete with you. Add metrics so that you know what people are doing and how to react. If you get acquired, think of how you can make the acquisition even more successful.

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OCTOBER 2010