iinnovate 5: Mike Ramsay, founder of TiVO

transcript from iinnovate

Matt and Julio – Episode 4: Mike Ramsay, Co-founder of TiVO 

Hi, welcome to iinovate, a podcast about innovation and entrepreneurship with Julio Vasconcellos and Matt Wyndowe.   

Hello and welcome to our fourth episode with Mike Ramsay, the co-founder of TiVO.  We spoke with Mike in Paulo Alto where he talked to us a lot about what it was like to found TiVO, and for those of you who don’t know, TiVO is the creator of the first ever digital recorder DVR.  So, enjoy the interview and check out our site, www.iinovatecast.com to leave comments, and look to hear us next week when we interview Dean Joss and Professor Sloaner of the Stanford Graduate School of Business.  Thanks for listening. 

We’re here in Paulo Alto with Mike Ramsay, co-founder of TiVO.  Mike, thanks for joining us. 

Mike: You’re welcome.  My pleasure. 

Mike, you built not only one of the more innovative products of the last couple decades, but also a verb.  Could you talk to us a little bit more about how it was starting TiVO, why you decided to found the company, and your experiences in growing the company. 

Mike:  Sure I can do that.  You know, we certainly didn’t start with the objective of creating a verb.  It was hopefully something a little bit more impactful than that but, I co-founded the company with my colleague Jim Barton, and he and I had worked together at SGI for many years, and so were very much involved in the entertainment industry.  I was responsible for products that, you know, people use to create special effects for movies, you know, like ILM and Pixar, and companies like that. 

    That was at Silicon Graphics, right? 

Mike:  That was at Silicon Graphics, right.  And Jim was involved in VOD, you know, on-demand video stuff, and so we kind of got into this place where we were really interested in using computers to do things that were kind of interesting, you know, instead of boring things like office applications and such.  And I suppose that was the seed for when we got together after we both left SGI to do something that was very, you know, we wanted to do with consumers, real people.  We were very interested in media kinds of applications, and so it was natural for us to start thinking about this space.  At the time, you have to remember that, this technology, which is obviously a key part of TiVO, was very expensive and nobody had really thought that you could record television on it.  It was kind of a wacky idea.  But we saw that, maybe not then, but a year from then or two years from then, this was gonna be a very different story, and there was this really interesting possibility to create an application where people could take charge of television.  And, in the early days we thought of things like, “Wow, you know, you can pause live television – isn’t that a cool thing.”  You know, so the ideas started to flow back in 1997, actually, when we started.  You know for us it was partly, we’ve got this cool idea and we’d like to exploit it, and it was partly we both really wanted to start a company, and that meant, you know, we’d like to start, you know, an organization, a place people could go and have fun and earn money and, that we’d be responsible for that, and we built a culture around the company, and it would be something that would be elastic.  In fact, that aspect of it was probably just as important to us as the product.  So in that summer of 1997, we developed the original ideas, we went up to Sandhill Road and got funding, and by October of ’97 we had an office and 12 people and off we went.  And that was the start of TiVO. 

So Mike, if there is an entrepreneur out there who has an idea, what first things should he/she be thinking of when starting up a company? 

Mike: Well I can, you know, I can only talk from my own personal view there, but I think the first thing I would say to anybody is that starting a company is a lot more difficult than you think.  And certainly for TiVO, it was a lot more difficult than I thought, and I’d been around the block a few times.  But it’s a big commitment – it’s a big commitment, and I think it’s important that anybody goes into it with relatively low expectations, maybe high ambitions right, but, low expectations, because there’s a lot of barriers to cross before you can legitimately say, you know, we have a company, we’ve got this thing running.  And I think some entrepreneurs will look at that problem and, having thought about it for a little while will go, “Oh my God this is too big” and they’ll be scared off.  There’s a natural self-selection process when you start to think about that, and other entrepreneurs relish that idea, you know, “you know I’m going to devote my waking hours to creating something new and working with bright people, and creating a market and a product that people are going to value, and hopefully make a lot of money along the way.  And it’s those people that get a charge out of that, get energized out of that, that move onto the next step right.  And so I would say first of all, do a bit of soul searching as to whether this is the right thing for you at this point in your career.  I think the other thing I’ve noticed recently, there’s companies that perhaps the founders are engineers, they’ve worked on a particular problem, perhaps even in research at universities, and they’ve discovered some really clever way to get something done, you know, maybe it’s delivering large files over broadband very quickly.  And so that’s the problem they’ve solved and they’ve tried to translate that into a business, but they haven’t quite got there yet, so they don’t have a business model and they don’t have a value proposition.  And I think you can go too early, you can say, “well I really believe passionately in this” and you end up trying to pitch it too early and you don’t have all the answers, and you have to go back with your tail between your legs and start again.  So I do think it’s important that people think through what they’re trying to get done, both, not just from a technology standpoint, but a business standpoint, and be prepared to stand up and justify this as rationally as you can.  And generally entrepreneurs, when they cook up an idea, the target market is not them, because they’re very unique kinds of people right, and so you have to sort of step out of your own point of view and think about how you might present this from somebody else’s point of view.  In terms of hiring, I think probably the number one challenge, and the number one priority is hiring a core team.  Nobody can do this on their own and, you know, I was fortunate to have Jim and PI, because we complemented each other, but even we knew that that could only go so far and we had to get sort of a critical mass of people.  And sooner or later you have to make decisions about, “Well, when do I need to hire a finance person or a marketing person or an HR person?”  Sometimes that’s sooner rather than later so you sort of have to think about that carefully.  But getting a core team in place and getting that energized is absolutely critical.  And once you’re there, you know, the great thing is once you’ve sort of got your mind around that you’re going to do it, and you’re committed.  You’ve got money in the bank and you’ve got a good story to tell and you’ve got a good core group of people, that’s a first milestone crossed, and now you can kind of get on with things, and that’s when companies start to move very fast. 

Mike, what do you look for when you’re hiring someone and how do you differentiate between someone that truly is a top player versus someone that just interviews well? 

Mike:  Yeah, good question.  I mean, number one rule for me is part of the person not the skill, so it’s very easy to say “I need a finance person, therefore I’m going to go and find somebody who has run finance before” and I find that all the failures in hiring that I’ve been responsible for have been because I’ve hired somebody for their experience, not for themselves, and some of the biggest successes I’ve had are when I find somebody that I just think is incredibly smart, very creative, doesn’t necessarily have all the experience I want in a particular area, but you know they’re going to learn it instantaneously, and that you know there’s a connection, you know, you know they’re going to be part of a team and there’s going to be a meeting of the minds.  And those qualities for me are far more important in hiring somebody than how good they are at adding up numbers or you know, building chips.  That’s important, but it’s kind of a given, you know, and the real variables are all around who they are as a person.  And I think, you know, when that clicks, when you, when somebody walks into a room and you make that connection, you know in five minutes whether it’s going to work or not, and the rest of the 55 minutes of the interview is kind of, you know, a waste of time basically, but you sort of feel compelled to go through it because otherwise you haven’t done due diligence.  But, I would always hire for the person and in fact at TiVO, most of the initial executive team had never done that job before.  They had never done that job before and that made them all the more motivated.  It worked out very well. 

TiVO is a disruptive technology.  What kind of challenges specific to disruptive technologies coming into the market did you guys face and how did you overcome those? 

Mark:  There’s a lot of them.  The first one was, we had to determine whether what we did was legal or not.  We determined it was of course.  And then we had to think about, well, okay, you know, broadcasters – television networks – rely a lot on commercials to make their money, in fact many of them rely exclusively on commercials to make their money, and here we are, we’re gonna, we already knew early on we were going to be fast forwarding through commercials and messing around with prime time and surf.  It didn’t take much to see that we were gonna really disrupt the normal flow of television programming, and given the conservative nature of the industry, we knew that was going to be a big deal.  So, and we were not that familiar with the industry to know that we could go to person A or B and sort of soften them up beforehand.  So we actually, to get into that one, we hired very early on, an individual, an executive, who came from the media world.  He actually was at CNN, so he’s part of the Turner group of companies, and we said to him that, you know, we were concerned about the disruptive effect.  We thought it would be great to have somebody in the company who is, you know, familiar with that industry, and knew people in that industry.  And in fact, what we were going to do is go over there and show people what we’re doing, you know, well ahead of time, and try to explain to them that this was actually okay.  Of course it wasn’t okay but we thought we’d give it a try and so we built a little prototype, it was actually built from a PC and it was a TiVO in a box and we had a little handle on it, and we, you know, carried it around.  And we had a slide show, and the slide show tried to show about other kinds of advertising you could do, so it’s very, very media company friendly.  And, when they saw this thing they’d just go completely nuts, you know, every emotion, anger, hate, you know, I mean it was very animated and sort of startling at first that those people that we showed this to would have such a negative reaction.  And not only did they have a negative reaction and throw us out of their office and all that kind of stuff, but they, you know, they talked to the, by that time the press were catching on to this, they thought this was a fantastic story so they were really interested and they would go around, and these people would tell them that we were, you know, evil, and that if this took off it was going to have a massive negative impact on the US economy and all sorts of doomsday kind of statements.  And so, we then had a pretty clear idea that this was, you know, this was an issue, and we weren’t sure if at the time we’d be vulnerable to a lawsuit because there were all sorts of noises being made about that, and some companies were trying to ask us to take a license and content so that we’d avoid that, and we didn’t want to do that – we didn’t think we needed to do that.  And so that was a difficult period but the cool thing about that was that all of that combined with the fact we also had a competitor in the form of replay TV that was doing the same thing, made it incredibly newsworthy and so for virtually no money, we’re getting a huge amount of press and PR around this because people were just interested in it.  And therefore, that was a good thing but it was not, it was not something you slept easy at night about, I mean, we concerned ourselves in a very serious way about it.  I hope we’re doing the right thing and I hope that, you know, we can get a chance to see this through, ‘cause for about six months to a year, it was not clear that would, that that would actually be the case.  So our history is absolutely one of, you know, a kind of disruption every step of the way, having to deal with a lot of emotion and a lot of established industries as a very small company.  And I guess, you know, for me I guess what I’ve learned about that is you sort of have to stick to what you’re doing, right?  Because the biggest weapon, although you may be a small company, the biggest weapon you’ve got in your arsenal is happy people, happy customers right?  And if you get three or four million happy customers who will never ever go back, and if they were forced to go back there’d be riots in the streets, you know, and when you’ve got them behind you, you can make things happen.  So we’ve got the leverage for that good will from our customer base that I think has seen us through that whole thing. 

Your TiVO users love the product, but the product itself isn’t really that straightforward.  When you were marketing the product and thinking about how to position TiVO, how did you make sure that you were selling it as more than just a super VCR? 

Mike: That was, I found that continues today to be the point of the biggest marketing challenges because, you know, it’s hard to describe to you in one line, and so you describe it and in the early days, you describe it and everyone goes, “oh, that’s just like a VCR”, you know, that’s just like telling Hindenburg it was just a balloon.  And we of course, we’d get very upset about that and say “no, no, no, no, no.  It’s much more than a VCR, it does this, it does that, let’s personalize it and all that stuff.”  But by that point, you’re into a five or ten minute conversation, not a 30-second conversation.  So the communication of what TiVO is became one where it was very difficult to describe it in, you know, in short terms, which for a consumer product is a real issue.  And so we decided that the only way you can really do this is to show it to people, and also to have people who have it and love it tell other people.  So word of mouth, demos, that kind of thing, getting in retail, were all really important and continue to be that way today.  It’s not an easy thing to describe, I mean, at one end of the scale you can say “it’s watch what you want when you want” right?  And that doesn’t mean very much right?  But that’s what it does, and the other end of the scale is, you know, yes it’s like a digital VCR, but it’s really smart, and it lets you search.  And that is too technical for most people, so it’s a challenge, but I think the category now is getting well-known, so maybe that problem isn’t quite as bad as it used to be, but it was certainly a marketing challenge for us. 

Where do you see the future of TiVO with video on demand, downloading content on the rise…are those disruptive technologies that you guys worry about, or where do you see that market going in the future and your role in it? 

Mike:  I think what the DVR phenomenon has established is that people really want to take control of television, and if you give them control, they don’t want you to take it back.  It’s probably also established the fact that it’s not necessarily that, you know, you have to watch something right – something comes in to your head, you don’t have to watch it right now.  This idea of sort of creating a wish list has been established, which is probably just as well right?  But the other companies have exploited that like Netflix for example, same model.  So there’s clearly been a change in fewer patterns on television, and the question is, you know, what’s going beyond that, and I think that the internet, you know, broadband, color video over broadband offers huge potential for further increasing the choice that people have, as we see models pop up of people, you know, publishing their own content, mainstream content being available on the internet, as well as perhaps more niche content that wouldn’t make it onto regular television.  And the upshot of that is that the choices you’re going to have in the future are going to be far greater.  You know, the 1990’s, the last century was all about, you know, 200 channels and nothing to watch.  This time around it’s 50 million channels and how in the hell do I find any of that stuff?  I think the choices that people have will be greater and it will all be on demand, essentially on demand.  So, I think, you know, TiVO clearly has taken a position that is going to integrate, you know, broadband and broadcast content and wants to be the node to do that.  I think that’s a big step – now, is that disruptive?  I think it is because it’s forcing the media companies to really think about the internet as a legitimate distribution vehicle.  You’re seeing it happen with i-tunes for example and TV programs being downloaded.  Virtually every broadcaster now has a website where you can get streaming media off their website.  So, it’s forcing the industry to embrace the internet as a legitimate distribution medium, and once they embrace it, they will find that their business models change and new opportunities will arise, and I think it’s going to cause an even bigger change in the industry than DVR did.  I think it’s going to be good for everybody, and people will make a lot of money. I think consumers will be very happy – hopefully get better, more relevant content than we did before. 

Mike, thank you for coming for the podcast, it’s been a pleasure. 

Mike: You’re welcome.  Thank you. 

Thanks for listening.  A transcript of this interview as well as bios and comments are available at iinovatecast.com