From India to Silicon Valley: The Jay Chaudhry & Zscaler Story

0:00ZSkill is a mission critical application. The feeling of being able to secure 48 % of Fortune 500 companies who depend upon you to do all this business, it's just very, very exciting to see. You're making a difference in the world. People famously describe how hard company building is. Elon's analogy of chewing glass and staring into the abyss. Do you agree with that? If it becomes a passion or hobby you like. In some of the past companies, like one of them got acquired, then the acquirer just crushed it and killed it. In other cases, it went on and off, even though it's smaller. But within that, it flourished.

0:35So it feels very good. I think that's what every entrepreneur feels. It's fun to see what you created at his own.

0:52Welcome to Grit. I'm Juven, partner at Kleiner Perkins, a show where we go beyond the highlight reel and explore the personal and professional challenges of building history-making companies. Today, we're at Zscaler's headquarters interviewing Jay Chaudhry. Our second conversation, his fifth company, the first four which he has sold, the fifth Zscaler, which he owns 40 % of, has created the wealthiest Indian American of our time. He's incredible. Enjoy the episode. I'm thrilled to be doing this. I don't know if you... Can I tell you what I heard about our part one? And I'll get your reaction to what you heard about our part one.

1:30Yeah, please. I had several, several people reach out to me that were kind of blown away by your demeanor. Here's maybe specifically what... I think your style of questioning was unique and different. And that's what I heard from many people. Okay. I had one investor who I saw last week at the Morgan Stanley Conference who said, yeah, I listened to that great podcast. Now my wife and I and my kids, we go for a bonding walk after this.

2:15That is awesome. But go ahead. I saw the answer. No, no. No, the thing that one question that people asked me was, okay, I'll give you, can I just go through the list and then get your answer? Because I've been dying to follow up on these questions. Yeah, yeah, please. The first was, this is his fifth company. People famously describe how hard company building is. I have a pretty firsthand look into how hard they actually are. I think Elon's analogy of chewing glass and staring into the abyss is not too far off from what I've seen in many cases. Do you agree with that? And if so, like one is one is Herculean.

3:01Then three more concurrently doesn't even make sense. And then now building Zscaler and it's a 30 like that. How does that work? I think it is truly, if it becomes a passion or hobby, you like it. It makes it easy. Here's the difference. If I look for and say, when do I get done and retire, then you're not really having fun. Then you get into a milestone. I get done. I declare victory. I move into something else. My wife and I talk about the fact that, hmm, can I retire? What will I do? how boring or tough the life could be when you're not doing something you enjoy. But I think it's a, I mean, people have fun in many areas.

3:53Maybe if you look at some of the areas of science, there's some scientists who let their work, they do the work. They don't even get paid much. But they do the research stuff they do. I mean, in entrepreneurship, probably it gets linked to money more. But even take some artists and all those people, they do a lot of work. It's not easy. But for them, it's easy. It's fun. So honestly, I don't know what I do. Have you, in the conversations with your wife, like, do you have a blueprint for what could be after? Is there an after? Like, is this company going down when you go down? Like, is there an after?

4:38No, no, no, no, no, no, no. This is meant to be. I mean, companies are supposed to last. I mean, if they don't, then you really are not successful. Now, we talk about having our next startup as a nonprofit entity to help giving back. So it's a different kind of thing. But I think of how Bill Gates actually had drove different stuff. After he left Microsoft, he drove his stuff almost like a business. So how do we help in two areas? One is education. Second is health to help the world, especially the needy people who need it the most. Sorry, can I ask you, like today, like you just had an amazing earnings report.

5:30the company's growing almost 30 percent it's it's it's over two billion of revenue i mean it's it's it's going but let me ask you this if for some reason which wouldn't happen but if for some reason in five years you step down and in 10 years the company starts to fail do you think it will be a failure do you think this would not be successful do you think you wouldn't have been successful It's disappointing. It becomes very disappointing. I mean, in some of the past companies, like one of them got acquired, then the acquirer just crushed it and killed it. In the other case, it went on and off, even though it's smaller.

6:16But within that, it flourished. So it feels very good when the company carries on. I think that's what every entrepreneur feels when I talk to others too. It's fun to see what you created carries on. Do you think it's part of your legacy? Do you believe in that idea? I haven't really thought about legacy as a legacy, but I think something you create succeeds is a wonderful thing. It's disappointing to see you did all this stuff, and it just goes to hell. And does this, many entrepreneurs describe to me this existential fear that all of a sudden everything's going to go to hell. It's all going to be, at any given point, at any twist and turn, things could just fall apart.

7:07And these are people that run gigantic companies. Does that exist for you? So if you think about enterprise company versus consumer company. Sure. The answer depends on what kind of business you are in. In the consumer business, things go up and down pretty quickly. Consumers are pretty fickle. This device, that device here, things happen. BlackBerry was good, went down, even though BlackBerry was widely used by enterprises. In the enterprise space, things take a long time to be successful. And you really have to screw it up for it to go down. And every enterprise company takes a long time to really go down.

7:57I mean, if you look at even Microsoft had done well, and under Bomber for many years, it was written off as something that's going down and down. But it's kind of sat there for many years. Yeah. And then Satya came and really jolted it and brought it in the right direction. I mean, even some of these companies, look at HP. I mean, I admired this company for a long, long time, from my college days. And then I saw it kind of just for the last 20 years. Yeah. Do you think about, like, let's just pull on this Microsoft analogy, where once Steve relinquished control, things started to get better. Once Steve got control, things started to get worse.

8:56Right. Once basically once it got from Bill. Right. Once the founder CEO left. Right. Do you think about like at some point you're going to do your thing? Do you think about that? Yeah. How to avoid that? Making sure you have a good success that is important. and it's one of the$50 million question because there's no simple answer of outsider versus insiders. I think I do think that in our kind of business, you need somebody who comes with a strong technical background. You just can't have someone who is a pure salesperson because they just don't appreciate it. I saw it firsthand at IBM when IBM had its peak days, John Akers was the CEO.

9:49He just didn't know any technology. We were seeing, I was at IBM, Steve Jobs had started a company called Next. It was kind of based on a flavor of Linux. And it was kind of a workstation like Sun and others. And IBM in a workstation called RISC6000. He sold, Steve Jobs sold the idea to John Acres and without even talking to his team, he kind of said, they're going to give you$50 million,$100 million, we're going to bring it in, blah, blah, blah, kind of stuff. And everyone was an idea of saying, man, what is this? But Acres was enchanted with this stuff and he moved in. Eventually this thing didn't work.

10:31It got booted out. But the many examples that I think things don't go well, I think Cisco is struggling with that. I think Cisco needed Satya to really turn it around.

10:52And maybe back to the original point about how this is truly a hobby for you. Can you really succession plan if this is your life's calling? Meaning, to attract Satya to run Zscaler moving forward, he'd need to probably look you in the eye and say, all right, within a few years, this is going to be my show. But I have a feeling, you tell me if I'm wrong, that you love doing this. You know? Yeah, that's true. Does that actually make sense? It does. But I really like innovation and engaging with the customers. Then I'm focused on creating the next great service and engaging with the customers at two levels.

11:45One, selling the broad, big vision. Two, showing them the new, exciting stuff you built, they're going to help with. I mean today too I'm more biased, my time is more spent on customer engagements on one front and new innovations we're doing on the second front. I spend a lot less time on mature products. Yeah, I spend a lot more time on doing operational excellence. Okay, are we really run in a proper cadence of operational excellence the way it should be? not really. So I would rather, you know, I think I would rather do some of those things and have someone run the company at some time. And okay, can I get to my next question that everybody asked me?

12:44Yes. On the traveling piece, first of all, everybody said, Jumin, do you believe him when he says he doesn't have a plane. And I said, definitely. And they said, well, how could you be the richest Indian in America? How could you be worth$13 billion or whatever and not have a plane? And I'm like, no, no, no, no. He doesn't just not have a plane. I actually believe him when he says that he flies. He doesn't fly in first in business. I believe him. So, no, I've been switching. I mean, I've been upgrading. Okay. Yeah. You're treating yourself. On the longer flights across the continent. Like to India?

13:27Or to Europe. I'm taking business classes. The first time I did was in India about a year ago. I want to reach six cities in five days. Yes, okay. Okay. So it's between Mumbai and Bangalore and Delhi and Lucknow and Hyderabad and Chandigarh. That was the only way to do it. So it makes sense. So I am using it where it makes sense. Okay. If I need to reach between Chicago and Cincinnati and Cleveland, right, and Detroit. it. If I go somewhere, I would rather spend three days or two days in four cities and do two meetings through noon here, two meetings in the afternoon, and two meetings the next day.

14:24So in two days, I can cover four cities and eight great meetings. Put another way, you'll spend money on efficiency but not comfort. I think there's no, I mean, I don't see the difference between sitting, I mean, yeah, I mean, there's not a whole lot of difference. Sure, the business class is a lot better than the others, so that's okay. I get upgraded quite often because of my status and all this stuff. When my admin looks for it, she doesn't look for business. She looks for time and what's that plane available to fly when I want to fly with my time. Okay, okay, okay. Because starting at that time, ending there is more important than a flight with a business class.

15:17Unless it's a longer flight. Yeah. Right? Do you feel guilt upgrading? Do you feel, is there a, or if you spend money, how you would define it as super, like just not necessary? Not really. I just think in terms of efficiency and productivity. My time is the most important thing. So I am optimizing my time more and more and more. But efficiency is picking up as more and more customers want to meet me. and that helps the customers and us both. So I do take advantage of whatever I need to. But, yeah, there's a little bit of ROI in the back of the mind. I mean, I just think I need to go to New York.

16:12I'm taking a red eye on United or private. It's no different. So why spend whatever amount of money on there? And then from New York, if I need to do four cities in two days, that makes good sense. Then I can get in and out anytime. And you fly a red-eye to New York? Many times. Why? It's depending on the day and time. If I have a busy day and going out there, you kill the whole day. Yep. Coming back you actually gain time you take a 630 flight you land at 930 That's not a problem. So it becomes a little bit of a Time saying what do I do do I want to lose my? Productive day of talking to you sleep on the plane when you take a red-eye.

17:10I do I'm on good sleep So even sitting upright you sleep no problem Yes I don't know, there's weird stories about home in my sleep, tell me. This was a few years, yeah, my alma mater, IIT, BSU invited me in 2015 or 16. They wanted me to, they gave me an alumni of the Century Awards, a nice day. So I had to go. They insisted and I couldn't really turn them down because they're recognizing me. So I decided, where is this? Varanasi, Banaras, India. So I got on a flight. The flight was to connect through Taipei and then to Delhi. And I got on the plane. And this was actually, at that time, this was an economy class.

18:16And I got, and the plane took off. Then I woke up. I look at this watch. And I look at the television screen. It kind of said, huh, 12 hours to go. What's going on? Something isn't right. the time is not adding up and so I talked to the aero-stess saying what's the disconnect here she said don't you know okay so the plane flew for two hours someone felt sick it turned around came to SFO chain got a plan I just slept through the whole thing go thing I had no idea What?

19:05I'm a good sleeper. So I've always been a good sleeper. In school, I had a hard time waking up. My sleep was so sound. I would have my mom say, please wake me up. And she would. I would just fall asleep. And I would put a glass of water next to my bed and say, can you please throw some water on my eyes? I can wake up, but I'm a good sleeper. I'm fortunate. Wow. Yeah. So the next question that everybody asked me is how could how could it be possible that he's accumulated this amount of wealth relative to like Satya and Sundar? And my answer was, well, because he owns 40 % of a very meaningful company.

19:53Is the reason that you still today, you own 40 % of Zscaler, right? I haven't sold it. You haven't sold anything. Not a thing. Not a thing. Maybe a little here and there. Nothing. My kids' trust have sold all over here. And I guess the question is, you raised, you did the first rounds with your own money? Yeah, I actually, yeah, I kept on putting money as long as it was needed. So I didn't think about raising money because I didn't need to, ever. So I did. I mean I had I put I never used money I I raised you can call it two rounds the first was the CEO of RSA this guy Art Coviello he he came in 2012 so and we were selling we are actually we're not really we lose it I mean I had I put about$50 million in this company.

20:51$50? Yeah. So he wanted to buy the company. I said no. Then he wanted to invest the company. I said no. Then he kind of insisted that not at all. So I gave him a price tag. I thought he would say you're crazy. So I told him half a billion dollar market valuation. And he said I'll take it. How much revenue were you doing at the time? hardly any, probably under$20 million. Yeah. Okay. So he agreed to put money, and he wanted to put, I think it was$50 million. I said, no, I won't take more than$20 million, or$20 or$25 was the number. And it was a fun deal because he would, he is the legal stuff. Wilson Sonsini was, my attorney Raj Judge was there, the guy.

21:54Do you know Raj Judge? He's a great guy. He's a partner there. He's involved in most of the startups. So he, when they sent the agreement and when they asked for some of the demanding terms, I'm just sorry, Jay won't take it. We'll walk away. So we got almost everything we wanted. For example, they wanted the first right or refusal. And we said, no, we're only going to give you a first right or refusal. You're a small investor. What else? And if I went to, I don't want to be viewed as a company associated with this company. So Ravi from Lightspeed had been talking to me for quite some time. I don't know if you know Ravi.

22:37He had been staying close to him. I said, hey, there's an opportunity to put$5 million in Zscaler if you want to take it. The terms are all agreed upon. And he said, good. I mean, that was done to really show independence rather than association with just one company. But we never used that money. And then the pre-IPO was done. it, it was about$100 or$110 million, which we never touched. So we had about 16%, 17 % ownership of investors in the company when we went public. So my typically VC companies have about whatever, 18%, 20 % employees, the rest is kind of others. My employees had about 30 % of ownership in the company.

23:30So you're saying you could reallocate more to employees? Exactly. It's a good thing because they work way hard. Having an operation this big in India, how involved and present do you think you have to be in order to stand that up effectively? Do you think that you have, you know, obviously you grew up in India, like, do you think that you have to be from there in order to be successful? Do you have any operating principles running so much of the business there? I think having someone who was born and raised in India to be a critical part of the operation is important. Even though I was born and raised there, I never worked in India.

24:14So I have zero experience of working. Though at ZSkill, I learned quite a bit about India. Before that, I did not. My principle was India has so many smart people. If we can find the right one, they're going to do the right thing. Early on, when the development was starting, I opened the Bangalore office before I opened our office here in Santa Clara. No way. How big was the company at that point? So we started with 10 people, opening company. I had a team of 10 people plus class, 11 people plus me and my wife, so 12 people. Okay. So all developers other than my wife and I who couldn't code, okay, everyone else could code.

25:00Right? So we had what? Out of those 11 people, six were in India, five were here. Okay. So we opened the Bangalore office and then we got an office space here. and I mean within months but it was good so early on I went to Bangalore every other month for two weeks for the first year or maybe first 15 months. Every other month for two weeks right so two out of eight weeks yeah so yeah because I there's nothing else to do other than development and a little product management and you'd spend two weeks at a time there what were you doing so recruiting was number one and doing product management was number two because I was the product manager to start and was your wife going back and forth with you or were the kids at home kids at home so now he came a couple of times but most time because she started the company with you yeah but she would take care of things.

26:12And on the, on the, so, okay, that was some of the questions that I've gotten. Can I keep going? Yeah. On hiring. There are legends about you that you get the absolute most out of people. and they stay with you for a while but you really get the most out of people my answer they asked how my answer was i think it's because he gets the most out of himself all the time and people just follow his lead but i'm curious what you would say you know i think you need to lead by example which is very important when they see you going the extra mile they go the extra mile. If the CEO is spending a lot of time on golf courses, it gets very hard to tell others.

27:03We like to say we don't ask anyone else to do anything that you're not willing to do yourself. I try to make sure that I am being very fair and taking care of people who go the extra mile who really are making the difference. I feel like it's my responsibility to go to them to promote them to do extra reward with equity before they have to ask but that group of people is generally very small the group of people who are really into the passion and drive is is not large the bigger the company gets, the more people you get from bigger companies, the harder it gets to keep that passionate and driven culture.

27:56And that's one of the things we are working on right now. But I think finding brilliant people is good. I have a rule here from very early on, if you find someone who walks on water, there's always a rack open for that person. And we have probably done a few dozen people that way. Give me an example. You came across someone who is outstanding and passionate and knows stuff and you say, aha, I should be hiring that person. But in your plan, you kind of have all the heads and you create room, you create things, you hire that person. And if you were to unpack what walking on water actually looks like in your mind right what is that i think it starts with people who are passionate driven everything else is secondary you could be the smartest person in the room but if you aren't passionate driven it really doesn't matter and you can see through passion quite often people and then you can this person come and make a difference.

29:10I mean there's some very sharp people out there. My chief architect, Kalash, I mean he's brilliant. I mean he just comes up with ideas that no one thinks about. He would think about how do I make this system 10x faster rather than 50 % faster and he would do those things. So looking for that kind of people so that's on the engineering side the people on the product management side who have a great skill set people on the sales and customer side so they're looking for people I I have interviewed lots of people I interviewed lots and lots of people without any role in mind many many times The two objectives, one, I'm looking for smart, sharp people we could recruit.

30:09Two, I'm looking for learning from their experiences. Every interview teaches a few things about what they've done, how they've done, what worked, what has worked in their previous company. Because every company has some goodness. Every employee has some goodness. Are there a few things you could learn and apply to your business ends up being an interesting where to look and say, huh, we could borrow those ideas. How much time do you spend interviewing? Lots. Like, how much? Like, if I were to look at your calendar for this week or last week, what percentage do you think is actually spent interviewing?

30:47Interviews end up being generally on the weekend. Huh. When the phone is not ringing, there are no distractions.

30:59And probably somewhere between three to five interviews every weekend. Three to five interviews between Saturday and Sunday. You do them at home? Do you come to the office? A combination if some of them are video calls, some of them are in person based on how important likely this person is or how critical the role is. That's all. And how do you, that's fascinating, how do you conduct an interview? Do you have a certain style? I'm often, I get more out of the questions they ask than the questions I ask. It gives me a little understanding of how are they thinking, what are they thinking about. And then I have my own set of questions.

31:55But I look forward to their thinking and their questions more than my questions. Do you let them lead with questions? No, it's generally good to leave it open-ended. My questions are open-ended. And let them start with open-ended stuff. I do, to make it more productive, I'm always kind of, My time is the biggest thing. I'm always trying to figure out how to - Get as much out of it as you can in a short amount of time. So rather than trying to spend 15, 20 minutes explaining Zscaler, what we do, how we do, I send them a few resources and say, here is some of the stuff you read, you'll have a good understanding of what, how, where, why, and then we'll have a conversation from there.