An Interview with Vladimir Miloushev
Founder, President & CEO, 3Tera, Inc.
(This inteview was done on Aougust 9 by Kevin Hsu, an MBA student at OCC, who interviewd Vlad for a school project)
3Tera’s President and CEO Vladimir “Vlad” Miloushev is a seasoned entrepreneur who has founded four companies in the last two decades. Over this timeframe, he has demonstrated considerable skill in identifying promising opportunities, creating innovative new products, communicating compelling vision, and attracting the right mix of employees, investors, and customers.
I knew Vlad through friends of mine who work at 3Tera and was able to speak with him on August 9. During that time, Vlad was able to share his insights on entrepreneurship, the current state of the industry, as well as his personal experiences.
The Early Years
Family Man
Vlad on VladWhat Is an Entrepreneur Anyway?
On Failure and ExperienceHelp and Team Building
The Product: AppLogicThe State of Industry and Competition
Technological ProgressIdentifying Opportunities
Vulture Capitalists in a Flattening World
Customer Appreciation
The Crystal Ball
Life After 3TeraLesson Learned
The Early Years
Vlad was born in Bulgaria in 1961; his father was an executive, his mother a research scientist. He recalls being sent to work at a young age, something that he believes helped foster his entrepreneurial spirit. Vlad lived a fairly typical life in Bulgaria but decided early on that he desired to be a world-class physicist. In search of that dream, he attended the prestigious Moscow University (“the Russian MIT”), where he earned a MS degree in quantum physics. After graduation, Vlad went on to work in academia while pursuing a PhD. However, Vlad soon realized that Physics had become a mature science where even the most basic research requires millions of dollars in equipment and grants, which limited severely the opportunities for young and aspiring professionals. At the same time, Vlad found the then new PC industry to be a place where smart and energetic people with a good idea and under $10,000 in computers can make a real difference. As a result, in 1987 he interrupted his doctoral program to found his first company, System Research. Vlad started the company with current 3Tera partner Peter Nickolov and created a network operating system designed to connect Apple II computers to PCs.
Family Man
Vlad has been married for 25 years to Krasimira “Krassy” Nikolova, 3Tera’s current CFO. He has two grown daughters (an advantage of marrying early he says), one of which has worked on and off for Vlad’s companies since she was 12 years old. I inquired about the nature of working side by side with Krassy. Does it get overwhelming? It turns out they maintain sanity by having different power distributions at work and at home – Vlad is the boss at the office, while Krassy runs the things at home. In fact, Vlad mentioned that Krassy frequently challenges him not to “play a CEO” with her outside of the office.
Vlad on Vlad
Vlad describes himself as a maverick, someone who does not like to work for other people. He is someone who maintains a slightly askew view of the world and likes to do things differently and to ask “Why?” This modus operandi is clearly not a good fit in highly structured companies. Besides the military (where he achieved the rank of Major) and academia, Vlad has only spent two years working in large organizations (when he first moved to the US in 1990).
What Is an Entrepreneur Anyway?
When I asked Vlad that question, he recalled a survey on work motivation that he had read in 1992. The survey found that both entrepreneurs and large-company employees are driven by the same motivation: desire for security. The difference is in the way the two groups define security. People who prefer to work for large corporations felt that being part of a big, stable business is secure, while running their own business is full of risks. Entrepreneurs, on the other side, felt that being a cog in a large system is risky, because they have no means to influence the decisions the company is making while having to live with the consequences of such decisions (e.g. layoffs); they saw running a business and being in control as a much more secure position, in which success depends primarily on their own efforts.
On Failure and Experience
Vlad is strong in his belief that people fail simply because they are afraid of failure. According to him, failure is usually a result of giving up too early. He lists his biggest struggles as simply overcoming his own limitations and fears. When I asked him if those fears had subsided as he gained more and more experience in building companies, Vlad said that they hadn’t – like walking on a rope, one just learns to live with them. To him, experience simply means that you’ve tried a lot of things, and thus know more ways things can go wrong. Experience can make you wiser, but one must constantly strive to overcome his limitations.
Help and Team Building
When I inquired about whom Vlad turns to for help, he immediately responded that it was his team. Vlad was keen to emphasize that, in a startup environment, everyone is key until the company grows to at least 50-60 people. As a founder and CEO of his companies, Vlad is “king” in a sense; but to him, this simply means that his mistakes are much more costly than the mistakes of others’. As such, Vlad really stressed the importance of building a culture of open communication and mutual trust, in which every employee can speak with honesty and candor. He likens the 3Tera team to a Special Forces unit trying to shift the balance of power against larger incumbents; they are each specialists, but possess the needed flexibility to help out wherever and whenever help is needed, and trust each other implicitly.
The Product: AppLogic
3Tera has developed AppLogic, a grid operating system that enables the creation and use of web applications using a utility computing model. The concept is simple: rather than operating servers, businesses subscribe to a utility computing service and pay only for the resources they use. The AppLogic software is vendor-neutral and is thus compatible with existing operating systems, middleware, and web applications. Each application includes everything needed to run on a grid of commodity servers; and as a result, applications running on AppLogic scale from one server to hundreds and can be replicated and deployed on demand without modification. To put things in simpler terms, AppLogic takes cheap servers and aggregates them, allowing companies to deploy web applications easily and transparently, around the globe. 3Tera doesn’t own the datacenters, but instead partners with leading hosting providers worldwide.
The State of Industry and Competition
Utility computing is a relatively new computing paradigm that promises to dramatically shape the industry in the coming years. Because of its potential, large companies such as Amazon, Google, Sun and Microsoft, are investing billions of dollars to enter this market. Each of these companies, however, is attempting to tie customers to their own datacenters (“clouds”) by introducing proprietary APIs and data models. 3Tera’s advantage is in having an open solution which (a) runs existing applications without requiring changes and use of proprietary APIs, and (b) can be used by any existing hosting provider to convert their datacenter into a utility computing cloud. As a result, AppLogic users don’t have to commit to a particular host – they can transfer their applications from one datacenter to another in hours, deploy the same application to multiple datacenters around the world without modifications, and enjoy the lower costs and improved service brought by having hundreds of competing utility computing vendors. 3Tera works with top-tier providers, such as British Telecom (BT), as well as with large commodity hosts like Layered Technologies, who have developed a unique competence in running huge datacenters at extremely low cost basis.
Technological Progress
Prior to starting 3Tera, Vlad founded a network storage company called Z-Force (currently, Attune Systems, recognized by InfoWorld as one of the top 10 virtualization companies). Z-Force was created on the basis of gigabit Ethernet, which allowed the aggregation of networked storage devices. The logic was that, at Gigabit speeds, data access could occur across a network at speeds comparable to that of a local drive. The current state of the art, 10 gigabit Ethernet, means that networks speeds are high enough to aggregate everything. As such, a technology such as AppLogic is made feasible. Vlad extended this idea further: he contends that companies like Intel are at the forefront of hardware innovation since they can amortize their monumental development costs over huge volumes, allowing them to combine class-leading performance with commoditized pricing. And as hardware becomes more and more homogeneous, software will become the real value added driver; nearly everything that can be done in hardware can now be done more cheaply in software. This is why 3Tera’s model uses off-the-shelf commodity PC components but ties them together with the innovative and powerful AppLogic operating system.
Identifying Opportunities
Vlad maintains that, in traditional industries, business arise to satisfy existing demand. Technology markets, on the other hand, work differently: first, an advance in fundamental technology makes new solutions possible or dramatically less expensive than it was possible before; as people adopt these solutions, they change the way they live, do business, or entertain. This change, in turn, creates demand for the new technology. For illustration, consider the mass adoption of digital cameras. What made digital cameras practical was an advance in semiconductor technology which made it possible to create a high-resolution sensor on a chip produced by the widely available CMOS technology. As a result, the cost of the sensor went from hundreds of dollars to pennies over just a few years. This, in turn, made it possible to build high-resolution digital cameras at or below the price of a conventional film camera. Consumers liked the instant gratification of the digital technology and the ability to email pictures. As a result, demand for digital cameras skyrocketed, and film was abandoned. Thus, Vlad argues that you shouldn’t try to find opportunities by looking at the market per se, as those opportunities are usually short in duration. Instead, you should be looking three to five years ahead, project the technology curve and predict what pain can be satisfied by technology at the time. This timeframe is driven by the estimated period Vlad believes it takes to develop a successful new hi-tech product.
Vulture Capitalists in a Flattening World
3Tera is part of the new wave of startups that do not make use of venture capital funding. Vlad contends that the world is becoming flat, a continuing trend that reached an inflection point at around 2003. What this means is that everyone around the world has access to the same information and shared experiences; location has stopped mattering to a large extent, and the cost of doing business globally has become insignificant. Working on that concept, in the mid-nineties Vlad tried to implement a virtual corporation, but was unsuccessful. However, with the recent advent of increased globalization along with lower barriers to communication, 3Tera is on its way to realizing the virtual corporation paradigm. Currently, about half of the company’s employees are located in Aliso Viejo, while the rest are spread around the globe. In addition, Vlad emphasized the point that technology had lessened dramatically the number of people and resources needed to run a business. For example, software releases can be done every month instead of twice a year. This results in an immense amount of flexibility; it means that you don’t have to continuously try to predict the future and deal with uncertainty. Vlad likened the traditional VC-backed firm to an ICBM, loaded with lots of fuel (cash), but flying a fixed path with low accuracy. And indeed, venture capitalists typically enjoy a roughly 10% “hit rate.” 3Tera, conversely, is like a cruise missile, with more brains than cash, flying low under the radar, constantly recalculating its trajectory to hit a moving target. Or, to use another military analogy, think of a sniper rifle versus a hail of machine gun fire (with a 1 out of 87 hit rate in the latest Gulf war).
Customer Appreciation
Vlad strongly emphasized the importance of selling your vision to your customers. Customers must believe in your product to expend the effort to try it; they must have conviction, faith even. At the early stages of a new product, analysis is not as important or may be simply impossible: since AppLogic is a new technology, there is not enough data anyway to perform meaningful analysis. Vlad recounts that 3Tera had 530 customer meetings with 120 customers before their first shipment. The company has successfully partnered with key early customers and incorporated their needs into the final product. Vlad is keen on asking for customer input and building close customer relationships.
The Crystal Ball
3Tera is driving toward profitability by the end of the year. To Vlad, utility computing is a sure path to the future. It is not a question of “What?” but a question of “When?” Once profits are realized, Vlad plans to grow 3Tera organically, focusing on product leadership and operational excellence. An IPO is possible, but Vlad would like to see $80-$120 million in sales and roughly 30% growth before becoming public.
Life After 3Tera
As to what comes after 3Tera, Vlad replied that, at age 45, he is too young to retire. And Vlad doesn’t even consider it “work,” since he simply does what he loves doing. To him, that passion is a key driver of success. Vlad recounted a posting on Netscape founder Marc Andreessen’s blog about reasons not to do a startup. He mentioned that Marc left something out: that it’s addictive. Once you realize just how much difference on the market a small group of truly talented people can make, and how rewarding the process of doing it is, there is simply no going back. Vlad couldn’t see himself doing anything else; he is, and I realized how clichéd this term has become, a serial entrepreneur.
Lesson Learned
When I asked Vlad what his most important lesson learned was throughout his entire entrepreneurial journey, he responded in three brief words: “Never give up.” He estimates that 99% of failure is just a result of giving up too early. This tenacity and persistence has carried him through many tough times and is what allowed him to continue to thrive and innovate. Never would I have thought that Vlad’s key to success could be so utterly simple.
