He's No Angel
Tech investor Ram Shriram likes to play innocent, but with a stake in Google that's nearing $1 billion, the act is proving increasingly tough.
By John Heilemann

(Business 2.0) – Ram Shriram is by nature a cheerful, easygoing guy, but if you want to get him a little miffed, just call him an angel investor. That's the mistake I made recently, when I cruised down to Silicon Valley and met with him on a sun-flecked afternoon. Obviously, I meant no offense; in fact, the unctuous phrase I applied to him was "the hottest angel in the Valley." Yet Shriram was quick to disclaim the appellation, insisting that angels—typically wealthy tech veterans who sink cash into infant companies before they're ripe for venture capital—"don't really do what I do." Shriram instead prefers to think of himself as a kind of startup sherpa: a grizzled guide for budding entrepreneurs as they scale the industry's peaks.

In the brief history of the commercial Web, few people have stormed those summits more often while attracting so little notice. As Shriram's resume attests, he has played a central role in no fewer than three of the Internet's seminal firms: Netscape, where he was a senior sales executive from 1994 to 1998; Amazon.com, where he served as VP for business development after helming the online comparison-shopping startup Junglee and selling it to Jeff Bezos's outfit; and Google, where he first tried his hand as a "mentor capitalist" (a designation he does approve of), advising Larry Page and Sergey Brin during the company's salad days, earning a spot on its board of directors—and making a fortune in the process.

Google's outsize success fixed a giant halo above Shriram's 48-year-old head. And it helped gain him entrée into two of the most-hyped startups of the Web 2.0 generation: Friendster and Plaxo. The obvious question this raises is, Can he do it again? Also, less obvious, a follow-up query: If he does, what will it mean? It's the second of these that interests me, for it speaks to something essential about the culture of Silicon Valley: the way it operates simultaneously as an insider's game and a meritocracy—and how people like Shriram, who excel in both spheres, are often rewarded most extravagantly.

Unlike venture capitalists, who surround themselves with partners, investors, and assistants, Shriram is a one-man show. At a glance, it might seem otherwise: His official title is managing partner of an investment firm called (ahem) Sherpalo. Yet Sherpalo has no headquarters and its only employee is Shriram. "It's very postbubble," he said the day we talked in a conference room at Plaxo. "I have no staff, no office, no institutional scaffolding. There are times I think it might be nice to have deep-pocketed limited partners to provide me with some cushion. But I enjoy having no responsibilities except to myself, financially. And so far it's turned out quite well."

As understatements go, this ranks right up there with saying the Red Sox played ball quite well last year. As a result of his work at Google, Shriram emerged from the company's IPO with more shares than any other solo investor—5.1 million, to be precise, for which he paid pennies apiece. At the time of this writing, Google's stock was trading at $196. You do the math.

So what exactly did he bring to the party to warrant this helluva payday? Discreet by both instinct and calculation, Shriram is loath to be seen as boasting about his contributions. He does claim credit for putting Google together with its gilt-edged VC backers, Kleiner Perkins Caufield & Byers and Sequoia, and for recruiting key executives such as Omid Kordestani, one of his underlings at Netscape and now Google's sales supremo. But Kleiner partner and Google board member John Doerr says Shriram did more than that, from helping nail down partnerships with AOL and Yahoo to "bringing clarity to the business model." Doerr adds, "Ram also has incredible taste and judgment when it comes to the Web, particularly from the user's point of view. He's insightful about that in much the same way [Electronic Arts co-founder] Bing Gordon is about videogames."

In Silicon Valley, where people usually succeed because of who they know or what they know but rarely because of both, Shriram's combination of expertise and connections makes him a scarce commodity. But equally important, I think, is the narrowness of his focus. Unlike VCs, who tend to think they know something about everything and therefore can dabble in anything, Shriram works only with startups, he says, "in market spaces where I have fairly deep domain knowledge—consumer Internet services and software." Also unlike VCs, who are compelled by the scale of their funds to spread themselves thin across many investments, Shriram is never active in more than three or four startups at once, all based in the Valley. "Almost every day I'm physically at one of them," he explains. "I stay close to the scene of the crime."

The final element of Shriram's formula is relentless independence. "My only loyalty is to what's best for business, not to any set of constituents," he tells me. "Sometimes that means going against the founders, sometimes against the VCs. So my judgments may be wrong, but they won't be biased judgments."

Google aside, Shriram's formula was honed at two less conspicuous, still-private companies on whose boards he sits: Elance and 24/7 Customer. But now it is being more sorely tested at the better-known Friendster and Plaxo, into which he followed different paths. At Friendster, Shriram was invited in by founder Jonathan Abrams and then helped arrange a hefty VC financing for the social-networking site. By contrast, Shriram was called in to contact-management startup Plaxo by Sequoia's Michael Moritz, who'd already invested.

What Shriram found was that the two companies were growing like gangbusters. They had heat, buzz, and a devoted community of users. What they lacked, however, were business models and seasoned CEOs. At Friendster, Abrams amicably stepped aside and made way for an A-list chief executive. At Plaxo, however, the transition was dicier, as founding CEO Sean Parker (the less famous co-founder of Napster) was unceremoniously deposed, despite the absence of a replacement waiting in the wings.

It's too early to gauge with any confidence the ultimate fates of Friendster and Plaxo, but the buzz around both in the Valley has turned negative. In the eyes of critics, Friendster is a has-been, woulda-shoulda-been, with no foreseeable business model; Plaxo's product is scorned as a scourge that gives viral marketing a bad name. Of course, this violent shift in sentiment is part of a familiar cycle in Silicon Valley: first the hyping, then the trashing. Though Friendster's prospects may have dimmed, the hiring of former Turner Broadcasting and NBC honcho Scott Sassa as CEO suggests there may be life in the company yet. And up until the recent hiring of VeriSign exec Ben Golub as CEO at Plaxo, Shriram himself acted for nearly a year, in the words of a VC who knows him well, as that company's "interim CEO in extremis."

If both companies do crap out, Shriram's reputation will be blemished. But will he be blamed for the high-profile flameouts? Not much, and that's as it should be. VCs exercise real influence over the startups they fund because of the size of their investments—and therefore should shoulder real culpability when things turn out for the worst. Shriram, however, puts in so little cash that he has no real power, apart from that of his ideas. As he puts it, "I've got to let the people who are in the business run the business. I can help them think through their decisions about products, about partners, about hiring. But in the end, the decisions are theirs, and so is the responsibility."

Of course, if either Friendster or Plaxo proves a hit, the converse won't hold true. Shriram's burgeoning legend will grow in Silicon Valley as the mentor with the Midas touch. If you think that sounds like a double standard, I wouldn't say you're wrong. But I find it hard to begrudge Shriram his share of recognition. Anyone with a record like his is plainly doing something right, and for years he's done it without whoring for publicity like so many of his peers. All I'd ask is that he ditch the cloying name Sherpalo. He oughta just get to the point and call his firm Ram.com.