From Zero to $400M with Shazam founder Dhiraj Mukherjee

We have had some amazing speakers, very wealthy people in inner circle elite over the last decade or more. The measure is always how excited Mark gets. So Mark didn't even know who our guest speaker was. And then we were on the train. I said, it's the. The founder of Shazam. He said, oh, my God, I still use the app. Look at this. I've got it on my home page on the iPhone 16. It's now my home page. He actually showed you, didn't he, dear A.J. he's very excited. So, Deeraj, how did you sell Shazam for $400 million to Apple? I would like the answer, please.

That's a great question. Well, what happened was we had got to the point in the journey where it felt like it was a natural time to exit. It took us 15 years to get to profitability, so we worked our socks off. I know. Here we go. And some of you moan.

15 years, no profit.

That's right. Yeah, that's right.

Was that strategic?

Not at all. No. It was accidental. But there comes a point in a company's life where a different partner, different fit. Makes sense. And we had known Apple for years and years, right from the time that the iPhone launched and the App Store appeared. But when the stars aligned and there was an offer on the table, we said, take it.

Okay, so when you started the company, the goal was not to sell.

When we started the company, the goal was to misspend our youth with the quick wins. It didn't work out for us, unfortunately, but no, it was never meant to be. Sort of a long 18 year journey from start to end, but that's what ended up happening.

Right, so how did you go 15 years without making any money?

It's called other people's money. Yes. So we had very patient investors, and I'm glad to say that they were all happy at the end. But, yeah, it was a long haul, which we didn't sign up for.

Right. So if we're all thinking about starting a tech business, how can we be profitable in 14 years or less?

Don't follow an example. Try to come up with a business model which works, don't spend a ton of money up front, prove the concept as early on as possible, and then ride off into the sunset. So.

All right, interview over. Do you think now with tech AI, you need to spend as much as maybe you did 18 years ago, or can you be more lean and agile now?

Oh, you can be so much more agile today. Because back when we started, and I'm showing my age a lot of the tools which we take for granted today didn't even exist. So we were inventing stuff as we went along, how hardware was much, much more expensive, software development was much more expensive, testing was much more expensive. And frankly, you get bogged down in details nowadays you can develop and launch and test much more quickly. And then words like pivot didn't even exist back in 2000. So. Yeah, so people can pivot if they choose to.

So I'd like to talk. There's three things that have come out of this. One is AI in the future. One is your journey towards the exit, and then another is the exit itself, because I know many people have sold their businesses and that stage of selling is quite intense, as I understand. So let's do the business journey. The 0 to 400 mil. What was the plan with Shazam?

So the plan with Shazam was always about solving a personal problem, which is you'd hear a song and, you know, we didn't know what it was, and we wondered and we didn't have any answers. So my business partner, Chris, actually came up with the original concept because he wanted to connect with all the radio stations in the country and work out what was being played at any given point in time.

So he was solving his own problem first?

Absolutely, yeah. So he was building his own back scratcher. Then he realized that actually, what would be much better than that would be if you could use your mobile phone to identify any song. And so that was the origin of the idea for Shazam.

So, and how much money did you need to put in from investors to get it ready to sell?

So we started off with just, you know, putting our own money in to get things going. Our first round was, I think it was a million dollars. This was in 2000. And then we raised our first venture round, which was $8.5 million, and then just snowballed from there. So I think in total, we raised over $150 million across five or six rounds.

Wow. And how much of the company did you and your partner still own and retain on the exit?

Not enough.

I wish it were more. Can you tell us how much?

I wish I could rob.

I bet we could find it on the Internet. What was your shareholding at the end?

So, as I said, unfortunately, I can't discuss that, but really? Well, no, because what happens is that you have investors which come in at different times. And naturally, when you've got a VC investor, then they take a big share of the company. And sometimes these stories end badly when people don't feel that they got something in proportion to the hard work that they put in. We were very fortunate because we had a good exit and everyone was happy. Everyone, yeah, as far as I know. But, yeah, it's. The miracle really was being there for 18 years because people lose patience, investors run out of time, you know, funds close, etc. So I look back and I'm very grateful that we were allowed to have that run.

So raising money, then you've done it five or six rounds, 150 million. What are some top tips on raising money?

So, top tips on raising money. I think that it's about kind of projecting an idea into an investor's head which matches your own. So I call it magical thinking. You've got a vision, you're trying to communicate that, and initially no one believes you, no one buys into it. But the more you try it, the more you try to make this idea come to life, paint this picture of what the possibility could be, the more likely you are to succeed. That's not the full answer, but that's the starting point, I guess.

And each time you got to bigger funds and VCs, did raising money get easier or harder, or the way you had to pitch for money become different?

It depended on the conditions of the market. And so there are good times and bad Times. There are VCs who are sympathetic, they're ones who are skeptical. And so it's always an art. But I would say that it's about spending lots of time, having lots of conversations, and then narrowing down to a few group of people. You can tell when you look in the eye that they're starting to believe the story. And you. And you go from there.

And did any investors get itchy or want to exit because it took 15 years to make any profit?

Oh, yeah, absolutely. I mean, the way VCs typically work is you have a fund which lasts seven, eight, nine years and you're trying to return the capital at the end of it. So that's the normal time horizon. So 18 years is an anomaly. And I have the distinction of being one of our early investors. We were the slowest investment he's ever had to exit. So. Yeah.

Are you proud of that achievement?

Very proud.

The slowest return ever.

Yes, that's exactly. I should hang a wooden spoon above my torping.

Wow. Okay, so the exit itself then.

Yes.

Start to finish. That is. Somewhere the idea comes, or you receive an email or someone says you should sell.

Yes.

To selling to Apple for $400 million. How long did it take and take us through that part.

Okay, so there's two parts of the story. So the first part took about nine months or so. And the reality is that, you know, it's a consensus on the board when you say this is the right time to sell and then you look for suitable buyers. And they were the usual suspects. And we hired very good bankers who help with this process because they understand the dynamics, et cetera. There was a second part of the story which I've not talked about very much, which was once the transaction was completed, it was subject to approval by the eu, which we thought would be a formality. It turned out not to be a formality at all. And took about nine months to get the approval. And so end to end, it was about 18 months. The first nine months were nerve wracking, the second nine months were fingernail biting. But we got there in the end.

So it took 18 months. And did they pay all cash?

You know, I wish I could give you more direct answers to these questions and I'll tell you why. Because this is not an official figure.

It's reported getting things out of people nearly as good as your app.

So.

Surely the part in cash and the part in earn out, we could find that on Google, couldn't we?

You know, the reality is that these kinds of transactions are structured in different ways. But what I can say is that it was very simple, it was very transparent, it was not complicated. It wasn't any bells and whistles which anyone was unhappy about. So it was a good, clean transaction. Yes.

So mostly cash.

You are a master, Rob.

Well, I'll tell you why I'm asking, because Mark and I talk about this all the time.

Yes.

We've been going 18 years.

Yes.

And we've seen so many people sell their business and in nearly, in fact, in every instance bar two that I've ever seen of my peers, the earn out has come to zero.

Yeah.

So Mark and I are like, well, the odds of us getting the earn out, that is you get 20 or 30% of your cash now and then the rest when you hit certain metrics which I think you refer to as bells and whistles. So I just want to know if these earn outs do actually come to fruition or is it just best to get all the cash up front? And would the VCs do all cash up front?

Okay, so let me answer this theoretically rather than specifically, which makes easier. So, yeah, in theory. Yeah, in theory, you can't structure the deal to be optimal. So cash is king. So if you can get cash, then by all means. I can't speak from experience about earnouts, but they come as a mixed bag as well.

So if you can't come from experience about earnouts, you didn't do an earn out. My goodness.

However, you may not be in that position. So if there is an earn out involved, then the reason for that is because the buyer wants certain things to be afterwards.

They want to lock you in.

Exactly, exactly. So one doesn't always have the choice about the structure of the transaction. Yeah, of course.

And I guess you'd get lower cash. No, earn out, Higher upside. With earn out, I guess it's a negotiation.

That's exactly right. And it depends on how critical the founders are to the business. I can say openly that we were not very critical to the business at the time of exit.

So that's a good thing though, isn't it?

It's a very good thing indeed, yes.

What was the multiplier or the earnings ratio that you sold for?

Oh, Rob, I love these questions. Yeah.

Does that mean you hate these questions?

There's an open offer that we can discuss this afterwards, but as you know, I'm not in a position to reveal that.

So we'll wait for the cameras off.

That's right, yeah.

All right, fine. Did you stay on?

No, I didn't stay on. No.

You took your maybe cash?

Yeah.

Ah, you didn't stay on. So there was no earn out?

No. Let me, let me explain, let me explain. So I, by the way, I'm having.

A lot of fun. I didn't know it was going to go down like this.

Oh, nor did I, otherwise you wouldn't have come. No, I actually, I put in a shift when we started and I had the distinction of hiring my boss and my boss's boss. And so it came to the point where I felt that, you know, the company was in safe hands. So I left after doing that first sprint, if you will, and I went and joined Save the Children because I wanted to give something back. So my, my career path was non traditional in the sense that my side gig was my startup. My day job was working for a charity. So, yeah, that's what happened.

So when. So did you leave immediately after the sale or before the sale?

Oh, no, so long before the sale. Yeah. So after about three or four years, I stayed on the board for about 10 years or so. And then my business partner Chris was on the board for many years after that. So we always had equity in the business and representation on the board through to the exit. But I wasn't Full time. I was, it was always. It was another sort of thing in my life, which as a founder you can never kind of let go and you can never take your eye off the. Off the ball.

Right, so you'd like a bit of a master of leverage then, because you put the early years in, got your partner to do all the work, sat on the board and then cashed out at the end.

You know, I'd never thought about it. Yes, you're right. Yeah, you're right. That was really clever. I should do that. Maybe we can write it together. That's clever of me. Yes.

Yeah, that is clever of you. And what did you do with the money that you made afterwards?

Oh, the money I made afterwards, unfortunately, is under the BDI of my wife. So she is, how should I say, part of the investment committee.

She is part of the investment committee, yes.

It's a two person investment committee, my wife and I, and so she keeps a sharp eye that it's invested wisely.

Right. Oh, are we allowed to talk about that part?

Oh, yes.

Oh, yeah. All right then. So, I mean, as I understand it now, you're an investor and you invest in other tech companies.

Yes.

Is that right?

Yes.

So, yeah. Do you want to talk about some of the investments you've made?

Sure. So I like to call myself a tech for good investor. So I try to invest in companies which are aiming to make a difference in the world and that covers a wide multitude of sins, anything from climate action to helping with diversity, to helping girls learn how to code. So, yeah, so it's very rewarding in the sense of intellectual stimulation. I'm not quite sure if it's going to be rewarding financially that the jury is out.

Right. Is this a problem? Because, you know, you can invest in tobacco and alcohol and just make billions and trillions in these more moral and ethical type business models. Is it kind of a harder thing to make money in them?

I'd like to think not, but I'm going to find out. What I do know is that it's just as hard to build a purpose driven business as it is to build any old startup. So it doesn't make it any easier. If anything else, it adds to the challenge because you're trying to measure are you having impact, et cetera, et cetera. But I'd like to think in five, 10, 15 years down the road, I can look back and say I made some small difference to a company which is trying to make the world a better place. Now, if it all goes horribly wrong, then you'll find me in tears, but I'm keeping. And in tobacco and alcohol, I can't promise, but I'm keeping my fingers crossed that this strategy pays out.

Right. And other than the sort of the moral, ethical criteria that you invest in, which is great, thank you. Because we need more people doing things like that. What are the other drivers for you to invest in a company like. What do you want to see or not see?

Yeah. So I don't invest exclusively in impact because it's almost impossible. So I try to avoid. I try to negatively screen for things like extractive industries or arms.

What's an extractive industry?

So, for instance, you know, oil exploration, for instance.

But that's difficult ammunitions.

Did you? Yeah. Yes. Yeah.

You don't want to fund wars?

No.

Like our government. You didn't say I did. So you don't got anything to edit out.

But it's a challenge. It's a challenge because you can't buy a footsie tracker because you'll have lots of companies you don't necessarily want to support, so you create a rod for your own back. But I think that if more people make the effort, then we look back on our portfolios with perhaps less guilt and more pride. But it's not easy. The impact part of my portfolio is much more selecting individual companies. And that's all about the entrepreneur. It's all about their drive, their vision, their commitment, you know, proper entrepreneurs, as I call it.

Right. And how do you find that out about someone?

I think it's just a personal experience. And how they interact with you and how they follow up and how they address you and how they, you know, walk through any doors that you open for them. And I'd like to say it's an art, but as I said, you know, the judgment hasn't come in yet. Whether I'm right or wrong, I'm just following my instincts and deploying my capital as I see fit. And now I'm on a journey with these entrepreneurs for the next five, 10, hopefully not 15 or 18 years, but. Yeah, and then. And then we'll find out.

So nearly in nearly every professional investor I know and have met, and I have met many, they say the same thing. They say they're investing in the person more than the business.

Yes.

You would back that up, would you? And you would say that?

Definitely. Yes. Because that's the absolute minimum. The problem is that businesses can change. I had a CEO who very sadly was diagnosed with cancer and needed to be operated. That affects the business as well. But at the end of the day, particularly if someone's going to be there for the long haul, it's down.

This recent budget should warn you that your pension is not safe and secure and they're coming for your inheritance. Do you even know how much is in your pension or where your pension is invested? Add to this the recent inheritance tax grab on your pensions and the risk of a market crash. You probably didn't know this and I didn't until recently, but physical gold can be added to your pension pot. Gold is inheritance tax free and has grown 700% in the last 20 years. You probably know from my content I'm investing heavily in silver and gold and that's why I've partnered with direct bullion. Myself and Nigel Farage are brand ambassadors and direct bullion can help you with gold to protect and grow your pension. I buy my gold and silver from direct bullion and I don't earn any money on any purchases of gold or silver if you buy direct from direct Bullion. So if you go to robmore.directbullion.com you can get a great price on your silver and gold and you can get the Pension Gold Investing guide completely for free. As you know, I don't do many strategic partnerships and when I do, I do them with people who are credible, who've been doing it a long time, who invest in things that I invest into and gold and silver's going wild. I'm investing heavily in gold and silver and I recommend you check out robmore.directbullion.com.

Character, I believe, and that trumps individual business circumstances or business cycle setbacks or whatever that might be.

And what character traits do you particularly like and look for?

I guess people who don't take no for an answer, people who are relentless about trying to win, supporters who can get the message across, whether it is to investors or employees or partners or distributors. You know, it's just the grind of communicating what they're looking for and people who have the flexibility to be able to lead from in front but learn from their team? Yeah, it's a multitude of skill sets which I don't analyze. It's done more on a field basis, I guess.

And have you found over your 18 year journey of building up Shazam that you know, you're really trying to continually sell the goal, the vision, the outcome that are good that you're doing every day to your team. But you know, you look at the bank account, you've got a lot of stuff going on that's hard how did you find that paradox?

Oh, yeah, absolutely. I think that, you know, everyone here knows what it feels like where you're trying to tell a story and talk about a rosy future, but you're worried about having three weeks of cash in the bank. And I spend a lot of time with fellow entrepreneurs, mostly tech entrepreneurs, and I know the butterflies you have in your stomach when you're coming up for a big contract or a big round. So that never goes away. And I guess that my blessing is that having been there, I feel I can be a good shoulder to cry on. Or I can understand that you might have a brave face but be grinding your teeth at night. And that's why I believe if I can do anything at all for my CEOs and portfolio companies, the empathy.

And what would you say was the hardest either phase or just constant challenge you had in building up Shazam over 18 years? This recent budget should warn you that your pension is not safe and secure and they're coming for your inheritance. Do you even know how much is in your pension or where your pension is invested? Add to this the recent inheritance tax grab on your pensions and the risk of a market crash. You probably didn't know this and I didn't until recently, but physical gold can be added to your pension pot Gold is inheritance tax free and has grown 700% in the last 20 years. You probably know from my content I'm investing heavily in silver and gold and that's why I've partnered with direct bullion. Myself and Nigel Farage are brand ambassadors and direct bullion can help you with gold to protect and grow your pension. I buy my gold and silver from direct bullion and I don't earn any money on any purchases of gold or silver. And if you buy direct from direct bullion. So if you go to robmore.directbullion.com you can get a great price on your silver and gold and you can get the pension Gold Investing guide completely for free. As you know, I don't do many strategic partnerships and when I do, I do them with people who are credible, who've been doing it a long time, who invest in things that I invest into. And gold and silver's going wild. I'm investing heavily in gold and silver. I and I recommend you check out robmore.directbullion.com well, just the first 18 years.

Were the hardest part.

Just all of it.

Yeah, yeah, come on, sell it to us. No, the joke always was that Shazam was two years away from success. We were convinced Another two years, we'll get there. But no, I think, in all seriousness, our good fortune was that we thought we had a good idea. We managed to get it off the ground. The bad luck was the timing was exceptionally bad. So we started in 2000. We literally incorporated the company the week that the NASDAQ was at its max. And then it went off the cliff like a roller coaster. And it was a real struggle from then just to, I guess, keep the lights on.

And how did you just keep going?

Well, my other business partner, Philippe, he uses the analogy, if you are a parent and your kid is starving, you're short of food, are you going to give up on that kid? Never. You can do whatever it takes to keep that child alive. Feed it, scraps if necessary, and that's what we had to do. And we had some breaks along the way as well, but went through some really difficult times having to let people go. We lost investors along the way as well, people who just didn't have the stomach for the ride, I guess. But we were lucky that we survived to be able to tell the story.

Did you ever have to let, like, a quite a high percentage of staff go?

No, no, no. More than sort of, you know, maybe 20%. Quite a lot. Yeah. But, you know, close friends, people who had worked 16, 17 hours a day, shoulder to shoulder, that you had to let go. Yeah.

How did you do that, get your business partner to do it?

I should have thought of that. I didn't do that. Unfortunately, I'm still friends with some of those people even today, so they've forgiven me for the brutality. But it's very difficult because it's a world of pain for them and for you. But it doesn't feel that way. It feels like it's coming in one direction, which is, I'm sorry, you don't have a job, but that's what we sign up for as entrepreneurs. That's the reality, which is no one has a smooth ride. Nobody just sails through. Except the founders of YouTube, who sold in 18 months. Yeah. I still wonder how they did it. Maybe that you could interview them. But no, it's always this roller coaster that's par for the course.

Is it worth it? Because I've spoke to James Watt very recently. He's become a friend of Brew Dog, my friend Al Bawera, who's taken grenade from nothing to now worth 611 million. And both of those look at me and go, it is hard. So is it worth it?

I definitely think so. I think just because it's Hard, it makes it more worthwhile. So if it was a breeze, you wouldn't value it as much. I'm not saying it should be so hard that it kills you off, because then that's no fun. But as long as you survive, I believe it's character building. And that's what you're left with. You're left with that character, that resilience, that belief in yourself. And I hope I can carry that forward and I hope I can contribute to that in the generation of startups and entrepreneurs after me.

So if there's one trait that you think is vital for every entrepreneur and one almost cancerous trait, that's going to kill entrepreneurship, can you give us both of those?

Yeah. So I think the one trait which is vital is to be sort of mentally fluid, so to know when to stick.

You have a name for this something? Adaptability, I think you call it.

Oh, yeah, yeah, I've got it here. Oh, I can't.

The art of adapting.

The art of adapting.

I call it the art of adapting.

Yeah, that's right. And you talk about adapting as well, isn't it? And so it's not about changing your mind every 10 minutes, it's about knowing when to stay the course, when that's what's needed, and knowing when to change your mind when that's what's needed. Now, that's not something you can write in a textbook, because it all comes down to it depends. But that characteristic, I think, is vital.

Right, so are we talking about agility or we're talking about being able to change our decisions or even change our beliefs? Can we drill into that a bit?

Sure. I mean, the way I think about it is that the market is constantly moving. So you have new technology, you've got new opportunities, you've got competition, you've got new products being launched, etc. And your job as an entrepreneur is to learn faster than the market, so to move faster than the market.

If I had something to write, I would be writing that. Learn faster than the market. In fact, I do. Okay, where's my phone?

I hope I.

Where's my phone? Joe, have you got my phone?

I've stolen Rob's phone. Here we go. Yeah.

Right.

So how do you do that? I think it's about processing new information, paying attention to weak signals, having conversations which are not just in your domain, learning from your newest employee, you know, coming up with crazy ideas and doing them outside of desk. So it's all those things. There's no. There's no magic recipe, no But I love that.

Learn faster than the market. And then what about the trait that you see over and over that just kills entrepreneurship? There's just. Is you're never going to be able to be an entrepreneur if you have this trait.

I think it's. It's the opposite, which is if you get locked into ideas to the extent that it sinks you. So if you're like Captain Ahab and Moby Dick, which is you're so fixated on a problem that you can't detach yourself from what's actually happening.

But that's a paradox, because we need that monomaniacal obsession of our app or our business.

Exactly.

So how do you know when you're insane? But aren't we supposed to be insane?

That's right. You put your finger. It's the paradox.

Yeah.

So that's. That's the tough part. That's the act we. Which is difficult to pull off because if you just carry on exactly the way you're going, despite changing circumstances, you're a fool. If you change your mind every 15 minutes depending on what's happening, you're a fool. So between those two things, there's this holy grail. But if it were that easy, everyone would be an investor and every startup would be successful. This is what distinguishes the great entrepreneurs from the ones who fall by the wayside. And that's what I have not discovered yet. That's. That's what I've signed up for in this journey as an investor.

Did you meet Steve Jobs?

I never met Steve Jobs. No, it would have. Although I get the impression that Steve Jobs was a difficult taskmaster. I think he was quite tough on his teams.

Were you not then?

No, I'm a softie, really. Well, I like to say that.

What would your wife and your kids.

Oh, I don't know. I'm glad you're not asking them. No, I think I like to look at, you know, what makes people happy, you know, what makes them perform to their best, you know, what brings out their natural talent, you know, what makes them curious. And that doesn't come from ruling with an iron rod or sort of dictating terms. But, hey, Steve Jobs was highly successful, and so maybe you should listen to him and not me.

Yeah, that'd be difficult right now. So I want to go there, actually, because in theory, ideology, I am more like you, and I like to lead the way. You've said. But I'm not sure that's working right now, where we have a pretty low work culture where things are harder and, you know, I see on LinkedIn every day all these sort of fluffy, wanky posts about how micromanagement and, you know, corporate culture is toxic, but at the same time, it's toxic to not hit accountability and not have goals and not win and not perform well and expect that you've got a job for life and be carried. So I sometimes think, you know, sometimes a bit of accountability and a bit of drive and a bit of micromanagement, it's not always a bad thing. Do you disagree?

I don't think there's a single answer. So the phrase I use is. Is creating a compelling vacuum. So I like to set up a problem and then ask my teams to run into that space which I've created, and then come up with their own ideas and their own way of doing things.

What if they're all shit?

Well, then I'm in trouble.

It's got to be back on you.

Exactly. So now I'm sticking with my story for now. And the reason for that is because my team are much smarter than me. So, unfortunately. Are they?

Or are you just saying that because you seem pretty humble? Guy, I.

It's all an act, really. My team are so smart, and I'll tell you why. Because they're super young, they're native AI users, they're very patient with me. They teach me all the time. I struggle with Google Docs, for instance, is a major challenge for me nowadays. But by basically asking the right questions rather than dictating the answer, I get fantastic solutions.

This episode was brought to you by Disruptive Media, helping bold entrepreneurs stand out through podcasting, video and social content. Visit disruptivemedia.co.uk to learn more. This episode was brought to you by Disruptive Media, helping bold entrepreneurs stand out through podcasting, video and social content. Visit disruptivemedia.co.uk to learn more.