10/31/2012 10:08 am ET Updated Dec 31, 2012

Rahul Sood on the Toughest Thing and His Book Club Recommendations

When you are building your company, you always end up facing that one hardest thing, or a myriad of hardest things. Every founder has experienced it, and if they haven't, they really haven't been a founder.

At a recent event that gathered some of the top Silicon Valley innovators to talk about their failures, I dove into the hardest things Bing Fund general manager Rahul Sood has ever experienced.

The Bing Fund was recently created by Microsoft to serve as an angel investor for young start-ups looking to work in a few areas of the web.

A high school protégé interested in gaming, Bing Fund general manager Rahul Sood developed VoodooPC machines, the first liquid-cooled PCs, with an eye of making the best PCs on the planet. In a nutshell, they were bought -- he turned down Michael Dell, who called him and emailed him personally -- and joined HP. But, as he told a crowd gathered at FailCon in San Francisco on Tuesday, he takes responsibility for taking his eye off the ball and letting HP have too much control over hiring, believing that a bigger company would do its best to bring in the right talent.

The lesson that Sood offers to start-up founders as now general manager of the Bing Fund, based in Bellevue, Wash., is this:

We asked him what are the essential pieces of what he looks for in a start-up, and how he sees the developer and startup ecosystem. We thought it was important to get down to the bottom of what the head of an angel fund thinks about the world he invests in.

One takeaway from his talk, that sheds some light on this, is that he said that founders and developers should consider Microsoft as a friendly "archangel" investor, that is looking to support start-ups with access to Bing APIs and other technologies that other start-ups don't get access to. In contrast to his experience with HP, he says that he feels immediately at home with Microsoft, because it's run by people who want to do good for the world.

The Bing Fund currently works with two startups, both in BizSpark, and they are taking on more soon.


Douglas: What was the hardest thing you have had to do as an employee? As a founder?

Sood: When we sold VoodooPC to HP, I went from being a founder of a small company to being an employee of a large one. The hardest part was finding the balance between trying to preserve the culture we had at Voodoo and letting go. Although I made some mistakes during that process and some of the lessons I learned were painful, I have learned a ton in the process.

Douglas: How do you know you are falling in love with a company to be considered for the Bing Fund? What specifically do you look for in a Bing Fund company?

Sood: Let me say first of all that "falling in love with a company" is dangerous. We try not to get too enamored of any company we're considering, because doing so could cloud our judgment. The enthusiasm that entrepreneurs have about their start-ups is infectious and it's easy to get excited. Ideally we will pick companies that Microsoft will want to acquire or partner with long term. So we have to ask ourselves questions such as: Do they have a mind-blowingly breakthrough idea, or at least a unique one? What's the level of talent in the company? And finally, how can Bing Fund help? Do we have technology assets or expertise that will get the company to the next level?

Douglas: Where do you fall on the change habits or make things easier spectrum?

Sood: The benefit must outweigh the cost. People will only change an ingrained habit if it's easier, less risky, or much more fulfilling to do the same thing some other way. Technology makes it easier to do banking online, so why drive to the bank? It's less risky to use voice recognition to send texts while driving.

Douglas: What are some of the current burdens to development for start-ups, and how do you address these burdens in your work?

Sood: Many people would say that funding is the major burden but I don't see it that way. It's cheaper than ever to get a technology start-up going, and there are plenty of sources for support, such as incubators and accelerators that are popping up in every city. Microsoft's BizSpark program gives start-ups free software resources for a few years, and there are plenty of free technology stacks out there. I think the major obstacle is talent. Great talent is hard to find, and it's even harder to keep. One way to keep great talent is to ensure your vision is clear, and the problem you're solving is real... if this is the case then you should be on a path to success. That's what we're trying to do -- help start-ups succeed.

Douglas: Why did you decide to go from building a company to funding companies? What is the harder work?

Sood: I think it's much harder to build a company, but that's not why I switched gears. I've had success (and failures) as an entrepreneur and it's fulfilling to share what I've learned to help other entrepreneurs succeed. I should clarify that what we're doing isn't about funding. Funding is just incidental to show we have skin in the game. We're adding much more value through the access we're providing to technology and subject matter experts.

Douglas: If there was a Rahul Sood's Book Club, like Oprah's, what books would you roll out to begin your club?

Sood: I would recommend Thinking, Fast and Slow by Daniel Kahneman, which delves into the science of what founders face daily - decision making. And despite the controversy, Jonah Lehrer's Imagine - How Creativity Works, which offers compelling examples on how companies facilitate innovation.