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A Pyramid in the Desert
A
conversation with Shopzilla's Farhad Mohit.
Where other Internet millionaires might pine for an invitation to Herb Allen's famed Sun Valley investment conference, Farhad Mohit, founder of Shopzilla, prefers to hang out with hippies in the desert.
This past summer, Mohit, a 1996 Wharton MBA, returned to Burning Man, the annual countercultural arts festival in Nevada. This time he took a pyramid, specifically, a Plexiglass one, wallpapered inside with U.S. currency, that he had built with friends.
Mohit, whether in business or pleasure, goes his own way. He started Shopzilla— a website where consumers can compare prices and rate online retailers —long before the Internet bubble sparked many business students' dot-com dreams. He's as likely to read poetry as a business book—in fact, he dismisses much business jargon as mumbo jumbo. And since he and co-founder Henry Asseily, a classmate at Wharton, sold Shopzilla in 2005 to E.W. Scripps, a Cincinnati media company, for $560 million, he says his "hunting-and-gathering phase" is probably done. For now, he's still running Los Angeles-based Shopzilla, with no plans to leave. But he imagines next trying something in the worlds of arts or culture.
He recently spoke with Get It Started!, sharing his views on entrepreneurship, venture capital, Shopzilla's history and, of course, Burning Man.
A pyramid wallpapered with money—why?
This year's Burning Man theme—every year has a theme—was "Hope and Fear: The Future," and I wanted to explore the theme of you as the creator of the future. The pyramid had a door, and you could enter and easily remove the bills from the walls. On the door it said, 'You Create the Future. Is You-niversal Trust Possible? The Answer Lies Inside You.' Forty thousand people got to go inside during the festival. For the first 24 hours, not a single bill was missing. Slowly some people took some bills, and by the end, maybe 20 percent were gone. But other people came in and put bills back up.
You'd planned a career as an academic. What happened that you ended up creating Shopzilla?
I came to business school to escape [computer] consulting, which I hated. It was my nightmare—suits and ties, bureaucracy and politics. I thought I'd get an MBA and then a PhD. But I saw the Internet, and it seemed like an opportunity. The kids understood it but couldn't have cared less about making money on it. The adults, whose businesses it was going to impact, didn't get it. I was in the middle. I was a computer programmer, a geek. So I could speak to the kids. And I was in business school and learning this business talk so I could talk to the adults.
Why a shopping site—you joke that you don't even like shopping.
I was solving a problem. Search engines don't work for transactions. If you're looking for information, it's fine to click on the wrong link, waste two minutes and then go to the next one. But for transactions, you need more. You can't just say I sent my $500 to that guy for a digital camera and it never came so I'm just going to the next link. The idea was to create the Yahoo directory for shopping, but with customers rating their experiences with online retailers.
Your partnership with Henry almost collapsed right after graduation when he told you that he was returning home to Lebanon. How did you persuade him to stay?
Henry's family has large business interests in Lebanon, so he couldn't just come to L.A. on a whim to start what was, for all his parents knew, a video-game business. A way to make it tenable was to get [Wharton marketing professor and former vice dean] Dave Reibstein involved. We asked Dave to join the board. And I said to him, 'In two months, I want you to put in $25,000 for 2.5 percent. I just want your gentleman's word, that's all.' Dave put the money in, in effect valuing the company at $1 million. Henry then could go to his parents and say, 'The former vice dean of Wharton put $25,000, so that's a million dollar company.'
Not all of your dealings with investors have been so pleasant.
By 2005, the venture capitalists on our board wanted to sell. We'd always kept a controlling stake, so they had no real power. Their only options were to pray, yell or cheer. I was talking about setting the company up for the next five years. But my CEO and his best friend, who were on the board, started to waver. I saw control of the company shifting to the two of them and the two VCs and didn't want any part of that. Once control issues start coming into play, I felt that I had no options except to sell.
So you're wary now of VCs?
I had a friend who took $35 million in VC money right before the bubble burst. Then it burst, and it became pretty clear that the company never would attain the valuation from the VC round. He didn't have control, so his board convened a meeting and decided that it was in the best interests of shareholders to give back their money. They dissolved the company.
How did Wharton help you start Shopzilla?
My degree gave me the courage to jump. I didn't have a sugar daddy, and I had $100,000 in debt when I graduated. But I knew I could get a job if I had to. Another important thing was that I learned the language of business. And the adults who had all the money spoke a different language. Wharton also gives you a great network. If I call Ernest Rutherford III, 1970 Wharton graduate, who, if he saw me, would probably throw me out of his office, he'll take my call. I've had a lot of doors opened because I'm a Wharton grad. Is that right? No. Is it useful? Yes.
Social entrepreneurship is a hot topic among students today. What do you think of it?
Gandhi said it best: 'The peacemaker's place is in a war.' So social entrepreneurs could end up doing a lot of good. The main thing is finding what makes you happy. Doing socially good projects has a huge utility for some people. Personally, I'd refuse to get into industries where I know I'm doing harm. For me, Shopzilla is as bad as it gets. I'm helping people shop, which isn't a great social thing, but at least they're shopping efficiently. And Shopzilla isn't making bombs or selling sugared water, and that makes me happy.
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