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Shopping with Wal-Mart

by Olaf de Senerpont Domis | Published November 30, 2011 at 2:21 PM

A seasoned Silicon Valley technology investor and entrepreneur might be viewed as giving up the ghost if he were to get a job at Wal-Mart Stores Inc., the largest brick-and-mortar retailer in the world.

But Venky Harinarayan and long-time business partner Anand Rajaraman have no regrets about having sold their Silicon Valley startup Kosmix to the Bentonville, Ark.-based retail giant back in April. "When Wal-Mart first called us, we were wondering: What is going on here?" Harinarayan said in a recent interview at Wal-Mart's new e-commerce headquarters in San Bruno, Calif. But the more he and Rajaraman discussed the idea with Wal-Mart, the clearer it became that the company was serious about boosting its e-commerce capabilities and expanding its technology brain trust to compete with the likes of retail leaders such as Amazon.com Inc.

"This is a big opportunity to build an interesting business from the ground up," Harinarayan says. And the pace of Wal-Mart's e-commerce growth has only accelerated since the purchase of Kosmix, which has been renamed @WalmartLabs.

Harinarayan and Rajaraman, now both senior vice presidents of Wal-Mart's global e-commerce operations, have overseen two acquisitions to bolster their operations, and they have been steadily hiring. The overarching short-term goal of the @WalmartLabs team is to fine-tune an in-house search engine for Walmart.com, the company's e-commerce site.

But there are a host of more speculative and risky long-term projects, as Harinarayan describes them. Several focus on weaving social networking into the Wal-Mart online and physical store experiences. For example, @WalmartLabs is working on applications and services to enable gift giving via social networks. It is also planning to experiment with creating a "social layer" in retail locations. This might incorporate a live feed displayed on a screen in a store and on customers' smartphones; consumers could use these tools to ask for product advice, for example. "We are trying to create new models," Harinarayan says.

Harinarayan, 44, and Rajaraman, 40, began their partnership when they met at Stanford University in the early 1990s. In 1996 they founded Junglee Corp., a comparison-shopping search engine that was acquired by Amazon in 1998 for $250 million. After a couple years at Amazon, the duo left, but not on bad terms. Their next project was founding Cambrian Ventures Inc., an early-stage venture firm. Amazon CEO Jeff Bezos was its largest investor.

They handed off the reins in 2005 -- "We realized a fund was a good business, but the required 10-year commitment scared the hell out of us," Harinarayan says -- and they set about developing their next big idea. That turned into Kosmix, which also received backing from Bezos, among others, an Internet search startup that eventually morphed into a platform for organizing social-media content by topic.

Wal-Mart reportedly paid about $300 million for Kosmix, proving it's serious about creating a cutting-edge e-commerce offering. So far, at least, it is going about it in a way that isn't too scary for engineers who would normally feel most comfortable at a tiny startup. "There's an opportunity to influence things at a very fundamental level, which would be impossible to do at a technology company that has Wal-Mart's scale," Harinarayan says. "We tell people that they have access to that big scale, but not a huge line of people in front of them trying to do cool things. It plays well for people thinking of joining the team."

It seems to be working. Though only a part of Wal-Mart for around six months, @WalmartLabs in September purchased OneRiot, a Boulder, Colo.-based developer of technology that targets ads using social media data. And on Nov. 10, it bought Grabble, a startup that develops point-of-sale technology for cellphones. Terms weren't disclosed for either deal.

Harinarayan says his team works closely with Brian Roberts, Wal-Mart's senior vice president of e-commerce business development and strategy, to evaluate and negotiate deals. The pace isn't likely to slow down, he says.

"Now Wal-Mart has a key kernel, and acquisitions are a way to grow that kernel," he says. "We will clearly be looking for companies that give us a leg up on talent, interesting new business models around e-commerce in social networking and international growth."

As for working for a giant corporation, the pros so far have outweighed the cons, Harinarayan says. "The support from all the way up to the board has been astounding," he says. "There is some overhead being within a large company, but you have to suck it up and deal with it. People are realizing that it is largely extremely positive."

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Tags: Kosmix | Retail | Wal-Mart Stores Inc.

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Shopping with Wal-Mart

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