Getting Customers to Prepay to Start Up, Then Building a $300M Business: RMS CEO Hemant Shah (Part 1)

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Hemant Shah is the co-founder, president and CEO of RMS, a leader in catastrophic risk modeling. He co-founded RMS in 1989 based on his research work at Stanford University. Twenty years later, RMS is a global leader in developing models for things such as hurricanes, terrorist activity, and earthquakes.

Sramana: Hemant, let’s start by reviewing your background. Where are you from? What is the backdrop to your entrepreneurial journey?

Hemant Shah: I grew up on the Stanford campus. I have been here all my life. I was born in Pennsylvania, where my father was a professor at the University of Pennsylvania. I went to school here at Gunn High in Palo Alto. I then went on to Stanford for my bachelor and masters degrees. I lived in Palo Alto and Menlo Park before I finally moved to San Francisco. Of course, my mother got upset when I moved to San Francisco because it was so far away! While I didn’t go far, that was the first time I had left the ZIP code.

Sramana: Where in this history does RMS start?

Hemant Shah: This has been my first and only job. I was one of the founders, and I have reinvented myself in the company a couple of times over the past 24 years since we spun it out of the university. The inspiration came from desperation while doing my masters work in engineering in the late 1980s.

There was a start of really interesting thinking about multidisciplinary education. The business school would welcome some of the engineering graduate students into their courses to get some cross-polinization between the technology community and the business community. One of the classes that my friend and I took over at the Stanford Business School was quite intimidating. It was something like Entrepreneurship and High Technology, and we had to write a business plan for the class. We had developed the business plan for Risk Management Software, which is now Risk Management Solutions.

We wrote the business plan and got some very positive feedback from the faculty, who introduced us to some people. We took that as a starting point and built out the plan. When we graduated in 1989 we started the business.

Sramana: What was your area of research?

Hemant Shah: It was in earthquake risk and risk management. The inspiration for that goes to my father, who was and is a highly regarded earthquake engineer. He was one of the pioneers in earthquake analysis and earthquake design. I remember as a young child that any time there was an earthquake anywhere in the world, my father and his grad students would disappear for days and weeks. We grew up around the kitchen table talking about earthquakes and his research, as well as his worldwide adventures.

The idea we had as students was to build a business not around the estimate of earthquake damage, but rather to apply all of this knowledge that exists about earthquakes to help institutions who suffer the consequences and pay the losses manage the financial risks posed by earthquakes.

This segment is part 1 in the series : Getting Customers to Prepay to Start Up, Then Building a $300M Business: RMS CEO Hemant Shah
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