Last week Read/WriteWeb editor Richard MacManus interviewed Satish Dharmaraj, Zimbra co-founder and CEO. The result is a 30 minute podcast available on Read/WriteTalk (transcript included). The following post is highlights from the discussion, which focused on Zimbra's journey from October 2005 Web 2.0 Conference launch to September 2007 acquisition by Yahoo! for $350M.

In September 2007 Web Office startup Zimbra was acquired by Yahoo! for $350M. As I noted at the time, it seems like only yesterday that Zimbra was the buzz of the 2005 Web Conference (which incidentally was the first Silicon Valley conference I attended). Yet in just under 2 years from launching, Zimbra went from Web Office poster child (one of them at any rate) to a company worth $350 million. How did it happen? What lessons can aspiring entrepreneurs learn from Zimbra, as they attempt to create a multi-million dollar business too? For me there was only one way to find out: interview Satish Dharmaraj, Zimbra co-founder and CEO.

The entire interview is up on our podcast show, Read/WriteWeb. Here are some of my favorite bits:

Question: who came up with the idea for Zimbra and when did that happen?

Satish: "While we were brainstorming on ideas - and we cycled through a lot of them - we always kept coming back to: What are the big things that people do on a computer? Well, they search and they web browse and they read email. We started believing that people spend more time on email than search or web browsing, and so we said, 'Man, that's huge.' It seems so evident but that was basically the genesis. Well Google is tackling search and, obviously, Firefox and IE are tackling the web browsing issue, and then we have Outlook or Thunderbird or Entourage for email. Well, that seems really broken. [...]

Then at the same time, we were thinking about technologies and how the web browser is becoming the predominant platform of modern day computing. Do we really need to have a desktop app and can we do everything on the server side? That's something to break into."

Question: [...] What was the initial reaction to the product when you launched in October of 2005?

Satish: "Peoples reactions to it was unanimously: 'I can't believe this is a web browser. I can't believe that this can be done all inside of Ajax and all with a server that's not hosted or with data that resided remotely.' Our goal was to basically blow the pants away of Outlook or any other client in terms of user interactivity, even though it was inside of a web browser. I think when we launched, we successfully got that kind of a reaction from people who were just totally wowed with it. They were all extremely excited that somebody was putting up such a huge and competitive product in the mail landscape which people had thought had been written off.

Then, for us, we knew in our hearts, and we didn't want to be a web 2.0 company that's just all hype and glam. We knew that we had planned all of this carefully with our board. We had always wanted to start making money. It has happened. As soon as we launched in October, back before we started making money, before we sold to Yahoo, we were handsomely cash flow positive. So we're always proud of what we went through as a company: got a lot of bugs, got a great product but at the end of the day, we were making money. That was basically the difference that set us apart."

Question: One thing that web 2.0 critics often derive about the current generation of web apps is that they are features and not businesses. Also, the web 2.0 startups have too large a reliance on M&A as the end goal. This is something we constantly hear from critics of web 2.0. Zimbra was obviously a very successful buyout. Was that your plan from the start or did you start out with the aim of being a viable standalone business? Back in October of 2005, what was your end goal for Zimbra at that point?

Satish: "Honestly, I can say this. We set out to build a great company with a real business behind it. That's what I think people should do when they start a business. They [have] got to think about: How do I make this an independently successful cash flow self-sustaining business? Then, there'll be very interesting M&A opportunities that will come and knock on the door. If instead we started a company thinking that there is going to be a quick flip, [in] 90% of the cases that does not work out because no one is interested in buying - or they want to buy you off really cheap. We were not thinking of an ideal nor were we thinking of an M&A. We were just thinking: Let's go and create a compelling product and create some real business in specific markets. That's what we started out to do and that's what we did."

Listen to the full podcast for more insight into the growth of Zimbra and some of the tactics they employed to build their ultimately successful web 2.0 business.