COLLOQUIUM The Entrepreneurial Life Cycle:

includes debate by Perspectives and Experiences

practitioners and
academicians on a
contemporary topic
Nishith Arora, Rahul Bhasin, Deep Kalra, Vijay Mahajan,
Shankar Maruwada, Narendra Murkumbi, Shantanu Prakash,
K Raghavendra Rao, Sandeep Singhal, Sanjeev Bikhchandani (Anchor),
and Rakesh Basant (Coordinator)

INTRODUCTION TO THE THEME

Rakesh Basant
Professor, Economics Area
Chairperson, The Centre for Innovation, Incubation and Entrepreneurship
Indian Institute of Management, Ahmedabad

T
he interest in entrepreneurship among the young is on the rise. But several
questions continue to linger. Why should I become an entrepreneur? How
do I know I am an entrepreneurial material? What is required to take the
plunge into entrepreneurship and when should I do it? Is there a well-tested mantra
to identify a business opportunity? I have heard that one should be prepared for
early days of struggle. What does that really mean? How do I ‘make every rupee
count?’ Fund raising is critical for start-ups. How do I do that? What do funders look
for? What kind of funding is desirable? Should I search for specific type of funders?
What does scaling up entail? What does exit imply? Why are VCs interested in exit?
What does exit mean for entrepreneurs? Such questions are endless. In order to ex-
plore these questions, a discussion was organized at the Indian Institute of Manage-
ment, Ahmedabad (IIMA). The panel consisted of distinguished entrepreneurs and
venture capitalists. This panel was organized as a part of the first IIMA Alumni
Entrepreneurs’ Conference held during June 28-29, 2008. The Centre for Innovation,
Incubation and Entrepreneurship at IIMA took the initiative for this event. Sanjeev
Bikhchandani anchored the panel discussion. In these free-wheeling discussions,
several interesting insights on the questions raised were shared.
KEY WORDS
PANELISTS
Entrepreneurship
Sanjeev Bikhchandani—Founder, Naukri.com (Anchor)
Venture Capital
Rahul Bhasin—MD, Barings Private Equity Partners
Start-up Organizations Sandeep Singhal—MD, Sequoia Capital
Investor Relations Shantanu Prakash—Founder, Educomp
Deep Kalra—Founder, Makemytrip.com
Return on Equity (ROE)
K Raghavendra Rao—Founder, Orchid Pharma
Manufacturing Businesses Narendra Murkumbi—Founder, Renuka Sugars
Decision Making Vijay Mahajan—Founder, Basix
Shankar Maruwada—Founder, Marketics
Scaling Up Process Nishith Arora—Founder, IntType

VIKALPA • VOLUME 33 • NO 3 • JULY – SEPTEMBER 2008 79

Sanjeev Bikhchandani—The first
question I would pose to Sandeep
Singhal and Rahul Bhasin—both ven-
ture capitalists with vast experience
is—When you look at a start-up or a
business at an early stage, how do
you identify a potential winner?
What does an investor actually look
for?
Overseas, we see a lot of
businesses that would
change the way people
work, but in India, we
look much more at
businesses that would fall
in the category of
uct or service, the entry barriers are
much lower and the environment
would let it succeed for far longer
than most of the markets in the world
where one would have to essentially
go through a learning curve. If there
is any place in the world that is good
to be an entrepreneur, it is probably
India.

Rahul Bhasin—There are no hard

‘cheaper, better, faster.’ Sandeep Singhal—When we look at
and fast rules; all I would like to say a business plan vis-a-vis an indi-
is that the bar to succeed is much lower in India than in vidual, the focus is on two things: the market and the
most parts of the developed world. Passion and com- team. We tend to lay a lot of emphasis on the market on
mitment are unquestionably the two essential elements. which the business plan is based. It is a sort of the pro-
However, passion should not be aspirational in terms verbial high tide – Is the business plan likely to be in a
of status or how much money a person wants to make; market that either today or in a reasonable time frame is
rather what we should look for is why a person wants likely to become a large market? We spend a lot of time
to do something and how he wants to effect other on that. Once that seems broadly a plan in the right di-
people’s lives through his endeavour. The second im- rection—either a high tide or an approaching high tide—
portant element is commitment—it shows up in a lot of then we focus on the team and the attributes such as
ways, in terms of how much homework a person does, credibility, educational background, and all those char-
the perseverance he has, the extent to which he tries to acteristics that are necessary for being above the bar.
hedge his bets. Overseas, we see a lot of businesses that Thereafter, we focus on the team’s complementary abili-
would change the way people work, but in India, we ties—X is good in this and Y is good in that. Another
look much more at businesses that would fall in the cat- thing that we look for is the team’s ability to keep the
egory of ‘cheaper, better, faster.’ The society here in In- big picture and have some good sense of detail. A lot of
dia is not yet at a level where they would look for people come to us with their big picture so right but the
aspirational products quite as much; details so wrong that we don’t know
in fact, the market lacks depth for if they are mere dreamers or also pos-
such products. Only those businesses
Even if it is a “me-too” sess execution power. Then there are
that are able to find efficient ways of product or service, the others who are so obsessed with de-
delivering products and services to a entry barriers are much tails that they are like a 40-page deck
wider audience, at a cheaper price, but might be missing on the big pic-
lower and the
would succeed. ture. So If I have to summarize, I
environment would let it would say that the market is the king,
The other thing that I would like to
succeed for far longer than and that the business plan has to be
reiterate is that most economies in the
West are well-developed, with their most of the markets in the based in an interesting market. What
is also important is the ability to think
businesses growing at 2-2¼ per cent world where one would about the big picture and execute in
and hence it is indeed very difficult have to essentially go detail.
for a new entrant to come in and
make a mark. In India, the economy
through a learning curve.
Sanjeev Bikhchandani—On the
is growing at a rate of more than 8 If there is any place in the funding front, I remember reading
per cent. Probably most of the sectors world that is good to be somewhere that the most successful
would be growing by double of that entrepreneurial companies in the US
an entrepreneur, it is
rate and in that kind of an environ- are not funded. They are bootstrap-
ment, even if it is a “me-too” prod- probably India.
ped and normally grow with inter-

80 COLLOQUIUM
nal accruals of some founders’ small not done rightly, if it is not frugal, and
money. In India, it is common A lot of people come to us if it does not take each and every ru-
amongst the young educated people with their big picture so pee to the longest, then I think, prob-
to say – “Let me be an entrepreneur; ably the seed of shut-down would get
right but the details so
I can raise venture capital.” sown.
wrong that we don’t know
Rahul Bhasin—The environment in if they are mere dreamers Rahul Bhasin—This is indeed a very
India has changed a lot. I recall a per- important point in the sense that you
or also possess execution
sonal incident. When we graduated have to understand that in any busi-
in 1989, two of my batch-mates and I power. Then there are ness you are in, you are not using
decided to start an entrepreneurial others who are so only your own money; you may be
venture. All of us had day jobs as we obsessed with details that using somebody else’s money—
had to pay the rents. We had decided shareholder capital, VC capital, or
to meet regularly and the scheduled
they are like a 40-page that of the friends and family. People
time of meeting was 10 every night. deck but might be missing who understand that have a far
We chalked out a business plan and on the big picture. higher probability of succeeding than
it all went wonderfully. We decided those who think that they can raise
on doing match-making using com- so much of capital and so they must
puter algorithm and thought it would be a great busi- carry on in a grand style and gilt-edge the business. We
ness. The only hitch was that the three of us could not have typically found that the gilt-edged businesses sel-
together mobilize enough money to buy a PC. But that dom survive. The other important thing is that when
did not stop us. Since we could not afford it, we decided the broad market is there, commitment is there, busi-
to build one. We thought we would save the taxes. We ness will usually evolve and survive. I have never ever
decided to build most of the components, but we could seen a business plan which 12 months down the line
not afford the terminal And so, for the time being, the has stayed static. Usually, it would change by 50-60 per
plan was shelved. cent; it gets fine-tuned and evolved. That is the normal
process; it just needs commitment, perseverance, cost
And, today, I am glad to tell you that one of my three consciousness, and frugality to succeed.
partners has actually taken the plan forward, evolved
it, and moved ahead in life. But, in today’s India, where Sanjeev Bikhchandani—Talking about frugality or
the salary levels are totally different, I think, for anyone
funding, I see a huge learning value in bootstrapping, at
who has worked for 2-5 years, funding should not be a
least for a while. Shantanu, I believe you probably
constraint to the execution of any business plan. In fact,
bootstrapped for a long time.
I think, there is so much more capital in today’s market
that anyone with a half decent idea and a reasonable Rahul Bhasin—Before Shantanu says anything, I would
track record can easily get funded. like to add one more thing. I have seen Sanjeev when he
left the campus, left his job. I have seen him struggle for
Sandeep Singhal—From my experience and a general years. Everyone in our batch used to ask him, “You have
perception of business—we have invested in 55 compa-
such great prospects. Why do you do
nies, a lot of which have done well
this?” It is only in the last three years
and a lot have not—if your business There is so much more that things have gotten easier. It has
plan is frugal, no matter whether it is
capital in today’s market really been 12-13 years of struggle be-
your money or the VC’s money or fore he suddenly hit the ball out of
that of family or friends’, the chances that anyone with a half
the path. And, that is a very normal
of survival are stronger. That is what decent idea and a path of entrepreneurship.
one should focus on. If the plan is reasonable track record
based on raising $ 2 mn, someone Sanjeev Bikhchandani—Coming to
may give it to me. But if the plan is can easily get funded.
Shantanu, first 6-8 years you prob-

VIKALPA • VOLUME 33 • NO 3 • JULY – SEPTEMBER 2008 81

ably did some hundred things, do been through it. In fact, many of us
you think it is a good experience for I have never ever seen a are still going through it. Deep, do
entrepreneurs to bootstrap? you want to say something about
business plan which 12
your experience?
Shantanu Prakash—A small correc- months down the line has
tion, I did the same thing in 100 dif- stayed static. Usually, it Deep Kalra—I totally agree with
ferent ways trying to see what finally would change by 50-60 what Shatanu said. I have had a
works. As for the value of bootstrap- slightly different kind of experience
ping, I think, two things are impor-
per cent; it gets fine-tuned and I think it is relevant here. When I
tant. Generally, in life, when you get and evolved. That is the initially started out, I got a $ 2 mn
things too easily, you do not value normal process; it just funding on a business plan. It was
them, and that is a general social com- good funding for those days. But
needs commitment,
ment which is also relevant as far as things got very bad one year after
business is concerned. The money is perseverance, cost that. In fact, it was unfavourable for
the same whether it is your own, or consciousness, and the entire travel business. We were
venture capitalists’, or someone hit by 9/11 and dotcom meltdown,
frugality to succeed.
else’s. Yet, trust me, every rupee that as a result of which our VC backed
you spend from your own money is out of his commitments to the coun-
different from spending somebody else’s money. So, it try including his commitment to us. That was the time
is very essential for entrepreneurs to start on their own when we were faced with a real entrepreneurial deci-
with whatever little capital they might have. Since sion. Because at that point of time, I did not have appro-
Educomp has had some capital for the past few years, priate resources to attract good people or retain them; I
we have had experience of either incubating or buying did not have capital to deploy new resources. We had,
out six entrepreneurial teams. One of the key things we at that point of time, anywhere between 2-3 months of
have looked at all the time is – What is the work ethic money to sustain our current burn rate because we were
they bring to the table? And the fact was that almost all not making money. It was a moment of truth and it was
of them started with their own money, whether it was about finding an answer to the big question: Do we have
Rs 5 lakh or 20 lakh. In fact, some of them even ran out enough belief in this business? Because it is not possible
of money in the middle of the business plan. To me, what to do it all alone beyond a certain point. So, I asked
was of huge value was that those people had the com- myself, “Do I have enough belief and would others be
mitment and the sincerity to do it on their own. So, while motivated enough or can I get them motivated enough
we talk about passion, the moot question is how to ex- to actually carry on the business?” I clearly saw prom-
ecute passion? One may have to execute by putting his ise in the business, and that was 15 months after I turned
last dollar on the table. So, clearly, there is a lot of value an entrepreneur—it was only after giving up a good job
in bootstrapping. One would under- that I really became an entrepreneur.
stand how to stretch the money, how For the next two years, it was
to sweat the asset and that is an ex- Every rupee that you bootstrapping—I had put in all the
perience every entrepreneur must go money I had; I didn’t draw a salary
spend from your own
through because once he becomes for 18 months. Two of my senior col-
successful, he cannot relive those money is different from leagues did the same thing; they
days again. I think, that value that spending somebody else’s bought back equity. We got angels
you, I, or many other entrepreneurs money. So, it is very from all over; there were people we
have created will be carried through clearly did not want to have as inves-
our lives even though now we might
essential for entrepreneurs tors or board members but those
be having much more capital. to start on their own with were the people who were ready to
whatever little capital they give us money. We took money from
Sanjeev Bikhchandani—Coming to them and I am happy to say that we
might have.
the phase of struggle, we have all have got them out of the company

82 COLLOQUIUM
now. But the fact is that, that is the lenge. Beyond the first few people
time you really realize how much be- As for nurturing a team, I who are going to be your key lieu-
lief you have in yourself. I totally feel, it is different strokes tenants, as co-founders, you can lure
agree on the difficulties of executing in early joiners.
for different times, for the
on passion. What is the measure of
passion? We are all very passionate. different phases of the Sanjeev Bikhchandani—So, clearly,
Giving up one’s job could be one entrepreneurial life-cycle. there will be a period of struggle and
measure of passion; another measure our commitment will be tested. We
When you are starting up,
is the willingness to take the whole do something we are really commit-
thing through even when the chips you need almost a ted to; we may quit when our com-
are down. different personnel mitment is put on test. Today,
headset—people who everybody is doing services or IT, dot
What we built during those two years com. What has happened to manu-
was a core team that was extremely share the same beliefs. facturing? So, K R Rao and Narendra
strong. We saw things move up, turn You can then take the ship Murkumbi, why did you choose the
profitable. We did various things for
through with brute force opportunities you chose and why not
profit; so, we changed our business services?
plan completely and focused on dif- and passion.
ferent markets. And, most impor- Raghavendra Rao—I think, it all
tantly, we built something which was very durable, very boils down to the experience a person goes through and
strong. So, after eight years—five years since the tough at what point of time the entrepreneurship in a person
time—today, when we go out together to the market for
gets kindled. In my case, with due respect to the cur-
raising another round of funds, we are accepted as a
riculum at IIMA, those two years at the Institute did not
very strong core team, as good as those who have been
make me an entrepreneur. After those two years at IIMA,
promoted to being co-founders and now when I look
I chose a job, worked for a small ice cream company in
back, I feel, that has been the most defining point of our Bombay, then I was in Ashok Leyland in Chennai for 3-
company’s existence. If we did not do that, I don’t think 4 years. I was located in different departments. But some-
we would have really enjoyed the journey that much or how, internally, I always felt I was not doing what I was
really savoured what has been happening right now. capable of doing. So, the break came in the form of a
As for nurturing a team, I feel, it is different strokes for group which was put together with Dr Reddys Labs at
different times, for the different phases of the entrepre- that time. And, in 1986, it was a first generation enter-
neurial life-cycle. When you are starting up, you need prise by Mr. Chandrashekhar Reddy who gave me a lot
almost a different personnel headset—people who share of freedom to establish diagnostic centres and manufac-
the same beliefs. You can then take the ship through turing facilities. I was a part of that team which led a
with brute force and passion. When project to get the first US FDA ap-
you are in a build-up phase, the scale- proval in our country in August, 1987
up and growth phase, you may some-
When your own for a product called, sulpha-metho-
times painfully realize that it is not entrepreneurship blossoms xazole, which is a Glaxo Smith Kline
really easy to go ahead and that is product. So, right from choosing a
within yourself and what
when the board can be really help- piece of land to establishing a project,
is the kind of environment buying equipment, going to ICICI,
ful. One can see it more objectively,
that sometimes different skills are in which it happens are getting the funding, I virtually did ev-
needed to go to the next level. Hope- erything, as I would do if I were the
the two primary factors
fully, as an entrepreneur, you can owner of a company. I was given that
that probably determine kind of freedom there. It brought out
change your own headset and move
to a different headset. So, I think, at- what you would do later my entrepreneurial capability in
tracting talent for a start-up, or a in life. terms of pulling up resources and
young company, is always a chal- technical people, and leading a team

VIKALPA • VOLUME 33 • NO 3 • JULY – SEPTEMBER 2008 83

which could make something hap- advantage of scale. Let me share a
pen. So, it was a situation that befell By and large, joke that a dentist friend told me. He
upon me and I grabbed it with both manufacturing has been a said, “You know, you are sitting here,
hands and said— Hey, here is an op- drinking with me, and your factory
much tougher area to do
portunity to make some company is working for 24 hours, but my fac-
bigger and better. In those two and a business in. But, I think, tory has stopped and I’m not earning
half years that I spent there, the com- that is changing anymore. That is the big difference
pany did very well and put up a lot between you and me.” That is the ad-
dramatically in certain
of manufacturing plants. The entre- vantage of manufacturing.
preneurial spirit in me blossomed localized areas in the
there and it all happened in the country. Sugar is one of the most capital-in-
manufacturing area in pharmaceuti- tensive industries in the agro sector.
cals. Those two things got stuck in my mind and I started We took a few steps. Firstly, we took shares from the
thinking— If I can make other companies bigger, why farmers who benefited from our first project—that is well
can’t I make my own? So, with that objective, I went documented. Secondly, we actually purchased an old
abroad towards the West and the Middle East. And there plant. That reduced our cost to half. And thirdly, be-
again, I happened to set up projects for another entre- cause we were reviving an old plant, the government
preneur. The experience of working with two entrepre- gave us soft loans; in fact, they do even today. So if you
neurs motivated me tremendously to put up a pharma consider mine and my mother’s equity, in our first
company in Oman. After the com- project, typically we had to invest 30-
pany grew from $ 2 million to $ 80
We have to look carefully 40 per cent and the banks gave us 60
million in four years, I came back to per cent. We ended up funding only
our country and started off. So, when which manufacturing 7.5 per cent for the project; the farm-
your own entrepreneurship blossoms business is going to give ers funded 2.5 per cent and for the
within yourself and what is the kind us more return on equity balance, we got soft commercial
of environment in which it happens loans. That is how I was able to get to
are the two primary factors that prob-
and a higher return on the ground level of a hardcore, highly
ably determine what you would do effort. And, if it is a low capital-intensive industry. So, you
later in life. In my case, at least, the return on equity and a low can always find a way out. You are
manufacturing industry came close thinking about your business 24/7
return on effort, then as
to my heart because of what I went and you may find ways that some-
through between 1986 and 1992. smart human beings, we times the salaried managers cannot
want to take our energy to think of.
Narendra Murkumbi—I do think
higher ROE situations. If Sanjeev Bikhchandani—But the fun-
that manufacturing industries are
different. Firstly, they are more capi- you are a purely damental problem remains that
tal-intensive than most service busi- manufacturing business manufacturing is not sexy. And we
nesses and raising the initial capital all want to do sexy stuff which is ser-
which does not have a vices. Rahul, Sandeep, you see a few
for a first generation entrepreneur is
always tougher than the kind of capi-
brand or something that hundred business plans a month. Do
tal that is needed for manufacturing does not allow you to be you see many manufacturing busi-
businesses. And speaking briefly commoditized in the long nesses coming your way and are
about why I went into manufactur- people really interested in manufac-
term, then you may do turing?
ing, I was too shy to sell anything. So,
I was always looking to hide behind well for a few years and
big pieces of equipment and I con- then get hurt at some Rahul Bhasin—The reality is that the
tinue to do that even today. And sec- manufacturing sector used to be the
point. highest ranked sector in the Indian
ondly, manufacturing has an

84 COLLOQUIUM
economy. Services have just started facturing business is going to give us
getting taxed since the last 3-4 years. The problem of garnering more return on equity and a higher
Thus most of the indirect tax burden resources—whether it is return on effort. And, if it is a low re-
was on the manufacturing sector in turn on equity and a low return on
capital or human
our country. The government inter- effort, then as smart human beings,
vention at every level was very high; resources, critical we want to take our energy to higher
it was enough to stifle any knowledge or less and less ROE situations. Secondly, there are
entrepreneur’s enthusiasm. If you some kind of barriers that allow you
licenses—that one needs
just look at the logistics and simple to create a long-term franchise. So, if
infrastructure in India, the effective to set up an enterprise are you are a purely manufacturing busi-
cost of manufacturing, because of low almost identical in a ness which does not have a brand or
productivity, made many of our business enterprise and a something that does not allow you to
manufacturing industries non-viable. be commoditized in the long term,
There are some exceptional and suc-
social enterprise. then you may do well for a few years
cessful companies in the country, but and then get hurt at some point.
if you look at them closely, they are either those manu-
facturing businesses which are of very high value and Sanjeev Bikhchandani—There is one more person on
precision or where the cost of logistics, transportation, this panel whose views are very different— Vijay, who
etc., are very low as a percentage of total costs. There passed out of IIMA and chose to go a very different path.
are exceptional automobile companies in the country that Can you tell us a little bit about how you took this call
have broken all the rules, but they are exceptions. By and what led you to go that way?
and large, manufacturing has been a much tougher area
to do business in. But, I think, that is changing dramati- Vijay Mahajan—Well, actually, I came to IIM-A to re-
cally in certain localized areas in the country. The total affirm my choice. I had kind of gotten interested in ru-
infrastructure hub that is being created in, for instance, ral development in my IIT and post-IIT days when I had
areas around Chennai and some parts of Gujarat gives a marketing job in Philips. Being coincidentally based
that opportunity. The second big constraint that I have in Kolkata, I had to travel all over the eastern region.
felt while talking to the would-be entrepreneurs in And I have to tell you that travelling through Bihar,
manufacturing is the mindset. Usually, I find that most Assam or Orissa in the 1970s, was straight out of Satyajit
business plans are worked out in such a way that the Ray’s films. I had heard of Ravi Matthai and the Jawaja
entrepreneur ends up owning 51 per cent of the com- Project from many of my IIT batchmates who had pre-
pany. In a very heavily capital-intensive industry, that ceded me here. So, I thought of coming to IIM-A, get a
is very unlikely to happen. I think career insurance, and also learn
what has also changed is the avail- Basically the conventional something. And, IIM-A reaffirmed
ability of capital for such large manu- my choice of going for development.
facturing projects. Capital is not at all
wisdom in India is that, if And it wasn’t just me. In my 1981-
a constraint in the market today. we are doing services, we batch, and 1-2 batches before and 1-2
have to reduce batches after, I think, due to Ravi’s
Sandeep Singhal—We see a lot of influence, several of us went into de-
somebody’s cost. Then we
manufacturing business plans these velopment work. Even today, in
days. In fact, we have invested in a started asking ourselves— Basix and Pradan, the two organiza-
few companies in that area. When we Why does it have to be tions that I set up, there are nine
look at manufacturing businesses,
about cheaper costs? Why people from the 1978-1982 batches
there are two things that are very im- who are associated either full-time or
portant. One is the issue of ROEs. can’t we create the world’s are on the board.
There are two kinds of ROEs—Return best solutions and deliver
on Equity and Return on Effort. We it out of India? Sanjeev Bikhchandani—Let us say,
have to look carefully which manu- you are taking up a career, setting up

VIKALPA • VOLUME 33 • NO 3 • JULY – SEPTEMBER 2008 85

an organization where the financial ground so that you understand some
rewards are not that high. How do We realized that it is better of the things in context. After IIMA, I
you attract talent and put together a to hire for attitude and joined P&G in brand management
team of talented people? You make because that is what I loved doing—
train for skill. It worked for
do with the people you get. Most Marketing. There we used a lot of
start-up companies, most young us because we were analysis to do a job and found it very
companies have a serious issue of at- starting up pretty much a interesting. Coming from IIT back-
tracting talent. ground, we did a lot of number
new kind of a model. The
crunching and converted that into a
Vijay Mahajan—I think, the problem only thing non-negotiable story. That story actually helped me
of garnering resources—whether it is in Marketics has been make better business decisions and
capital or human resources, critical client delight. There are finally whether we succeeded or not
knowledge or less and less licenses— depended on those decisions. But,
that one needs to set up an enterprise
no leave-related policies; one fine day, entrepreneurial bug bit
are almost identical in a business en- you can work from me, and I started a dot com that did
terprise and a social enterprise. It is anywhere—pretty much a not go anywhere; so it was morphed
just that what we are trying to do is to an ECRM company; and when
collegial kind of culture
slightly different. The people issue even that did not take off, we tried to
has become difficult only in the last which worked for us and do analytics. As we did not have any
few years. Earlier it was easy for us helped us to attract talent expertise, we tied up with an
to attract people from the top insti- analytics company, but even that did
even at a slight discount to
tutes. But we stopped recruiting from not work. So, we started doing
IIMA in the mid ‘90s, IRMA in the market. analytics on our own. We started do-
late ‘90s, and certain other institutes ing what we did not do in the college.
in the early 2000. Now we don’t even bother to come to We read up statistics and started doing the analysis our-
these campuses because they are just too far out of our selves. We started doing actual projects and because of
reach. However, there are now 1,000-odd MBA schools our P&G background, we got lucky to get a small project
in the country, dozens of agricultural universities, and from a P&G global headquarters in Cincinnati. We did
engineering colleges. We can get enough number of good what we were taught to do by P&G. We did great analy-
people and train them. I have finally reached the con- sis, converted that into a simple story, and communi-
clusion that it is best to avoid hiring MBAs from schools cated to our clients. They just loved it. Then we sat down
because now they are in a different together—the company that had
world and it is better to let them that taught us marketing was now saying,
either go to Goldman Sachs or do It is best to avoid hiring ‘Wow, you guys have really helped
their own start-ups rather than waste us.’ A colleague of ours in India who
time trying to convince them that MBAs from schools had seen talent in China, and being
what we are doing is meaningful. because now they are in a in P&G headquarters, had worked
different world and it is with people around the world, said,
Sanjeev Bikhchandani—Shankar, “The kind of Indian talent we get has
what is your experience on this whole
better to let them either go to be seen to be believed. So, I am not
issue of attracting talent, putting to Goldman Sachs or do surprised you guys did what you did;
them in the first team, second team, their own start-ups rather I don’t think anybody else would
etc.? How do team relations change have done it.” That was when we
than waste time trying to
with the life cycle of entrepreneur- thought we should not take ourselves
ship? convince them that what for granted as we did. If we can do it,
we are doing is why can’t we create more people like
Shankar Maruwada—I would take a meaningful. us? So, basically the conventional
couple of minutes to give my back- wisdom in India is that, if we are do-

86 COLLOQUIUM
ing services, we have to reduce kind of said, ‘It rings a bell.’ So, we
somebody’s cost. Then we started In a context like India, started with that. We did not have
asking ourselves— Why does it have where you have such any funding; so, we were just doing
to be about cheaper costs? Why can’t projects. Then we needed to recruit
organic compounding
we create the world’s best solutions people. The first person we recruited
and deliver it out of India? It just so growth kind of an was coincidently from IIMA who
happened that we were in India and environment, I think wanted to shift back from his current
the clients also got a cost advantage.
exiting quickly is probably job and did not mind joining a small
So, we did not get a lot of buyers unknown company. When I met him
there. We therefore did the only thing a suboptimal solution for and shared this vision with him, we
that we could do, i.e., do more work. people in our own pretty much sealed the deal there.
As we did more work, we ourselves business. After that, I explained the kind of
started to believe that what we were work we did. The work was exciting,
saying was possible. We can create a but he actually signed on with us for
world-class company that can do cutting-edge work to what we were trying to do. With that we also got more
add value to clients in demand generation—that is what people and started doing great work and that became a
we do—and not necessarily what they tell us to do at a selling point to attract others. In fact it was through
cheaper cost. employee referrals in the Yahoo group that we scaled
up. We asked questions like: “Did you join Coca Cola,
We were all failed entrepreneurs, but we did not think thinking you would do great marketing work? Are you
of ourselves as failures. Rather we thought of ourselves now in rural Bihar sitting on a truck selling and wishing
as having learnt a lot of lessons on how not to run a
that you never did that? If so, you are like me, join
business. When we did not have too much of business,
Marketics because this is what we do here.”
we had a lot of spare time and a lot of stories to share.
So, it was just a discussion like this. What kind of com- Sanjeev Bikhchandani—Would it be fair to say that the
pany do we want to create? Our earlier company was initial team is more likely to get believers rather than
VC-funded and we walked out of it. We thought unless people who are coming for job or career prospects?
we knew what we wanted, we are not getting any
money; it would be our money. So, what kind of com- Shankar Maruwada—Basically, we realized that it is
pany do we want to create now that we have the com- better to hire for attitude and train for skill. It worked
plete freedom to do so? Out of that 5-10 minutes for us because we were starting up pretty much a new
discussion came out a statement which at the core de- kind of a model. The other important thing was the cul-
scribed what we wanted to achieve. ture we created which was again an
We put that up on our website. It just extension of our own beliefs, i.e., fo-
said, ‘We would have globally delighted Our business model is cus on the work. The only thing non-
clients not just satisfied but who will ben- based on the fact that for negotiable in Marketics has been
efit from us being the world’s best pro-
every bit of money put in client delight. There are no leave-re-
fessionals at what we do.’ We had not lated policies; you can work from
specified what we would do. So, we a pension fund or a life anywhere—pretty much a collegial
looked at the statement and said, “It insurance policy, there is a kind of culture which worked for us
is nice but how is it different from a liability attached. So, in and helped us to attract talent even
whole lot of other motherhood state- at a slight discount to market.
ments and vision statements.” Then,
10-12 years, we have to
somebody quietly said,“We will have square our funds and send In our case, therefore, there was a
globally delighted clients who will ben- strong belief system. We realized that
back the capital that we
efit from us being the world’s best at what when we looked out for people, we
raised to invest in these did not necessarily look for a person
we do and in doing so we will have fun
and also get rich.” To that, everybody companies. for a job but we tried to look for what
that person could do. Or what the

VIKALPA • VOLUME 33 • NO 3 • JULY – SEPTEMBER 2008 87

person wanted to do. Not necessar- else, I decided to get out and start
ily what the person was doing. So, One can exit even from something new again. So, today I
the people we spoke to also found it conceptual paradigms, not have created a situation for myself
very refreshing that we were not nec- where I manage a portfolio; I have got
just from an investment.
essarily judging them by their job and enough money for retirement; I have
thus we used to get into engaging The biggest investment an got bonds; and I have now again
discussions on their interests— investor makes is in his moved to my next project where I am
whether they were interested in busi- my own VC. That, I think, is a com-
own belief system. And to
ness development; whether they pletely different model from what
wanted to be in the US. In that case, be able to exit from your others here have.
we could create an opportunity for belief system is the biggest
them. We found that working ex- write-off that you can Deep Kalra—We all have our core
tremely well for us because they had team and that is important. It is for
the hunger to learn. And they are the
make; it could yet be the the enhancement of that team that
people who have stayed and grown highest pay-off, if you you start bringing in people who
with us. They are even free to experi- come into the next belief sometimes have to do others’ jobs,
ment with changing roles, etc. Thus who sometimes have to step on oth-
system which you think is
we found that believing in them and ers’ toes, and sometimes have to al-
their abilities even when they them- more effective. most replace them which I think is
selves could not do it was very use- the hardest thing. You know, I have
ful. had to take certain decisions like that which I think I
had known since long but was just procrastinating till it
Nishith Arora—A lot of people in this panel who have became very clear. And you bring in someone from the
built companies have got great plans for their compa- market. So, I guess, when you reach the next level or
nies. I think, it is all a matter of your own personal na- scale, it becomes in some way easier, but how will you
ture and choice how you shape up your life. As for pull talent away from, let’s say, a top notch company,
myself, boredom has always motivated me to change e.g. GE, or like Nishith who for his BPO firm was trying
jobs every four to five years. When I started on my own to get someone and said he was poaching. Now, we may
a few years ago, I tried a few things, be having similar circumstances. We
and one of them worked. I made would try to get product managers
Who you bring in as the
some capital, but 3-4 years later, it did with Yahoo, Amazon or Google kind
not seem large enough and hence so-called independents on of an experience, which is really dif-
shut it down and got into the BPO your board is critical. If ficult. With a lot of people coming
space where I managed to create a you are the one to do it, it back, it might be getting easier now,
very successful company. We have but the one who is going to join you,
heard of esoteric ways of acquiring would mean that you have is really looking to re-invent himself.
talent. I just poached on a huge com- got acceptance from your You have got to see that spark. He is
petitor, who had 2,000 people two investor/s. If your investors here because he wants to make a dif-
miles away from us. We hired about ference.
400 people from them in about 3-4
brought in an
year period. I used to come to the of- independent, it would Sanjeev Bikhchandani—One ques-
fice and enjoy building the business come with a caveat. Very tion I am often asked is: Why do VCs
and finally when it stabilized and need to exit? Can we have views of
often, he would not be
started making a few billion dollars some VCs who have done exits? I
of profit a year, we became the target that independent. So, I feel, one thing must be clearly under-
for acquisition. At that juncture, think, one should be a stood. If you do raise venture capi-
when I had the choice of getting into little careful about that. tal, you are necessarily embracing the
private equity or an IPO or something path of trying to build a large com-

88 COLLOQUIUM
pany, scaling it up and then creating funds and send back the capital that
a liquidity event which after a few What is most important is we raised to invest in these compa-
years, will enable the investor to to choose the right person/ nies.
encash and exit. And Deep, you’ve
s without worrying so There are primarily two modes of
done one exit already and I guess in
much about the fund. We exit: M&A and going public. And the
the future, there will be another exit.
rationale for choosing one over the
I’ve done one and Shantanu, you’ve have typically not gone for
also done one. Rahul, can you please other can be many. In simple terms,
brand names and funds. If if you can build a large standard loan
explain the mechanism?
it happened to be, so be it. company that can keep growing for
Rahul Bhasin—Capital is unfortu- But the individual is a long time to come, then you can ac-
nately not our own. We get capital cess the public markets and you can
definitely more important. be an independent company that ex-
from institutions, for a certain de-
ists for all times to come. But a lot of
fined lifetime. We have to make in-
times, and that is probably true in half
vestments, facilitate the companies to
of the cases, or maybe 2/3rds, you
grow, increase values, and then divest those investments.
In a context like India, where you have such organic com- would have built a company that is interesting, that
pounding growth kind of an environment, I think exit- would have got into a reasonably good scale, but you
ing quickly is probably a suboptimal solution for people are at a point where it is not clear if the market is large
in our own business. And, as a consequence of that, we enough for you to build a company that can keep grow-
have convinced our investors that we should be run- ing for 10, 20, or 25 years. At that point of time, it is
probably better to get a strategic exit and merge with
ning 12-year cycles on our funds which is the longest
another company which can then make this a part of
anyone has, anywhere in the world. But having said that,
their overall business; the larger company grows. There
there is still a necessity to exit as you need to return the
is also a second reason for going for M&A or an IPO—
capital.
the human perspective. We have seen some of our com-
Sanjeev Bikhchandani—Can we talk about the various panies’ long road of being an entrepreneur. Not
ways of exiting? everybody wants to be in the business for 30 years. In
fact, there have been situations where the entrepreneur
Sandeep Singhal—One thing we need to understand is has literally lost a lot of health—something that is less
that we have more private equity investors than ven- known. It really takes a toll on the entrepreneurs and
ture capital, and to that extent, we invest in mature busi- their family because basically they give everything they
nesses and also do start-ups. So, it is have to that company. And in many
relevant that both venture capital and cases, you reach a stage where you
private equity businesses are finan-
Before Educomp became a say, “Listen, I have built a reasonably
cial services companies. Their busi- public company, we had a interesting amount of value, I don’t
ness model is as follows: there is VC in the company; we want to be running this for the rest
capital from endowments, pension of my life. I want to liquidate, and
successfully transitioned then I want to move on and do some-
funds that may increase the value of
that endowment. They give you and bought out the VC at thing else.” A lot of times, the deci-
money for a certain period of time— a time when things were sion takes place on the second
10-12 years, as Rahul said. All of us parameter. And, sometimes, it gets
bad. This was a great
have gotten 12 year funds now. But taken on the first parameter.
our business model is based on the lesson for us, and it might
fact that for every bit of money put be of learning value for a Vijay Mahajan—I would also want
in a pension fund or a life insurance lot of budding to talk about exit. We all know that
policy, there is a liability attached. So, VCs and investors exit, but even I
in 10-12 years, we have to square our
entrepreneurs. have personally exited from a whole

VIKALPA • VOLUME 33 • NO 3 • JULY – SEPTEMBER 2008 89

way of doing things. I have been board is critical. If you are the one to
working on rural livelihood for the In India, education has do it, it would mean that you have
last 27 years, since the time I left IIMA always been considered to got acceptance from your investor/s.
in 1981. For the first 10 years, I did it If your investors brought in an inde-
be a non-profitable,
as an NGO because of the belief that pendent, it would come with a caveat.
credit or capital for this will come charitable business with a Very often, he would not be that in-
from banks or from the government noble purpose and not dependent. As he was brought in by
and what we have to do is, R&D, the investor, they would be probably
something you make
training, motivation and so forth. sharing some kind of a relation be-
However, that did not prove to be a money out of, unlike cause of which, they may be getting
valid assumption on the ground. We everywhere else in the into a lot of boards together. So, I
spent a lot of time trying to raise world where there is a think, one should be a little careful
money from banks for poor people about that.
but failed. So, somewhere around
legit for profit motive.
1991, I decided to exit from the NGO About choosing a VC before manag-
modality but continue to do what I wanted to do, i.e., ing it, people say, first you should have a problem of
promote a large number of rural livelihoods, but in a plenty or a problem of choice which is a good problem
manner that I would have to raise capital myself. I there- to have. If you have that, I would say, “Always go for
fore set up Basix as a company which was a kind of blas- that person who is going to sit on your board. See, what
phemy because we were trying to do poverty alleviation kind of a person he/she is. What kind of personal chem-
yet wanted to do it like a company. A bit like Educomp istry you share with that person? Do you think that per-
where you say you want to do education but you want son will be a little more kind and empathetic when things
to do it through a for-profit model. Thus, one can exit are tough?” I mean, you can’t expect him to be irratio-
even from conceptual paradigms, not just from an in- nal. VCs are by and large very rational. But, get a per-
vestment. The biggest investment an investor makes is son who you think can understand beyond, who will
in his own belief system. And, to be able to exit from not only think for you, but also for himself. And I have
your belief system is the biggest write-off that you can always believed that the litmus test is: “Would you take
make; it could yet be the highest pay-off, if you come that person on your board if he didn’t bring in money?
into the next belief system which you think is more ef- Would you take him on board if he was an indepen-
fective. dent?”

Sanjeev Bikhchandani—What is it like to be an entre- We have got three investors, who have bought seats on
preneur with external investors inside your company. our board and I really think, each one of them adds value
How is it like to manage investor relations with VCs in some way or the other. In one particular case, we
and even public shareholders? Deep, you can talk about found another partner in the VC firm, which was the
it. Shantanu, after that you can take your call on it. reason we did the deal but someone else wanted him on
the board for their internal reasons and even that was
Deep Kalra—Sure, I might be the okay with us. You can reach out to
most qualified to talk about this. I your other partner as often as you
have one large VC and three VCs Our economy is getting want. So, I think, it is really critical
with small stakes, three independent into a slowdown and there that you get on board good people
board members, all of whom I asked and then the managing, etc., just hap-
is turmoil all over the
to join my board. Managing a board, pens. I have friends who run compa-
particularly managing investors is world. In such times, high nies, who have got VCs and investors
quite different from managing inde- quality investor relations where it has become highly non-ami-
pendents. Independents are people
are more critical than ever cable. And those are bad situations.
you bring in. Who you bring in as the Those are situations you want to
so-called independents on your before. bring to closure, one way or the other.

90 COLLOQUIUM
No matter whether you are building investor looks at things because the
a billion dollar company or not, if you Capital, I think, is now investor has a certain theme about the
can’t sleep well at night, it is not much less of a challenge investment, a certain view of the
worth it. Or like Sandeep said, if it is market, which could be potentially
in India over the last 5-10
going to take a toll on your health, different from the views of the found-
etc., then it is just not worth it. I think, years. For people who ing team. And, we actually seized
you have got to have a board. Gover- have delivered, who have that opportunity; we bought the in-
nance is very important. Here, I must vestor out and the next exit event we
a track record, scale up
add that, sometimes my senior col- did was to take the company to pub-
leagues crib about the pressure com- capital is always available. lic. And then our entire challenge of
ing from VCs, and I think, it is great. So, I would say, people investor relations was very different.
I believe every board meeting that we and managerial I think, we were the first company of
have, charges us up. They are really our kind, which was in core educa-
intellectually stimulating, brain-
bandwidth is very critical. tion services, to go public. So, our first
storming sessions. They typically last challenge was to see how to evange-
for about 45 minutes to an hour and after that the rest of lize the story. How do you even tell people that educa-
the half day or sometimes even whole day is really a tion is a business? Particularly, in India, education has
brainstorm of one of the best minds in the business. So, always been considered to be a non-profitable, chari-
what is most important is to choose the right person/s table business with a noble purpose and not something
without worrying so much about the fund. We have typi- you make money out of, unlike everywhere else in the
cally not gone for brand names and funds. If it happened world where there is a legit for profit motive. So, I re-
to be, so be it. But the individual is definitely more im- member spending a lot of time on the road talking to
portant. investors, explaining to them the rationale behind run-
ning an education company, getting them convinced.
Shantanu Prakash—Sanjeev, I run a public company, We put in a lot of hard work in that process. Once
so my challenge of managing investors is a little differ- Educomp went public and people saw that it was an
ent. Because in a public company, you don’t get to choose educational business actually throwing out profits and
who becomes a significant investor in your company. producing growth, our challenge became a bit differ-
Anybody may decide to go and buy shares in the stock ent: How do we get in investors who understand the
market and if they like your company, over a period of true value of our business? So, a lot of the investor com-
time, they create a significantly large munication that we do now is all
stake and then they would like to be about (a) reaching out to people who
kept informed about the company Passion has to be do not understand India (b) potential
and so on. But let me take a step back. of educational business in India, and
consistently there; what
Before Educomp became a public (c) our value in the company and the
company, we had a VC in the com- should change is the ecosystem.
pany; we successfully transitioned business plan and strategy.
and bought out the VC at a time when In the end of one era, half Sanjeev Bikhchandani—So, it is ul-
things were bad. This was a great timately a sales job.
lesson for us, and it might be of learn- of what you said one year
ing value for a lot of budding entre- ago, may not be valid due Shantanu Prakash—Yes, indeed, it
preneurs. to the market is. But there is a flipside to it. In the
sales job, you get the investor excited
In the course of a company’s evolu- circumstances. So, re- about investing in your company and
tion and growth, there could be a jigging the strategy, getting buying your stock. After that, one
situation where the founding team
money big time was a big very important task is to make him
has a view of the country’s growth sustain his interest in the company,
which is divergent from the way the challenge.
make him stay excited in the growth

VIKALPA • VOLUME 33 • NO 3 • JULY – SEPTEMBER 2008 91

story. It is partly marketing and sales, the right kind of people who would
but it is also giving the right kind of There are a lot of young work with me to help the company
information. We are very transparent people who started their grow. Many times, at least, I was
as a company, and are trying to cre-
businesses at 20, 21, and asked: ‘Why should I leave a com-
ate a disclosure matrix that is the best pany like, Ranbaxy, Lupin, or Dr
in class in the world and to do that 22—and succeeded in Reddy’s, and join a start-up company
very diligently. And, I think, the building up great which is also in the field of pharma-
value of true investor relations gets
businesses. But their desire ceuticals?’ So, to convince people and
particularly enhanced when times are get them on board was the first very
not good. Our economy is getting into and need to do something
big challenge in the beginning. What
a slowdown and there is turmoil all like that was very strong. I used to do was to present a five year
over the world. In such times, high plan to them. I said, “With or with-
quality investor relations are more out you, I want to scale up to a different level. If you join
critical than ever before. So, certainly in our company, I and participate in this, you can also look back and say,
spend a lot of my personal time nurturing investor rela- you played a role in transforming the company from
tions. one level to another and get some satisfaction from it. If
you don’t do that, I will still market it to other people
Sanjeev Bikhchandani—The next area I would like to and try to get them on board. You can always try after
touch upon is the challenge of scaling up. You have 2-3 years and see what we have done so that you can
started a company, and you have got some money, and help me take this company to the next level.” Not all
now you want to scale up your organization. What are bought this story except for some who were there in the
the challenges and how are they different? What have company from the beginning. So, that was the first chal-
you done in your companies to manage the scale-up? lenge we faced.
Can we here it from you, Narendra?
Later on, the strategic changes needed to move from bulk
activity to the dosage forms and then to the basic re-
Narendra Murkumbi—One of the most difficult things
search, brought in a lot of different challenges. Raising
I have found is to let go of doing everything yourself
big money was the next challenge. So, I went to Schroders
and being able to delegate. I think one of the flipsides of
and IFC-Washington at the World Bank, briefed them
starting right out of the campus is
about the five-year projections and
that you never worked anywhere.
the strategy, and convinced them to
And, to get people, empower them, There was only 15 months be passionate about our business.
especially at middle management
of money left and there Passion has to be consistently there;
and senior management levels, is one
was no hope of another what should change is the business
of the big challenges. From my own
plan and strategy. In the end of one
personal experience, capital, I think, round of funding. In that
era, half of what you said one year
is now much less of a challenge in kind of a situation, what ago, may not be valid due to the mar-
India over the last 5-10 years. For
really works is, the top 2-3 ket circumstances. So, re-jigging the
people who have delivered, who
strategy, getting money big time was
have a track record, scale up capital people, the entrepreneur
a big challenge. Another challenge
is always available. So, I would say, and the CEO — how good was the execution of different pieces
people and managerial bandwidth is
they are at a personal of this puzzle and now that all that is
very critical. over, we are at around US $ 300 mn
connect with every
as a company. But, what is the differ-
Raghavendra Rao—The challenges individual of the company entiation that you bring onto the table
are very different at different points to be able to continue the for you to become a billion dollar
in time. When we started the com- company earlier than other people?
belief.
pany, the first challenge was to get This is a new type of challenge now

92 COLLOQUIUM
where you need to innovate and dif-
ferentiate and you need to globalize.
Thus, in our Orchid life, we have had
four types of challenges in the last 14
years. I think, every challenge is a
new one and that is where entrepre-
neurial and leadership spirit comes
in. How you respond to those chal-
lenges is what is most important.
Nishith Arora—I would like to talk
about how to scale up a one-man
business. And that was pretty much
where I started from when I left work
in my late ‘30s. I started representing
large American companies as an
agent, and one of the things I quickly
figured was that it was possible to
make some money, but the main
problem was how to scale that up. For
that, we needed resources. When I set
up my B-to-B project, the publishing
BPO, I first built the infrastructure.
We first built a 30,000 sq. ft. facility
in Noida without a single employee
or customer in sight. And then we got a few core people very early and become big and successful, as Prof. Basant
in, and once we were clear that we could start, at least says, people start off at a point where various kinds of
on a pilot scale, we started approaching customers. It
took time to get them to visit us and we slowly built
confidence in them requesting them to try us out first
on one book, then on two books and so on. Essentially,
we put in place the complete infra-
structure to give them the confi-
dence—“Once you succeed with us,
we can scale this up for you.” And
that is what is important for scaling
up; you need to be able to show your
customers what you can do for them.
At least that is the model I used.
Sanjeev Bikhchandani—Another
question is about age, knowledge,
and experience— Would you fund a
fresher, a young person?
Sandeep Singhal—Yes, of course, if
he is the right person. Anything that
is going to be said on this question
Just saying—‘Stay with
me, one day it will
happen’—is not good
enough. You have to
logically deconstruct the
entire strategy thing- —
“Look, this is my business
plan; this is what we are
doing; this is what is likely
to happen, and this is how
we will get out of the
woods and finally make it
into a very successful
company. And, hopefully,
the people around you
would be smart and
intelligent enough to
understand.
assets that they have, in terms of knowledge, confidence,
and maybe capital, are at the threshold level. You could
be the Bill Gates of tomorrow, but if you were, you won’t
ask that question; you’d just go out there and do it!
Even if you are not calm
inside and are probably
going through a storm,
staying calm on the
outside, does help. Those
who survive are the ones
who have been
scrambling like crazy
underwater, but are like a
silent duck if you look
from the top.
will be just one of the views; that
would not be the only view. It is ac-
tually very difficult to answer that
question. There are only two parts to
building a business. One is a strong
desire. Whatever your reason may be,
you may want to become rich; you
are looking for a mountain to climb;
you are bored as hell with whatever
else you are doing; so, you are look-
ing for a challenge. That is the desire
part. The second is ability. There are
a lot of young people who started
their businesses at 20, 21, and 22—
and succeeded in building up great
businesses. But their desire and the
need to do something like that was
very strong. And normally, they
don’t ask the question that you’re
asking. They are just out there doing
it. So, I think, you will have to wait
for the time that that question gets an-
swered by yourself rather than some-
one else. But, by and large, barring a
few successes of people who start out
Rahul Bhasin—I would just like to
add that, one of the most successful
companies we funded for a very long
time was of a young gentleman of 23,
who had started three companies and
failed in all of them, crashed and
burnt in all the three of them. But
what was remarkable was that when
we found him, he was very clear that
he wanted to build a business; he
wanted to build a company. He did
not understand accounts; he did not
know how to calculate profit and loss,
but after talking to him three-four
times, we were convinced that he

VIKALPA • VOLUME 33 • NO 3 • JULY – SEPTEMBER 2008 93

could do it. And, one of the key
strengths that he brought to the table
was that he knew what he knew and
he also knew what he did not know.
So when we agreed to fund him, we
said, “We have one condition, that we
will help you recruit three to four
people.” And, it is just a strange co-
incidence that the three or four
people we helped to recruit were all
alumni of IIMA and the company did
brilliantly. For two and a half years,
it went nowhere, and then it just took
off and never stopped since.
Audience—When the companies are going down and of the woods and finally make it into a very successful
when the funds are low, how do you keep believing in company. And, hopefully, the people around you are
yourself and, make the people working with you be- smart enough and intelligent enough to understand.
lieve in you?
Sanjeev Bikhchandani—You know,
there was a point of time when, we
raised venture capital in April 2000
and the meltdown happened in May
2000. First there was the dotcom melt-
down—there was an IT meltdown in
November—and then, there was
9/11 and the global recession. At that
time, we had about Rs. 4 crore left in
the bank; and we were bleeding
Rs. 25 lakh a month. Thus, there was
only 15 months of money left and
there was no hope of another round
of funding. I think, in that kind of a
situation, what really works is, the
top 2-3 people, the entrepreneur and
the CEO—how good they are at a
personal connect with every indi-
vidual of the company to be able to
continue the belief. If it is a ten thou-
sand person company, it will be
harder. But at that time we were only
150-200 persons; so, it was slightly
easier. I knew everybody in the com-
pany. At that stage, a lot depends on
the entrepreneur himself, his per-
sonal relation with the employees,
94
In many companies, if
there are four or five
founders, and the
company scales up, two of
them will turn out to be
capable of handling large
teams or companies but
two others may essentially
be very good at small
start-up companies.
And, I completely agree on personal connect. If a prob-
lem occurs when you are small, I think it is easier to
The consistency of
communication, even in
good times, is the seed
that we should sow for
bad times to come or any the initial phases, I think, it is still
indifferent times that the
company might go
through. If you are
consistent, if you are
transparent, and if you are
communicating even in
the good times and
sharing all the corporate
and business plans and
leading by example,
people are smart enough
to see through what you
say and what you do as a nect with the team. But again, that
leader and an
entrepreneur.
his charisma, I think, all that is
important.
Shantanu Prakash—More or less, I
agree with you. Most people are in-
telligent enough to realize, if you ex-
plain to them or over a period of time,
how that formula is going to work.
Just saying—‘Stay with me, one day
it will happen’—is not good enough.
You have to logically deconstruct the
entire strategy thing—“Look, this is
my business plan; this is what we are
doing; this is what is likely to hap-
pen, and this is how we will get out
handle than if you are a 2,000-man
company, because when you have
2,000 people, the level of disengage-
ment of the top management with the
middle and the bottom layers, could
be difficult to bridge. But, if the com-
pany is going through a bad time in
easier to handle, with the charisma
and the passion that the founding
team of the company exhibits every-
day on the job.
Deep Kalra—Just a small comment.
I think, transparency really helps.
Particularly with your first level,
keeping it very open in terms of what
the real crisis is, how bad it is, and
how you plan to face it—that actu-
ally gets their involvement which in
turn gets a buy-in. And, that is the
only reason for which they are going
to stay engaged. They will stay en-
gaged because of your personal con-
will last only that long. However, if
you make them a part of the prob-
lem, which is also a part of solution-
COLLOQUIUM
seeking, that, I think, would really ment, I don’t think, any amount of
make a difference. The fundamental question conviction or passion or talking or
that one needs to answer even restructuring, as Sandeep men-
Sandeep Singhal—Two other things. tioned, might really help. If you are
is: What do you want to
One is, even if you are not calm in- consistent, if you are transparent, and
side and are probably going through do with your life? If you if you are communicating even in the
a storm, staying calm on the outside, can try and explore the good times and sharing all the cor-
does help. Those who survive are the porate and business plans and lead-
answer by setting an
ones who have been scrambling like ing by example, people are smart
crazy underwater, but are like a si- enterprise, then go for it. enough to see through what you say
lent duck if you look from the top. But it might as well be and what you do as a leader and an
And, the second thing I wanted to done by several other entrepreneur. So, if you keep doing
mention is that, in those times, you that, and on the other hand, if you
should be ready for some structural
methods. So, the key trust the people that you have, that
changes as well. And, I wonder if any question is not really is something that will help you de-
of the entrepreneurs would comment about the enterprise; it is velop a belief system and culture in
but that may mean looking at some the company. Then the attrition rate
about how you would feel
of the lieutenants who are employ- would definitely come down even in
ees, who become more of your share- fulfilled in your life. difficult times and they will realize
holders. You have to look at the that ‘Yes, this is something all of us
situation and reconstruct it. It is an unstable situation; it are party too and together, we’ll come out of it.’ So, I
can spiral out of control. You have to reconstruct the would vote for consistency in communication in good
situation to bring it back to a stable condition. You get times as a starting point only to live the bad times.
some time on your hands, say, 6-9 months or a year in
which you hope the market will change. Do any of you Narendra Murkumbi—Just one piece of advice. I think,
want to comment on the structural adjustments? if the cash is very tight, find a way to pay your employ-
ees on time and sweet talk for the later payments. I think
Sanjeev Bikhchandani—Well, it frequently happens, in that works wonders.
many companies, that if there are four or five founders,
and the company scales up, two of them will turn out to Sanjeev Bikhchandani—I would like to close by ask-
be capable of handling large teams or companies but ing each member of the panel if there is one piece of
two others may essentially be very good at small start- advice that you would like to share about looking at en-
up companies. What do you do then? Many start-up or- trepreneurship as a future life option.
ganizations have been through that
and they have found that they have Vijay Mahajan—Well, I think the
Do what you enjoy doing,
to restructure and sometimes when fundamental question that one needs
they are not proactive, when they do it with people you to answer is: What do you want to
leave it too late, crisis hits and then enjoy being with and do with your life? If you can try and
they have got to do it anyway. So, that
spending time with. And, I explore the answer by setting an en-
is another way of doing it. terprise, then go for it. But it might
think, when you look back as well be done by several other
Raghavendra Rao—I would like to at what you have done, methods. So, the key question is not
add one point. The consistency of maybe 10-20 years from really about the enterprise; it is about
communication, even in good times, how you would feel fulfilled in your
is the seed that we should sow for bad
now, you will be happy life.
times to come or any indifferent times that you have done what
that the company might go through. you wanted to do. Raghavendra Rao—Stay hungry,
If you are doing only crisis manage- stay foolish! I think, you should have

VIKALPA • VOLUME 33 • NO 3 • JULY – SEPTEMBER 2008 95

a philosophy to live for something. It So, you want to flip it. If you have
can be anything. But live for some- Being an entrepreneur that desire, please go ahead and try
thing, focus on it, try to differentiate today is actually one of it out. What can go wrong? You are
and innovate. And when you look for sitting in the No. 1 institution, at least,
the least risky things that
gaps, you will definitely find them. in this part of the world. It is a great
There are many opportunities. You you can do with your life. opportunity; actually, you are almost
can learn something from anything It is actually the least risky hedged, the moment you get into this
that you see. You can learn scale and place. So, go for it.
path to wealth creation.
depth of enterprise and economy
subscale, or management of the scale Shantanu Prakash—Now, for all
of the business from, say, the Ambani group. You can those of you who are sitting on the fence thinking should
even learn from history in terms of developing things in I or should I not do it for various reasons, one of the
adverse circumstances like Jamshedji Tata or L&T. You myths that I would like to demolish is that entrepre-
can learn from knowledge creation with a few people neurs are generally fairly risk-averse people; they know
and making it big like Narayana Murthy. You can learn how to manage risk very smartly. And, being an entre-
many things from everybody. But after choosing from preneur today is actually one of the least risky things
that, you have to focus on something, differentiate, and that you can do with your life. It is actually the least
make a difference to the nation. risky path to wealth creation. Besides, it will also give
you professional satisfaction, and other things. But even
Rahul Bhasin—Do what you enjoy doing, do it with from a purely wealth creation perspective, it is the least
people you enjoy being with and spending time with. risky choice that you can make today.
And, I think, when you look back at what you have done,
maybe 10-20 years from now, you will be happy that Sandeep Singhal—I don’t have much to add; I would
you have done what you wanted to do. And, if the an- just like to amplify what he just said. Most people think
swer to those three things is starting with enterprise, by that entrepreneurs are risk-takers. I see the best entre-
all means, don’t stop. preneurs as risk managers. And, the other thing about
the environment— the perception of risk of being an en-
Nishith Arora—I think, if you want to be an entrepre- trepreneur used to be different 10-15 years ago. So, ku-
neur, the first thing is to start working for one. Both K R dos to all those people who went out and started
Rao and I were strongly influenced by the last two bosses companies in those times. But, in today’s time, even if
we worked with both of whom were excellent entrepre- you go out there and do something which does not work,
neurs. It is unlikely that if you go to Goldman Sachs, you are anyway going to land up at a pretty good place
you are going to end up the hard way, like the entrepre- because a lot of people are looking for people who have
neurs. So, select your first job carefully, and try and work had a real-world experience like you. So, your risk is
with an entrepreneur for a few years. much lower these days. Even if you fail, there are a lot
of good options. And, this experience would be very
Deep Kalra—I know why Rahul is so smart. He read valuable for trying out those options.
my mind and said exactly what I wanted to say. Actu-
ally, that is very true; you have got CONCLUDING REMARKS
to do something you are very happy
about. Particularly for the students at Rakesh Basant—No summary can
Most people think that do justice to this insightful discus-
IIMA, if you are sure you want to be
an entrepreneur, you can use this
entrepreneurs are risk- sion. The diversity of experiences and
degree as an insurance policy. Half takers. I see the best perspectives for each stage of the en-
the people do not do it because it be- trepreneurial life cycle suggests that
entrepreneurs as risk
comes a golden cage. It is very hard looking for a unique success mantra
managers. would be inappropriate. A few things
to get away from such lucrative jobs.

96 COLLOQUIUM
which are common across ex-
periences, however, stand out.
Becoming an entrepreneur,
like many other critical deci-
sions in life, is a very personal
one and the individual needs
to take a call. The entrepre-
neurial journey entails a pro-
cess where one has to deal
with ambiguities on a regular
basis. And these ambiguities
remain even after the so-called
‘scaling up’ process has been
crossed; only the nature of
challenges and ambiguities
change. Transparency, com-
mitment, and passion are im-
portant in all stages of the entrepreneurial life cycle and preneurial journey begin!
VIKALPA • VOLUME 33 • NO 3 • JULY – SEPTEMBER 2008
help keep the ‘flock’ together
The entrepreneurial journey entails a and energized. Perseverance
process where one has to deal with and frugality (even when you
ambiguities on a regular basis. And are spending somebody else’s
money) help startups survive.
these ambiguities remain even after
A good entrepreneur should
the so-called ‘scaling up’ process has be willing to give up control
been crossed; only the nature of (both in terms of decision mak-
challenges and ambiguities change. ing and equity) in order to let
the firm grow. Venture capital-
Transparency, commitment, and
ists need to be seen as partners.
passion are important in all stages of Jury is still out if one needs ex-
the entrepreneurial life cycle and perience to become a success-
help keep the ‘flock’ together and ful entrepreneur but having
energized. ‘entrepreneurial’ experience
within regular jobs generally
comes handy. So let the entre-
Entrepreneurs are risk takers, willing to roll the dice with their
money or reputation on the line in support of an idea or
enterprise. They willingly assume responsibility for the success
or failure of a venture and are answerable for all its facets.”
—Victor Kiam
97