My Proficorn Way (Part 100)

A Century

Little did I know when I started the Proficorn series on my blog a year ago that I would end up with a hundred posts! And yet – here we are. A 20 Mile March of my own – driven by the decision to write daily. While the writings have covered diverse topics in marketing and India’s political economy, the proficorn series where I have written about my experiences as an entrepreneur is the one which has been a consistent theme. I have dug deep into my past for stories and learnings to share – hopefully these can help others given that it’s coming from a practitioner who has failed many times more than has succeeded. I have written as candidly as I can so that there are meaningful takeaways and actionable insights.

Entrepreneurship is on the rise in India. As success stories abound, there are many who want to walk down the path of setting up their own business. While there is a great romantic view of entrepreneurship, what I have tried to also present is the reality of the entrepreneur’s journey. The freedom that comes from running one’s company has to be also seen with the rocky life that startups (and their founders) experience. Worries cannot be left at 6 pm – they continuously stir the mind of the entrepreneur. Rarely a day goes by that goes according to plan – new fires arise even before old ones are extinguished. And in all this, one has to, in the words of Dan Bricklin, “like the feeling.” My hope is that these writings bring to life what an entrepreneur goes through.

I have thus far not raised any external capital through my nearly three decades of running diverse ventures. I have tried many times without success. This forced me down the path of focusing on profits as the only way to grow the business. In doing so, I built two proficorns (a word I coined) – companies that were private, profitable, promoter-funded and valuable. I also had success with a non-tech venture in the form of Niti Digital which helped the BJP achieve a majority in the 2014 Lok Sabha elections – guess that can also count as a proficorn of sorts!

Today, with easier access to capital, the temptation for a new entrepreneur is to raise money early and constantly. My pitch is that there is a different path also available to build a business – and one that is the default for most entrepreneurs. It is just that we do not read or hear stories of such entrepreneurs. They are the true unsung heroes and also need to be celebrated. To risk everything one has, to devote years of one’s life in the search for making the world a better place, entrepreneurs who choose to not raise capital are fighting far greater odds stacked against them. There is no “other people’s money” to lose – it is all their own.

It is definitely doable – not raising external capital and building a valuable business. While the option of not raising capital may not be available to everyone, if one has a choice, tread the path to being a proficorn. The time not spent with investors will be spent with customers. The time not spent on making MIS reports will be spent on imagining tomorrow’s world. The time not spent chasing valuation will be spent in building a company to last. The time not spent burning cash and rushing for the next round will be spent in a more peaceful frame of mind without the pressure of finding an exit for the angels and Series A VCs.

I hope I have made the case for a proficorn stronger through this century of posts. It is not a path for the faint-hearted. But is a path that will leave you freer and more fulfilled. Because if you do not control your destiny, the investors will.

My Proficorn Way (Part 99)

20 Mile March

As part of the readings for the Great Company course based on Jim Collins’ books, I read about the 20 Mile March. It is discussed in “Great By Choice.” The basic concept, in the words of Jim Collins, is this: “Companies that thrive in a turbulent world self-impose rigorous performance marks to hit with relentless consistency—like walking across a gigantic continent by marching at least twenty miles a day, every day, regardless of conditions. The march imposes order amidst disorder, discipline amidst chaos, and consistency amidst uncertainty. For most organizations, a one-year 20 Mile March cycle works well, although it could be shorter or longer. But whatever the cycle, the 20 Mile March requires both short-term focus (you have to hit the march this cycle) and long-term building (you have to hit the march every subsequent cycle for years to decades). As such, it’s a rarified form of disciplined action that correlates strongly with achieving breakthrough performance and sustaining flywheel momentum.”

As I read it, I realised that this gave a name and put into words what my philosophy has been at Netcore for a long time! Netcore’s high margin business (email and marketing automation) has demonstrated exactly this growth over a decade.

Except for one year where we were flat, we have maintained the 20 Mile March discipline – under three CEOs. Even during the past year disrupted by the impact of the pandemic, we have grown 30% over the previous year. It is this discipline which is the hallmark of proficorns.

For a proficorn, there is no growth capital other than the profits made from the business. So, if one has to expand, one has to generate profits which can then be reinvested for future growth. In the early years, Netcore’s SMS business delivered the profits which we reinvested into the email business. As the email business grew, it delivered the profits which enabled us to invest in marketing automation, international expansion and tuck-in tech acquisitions to add personalisation and product experience to our martech suite.

Building a business to operate with this discipline over long periods of time is not easy. It has meant that we have had to stay from bet-it-all acquisitions which could have gone either way. It has meant that we have had to sequence our international expansion – learning in SE Asia, and then foraying into US, and now Europe.

All of this was made possible by the fanatic discipline of the 20 Mile March. Day after day, month after month, quarter after quarter, year after year. And it all compounds over a decade into the great growth chart you see.

My Proficorn Way (Part 98)

Rethinking Assumptions – 2

It was February 2019. Kalpit (Netcore’s CEO) and I were attending SaaStr, the premier SaaS (software-as-a-service) conference in San Jose. As we sat through session after session, the realisation hit me that we had completely missed the new way of building products and taking them to market. We had been too caught up in the ways of the past – building a full-scale product and then a direct sales team to approach enterprises. This is what had got us initial success in India and SE Asia. My belief was that our products were complex and needed face-to-face persuasion which could only be done by experienced sales people.

Meanwhile, the world around had changed in multiple ways. Software developers wanted APIs that they could integrate into the code they were writing without having to talk to salespeople. For this, the product needed a self-serve and perhaps even a free trial. This needed a new approach to product development and sales. It needed targeting developers – which needed a very different approach then meeting CIO and CMOs. The SaaS way of marketing and sales was also different – a new world of SDRs (sales development representatives) and ABM (account-based marketing) was enabling companies to reach out globally without a physical presence in multiple countries. The primary metric was not annual sales but MRR (monthly recurring revenue). There was a new language of business that had fuelled a new generation of companies – and we were oblivious to both the vocabulary and the competition.

SaaStr opened my eyes to this new world. And the question that kept coming to me was – why had I not seen it earlier? A few knowledgeable colleagues had told me about the new world of SaaS – I ignored them repeatedly. I did not recognise that a new set of decision-makers were emerging in enterprises – developers, product managers. I also failed to recognise that a new class of companies was emerging – aggressive, exponentially growing startups. I was still locked to a worldview that sales and marketing of our solutions had to be via face-to-face connect in large organisations.

As Adam Grant explains in his book “Think Again”: “Scientific thinking favors humility over pride, doubt over certainty, curiosity over closure. When we shift out of scientist mode, the rethinking cycle breaks down, giving way to an overconfidence cycle. If we’re preaching, we can’t see gaps in our knowledge: we believe we’ve already found the truth. Pride breeds conviction rather than doubt, which makes us prosecutors: we might be laser-focused on changing other people’s minds, but ours is set in stone. That launches us into confirmation bias and desirability bias. We become politicians, ignoring or dismissing whatever doesn’t win the favor of our constituents—our parents, our bosses, or the high school classmates we’re still trying to impress. We become so busy putting on a show that the truth gets relegated to a backstage seat, and the resulting validation can make us arrogant. We fall victim to the fat-cat syndrome, resting on our laurels instead of pressure-testing our beliefs.” I was trapped in an overconfidence cycle.

While we did change the organisation direction on our return to India, we lost a few crucial years of growth. When I look back, I wish I had more humility and openness to listen to others, a better recognition of what I did not know so I could have reset my initial assumptions. I should have fast-tracked my rethinking and done it much earlier.

My Proficorn Way (Part 97)

Rethinking Assumptions – 1

One of the reasons companies fail (and I have also gone through my share of failures) is that entrepreneurs do not reset starting assumptions against the market realities.

Entrepreneurs start off with some ideas and assumptions about the market. Once they take the product out into the market, they get feedback – about customers’ expectations and market size. It is at that time that there is a need to think about some course alteration – in case there is a mismatch. Many times, they don’t do that – working under the principle that their efforts will accelerate the market’s response towards their product. That rarely happens. What follows is disappointment.

It is never easy changing one’s assumptions quickly, especially when one has been thinking about them for a long time. But they should be exactly that – just starting assumptions.

Adam Grant is his book “Think Again”:

Intelligence is usually seen as the ability to think and learn, but in a rapidly changing world, there’s another set of cognitive skills that might matter more: the ability to rethink and unlearn. In our daily lives, too many of us favor the comfort of conviction over the discomfort of doubt. We listen to opinions that make us feel good, instead of ideas that make us think hard. We see disagreement as a threat to our egos, rather than an opportunity to learn. We surround ourselves with people who agree with our conclusions, when we should be gravitating toward those who challenge our thought process. The result is that our beliefs get brittle long before our bones. Intelligence is no cure, and it can even be a curse: there’s evidence that being good at thinking can make us worse at rethinking. The brighter we are, the blinder to our own limitations we can become.

As I’ve studied the process of rethinking, I’ve found that it often unfolds in a cycle. It starts with intellectual humility—knowing what we don’t know. We should all be able to make a long list of areas where we’re ignorant. Recognizing our shortcomings opens the door to doubt. As we question our current understanding, we become curious about what information we’re missing. That search leads us to new discoveries, which in turn maintain our humility by reinforcing how much we still have to learn. If knowledge is power, knowing what we don’t know is wisdom.

I can trace almost every one of my failures to my inability to rethink my starting assumptions and relearn based on market feedback. I did not take an empirical approach and stayed rooted in my original beliefs. Even in the face of overwhelming evidence, I clung on to hope – wishing for that one big thing that would change the game. I did not listen to feedback from others – because I thought I was wiser than them. I did not know what I did not know – and it has had bad consequences for me as an entrepreneur.

My Proficorn Way (Part 96)

Non-consumption, not Competition

When starting off on a new idea, there are two possible approaches: to compete against incumbents with a product or service that is faster, better, cheaper; or, to look at non-consumption and unmet needs. Getting existing customers to change is not easy – the “switch pitch” must be very compelling for them to stop using what they are doing and start using a new product. Changing behaviour and products takes time (and therefore money). An alternate go-to-market strategy can be to look at customers who are non-consumers and need a product that is just about good enough for specific use cases.

Clay Christensen’s Disruption Innovation theory and W. Chan Kim and Renée Mauborgne’s Blue Ocean strategy outline the thinking around the non-consumption approach.

Disruptive Innovation (from BMC Blogs): “The theory suggests that a small organization with fewer resources has the ability to challenge their larger counterparts by focusing innovative products and services toward the low end of the market, which is often ignored by incumbents as they grow profitable. The new entrants are gradually able to improve their innovation performance to attract the high end of the market, without compromising their original qualities – such as low cost, convenience, access or security, among others – that allowed them to succeed in the underserved market segment. When incumbents fail to identify the market void and realize a small company competing for their mainstream market-share, the damage is already done and disruption has occurred through the small company’s innovation.”

Blue Ocean Strategy: “Blue ocean strategy is the simultaneous pursuit of differentiation and low cost to open up a new market space and create new demand. It is about creating and capturing uncontested market space, thereby making the competition irrelevant. It is based on the view that market boundaries and industry structure are not a given and can be reconstructed by the actions and beliefs of industry players.”

When I launched IndiaWorld in 1995, I focused on Non-Resident Indians – who had limited access to Indian news and information. The Internet bridged the gap with a site which did not match up the traditional Indian newspapers and magazines but offered it to them faster and cheaper. Over time, we improved and widened the portfolio of our content offerings. By the time the mainstream Indian media woke up to the Internet opportunity, IndiaWorld’s websites had created a daily habit that was hard to break.

More recently, when we take Netcore’s email products to the US, we found only limited success – because we are offering a product similar to competitors and trying to compete in the red ocean. This is where I have been thinking about microns (micro newsletters) with a radically different pricing as compared to regular emails – as a possible disruptive innovation at the low-end and also creating a new market space for daily branded emails.

For an entrepreneur, the ideas of disruptive innovation and blue ocean are two very good starting points for thinking about the product and the target customers.

My Proficorn Way (Part 95)

100X Disasters

We see them every so often in business (and perhaps in personal life): disasters which we could have avoided had we made a decision to spend 1% of the time or money sooner.

I had one such 100X disaster in the company in my early years as an entrepreneur when one of our persons in the billing team took suddenly ill. She used to single-handedly manage the billing for our mailing renewals. And as it happens, there was no backup or written process — there were just so many things in her head! She was amazingly efficient at things, so until she had to take leave for an extended period, we didn’t wake up to the extent of the flaw in the internal system. It would have taken little for us to have an understudy associated with her, but we had not even thought about it — one of these things that slipped through the cracks.

It boils down to “no backup” — either of a person, or of a process.  The question to really ask every so often is: which one thing are we doing (or not doing) which could cause a blow-up that can hurt? Of course, one cannot take it to an extreme, and duplicate every person or process. But there will be a few such things that we can do (insurance, Plan B – call it whatever) which can save embarrassment at a future point of time.

For example, a data leak can be a 100X disaster. Many times, businesses optimise on security checks. All it takes is a single error to create irreparable damage. A small investment in cybersecurity systems can go a long way to alleviating such disasters. Some other examples are: underinvestment in IT infrastructure (having a single point of failure), overdependence on a single large customer, lack of adequate backups of key software or systems.

For a growing business, it can be very difficult to recover from 100X disasters. So, entrepreneurs should make sure they are avoided at all costs. Looking ahead, planning and thinking of worst case scenarios can help ensure that such disasters never happen.

My Proficorn Way (Part 94)

Markets as Menaka

In one of our reviews in Netcore after we had failed to show progress in our international foray, one of our Advisory Board members asked: “Why are you chasing Menaka?” Seeing my puzzled look, he said, “Are you really serious about your international efforts? Or are they just so some of you can travel abroad periodically? Right now, you are chasing Menaka – it’s an attractive distraction.” Since that day, the phrase “Menaka – attractive distraction” has stuck with me.

I was reminded of that recently when I got a call from an investment banker saying that the markets are very hot and it would be a good time to do an IPO soon. Listed stocks were rising rapidly and trading at very high multiples. So, we should also take advantage of that. I listened to him and I thought to myself – our business fundamentals have not changed. We still need to deliver consistent growth. A PE of 50 or 100 would be very difficult to justify for the growth we had. Instead, they would probably distract us from the core task of building a solid business with long-term growth.

Public markets are a very different ballgame. They can create their own dynamic – as the stock rises, the temptation is then to do acquisitions or a QIP issue to raise more capital to justify the high price and accelerate growth. While some companies have pulled it off and built their model around continuous acquisitions, I did not think we were ready for that. In that sense, what the public markets do were a distraction – seeing the ups and downs of the stock prices daily would create undue pressure on us and also possibly push us down a path we were not fully ready for.

What the Nasdaq and BSE Sensex do is irrelevant to your business. Technology makes it so much easier for us to be aware of what is happening worldwide. Awareness is good, and in fact important. But entrepreneurs should not become obsessed with the markets. Focus should be on the business. Even if one wants to list on the public markets, it is an event which is likely to be a few years away. What the market will be then one does not know (or care about) at this point of time.

Too often entrepreneurs think of exit strategies (IPOs and MAs) even as the business is being built. This is the wrong approach. Build a business to keep, to manage forever. The business has to be something which makes you wake up every morning with excitement. One has to feel that the business can provide that joy – only then should one consider starting up. Exit strategies and wealth creation are incidental and not controllable by the entrepreneur. An IPO when it happens is just another milestone – it should not become an obsession. Once an entrepreneur takes in external capital, the increase – so that should be only done once there is clear visibility for future growth irrespective of circumstances.

So, watch the markets as one would watch a cricket match. Build the business right. There are no shortcuts to creating an institution that will last forever.

My Proficorn Way (Part 93)

Crucible Experiences – 3

I returned from the US to India in May 1992, thinking of myself as God’s gift to the country. I had great dreams of building a software company that would be among the best in the world in 5 years. After all, I had great credentials: an IIT and Columbia education, work experience at one of the foremost telecom companies in the world, and some wonderful ideas. All I had to do was conquer. Or so it seemed.

Two years later, all the dreams lay in shambles as I experienced failure after failure in all that I tried. Nothing it seemed could go right. I withdrew into a shell. Each day, I had to force myself to wake up and go to work. Anything I did seemed to make matters worse. I had let down my staff and family. I wallowed in self-pity. I could not see a way out of the hole that I had dug. I was a failure as an entrepreneur and that was almost impossible for me to accept, as I thought of myself brighter, even superior, than everyone else I saw around me. Something had gone wrong big time, and I just couldn’t figure out what. My pride prevented me from talking to others, even my family. I began to realise in that summer that the company I had wanted to build was all but dead. I would have to restart.

When one is in a difficult situation, it is very hard to think straight. One encounters, what I call, paralysis by analysis. Because one is smart (too smart for one’s own good), there is a tendency to keep analysing the situation replaying events and getting lost in an infinite maze of what-if scenarios. The need of the hour is for tough decisions and surgical actions, but that’s the last thing one does, because of the belief that there has to be a logical way to remove the bugs one-by-one from the system. This inaction compounds the problem. I went through such a phase for many months. Outwardly, I had to act normal and optimistic because of the other people who looked up at me for direction and guidance. Inwardly, I was coming apart.

It took me many months to act. I spent two months in the US at a friend’s place. It was only then that I started coming to terms with the reality and the monster that I had created. I came to grips with the situation, built out a business plan for a new venture (what later became IndiaWorld), returned to India, laid off most of the staff, decided to focus on a single business with the aim of making it profitable as quickly as I could, and got started with gusto. The crucible experience had made me even more determined. I had seen failure first-hand. There was little else to lose. There was a life to be lived. If I didn’t conquer my own inner self, I would be a nervous wreck. I figured that it couldn’t get worse than what it was. From where I was, one could only make things better. As so it turned out.

These three experiences in their own way shaped part of me. As I went through these experiences, it was very hard to imagine why God was making me go through it. But, as someone once told me, there is always some good which comes out of every experience. One does not know it then, and it may take a long time to see that good. At some stage, we will all be grateful for our crucible experiences for it is these that come together to make up Life.

My Proficorn Way (Part 92)

Crucible Experiences – 2

I was in the ninth standard in school and contested the elections for the school captain. While there was competition, I hoped my academic record and being a favourite with the teachers would see me through. As part of the elections process, all candidates had to talk about their ideas and plans to the school general assembly. I still remember that day. I had written a nice two-and-half-page speech and memorised it because I didn’t want to be seen reading it. My turn to talk came.

I started my speech. And then, my mind went blank. Standing in front of a thousand students, suddenly, something gave way. I forgot my words. I rambled a little, and then walked off the stage. The elections were as good as over for me.

That was the time I realised the importance of public speaking. It didn’t matter how good one thought one was, or how good one’s ideas were. If one could not communicate them in public, it didn’t matter. My academic brilliance could not teach me how to speak on a stage. I had to change that.

During the summer vacation that followed, I enrolled at the Indo-American Public Speaking course. At just under 15 years, I was by far the youngest in the group of 25. As the days went by, my public speaking abilities improved. In the competition held at the end of the course, I came first, with a speech on Circles. The cup I won that day is still a treasure for me. More than anything, I had also set aside some internal ghosts. That was my first crucible experience.

My second crucible experience was in my first semester at IIT-Bombay. As a topper in school and college, I expected to do very well academically. I eschewed all other extra-curricular activities and just concentrated on my studies. As the semester ended and the grades came out, I realised that my best efforts were just not good enough to top in a world of equals. I had to confront the reality that I was not going to be in the top few, an experience I had not gone through my entire academic career so far.

It was time for some soul-searching during the December break. I diverted my mind by working as a volunteer for the youth festival, Mood Indigo. And in that, I came into my own. I discovered a side of my personality that I hadn’t thought existed: doing something beyond academics and excelling at it. My work was appreciated. I stood for elections in my hostel (for Literary Secretary) and against all odds, won. I had found my calling. Academics took somewhat of a back seat, as I played an increasing role in student activities. In my final year, I was elected unopposed to one of the highest posts: General Secretary (Cultural).

The first semester experience helped me develop a more well-rounded personality by the time I graduated. I discovered a world beyond the classroom. It was then that I learned that an infectious enthusiasm can more than make up for lack of deep knowledge. Much of my entrepreneurial passion has its birth in the four years that I spent at IIT.