Category: Entrepreneurship

Passion Wins

In the early days of a venture, the only asset the entrepreneur has is passion. The entrepreneur has a vision of tomorrow’s world, and this must be transmitted to others in meetings. “Infectious enthusiasm” is the entrepreneur’s greatest ally for getting the first employees and customers.

When I started IndiaWorld in late 1994 it was after a series of failed ventures over a two-and-a-half year period. At times, I doubted myself – would I ever be able to do anything right to succeed. But when I went out for meetings, I was a different person – high on my passion for what the Internet could. I had to make others see the way I saw the future. And it worked. I had no track record, no connections, and no mentors. But I had an inner drive – I had an idea of what the Internet could do, and I shared it with high energy in meetings. I knew that it was “do-or-die” and I had been through enough ‘deaths’ in the previous years!

The one thing that has always stayed with me through my entrepreneurial career is my passion. I have failed many times through this period. But I take up every new idea with a zealous fervour. Even now, as I have been working from home, I am making daily presentations over Zoom to CMOs on how Velvet Rope Marketing is the key to unlocking a new world of profitable growth. It is harder to show one’s passion over a video conference in a small window on someone else’s screen, but I use my voice and hand gestures to convey my enthusiasm.

In the early days of a venture, there is no product – just a dream. Passion will pull in people, who will chart the path to profits. The entrepreneur has to inspire through tough times that will inevitably be the norm in the startup period. People follow leaders, and for every leader, the starting point of the proficorn journey is passion.

Tomorrow: My Proficorn Way (Part 8)

Explore and Experiment

I have seen many people and ventures fail because they were too rigid about sticking to the original business plan. This is not to say that the plans are not necessary – they are important to get one started on the journey. But after that, one has to continuously evolve. To date, I spend a few minutes every morning thinking about what I learnt in the previous day and what I need to change in our business approach.

I remember a meeting I had in 1997 with the CFO of a global tech company which was considering an investment in IndiaWorld or one of our competitors. Here is my recollection of how the conversation went:

CFO: I need to see financial projections for the next 5 years.

Me: I don’t have the projections. I can barely tell you what our numbers will be for the next year.

CFO: I need those projections before I can make an investment decision.

Me: Ok. Here is what I can do. Tell me the numbers you need to see in year 5, and I will fill out years 1 to 4.

CFO (shocked): What do you mean?

Me: It is such a fast-evolving world. There is no way I can tell you with any degree of certainty what the future numbers will look like. But what I can tell you is this – I run this business as if my life depends on it. I will make sure we succeed. I have stayed ahead of every competitor for the past 2 years. Whatever new ideas come, I will be the first to do them. This is a life-and-death business for me. But there is no way I can give you any believable projections for the next few years. No one can.

The meeting ended shortly thereafter. As expected, I did not get the investment while my competitor did. I had the last laugh when IndiaWorld was acquired for $115 million in November 1999!

My approach to running a business is to always be on the lookout for new ideas – how can I make it better daily. Some ideas will work, while some won’t. Unless I explore and experiment, I will never know. In IndiaWorld, we launched 13 portals – 4 succeeded, 9 did not. I would never have known which ones would have worked unless I was willing to try. That’s how proficorns get created.

Tomorrow: My Proficorn Way (Part 7)

The Profits Flywheel

I first came across the idea of a flywheel in Jim Collins’ book, “Good to Great.” Here is an excerpt:

Picture a huge, heavy flywheel—a massive metal disk mounted horizontally on an axle, about 30 feet in diameter, 2 feet thick, and weighing about 5,000 pounds. Now imagine that your task is to get the flywheel rotating on the axle as fast and long as possible.

Pushing with great effort, you get the flywheel to inch forward, moving almost imperceptibly at first. You keep pushing and, after two or three hours of persistent effort, you get the flywheel to complete one entire turn.

You keep pushing, and the flywheel begins to move a bit faster, and with continued great effort, you move it around a second rotation. You keep pushing in a consistent direction.  Three turns … four … five … six … the flywheel builds up speed … seven … eight … you keep pushing … nine … ten … it builds momentum … eleven … twelve … moving faster with each turn … twenty … thirty … fifty … a hundred.

Then, at some point—breakthrough!  The momentum of the thing kicks in your favor, hurling the flywheel forward, turn after turn … whoosh! … its own heavy weight working for you. You’re pushing no harder than during the first rotation, but the flywheel goes faster and faster.  Each turn of the flywheel builds upon work done earlier, compounding your investment of effort. A thousand times faster, then ten thousand, then a hundred thousand. The huge heavy disk flies forward, with almost unstoppable momentum.

Now suppose someone came along and asked, “What was the one big push that caused this thing to go so fast?”

You wouldn’t be able to answer; it’s just a nonsensical question. Was it the first push? The second? The fifth? The hundredth? No! It was all of them added together in an overall accumulation of effort applied in a consistent direction.  Some pushes may have been bigger than others, but any single heave—no matter how large—reflects a small fraction of the entire cumulative effect upon the flywheel.

The flywheel image captures the overall feel of what it was like inside the companies as they went from good to great. No matter how dramatic the end result, the good-to-great transformations never happened in one fell swoop. There was no single defining action, no grand program, no one killer innovation, no solitary lucky break, no wrenching revolution. Good to great comes about by a cumulative process—step by step, action by action, decision by decision, turn by turn of the flywheel—that adds up to sustained and spectacular results.

The flywheel is what a proficorn entrepreneur looks for. What are the series of small steps and actions that can create a profit machine?

In IndiaWorld, it was the twin combination of our own portals and website development. The services business of developing websites kept the cash coming in. Advertising on our own portals for these new sites to get their own traffic helped accelerate the flywheel. The additional profits helped us build even more of our own sites and get more traffic. Each step helped make the flywheel go faster.

As I think about Velvet Rope Marketing, it can become a similar profitability flywheel for businesses – get more revenue from the Best Customers, acquire more like them, help them get to their maximum thresholds faster. What I still need to think about is how to make it even better – perhaps our owned properties which can reduce cost of acquisition even further.

Every entrepreneur needs to find their profitability flywheel – that is the difference between a good business and a great built-to-last business, one that can grow with its customers. When one sees a proficorn, there will inevitably be a flywheel as the secret to its success.

Will be continued soon.

Living in the Future

One of my defining memories is reading CK Prahalad and Gary Hamel’s book, “Competing for the Future,” when it was published in 1994. That was a very difficult time for me. I had failed multiple times in various ventures that I had tried over the past two-and-a-half years. The realisation had dawned on me that my most recent foray into creating an image processing solution was headed the same way and had to be shut down. I was staring at an abyss.

It was at that time that I picked up the Prahalad-Hamel book and started reading it. The book transformed me. I made notes on Post-Its through the book – these notes became the eventual business plan for IndiaWorld. There is one particular passage that struck a chord and has stayed with me through the years:

There is not one future but hundreds. There is no law that says most companies must be followers. Getting to the future first is not just about outrunning competitors bent on reaching the same prize. It is also about having one’s own view of what the prize is. There can be as many prizes as runners; imagination is the only limiting factor. Renoir, Picasso, Calder, Serat, and Chagall were all enormously successful artists, but each had an original and distinctive style. In no way did the success of one preordain the failure of another. Yet each artist spawned a host of imitators. In business, as in art, what distinguishes leaders from laggards, and greatness from mediocrity, is the ability to uniquely imagine what could be.

To build a proficorn, an entrepreneur must imagine the future and get there first. One is not building just for the next few months – one has to imagine tomorrow’s world and create that future. If you get there first, you win. This journey is what makes entrepreneurship so exciting. It is a race – where there are many competitors, known and unknown. But there is a second race – in the entrepreneur’s mind, to create and craft a future that isn’t yet unknown. The entrepreneur then also has to persuade others (employees, partners and customers) about that future. It is the ultimate reality game!

Even now, as I sit at home, I am trying to imagine the new future – one where every offline business needs an online business, where hundreds and thousands of new online-only brands will get created. All of them will need help with their customer relationships – identifying their best customers and ensuring they reach their full spending threshold. What kind of tech solutions will they need? How can I as an entrepreneur fill this gap? The future beckons, and that’s where proficorn entrepreneurs live.

Tomorrow: My Proficorn Way (Part 5)

Open-sourcing Ideas

One of the approaches I have followed in life is to be very open with my ideas. Whether it was IndiaWorld in 1994 or Velvet Rope Marketing in 2020, I have always been of the view that sharing and discussing ideas with others improves the ideas. I go into meetings thinking that if there is one new thing I can learn then the meeting will have served its purpose. And since I will never know until I do a meeting whether I will have learnt something or not, I tend to be open to doing meetings. And in these meetings, I talk about my ideas and thinking – even though they may not be fully baked. The feedback I get from others helps me refine the ideas. The more the inputs, the better the idea becomes.

In the fall of 1994 when I first thought up the idea of how an Internet portal could bridge the news and information for NRIs, I discussed the idea with dozens of people. I had a Visit-USA ticket on Delta – which allowed me to fly standby for a period of two months for a fixed price. It was an entrepreneur’s dream! I would talk to people and anyone who agreed to meet, I would tell them, “How about I meet you at your office tomorrow so we can discuss this in depth?” (That was, of course in the pre-Zoom days!) Go the airport, take the first available flight, and do the meeting. No cost-benefit analysis; just meet. The travel time would allow me to read and think. The different settings would trigger new ideas. And the meetings themselves were link hyperlinks which opened up new windows. I became better each day – one meeting at a time.

I find too many entrepreneurs now are very cagey about sharing their ideas. What they don’t realise is that someone somewhere is likely to have the same idea anyway. The idea is just the starting point. It is a key that opens a door. After that, it’s all about the way one executes and creates the new world. And in execution, a million things have to go right for eventual success.

So, to build a proficorn, start by sharing ideas – every person you meet and discuss it with will add value and make the idea better. Open your mind, open-source your idea and learn from the wisdom of others.

Tomorrow: My Proficorn Way (Part 4)

Journey not Money

My wife, Bhavana, once told me, “The more you chase money, the further it runs away from you.” As an entrepreneur, I have never obsessed about money. I have done things because I saw a problem and gap in the market, and I tried to solve it. At times, it has worked. At other times, it has failed. The journey of discovering the opportunity, thinking through the solution and taking it to customers is what has been the driver. It cannot be about the valuation and exit one will get – focusing on these will distract and make for short-termism which will necessarily hurt the growth and profitability of the business.

At this point, it is useful to understand what an entrepreneur does. Israel Kirzner has this to say:

We have to recognize that when the entrepreneur discovers the automobile, he is not simply disrupting the calm. He is identifying what was in fact waiting to be introduced. Technological knowledge was being misapplied. Resources were being wasted on trains, carriages, and bicycles, when, in fact, what was waiting to be put together was this new gadget called the automobile. A person who recognizes this is responding to a preexisting, gaping hole in the market.

[I]n a more fundamental sense, he is correcting an already existing discoordination. He is redirecting resources that are already misplaced. People do not have to go on for years and years behaving in ways that are socially inefficient. The person who abruptly draws their attention to this inefficiency is assisting in the process of economic coordination.

While entrepreneurs may not know it, it is exactly what they do. This journey of filling in gaps in the market is what has to create the excitement. The financial reward that lies in store for success is just icing on the cake.

For me, when I launched IndiaWorld, the gap was in the flow of information from India to NRIs globally and the recognition that the Internet could play an instrumental role. The excitement was in making this happen – and not that one day I would sell the business and make a lot of money. It was this desire to make lives better that drove me – starting with news, then cricket scores, recipes and much more. The thrill lay in solving one problem and then the next and so on. Proficorns are built thus – one solution at a time.

Tomorrow: My Proficorn Way (Part 3)

In my previous two essays on proficorns, I wrote about building a proficorn and compared proficorns and unicorns. In this series, I want to share some of my learnings through my 28 years as an entrepreneur who has focused on profitability, never raised external capital and yet created significant value through two successful enterprises – IndiaWorld and Netcore.

Even though I coined the word ‘proficorn’ a few months ago, I realised that there are many common threads in my approach to doing business. The need for profit was drilled into me early on by my father – because without profits one has to either shut down or be dependent on a continuous inflow of external capital which would mean sacrificing decision-making freedom at some point of time. To be profitable and maintain a track record of profitable growth in a business is never easy, especially in the world of technology where obsolescence and disruption are never too far away.

As I have been thinking about proficorns, I have realised that there is a mindset which defines one’s approach to business. For me, getting to cash flow profitability on a monthly basis was the most important requirement – the spectre of continuing cash burn was too horrific to contemplate. As such, the decisions I made were driven by the desire to get to profitability and keep it that way. It also meant creating a cash reserve during the good times which could serve one well during difficult times – like the present times where most businesses are facing declining revenues.

Like the Feeling

An entrepreneur’s life is never easy. There is no switching off Friday evening. The business and its future consumes you because failure is just one mistake away. It is also a lonely perch because no one else can fully understand today’s challenges and tomorrow’s uncertainties. Decisions made cannot be easily unmade; the rear view mirror exists only for post-mortems. And through all these times, one must always maintain a positive outlook because pessimism can create a negative spiral.

These words from Dan Bricklin that I read a long time ago have stayed with me through the years and beautifully capture the essence of being an entrepreneur:

Being a successful entrepreneur is tricky. You have to live with having control and not having control at the same time. It’s like this: In big business, when you need to cross a river, you simply design a bridge, build it, and march right across.

But in a small venture, you must climb the rocks. You don’t know where each step will take you, but you do know the general direction you are moving in. If you make a mistake, you get wet. If your calculations are wrong, you have to inch your way back to safety and find a different route.

And, as you jump from rock to slippery rock, you have to like the feeling.

That is the feeling I have liked and lived through for 28 years.

Tomorrow: My Proficorn Way (Part 2)

I realised that I had gone astray in the chase for valuation. I had become an investor in my business trying to become a unicorn (even though that word did not exist then). I had thrown all caution out of the window. We had hired indiscriminately, and had lost control of the expenses. I chased a rainbow. I had forgotten my own lessons in building IndiaWorld a decade ago. The sermons I gave on profitability – well, I had started doing exactly the opposite.

Bhavana opened my eyes. And I learnt a lesson I have not forgotten to this day. The purpose of a business is to create value for its shareholders, employees and customers. And it cannot do so if it is not profitable. It is hard to do it with an insatiable appetite of funds with all kinds of bad habits creeping in.

As it turns out, that story did have a happy ending. In less than a year, we made the business profitable. And Netcore has never lost money after that in the past 12 years.

We have gone through multiple shocks over the years – and every one of them has made us stronger. We are what Nassim Taleb would call antifragile. And that is probably true of all proficorns. Each one has a story to tell. But the world is fascinated by the stories of funds raised by young startups, not the profitability of older companies.

It is not that the world does not need capital to fund companies. Some businesses do require capital to begin with. The problem is when raising capital becomes the primary business model rather than embarking on a path to creating a profitable and sustainable business. That’s the contrast I wish to draw. There is an alternate model to build a business, and it is in times of crises that the differences stand out.

For entrepreneurs, the choice is for them to make. For me, building a business that is antifragile, that has the innate financial heft and freedom to convert a crisis into an opportunity, and that can hire and grow is the right way to do business. The Proficorn Way is my choice. What’s yours?

Unicorns are fragile, while proficorns are antifragile. To understand this very important difference, let us first understand what Taleb means when he talks about something being antifragile. Here is an excerpt from his book:

Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty. Yet, in spite of the ubiquity of the phenomenon, there is no word for the exact opposite of fragile. Let us call it antifragile. Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better. This property is behind everything that has changed with time: evolution, culture, ideas, revolutions, political systems, technological innovation, cultural and economic success, corporate survival, good recipes (say, chicken soup or steak tartare with a drop of cognac), the rise of cities, cultures, legal systems, equatorial forests, bacterial resistance … even our own existence as a species on this planet. And antifragility determines the boundary between what is living and organic (or complex), say, the human body, and what is inert, say, a physical object like the stapler on your desk.

The antifragile loves randomness and uncertainty, which also means— crucially—a love of errors, a certain class of errors. Antifragility has a singular property of allowing us to deal with the unknown, to do things without understanding them— and do them well. Let me be more aggressive: we are largely better at doing than we are at thinking, thanks to antifragility. I’d rather be dumb and antifragile than extremely smart and fragile, any time.

Crises make unicorns weaker and proficorns stronger. Unicorns are fragile, while proficorns are antifragile. It is the stresses that makes the proficorns who they are.

Netcore faced a big crisis around 2007-8. For a while, I too was taken up by the chase for valuations. Before I realised it, we were losing Rs 1 crore a month, chasing a mythical valuation of an SMS-led, capital-fed consumer business. It was at that time that my wife, Bhavana, returned to Netcore after a 3-year break following the birth of our son. She was aghast at what she saw and gave me an ultimatum: be profitable in a year, or shut the business down. Her training in accounts —  she is a CA — did not allow her to see money just being burnt at the altar of something as ephemeral as valuation! That was what opened my eyes. It was a lesson in financial management that I did not forget.

Tomorrow: Proficorns vs Unicorns (Part 6)