A morbid fear has gripped the nation that anyone can be a Covid carrier and therefore potentially a killer. This has led to imposition of local quarantines – households, buildings, societies, villages, districts and states. What started at the national level (closing of borders) is now happening at the smallest possible level of homes. Even though fatality rates are very low, the “Laxman Rekha” has imprinted itself in the collective psyche of people. Only when we start rising above that will we be able to look ahead.
What is clear is that winning the war against the virus will take time – until we have herd immunity, or a vaccine is created. Either way, there are no short-cuts. Life is not going to return to normal any time soon. We will operate at sub-optimal levels for many months if not a year or two. Many industries will face significant downside going forward, even as new opportunities arise.
This is not just like a tsunami or earthquake which is a one-off event, and then one can get down to the rebuilding process. This is more like being attacked by a distributed guerrilla force with outbreaks here and there which will need to be suppressed as and when they emerge.
At some point in the future, the fear and devastating impact of the virus will pass. While the government actions in the near-term will determine the duration of the pain, what is clear is that there will be a time when the focus will shift from lives to livelihoods. That has not yet happened in India. Most minds are focused on the healthcare supply chain. I think it’s time for some of us to start thinking forward to the India that emerges on the other side of the pandemic, and imagining the India that will emerge from the ever-increasing lockdown carnage.
Like 1947, we face a fresh start. There is a fork in the road – a choice between two futures. We chose the wrong path then. Will we make the same mistake again?
Tomorrow: India’s Two Futures (Part 2)
As we live through these difficult times of the virus and lockdown, I know that Netcore will come out even stronger – we have converted every crisis into an opportunity. As I told my colleagues at a townhall meeting recently, Netcore has 3 significant strengths compared to our competitors – profits, cash in the bank, and no investor pressuring us to cut 25% of our costs. This helps us take the long view – an “infinite mindset” in the words of Simon Sinek.
True, the next few quarters will be challenging. There is uncertainty about the future. I don’t have too many memories of 2008 since Netcore was very small then. But I know that the basics of business don’t change. Eventually, all businesses are valued based on their future cashflows – and for that, profits have to matter. All of us in Netcore are focused on creating a “built-to-last” business – without worrying on what the exit is going to be.
It is the same mindset I had at IndiaWorld – love the business enough to be able to run it for the rest of your life. Only then will one make the decisions to make the business stronger daily. If one is distracted by the objectives of investors and raising capital continuously to fund losses, eventually the interests of employees and customers will take a backseat. Profitability is a mindset and a founder’s DNA – it cannot just be developed overnight.
I hope the world will see more profi-corns. It is not an impossible mission – it just means committing to a different set of choices. By making employees and customers central to the mission, by ensuring costs never exceed revenues, by realising that there is no finish line in business, by continuously learning from mistakes and not giving up on the things that truly matter, by believing that profits and growth are both possible simultaneously – every entrepreneur can work to building a profi-corn. It is a happier journey.
Along the way, in IndiaWorld and Netcore, I made many mistakes – luckily, none were too serious to kill the ventures. As long as one gets the big decisions right, one will eventually win. A friend once asked me (after the IndiaWorld sale) – was I smart or just lucky? After some thought, my answer was that one has to be smart to benefit from luck.
Building a company focused on profits means making a different set of choices than one would if there was unlimited capital available. Of course, there have been very big venture-backed successes – most of the big tech companies today were all venture-backed in their early stage. But that does not make it the only route to growth and success.
In Netcore, we have survived many industry shifts. The company today is unrecognisable from the one 20 years ago, or even 10 or 15 years ago. I could never have imagined us having 600 employees, or a presence in many countries including the US. Yes, I did want to grow, but at each stage, it was climbing the next mountain – and then discovering there is one more mountain to climb! There is a long-term vision, but that’s only as good as the execution one can do over the next 12-24 months. (Strictly speaking, that sentence is internally contradictory.)
A friend once called Netcore a “survivor”. We have seen many challenges and challengers. Each has been overcome. We haven’t always been the first in a vertical, but our tenacity got us through. We worked hard to get it right. We failed in our expansion outside India for many years, but did not give up – and finally succeeded. As I see the Netcore flag planted across South-East Asia, it is such a joy to behold us helping customers beyond the shores of India. We did not get our initial foray into martech right, but have worked through it and now are competing with the best in class globally.
We can make these decisions because there is a long-term focus that we bring to bear. At Netcore, we live for our customers and employees. There is no third category (investors) that we need to worry about. And that, for us, has made all the difference.
Tomorrow: Building a Profi-corn (Part 5)
Netcore has been my second profi-corn. Its 22-year existence can be split into two parts – the first 10 years or so where we did not grow because of my inability to create commercially viable products (other than a mailing solution for enterprises). In the second period, post 2007 or so, I got out of the way and brought in professional management to help build the business. That worked wonders. Netcore’s growth over the past decade has been spectacular – funded by its profits.
Netcore has stuck to a single focus – solutions for B2C companies. It started with SMS and email, and over the past few years expanded to a complete marketing technology (martech) stack. We made many mistakes en route, but none serious enough to kill us. We weathered many storms, but never deviated from the focus on ensuring profitable growth. Netcore has been led by 3 CEOs over the past 13 years who echoed this belief on profits.
I may make it sound easy, but it has been anything but that. When one sees competitors raise and splurge money, there are moments of self-doubt. I have had potential investors tell me that I was sacrificing growth for profits. I had never thought of this as a trade-off, but I do take criticism seriously and have introspected on this many times.
My conclusion is that each company has a certain DNA and that replicates the founder’s core beliefs. By nature, I am a fiscally conservative person. Once in my life in Netcore, I took the “cash burn” path (with my own money) and chased valuation – before my wife (who has been more than my equal in both IndiaWorld and Netcore) brought me back on track. For me, growth means being profitable, and being profitable ensures growth. They are two sides of the same coin. It’s not an either-or when it comes to profits and growth.
Tomorrow: Building a Profi-corn (Part 4)
When I started off as an entrepreneur in 1992 after I returned from the US, my father had two pieces of advice for me: never raise debt, and never lose other people’s money. Over the past 28 years as an entrepreneur, I have followed both suggestions.
My first significant venture was IndiaWorld. I started it after a string of failures in the first two-and-a-half years after my return from the US. IndiaWorld was amongst the first few portals globally – launching on March 13, 1995. The focus was to deliver India-centric content to global audiences, using the Internet as a distribution channel. I launched it at a time when the Internet was not even commercially available in India.
The desire to be profitable soon was paramount in my mind. So, even as we published the content, it was not all free – there was a $20 annual subscription fee that stayed for the first two years. It helped cover basic costs. I also started a service to offer website development and hosting for Indian companies. That took time to take off, but it did. At its peak, we were managing 200 corporate websites. And somewhere down the line, advertising kicked in as the portals gained popularity with NRIs (non-resident Indians).
I met with many VCs during that period. In most meetings, I would quote my expected valuation right at the start. Very few meetings went to a second stage! I could do that because we were profitable and I was under no pressure to raise capital. I knew the limitations also – it was hard to attract high-quality talent, which meant our 20-person team was stretched to the limit. We also improvised. Samachar.com was born as a tech alternative to expensive news editors and journalists. Our Khel.com live cricket coverage was done by two office peons whom we taught how to use computers, watch TV and update the scores in real-time.
IndiaWorld was profitable within the first year of its operation, and stayed that way through its eventual sale to Sify for $115 million five years later. It was my first profi-corn.
Tomorrow: Building a Profi-corn (Part 3)
In a recent Netcore Advisory Board meeting, one of the members remarked that Netcore had built a very interesting and different model – of profitable growth, without raising external capital. This needed to be talked about more, as an alternative to the “unicorn” growth model – where lots of capital is raised and burnt through quickly in the quest for rapid growth at all costs. As I was listening, a word came to my mind – “profi-corn”. I said it aloud, and everyone loved it. I spoke about this in a US visit earlier this year, and got a positive response – the word has a certain ring to it.
I defined a profi-corn as a company having four characteristics: profitable, private, promoter-funded and having a reasonable valuation (say, $100 million or more). Building a profi-corn means making a different set of choices than a venture-backed company. This is what I want to talk about in this series.
I have done two significant ventures in my life (IndiaWorld and Netcore), and in both I did not raise venture capital. Both were bootstrapped and became profitable early on, and so I was not desperate for raising external funds. Both have been profi-corns. In IndiaWorld, I got an exit which valued the company at $115 million in 1999.
Over time, I have come to realise that chasing valuation only gets you so far – if the focus is on building a profitable business with the right business model, one can survive through all ups and downs. It is not that I have never tried to raise venture capital or private equity – it is just that in all cases, I was in a position to quote my terms (which never got met). That did not slow me down. It just forced me to do the right things to ensure growth.
So, what does it take to build a profi-corn? Is it a binary choice between profits or growth, and between the short-term or long-term? Is it possible to ensure a balance? Why are profi-corns so rare?
Tomorrow: Building a Profi-corn (Part 2)
The world after Coronavirus will look very different. Just like wars change nations, so too the virus will change India. It will be very difficult for us to go back to the nation we had before the virus did the damage. People will have been displaced, jobs would have disappeared, companies will look different, behaviour of consumers will have changed. Many industries will be transformed beyond recognition – for example, in travel and tourism, what will many months of zero revenue do? These are questions no business plan ever factors in. Whatever fiscal stimulus the government provides, it will never have the knowledge to restore India to the pre-virus state. A glass once broken cannot be made the same given. This is not something anyone could have planned for. The impact of the virus is likely to last for some time.
I have always believed that every crisis is an opportunity in disguise – if one is willing to look at it the right way. For India, we can make this the turning point in our economic history. No amount of handouts will be enough given the constraints we face. This is a moment in time to throw out the old rules that have governed India and create a new India – truly.
Here is a 7-point action plan that can get “The Indian Revolution” underway – a transformation that will put the people on an irreversible course of freedom and prosperity:
- Start by returning every Indian family Rs 1 lakh every year for the next 10 years. No distinction is to be made between rich and poor – the cost and time of figuring that is simply not worth it. As they spend, we will see jobs getting created and industries humming.
- This will require about $4 trillion dollars. Here is the calculation. 26 lakh crore a year equals $350 billion a year. Factor in some population growth, and that comes to $4 trillion. Where does this come from? From the people’s assets that are controlled by the government – land, minerals, PSUs, whose total value we had estimated at $20 trillion. Since these are new assets being brought into circulation, there will be no inflation.
- Commit to spending an additional $1 trillion dollars for the right infrastructure in India – hard (roads, railways, ports, airports) and soft (defence, police, judiciary).
- Cut all taxes to sub-10%, to leave money in people’s hands and make India an attractive investment destination in the world.
- Focus on the core things that a limited government should do – ensuring rule of law, protect economic freedom, property rights, free markets, free trade, decentralisation, and so on. All one has to do is to look at why some countries became rich – and replicate the ideas. Embed these ideals in a brief, new Constitution of India.
- Government should get out of the way of people. Let trade and voluntary exchange flourish. Let the entrepreneurs take over the task of creating wealth. They will find ways to solve problems.
- And finally, for all of us: for 10 years, forget about everything that divides us, and let us all unite for a single mission – to rebuild India from the ruins of the virus, to make India the nation it was once destined to be, to make every Indian free and rich in our lifetime.
These are ideas I have discussed at length in my earlier writings, and I will do so again on this blog. We need to start thinking of the future – one which is not riddled with fear, but filled with hope. We need to imagine a new India – the way a sculptor sees a rock and imagines a finished sculpture, the way an architect sees an empty tract of land and envisions a completed building.
Are we willing to think different to “Unlock India” not just once, but forever?
There is a second meaning of ‘Unlock India’ that we now need to start thinking about. It is about unlocking the true potential of the nation and its people.
The forced lockdown gives us all time to think about our past and the future. We should ask ourselves: Why has India not achieved its true potential in the world? Why has India not become a developed nation? Why is India still poor?
The single, simple answer to all of these questions is that Indians are not free. We have had governments since 1947 that have been extensions of the British Raj. They have kept most of the rules that maximise their power, which therefore minimise the freedom that people have. We rejoiced on August 15, 1947 when we became Independent – not realising that the only thing that changed was the skin colour of our rulers.
The virus era is going to allow the government to chip away even at the little freedom that we have. And in the name of safety, we will keep giving up our liberty. These compromises never end well. The elusive world of prosperity will slip away even further. For those in power, the virus has been a godsend – they get to control us even more, dictating every aspect of our daily life.
That is where we need to step back and think. The immediate unlocking of India so we can get back to economic activity must only be the start. We need to do much more – fight for our freedom so we can get on the path to prosperity. For this, we need to let markets work without government intervention – we are all capable of making the right decisions on our own and that is the only path to prosperity. We need to unlock the $20 trillion of wealth that is being controlled by the government in India – land, minerals and public sector undertakings. If this wealth is returned to the people, they can each chart out their own path going forward.
This virus inflection point must be leveraged to move India towards freedom and prosperity. This is the Nayi Disha India needs. Are we willing to, in the words of Swami Vivekananda, “arise, awake and stop not till the goal is reached?”
Tomorrow: Unlock India (Part 5)
We need to recognise that the effects of the virus will be there with us for a reasonable period of time. It will take time for immunity and/or a vaccine. In the meantime, if we do not take the necessary actions to get the economy moving, we are going to have a very long period of sub-optimal economic activity. This will end up causing more death and destruction than the virus itself. Every human life is vital, but as I pointed out earlier, no society can save every life – and the Indian reality is that 1,000 people die every HOUR.
We must start the debate about freeing people from their homes and getting them back to work. With each passing day of zero or low revenue, more people and businesses will die. We may not see this because unlike the Covid deaths, newspapers don’t count these deaths. Do we know that 2,500 people die on Mumbai’s railway tracks every year? Do we see those on the front pages of newspapers and prime time TV? No decision is easy at this time, but we must start discussing alternatives to what is the most draconian lockdown globally.
Here is a 7-point solution to Unlock India:
- All 65+ year olds to be quarantined – families to make the decision for their own safety. Most of the deaths globally have been in the older people with pre-existing conditions. In India, just 5% of the populations is over 65 years of age.
- Anyone going out should wear a mask. This is for their own safety and for that of others. We are already seeing the rise of the use of masks. We need to get this going faster.
- We need to increase testing, and have people take a simple smell-and-taste test – since the loss of smell and taste seem to be the early warnings
- Those who test positive should stay at home to start with – especially if they are below 65 years of age. In most cases, they will recover on their own. If conditions deteriorate in a week after onset of symptoms, they should approach a doctor / hospital. This will also ensure that limited medical resources are used only for the most critical cases.
- Each individual needs to improve personal hygiene: maintain some distance when possible, and wash hands regularly. We should avoid crowded public spaces for some more time.
- Should outbreaks happen, those areas will need to be quarantined – think of this as a “Local Lockdown.” Instead of unlocking areas selectively and keeping a national lockdown, we need to unlock India nationally and then make decisions on which areas to lock based on the cases that emerge.
- We need to decentralise decision-making about lockdowns to the lowest level possible. Every elected representative (MPs, MLAs, corporators) should be “quarantined” in their constituency instead of the safety of capital cities. They have been elected by the people and are close to the ground. They should be the “chief ministers” of their neighbourhoods and make decisions on which clusters to quarantine should outbreaks become severe.
The rest of us need to get back to work, and move India forward.
Tomorrow: Unlock India (Part 4)
The economic projections for India are going from bad to worse with each passing week. Migrants are ‘locked’ up in camps, employees ‘locked’ up in their homes, and goods are getting ‘locked up’ in – well, they are not even being manufactured. Of course, the government will print money and promise succour to many – like many governments are doing globally. Printing money without production will have serious consequences down the line which can plague Indians for many years to come. At a time when India needs to accelerate growth to put its people on a path to prosperity, the lost decade will become a lost generation.
So, what are we to do? We have a government almost entirely focused on the aspects and neglecting the economic aspectsSome handouts have been offered to selected sections of people; and more will come. There is never any free lunch – if something has to be given to someone, it has to be taken (by force) from someone else.
We are also back to the era of Soviet-style central planning where a few ‘quarantined’ bureaucrats decide on who should get what – they are already playing God defining what is an ‘essential service’. We are creating new processes (e-curfew passes) and trying to do efficiently things which we should not be doing at all.
That is what those in power have done for times immemorial. Every crisis becomes an opportunity to grow the Leviathan that is the government. And with that, the future prospects for both freedom and its twin, prosperity, will recede even further. In 1755, one of the Founding Fathers of the United States, Benjamin Franklin wrote, “Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety.”
What’s the solution? We need to “Unlock India.” The politicians and the elite aren’t going to do it – most of them are in the segment most at risk because of the virus (over 65 years of age, and with pre-existing conditions). We need the people to demand that we be allowed to work. We have to take care, but life has to go on. Else, the India that will emerge on the other side of the virus is one which will be a nation we will not recognise.
So, what do we need to do? How can we unlock India?
Tomorrow: Unlock India (Part 3)