Netcore as an Enduring Great Company (Part 3)

The Past

Netcore is an unusual survivor; most companies don’t get to be 24 years old and still go strong.

I started it in 1997-98. IndiaWorld was my primary focus at that time. But I had to separate the fledgling Linux mail servers business because it made for distracting conversations when I was trying to raise capital for IndiaWorld. For the first 10 years, Netcore stayed small. After I sold IndiaWorld in late 1999, I spent a couple years at Sify. When I came back to Netcore, I worked through many interesting ideas but none clicked. Netcore’s growth started in mid-2005 when I professionalised the management to get past my inability to convert products into revenue. Our growth was led first by SMS and then email – both sold to enterprises looking to communicate with their customers. They created the early profits for Netcore which were reinvested into growth. The management team laid the foundation for a successful B2B business. From 2009 onward for about 10 years, I was peripherally involved in Netcore, focusing instead on initiatives to transform India: Niti Digital, Free A Billion and Nayi Disha. I eventually ended these efforts because I realised that changing minds and channelling votes for freedom and prosperity was going to be much harder than I had imagined. Ideas that seemed obvious to me were alien to most others.

Until 2019, my approach to Netcore was that of a majority shareholder involved only in key strategic decisions. The thinking was tactical – what needs to be done in the near-term. I did not have an intuitive and deep understanding of the spaces we operated in, and hence I made many mistakes on our expansion decisions. The business was profitable and growing, and I was happy. But I did not fully grasp the emerging world of B2B SaaS, CPaaS and martech, and how big the global market was. For too long, I was happy addressing just the Indian company. We stayed small for far too long – and it was my narrow view of the world that limited our investments into new growth areas. I said no to most acquisitions and funding opportunities. I was too cautious and focused excessively on profits rather than growth. I did have the outside in view. Netcore was a side project to my (futile) efforts to make Indians free and rich.

It was only after I decided to shut Nayi Disha in early 2019 that I started focusing more on Netcore. It took me many months to understand the new world of tech and the changed landscape that we operated in. In 2019, I attended many conferences in the US, and got a better and deeper sense of how the B2C communications and marketing worlds were coming together. Even then, I wasn’t sure of how Netcore fit in. The ambitions were narrow and short-term. Only through repeated conversations with Kalpit, Netcore’s CEO, did I start grasping the opportunity that lay ahead.

Thinks 370

Benedict Evans presentation: “Three Steps to the Future”

Akash Prakash: Reflections of a rookie private market investor. “Committing capital to younger companies is full of promise, but there are a few factors investors need to watch out for.”

Donald Boudreaux: “By following rules we can, and do, increase the number of individuals with whom we cooperate beyond the number that we personally know. An example is trade, which has at its base this rule: Each person is entitled only to what other people voluntarily give to him or her. No one gets to take other people’s stuff without their permission. Under this rule, if Jones wants some item, say an axe, owned by Smith, Jones understands that he can get this axe only by persuading Smith to give it to him. And especially if Smith is a stranger to Jones, the most obvious way for Jones to persuade Smith to give him the axe is for Jones to agree to give some other item – say, a barrel of beer – to Smith in exchange…Trade allows each of us to tap into the unique talents, interests, and endowments of our trading partners, be they neighbors across the street or strangers across the ocean. And trade is possible because its most basic rule is easily understood by every human being regardless of cultural background.”

Netcore as an Enduring Great Company (Part 2)

Looking Ahead

In April this year, as I began this blog’s second year, I had written: “Going forward, I want to write more about the present and future – how to go beyond entrepreneurship and build an enduring, great company. It is what I am focused on at Netcore, and I want to share my thinking and learnings as we go along.”

It is a promise I have not kept. Most of my writings since then have been on marketing – the ideas of rethinking the brand-customer relationship via ems and microns, solving the attention recession problem via atomic rewards, and the coming martech era. (I also wrote a few more series on Nayi Disha, a new path for India.) But until now, there hasn’t been much I have written on the great company journey. It is time to rectify that.

I spoke to Business Standard a few months ago about the forward-looking IPO and growth plans: ““We want to become India’s first B2B SaaS (company) going for an IPO by 2022,” says Jain … “One of our goals is to double our annual recurring revenue (ARR) in the next two years to $150 million,” says Jain. “We’ve done very well in India, Southeast Asia, the Middle East and Africa. Now our plan is to grow very rapidly in the US and Europe. We are looking at both organic growth, and acquisitions.””

A subsequent interview with the Economic Times elaborated on some of my thinking:

Martech SaaS company, Netcore Cloud is looking to double its annual recurring revenue (ARR) to $150 million by 2024 and will look to expand in new geographies, said Rajesh Jain, founder and managing director of Netcore.

“We are at about $75 million at this point of time and we are profitable,” he said. “The growth will come from multiple dimensions. The first is international expansion. We have had great success in India, Southeast Asia and the Middle East and want to now replicate that success in the US and Europe.”

… He said that he expects about 30-40% of the company’s revenue will come from outside India in the next few years through a mix of both organic growth and acquisitions.

Through 2020 and the first half of 2021, I wrote extensively on learnings in my nearly three decades as an entrepreneur and building two proficorns, IndiaWorld and Netcore. Each of three decades as an entrepreneur has had one success: IndiaWorld, Niti Digital (in helping the BJP get a majority on its own in the 2014 Lok Sabha elections), and then Netcore. These thirty years have also been punctuated with many failures, and even in Netcore’s success, I have had to endure the aftermath of many wrong decisions. And yet, we have survived and thrived. Could Netcore have been bigger and better? Yes. But that’s water under the bridge. Business is an infinite game; one has to visit past decisions to take stock of errors in judgement, but for the most part, one has to look ahead to the future that is unfolding.

Thinks 369

Jonathan Cogley on whether to take VC money or bootstrap. He suggests answering the following questions: “Do you want to do it all yourself? Do you have the resources and skills to do it on your own? Is the market opportunity compatible with a slower growth model?” His take: “These questions and key indicators help founders determine the necessary velocity of the business and which business strategy is most likely to be successful. Simply speaking, it helps founders calculate if they will run out of money and how much time they have before they do. From here founders can assess how much outside funding they will need to avoid this failure. Even though bootstrapping companies are famous for their long growth paths and the VC-funded ones are usually fast-tracked, there is no definitive timeline for either of them. Fundraising can be very slow and unpredictable and you may have to pitch 100 investors before getting any interest. Going down the entrepreneurial path is like sailing: you need to understand the prevailing winds and market conditions as you prepare for your voyage.”

Peter Coy in NYT: “The demise of cash isn’t the only development causing concern among economists. Most of the money we use today is issued by banks, not the government. When you pay with a credit card, a debit card or electronic funds transfer, the institution standing behind the transaction is a bank. In that sense, a virtual dollar in a checking account at your bank is fundamentally different from a dollar bill or four quarters in your fist. The next stage in the evolution of money will be the rise of nonbank money, including cryptocurrencies, which are encrypted virtual currencies that exist in online ledgers. But the evolution could be rocky. In the United States, credit and debit cards are deeply entrenched. Bitcoin and other volatile cryptocurrencies, while popular as speculative investments, by and large, aren’t useful for everyday transactions, making them more akin to financial assets than to money.”

Maria Ressa: “What are you willing to sacrifice for the Truth?” – in her Nobel Lecture

Netcore as an Enduring Great Company (Part 1)

Beyond Entrepreneurship

As Netcore prepares for an IPO in the next 12 months in its 25th year, I have started to think a lot more about the long future. What is the best path to creating a “built to last” company, an “enduring, great company”, an institution that outlasts the founder (in this case, me)? Over the past few months, I have had multiple conversations with bankers, PE firms, potential acquisition targets, and our internal teams. While the discussions continue, I thought it would be good to start sharing what I have learnt and my current thinking.

In January, I wrote:

Somewhere during the lockdown days of 2020, the idea of “building to last” started taking hold. For the first time in my life, I had started thinking of the long future. IndiaWorld had lasted five years before I decided to sell. Netcore’s first decade when I was involved was a period of low growth. In Netcore’s second decade when it grew, I was in a different world as a political and prosperity entrepreneur.

I was now thinking about what next for Netcore. We had done all the hard work in getting past the obstacles that young companies face to grow. Why give it up now? Why not continue building? As long as we could maintain a good growth rate, why not keep it going? If so, how could we do it? What did it take a company that could not just survive and thrive for a long time?

It was then that I had come across Jim Collins’ book, “Beyond Entrepreneurship 2.0.” I wrote: “As the world of Jim Collins’ writings enveloped me, I decided that I will do what it takes to make Netcore an enduring great company. In our third decade of existence, I would lay the foundation for the future – an ambition beyond wealth for myself; an institution with a purpose; a greatness with longevity. It would not be an easy journey, but one I was ready for. I had to also persuade our leadership team and everyone else that it would be a journey worth undertaking. Even as we focused on the weekly, monthly and quarterly, we would start laying the foundation for making Netcore an enduring great company.”

Over the next three months, the Netcore leadership team read and discussed the works of Jim Collins to understand better and develop a common vocabulary for building an enduring, great company. I ended the January series thus: “In the tech industry that Netcore operates in, it is not easy to survive and thrive against both global giants and nimble startups. My hope is that the very process of setting off on the path to greatness will make us a better people and a better company. And in our small way, it would be a nice homage to Jim Collins and Bill Lazier for their teachings if we can go beyond entrepreneurship to craft Netcore 2.0.”

Thinks 368

Ishan Bakshi quoting from the World Inequality Report: “The top 10 per cent [in India] earns 57 per cent of the national income. Within the top 10 per cent, the very elite top 1 per cent earns 22 per cent. In comparison, the share of the bottom 50 per cent in national income has declined to 13 per cent.”

Elon Musk is TIME’s 2021 Person of the Year. “This is the man who aspires to save our planet and get us a new one to inhabit: clown, genius, edgelord, visionary, industrialist, showman, cad; a madcap hybrid of Thomas Edison, P.T. Barnum, Andrew Carnegie and Watchmen’s Doctor Manhattan, the brooding, blue-skinned man-god who invents electric cars and moves to Mars. His startup rocket company, SpaceX, has leapfrogged Boeing and others to own America’s spacefaring future. His car company, Tesla, controls two-thirds of the multibillion-dollar electric-vehicle market it pioneered and is valued at a cool $1 trillion. That has made Musk, with a net worth of more than $250 billion, the richest private citizen in history, at least on paper. He’s a player in robots and solar, cryptocurrency and climate, brain-computer implants to stave off the menace of artificial intelligence and underground tunnels to move people and freight at super speeds.”

Watching: The Expanse (Amazone Prime Video)

Looking Back, Looking Forward (Part 3)

Memories and Writings

As the year ends and a new one is ready to begin, a mix of blurred memories flash by. My first flight in almost 19 months was in late August when I went to Delhi. Being featured in The Economist (in successive issues) for the Prashnam survey on Covid deaths. The many hippoBrain and MartechBrain conversations – until the first half of the year. The talk on Nayi Disha at Manthan. The joy of meeting friends in person. Reconnecting with a classmate from my MS program at Columbia University after 32 years and seeing how smoothly we picked up the threads. Completing the writing for my Proficorn book. Reading many good thrillers throughout the year. An Asimov immersion: reading the Foundation series, and watching the Apple TV series.

My blogging has continued. I started a “Thinks” series with 3 links daily. 365 posts through the year. Most of my writing this year was focused on marketing, especially after April. At times, when I re-read what I have written, I am surprised (in a positive way) and wonder: “Did I really write that?!” Most of the writing is done early in the morning – it is the time when the day has not yet brought forth its distractions, when everything is still quiet, when my mind is fresh and uncluttered. This is for the “flow” zone when the ideas and words just pour forth. Here are all my essays organised chronologically by section.

Marketing

Entrepreneurship

India

General

At about 500 words a day, this comes to 180,000 words of writing in a year.

I also did many interviews and talks through the year. Here is a list:

And finally, here are the top viewed pages in 2021:

Thinks 367

Saurabh Mukherjea: “We basically invest in a company which goes on to consolidate a large market. If you ask me this is a massive opportunity. There are so many more sectors where the consolidation is yet to happen in our country. That it is quite mouth-watering if you look at the Indian economy and see how much wealth will be created in the next 10 years as you consolidate the sector. In the last ten years, the Indian stock market created a trillion dollars of wealth. I reckon that in the next 10 years, Indian stock market could create two trillion dollars of wealth. So from 2000 to 2010, the market created around 0.5 trillion dollars of wealth, from 2010 to 2020 you had a trillion dollars of wealth and the next 10 years could be potentially two trillion dollars. Plays like the formalisation of consumption and shift from physical assets to financial assets are epic themes as so much wealth is waiting to be created there.”

Jagannathan on the Constitutional changes India needs: “One, the concurrent list must go, and most powers should be devolved downwards to states and very few upwards to the Centre. There must be a third list — a local bodies list — that is not subservient to state power. Local bodies are the best places to exercise democratic rights, but right now this is the most disempowered part of the governance structure. The power allocation between the judiciary and state also needs to be rejigged, with the former being barred from making laws. The higher judiciary needs bifurcation between a final court of appeals and a constitutional court. The power to adjudicate on public interest litigation must be exercised only by the constitutional court, and that too sparingly when real questions of law are involved. They cannot be used to impose a tax on SUVs entering the National Capital because of pollution, or to examine the efficacy of the Centre’s vaccination policies. Real power in the three-tier state structure must be maximised at the local body level, so that people have a greater say in the everyday things that matter to them.”

Atanu Dey on “Eliminate Poverty, not the Rich“: “Nobody reasonably questions the goal of eliminating poverty; our quarrel is about the appropriate means. If you think slowly about that, you realize that people who have the freedom to create and keep wealth, create the most wealth, and that ends up helping everyone, and reducing poverty.”

Looking Back, Looking Forward (Part 2)

Martech and Netcore

In the past few months, I have been able to put a very good story around our vision and solutions. The “coming martech era” and the shift from adtech to martech 1.0 to martech 2.0 has been the focus of much of my recent writing on the blog. With each essay, I have developed greater clarity on how Netcore can help enterprises enrich the lives of their customers.

I have started speaking publicly a lot more on the transformations in martech. I have always sought out ideas for the future, and over the past few months these have come together very well. It is this virtuous cycle of thinking-writing-speaking-reading that I like very much. Every talk I give brings new questions which push me to make the story sharper. The writing also drives more reading. I am also excited about bringing the microns idea to life in a bigger way in the coming year.

Netcore is in the thick of the action. We have had a good year of growth. I marvel every time I see demos of our products and what’s coming. For Netcore, growth going forward will need to combine BAU (business as usual), buys (acquisitions) and breakthroughs. I hope we can script our own version of “exponential forever profitable growth”. We have the scale to look at an IPO in the near future, and lay the foundation to becoming an “enduring great company.” It has been a 25-year journey for us. For the first 10 years, we did not grow much; that changed once I replaced myself at the top. With each passing year, we are pushing for greater growth while maintaining the profitability that has made us a “proficorn”.

Looking ahead, I want us to learn from titans like Danaher and build a “Netcore Business System” that helps drive continuous improvements and an acquisitions factory that helps us accelerate growth and provide the full stack solutions that marketers need. Competition is increasing and I constantly think about how we can create a moat in our business to ensure the NRR (Net Revenue Retention) keeps rising. I have always believed that business is the equivalent of modern day warfare, albeit without the violence. Strategy is critical for success, and it needs to be matched with flawless execution. Getting the big decisions right is what will determine whether we can maintain and increase our 25% CAGR on price per share for another decade.

Thinks 366

WSJ on tech trends: “There’s a new type of consumer out there—who I call “Generation Novel”—born out of the disruption of the novel coronavirus. Due to many months of lockdown, consumers had to learn how to become digital-first in basically all aspects their lives—including the way they work, learn, buy, relax, and connect with friends and loved ones. In doing so, customers forever changed how they shop and make decisions, what they value, and which brands earn their attention and loyalty. Businesses of all sizes and in all industries will now need to quickly re-evaluate the customer experiences they offer, and pivot to meeting the changing demands of this new generation.”

Anticipating the Unintended: “It is not the differences between the BJP and the opposition, in the shape of TMC and others, that’s important. Those differences on secularism or the definition of nationalism will be used for narrative wars that will continue to deepen the schism in the society. But I don’t see them changing how India will be governed. It is the similarity, where the ‘enemies’ emulate each other that has me worried.  And what’s the similarity? To put it simply, it is their belief in running a ‘party state’ model of governance. What the Left built in West Bengal and the TMC inherited has now been finessed and taken at the national level by the BJP. The party or its affiliates have their imprint everywhere. The law of the party trumps rule of law.”

David Perell: “The smartest kid in my middle school class used to take computers apart and put them back together again in order to understand how they work.
That’s what writing is too. Whenever you write, you’re tinkering with ideas and playing with all their component parts.”