april 2010
Rising Bottom Lines
At Inc. India 500 Page 46
What makes Dr Lal happy?
The Magazine for Growing Companies
The house that
Vikram Talwar & Rohit Kapoor Rebuilt Page 40
weird hiring rituals Page 55
What makes
DrLal
happy? A successor who has quadrupled his top line to
The magazine for growing companies
How I Did It Rajiv Mody of Sasken Page 52
Dr Arvind Lal brought in a team of professionals to spearhead the growth of his chain of diagnostic labs.
April 2010 | Rs.150 | Volume 01 | Issue 03 A 9.9 Media Publication
Rs 170 crore in five years
Page 30
April 2010
contents
30 The Right Formula for Success
In 2005, Dr Arvind Lal bet on a professional team to spearhead the growth of his chain of diagnostic laboratories. Today, profits are five times higher from labs across India. Here’s how Dr Lal Path Labs got its formula just right. by pooja kothari
40 A Vault of Resilience
Vikram Talwar and Rohit Kapoor have seen EXL Service through some tough times. Here’s what eggs them on. by pooja kothari
52 How I Did It Rajiv Mody
He started out of a garage in California, but came home to Bangalore to build a multi-million dollar technology business, Sasken Communications. by jacob cherian
46 Special Report The Truth About Profits They are not as thin as you would imagine them to be. by john khiangte
Matching strides Dr Arvind Lal (front) has successfully handed over the reins of his family business to a team of professionals headed by Dr Om Manchanda.
This edition of Inc. magazine is published under license from Mansueto Ventures LLC, New York, New York. Editorial items appearing on pages 11,14-15,22-23,25,55-59,62-64,66-67 were all originally published in the United States edition of Inc. magazine and are the copyright property of Mansueto Ventures, LLC, which reserves all rights. Copyright © 2009 and 2010 Mansueto Ventures, LLC. The following are trademarks of Mansueto Ventures, LLC: Inc., Inc. 500.
on the cover
Dr Arvind Lal, owner of Dr Lal Path Labs photographed at Gurgaon by Subhojit Paul. Cover design: Jayan K Narayanan
36 Case Study Betting on a bull run
A founder desperately wanted his broking business to grow out of his shadow. Could a professional do what he wished he was able to? april 2010 | INC.india | 1
contents
April 2010
62
60
06 26
04 Contributors 05 Editor’s Letter
06 Behind the Scenes One of India’s very first malls— Ansal Plaza—needs security, media-space, parking and gigantic flex banners.
09 Launch
Who’s optimistic about 2010; who’s hiring; and more The Ticker A Skimmer’s Guide to Rework, by Jason Fried and David Heinemeier Hansson Developing a business plan in two days—that’s what entrepreneurs did at iWeekend A workshop that tested an owner’s ability to grow his business to the next level
14 How Hard Could It Be?
By Joel Spolsky His blogging and column are holding his business from seriously taking off. So, he bids farewell to his followers.
16 Passions
Yogen Khosla ditched 20 years of golfing for his new love— cycling.
20 Innovation
Outdoors and feeling cold? Here’s a jacket that allows you to stay warm in winter and cool in summer.
22 Balancing Acts
Guidebook
How to use a dashboard to get a clear and accurate picture of the business. Read more on this following page 28.
68 I Wish I Knew...
Rajesh Jain started his first venture nearly two decades ago. Since then, he’s learnt to watch his cash flow and be more disciplined about meeting numbers.
Strategy 55 managing Little rituals bring new employees into the fold.
By Meg Cadoux Hirshberg Your business is a big force in your kids’ lives. Is it a force for good?
57 hiring How to choose your replacement.
25 The Goods
58 Growing Pains Could that big account could be risky? Then diversify your customer base.
Jazzy presentation tools A faster, lighter PDF reader Part tablet, part netbook Recharge batteries anywhere Stay sane on long-haul flights Television sets for the sporting season Super laptop charger Essentials for a Mumbaibased placement specialist
60 elevator pitch Can giving the right fitness advice pull in US$1million for LifeMojo? 62 technology Who gets your passwords if you pass on? 63 social networking Get people to talk about you on Facebook and Twitter. 65 sales & marketing Four entrepreneurs advise a theatre group on how to scale up its artsy approach to business management. 66 finance How to read a term sheet
2 | INC.india | april 2010
Inc.com
10 things to do
online this month
contents
1. Meet Our New Columnist Jason Fried, co-founder of the software company 37signals, will be joining Inc. as a columnist. In Rework, a book he co-authored due out this month, Fried outlines his counterintuitive approach to managing a company. Last month, he answered readers’ questions on managing people, dealing with customer complaints, and more. Watch the video on www.inc.com/author/jason-fried
10. Obsess Over Apple’s New iPad
CEO Steve Jobs revealed the sleek iPad in San Francisco in January. Will the device become a must-have for techies? Here is a collection of our articles on Apple’s latest innovation. www.inc.com/topic/Apple+iPad
9. Debate the Pros and Cons of Having a Business Partner
Like a marriage, a business partnership promises stability—and some nice tax advantages. But maintaining harmony is far from easy. www.inc.com/keyword/mar10
8. Master the Art of Cold Calling Tips and techniques for developing one of the hardest skills in sales www.inc.com/ keyword/mar10
2. Download HR Tools
Check out our library of employment forms available for downloading, including templates for job descriptions, a checklist for appraising reactions to a job applicant, and a sample offer letter. www.inc.com/tools
3. See 10 Creative Business Card Ideas
Check out this gallery of cards—one of the site’s most popular recent items— and see clever images, origami, die cuts, even stainless steel. www.inc.com/ss/10-mostcreative-business-cards
4. Keep Up on Tech Trends
Nadine Heintz, editor of The Goods, reports on e-readers for businesses, cloud-friendly hardware, tablets, mobile TV for road warriors, and greener desktops. www.inc.com/ss/businesstech-tools-5-trends-2010
Succession planning raises a series of thorny questions. Among them: Who should run the business, and how quickly should the transfer of authority occur? This step-by-step guide will help you get started. www.inc.com/guides/chooseyour-successor.html
6. Visit America’s Coolest Workplace 7. Reduce Your SmallBusiness Tax Bill
Advice on write-offs, making smart elections, and good tax resources for the small-business owner www.inc.com/guides/ reduce-smb-tax.html
Professional skateboarder Rob Dyrdek has parlayed his fame into more than a dozen business ventures and two hit shows on MTV. Join Inc.com on a tour of his Los Angeles offices, which feature an indoor skate plaza, zip line, and foam pit. www.inc.com/keyword/mar10
april 2010 | INC.india | 3
clockwise from top: courtesy sergio delgado; don hammond/corbis; courtesy subject
5. Pick Your Replacement
MANAGING DIRECTOR: Dr Pramath Raj Sinha Printer & Publisher: Anuradha Das Mathur Editorial Editor: pooja kothari assistant Editor: jacob cherian assistant features editor: rohini banerjee consultant features editor: payel mukherjee DEsign Sr Creative Director: Jayan K Narayanan Art Director: Binesh Sreedharan Associate Art Director: Anil VK Manager Design: Chander Shekhar Sr Visualisers: PC Anoop, Santosh Kushwaha Sr Designers: Prasanth TR & Anil T CHIEF Photographer: Subhojit Paul community team product manager: mahesh ravi manager: shreya pilani associate: deepika sharma
Sales & Marketing Vice President: Naveen Chand Singh National Manager (Online Sales): Nitin Walia National Manager (Events and Special Projects): Mahantesh Godi regional manager (south) Vinodh K (+ 91 97407 14817) regional manager (north) Pranav Saran (+ 91 93126 85289) regional manager (west) Sachin Mhashilkar (+91 99203 48755) manager (Kolkata) Jayanta Bhattacharya (+91 93318 29284)
OFFICE ADDRESS 9.9 mediaworx Pvt Ltd K-40, connaught circus new delhi -110 001 India Printed, EDITED and published by anuradha das mathur 9.9 mediaworx Pvt Ltd K-40, connaught circus new delhi -110 001 India Printed at Nutech Photolithographers B-240, Okhla Phase-1 New Delhi – 110020 India
Production & Logistics Sr General manager (Operations) Shivshankar M Hiremath Production Executive Vilas Mhatre Logistics MP Singh, Mohd. Ansari, Shashi Shekhar Singh
CONTRIBUTORS John Khiangte talks business most of the time. If he isn’t holding forth on trends across industries, functions and geographies, then he is forecasting change (or, the lack of it). When you need an objective answer, he’s the man you want to seek out. After all, he has six years of experience in setting up business intelligence units. Although he studied at the Delhi School of Economics, John is an avid reader of political history. He does have other passions, though. He loves trying out new things, be it food, sports or travelling. “I will travel anywhere just to know what that place feels like,” he says.
Charu Bahri would like to say that she writes for the sheer love of it...but, in truth, she earns her living as a freelance writer! She enjoys writing on subjects as diverse as business and spirituality. She likes talking to people to learn more about how things work, almost as much as arranging words in a way that benefits readers the most. In the past five years, she has written 500 plus articles for a medley of Indian and overseas publications and websites. Bahri lives in Mount Abu with her parents and her dog.
4 | INC.india | april 2010
editor’s letter
The Magic of Teamwork My youngest sister was born nine years after me. Over the years, she seemed to belong to an entirely different generation. Our views and opinions were as different as our taste in music and clothes. I was often told how little I knew about what was in fashion. Our story on EXL Services brought back these memories of dealing with age differences. We almost always presume that people who are born more than five years apart would not have much in common. While it is sometimes true—as is the case with my sister and me—the chemistry between the EXL founders proves that age may actually be a bridge between two very different working styles. Vikram Talwar is 15 years older than Rohit Kapoor, and admits that he sees things differently. But they’ve managed to create great value in the past decade they have worked together. Things I Learnt In This Issue Our cover story on Dr Lal Passion is key to Path Labs is another interestdoing a job well. ing take on partnerships. Money is no Here, the dynamics at work substitute for are between the owner of a passion. If you just business and a rank outsider want to make money, brought in to grow the busifind other ways to do ness beyond its regional domthat. Don’t become an entrepreneur. inance. Again, the Dr Arvind Lal-Om Manchanda partner Discipline in meeting numbers has to be ship has a significant gap in instilled early in a age. And again, it somehow company’s life. Else, works in their favour. it becomes a bad Maybe experience does habit that is difficult teach to let go more often; and to break.
focus on the positives rather than the shortfalls of a person. It’s a lesson we all need to focus on—otherwise, why will any one buy books urging managers to encourage certain behaviours through positive feedback than discourage through criticism. The Inc. India team, too, has put up a true show of partnership in this issue. Our survey on the current sentiment among medium-enterprises was carried out by our research team. You can read the details in the Launch section. Our heartfelt thanks to the 50 companies who responded; hope we get more of you to participate the next time round. We have also put together a profitability report on the Inc. India 500. Given all the noise around bad times, it is heartening to see that things are picking up—at least on the margins front. Thanks also for the feedback. Our feature on The Way I Work, introduced in the second edition, was very well received. An upclose-and-personal look at the day-to-day tussles of successful entrepreneurs like Arvind Rao clearly resonated with our readers. We have introduced another feature in the Strategy section. How Would You Sell That offers a product or service, and brings together opinions from a variety of people on how best it could be sold. It talks about a theatre group that takes an artsy approach to teaching management theory. In the coming issues, we will keep trying to find new ways of interacting with you. Stay tuned and keep writing in to tell us what you want. Enjoy the issue!
Pooja Kothari pooja.kothari@9dot9.in APRIL 2010 | INC.india | 5
BEHIND THE SCENES
Companies at the heart of everyday life
Media space The walls of one of India’s oldest malls offer advertisers plenty of space to blow their trumpet. And helping them out is DS Mittle—a Mumbai-based company that sells space for advertising. Founded in 1951, the firm has collaborated with All India Radio, Indian Railways and television. Mumbai’s train commuters would be familiar with their work—ads that run across the length of a train. Run by the third generation Mittle—Anup—it has a turnover of Rs 15-20 crore. Given that onground work demands labour, Mittle employs 20 permanent employees in Delhi and 50 contract-based personnel in Mumbai.
Security apparatus The terrorist attacks in Mumbai made security a key issue across India, and led to stringent safety measures. Suddenly, there were metal detectors everywhere—including outside Ansal Plaza. Some enterprises, such as Zorba Security, were able to cash in on this phenomenon. Its owners, Sapna and Sushil Kumar Sharma, both engineers, had worked with security companies before venturing out on their own. Their 10-year-old firm, based out of west Delhi, has a turnover of under Rs 40 lakh. The duo manufacture and repair walkthrough and hand-held metal detectors, searchlights and vehicle inspection mirrors.
6 | INC.india | april 2010
Ansal Plaza, New Delhi
09.03.10 4:05pm
Flex banners Are you dazzled by the bright banners draped along the inner circumference of Ansal Plaza? If yes, here’s a little low-down on them. The banners were all printed on flex by Splendid Advision—a company that not only provides the material, but prints such banners as well. The firm has its giant printers at their Okhla (Delhi) office. Splendid handles both indoor and outdoor flex-based advertisements for Ansal Plaza. Its owner, Rishi Gautam, runs the business with his uncle. Their annual business comes from Ansal Plaza alone and is pegged at Rs 50,000 a month, or Rs 6 lakh in a year.
Parking management Finding a parking spot in a mall, especially on a weekend, is a nightmare. Ansal Plaza banks on SA Parking Services to help customers find space. The firm is barely five years old, but its founder Sajjad Ahmed is a pro—having handled parking lots on government contracts before. Ahmed now focuses on the private sector (read hospitals and malls). He has 70 permanent employees and another 130 on contract; and promises that his employees manage more than underground traffic—they can change tyres and even fix a breakdown in the parking lot. His turnover hovers around Rs 3 crore.
photograph by Subhojit Paul
reported by Jacob Cherian
launch
News, Ideas & Trends in Brief
Why Inc. India 500 CEOs are smiling They’re getting ready for good times ahead—and they’re hiring again
in focus
A venture on ventures
How many employees have you hired in the past six months?
How optimistic are you about 2010?
Very 70% Somewhat 28% Not at all 2%
38% Less than 20
24% 20 to 50
38% More than 50
Do you plan to spend more in 2010 on these?
Marketing
PHOTO BY PHOTOS.COM
88% Yes
12% No
Training
96% Yes
In the second half of 2008, when the global economic downturn hit India, everyone assumed we were headed for another Great Depression. Many observers cautioned that things were not as bad as they looked. Then, early this year, a similar sentiment echoed across corporate corridors, when people warned that things aren’t as rosy as everyone’s expecting them to be. We, at Inc. India, decided to put that to test. We wondered if businesses really felt as confident as they were saying. We checked with Inc. India 500 CEOs, an elite club who are building the leaders of tomorrow. The vast majority of respondents said they are planning to hire again—some had already been hiring in the past six months. Their optimism isn’t surprising—after all,
4% No
Technology
8% No
92% Yes
they are the fastest-growing medium-sized enterprises in the country. Even if you discount that, the trend is clear. India Inc. is looking ahead and planning for better times. More than 30 of the 50 companies who responded to our questionnaire said they were “very optimistic” about the year ahead. The Inc. India 500 leaders are not alone in feeling good about the future. There are signs that other business leaders are also starting to look at the bright side. Business confidence was at a two-year high, as evident from a survey conducted by National Council of Applied Economic Research and MasterCard Worldwide in January. Another survey, conducted by global continued on the next page
A New Platform Will users give a thumbs up to Yourstory.in?
As a journalist covering startups, Shradha Sharma met numerous entrepreneurs looking for a platform to raise their visibility. She was always held back by word counts and airtime, and couldn’t feature as many entrepreneurs as she would have liked. So she decided to provide that platform on her own—by starting YourStory.in—a website that aims to connect entrepreneurs with each other, and provide them with networking opportunities. “It’s meant for people who want visibility,” says Sharma of her maiden venture. In its 15-month existence, the company claims to have profiled more than 1,000 entrepreneurs and built a database of 30,000 registered users. Sharma’s team of technology journalists, along with a pool of freelancers, supplies content to the website. The company makes money by creating content, and through advertorial content and advertising. It has also recently signed up to provide content to three firms. Whether it actually proves useful to the future generations of India Inc. will only become evident over time. For now, Sharma’s having fun writing her own entrepreneurial story. —Jacob Cherian april 2010 | INC.INDIA | 9
launch
Good times ahead... continued
staffing services firm, Manpower, had shown that India was “the most optimistic nation in terms of hiring plans for the next three months and the recruitment pace is expected to return to the pre-recession level” in 2010. The survey further stated that India had rated the highest among 35 countries on a measure of recruiting plans for the first quarter of 2010. For many Inc. India 500 CEOs, the need to hire is already evident. Says Arvind Thakur, chief
to maintain that rate in the next fiscal. He plans to add up to 25 people in the next six months at his Rs 630-crore firm. In fact, more than 90 per cent of those surveyed had drawn up plans to hire more employees in the near future; of these, 64 per cent said they will add more than 25 employees. Only four companies out of 50 had no plans to hire any employees. Even big guns, like TCS, one of the leading software companies in the country, have announced plans to start hiring again in
Do you expect to hire employees in the next six months?
8% No 92% Yes
13% Less than 10
executive, NIIT Technologies, which was ranked 51st in the Inc. India 500 list: “The worst is behind us and we are embarking on new areas.” His company, which develops software for education, has hired more than 25 employees in the past six months, and plans to add another 50 or more in the next six. Says Rajesh Mittal, managing director, GreenPly: “We plan to add more people to our marketing team so we can build a distribution network in rural India.” His company, which manufactures and exports plywood and laminates, has been growing at a healthy 25 per cent and expects 10 | INC.INDIA | april 2010
22% 11 to 25
64% More than 25
2010. Newspaper reports suggested it plans to hire 30,000 in the current financial year. It isn’t just hiring that shows the optimistic mood. A majority of our respondents said they planned to increase their budgets for marketing in 2010-11. An overwhelming 96 per cent said they planned to spend money on training and 92 per cent on technology in this financial year. Their willingness to open up the purse strings only goes to show that they foresee good times ahead. —Deepika Sharma and Pooja Kothari
The Ticker Deal-street is buzzing with activity. Azure Power, an independent solar power company, raised US$10 million from IFC. Founder Inderpreet Wadhwa plans to utilise this injection to produce wadhwa more clean energy that will be distributed to hundreds of villages around the country...Another firm to raise money is NetAmbit, a financial products distribution firm, which got Rs 50 crore from Helion Venture Partners in a second round of funding. Bessemer Venture Partners gave an additional Rs 10 crore, its second input into the company since 2007. Its managing director, Girish Batra, wants to use this money to expand its distribution channels....There’s raising capital once again also been a lot of talk of firms changing hands. Ram Chandra Agarwal’s Vishal Retail is reportedly being taken over by TPG Capital….Peter Mukerjea, the former head of STAR India and the founder of INX Media, is said to be selling off his venture to Zee for Rs 65 crore....Prannoy Roy’s NDTV sold almost its entire stake in NDTV Imagine to Time Warner earlier michael dell this year....Michael Dell came calling, albeit just for a day. He spent an hour with the winners of Dell’s Small Business Excellence Award, given to companies for innovative use of technology, from China, Australia, Japan and India. Keeping the Indian flag flying high was Ekgaon, which uses information and communication technologies to cater to rural-based clients. After the awards, Michael delivered an inspiring talk at the Nasscom summit next door, where he declared, with a healthy dose of optimism: “Growth is back.”
launch
Two days, two applications, 50 entrepreneurs and a 1000 possibilities A new platform for start-ups to network and build better business plans
A skimmer’s guide to the latest business books The book: Rework, by Jason Fried and David Heinemeier Hanssone; Crown Business; March 2010. The big idea: Rework takes an aim at marketing, hiring and other disciplines associated with building a business as if they are bottles lined up against a wall. Then it blows them away.
PHOTO BY PHOTOS.COM
It is known that nine out of 10 start-ups fail
to take off. And it is also known that a “single founder” is often the reason for this failure. That’s why the iWeekend event, held at Amity University’s Delhi campus, attracted quite a crowd, willing to work together on select business plans. The event brought together a motley group of developers, business managers, start-up enthusiasts and marketing gurus to ideate and launch the first versions of two web applications—all over the course of one weekend. More than 50 entrepreneurs converged on March 19 armed with business plans— more than willing to argue their case. Of the 15 submitted, two plans were chosen for further discussion. The audience, divided into two teams, was given the choice of supporting one of these two. Judges, such as Alok Mittal of Canaan Partners and Luv Sayal, the founder of iWeekend, provided overall support encouraging participants to speak up or the audience to field questions. Given that most participants lived in and around New Delhi—a city often in the news for being unsafe—it wasn’t surprising that most ideas were centred on the concept of security. An entrepreneur pitched a
product that allowed users to monitor homes from any part of the world using security cameras and internet technologies. Another offered a GSM-based system that kept track of a single vehicle, or even an entire fleet, helping owners locate their car, while keeping an eye on problems such as fuel pilferage. Founded by Sayal, a Barcelona-based entrepreneur of Indian origin who worked as a sales professional till as recently as 2006, iWeekend began in Spain. It recently crossed borders into India and Mexico. “It is ideal for entrepreneurs who are looking for a team to build their idea, or for those who simply want to network,” explained Sayal. He’s had to tweak the model along the way. In Bangalore, Sayal realised that there wasn’t enough time to develop a business model and the web application over a single weekend. So, at this Delhi event, iWeekend focused only on fleshing out the business model for an idea; the actual code writing was left for later. This ensured that instead of working in the backroom on their keyboards, coders got a chance to participate in the business planning. The event is headed next to Ahmedabad, which will be its last stop for now.
—Jacob Cherian
The backstory: Fried cofounded the Web-application company 37signals, and Hansson later joined in as a partner. They are big believers in what others call transparency, though they loathe business jargon with a white-hot passion. Simplify, simplify: Fried and Hansson preach doing less and embracing constraints. That leads to counterintuitive advice, such as, stop tailoring your product for existing customers and deliver less than your competition. Attitude: Unlike most business books, Rework is written with a genuine voice—sometimes a cranky and a profane voice, at that. If you read nothing else: Rework is composed of brief lessons delivered in unadorned prose on pages with fat margins and lots of pictures. You can finish it over lunch, so no need to skip anything. Rigor rating: 7 (1=Who Moved My Cheese?; 10=Good to Great). The advice is based almost exclusively on the experiences of 37signals, which is compelling, but not necessarily representative. Some other cursory examples are culled from magazines and websites. —Leigh Buchanan april 2010 | INC.INDIA | 11
launch
Can you work one day a week and run your business? That’s the true test of an entrepreneur’s ability to scale up his business. Instead of getting stuck with fire fighting, enable others to do the work. Change your mindset from ‘doing the work’ to ‘getting it done’. As the owner, you are accountable for increasing the profitability of thebusiness, so focus on growing that.
PHOTO BY PHOTOS.COM
A year after the global
economic system nearly collapsed, most companies are still trying to get out of the worst economic shock in decades. First-time entrepreneurs cannot even comprehend what hit them, and are struggling to find ways to make profits under the new conditions. So an invitation to a session, which offered to help business owners increase the profitability of their businesses by as much as 100 per cent, didn’t go unanswered. At least 50 entrepreneurs from the capital and its neighbouring towns spent a good 3-4 hours at the event, organised by TiE (The Indus Entrepreneurs) in Delhi last month. Rahul Jain, a professionalturned-serial entrepreneur, who has also been a business coach since 2004, conducted the workshop. A major part of the session was focussed on teaching entrepreneurs to grow out from being a hands-on team manager to become a hands-off business owner, who ensures cash flow. As obvious as it may sound, for an entre-
12 | INC.INDIA | april 2010
preneur, it was almost blasphemous to be told that being hands-on in business may, in fact, sit in the way of scaling up to the next level. Jain urged entrepreneurs to view the whole world as a potential market place and then calculate the revenue. “The total market size is equal to the total number of your prospective clients, multiplied by the average business one client gives you in a year,” he instructed. That result, he added, can never be under Rs 1,000 crore. If this is the scope, he asked, then what is really stopping you from growing? He then laid out the basic reason why business-owners do not grow fast after an initial start-up period. “They get so caught up in the daily emergencies and fire fighting that they do not have the bandwidth to focus on their true accountability, which is growth in profitability,” he explained. To grow the business to another level, one has to get the business running on its own, for which the mindset has to shift from ‘doing it’ to ‘getting it
done’. “The minute that happens, you are on your way to scaling your business up,” was Jain’s advice to the participants. He then proceeded to list the five levels of true entrepreneurship: The self employed: being your own boss. The manager: employing and managing people. Most business owners, typically, remain stuck in this stage and keep chasing people to work. The business owner: Setting up systems and letting the team work. The cash flows in whether you get out of bed or not. The investor: With this cash flow, you become an investor and invest in business, stocks, property, etc. The entrepreneur: Tapping in to other people’s money, idea, talent and time to build businesses. Jain’s recipe for success requires business owners to graduate to the fifth level and become an entrepreneur in the true sense. He shared a simple, yet powerful, business manage-
ment system, which would allow an owner to work one day a week, and yet, run their business. Here is a five-step guide: Make an organisational chart: list all positions, reporting structures and their accountability. Define how work will flow through the organisation. Create a reporting structure and generate weekly reports on performance of all departments. Clearly define key result areas, so people know what they have to deliver. Build a schedule for executive meetings, which will set the owner free. Once the business owner is free for 4-5 days a week, in a manner where no paper comes to his desk and no one talks to him, he would have achieved entrepreneurial nirvana. And only then would he be able to scale up his business to another orbit. The way to profits, it seems, lies right in their working habits. —Jacob Cherian
HOW HARD COULD IT BE? BY JOEL SPOLSKY
Let’s Take This Offline
A decade ago, I started Joel on Software, a blog that put my company on the map. But as the business matures, I’ve come to realise that blogging is holding me back
PHOTO BY PHOTOS.COM
You’ve started a business. You’ve
built a great product. Now you’re trying to get the word out. You don’t have the budget to buy ads, or retain a PR agency. You’d like to hire a salesperson, but the experienced salespeople are smart enough not to work for you. Well, there’s always blogging. These days, it seems that just about every start-up founder has a blog; and 99 per cent of these bloggers are doing it wrong. The problem? They make the blog about themselves, filling it with posts announcing new hires, touting new products, and sharing pictures from the company picnic. That’s lovely, darling—I’m sure your mom cares. Too bad nobody else does. Most company blogs have almost no readers, no traffic, My fellow Americans Blogging is a and no impact on sales. Over joyous experience. But it is tiring as time, the updates become well; and takes a tonne of time. few and far between (especially if the responsibility for the blog is shared among several staff members), and the whole thing ceases to become an important source of leads, or traffic. There were far fewer blogs when I set up mine, Joel on Software, 10 years ago (even before I started my company). The site quickly became a popular hub for programmers who wanted to discuss all sorts of things—how to write an elegant code, how to deal with unreasonable deadlines and how to get paid more. As the blog grew—eventually, it surpassed one million unique visitors a month in traffic—it also drove interest in my start-up, Fog Creek Software, and our products.
14 | INC.india | April 2010
So, what’s the formula for a blog that actually generates leads, sales and business success? I didn’t even understand it myself until last year at the Business of Software conference, when one of the speakers, a wellknown game developer and author, named Kathy Sierra, blew me away with an incredibly simple idea that explains why my blog successfully promoted my company while so many other blogging founders foundered. To really work, Sierra observed, an entrepreneur’s blog has to be about something bigger than his or her company, and his or her product. This sounds simple, but it isn’t. It takes real discipline to not talk about yourself and your company. Blogging as a medium seems so personal, and often, it is. But when you’re using a blog to promote a business, that blog can’t be about you, Sierra said. It has to be about your readers, who will, it’s hoped, become your customers. It has to be about making them awesome. So, for example, if you’re selling a clever attachment to a camera that diffuses harsh flashlight, don’t talk about the technical features or about your holiday sale (10 per cent off!). Make a list of 10 tips for being a better photographer.
HOW HARD COULD IT BE?
If you’re opening a restaurant, don’t blog about your menu. Blog about great food. You’ll attract foodies who don’t care about your restaurant yet. If you make superior, single-source chocolate, don’t write about that great trip you took to the Dominican Republic to source cocoa beans. That’s all about you. Instead, write the definitive article about making chocolate-covered strawberries. For the next 10 years, whenever a gourmand or a baker searches Google for a recipe on how to make chocolate-covered strawberries, he or she will find your post. Helping your users make awesome chocolate-based confections is likely to attract readers who might buy fancy chocolate, and that’s the point of a successful blog. Writing about trips to the Dominican Republic is going to attract only people who might want to travel to the Dominican Republic. Unless you’re selling that, you shouldn’t be blogging about it. In retrospect, Joel on Software was essentially a small, perfectly targeted magazine for programmers with a certain pragmatic philosophy toward software development. It was also free advertising for my company, but the advertising actually looked a lot more like editorial content than anything else; the most popular post I ever wrote, for example, was about how technology companies should never, ever rewrite their code from scratch. Once I had built an audience among programmers, enough of them turned into customers that I was able to get my bootstrapped company off the ground. The audience was so precisely defined that products we tried to make, which weren’t specifically for programmers, pretty much flopped. They were great products. But they just weren’t for programmers and we didn’t have a way to market them effectively to non-programmers. Of course, blogging took a tonne of my time: It is a manual, labour-intensive and homemade way to reach customers. All told, the work I’ve put into the website and related books, training videos, conferences, and even this column, has probably accounted for about a third of the total work I’ve put into Fog Creek Software over the past decade. That’s three or four years of my work life.
Having become an internet celebrity in the narrow, niche world of programming, I’ve decided to retire from blogging. Was it worth it? Should you blog? Well, it worked brilliantly for me; but the more I’ve looked around, the more I’ve noticed that plenty of start-ups have managed to get customers and grow nicely without devoting a huge chunk of their early years to building a cool blog. What’s more, I have trouble pointing to other successful entrepreneurs who have used the same formula and reaped the same dividends I have. The big-hit technology companies from the past 10 years tend to have pathetic blogs. Twitter’s blog, like Facebook’s and Google’s, is full of utterly boring press releases rewritten to sound a little less stuffy. Apple’s employees produce virtually no blogs, even though the company has introduced several game-changing new products in the past decade. Meanwhile, hundreds of Microsoft’s employees have amazing blogs, but these have done nothing to stave off the company’s slide into stodginess. So, having become an internet celebrity in the narrow, niche world of programming, I’ve decided that it’s time to retire from blogging. March 17, the 10th anniversary of Joel on Software, will mark my last major post. This also will be my last column for Inc. For most part, I will also quit podcasting and public speaking. Twitter? “Awful, evil, must die, CB radio, sorry with only 140 chars I can’t tell you why.” The truth is, as much as I’ve enjoyed it, blogging has become increasingly impossible to do the way I want to, as Fog Creek has become a larger company. We now have 32 employees and at least six substantial product lines. We have so many customers that I can’t always write freely without inadvertently insulting one of them. And my daily duties now take so much time that it has
become a major effort to post something thoughtful even once or twice a month. The best evidence also suggests that there are many other effective ways to market Fog Creek’s products—and that our historical over-reliance on blogging as a marketing channel has meant that we’ve ignored them. I realise now that blogging made me, and Fog Creek, a big fish in a very small pond. As a result, we have the undisputed No. 1 product among the 5 per cent to 10 per cent of programmers who regularly read blogs about programming. Meanwhile, we’re almost unknown in every other demographic. My hope is that giving up blogging, and the rest of it, will be the equivalent of making a cross-eyed kid wear an eye patch on his good eye for a while: The weaker eye will grow stronger. My company needs to get better at what every other company already knows—how to promote and market products without depending on a single channel. We’ve completely saturated a small slice of the target market. Now we have to go after a much larger group of potential customers. To my readers: Thank you for your attention over the past 10 years. I couldn’t have done it without you, and the nice emails, comments, tweets, and blog replies have made it a joyous journey. I enjoyed meeting you virtually, and I look forward to meeting many of you in person in the next phase of my company’s life.
Joel Spolsky is the co-founder and CEO of Fog Creek Software and the host of the popular blog Joel on Software. For an archive of his columns, go to www.inc.com/author/joel-spolsky. April 2010 | INC.india | 15
PASSIONS
Life Outside the Office
“Cycling developed my stamina and strength. It has taught me to never give up mid way in life, as well.” 16 | INC.india | april 2010
Yogen Khosla
Cycling
Two years ago, as Yogen Khosla watched a video footage of his elder brother’s cycling trip from Manali to Leh, it struck a chord deep down. The image of this group of cyclists, on what is considered one of the 10 most dangerous and stunning routes in the world, overwhelmed him. It held Khosla’s interest so much that the managing director of the US$10 million microfinance firm, Capital Trust, decided to give it a shot. Today, he’s nearly given up 20 years of golfing to accommodate his passion for cycling. In December, he rode 300 kms from Bikaner to the desert of Jaisalmer. Next, his sight is set on the same trail that his brother rode years ago. “I am training very hard for it. I am told it’s every rider’s dream journey,” says the 48-year-old, who feels cycling has made him the fittest he has ever been in his life. He finds cycling more enjoyable than going to the gym or running, since it allows him to “cover a lot more distance in the same amount of time” and offers “so much more to see”. Khosla rides with his group of rather “competitive” cycling friends twice a week in Delhi, even though he hasn’t participated in any races so far. Training Schedule Four days a week Two days cycling Two days spinning—a group cycling class Fancy Wheels Two Trek mountain bikes Trek road bike
photograph by Subhojit Paul
reported by Pooja Kothari
on the contrary BY MAHESH MURTHY
Lonely, lonely, lonely, lonely, lonely, lonely time
Entrepreneurship has long been considered a solitary journey, but times are a changing. There are now plenty of networks and groups to keep business owners company. The instant messenger pings and a little querying rectangle pops up on screen. “Got a minute?” my friend, the entrepreneur, asks. “Sure,” I say. I know what she wants to say will take more than ‘a minute’. I also know it’s important to her, not just in terms of getting an answer to her question, but also in terms of having someone around—even if it is at the other end of an iffy internet connection—to talk to. I remember the few times I started out trying to form a business—what hit me was that no one had ever told me it was going to be so lonely.
I was starting out businesses without knowing how to do it. My college, or whatever little I had attended, wouldn’t deign to touch unworthy subjects like ‘how to start a company’. Instead, it concentrated on far more important issues such as ‘what Babcock and Wilcox considered Connecting the dots With an when they designed a boiler’. abundance of dedicated events, Books didn’t help. Most management and text a copy—never had the money to buy websites and magazines focussing books I read, seemed to speak in that arcane language one. However, it focused more on on the Indian entrepreneur, it’s hard to be lonely nowadays. which only professors and students shared—neither what a start-up did once it hit the of who ever seemed to have come near starting a billion-dollar mark in revenue and business, even from a distance. was no longer a start-up. That was way too far out for Magazines such as Fortune were a slim hope, when I could steal a glance at me. Still is, actually. 18 | INC.india | april 2010
PHOTO BY PHOTOS.COM
It’s been a long time since I rock and rolled, It’s been a long time since I did the stroll. Ooh, let me get it back, let me get it back, Let me get it back, baby, where I come from.
on the contrary I didn’t know who to ask questions. Starting a business was not in my blood, as my family repeatedly told me, at least not for the past 10 generations that they had news of. Not only was there nobody I knew then who I could ask, the few I ended up talking to not only told me not to do whatever I was doing, but to be a good boy and make Appa-Amma happy, finish my studies and take up a job. That was the second— and worse—whammy. It’s been a long time since the book of love, I can’t count the tears of a life with no love. Carry me back, carry me back, Carry me back, baby, where I come from. Yes, I failed then. My first two efforts in business ended up as bad memories, lost
watchful eyes and guardianship. I didn’t have the right genes to be a part of that set. There was little else I knew then. So, I reverted to being an employee, working for others in India, and then outside. Seems so long since we walked in the moonlight, Making vows that just can’t work right. Open your arms, opens your arms, Open your arms, baby, let my love come running in. Years later, in the US, I discovered the sort of networks that I would have loved to have had. Angel investors telling start-ups the doors they would open. VCs telling you who to go to and how to shape your pitch. Sales directors signing up for businesses
“Yes, I failed then. My first two efforts in business ended up as bad memories, lost cash, burnt relationships and gaps in the CV.” cash, burnt relationships and gaps in the CV. I remember when I had started out I had kilotonnes of confidence and eyes bright with dreams that all entrepreneurs harbour. I’d ended up with dark circles—a humbled loser. Maybe my ideas sucked, maybe my execution sucked more so, and maybe I did deserve to fail. But, equally maybe, I deserved some support system when all was against me. Yes, it is romantic when the world is against you and off you go, all Don Quixote-like, lance in hand, looking to fight windmills. But horses run out of hay, you run out of breath, and eventually both of you need a place to collect calories and courage before you start the next day and the next fight. In India, these places are traditionally within the family, as businesses move from generation to generation under the family’s
that they could help deliver. And I saw promoters drink like hungry camels from these wells of support. Given all these, it would be harder to fail, I thought. When I came back to India and started investing, I tried consciously to be a part of such groups, or to help form some. We had some flashes in the pan. One group of entrepreneurs met for social do’s one Tuesday every month. Another hung out in the lobby at the Oberoi in south Bombay. A third hung out at a cafe, called Just Around The Corner, in the suburb of Bandra. I was one of this last lot with almost an official table and drink (iced tea) designated for a few years. Very few of these networks lasted long. One that I stuck to was TiE (The Indus Entrepreneurs)—a Silicon Valley import that started before the boom, and fortunately for us, lasted through the bust. Today, TiE does an amazing job of forming
a nexus that tries to help entrepreneurs not fall through the cracks—to mix a few metaphors. I’m really happy to spot TiE chapters in dozen-plus places around India. A bit of our role, as early birds, has been to hand over the baton to others who are now ready to serve. And things have gotten even better since. I see Start-up Saturdays happen around the country in a super collaborative way, glued together by the social media. Sites such as Pluggd.in exist with news and views for those of us who are tech-start-up minded. Events such as Headstart and Proto do things with professionalism, sponsorship and make money off it—and why not? As long as entrepreneurs are being served. And there are other groups that I’m not a part of, which have been around for long. I’m told that YEO and YPO help you if your daddy was an entrepreneur—that’s a support system for the second generation business people too. So, you’re beginning to see specialisation here, too. A couple of years ago, there was no demand for columns on how to start a business. Now there are magazines devoted to it. I write columns here and in a couple of other places as well, and have had to say no to some folks. Never before has there been so much support for the entrepreneur in this country. It’s been a long time, been a long time, Been a long lonely, lonely, lonely, lonely, lonely time. Yes, it has. Never have you ever been so un-lonely. Enjoy the company, enjoy the conversation. Plug yourself into groups who will support you—for there are sure as heck many who won’t. And remember this, it’s not like it used to be for many of us. There are thousands, maybe tens of thousands of others out there like you. You’re no longer alone. Mahesh Murthy is the founder of Pinstorm and Managing Partner at Seedfund. He can be reached at mahesh.murthy@gmail.com or @maheshmurthy on Twitter. april 2010 | INC.india | 19
innovation
Companies on the Cutting edge
Braving the Weather
Kranthi Vistakula put into practice the theory of converting temperature differences into electric voltage, and vice versa, and built a technology, called ClimaCon. He used it to make apparel that can control the body temperature of the person wearing it. ClimaGear, the jacket, uses battery and Peltier chips to manipulate temperatures in the range of 18 to 40 degrees Celsius. In 2008 he founded Dhama Apparel Innovations. Still being run out of the NID Incubation Centre in Ahmedabad, with help from a five-member team, the company’s other products include a helmet and a neck accessory. Priced at Rs 40,000, ClimaGear may be keeping the Indian Army warm, but is unlikely to be civilian chic any time soon.
High Achiever Red Herring’s top 100 promising technology companies in Asia in 2009 irst prize in Champion of F Champions category in Intel India Innovation Pioneer Challenge in 2008 2008 finalist in the Intel A Berkley Technology Entrepreneurship old medalist at Lockheed G Martin Innovators competition in 2008 on the MIT 1K business W plan competition on multiple grants from W DSIR, Government of India
2 0 | INC.india | april 2010
Fashionably Yours Made of micro-filament polyester Water resistant etachable inner lining D embedded with electronics and battery ccompanied by 150ml A water tank Weighs 650gm
ClimaGear
Dhama Apparel Innovations
“While studying at the Massachusetts Institute of Technology, I never found mathematics challenging. It was the extreme cold and hot weather that was tough to tackle.” —Kranthi Kiran Vistakula, CEO and Founder, Dhama Apparel Innovations
Imaging by Santosh kushwaha reported by SUNAINA SEHGAL
Balancing Acts BY Meg Cadoux Hirshberg
Minding the Kids
For better or for worse—and that’s mostly up to you— your children are deeply involved in your business.
ILLUSTRATION BY Binesh Sreedharan
Now that our youngest is about to graduate from high
school, my husband, Gary, and I have been reflecting on how we raised our three kids. Curiously, it had never occurred to us to ask our children how they felt about our company, Stonyfield Yogurt, and its endless claims on Gary’s time, presence, and attention. Gary always worked hard to make up for his frequent absences. If he couldn’t be there consistently, he wanted at least to be consistent about some things that were meaningful to the kids. When he was home, he would rise with them, make yogurt smoothies for breakfast and drive them to school. He coached their soccer teams. When he was away, he constructed crossword puzzles, which he faxed to them from the road. We both hoped it was enough. But we didn’t really know. So I posed the question to each of my children: What was this like for you? Part of my inspiration to ask this simple question came from a conversation I had at last year’s Inc. 500 conference with Salem Samhoud, founder of &Samhoud, a consulting firm in the Netherlands. Stealing a trick from the manager’s tool kit, Salem holds quarterly “360 degree reviews” with his wife and three
2 2 | INC.india | april 2010
children, ages 20, 13, and 9. The reviews show him where he’s falling down as a parent and also where he doesn’t need to sweat it. “Last September, they told me I spend too much time on my iPhone,” he told me. “They were right. Now I switch it off on weekends. Because of their feedback, I already feel more relaxed and focused. They asked me to do it for them, but it’s also better for me.” Every six months, each child spends a day with Salem at the office. “They get to see not just the negative—my absence—but the positive—what I do all day, how I work and how my work is valued,” he says. The subject of children is fraught for many working parents, but company owners experience extra dimensions of guilt. It’s one thing to expose yourself and your spouse to financial risk and instability, another to expose
Striving for balance The subject of children is fraught for many working parents, but business owners experience extra guilt.
balancing acts
kids who have no voice in the matter. Work follows the entrepreneur wherever he or she goes—into the family room, onto the beach—providing an ever-present reminder that Mom or Dad has competing priorities. Frequent travel is usually unavoidable. And even when you’re there, you’re often not there. Your body is at the Girl Scout meeting with your daughter, but your mind is mulling over margins. When children are affected by a parent’s absence or preoccupation, they often have ways of letting the parent know. At the same conference last August, I met Susan Edwards, who told me that her entrepreneur-husband, Barry Edwards, got a wakeup call when their youngest child was about 2 years old. Susan had just pulled up to her husband’s office with their son Cody. The boy excitedly pointed towards the building and exclaimed, “Daddy’s house!” “That comment changed my husband,” Susan said. Across from his desk, Barry hung a poster of a little boy who looked like Cody. Printed in bold at the bottom was the word Priorities. “It’s been his daily reminder of the need to shut down and go home,” Susan said. The competing pressures of business and children can be hardest on female entrepreneurs. Entrepreneurship is attractive to mothers, because it promises flexible hours, but how flexible can hours be when you’re working 16 of them? Recently I met Amy Cueva, co-founder of a technologydesign firm called Mad*Pow and the mother of three children, ages 5, 11, and 12. “Sometimes I don’t even feel like a woman,” she told me. “I don’t have time to nurture and be there the way my mom was. Recently my daughter emailed me with a detailed plan for her 11th-birthday party. I didn’t know whether to be proud of her organisation and tech savvy, or be depressed that she knows that email is the best way to get in touch with me. “People tell me how amazing it is that I accomplish all that I do,” Amy said. “But I feel like I’m screwing up every day.” Still, there are upsides to being the progeny of an entrepreneur. Many company owners have extraordinary latitude to involve their kids in their work, spending time together while providing an early edu-
Children watch their parents acting as leaders, and taking responsibility —both for their own lives and for the lives of others.
cation in business. Packing boxes after school or counting inventory on weekends is often a terrific first job. While labouring alongside a parent, children feel proud of the family business—this is ours! We are making this! And they watch their parents acting as leaders, and taking responsibility both for their own lives and for the lives of others. The intimate observation of entrepreneurship also helps shape children’s future decisions. Some find their own horizons expanding as they realise they can choose to build something themselves rather than become part of something built by others. I was surprised to learn that my son Ethan, 19, is now interested in business. “Dad has a cool life,” he told me. “It’s really busy and demanding, but he has a personal attachment to what he does.” Some children see the labour, the stress and the sacrifice, and decide the entrepreneur’s life is not for them. My 17-year-old daughter, Danielle, for instance. “When I was a kid, I thought it would be cool to have Dad’s job, but as I got exposed to what it’s really like, I’m just like, ugh.” My children also had differing reactions to Gary’s absences, mental and physical. The boys weren’t much bot hered by them. “Dad was there for things I cared about, like my soccer games and teaching me to ride a bike,” said Alex, who is now 21. “All I remember now are the things that he was able to do.” “I think Dad’s absences put a lot more pressure on you than they did on us,” said Ethan. Danielle had another view. “It was great that he coached my soccer team. But during those times he was my coach, not my dad,” she said. “Our games and practices were just part of his busy schedule. Sometimes I felt bad when he came to soccer games, because
I knew there were more ‘important’ things he should be doing. “At this point in my life, I appreciate his mission and what he’s doing to support organic farmers,” Danielle continued. “But sometimes, I think, why does my dad have to be the guy who saves the world? Sometimes you need to be the guy who chills out. Let somebody else save the world for a while.” An entrepreneurial business sucks the entire family into its vortex. Marinating in guilt is an opportunity lost. So invite your kids into your work life. Let them see how things are made or marketed, how problems are tackled and solved. They will gain more appreciation for what you do. “Daddy’s (or Mommy’s) house” will feel more like their house, too. My “interviews” with our children let Gary and me understand them better and deepened our relationship as a result. Your kids’ feedback may change the way you run your business and live your life. As I write this, Gary is downstairs in the den with Danielle, watching her latest favourite show (United States of Tara) and, to all appearances, completely chilling out. Of course, it’s possible he’s mulling over margins.
Meg Cadoux Hirshberg (mhirshberg@inc.com) writes a regular column about the impact of entrepreneurial businesses on families. She is married to Gary Hirshberg, president and CEO of Stonyfield Yogurt. april 2010 | INC.india | 2 3
Your Business Toolbox
The Goods Upgrades
Google Docs, meet Office 2010
Four Great PowerPoint Tools New ways to make your presentations yawn-proof No matter how much we grumble about them, PowerPoint presentations are a fact of life.
Thankfully, plenty of companies roll out innovative software and gadgets to make them a little less tedious. Here are four offerings we like. —John Brandon
Illustration: photos.com
TWITTER TOOLS
SAP recently introduced several updates to its suite of PowerPoint Twitter Tools, including Autotweet, an addin that lets you automatically tweet tagged text from a presentation. A new feedback slide, which you download and insert in a PowerPoint file, lets you ask audience members questions and display their Twitter responses. COST: Free
PAPERSHOW
The Papershow kit, which includes a Bluetooth digital pen, special paper, and a USB key loaded with software, lets you annotate presentations onscreen. To use it, import your presentation into Papershow, print it on the special paper, then scribble away. You can also advance slides with a press of the pen. COST: US$199 for a starter kit
POLL EVERYWHERE
Poll your audience in real time by downloading a slide from the Poll Everywhere site and inserting it into your PowerPoint file. Audience members can respond to questions by text or Twitter from their phones. Results appear in a customisable graph or running list of tweets. COST: Free for audiences of up to 30, then 10 cents to 30 cents per person
FOTOLIA
Still using generic clip art on your slides? This plug-in gives you quick access to millions of stock images from Fotolia. Once you download and install the software, you can search for photos, doubleclick to preview them in slides, and buy them, all without leaving the PowerPoint program. Images cost from US$1 to US$20. COST: Free
At first blush, Microsoft Office 2010, due out in June, doesn’t seem much different from its predecessor. But a focus on mobile computing and collaboration makes the software suite worth a second look. The biggest change is the rollout of free Web-based versions of programs such as Word and Excel, a reaction to Google’s popular Docs and Spreadsheets offerings. The stripped-down online programs, which were not available for review at press time, will be accessible on computer browsers and Web-enabled mobile phones. Updated mobile apps also will be available for Windows Mobile phones. The desktop programs have some handy new features, including basic photo- and video-editing capabilities in PowerPoint and data snapshots in Excel. A more notable improvement is the ability to share files by uploading them to Microsoft’s SharePoint collaboration system and SkyDrive cloud service. You can also format documents and publish them in an emailor on a blog. The Professional edition of the suite, which includes the Access database program, is US$499 for two computers. There is a discount for high-volume purchases, but not for upgrades from a prior version. —Renee Oricchio april 2010 | INC.INDIA | 2 5
the goods
Products + Services
Gadget-o-Bot Part tablet, part netbook, all cool
Software
Document Reader As a PDF reader, the Adobe Reader has been considered pretty bloated and many users have moved to better alternatives. Foxit Reader has become a popular choice in the last few years, but now, there is another option, an open source program called SumatraPDF. It comes with the most basic features expected from a PDF reader— but that is a blessing since it has everything we really need to use, and none of the complicated menus and settings that make us lose our way. It loads PDFs almost instantaneously, and allows files to be viewed in full screen—and even as pages in a book. There’s a slight delay while changing pages, but that keeps the program lightweight as it reads a page or two at a time. SumatraPDF is ideal for slower PCs and laptops. On netbooks, it can be used as an eBook reader as well. It’s portable, and can be carried on a flash drive without having to install it. There is, however, no built-in help file or manual to help the user. It is freely downloadable from http://blog.kowalczyk.info/software/sumatrapdf/index.html
2 6 | INC.INDIA | april 2010
By now, we’ve all heard about the new Apple iPad tablet, a hybrid device that’s part smartphone, part laptop. There’s another hybrid gadget expected in the markets by June this year—the IdeaPad U1 from Lenovo. It has a detachable screen that can be used as a multi-touch slate tablet with its own processor. The two parts of the computer are designed to work together or separately in a seamless way. If you’re surfing the Web in netbook mode, for example, you can detach the tablet, which has its own processor, without interruption. The clamshell device, which has a red exterior and weighs just 3.8 pounds total, is likely to be priced at US$999 (Rs 46,730). The device was showcased at the Consumer Electronic Show 2010 in an early prototype form. In netbook mode, the device runs the Windows 7 OS on an Intel Core 2 duo processor. In the slate mode, the device runs a Linux variant, known as Skylight, and is powered by a Qualcomm Snapdragon ARM processor. Both the iPad and the IdeaPad are likely to appeal to business users who aren’t thrilled with the idea of buying multiple gadgets, then schlepping them from meeting to meeting.
Lasts long very long tring tring
Rechargeable pocket booster There are few things more annoying than running out of mobile battery charge. With the Kensington pocket booster, that is unlikely to happen to you any time soon. It is a small USB battery dongle that looks like a flash drive and charges two AAA rechargeable batteries. You can charge the batteries using a USB port on your computer. Once it is fully charged, you can charge any mini-USB mobile phone or portable media player. It comes in handy for those who forget or don’t get time to charge their mobile phones at home. At Rs. 1,500, it’s a bit expensive, but that shouldn’t bother anyone who values longer battery life on their phones. The only complaint is a lack of other connectivity options. Powered by:
Work + Play
the goods
Don’t be an idiot, buy the right box Watch the pitch closer and clearer The time for Twenty20 is here. Over the weekend, sit back, relax and let the cricketers and the cheerleaders do all the running and dancing. Reminisce (if you wish) of the “glorious days of Test cricket” or, cheer along with the so-called youngistan. After all, the Indian Premier League, or the IPL, is all about fresh legs, adrenaline-rush, young blood and springtide cricketers. Here are a few HD television sets that promise to keep you focused on the ball and boundaries—files from office notwithstanding. They come ready for the next generation of clarity and immersion.
First person
How I keep my sanity on long haul flights
Srinivas Balasubramanian, CEO, Photon Infotech, Chennai
LG Jazz Theatre LCD TV Onida 32 Diamond LCD
This one’s quite a looker. Its full HD panel (1920x1080) display has good clarity. It has nine speakers, of which two are rear-mounted subwoofers. Its fantastic audio quality makes every snick crystal clear and sets it apart from its competitors. Besides the standard connectors, it has a USB 2.0 port that reads MP3s, JPEGs, DivX/Xvid and MPEG 1 and 2. It does have a slight motion blur problem. Cost: 42”- Rs 60,000 32”- Rs 37,000
This 32” screen is a Full HD TV with a 1920x1080 resolution. The rear-mounted speakers, pumps out good sound at 400 watts (PMPO). The black levels are good and it scores well as far as details and sharpness of picture is concerned, though it could be a little brighter. Besides the basic ports the USB supports mass storage up to 250GB and lets you read JPEGs, SD Movies (MPEG 1 & 2, MPEG 4 SimpleProfile) and MP3s/WMAs cost: 32” - Rs 32,000
Philips 32PFL5609 LCD
This one’s design is nicely rounded off and comes with a glossy finish. The panel resolution the panel stands at 1920x1080. The black levels are deep, while the colours are nice and vibrant. However, pictures do seem a little over-saturated sometimes. The backlight is clearly brighter than the rest of the models in its range. Basic connections aside, the USB plays MP3s, JPEGs MPEG4 files like DivX and MPEG1 files. cost: Rs 48,000
Powering Up
The Best Laptop Charger for Business Travellers There’s nothing sexy about laptop chargers, but a new offering from Targus is more exciting than most. The company’s Premium Laptop Charger can charge a laptop and cell phone simultaneously in a single wall outlet. A separate DC cable, included in the package, lets you power up two devices at once in a car lighter. The charger comes with interchangeable tips for nine different laptops from most major manufacturers, with the exception of Apple, as well as a mini-USB tip and a tip for an iPod or iPhone. More good news: Targus will supply future tips for free if you buy a new phone or laptop, though you will have to pony up for shipping. COST: US$149
I spend around 40 hours a month on flights. On lucky days, I get upgraded to business class. But that’s a mere 35 per cent of my flight time. Rest is spent in coach. So I create the “home away from home” atmosphere to keep my sanity intact. The Kindle helps me to do so. I have no idea what I might wish to read in-flight. On some days, I browse through business magazines; on others, mindless fiction is more appetising. The Kindle allows me to download whatever I feel like reading. The difference between a good seat (read; emergency row aisle) and a bad one (middle seat at the back of a flight) is like night and day. Seatguru is my route map to the right seat. Even if it fails me at times, my Travel Pillow is a real game changer that helps me sleep during flights. I typically cross three to four time zones every month—but jet lag is not an option, given the meeting schedules. Thus, Sleep Aids to the rescue; they help my body cope with the new time zones. When it comes to luggage, my record is impressive, if not squeaky clean. I have lost my bags only 10 per cent of the time. Losing the luggage after a 30-minute wait is mindnumbing. But I always keep my Tumi Carry On loaded with essentials and walk out like an unvanquished conqueror. —As told to Sunaina Sehgal april 2010 | INC.INDIA | 2 7
the goods
Beyond Business
Things I Cannot Live Without My favourite T-shirt It says: “In a start-up, nothing happens unless you make it happen”. No wonder, I love it!
iPhone Others can’t do without their swanky cell phones and I cannot live without my iPhone. I adore its interface, the touch feature and browsing capabilities.
Hyundai i10 This is my first car and I love it. It’s a part of nearly everything I do, work or personal errands.
Bean Bag Sometimes when I’m really tired, this bean bag becomes my home in office. I take a nap, or make long calls while curled up in it.
founder, SUTRA SERVICES
Waqar Azmi
2 8 | INC.INDIA | april 2010
...and What I Covet A sea-facing office at Nariman Point I’d prefer a sea-facing office to a home because I spend a lot more time at work than at home.
PHOTOs BY Jiten Gandhi
Converse Shoes These shoes can be worn anywhere, and with anything, especially the black ones. I wear them to work or to parties.
He works out of a small office in Andheri, a Mumbai suburb that’s home to a galaxy of telly stars. But, Azmi’s more into start-ups than he is into stars. His placement firm—Sutra Services— works with young companies to find quality talent for their needs. And he adores Mumbai, despite its standard of living; even more than Chandigarh, which is his favourite holiday destination in this country. “The richest Indian lives here; and the best people and facilities are found here,” says Azmi, who admires the enterprising and go-getter Mumbaikars. “If you gave me an opportunity to work in the US, I wouldn’t take it. I want a global business, but I want to build it out of Mumbai,” he says. He would happily send the traffic of Mumbai across the seven seas instead. —Jacob Cherian
Getting the chemistry right Dr Arvind Lal knew that he was good at running tests, but needed Dr Om Manchanda’s business skills to expand his chain of labs.
3 0 | INC.india | april 2010
the right Formula For Success In 2005, Dr Arvind Lal bet the future of his chain of diagnostic labs when he brought in Dr Om Manchanda to pilot its growth. Here’s how Dr Lal Path Labs got the experiment right. by POOJA KOTHARI photograph by Subhojit Paul
april 2010 | INC.india | 3 1
“I
wasn’t
meant to
be a doctor.
I was supposed to join
the navy and become a fighter
pilot,” says Dr Arvind Lal, almost wistfully. His fifth floor office in Gurgaon, a suburb of Delhi, is testimony to those dreams. On the table right behind his desk, sit miniature planes of various designs and sizes. On the wall in front, a huge framed picture of five Suryakirans, performing an aerobatic combination at an armed forces’ parade, seizes the attention of a visitor at once. “That picture was taken by me,” informs the 60-year-old owner of Dr Lal Path Labs (LPL), a leading chain of pathology laboratories in the country. “I can recognise just about any fighter plane in the world,” he adds. From planes to path labs, that’s as unusual a journey as can be. But as we talk over numerous cups of tea on a Saturday morning in the garden of his south Delhi residence, the story unravels pretty quickly. It has Dr Lal growing up in Delhi in the sixties, dreaming about landing planes on moving airstrips. He even opts for geometric design over biology in school because someone tells him “it would help him steer the plane on to the ship”. The fighter-jet dream, however, got mortgaged to failing eyesight; a shattering of heart followed, post which the young Lal decided to pick up a degree from Armed Forces Medical College at Pune. 3 2 | INC.india | april 2010
In 1977, the sudden death of his father brought Dr Lal back to Delhi. The incident also thrust upon him the responsibilities of running the laboratory set up by his father, a pathologist who came to India after partition and started working at a government lab to make ends meet. In 1949, the senior Dr Lal set up his own lab in the heart of Delhi, where the main branch still stands. The state of the industry was particularly bad when Dr Lal took over the single lab. “We’ve had the pleasure of seeing the effect that testing had on clinical treatment in India,” recalls he of the early days. “Some things happened that turned the tide my way. Take the auto analysers, for instance, which ran blood tests automatically. I was lucky that these were just coming into the country then. I knew what they could do,” he adds. And the results are there for anyone to see. From 30 patients a day at one lab in 1977, LPL has mushroomed to 45 labs across the country, visited by 12,000 patients every day. Its touch points include 750 collection centres and 2,500 pick-up points throughout India. It is also in the process of inaugurating Asia’s largest laboratory in Rohini, a suburb in west Delhi. The company has also built a reputation for being a pioneer in
The right Formula For Success
innovation, whether new tests, such as the HPV test for cervical cancer that it is now in the midst of bringing to India; or, new equipment, such as the auto analysers for blood tests that reduced the time taken to generate results for ailments as common as jaundice. “Any innovation seen in pathology—new tests, new instruments, vacutainers, bar-coding of vacutainers—all of that was brought into the country by us,” informs Dr Lal. “We are the Supreme Court of testing,” he adds, referring to the highest judicial authority of India. “Patients often come to us to recheck their tests done at other labs.” It might sound like a boast, but isn’t. Last year, when India was in the grip of the tenacious H1N1 viral epidemic and the load on government-run labs became unmanageable, the Delhi government chose LPL to be one of the two private labs to run those specialised tests. “We were told, not asked,” stresses the doctor, who has even been awarded the Padma Shri for his contribution to the field of testing. Dr Lal was the first in the country to start collection centres and claims to be a worldwide pioneer in healthcare industry in taking the franchisee route. Of course, these were born more out of necessity than anything else. “When we approached people to give us their shop to start a collection centre, they would refuse, saying we don’t rent space to doctors and lawyers. They feared that their grandchildren would be fighting to get my grandchildren out of their premises. So I had to find a way to take that shop,” says Dr Lal, who admits to never having heard the word “franchising” before then. So, in 1982, LPL set up its first collection centre at Dr Lal’s bungalow. “We tried the concept in our own house, and never looked back. We cracked a problem, and landed up finding a novel way,” he adds. Once it experimented with the huband-spoke model, LPL came up with another innovative strategy—using thermocol boxes with gel packs and perforated sponges to transport samples of blood drawn from across the country to its centralised labs in Delhi. This time, the resistance came from Dr Lal’s marketing team, which protested against the amount of money being spent on these boxes. “I refused. Right is right. Wrong is wrong. I have been uncompromising, where quality is concerned,” says the honorary brigadier of the Armed Forces Medical Services. By the mid-90s, Dr Lal began to understand the potential of growth that his business held. He also knew he “had to stop thinking like a doctor and think in terms of a business”. Having hit the realisation that he knew neither “finance nor marketing,” his next step was to find someone
who did. But those were the days when “MBAs in finance were not interested in joining an industry as unglamorous as ours. It is about running blood tests at the end of the day”. Dr Lal settled for full-time CAs, who gave him his first taste of what professionals can do. “They got information out of me. And I knew I had started down the right road,” he adds. The strength of the brand started getting recognition from others in the field. By 1995, LPL had struck a partnership with Quest Diagnostic, the world’s largest chain of diagnostic labs. Not ready to give up majority stake in his business, Dr Lal settled for a joint venture, which allowed him to send samples for testing to the US. A decade later, WestBridge Capital Partners, now called Sequoia, joined the board as an investor. It owns a 30 per cent stake at LPL. “We are one of their success stories,” claims Dr Lal. Says Sandeep Singhal of Sequoia, who handles the healthcare portfolio for the investment firm: “Dr Lal Path Labs stands out particularly for its organic growth and robust bottom line.” In the last five years, LPL’s profits have grown five times, without following the route of acquisitions taken by many of its competitors. The turnover of the company has grown more than four times to Rs 170 crore since 2005. This growth is a result of Dr Lal’s vision and thinking that allowed him to seek the help of a team of professionals and encourage them to perform well together. “It is a combined effort for which the team must get credit,” adds he.
The right values A firm believer in karma yog and jap yog, Dr Arvind Lal conducts a havan every week at his residence. “I try to be one with God,” says the Sanskrit scholar, who has trained five priests till now. april 2010 | INC.india | 3 3
The right Formula For Success
Heading that team of professionals is Dr Om Manchanda, a veter- equity” sweetened the deal; Dr Manchanda came on board as the inarian-turned-IIM-Ahmedabad alumnus, who was hired in 2005 chief operating officer of LPL in 2005 and there began a new as the chief operating officer and is now the chief executive. chapter in the life of LPL—and its owner, who had to “really When Dr Manchanda was brought in, LPL was a change” himself. “I am firm, but open to listening to others. The 450-employee company with a turnover of Rs 40 crore. Although initial days were very tough,” admits he. it had a few labs in other cities in the country, it was primarily a Dr Manchanda, on his part, treaded carefully. His earlier stint regional player—dominating the scene in Delhi. It was run by Dr at Ranbaxy, a family-owned business then, had taught him how to Lal and his wife, Vandana, who still works at the first lab in central work with business owners. Although he was itching to put to use Delhi. There weren’t any clear systems or processes in the comall that he had learnt in the naer-decade at Hindustan Lever, conpany—as is the case with most family-run businesses. And compe- sidered the best training ground for managers, he bid his time. “I tition had heated up with international players arriving on the didn’t change anything overnight. I just observed the dynamics of scene and cutting away workforce. the organisation,” says he. Over the years, Dr Lal had developed the gnawing sense that he Slowly, but surely, he fed changes—one process at a time. “I hired the senior management team; clarified people’s roles and should be getting a professional on board the family business. “I knew that if I had to grow the business across India, I had to strengthen the nontechnical part of the business,” says he. “We interviewed 5-6 guys. Om asked pertinent questions and stood out for experience. Add to that the Dr Arvind Lal managed to get his inquisitiveness,” recalls soft skills and the character it right. However, inducting Dr Lal, adding, tongue required to work with and for professionals into companies, firmly in cheek, “Of course, especially into family-run busi- you—the vision and value sysit helped that he could distems of the company and the nesses, is a tough act to pull. tinguish between the prosCEO have to be congruent. Higher the post and greater Remember, it helps to have the stakes—matters can get tate and pituitary glands.” talented professionals working real messy. Here are a few Working with his invesguidelines to perfect the recipe for you. “When I joined Dabur, tors, Dr Lal charted out the it was significantly run by profor hiring CEOs. requirements. To begin with, moters. But, there was a clear Don’t miss the bus: “Most they decided to fill three understanding that they business owners bring in prowished to make that transition fessional help only when the positions: COO, chief finanfrom being promoter-driven to writing is on the wall. When cial officer and head of sales. professionally-managed. They they know it’s either time to But it wasn’t easy to attract inducted professionals shape up or ship out,” says talented professionals into because they wanted a corpus Sanjiv Bhakat, a Delhi-based the family set-up. of managers they could easily management consultant. aspirations. There is naturally transition to,” explains Sunil Don’t wait for that long. It’s Says Singhal: “It helps a rivalry within several power Duggal, the CEO of Dabur. time to bring in the profesthat Dr Lal is a very pragcentres,” cautions Bhakat. To Separate management and sionals and independent matic man who knows what ensure that your CEO is not ownership: Toughest decidirectors on board when operhe does not know and hires pulled in different directions by sions start with segregating ations begin to get complex. varying agendas, formation of people to do that. He parted roles to be played by the family “Typically, an enterprise a family council—a platform and the non-family CEO. Help achieves critical mass when with equity for his senior that helps members develop family stakeholders don the revenue crosses the Rs 100management team and paid and communicate a consistent owner’s hat and give up the crore mark,” says Dr Ajit market-related salaries.” message to the CEO—is a manager’s hat. Ensure memDangi, who has helped out Even Dr Lal acknowlgreat idea. “At Dabur, the famseveral family-owned pharma- bers graduate from managing ily has a sophisticated goveredges the huge risk that Dr to influencing, from exercising ceutical firms. nance council. In private powers of the executive to Get the “right” CEO: Not Manchanda took. “He must meetings, issues are heatedly invoking the rights of the every professional manager have had fears. Will our perdebated as everybody has who has led the industry peers shareholder. sonalities match? Om must opinions, after all. But, the disInstitute a Family Council: might be the right choice. The have thought hard before cord never reaches us. We get “The Generation Next poses a target is someone who has a single direction from that taking this position up.” problem sometimes. Many of industry insights, business private meeting,” explains them are qualified and have acumen and managerial “A reasonable chunk of
how to find the right person
3 4 | INC.india | april 2010
The right Formula For Success
responsibilities, and gave them empowerment and room for error,” says he. Given that most of these recruits had moved from multinationals, Dr Manchanda had to attend to their emotional pressures, in addition to remaining accessible to all the members of the team. Very soon, a transparent performance system was put in place as well. He also suggested the move to a corporate office in Gurgaon away from the lab in central Delhi three years ago, so that “the management team could properly balance between day-today firefighting and long-term strategic thinking.” It helped that Dr Manchanda was working with an owner who trusted him immesnely. ‘I knew I could churn out good blood tests and multiply them across locations, but I couldn’t build a business. For that, I needed someone whose trade was business,” says Dr Lal. Somewhere deep down, what also made a difference was that
for your business Find the right person If the business has crossed Rs 100 crore in revenue, start looking for a professional to run it—and have faith in the person’s skills.
Duggal. He advocates anointing a leader, a family spokesperson who does the talking to the management. Make it clear that the CEO is “the” authority for all operational decisions: Ensure that employees, owners, family members and business stakeholders respect the CEO’s position. Publicly advocate the CEO’s role and do not allow stakeholders to circumvent the chain of command. Have faith in the skills that the CEO brings to the table: Most family-owned companies run on the genius of a single man. Founders believe this will
carry them through to the end. But, a promoter’s limitations can often hamper the evolution of a business into an institution. “Recognise the importance of formal education. As much as you read about architecture, you cannot become an architect. Realise that and utilise the value of a trained mind,” advises Bhakat. Chalk out a long-term incentive plan: CEOs are often viewed as short-term players brought in to churn out quick, immediate results. “Succession planning, empowering the CEO and clearly writing down goals that have been mutually agreed upon—these are the key rules. People believe that if you throw enough money, perks and fancy titles, it is easy to attract professionals. This is a shortsighted approach and will not work in the long term,” warns Dr Dangi. A long-term plan will align the owner’s interests and the CEO’s aspirations. — By Shreyasi Singh
Dr Manchanda understood the science behind the business. “We have zero tolerance for getting a test wrong. We have to get the test right in the first instance and get it right every time,” says Lal. Given his training as a veterinarian, Dr Manchanda could empathise with that. It’s a mindset that the duo now hopes to inculcate in the entire organisation. Given that “70 per cent of all clinical decisions are based on pathology tests”, it is vital to get the results right. An incorrect report can have serious consequences for patients, and too many such errors could cause irreparable damage to the company’s reputation and drive patients away. “It is difficult to hammer this message into the entire workforce of 1,400 employees, but we do try to inculcate a sense of commitment,” says Dr Lal, who still handles the technical part of the business, from deciding which new tests can be brought into the country to research and development and strategic management. While Dr Lal has the upper hand in the equation— including the power to sign a cheque of an unlimited denomination—the day-to-day functioning of LPL rests on Dr Manchanda and his team who operate out of the corporate office. Together, they have taken a lead within the industry—be it in terms of technology, wherein all LPL labs have been connected to a central lab; or, in terms of operational concerns, such as building strong financial systems to ensure cash is handled properly, or, finding newer ways to get closer to the customer and turn around a report in a rapid timeframe. For instance, when it came to choosing Rohini for the new state-ofthe-art laboratory, proximity to a metro station was a deciding factor. “It reduces the time taken to transport samples tremendously,” says Sequoia’s Singhal. The next 18 months should add another interesting chapter in the history of this company—and the partnership that holds it together. Investor Sequoia has to exit by 2012; yet, the markets are still too volatile for a public offering. Another round of fund-raising looks inevitable, with whispers of the process already being underway. Although LPL has managed to grow reasonably well in the past, it runs a complex business. “It has all the issues of retail and the complexities of a logistics business,” says Singhal. LPL has to think like a consumer business—its employees are its first point of contact with its customers; it has to process information in real-time with zero errors, as is typical of a healthcare business, and, it has to manage scale in a people-intensive set-up quite like a manufacturing process. Its ambitious plans for the next few years dictate that the partnership in the cockpit stays at its effervescent best. Ultimately, as Dr Lal must very well know, the fate of an aircraft lies with the men who pilot it. april 2010 | INC.india | 3 5
case study
Could a broking business reinvent itself by replacing hard work with smart work?
B
By Pooja Kothari Photograph by mexy xavier
y 2006, Kailash Biyani had come to a sobering realisation. Business could not go on as
usual at his Mumbai-based broking firm, Asian Market Securities (AMS), he concluded. The stir in his thought-pot was not any immediate problem; business was doing just fine. Yet, Biyani sensed a need for a shift in strategy. A member of the Bombay Stock Exchange and the National Stock Exchange since 1999, AMS was well-respected for its institutional broking service, and served most FIIs, mutual funds and insurance companies in the country. Biyani, too, had earned his reputation within the financial community, possessing enough command to attract business due to sheer goodwill. However, he was unable to shake that feeling that had been rubbing on him for some time, a feeling of something being amiss. “We ran like a traditional family business. I was at the helm of affairs, almost a one-man army. I took all the decisions and people implemented them. I got business due to my relationships with the outside world,” recalls the 47-year-old. The industry had been changing rapidly. A lot of foreign players had entered the broking business in India. There was also killer competition from local players who had become more aggressive, even as newer companies, such as Edelweiss, were sinking their teeth into the industry. Even the technology being used to service clients was different.
3 6 | INC.INDIA | april 2010
Preparing for a bull run Kailash Biyani is glad that he got over his fear of change and worked on the blue print drawn by a friend and board member. Backed by processes, his decade-old institutional broking business is now at a new high.
case study
The Experts Weigh In “I realised that this had to change. I knew something was find a differentiator The measures undertaken would have worked 12-15 years back in missing, but wasn’t bold enough to try to change it,” he the early stage of the ‘foreign invasion’. However, the industry is far adds. “I was reading Good to Great at that time and it more developed now. The key question to ask is: “How do I differentireally pushed me.” ate and create a mark that separates me from the rest?” The In his heart, Biyani knew his business was itching for founder should engage his new team in brainstorming sessions and create a clear differentiation/branding strategy that is sustainable. change—and more importantly, what needed to be done. That should enable them to get the higher end of the creative talent Many local players around him, such as Motilal Oswal and out there as well, and lead to a virtuous cycle of business creation. Anand Rathi Securities, had implemented those changes Kaushal Aggarwal | Managing Director | Avendus Capital years ago. But given the typical family set-up, where many of his workers were also his distant relatives, he also knew don’t apologise for being a family business that the switch in strategy was not going to be painless. It is wrong to assume that ‘professional MNC style’ is superior to ‘traditional family business style’. Each has its own strengths. In the So, his first move was to get the “right person” to guide finance industry, people are hunted partly for their skills and partly his business during the churn. He had come to know Raju for the relationships they bring along. So the firm getting business Panjwani, former managing director of Morgan Stanley, due to its owner’s relationships is not a handicap. What matters for New York, quite well over the years. Panjwani had set up business to succeed is a clear management perspective—irrespective of the management style. The firm seems to have done well on the multinational’s India operations, including value creation, role definition, strategy and organisation developinstitutional equity broking in 1995, and knew what got ment. It is on the path of evolving into a process-driven organisation the industry going. Biyani persuaded him to join the with a very progressive outlook. AMS board. Parimal Merchant | Chairperson | FMB, SPJIMR, Mumbai “It took us six months to understand what he wanted to do and he wanted change everywhere,” recalls Biyani. Together, they spent 3-6 months just drawing up a white paper and business plan for the future. Panjwani “knew this business inside out,” and set up milestones and suggested diver- a brand identity. The firm was rechristened Amsec—a move aimed sifications, such as investment banking, given that it required the at erasing any regional connotations and establishing a global idensame skills in manpower as the institutional broking business. tity. They worked on building some media presence and held biA business, which was run more on the matrix of emotions, had monthly knowledge series for their corporate clients, where experts to “change into a professionally-run business; and that was the hard helped enhance their knowledge on investment strategies. part,” according to Biyani. But the trigger had to be pulled. In the first phase, the Panjwani-Biyani duo followed a three- The Decision With Panjwani on board, Biyani got over his “fear pronged approach to change. The first thing to go under the trans- of failure” and supported the changes. In hindsight, that turned formation hammer was the recruitment practices of the company. out to be a smart bet. Over the past three years, the business has Instead of hiring referrals, AMS started signing on professionals grown to more than a hundred clients. “Both the depth of business with the right mix of qualifications and experience. Next came the and breadth of clients are increasing,” says Biyani. implementation of a CRM software package, which instantly gave a The changes have yielded impressive rewards. The execution of leg-up to the quality of service. Most importantly, the focus of the deals and orders has become more efficient. Clients, who would firm’s offerings shifted from relationships to service supported by earlier make requests on phone, now have to follow a formal process the best quality of client-centric research available in the market. for buying or selling instructions. This ensures there are zero errors “We decided to do a few things, but do them well,” adds Biyani. on that front. With the software absorbing every minute detail of “Our hard work had to change to smart work, using technology and every transaction, managers can effortlessly summon up a cornugood-quality research.” copia of information. The fate of every client meeting is fed to the Panjwani also put in place a bunch of processes and structures. system so that anyone can follow the trajectory of a relationship, and Reporting lines were put in place and decision-making was decen- take over an account, should the need arise. tralised. A bouquet of small, yet significant, changes were also With an overhaul of its operations, there has also been an pushed in. For instance, given that it was a broking outfit, a rule improvement in the quality of service provided by Amsec, thus banning cell phones on premises was implemented. Everyone, attracting more business from its clients. “Earlier, the research including Biyani’s daughter, Nikita, who worked as an intern, had supplied was sector-specific. Now, research is more clientto deposit their mobile-phones upon arrival. centric. Instead of giving clients what we feel is right, we are As the hard part of kick-starting any change always is, new rules giving them what they want. We track a sector for a particular never sink in well with old employees used to specific comfort zones. client,” explains Nikita. The firm had to part ways with 5-6 key people and non-performers With 40 employees and the revenue needle moving in the posiwho were unable to adjust with the shifting dynamics of the job. tive direction, Biyani is happy he listened to the voice inside nagging In the second phase, Panjwani and the board focussed on creating him for change. 3 8 | INC.INDIA | april 2010
Stepping up “Each time we hit a crisis, our desire to succeed becomes stronger and we come out stronger, ” says Rohit Kapoor (R) of the company he has built with Vikram Talwar (L)
A vault of resilience One was 50; the other barely older than his son. Yet, Vikram Talwar and Rohit Kapoor decided to test the waters of entrepreneurship together. In the decade since, they have navigated their outsourcing business through a bankruptcy, loss of a major client and a listing on the Nasdaq in 2006. Instead of cashing in their chips, this duo still wants to run the US$500-million EXL Service. Here’s why. by POOJA KOTHARI photograph by Subhojit Paul april 2010 | INC.india | 41
A vault of resilience
ikram Talwar walks in, dollar notes sticking out of his back pocket, into his office suite in one of the many office buildings that his firm, EXL Service, has in Noida—a commercial suburb of Delhi. Point that out to him and he shrugs it off, saying: “I usually have five or six currencies on me.” A few details later, you realise why. He’s quite a globe-trotter—he spent just two months in Delhi last year, despite being based here. “I have spent most part of the year in hotel rooms. And I love it. It isn’t easy to do. But it helps the company become successful because I am in front of the clients more than my counterparts can be,” he adds, disarmingly. It’s difficult not to be surprised by this joie de vivre from a man in his early sixties, and more importantly, in someone who has been working since 1970, and still loves coming to work every day—to feel “the thrill of a sale”. Talwar’s decision to walk the minefield called entrepreneurship at the age of 50 was as unusual as his desire to be in front of the customer even today. “The day I get bored, I’ll walk out,” declares the executive chairman, flashing a bright smile. For now, Talwar isn’t budging from his corner suite, which he shares with his partner, Rohit Kapoor, chief executive officer and president of EXL, whenever the latter is in town from New York. “Both 4 2 | INC.india | april 2010
Rohit and I wanted to build something—a brand, a company; and we have achieved that. We are not in the market to sell this company. Having built it to the level it is, we have an emotional attachment,” adds Talwar. That doesn’t sound very entrepreneurial, you think. Nine out of 10 entrepreneurs in their position would have sold off the company by now. The scene is a tad different here. The founders are still happy coming to work every day; Talwar to pitch their outsourcing services to clients; Kapoor to run the show globally. A deal closed still manages to flutter their hearts, much as start-ups feel in their initial years. May be, it has something to do with their lives before EXL. They were both bankers; Talwar for 26 years with the Bank of America (BoA), which he joined straight out of IIM, Ahmedabad in 1970, and Kapoor for more than a decade. In fact, they met as bankers, when Talwar interviewed the young Kapoor for a position at BoA in India. But more on that later. “Business as usual is not as exciting, or creative enough for most entrepreneurs. It becomes bureaucratic; but then, between Rohit and me, we have seen what it is to run a corporate entity,” laughs Talwar.
He has a supporter in Sanjeev Aggarwal, managing director, Helion Advisors, a private equity fund: “Founders who have been CEOs and company executives are better at navigating the scale-up phase than they are at the start-up phase, when everything is about boot-strapping. Having navigated the tougher part of the journey, what happens next is second nature to them.” Aggarwal is also a veteran of the business process outsourcing industry in which EXL operates. In fact, Daksh, the company he founded and later sold to IBM, was built around the same time as EXL and Spectramind—another success story of that time which was sold to Wipro. Talwar and Kapoor, however, have chosen to stay on—a decade after they started out on their entrepreneurial journey. And what a ride it has been! Neither Talwar nor Kapoor had envisioned entrepreneurship in their matrix of career possibilities. Both belonged to middle-class families, where most members strived to achieve the security tagged to service. “When I told my father I wanted to do an MBA, he wanted to know what the hell that was,” recalls Talwar. They weren’t friends either. Talwar, 15 years older than Kapoor, had at one point
A vault of resilience
hired him. They weren’t even working together after some years, but joined forces to test the waters of entrepreneurship. They tried several things before EXL. When reforms rolled into India by the mid-nineties, opening up the banking sector, the first thing the duo did was to build a business plan to set up a non-banking financial company, along the lines of Kotak. The plan, however, failed to lure investors. Not ones to give up, they tried again a few years later; except this time they managed to hit the nail—raising US$10 million to establish a private bank. But, “the Asian crisis happened and our funding was withdrawn,” says Kapoor. By then, Talwar was done trying. He gave up his job with BoA and came back to India to “play golf” and look after his ageing parents. Kapoor, meanwhile, moved on to Deutsche Bank. At 48, Talwar, however, was hardly ready to retire—or, at least his head-hunter wife thought so and found him a new assignment. He joined Ernst & Young in India to set up its technology consulting business, which was later sold to Cap Gemini. During the year and a half that Talwar built the business, he got an insider’s view of the emerging concept of outsourcing. E&Y finally didn’t get in to that space; Talwar did. “I decided to go out there and do it myself. It was a tricky decision. I was nearly 50 years old, hardly an age for taking chances,” says he. But it was also an opportunity to “prove to myself that I could build something of my own”. The time was just right. India had till then only seen captive, or shared service centres, of global financial biggies, such as GE, Citi and American Express. There were no third-party outsourcing companies. Even the environment was different. The dotcom boom was at its peak and everyone was intent on founding a company out of some idea. Talwar, along with Kapoor and another colleague from BoA, finally took the plunge, incorporating EXL in 1999. They had an idea that no one had ever tested before. But they believed that the model made sense. “The very large companies could set up their own shop, as GE did. But if you went below that level, or looked at
Awesome Twosome
companies that didn’t have an international footprint, it just made sense for them to take up our third-party services. The only hitch was the high cost of telecom,” adds Talwar. Having decided to bet on all the copper that was “Ours is a left-brain, right-brain partnership,” says being laid all over the Vikram Talwar, the executive chairman of EXL Service, world, their next problem of his decade-long innings with Rohit Kapoor, his partwas the capital intensive ner and now the chief executive and president of the company. They are as different as chalk and cheese. nature of the business. While Talwar is quite liberal with his smiles as he Even before they got a clistrikes up a conversation; the same cannot be said of ent, they had to have the quieter Kapoor, who is known to be analytical and trained people on board, methodical in his thinking. “I am a gut feel, let’s-justready technology and a do-it kind of person,” adds Talwar. Yet, they have created great value in the past 10 years. Here are some rules centre operational to that worked for them. deliver the services. Plan A had hinged on the thought On the partnership front: that if they could secure Disagree over issues, but debate them and come to an “US$2 million”, things agreement. Don’t allow people to play politics with you. would be “in good shape”. There’s nothing like mutual trust. Trust the decision Of course, by the time they taken by the other; don’t doubt it. set up their first centre in Have tolerance for differences. It’s okay to have differNoida, they knew they ent perspectives. needed a Plan B. The US$3 Put the organisation’s interests above your own ego. Align individual economic interests. million raised from Gary Wendt, the former chairOn the business front: man of GE Capital and a Forget conventional wisdom. Do what makes sense to friend of Talwar’s, for you. which they almost sold the Take a risk and manage it well; but don’t necessarily analyse it to death. company, barely sustained Do a fair amount of contingency planning; build a them. By the time the censafety net. tre became operational in Build a wide variety of clients. October 2000, the EXL Work with the right kind of customers. founders had done a lot more fund-raising in between. Meanwhile, they also had to change who had by then moved on to Conseco, an their premise on the business model. They insurance company, also got them their had begun offering email processing serfirst customer. EXL’s relationship with vices to internet companies. “EXL proConseco was such that in August 2001, the cessed email at a cost of a dollar, as against insurance company acquired the service the cost of US$3. We even got two custom- provider. Talwar and Kapoor “sold the ers, 1800Flowers and Lifeperson,” recalls company for stock” and “felt good” watchKapoor. But, within a few months, the ing the share price of Conseco climb from price of email support dropped down to 10 US$14 a share to US$20. cents an email. That’s when they decided to And then, abruptly, disaster struck. experiment with the “non-commoditised Conseco filed for bankruptcy—and share end of outsourcing services” and began prices tanked to US$7 a piece. scouting for transaction-processing work. “We had signed an agreement saying we Luckily, their association with Wendt, couldn’t sell for three years. Our sold price april 2010 | INC.india | 4 3
A vault of resilience
of US$50 million had suddenly evaporated completely,” recalls Kapoor, who had two young kids to support. Towards the end of 2002, Talwar and Kapoor found new partners in Oak Hill Capital and FTV, and bought back EXL from Conseco. And that began a new chapter in the history of the company. The nightmare didn’t end there, though. They had no clients—and 1,500 people on rolls. “Our burn rate was nearly half-a-million dollars a month,” recalls Kapoor. He knew that signing on a new client would take anywhere between “9-12 months”, given the nature of the industry. “We had a difficult decision to make. Do we let go of people we had trained in the hope that it will buy us more time to find a client? Or, do we think ahead and preserve the trained, tested and experienced workforce that was our real marketing edge?” Talwar lays out the dilemma. Ignoring conventional wisdom, they decided to keep the people. The senior management team even got the option of buying shares in the company with their money. Employees were paid to stay at home and the time was used to build training manuals, internal processes and build sales strategies. As Talwar put it, “it was pure risk-taking”. And the gamble paid rich dividends. By February 2003, Aviva had signed up. The years that followed have been unanimously stamped as the “best times of our lives” by Talwar and Kapoor; and offered them numerous chances to prove themselves– again and again. Says Helion’s Aggarwal: “I admire their resilience. These guys have been to the brink of a disaster several times, when big customers have left leave them, but they have navigated those challenges and reinvented themselves each time.” 4 4 | INC.india | april 2010
Sunny days Vikram Talwar and Rohit Kapoor have steered EXL Service through some very turbulent times. Mutual trust, combined with complimentary skills, has worked in their favour.
Like, in 2005, when the duo sought exit from its “volatile” relationship with Dell Computers, which accounted for 20 per cent of the firm’s revenue. “It was not the right kind of business for us,” says Kapoor in hindsight. Another time, a build-operate-transfer contract resulted in the client walking away with the assets. “We learnt never to do a BOT deal again,” adds Talwar. “Each time we hit a crisis, our desire to succeed becomes stronger and we come out stronger,” feels Kapoor. EXL, which is listed on the Nasdaq, boasts of a global footprint spanning 14 centres across India, Philippines, Czech Republic and Romania. It is now dreaming bigger than ever. “We want to be a half-abillion-dollar company by revenue,” spells out Kapoor. In March this year, it announced plans to set up two new centres in India. Prior to this, in 2009, it acquired two companies: the global travel business of American Express, called the Global Travel Service Center; and Schneider Logistics’ back-
office operations in the Czech Republic. EXL almost seems to be making up for lost time. Talwar acknowledges that “we could have grown a little faster inorganically and created a global footprint sooner. But Rohit and I have been quite conservative in our approach.” The path ahead has many options. EXL could either widen the geographies it serves, or add more verticals. With its attention heavily focussed till now on the US and Europe, the Asia-Pacific region would certainly be an area of growth. Similarly, while the focus on financial services has served them well till now, the future might need them to address more verticals such as telecom, technology, or retail. For either road to growth, the easiest is to grow inorganically through acquisitions, which the company has already started doing. There’s one other option, though: getting acquired by a large European company that wants to set foot in India. But given Talwar’s love for multiple currencies and the duo’s global nomadic existence, the last is not likely to make it into the EXL matrix any time soon.
special financial report
The Truth About Profits Despite the rough ride of the past 18 months, profit margins are in much better shape than expected. Here’s how medium-sized companies in 10 sectors fared during the global recession.
by John Khiangte
4 6 | INC.INDIA | april 2010
A Photos: photos.com
ccording to estimates by the International Monetary Fund, the worldwide financial loss from the economic meltdown stood at US$4.1 trillion. That’s like wiping off Japan’s GDP from the global economy! In the Unites States alone, the estimated damage in assets stood at US$2.7 trillion. The sheer scale of wealth destroyed is unprecedented. Given the barrage of bad economic news, it makes you wonder whether profits have withered away to nearly nothing in these 12-18 months, especially closer home. Sales and profits of Inc. India 500
Profits margins of Inc.India 500 plunged to their lowest level in the third quarter of 2008-09. The decline in sales growth was, however, slower—reaching its lowest level in the fourth of 2008-09. The real GDP followed, All quarter plummeting to its lowest level in the next quarter. 12
GPM = Gross profit margin NPM = Net profit margin
10
8
GPM (%) NPM (%)
6 4 values in %
An analysis of 2,000 listed companies in India showed that sales and profit margins during the second half of 2008 dipped to their lowest levels in the last 20 quarters. The general trend of revenue and profit margins getting hammered over the last 18 months was also witnessed by the Inc. India 500—our annual list of India’s best performing mid-sized companies. However, even though sales have remained gloomy, something promising has begun to happen: the profit margins of these businesses have been crawling upwards. The net margins of the Inc. India 500 grew by a full percentage point between July and September 2009. The growth appears especially robust in some industries. Net profit margins in the IT sector, for instance, increased by 2 percentage points. Pharma witnessed the highest increase in net profit margin, with a gain of 5.8 percentage points; followed by the entertainment sector with 4.1 percentage points. That’s the result of an analysis of
Q4 ‘07
Q1’ 08
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250 200
Sales Growth (%) Profit Growth (%)
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april 2010 | INC.INDIA | 47
special financial report
The encouraging news about the bottom line is offset by the fact that the top line—that is, sales— continues to be anemic in almost every industry sector.
4 8 | INC.INDIA | april 2010
the financial results of this group, from the last quarter of 2007 to the second quarter of 2009, the most recent period for which data is available. To gauge just how well did these mid-sized gems weather the global financial storm and its ensuing shock, we looked at three key indicators: gross profit margins, net profit margins and growth in sales for 10 sectors. Except for hospitality, net margins strengthened in all the sectors in the second quarter of 2009. While stronger margins are undeniably a good thing, they need to be interpreted with caution. In fact, sales growths were still negative in six sectors, offsetting the encouraging news on the margins front. Companies from the steel industry saw year-onyear sales fall by 24 per cent in the second quarter of 2009. Sales in the IT sector dropped some 3.2 per cent. The bright spot is that profit margins in these two sectors rose by 1.2 and 2 percentage points, respectively. This is indicative of some solid cost-cutting measures, which have pushed up the margins despite a slump in sales. The remaining sectors experienced marginal sales growth, averaging around 4 per cent for the first two quarters of 2009. Construction and realty sector saw the highest growth in sales: 26.9 per cent, followed by the consumer durables sector with 14.8 per cent. Consecutive double digit sales growth in the construction and realty sector indicates recovery, signs of which began emerging in the first quarter of 2009. Also, contrary to trends in the US and other crisisaffected countries, sales growth for consumer durables sector was negative only till the third quarter of 2008—indicating that consumers in
India began loosening their purse strings again much before their counterparts in other countries. In the US, for instance, consumer spending started picking up only in the last quarter of 2008. The Inc. India research also analysed the difference between gross and net profit. Gross profit reveals how much a company earns after accounting for the cost of producing the product or service it sells; when gross profit margins fall, it generally means that a company has little to invest in nonincome-generating activities, like marketing or tapping new markets. Net profit, or the bottom line, shows how much a company actually keeps after subtracting all expenses, such as taxes, interest paid on debt, and other non-production costs. The problem is that although net profit margins are strengthening, gross margins were for most part below net profit margins. That means that even though the Inc. India 500 companies were able to snip costs, they did not have much to invest in non-income-generating activities during the entire period under study. Nevertheless, the robust increase in margins seems to indicate that a new normal is settling in for the Inc. India 500 companies and most are ready to ride the next wave of growth. We are presenting below the key findings from the analysi. We also asked top executives from some sectors to describe how their industries fared during the crisis and share insights into how they struggled to maintain their margins.
The Industries How are profits and revenue doing in your sector? Turn the page and find out.
Graphs represent industry averages
key:
Gross Profit Margin
Steel
Steel
NPM (%)
GPM (%)
10
NPM (%) 8
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800 700
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600
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500
6
400
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1000
Sales Growth (%)
800
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0 -100
Sales % Change
Consumer Durables Consumer Durables
GPM (%)
values in %
values in %
10 8 6 4 2 0 -2 -4 -6
Net Profit Margin
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-200
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“Emami adopted a slew of stringent cost-reduction measures during the economic slowdown. We reduced administrative and procurement costs; cut freebies; availed fiscal benefits by producing goods from exempted zones, opted for appropriate financial leveraging, etc. Having said so, it is pertinent to point out that the FMCG sector was not as affected by the economic downturn as compared to its other industrial cousins. The rural economy played a major role in sustaining the FMCG sector, as there was hardly any impact on agriculture income during the economic downturn. —RS Agarwal, Chairman, Emami
FMCG FMCG
Construction & Real Estate Estate Construction & Real GPM (%)
8
15
6
10
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500
Sales Growth (%)
400
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values in %
values in %
NPM (%)
7
5
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20
NPM (%)
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4000 3500
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0
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april 2010 | INC.INDIA | 49
key:
Gross Profit Margin
Net Profit Margin
Sales % Change
Graphs represent industry averages
Pharma
Pharma
15 GPM (%)
Sales Growth (%)
200
NPM (%)
Profit Growth (%)
150 100 values in %
values in %
12
9
50 0 -50
6
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-100
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“While decision-making was slow, no one cancelled projects, not even in the US and European markets. In fact, we saw some good activity in the Middle East and some emerging markets. Clients went slow on capital expenditures, which in turn, adversely impacted the build-up of pipelines.”—AP Singh, Joint Managing Director, Rolta India
IT & ITeS IT
Hotels & Restaurants Hotels & restaurants
GPM (%)
25
NPM (%)
GPM (%) NPM (%)
30 25 20
20
15 10
15
5 0
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-5
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250 200
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150
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values in %
values in %
10
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120 100 80
Sales Growth (%)
60
Profit Growth (%)
40
100
20
50
-20
0 -40
0
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-100
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-120
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Q2 ‘09
“The economic downturn resulted in many companies cutting costs on their marketing activities, which lead to a fall in our (advertising) revenues. New players entered the market, thereby fragmenting it further. We took several initiatives to ensure sustained profitability, which included cost optimisation, increased thrust on renegotiations, and investing into new areas for increased turnover.”—G Krishnan , Executive Director and CEO, TV Today Network
5 0 | INC.INDIA | april 2010
special financial report
Entertainment Entertainment 20
GPM (%)
values in %
Sales Growth (%)
250
NPM (%)
Profit Growth (%)
200 150
15
100 50 10
0 -50
5
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-100
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“Sectors like TV, print, radio and outdoor, which depend on advertising revenues, were impacted. If you just consider the multiplex space, then we were not affected by the meltdown. I am proud to say that PVR and its employees have emerged stronger from the slowdown; and we are poised to achieve greater growth. We took a hard look at the way we have been doing our business; and looked at ways to achieve efficiency at all levels and across departments.”—Ajay Bijli, Chairman and Managing Director, PVR
Capital Goods Capital goods
Auto Autoancillary Ancillary
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GPM (%)
20
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15
NPM (%)
10
10
6
5 Q4 ‘07
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350 300
Sales Growth (%)
250
Profit Growth (%)
200
values in %
values in %
8
0
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250
Sales Growth (%)
200
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150
150
100
100
50
50 0
0
-50
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300
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-100
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“The industry adopted various measures, ranging from cost cutting to quality control, to stay afloat. Specifically, we purchased raw material in bulk; improved efficiencies; tightened quality-control measures and brought down defects drastically. We also controlled our admin costs, and closely monitored travel, electricity and stationary costs. We are encouraging car pools for meetings and other travel.” —Udayan Banerjee, Executive Director, Sharda Motors
april 2010 | INC.INDIA | 51
Always learning Mody feels his willingness to learn and experiment has helped him immensely in building his million-dollar business.
HOW I DID IT
Rajiv Mody
From the garage to the stock exchange
It’s a classic Silicon Valley start-up. Rajiv Mody, along with his two friends, left his job to build their dream project out of a garage in California. The business soon travelled miles away to Bangalore, where it continues to rake in millions of dollars in profits. Sasken Communication Technologies is known for its expertise in developing software embedded within chips, and multimedia technology for cell phones. Nearly 50 million handsets worldwide carry intellectual property created by Sasken. Mody is now pulling all-nighters to wrap up his final-frontier project—the next generation of satellite phones. as told to jacob cherian photograph by vinod
I was born in Mumbai and did my schooling in Rajkot. After I completed my engineering in 1981, I went to the Polytechnic Institute of New York University. In my second year there, I began teaching undergraduate students. It was a tough job—I was teaching a class of nearly 50 students about things that I wasn’t completely sure of. The American students asked really difficult questions. After my very first class, someone reported me for doing a lousy job. I had to face the administration. Thereafter, I fought hard to overcome the fear of teaching and went on to teach graduate students. I gleaned a valuable lesson—consider the view point of the person sitting on the other side of the table. These years also taught me the importance of preparation and the trick to dealing with a rough crowd. In 1983, a campus interview got me placed at Advanced Micro Devices, better known as AMD. We did a lot of skunk work there, try-
ing to look for the best possible approach for circuitry on microchips. It was a great time to be in California. The area was full of old friends doing similar work at good companies.
Two years later, I moved out of California. I joined a small company,
called Seattle Silicon, and did some cutting-edge stuff. By 1987, I moved back to California since my dentist wife could practice there, but not in Washington. I joined VLSI Technology, where I met my future partners, Suresh Dholakia and Badru Agarwala. We would throw around ideas and dissect them over lunch. The concept of building a venture, which would have a face in the US but would leverage the cost advantage of India, emerged during such meetings. april 2010 | INC.india | 5 3
how i did it
In October 1989, all three of us quit on the
same day and began working out of Badri’s garage in Fremont, California. We managed to raise US$200,000 from investors and added to that our grand savings of US$35,000. By January 1990, we had our first order from Bell-Northern Research Labs to develop software at a distance.
Almost simultaneously, we also applied for an Export Oriented Unit licence in India. I am a believer of the old adage that luck favours the bold. We were given the licence on the condition that we would export Rs 90 lakh worth of our product in the next five years. The exchange rate stood at Rs 14 to a dollar. It seemed like a huge target back then, but we surprised ourselves by achieving it in a year and a half. In April 1990, we sold our digital simulator, called Vx-SIM, to NTT and Konami in Japan for US$250,000.
“My biggest challenge has been to look at things holistically; step back and see if the object of my affection is good for business.”
Resonance of success Rajiv Mody ringing the bell at the Bombay Stock Exchange in 2005. The public issue was oversubscribed 72 times.
technology—a pretty ambitious move at that time. The credit for these decisions primarily lies with Venkatesh, whose technical expertise and knowledge helped us spot trends well in advance. Four years later, Intel and Citibank chan-
My wife and I headed back home. It was a risky decision, but I still had my Green Card if things went terribly wrong. I shuttled between India and US, meeting potential clients. We also concentrated on getting some really smart people. I visited IIT Bombay, where professors like G Venkatesh and Sunil Sherlekar, who later joined us, were doing cutting-edge work in the communication technologies field.
nelled US$10 million into Sasken for a 10 per cent stake. We used that money to build our Bangalore facilities.
We began sponsoring projects for Rs 10,000 a year; the money helped students
As an entrepreneur, my biggest challenge
get a masters degree in technology and helped us strike up a relationship with some of the best brains on campus. This fuelled our technical developments. By 1995, we had become a destination for quality talent. The same year, Suresh and Badru, spun off our chip design simulator product into another company and left.
Three significant decisions helped boost our stand in the market. We started work-
ing in GSM with Nortel, not realising that this would become the de facto world standard. Secondly, we were working on ADSL technology, which we licensed some of that work to a company in the Valley in 1998. Thirdly, we began work on 3G WCDMA
5 4 | INC.india | april 2010
In 2000, we decided to focus our energies better. We removed electronic design
automation from our bouquet of services. Our turnover grew from US$17 million in 1999 to US$28 million the next year—simply because we were more focussed.
has been to transform from being someone who is passionate about something to a person who can look at things holistically. I learnt to step back and see if the object of my affection is actually good for business.
At the turn of the century, the tech bubble went bust. We had to ask people to take a 20 per cent pay cut. The gloomy air and the nervousness of that August afternoon reminded me of my teaching days. I learnt that day that when people see your vulnerabilities, they usually understand you, and accept that these are temporary times. Three years later, we went for a public listing. Those were heady days; like being
on opium. We were oversubscribed 72
times. Later that year, we were voted the second-best place to work at by a survey. In 2006, we acquired Botania Hitech in Finland for US$45 million to get close to
Nokia, as a customer. Our plan worked; it is our single largest customer. That same year, we also set up shop in Mexico.
Then, in 2008, the economy cratered and survival became the order of the day. At the same time, Texas Instruments exited the chip design space. This was really bad news for us, since they were a partner. Tough times bring on tough decisions. I had to ask Hari Iyer, head of HR, and Sri Kannankote, head of marketing, sales and offerings, to resign. We started downsizing from the top. Since then, we have been focussing largely on raising the bar on our efficiency. We are now working to finish the satellite phone. The launch date is July. Our cell
phones transmit a signal one or two km to the closest transmission tower. A satellitephone signal will be able to push past 36,000 km, and yet not kill the six-hour battery-life of the phone. It’s a project that has almost come to represent the next frontier. We are proud of this accomplishment.
I believe it is important for every person to challenge themselves to do things that
seem impossible. The hardest part is the act of doing something; once you take the plunge, there is nothing more gratifying . The journey that follows is your reward.
Calorie karate (L to R) Himanshu Khurana, Varun Gupta, Namit Nangia at the park, outside their office.
6 0 | INC.india | april 2010
Photograph by Vinod
strategy
Company:
LifeMojo.com Founding Team:
Namit Nangia Himanshu Khurana Varun Gupta Location:
Bangalore Number of Employees:
Six
Founded:
May 2008
Revenue last month:
Rs 1.55 lakh
Projected revenue for next year:
Rs 50 lakh
Business Model(s):
Fitness products, diet counselling to individuals over phone, and corporate wellness packages Charges for services:
Rs 1,490 per month for a weight loss diet consultation. Charges for products:
Rs 50 to Rs 80,000 Client base:
120+ customers per month Funding sought:
US$1 million
Elevator Pitch LifeMojo wants to make Indians healthier, byte by byte. Can an injection of US$1 million help? The Pitch “We help people lead healthier lives. Most websites offer tips for
healthy living, but we go a step beyond. In addition to health-related content, we provide consumers a telephone consultation with experts to solve queries related to fitness and weight management. The bouquet of services on our website makes wellness effective, accessible and affordable for all. For example, we can customise a consumer’s weight loss plan—after the initial diet consultation, we can send targeted tips, recipes, articles and homeexercise videos. We intend to make this service even more effective over time by offering statistical analysis of the diet plans given to the clients. This in turn raises the entry barrier for anyone who wishes to enter this space as a competitor.” — As told to Jacob Cherian.
The Experts Weigh In Good Market, Adapt Quickly
Sharpen Focus
Specialise and Spa
There are only a few large and credible sources of information, advice, services and products in the health category. So the opportunity clearly exists to create a brand in this category. The challenge is likely to be the business model economics: what is the cost of customer acquisition and customer servicing (voice calls), and is it lower than the revenue earned per interaction/month/year from the consumer. In the early days, it may possibly be more capital-efficient to focus on the B2B opportunity (to acquire customers quickly, get revenue early and build the brand cheaply), while the B2C opportunity emerges.
LifeMojo should identify a segment that it can own, rather than offer broad-based weight management solutions. They should take a call on which elements of the services mix to retain, so they can present a focused value proposition to the consumer. My view would be to un-clutter the portal by eliminating non-paying services, such as SMS tips, etc. and online product store as these are not areas in which Lifemojo wants to establish market leadership anyway. And I don’t think consumers are going to miss them. Lifemojo will need to reach out to large groups of potential customers. B2C will be an expensive game to play.
LifeMojo will need one lakh customers to become a Rs-15crore company. For this, they need to give information that is highly-specialised, hard-to-find and India-specific. Specialists make a lot of money because they can charge a lot. So how do you appear to be a specialist and get people to trust you? From our experience in this space, we have learnt that people would rather go to their own doctor instead of trusting online advice. There should be an offline element which they can execute on their own, and at the same time it should be inexpensive—like a poor man’s spa. They should also focus on building a community.
Manik Arora, Founder & Managing Director, IDG Ventures India Advisors
Prajakt Raut, Co-founder, Orange Cross
Pravin Gandhi, Managing Partner, Seedfund april 2010 | INC.india | 61
Managing Initiation rites for new employees this page Hiring How to choose your replacement page 57 Growing Pains Could taking on a big client be worth the risk? page 58 Elevator Pitch A new websitewants to make Indians healthier, byte by byte. Will an injection of US$1 million help? page 60 Technology Estate planning for your digital files page 62 Sales & Marketing How would you market a theatre group that spins plays out of management books? page 65 Finance How to read a term sheet page 66
Social Networking
Getting people to talk about you on Facebook and Twitter page 63
strategy Move It When new hires at Gentle Giant run the tiers of Harvard Stadium, even the company's CEO joins in.
Managing Welcome aboard. Now, run! Rituals bring new hires into the fold photo: photos.com
Fourteen men and one woman are snaking up and down the steep
tiers of Harvard Stadium. They started in a tight pack but have spread out, the natural athletes bounding ahead, the rest trotting resolutely behind. Their boss, Larry O’Toole, jogs along toward the rear, his back straight, his long legs scissoring. At 59, O’Toole is almost three times the age of some of the run-
ners. At the top of the final section, after racing up and down more than 1,000 steps, he rests, bent at the waist, his hands splayed across his knees. Around him, people are clapping. “All right, man!” someone cheers. “Nice, Larry. Nice.” The stadium run is an initiation rite at Gentle Giant, a US$25 million moving company based in Somerville, april 2010 | INC.india | 5 5
strategy
Massachusetts. The practice began informally in the 1980s, when O’Toole hired members of college rowing teams, who liked to work out on the stadium stairs. In the early nineties, O’Toole institutionalised the run as a way to test the mettle of new hires and emphasise that he expects them to push themselves. Most movers complete the trial within their first few weeks on the job. Office workers are encouraged to try as well, and about a quarter of them do. Afterward, they recharge with scrambled eggs and sausage while O’Toole delivers an orientation speech. “A lot of people who come here have heard about the stadium, and it tells them this is the kind of place they’re looking for,” says O’Toole. “Some come from other moving companies, and they’re tired of working with layabouts. They want to work hard and challenge themselves. And they want to do it with people who feel the same way.” That a gruelling run up multiple flights of stairs can be an effective recruitment tool speaks of the power of ritual. Institutions as diverse as religious orders, fraternities, and the military use ceremonies to welcome new members and communicate their beliefs. Businesses can do something similar. So long as they don’t devolve into hazing, company initiation rites speed up assimilation by engaging recent hires in activities that convey the organisation’s character while creating an instant bond. “Initiation rites are an opportunity to create meaning for employees and a connection between them and their new employer,” says Daniel Denison, a professor of management at IMD in Switzerland and CEO of Denison Consulting, a leadership specialist. Some rites are glorified icebreakers designed to transform strangers into friends as quickly as possible. For example, within 30 days of their hiring, all new employees at CXtec, a supplier of data networking and voice equipment, serve coffee and doughnuts from a cart to everyone at the company’s Syracuse, New York, headquarters. Each freshman is paired with a 5 6 | INC.india | april 2010
veteran staff member. At CityMax.com, a build-your-ownwebsite service in British Columbia, new employees always start on Fridays, when work is less hectic and everyone has time to introduce him- or herself. The hire is greeted with balloons, streamers, and a welcome card signed by the entire staff. By the time lunch rolls around, “the comfort level is through the roof,” says cofounder and president Dean Gagnon. That’s when new hires are asked to relate an embarrassing story about themselves. “It gives everyone insight into the new person,” says Gagnon.
have heart, plead your case, finish what you start, and a dozen more. Greenawalt leads a discussion of how the practices are applied in the film and how new hires should apply them at Foot Levelers. Greenawalt estimates that several hundred people have watched Rudy in the 15 years he has screened it at the Roanoke, Virginia, company. “It moved me,” he says of the film. “I decided: That’s the kind of person I want working for this company. We’ve made it a policy that within 90 days, every new hire sees it. It’s a rite of passage.” The lessons of Rudy have become
When an employee runs into trouble solving a problem, the manager routinely responds, “Did you Rudy that?” The most effective initiations immerse new hires in the company’s mission and directly involve the CEO. “Leaders can’t always be there,” says Denison. “And the best way to be felt when you’re not there is to leave behind common stories and experiences that leverage your principles in a viral way.” When employees of Foot Levelers, a maker of chiropractic products, notice the “Rudy in Progress” sign affixed to the door of the executive conference room, they can picture the scene within. A handful of new hires sit around a long table piled with candy, sodas, and bowls of popcorn as they watch a DVD of Rudy, the 1993 inspirational football drama. Rudy Ruettiger, an ungifted but never-say-die sparkplug, finally takes the field in the last minutes of a game between Georgia Tech and his beloved Notre Dame. Fans in the stadium chant his name. As Rudy realises his impossible dream, employees pluck at boxes of tissues. The lights go up to reveal CEO Kent Greenawalt, who asks for everyone’s impressions of the film. Then he passes out a sheet that identifies practices that made Rudy successful: Stay focused,
ingrained in company vernacular. When an employee tells a manager he has run into trouble solving a problem, the manager routinely responds, “Did you Rudy that?” The employee is expected to say, “Let me get back to you” and go try again. “They learn to ask the question: Have I done all that I possibly can?” says Greenawalt. Similarly, Gentle Giant’s stadium run contributes to the quality control that has earned it nine Best of Boston awards from Boston magazine. In many cases, O’Toole won’t put a new hire on a truck until he has observed the hire’s performance on the stairs. “Moving is very unpredictable,” says O’Toole. “You need to know the person isn’t going to let up.” Many who complete the run return to do it again and again, panting alongside new employees to demonstrate solidarity— and to try to improve their performance. “I’ll definitely do better next time,” says Kyle Green, who joined the company in the fall. “You’re not a Gentle Giant until you’ve done the run.” —Leigh Buchanan
strategy
Hiring Filling some big shoes How to hire your replacement
Who's the best? Founders look for people who can share their vision and work well with them.
Early on, Adam and I decided that we would need to bring in a
CEO who had stronger management and operating experience. For a founder, giving up control is always challenging. When you start a company, you have a vision that you’re trying to bring to the world. The key is to find partners who have that same vision. When we brought in a CEO to build the next stage of the company, it was not an easy search. Adam and I worked very closely with our board. The board was sensitive to the fact that we needed to find someone who would work well with us. We needed someone who came from a consumer packaged goods background, who had really strong management and operating skills. Yet we also needed somebody who would embrace and enhance our unique culture. One of our values is to keep Method weird. At a lot of companies, you act differently when you are at work. We want people to be themselves here, so they can be cre-
ative, open-minded, and willing to take risks. Before any candidates get hired at Method, they’re asked to do a homework assignment, which always consists of three questions. For this particular assignment, the first question was, “How do we stay ahead?” The second question was, “How do we maximise profitability?” The third question, which is always the same, was, “How will you help keep Method weird?” We don’t expect anybody to have a “right” answer, but we want to see how people think. It lets us see what a board meeting would be like with these people. When we push back on something they believe in, are they defensive? Initially, back in December 2008, we had three finalists. We didn’t move forward with any of them. The second time around, we had three new candidates, and Drew was one of them. Adam and I had worked with Drew when he was at Whirlpool, which is a strategic partner of Method, so there was a previous relationship in place. Ultimately, he came out best in the homework assignment. While we were interested in how Drew would fit in culturally, we were first and foremost examining how he would drive the business. So for april 2010 | INC.india | 5 7
Photo: photos.com
Being the boss isn’t always easy, but handing the job to someone else can be even tougher. After carefully building a company from scratch, hiring someone else to be CEO can feel like giving away your child to a stranger. Yet many company founders—especially those who are ambitious, but inexperienced—eventually decide to hire a more seasoned replacement, in the hope of turning a scrappy start-up into a household name. Eric Ryan and Adam Lowry, cofounders of Method, a San Francisco– based maker of home cleaning supplies, have gone through the process twice. In 2001, nine months after founding the company, they hired Alastair Dorward, Method’s first CEO, to focus on raising capital while Ryan and Lowry concentrated on sales and product development. Last May, the company, which has US$100 million in annual revenue and some 100 employees, brought in Drew Fraser, who was previously an executive at Whirlpool, to help chart Method’s next phase of growth. Ryan recently talked with Inc. reporter April Joyner about how he chose the right candidate the second time around.
strategy
Finding That Special Somebody First you have to identify the right person to nurture the company’s vision. Then you have to adjust to a new role. Here are some tips for making a smooth transition.
Drew, demonstrating how he would help keep Method weird was showing how he would 1. Have specific goals in mind Take some time to think about your long-term goals and strategies. Identify your maintain the balance between being strategic strengths and weaknesses, so you can hire someone who complements you. and having discipline, and keeping our edge and endorsing creativity. He’s been the perfect 2. Don’t make the decision alone fit for our culture. Get advice from your board, a trusted mentor, or a consultant. Allowing others to aid in Every Monday, we do a company huddle, the vetting process frees you to concentrate on the intangibles that others may miss. and we introduce new employees at that 3. Evaluate personalities as thoroughly as resumés time. Often we’ll ask them to share their No matter how sterling their resumés, some candidates just don’t click. To get a answer to “How will you help keep Method sense of candidates’ personalities and managerial styles, interview direct reports at weird?” When we introduced Drew, his wife their three previous positions, suggests Dick Strayer, founder of Strayer Consulting, helped us with a slide show of childhood which advises firms on hiring executives. photos that were on the embarrassing side. It 4. Take time to adjust was a great icebreaker. The transition from a leading to a supporting role within your company can be disoriWe worked hard up front to make sure enting. You may need to try a few positions at the company before you find the best fit. Drew got the information he needed so he could digest it before he got here. Then we gave him free rein. Drew has elevated the management of our company. He’s built a recently launched what we believe is the world’s most efficient stronger career development program to help employees get what laundry detergent. For a small company, it’s a huge revolution, they need, and he’s holding us more accountable. But we haven’t lost what makes us special: creativity, innovation, great culture. from the chemistry to the packaging to the dispensing. As the Because the company is better run, Adam and I are freed up to founder, I’m freed up not only to push innovation but to hold contribute at the highest level. I spend a lot of time working with everybody true to what our mission is, what our vision is, and how designers on product innovation and meeting with we should continue to be courageous. retailers. My goal is to be the editor in chief of our brand. We
Growing Pains Could that big account be risky? Diversifying your customer base
Beware the size Whatever you call it, taking on a big client can put you in a vulnerable spot.
5 8 | INC.india | april 2010
Entrepreneurs often talk about the prospect of scoring a big client in hunting terms—catching the elephant, hunting the bear, reeling in the big fish. Landing a big client means more prestige, better connections, and bigger paychecks. But relying on a client for a large chunk of your revenue can put you in a vulnerable position, especially if you have hired more staff or neglected your other clients to cater to its whims. “No matter how seductive it is to have a client like Amazon or Wal-Mart, those deals go away,” says Kerry Sulkowicz, founder of the Boswell Group, a consultancy based in New York City.
Sam Chapman knew that was a possibility when Morgan Stanley hired his 20-person Chicago PR firm, Empower Public Relations, to represent some of the brokers in the financial firm’s local office. The account made up 33 percent of Empower’s annual revenue. Everything was going well, until Morgan Stanley suddenly dropped Chapman’s firm in preparation for its merger with Smith Barney. Chapman was left scrambling. He had to dip into his personal savings to make payroll. Experts caution small businesses not to depend on one client for too much revenue. But no one wants to turn down
strategy
a big account, especially in a recession. So, how does a business manage to reap the rewards without putting everything at risk? Watch the percentage For Terralever, a Tempe, Arizona, interactive marketing company that works with brands such as Red Bull, BMW, and Microsoft, managing risk starts with getting an appropriate client mix. Ideally, no one account—and no one industry—would represent more than 25 per cent of revenue, says Scott Miraglia, Terralever’s chief operating officer. “You almost want to look at it like a portfolio of stocks. You don’t want to have everything in just one industry,” he says. For example, says Miraglia, a great number of interactive agencies catered exclusively to the auto industry, and many of them folded in the wake of the sector’s demise. At Terralever, Red Bull represents about 20 per cent of the company’s annual revenue, but Miraglia works hard to keep the percentage under control. Terralever, which started with one Red Bull event in 2005, now works on 45 projects for the energy drink company’s global and North American divisions and has seen revenue from Red Bull increase 30 per cent to 50 per cent annually. That has prompted Miraglia to hire more salespeople and spend more of his company’s revenue on business development. Focusing on sales can help prevent you from being lulled into a false sense of security, says Constance Bagley, a professor at Yale School of Management. “You can’t stop being scrappy. It’s a matter of mental discipline. You have to constantly be thinking that things can change dramatically in 60 to 90 days.”
Be flexible For some companies, diversification isn’t always an option. “I would like to have a nice balance of clients,” says Chapman from Empower Public Relations. “But two things happen when you’re a growing business. You get lucky sometimes—and sometimes you have to shrink very quickly.” If you are not able to diversify your portfolio of clients, then you need to be prepared to scale down as fast as you scaled up. When Chapman landed the Morgan Stanley account, he was cautious about staffing up, hiring only a few employees and pushing his staff to work overtime to handle the extra load. “I tried to do it so that we would be really stretched as a firm at the beginning of the engagement,” he says. As a result, Chapman had to lay off only two people when Empower lost the account. At Terralever, Miraglia hires freelancers to handle 20 per cent of the firm’s overall workload. That way, he figures his company can sustain the loss of the Red Bull account without having to “cut into the muscle of who we are.” Of course, it’s not always easy to stay nimble when you are trying to please a big brand. After two years of flying back and forth from Tempe to Red Bull’s North American headquarters in Santa Monica, California, Erin Enriquez, who manages the Red Bull account, opened a four-person Santa Monica office in 2008. Although workers in the satellite office devote 75 percent of their time to servicing Red Bull, Terralever’s goal is to use the location as a springboard to diversify its client list.
Manage the relationship Even if you planned for the possibility, no one wants to lose big clients. So, how do you make sure they hang around for as long as possible? Big companies are looking for value, says Bagley. Figure out your client’s immediate concerns. “Make sure the information is flowing both ways,” she says. “What info can you bring them about Crafting the Contract their costs and competitors? Have your account manNegotiating deals with big companies—and their teams of lawyers— can be tough. Often, smaller companies don’t have a lot of leverage ager talk to their counterpart; have your salespeople to make demands, but it doesn’t hurt to push for better terms. talk to their R&D.” Enriquez uses this strategy with Red Bull by Ask for more notice Contracts often include a notice to terminate. You want to negotiate for focusing on the client’s desire to be perceived as as much notice as possible in the event that the client leaves. You can also ask technologically forward in its online marketing. for “the right of negotiation” or the “right of first refusal,” which gives you a “The No. 1 thing is to be aware of the competition chance to throw in a bid if the client wants to go to a competitor. and what they’re doing, and what new types of technologies are out there,” says Enriquez. “Red Lose the nondisclosure Having a big brand on your client list isn’t as valuable if you can’t tell anyone Bull appreciates us coming to them and pitching about it. Terralever asks each client if it is willing to be used as a case study them and usually agrees to let us do a portion of on Terralever’s website and whether Terralever can use the client’s logo on that work.” marketing materials. Plus, once you have that competitive insight, you can use it to attract new clients—especially Hang on to your intellectual property If your company will be creating something—say, a new technology—for a if your contract isn’t exclusive. “It’s a lot like client, ask for shared rights to the intellectual property. COO Scott Miraglia high school dating,” says Bagley. “Nothing makes usually asks for shared ownership of the software code Terralever produces you more desirable than the fact that someone else for its clients’ interactive marketing campaigns. “It can become tricky,” he wants you.” —Nitasha Tiku says. “We want to take the code and repurpose parts of it for other clients. They want to be able to use it anyplace, anytime.”
april 2010 | INC.india | 5 9
Calorie karate (L to R) Himanshu Khurana, Varun Gupta, Namit Nangia at the park, outside their office.
6 0 | INC.india | april 2010
Photograph by Vinod
strategy
Company:
LifeMojo.com Founding Team:
Namit Nangia Himanshu Khurana Varun Gupta Location:
Bangalore Number of Employees:
Six
Founded:
May 2008
Revenue last month:
Rs 1.55 lakh
Projected revenue for next year:
Rs 50 lakh
Business Model(s):
Fitness products, diet counselling to individuals over phone, and corporate wellness packages Charges for services:
Rs 1,490 per month for a weight loss diet consultation. Charges for products:
Rs 50 to Rs 80,000 Client base:
120+ customers per month Funding sought:
US$1 million
Elevator Pitch LifeMojo wants to make Indians healthier, byte by byte. Can an injection of US$1 million help? The Pitch “We help people lead healthier lives. Most websites offer tips for
healthy living, but we go a step beyond. In addition to health-related content, we provide consumers a telephone consultation with experts to solve queries related to fitness and weight management. The bouquet of services on our website makes wellness effective, accessible and affordable for all. For example, we can customise a consumer’s weight loss plan—after the initial diet consultation, we can send targeted tips, recipes, articles and homeexercise videos. We intend to make this service even more effective over time by offering statistical analysis of the diet plans given to the clients. This in turn raises the entry barrier for anyone who wishes to enter this space as a competitor.” — As told to Jacob Cherian.
The Experts Weigh In Good Market, Adapt Quickly
Sharpen Focus
Specialise and Spa
There are only a few large and credible sources of information, advice, services and products in the health category. So the opportunity clearly exists to create a brand in this category. The challenge is likely to be the business model economics: what is the cost of customer acquisition and customer servicing (voice calls), and is it lower than the revenue earned per interaction/month/year from the consumer. In the early days, it may possibly be more capital-efficient to focus on the B2B opportunity (to acquire customers quickly, get revenue early and build the brand cheaply), while the B2C opportunity emerges.
LifeMojo should identify a segment that it can own, rather than offer broad-based weight management solutions. They should take a call on which elements of the services mix to retain, so they can present a focused value proposition to the consumer. My view would be to un-clutter the portal by eliminating non-paying services, such as SMS tips, etc. and online product store as these are not areas in which Lifemojo wants to establish market leadership anyway. And I don’t think consumers are going to miss them. Lifemojo will need to reach out to large groups of potential customers. B2C will be an expensive game to play.
LifeMojo will need one lakh customers to become a Rs-15crore company. For this, they need to give information that is highly-specialised, hard-to-find and India-specific. Specialists make a lot of money because they can charge a lot. So how do you appear to be a specialist and get people to trust you? From our experience in this space, we have learnt that people would rather go to their own doctor instead of trusting online advice. There should be an offline element which they can execute on their own, and at the same time it should be inexpensive—like a poor man’s spa. They should also focus on building a community.
Manik Arora, Founder & Managing Director, IDG Ventures India Advisors
Prajakt Raut, Co-founder, Orange Cross
Pravin Gandhi, Managing Partner, Seedfund april 2010 | INC.india | 61
strategy
Technology I bequeath to you the server password Estate planning for your digital data
6 2 | INC.india | april 2010
Open Sesame If an owner were to be hit by a car, how would anyone get access to vital information, such as the corporate bank account?
public document,” says Colonel Betz, a partner who specialises in estate planning at the law firm Perkins Coie. Some estate planners have begun developing ways to pass on this sensitive information. At Perkins Coie, a client’s login information can be filed in a separate document, called a data form, that will be given to the executor of the estate upon the client’s death. Visiting your estate planner every time
you change a password or sign up for a new online service probably isn’t feasible. But there’s always pen and paper. You could even store the information on a USB flash drive and keep it in a safe-deposit box or a safe in your home. “At the very least, you want to write down a list of everything that you have passwords for,” says Mark Gotlieb, an attorney at Gotlieb & Associates, a Miami law firm that specialises in estate planning. You should also include
Photo: photos.com
After the birth of his first child, Sol Lipman, the 36-year-old CEO of 12seconds.tv, began contemplating what would become of his business if something were to happen to him. Lipman founded 12seconds.tv, an online video hosting service based in Santa Cruz, California, two years ago. Although he managed eight employees, he was the only one with access to much of the company’s important digital information, such as passwords to the servers, employee payroll and benefits accounts, and the corporate bank account. “I do it all,” says Lipman. Not only that, but his email inbox contained a lot of crucial information. If he weren’t around, he worried, how would anyone get access to this stuff? These days, much of what makes a company tick is wrapped up in digital files that entrepreneurs go to great lengths to keep private. And at many small companies—especially those, like Lipman’s, that lack formal IT and HR departments—the owner is the only one with access to important login information that is necessary to keep the business running. Without a plan to pass on those digital files and passwords, sorting through an entrepreneur’s online estate after he or she is gone can be time consuming and frustrating for loved ones. If you already have a will, your attorney can draft an addendum that spells out who should receive the keys to your various digital accounts. However, a will is not the place for usernames and passwords. “You don’t want to file that information in a will, because it becomes a
strategy
For $30 a year, Legacy Locker helps you pass on your digital files and accounts. acy Locker password to his CTO and, because he and the CTO often travel together, named his software engineer beneficiary of 12seconds.tv’s server passwords, administrative logins, and website source code. Lipman’s wife is listed as the beneficiary of his personal accounts. “If something were to happen to me, I want to make sure someone has access to those things quickly,” says Lipman, “without having to appear before a judge or check in with an executor of a will.” —Tamara Schweitzer
Social Networking Tell your friends about us How to get Twitter endorsements When Jim Amos announced the
opening of Tasti D-Lite’s new store in Nashville last July, he got an unexpected publicity boost. Country music star and Nashville resident Taylor Swift took it upon herself to promote the opening, sending an enthusiastic Twitter message to her 800,000 followers on the social networking service. “We’re getting a Tasti D-Lite in Nashville,” Swift wrote. “YES!!” Amos, who became CEO of Tasti D-Lite in 2007 after leading Wooing followers If a friend tweets your a buyout of the company, was brand's name or evangelises your certainly pleased, but high-proproduct or service, look for a way to reward them. file endorsements of his product have become almost the norm. Since its founding in New York City in 1987, Tasti D-Lite, which sells frozen dairy desserts that taste like ice cream but are lower in fat and calories, had grown with the help of plenty of celebrity endorsements and prominent placements in television shows like Sex and the City. But as Amos looked to expand beyond New York City, where most of Tasti D-Lite’s 60 stores are located, he decided to focus on winning endorsements of a more pedestrian kind: those made by regular customers on social networks. “The celebrities helped us with word of mouth before the technology was there,” says Amos. “But now with Twitter and Facebook, regular customers are having conversations that can be used to build our brand.” Amos imagined thousands of happy customers raving about his company’s low-calorie desserts to their online pals. The strategy makes sense. Both Twitter, with some 60 million monthly users, and Facebook, with more than 350 million, encourage people to spread the word about rock bands, television shows, and companies they love. (Users do this by “following” a person or company on Twitter or becoming a “fan” on Facebook.) The services have helped turn C-list celebrities into hot commodities, insurgent political campaigns into wellfunded machines, and struggling companies into hip brands. But how do you get followers if you are not famous? And how can you persuade people to endorse a seemingly mundane company or product? april 2010 | INC.india | 6 3
courtesy company
instructions so your successor knows, say, which email folders contain sensitive company information and where to find certain files on your laptop. It’s important to update the document regularly, says Gotlieb, and to make sure someone you trust knows where to find it if the need arises. He advises telling more than one person how to find the data. “If something happens to you and your business partner, and your information is stored at work, your family might not know that,” Gotlieb says. There’s also a new service that may help. For $30 a year or $300 for a lifetime membership, a website called Legacy Locker helps you pass on your digital files and accounts. You enter usernames and passwords and designate beneficiaries for each account. You can also upload digital files and leave instructions (and farewell notes if you are feeling sentimental) for your heirs. The service requires you to name someone responsible for confirming your death. (This individual must submit a death certificate to Legacy Locker.) Lipman decided to try out the service after working with an estate planner to draft a traditional will. He gave his Leg-
strategy
It’s not easy. “Most people won’t spontaneously want to become Tasti D-Lite’s social networking strategy represents a new twist on fans of your company,” says Victoria Ransom, the CEO of Wildfire the approach taken by Powell’s. Rather than simply asking for folInteractive, a Palo Alto, California, company that specialises in lowers, in January, the company began asking its customers to helping businesses attract fans on Facebook and followers on Twit- turn over their Twitter account information as part of Tasti ter. “You have to give customers a reason to engage with your D-Lite’s loyalty program. Frequent shoppers get a point for every brand.” For anywhere from a few hundred dollars to thousands of dollar they spend and an extra point if they post a message about dollars, Ransom’s company will build you a Facebook application their purchase on Twitter. Fifty points gets a customer a free designed to attract new fans to your company’s page. The applicamedium cone or cup. tions typically try to entice users with a contest—say, a chance to To get points for tweeting, a customer submits his Twitter userwin a US$50 gift certificate—or a coupon. Once a customer clicks name and password. Then, every time he buys something at a on the link, she is directed to a page that asks her to input her Face- store, he swipes a loyalty card at the register. Tasti D-Lite’s pointbook account information. When the customer completes the of-sale system automatically logs in to his Twitter account and form, a link to the promotion typically will be published on her sends a tweet informing his followers of the purchase. “I just Facebook page, which can attract more fans. earned 9 TastiRewards points at Tasti D-Lite New Rochelle,” was Wildfire’s approach worked for Edible Arrangements, a the Twitter message posted on the account of Drew King after he Wallingford, Connecticut, franchiser that sells fruit baskets in and his wife treated themselves to dessert in mid-January. It the United States, Europe, and the Middle East. In a ploy to boost included a link to a website that encouraged King’s friends to sign holiday sales, the company announced in October that it would be up for the program. giving away a coupon that could be redeemed for a US$15 box of Creating the world’s first tweeting cash register didn’t come chocolate-dipped fruit to the first 100,000 people who became a fan cheap—Tasti D-Lite spent more than US$10,000 to modify its of the company on Facebook. Within four days, Edible Arrangepoint-of-sale system—but Amos expects the program to pay for ments had reached its goal. Many of the new fans went on to make a itself as more customers sign up for it. “It’s going to be very profpurchase. Sales were up more than 10 per cent compared with the itable,” he says. “Word-of-mouth marketing has always been previous year. “The Facebook program exposed a lot of new cusextremely important to this company, but Twitter has the tomers to the company,” says Stephen Thomas, the company’s vice capacity to increase word-of-mouth discussions exponentially. president of marketing. Edible Arrangements paid about It’s like the difference between snail mail and email.” US$15,000 for the promotion, plus the cost of the free merchandise. —Max Chafkin If you can’t afford to give stuff away, you can always just ask customers to give you some Facebook love for free. That was the approach taken by Powell’s Books, a bookstore in Portland, Oregon. Getting Friended Beginning in 2008, the company placed small Social media consultants will tell you that spending time graphics at the bottom of every page on its website interacting with your budding audience is the best way to build a following. That's true—but getting popular can take a long and email newsletters. These little advertisements time. Here are three ways to jump-start the process. entreated customers to “Find us on Facebook” and “Follow us on Twitter.” For a month, Powell’s even used the marquee in front of its store to ask Tactic How it works Cost for Facebook fans, which was surprisingly effec Beg If you have a few loyal customers— Free tive, says Megan Zabel, who manages the compa or even a big family—simply asking ny’s social media efforts. them to become fans or followers Over the course of a year, the company went is a great way to get started on from roughly 3,000 fans on Facebook to 38,500 Facebook and Twitter. Send them an email or put a note on your website. and from a few hundred followers on Twitter to more than 12,000. Although the campaign has Sweeten Unless you are famous, most people Low not directly produced a large revenue increase, the deal won't be inherently interested in Zabel says the fans’ and followers’ online pur your tweets or Facebook messages. chases have more than offset the cost of the cam Entice them with special offers, contests, or coupons. paign. In addition, having a large fan base creates the impression of a vibrant community that she Advertise Many a company has successfully Moderate thinks will help Powell’s in the long run. “The upped its fan base by buying online more fans we have, the more people are prosely ads. It works, but you may be better tising our brand,” she says. “Word of mouth is off spending your advertising dollars on acquiring actual customers. one of the most powerful selling tools.” 6 4 | INC.india | april 2010
strategy
Sales & Marketing Trade twist to theatre act Can it script a success saga in the next act? Evam is a theatre group based out of Chennai. They are known for spinning English plays out of management-related books. A weird combination explained by the founders’ passion for story-telling and their management backgrounds. Not content with just staging plays and making money out of the ticket sales, the group also offers training products for corporates and educational institutes using theatre methodologies. They sell their entertainment arm through customised and pre-booked shows and take this a step further by offering theatre as a medium to brand partners. The group was founded in 2003 and in seven years they have raked in an annual revenue of Rs 1.5 crore. Venue costs are their largest expense in the entertainment vertical, while human resources training is the most expensive in the training vertical. Their biggest challenge at the moment is finding more industry players who vibe with their methodologies and approaches. We asked entrepreneurs to come up with ideas on how to market this unique idea.— Jacob Cherian
How would you sell that?
PITCH NO. 2: Online and On-ground Harsh Roongta, Apnapaisa.com, a price and feature comparison service provider for financial products. Their advantage, and also their disadvantage, is that they have no competitor. Disadvantage, because they will have to build their idea from scratch. They could look at tying up with event management companies or HR management companies and take part in annual offsites. I don’t see Evam in the results when I google “management training techniques”. SEO/SEM is not expensive.
PITCH NO. 3: Language, Location Aslam A Memon, Navarang, designs, manufactures and prints T-shirts. If they expand the language base and include Hindi and Tamil plays, they will connect with a larger audience located across cities.
Act fast Quick action is needed on the digital front for this theatre group.
Feedback on the Feedback: Franchising is a fabulous idea and we are in the process of doing a collaborative-franchise model. Generating content from the FB group will not work. Ideas may happen by accident, but developing a system there is not likely. HR conferences are fabulous idea. We are already looking at influencing students who go into HR institutes and to have student outreach programmes—as they are our future buyers. The corporate identity of our training vertical— Happy Factory—will be live by April. We have been doing it till now as a natural extension of what we do. We want to stick to English as our medium as it gives us access to all of India as well as the world. We are completely to blame for our current online identity. We want take the advice of handling our online identity and content very seriously.
PITCH NO. 4: Link up quick Jessie Paul, managing director, Paul Writer Strategic Services, author of No Money Marketing and a B2B marketing expert. Primary buyers for their product would be HR professionals responsible for training and development. Search Engine Optimisation would be an obvious investment. Evam’s CEO’s LinkedIn profile shows 41 connections—he has the potential to add more. This product could be marketed easily through LinkedIn ads. Many HR professionals emerge from XLRI—Evam can offer their service on-campus, so that future potential buyers can experience their value first-hand. Sponsoring XLRI’s alumni meetings would be another way to reach the core community. Targeted PR in HR-oriented magazines would be another key. Given their revenues, they must have testimonials from current happy users, but their website shows none. Another route for them would be to rope in corporate leaders or academics to validate their programmes.
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courtesy company (2)
PITCH NO. 1: Franchise It Kunal Jain, TheIndianStartup.com, a networking site bringing Indian entrepreneurs together on a single platform. They need a franchise model to expand their geographical reach. They can sell the rights for their training methodology and share revenues. Evam can use a social media to find evangelists to sell their products. With a Facebook page/group, they can involve a larger audience in idea generation, scriptwriting and other production processes. This audience can help pre-sell shows, thereby reducing risk of wasting venue costs. Audiences can connect Evam to decision-makers to promote their corporate-training programmes. A commission-based lead generation structure could be used to maximise results from key connections.
strategy
Finance Coming to terms How to read a term sheet When you’re in need of funding, receiving a term sheet—a legal document that, despite its name, is usually several pages long—is a reason to celebrate. You have probably spent hours working hard to land an offer from investors, delivering countless pitches and presentations along the way. But don’t be so quick to sign on the dotted line. Term sheets also represent a means for investors and venture capitalists to dilute your shares and gain control of your board. There are several areas that frequently become points of negotiation between entrepreneurs and investors. Here are a few of the terms you should look over especially carefully. A securities lawyer can help you detect other possible snares. And don’t forget—most term sheets are nonbinding. Until you sign a formal contract, the investors can change the terms at any time. —Darren Dahl
What the company’s worth
The valuation is what most entrepreneurs focus on first. It’s basically an agreement with the investors about how much the company is worth. It is crucial to understand the difference between “premoney” and “postmoney” valuation— the value of the company before and after the investment. For example, according to this term sheet, the company will have a postmoney valuation of US$8 million. That includes US$3 million from the investors. So the company’s premoney valuation is US$5 million. Do the math: The investors get a 37.5 per cent ownership stake. The greater the premoney valuation in relation to the postmoney valuation, the more of the company the founders get to keep.
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Offering terms: Issuer:
Bootstrap Innovations
Investors:
Goodfaith Venture Capital
Securities to be issued:
Series A Preferred Stock
US$3,000,000
Price: US$1 per share Pro forma capitalisation:
Shares
Common Stock
4,000,000 50
Option Pool
1,000,000 12.5
Goodfaith Venture Capital 3,000,000 37.5
Total:
Setting aside stock options
Most term sheets reserve some stock for an option pool, which will be used to compensate employees. A frequent area of contention is whether the size of that pool is determined using the premoney or postmoney valuation. “When it comes out of premoney, it dilutes the founders’ shares,” says Healy Jones, a former VC who pens the blog Startable.com. In this case, the option pool is 20 per cent of the premoney valuation.
Per cent
8,000,000 100
Surprise! You have to earn your shares
Some term sheets include a vesting plan, which states that founders and other common stockholders are expected to earn their ownership stake over a certain time frame, typically two to three years. Because the founders own 100 per cent of their shares before they bring on investors, agreeing to a vesting schedule “can be very confusing for them,” says Salil Deshpande, a former entrepreneur and general partner at Bay Partners, an early-stage VC firm in Palo Alto, California. The reason for including this term is to ensure that the founders stick around, says David Freschman, managing principal of Innovation Capital Advisors, an early-stage VC firm in Wilmington, Delaware.
strategy
Liquidation Preference: In the event of a liquidation, dissolution, or winding-up, the proceeds shall be distributed to the stockholders as follows: First, pay three times the original purchase price plus declared but unpaid dividends on each share of Series A Preferred Stock. Thereafter, the Series A Preferred participates with the Common Stock on an as-converted basis.
Keeping control of the board
Make sure you have adequate representation on the company’s board. A typical term sheet might specify that the investors get two seats, the common shareholders get two, and a fifth goes to an agreed-upon outsider, such as an industry expert. But, when deciding who gets the seats for the common shareholders, be sure you leave room for both yourself and a CEO, advises Joshua Baer, founder of Austin-based OtherInbox, which recently raised US$2.3 million in funding from angel investors. “Not all founders remain CEOs postmoney,” he says.
Antidilution protection: The Series A Conversion Price shall be adjusted on a broad-based weighted average basis in the event future private placement equity financing is at a lower price.
Investors lock up their shares
If investors suspect one round of funding won’t be enough, they might try to secure aggressive antidilution provisions, which prevent their equity from being diluted by later investments. These provisions, called a full ratchet, allow the investors to maintain the same ownership percentage in the company even if the company brings on additional investors. The difference, of course, is typically made up from the founders’ shares. Fortunately, many investors will agree to a weighted average antidilution term—like the one seen here—which weights the value of the investors’ money based on when it was invested. This tends to protect the founders’ shares to a greater degree.
Who gets paid first— and how much
Other than the valuation, how the founders and the investors will be paid after a sale or IPO can be the most contentious point of negotiation, says David HenkelWallace, a serial entrepreneur who has raised US$60 million from VCs. Investors typically request preferred shares, rather than the common shares retained by the founders and employees. Preferred stockholders usually get paid first when everyone cashes out. “Participating preferred” stockholders also share in payouts that would otherwise go to common shareholders. This can get dicey when there is no cap on the payout the participating preferred stockholders receive. For example, according to this term sheet, the investors would receive uncapped participating preferred stock, which entitles them to two sources of cash if the company gets sold. First, the VC firm gets back three times its investment—or US$9 million— plus any accumulated dividends. Then, because the investors own 37.5 per cent of the company, they also receive 37.5 per cent of whatever money is left over (if any) for common stockholders like the founders.
Don’t get tied down
Dividends: Annual 8 per cent dividend on the Series A Preferred Stock, payable when and if declared by Board, and prior and in preference to any declaration or payment of other dividends; dividends are not cumulative. For any other dividends or similar distributions, Preferred Stock participates with Common Stock on an as-converted basis. Paying out profits
It’s standard for investors to request an annual 8 per cent dividend, but that money is rarely pulled out of an early-stage company, either because the company is not profitable or because it’s wiser to reinvest the money in the business. If a term sheet states that dividends are cumulative, meaning that dividends compound year after year, watch out. That can end up being particularly expensive for a company that doesn’t sell or go public for four or five years.
Often tucked at the end of the term sheet is a standard “no-shop” provision that specifies that, upon signing, an entrepreneur will cease the process of courting other investors. Most investors ask for 60 days to 90 days, which is far too long, says Jones, who helped his new company, Pixily, raise US$1 million. Jones suggests pushing for 30 days.
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I Wish I Knew Then...
Rajesh Jain, founder, NetCore Solutions
It has been rightly pointed out that cash flow problems are the beginning of the end for many small businesses. I couldn’t agree more. If billings take time to convert into money in the bank, you are most likely headed towards a difficult predicament—the cash continues to leave your business through expenses that happen on schedule, even as the cash funnelling into the business shrinks. This happens despite meeting the sales targets. The years have taught me to keep a close watch over collections, and monitor reports of debtors, especially those that go beyond 60 days. I’ve come to realise that you have to keep thinking about multiple modes of monetisation. A friend once asked me a seemingly innocuous question: “What is the one thing that can cause us to fail?” After a pause, I replied: “Reliance on a single revenue stream.” To which, he argued that a business must always have focus. My counter-point was that at an early stage of a new venture, it is not obvious where the value creation will occur, or what will be the dominant business model or revenue stream. So, one needs to try different options and derive quick learnings on what will work and what won’t. At such a stage, it would be suicidal for a business to bet
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targets were met or not. I was wrong on both counts. Habits once formed are difficult to kick. Over time, missing numbers starts becoming an acceptable thing, and the culture strikes roots—both on the sales front and on the expenses side. That is why it is crucial to instil the discipline of meeting numbers early in companies. I also realised that closely linked with this discipline of numbers was the need to make everyone accountable to numbers that are committed. This forces the management team to review itself every three months, ideally with Learning with numbers Rajesh Jain learnt that external board advisors, you should never bet on a single revenue stream and get inputs that are mostly lost in the daily buson a single revenue stream. tle of business. These reviews can be a useful; Every company, however small, must and are an essential part of the process of develop a “numbers discipline” when it comes ensuring that even as the team thinks longto revenue and costs. For much of my busi- term, it realises the importance of delivering ness life, I have not bothered to do this. I used results in the short-term. to think that (a) small companies could not accurately estimate numbers for a month or quarter, since business is generally unpredictable, and (b) it didn’t really matter whether the
PHOTO BY Jiten Gandhi
He’s been an entrepreneur for more than 15 years. His first venture in the nineties, IndiaWorld, was a memorable one—bought by Sify in 1999 in one of the biggest internet acquisitions of the time. There, Jain didn’t really get a chance to learn what it takes to “build to last”. However, now, with NetCore Solutions—offering products and services in the mobile and messaging space—he wants a bigger, stronger company that will remain in his hands a lot longer. Here is what this IIT alumnus wishes he knew in the early years.