VARDENCHI RIDES HIGH PG 64 • KEKI MISTRY ON HDFC’S GAME PLAN PG 84
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The marketing whizkid tells you how to connect with customers the way the corporate guys can’t PG 42 ALSO
marketing masterpieces PG 52 Fixing three common online mistakes PG 60
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MARCH 2013 VOLUME 4 ISSUE 7 `100
GUIDE PG 106
The Customer Connect STARTUPS AND NEW BUSINESSES most often get busy trying to solve basic problems of setting up and growing the business: Getting a bunch of guys who believe in their ideas and would be willing to fund them, and later making tedious pitches to venture funds or private equity people who would be willing to take these ventures to the next stage of growth. In this conundrum, they don’t focus on understanding the market, mapping it right and figuring out whether the product or service they sell really has any future at all. Very often, new ventures also fail because the business owners could not understand the market correctly, or failed to connect with customers with the right message which would resonate with the customer. Of course, the product is king, and a bad product will never work. But the reason why even good products sometimes fail is because they didn’t connect in the right way with customers. New business owners or those in the early stages of growing their businesses often don’t understand the real value of marketing—how they can convey the benefits of what they are selling to the vast pool of potential customers out there. Sometimes, consumers may not even know a need exists until you tell them the benefits of a product which may change things for them. The most obvious examples are the iPod or the iPad, two devices which addressed needs which the market initially did not even know existed. In this issue, we bring you a clutch of stories
and insights which we hope will reduce some of the confusion on what marketing is all about and tell you how some thought leaders and companies are using powerful tools to get their messages across to the maximum number of people. While maverick marketing whizkid Seth Godin—whose followers seem to be growing by the day—tells you how to be disruptive in getting that message across to customers, we also get you 10 amazing marketing campaigns which we believe drive home the point that, more than what you say, how you say it out there in the market is going to be critical for your business and help you stand out amidst the clutter. We do believe that startups and emerging businesses need to learn newer and more disruptive ways of getting their messages across in a world where attention spans are shrinking and new competitors coming in every second. The Union Budget 2013 presented by Finance Minister Palaniappan Chidambaram is also demystified in a separate booklet with this issue. While the Budget was steady and workmanlike, it does contain good news for angel investors, startups and micro, small and medium enterprises and the FM deserves kudos for recognizing the role played by these segments in the economy. We will now need to build from here.
Very often, new ventures fail because the business owners could not understand the market correctly
Sourav Majumdar Editor-in-Chief email@example.com Intelligent Entrepreneur March 2013 5
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Published by Lakshmi Narasimhan and printed by Mohan Gajria on behalf of Network18 Editor-in-Chief: Sourav Majumdar Printed at Infomedia Press Limited (formerly known as Infomedia18 Limited), Plot No. 3, Sector No. 7, Off Sion-Panvel Road, Nerul, Navi Mumbai 706 & published at Network18, ‘A’ Wing, Ruby House, J.K. Sawant Marg, Dadar (W), Mumbai 28. Published by Network18 under license from Entrepreneur Media Inc, U.S. Entrepreneur is a registered trademark of Entrepreneur Media, Inc., 2445 McCabe Way, Irvine, California 92614 U.S.A. Entrepreneur is published in the U.S., Russia, Philippines, South Africa, Mexico, Middle East and China. Copyright©2009 Entrepreneur
*Ownership of this magazine stands transferred from Infomedia18 Limited (Infomedia18) to Network18 Media & Investments Limited (Network18) in pursuance of the scheme of arrangement between Network18 and Infomedia18 and their respective shareholders and creditors, as approved by the Hon’ble High Court of Delhi and the necessary approval of Ministry of Information and Broadcasting is being obtained.
6 Intelligent Entrepreneur March 2013
TABLE OF CONTENTS COVER STORY
16 The Price Factor
Vikram Sood asks entrepreneurs to follow an outcome-based pricing model
39 Say Yes to Nas-tees Mumbai-based startup No Nasties designs, produces and sells completely organic T-shirts
18 Social Media for Business
Nandini Vaidyanathan has dos and don'ts to help improve customer reach
By Julie Sam
20 Engaging in Job Creation
Tara Thiagarajan touches upon the topic of microentrepreneurship
48 Creative Cuts A state-devised policy is giving Karnataka’s animation, VFX and gaming sector a much needed push
22 Make Success ‘Antifragile’
Author of more than a dozen bestselling books, Seth Godin, also writes one of the most popular marketing blogs on the Internet. His entrepreneurial mantras are uncomplicated, which makes everyone want to stick around By Corie Brown
24 Vision Inc.
Richard Branson says selfmotivation may not be enough on your entrepreneurial journey
32 ‘Anyone can start up’ Traveler and entrepreneur Chris Guillebeau has tips on how anyone, anywhere can start a business
Nandini Mansinghka tells you how you can get the best deal from your investor
28 Fixed vs Growth Mindsets
By Shruti Chakraborty
52 10 marketing masterworks An effective marketing campaign can etch your brand's name in people's minds for a long time. Read about some strokes of marketing genius
LEGACY 58 No storm in his teacup The tea industry has been seeing volatile weather, but Aditya Khaitan has taken the dip in productivity in his stride. His company McLeod Russel is looking at new ways for growth By Sudipta Datta
MY STORY STRATEGY 60 What’s your marketing malfunction?
29 Dilemmas and Blessings
Online marketing can have its challenges. Find out where you are going wrong with it
Anurag Batra advises entrepreneurs to learn how to let go of talent
By Ann Handley
62 Mimicking the dragonfly
30 A New Series of Sovereign Bonds
Defense systems company Tonbo has gone from selling technology to full-fledged products globally
Bharat Banka has some suggestions to help Indians get better social security benefits
By Jennifer Wang
26 The Valuation Discussion Decoded
Manish Sabharwal talks about how important it is for companies to cultivate a growth mindset
By Shonali Advani
42 Myth Buster
R Jagannathan asks entrepreneurs to keep their options open
By Ashna Ambre
34 No Kidding
Co-CEO of Archie Comics Publications Nancy Silberkleit, who, as a child, had no love for reading, shares her journey
WOMAN ENTREPRENEUR 36 By Decree
Arko Provo Mukherjee
There are many more women entering the legal field now than there were when Naina Krishna Murthy started her journey By Ashna Ambre
8 Intelligent Entrepreneur March 2013
64 One for the road From modifying motorcycles and custom making them, Vardenchi Motorcycles will now be manufacturing its own range By Pranbihanga Borpuzari
TABLE OF CONTENTS TECH DEPARTMENT
88 Steady, not great
STARTUPS 94 Keep Talking
Nokia’s latest, Lumia, is as good as any Smartphone out there. But is that good enough for Nokia?
Ravi Saraogi and Umesh Sachdev, Co-Founders of Uniphore have developed speech recognition and voice biometrics platforms By Shonali Advani
By Ankush Chibber
89 A little latitude The Latitude 10 is a good tablet to surf the web, work Office documents, etc. But will it work at places that have more complex requirements? By Ankush Chibber
68 Not a Smoky Affair Street food vendors often use unhygienic cooking practices which have a negative impact on their health. Svati Bhogle has found a solution By Shonali Advani
96 Hire and drive
106 Be a Leader
81 The Partners Chip In
Zoom Inc. lets you enjoy the benefits of using a car without having to own it
Vivek G Pawar left behind his life in the US to come back to his roots and set up Sankalp Semiconductor
98 Bill It
If you can get the best out of your employees, you are a leader. But don’t rush in By Avanish Tiwary
108 Reduce Shipping Costs
By Shonali Advani
Not reining in your shipping costs can result in your profits growing smaller
By Shruti Chakraborty
110 Tap and Foster Employee Ideas Companies need to retain talent the right way for better organizational results
By Pranbihanga Borpuzari
ChargeBee has found a way to simplify the task of raising invoices and generating bills for online transactions By Ashna Ambre
100 Pins and Pens
82 ‘As you deal with challenges, you get resilient’
OfficeYes.com offers stationery to furniture for small and large enterprises online
Awaaz Entrepreneur’s Harshada Sawant talks to entrepreneurs on the aspects one should consider before starting a laundry business
By Avanish Tiwary
103 Good Catch
SPECIAL REPORT 83 Taking the Next Step
By Ashna Ambre
113 Merchandize your Brand It can open up new and exciting business opportunities By Raghu B Viswanath
116 Enter South American Markets Among emerging economies, South America has become a destination for new ventures By Sheshadri Vasudevamurthy
REGULARS 12 FEEDBACK 13 RESOURCES 14 A SK ENTREPRENEUR 120 BACKSTAGE
BANK CHAT 84 ‘We’ll never sacrifice asset quality for market share’ HDFC’s Vice Chairman and CEO Keki Mistry discusses his strategy and why he believes the bank can grow by around 20 percent on a sustainable basis
Quick service restaurant Fisheteria wants to popularize seafood in the void between fine dining and fast food
By Sourav Majumdar
91 Cheap Tricks While taking the cheaper option may seem like an attractive option, it may not always be the best By Erika Napoletano
92 Asset Allocation for Entrepreneurs A judicious assessment is necessary while investing in safe and risky assets By Bharat Phatak
10 Intelligent Entrepreneur March 2013
By Ashna Ambre
Mahindra & Mahindra and Ssangyong’s first product, the Rexton is up for a fight with the established players By Ankush Chibber
CONTACT INFO • Write letters to: Entrepreneur Network 18 Publishing 2nd Floor, ‘A’ Wing, Ruby House, J.K. Sawant Marg, Dadar (W) Mumbai - 400028 ..................................................... • E-mail: email@example.com ..................................................... • To Subscribe: SMS IE to 51818 Call 91-22-3003 4631/33, or Log on to http://eshop.infomediaindia.com ..................................................... • For subscription queries: customercare@ network18publishing.com Letters may be edited for brevity and clarity. 12 Intelligent Entrepreneur March 2013
This e-mail is in reference to column ‘It Isn’t About the Budget, Silly’ by R Jagannathan in the February 2013 issue. It is said that the super rich must pay more taxes—at higher rates. But the super rich earn more and pay more taxes otherwise too, then why legally extract more of taxes from them? It has already been proved beyond doubt that a lower tax rate yields more revenue. Higher rates for the high income bracket leads to more black money. We must rather simplify the tax laws instead of lengthening the list of deductions and exemptions. The bigger problem is the diminishing purchasing power of the rupee due to sustained inflation, which the government has failed to control. So while the cost of living goes up, the average Indian is struggling to earn a decent income. Therefore, it is necessary to raise the income-tax exemption limit to at least `6 lakh for individuals. With critical medical costs shooting up, it would also be a good idea to raise the reimbursement from `15,000 to `30,000 without the submission of medical bills. - Mahesh Kapasi Via e-mail
This e-mail is in reference to the article ‘Indie Up Rising’ by Jason Ankeny in the February 2013 issue. The future of gaming will increasingly be in the hands of companies like Bolt Creative and Imangi Studios which focus on extreme gaming applications. This article would have also inspired many young developers in game development to explore new opportunities in this core area. Inspired by Allan Dye and Dave Castelnuovo of Bolt Creative, I hope many Indian developers will join the race soon. Thanks for sharing bundles of knowledge with the audience. Great work! Keep it up Team Entrepreneur. - Jatin Dutta Via e-mail
Inspiring Read The column on ‘How ‘Cultured is your Business?’ by Ravi Kiran which spoke about organizational culture was wonderful. The ideas were splendid and impeccable for my startup! The categorization of 4 C’s: collaborate, create, control and complete was really worth thinking about. - Shubham Khichi Via e-mail
From the Web On the story ‘How To Optimize Lead Generation’: This is a very important topic and wellarticulated as well. To add to ‘Focus on your callers’ skills’ within the skill sets, the questioning skills will make all the difference. The BANT (budget, authority, need and timeframe) questions need to be more of a dialogue to understand the prospect situation. - Manoj On the column ‘Doomsayers’ Oracle’ by Shruti Kohli: This column is written using high quality wit and satire—I like this style of writing. Another thing is that all that
you’ve said in this column holds true across the board. We have too many of these uncles and aunts and all of them who think achievers are big zeros. Some won’t give you credit even after you have achieved. And just to tell you that even though a handful of people may be there to discourage, know it always that the world is with you. Good luck Shruti! - Deepanita Banerji This column is an awesome piece! This piece makes me your fan…absolutely! The column has a very good use of wit. I will be reading your columns every issue now. Sure thing! - Sakshi
tartup Festival, a four-day mega-event co-anchored by TiE Bengaluru, will unite thousands of people and over 100 partners under one brand to celebrate Bengaluru’s rise as the startup capital of India. The event has not been designed as a regular conference, static at one location. Instead, it will take place across four locations in the city: Koramangala, Indira Nagar, Jayanagar and Palace Grounds, one on each day. The festival brings together entrepreneurial veterans, aspiring entrepreneurs, mentors, investors, and thought leaders for a series of activities that go beyond the typical conference format. The day will start with Startup Pump, an early morning, energizing workout session at partner locations. The Powerhouse session will bring together thought leaders, visionaries, executives and policy makers to discuss the future of Bengaluru as an entrepreneurial hub. An interesting aspect of the festival is the Startup Crawl where 50 of Bengaluru’s
startups open their offices to participants to host sessions on starting a venture in a 30-minute workshop format. Fifteen topics ranging from product design to building a team will be covered over three days. In addition, the four-day event will have opportunities for entrepreneurs to connect and have one-to-one networking sessions with investors and mentors at the breakfast Reload sessions. Also at the epicenter of the festival is Launchpad, where startups can unveil their products in a seven minute demo to investors and mentors. Phanindra Sama, CEO of Redbus; Deepak Ravindran, CEO of Innoz Technologies; Shivakumar Ganesan, Founder of Exotel and Rajat Dhariwal, Founder of MadRat Games will be among those who will be speaking at the event. Date: March 7-10 2013 Venue: Bengaluru Fee: `899 Contact: firstname.lastname@example.org or email@example.com Website: www.startupfestival.in
CII Knowledge Summit
he CII Knowledge Summit is a wellestablished exclusive platform that has been effectively delivering quality by bringing together leading national and international speakers, to share information on the recent trends and important issues concerning the field of Knowledge Management (KM). The theme of the summit is ‘KM for double digit growth’. The event will hold a session called ‘KM–A Driver of Competitive Advantage and Business Growth—the role of Business Intelligence Analytics and Corporate Learning in building knowledge corporations’ which will focus on the role of business intelligence and learning models to enable corporations to become truly knowledge-driven. There will also be a session called ‘Unlearning for Innovation and Growth:
KM–The Strategic Facilitator’ which will highlight how KM facilitates and supports the process of unlearning as organizations move ahead on their journey of innovation. Ajay Nanavati, Managing Director, 3M India; CP Gurnani, CEO, Mahindra Satyam; Anand Deshpande, Founder, Chairman and Managing Director, Persistent Systems Ltd, Aditya Chandrasekharaiah, Lead Consultant, Zensar Technologies and Arun Gupta, CIO, Cipla Ltd will be among the speakers at the event. Date: March 6-8 2013 Venue: The Lalit, Mumbai Fee: CII Members: `8,000, Non-members: `9,500 Academia: `5,000 Contact: +80 2328 9391 Website: www.cii.in
Statement about ownership and other particulars about newspaper/periodical namely Intelligent Entrepreneur, as required to be published in the first issue of every year after the last day of February Form IV (See rule 8) (Press and Reg. Of Books Act, 1867) 1.Place of Publication: Ruby House, ‘A’ Wing, JK Sawant Marg, Dadar (West), Mumbai-400028. 2.Periodicity of Publication: Monthly 3.Printer’s Name: Mr. Mohan Gajria Nationality: Indian Address: Ruby House, ‘A’ Wing, JK Sawant Marg, Dadar (West), Mumbai-400028. 4.Publisher’s name: Mr. Lakshmi Narasimhan Nationality: Indian Address: Ruby House, ‘A’ Wing, JK Sawant Marg, Dadar (West), Mumbai-400028. 5.Editor’s Name: Mr. Sourav Majumdar Nationality: Indian Address: Ruby House, ‘A’ Wing, JK Sawant Marg, Dadar (West), Mumbai-400028. 6. Names and addresses of individuals who own the newspaper & partners or shareholders holding more than 1% of the total capital : Network 18 Media & Investments Limited** is the owner of the publication namely Intelligent Entrepreneur, having its registered office at 503, 504 & 507, 5th Floor, Mercantile House, 15, K. G. Marg, New Delhi - 110 001. Details of the shareholders of Network 18 Media & Investments Limited who holds more than 1% of the paid up equity capital of the Company as on 20-02-2013 is given below: 1 RRB Mediasoft Private Ltd., 403, Prabhat Kiran 17,Rajendra Place New Delhi 110008 2 RB Mediasoft Private Ltd., 403, Prabhat Kiran 17, Rajendra Place New Delhi 110008 3 RB Media Holdings Private Ltd., 403, Prabhat Kiran 17, Rajendra Place New Delhi 110008 4 Watermark Infratech Private Ltd., 403, Prabhat Kiran 17, Rajendra Place New Delhi 110008 5 Colorful Media Private Ltd., 403, Prabhat Kiran 17, Rajendra Place New Delhi 110008 6 Adventure Marketing Private Ltd., 403, Prabhat Kiran 17, Rajendra Place New Delhi 110008 7 Shinano Retail Private Ltd., 4Th Floor Court House Lokmanya Tilak Marg Dhobitalao Mumbai 400002 8 Nexg Ventures India Private Ltd., C-157, Industrial Area, Phase - VII Mohali, Punjab 160055 9 Arizona Global Services Private Ltd., 1204, 12Th Floor Hemkunt Chambers 89, Nehru Place New Delhi 110019 10 Acacia Banyan Partners Citibank N A, Custody Services 3Rd Flr, Trent House, G Block, Plot No. 60, BKC, Bandra - East Mumbai 400051 11 Independent Media Trust (Held In The Name Of Its Trustee) Empire Complex 1ST Floor 414 Senapati Bapat Marg Lower Parel Mumbai 400013 12 Network18 Media Trust (Held In The Name Of Its Trustee) 503 504 And 507 5Th Floor Mercantile House 15 Kasturba Gandhi Marg Delhi 110001 13 Network18 Group Senior Professional Welfare Trust (Held In The Name Of Its Trustee) 503 504 And 507 5Th Floor Mercantile House 15 Kasturba Gandhi Marg Delhi 110001 I, Lakshmi Narasimhan, hereby declare that all particulars given above are true to the best of my knowledge and belief. Dated: 20th February 2013 Lakshmi Narasimhan Signature of the publisher ** ownership of this magazine stand transferred from Infomedia Press Limited (formerly known as Infomedia18 Limited )( hereinafter “Infomedia”) to Network18 Media & Investments Limited (Network18) in pursuance of the scheme of arrangement between Network18 and Infomedia and their respective shareholders and creditors, as approved by the Hon’ble High Court of Delhi and the necessary approval of Ministry of Information and Broadcasting is being obtained.
Intelligent Entrepreneur March 2013 13
GET YOUR BUSINESS VALUED Running a business is not a cakewalk. At every stage, one can be inundated with problems ranging from regulatory to operational, taxation to HR. If you have any queries on running a business in India, write in to us at firstname.lastname@example.org and our experts will answer your queries Q: My father is running a successful small scale industry for the past 35 years. Now he is close to 70 years and being the only child I wish to see him retire. I am not interested in running the company even though it is doing quite well. We do not have any loans or liabilities. How can we unlock the potential of this company and what are the steps we need to take in case we want to sell the company? How do we find a buyer? What are the documents we need to get ready? What should will be our first step? We are paying our IT returns. - Shweta Jaikumar A: Selling an on-going business is a fairly complex activity with the following key steps—financial and legal due diligence, business valuation, marketing of deal, commercial negotiations with potential buyers, deal closure and legal documentation. It may be prudent for you to engage an investment banking company, which will help you go through the sale cycle. You may want to first get your business valued through the investment banking company. This will give you an indicative value of your business and will help you decide on whether you want to go for outright sale or work towards increasing the business value. For improving the valuation, you will be required to work towards maximizing cash generation and growth prospects of the company. Answer by: Ramendra Shukla, Associate Principal, Friends of Ambition, a growth advisory firm focused on middle India
Q. I want to form a pvt. ltd. company. What is the legal procedure to be paid by my company? Can I draw a salary? – Asked on vakilsearch.com A: Certainly, you, as the founder of the company, can be paid by the company. There are different ways in which 14 Intelligent Entrepreneur March 2013
you can be paid. If you decide to act as the employee of the company, then the manner in which you can be paid is a salary. Here you would, like any other employee, need to enter into an employment contract with the company, and receive remuneration. In addition to this remuneration, on the basis of this employment contract, and a specific clause for bonuses, you may be paid a bonus at either regular intervals or on the achievement of certain goals. For example the bonus could be paid every quarter (three months), `5,000, or for every 10 happy customers a `1,000 bonus. What may also be done is that you could be paid by way of consultancy fees—for your expertise in management and your time. So, if you are going to be managing the marketing efforts being made by your company for instance, you may derive your salary/remuneration in the form of this consultancy fee. Shares are a good way of deriving remuneration in the form of dividends. This can happen by the company giving you a certain amount of shares at regular intervals. For example, your Shareholders’ Agreement could state that you will get 0.2 percent of the shares of the company every two months. Dividends are the payments made to the shareholders of a company out of the profits made by the company. For example, if the total profit of your company in a particular year is `1,000,000 and you want to distribute 10 percent of that as dividend, and you hold 49 percent of the shares of your company, then you would be entitled to get `49,000 as dividends. An uncommon way is through the payment of a commission. For example, the company sets a goal that on the completion of every 500 clients, `50,000 will be given to you as the founder. This could be a form of payment. Answer by: vakilsearch.com, a legal advisory firm
Q: I’m a retired Naval Officer and opened an IT company SSE at MIDC Mahape in Navi Mumbai. I have all the development infrastructure but there is no perceptible business growth of my unit for the last four years. What strategy should I adopt to give momentum to the business growth of my IT company? - Lt Cdr Harcharan Singh (Rtd). A: Business growth is a complex issue and defies simplistic solutions. There are many reasons why growth stalls, but fortunately nearly 85 percent of those are within management control. This means you can do something about your business. Since your letter does not tell us much about the specific kind of IT company you are running, it is difficult for us to be specific in our analysis. But the first thing you should do is meet a few of your existing and past customers and ask them to give you an honest opinion about your product and whether there are any areas in which they would like to see improvements. If you are in a B2B business, you need to remember that client referral is a big thing and your current and past clients, if they are happy, can open doors for you and sometimes, all you need to do is ask. Answer by: Ravi Kiran, Co-Founder and Managing Partner, Friends of Ambition
Q: What powers and responsibilities does a nominee have? – Asked on vakilsearch.com A: A nominee is a representative of the investor or the third party getting involved in the company—a dual, almost conflicting position. A nominee is appointed to have the power to supervise and sit in on the proceedings of the board, and to be present at the meetings of the board. As the director of the company, he has to serve the company and take actions which are in the best interest of the company. Since he has been appointed to protect the interests of the investor investing in the company, he has to also make sure that the investor’s interests are safeguarded, even if that in some cases means going against the interest of the company. Answer by: vakilsearch.com Disclaimer: All answers have been provided on best efforts basis, without any prejudice and based on limited information provided by the readers. Neither the organizations involved [Network 18, Entrepreneur, Vakilsearch and Friends of Ambition] nor their employees, allies, and associates take any responsibility—legal, financial or otherwise—arising out of application of advice given herein Intelligent Entrepreneur March 2013 15
The Price Factor ‘Outcome-based’ pricing is an efficient way to grow the value and revenue in your business
[ VIKRAM SOOD ] IN THIS ARTICLE, I AM putting forth a new and revolutionary working and remuneration methodology for the entire marketing communications (Marcomm) industry. In fact, I feel by March 31 this year, every brand and business owner should already be demanding this. And halt contracts if they are denied this privilege. Outcome-based pricing I am proposing a revolutionary new model for paying your branding and marketing consultants or partners (however you want to call them). ‘Outcome-based’ remuneration can be a percentage of the growth they drive for your business. When you pay your fund manager or wealth manager a percentage of the outcome they create for you; why not pay your branding, marketing, advertising consultants and partners the same way? Isn’t their job also to grow the value and revenue of your business? Billing vs building As I see it, branding, marketing and advertising industries are reactionary industries. When mass production became the norm, mass consumption became the need and advertising was born. Let’s go back to 1836. La Presse, a French newspaper, for the first time ever, introduced paid advertising to reduce cost of the newspaper for readers. And that model continues even today. Every new medium grew on the ads which discounted its reach. Television-films, Internetdisplay/cost per click/cost per action and mobile; the story is the same. We have moved to a knowledge economy and are well on our way to a conceptual economy. In this age, the only thing which hasn’t changed is the billing behavior which builds nothing. As business owners and investors, your responsibility is to deploy capital in the most efficient 16 Intelligent Entrepreneur March 2013
manner to achieve your business outcome. It is your Marcomm or corporate communications partner’s responsibility to achieve this. Every smart Indian business owner’s responsibility today is to acknowledge that the system this 400 year industry is using is not building anything, it’s only billing. You need to rethink every think from an outcome perspective, and work with Marcomm partners to bill your brand.
Once you shift to an outcome mode, you can build your business faster than before by thinking like an investor and forcing your partners to think the same. Outcome-based thinking encourages teams—internally and externally—to question everything, structure curiosity into research, think openly, and create brand-led innovations, which create lifelong bonds with consumers. Six years ago, using outcome-based thinking, I created original comic book characters and experiential books to sell it to a kids’ paint brand. This ensured the client did not spend a naya paisa on mainstream advertising in five years. Kids love the books and change room themes after reading these comic books. And to top it all, the comic book had a brochure builtin, and still sells for `300 per copy in Mumbai.
A parting thought If the outcome-based pricing model for your branding agency, advertising agency, marketing agency looks new to you, just look at what is considered the most sacred business—arts. An artist puts life and soul into a canvas or a Carrara marble, long before the auction hammer comes down. VIKRAM SOOD is the Co-Founder & CEO of And Then Consulting
WOMEN IN CONTROL
Social Media for Business Expand your customer reach with these dos and don’ts
[ NANDINI VAIDYANATHAN ] IF THE EARLY YEARS of 2000 were all about the and Google Chrome—in fact, I love Google Jam on Internet, from 2006, it has been all about social Chrome which allows up to three people to jam media. First, it was the obsession of living out our online and even choose your own instruments! entire life in the public eye, giving a blow-by-blow You can create content on blogs and Tumblr account of who we are, who we are with, what we (Tumblr is a microblogging and a social networkdo with them, where and sometimes even why. ing site, where you can combine text and pictures) So in the beginning it was all about voyeurism You can react to stimuli in your environment within one’s network. using Rotten Tomatoes (movie rating site) and When the companies discovered these voyeurs Burrp (event/restaurants rating site). were also either their existing customers or You can categorize and organize stuff using prospective customers, a simple social networkHashtags (add the hash to your content and it ing platform transmogrified will tag all similar content in itself into a potent marketing your network), StumbleUpon Given the buzz about tool. Until then, the word ‘viral’ (create categories like social media, it is was an adjective that described music, jokes, fiction etc) and quite fashionable to a particular kind of fever. Now Delicious (which allows you every marketer set his sights to bookmark not just on your say that we use social on going viral in the market. laptop but on web, so all those media technologies in Given the buzz about social who are browsing can see business media, it is quite fashionable them) to say that we use social media You can consume content technologies in business. Most using a RSS (Really Simple of us have no clue why we Syndication where content should use it, how we should use it and what we comes to you, e.g. ESPN Cricinfo sends cricket should expect it to do for our business. Let me updates to your mobile), and widgets (which unravel it for the uninitiated. sit on your device and gives you updates, e.g. a weather widget). What are social media technologies? Broadly, all of the above can be labelled as It is social because it connects multitudes of social media technologies. people and facilitates their interaction (although some may argue that in fact social media has How is social media different from other media? made people more isolated!). It is viral—it can reach a huge number of And it is media because it is published people in the shortest possible time. content. So what are the things you can do on It is engaging—you can maintain high interest social media? levels by using content strategically. You can share videos on YouTube, and pictures It is cost-effective—whilst it costs money, on Flickr, Pinterest and Instagram. it does not cost as much as print and TV and You can connect with people on Facebook, considering its potential for reach, it is the most Twitter and Google+ bang-for-the-buck tool You can collaborate on Wikis, Google Hangout In a business context, these properties of social 18 Intelligent Entrepreneur March 2013
Photo Sanjay Ramachandran
media can be effectively exploited to acquire new customers, retain existing customers by engaging them and getting existing customers to acquire new customers (this is where you maximize your benefit through social media). Thanks to social media, you don’t go around spending money on acquiring every single customer. You spend on one and the customer will bring the next customer and so it grows virally. The best thing is that your cost of customer acquisition and retention will reflect favorably in your profit and loss statement.
What are the reasons for which you can use social media?
You can measure conversion (how many actually bought. In a travel portal for instance, it is measured as ‘from look to book’) You can measure influence (in the Delhi rape victim Nirbhaya’s case, huge support was mobilized to influence policy making through social media) You can measure sustainability (what is the attention span, is it lasting or fleeting?)
What are the tools for measuring social media effectiveness? You have Facebook Insights which gives you the analytics in terms of traffic, demographic profile, page views, external referrers, etc. You have Twitter Meter that gives you the most frequently used twitter words, trending etc. You have YouTube Insights which allows users to understand audience profile. All social media sites have pretty much developed fairly sophisticated analytics to help you measure the effectiveness of each of your campaigns on each of the social media.
You can use it to acquire new customers. You can use it to keep your customers engaged and involved. It is not just external customers but your internal ones too, your employees. You can use it to create awareness if you have a new product or a new geo footprint. You can use it to simply inspire the world. You can use it to build your brand. Most people assume The bottomline really is that that using social you can use social media simply How much will a startup typito engage every stakeholder in cally need to allocate for social media is all about your habitat! media for a year? ‘posting’ content. By talking, listening, energizLike I said before, social media On the contrary, ing, embracing and supporting is a tool for implementing your it is more about you can engage with your audimarketing strategy. It is not the ence in different ways. strategy itself. ‘managing’ content Whatever you do, just rememMost people assume that ber this. Before you embark on using social media is all about an exciting ride on social media; ‘posting’ content. On the define the purpose, the expected outcome, target contrary, it is more about ‘managing’ content. audience, and your evangelist (Celebrity as in the So you will need to spend on a social media case of Lux or laymen as in the Dove campaign). agency (whose job it is to ‘manage’ the campaign), Define your goal first. Draw up your strategy an in-house content creator, Facebook Ads, next. Then choose your social media. prizes for contest, collaterals, videos and Social media is a marketing tool. Don’t confuse the like. So all told, you will need to allocate a it with strategy. It could be a single channel or minimum of about `10 lakhs in a year! multiple ones. Your choice should be governed by your goal. Disadvantages of using social media If you can’t measure something, it is of no use There are various disadvantages but the biggest to anyone. The effectiveness of social media can downside is that once you have put something on be measured. the Internet, it is very hard to retract. As Kevin Rose, the founder of Digg said, it is like What can be measured? trying to take pee out of the swimming pool! You can measure footfall traffic (how many people visited your Facebook page for instance) NANDINI VAIDYANATHAN teaches entrepreneurship, You can measure reach (how many liked it mentors entrepreneurs (www.carmaconnect.in) and has enough to share it with their network) authored the bestseller Entrepedia. Intelligent Entrepreneur March 2013 19
Engaging in Job Creation
From income generation to micro-entrepreneurship, it is time to flip the paradigm [ TARA THIAGARAJAN ]
LESS THAN 50 MILLION PEOPLE are employed in the formal economy. That’s less than 5 percent of India’s population. What this means is that most of the country operates in the informal economy and most are by definition ‘poor’. When we speak of the formal economy, which accounts for almost all of our GDP, we often throw around terms like value creation, entrepreneurship and job creation and the like. But when it comes to the majority of India’s populace, we flip the paradigm to ‘income generation’ and ‘livelihood creation’ and use this interchangeably with micro-entrepreneurship, which it is not. It may seem logical, that after all, poverty is the lack of income and most of India has little of that. So, it is best to rush out to generate some income to feed yourself. Except that it’s not.
Value creation The wealth of a country, and largely organizations and individuals within it, depends on the value it creates. Wealth is not money printing. It is about how well we engage our resources to build new possibilities—make things better, faster or cheaper, and enhance our own capability as human beings. Grand stuff, all that; but it matters because for a healthy economy the money supply must track this—our collective value. It, therefore, makes for ineffective and potentially ugly economics if everyone is simply rushing to grab a piece of a fixed pie.
Generate income The unfortunate paradigm of income generation is to begin with some sort of hand skill—basket weaving, tailoring, mushroom cultivation and the like—with the expectation that someone (a non-profit or failing which, God or government maybe) must come along and compensate them for the energy expended. A belief we relentlessly 20 Intelligent Entrepreneur March 2013
perpetuate through government schemes and non-profit is that hard work and sacrifice should be rewarded by someone, regardless of whether it is effective or useful. No matter that there may not be an accessible market or any market at all for the product. No matter that they are cost inefficient. No matter that the product may be of too poor a quality to be of value to anyone. Such income generation schemes are not empowering because they work inside out. They begin with a skill and search for a market rather than the other way around and are littered with bad economics, disappointment and shattered expectations. This is the inverse of entrepreneurship which begins with identifying a need and creating value that serves that need. If we believe in the human potential of our populace, then our goal should be to empower people with the tools of entrepreneurship, to seek value paradigms that begin outside in. And if we must help, we should do this by exposing people to markets, standards and competition.
Failure—the better teacher Hand-held ‘income generation’ schemes are more gentle and assuring of income in the shortterm. ‘Make and we shall support you’ (at least until we run out of donor money). Genuine entrepreneurship comes with little assurance and is littered with failure. But it is in the failure that we learn our most significant lessons; the ones that teach us what can go wrong and how to rise above. The failures sow the seeds for something better, raising the overall standards and productivity of the system. So, let’s go from income generation to micro entrepreneurship, flipping the paradigm from inside out to outside in. TARA THIAGARAJAN is Chairperson and Managing Director, Madura Microfinance Ltd.
Make Success ‘Antifragile’ It is best to have options in business, since high performance is fleeting [ R JAGANNATHAN ]
IN A WORLD WHERE VOLATILITY is the norm and predictability of future events next to impossible, governments, corporations and even individuals need to rethink their game plans. The world has been lurching from crisis to crisis—the 1980s Wall Street meltdown, the 1990s Asian collapse, the turn-of-the-century dotcom bust, and, most recently, the sub-prime bubble burst in 2008—not to speak of political upheavals of every kind; but we still want to believe that there is something called a safe path to growth. In fact, one can safely predict that the flood of cash created by the US Fed, the European Central Bank, the Bank of Japan and others has created so much government debt, that even this has to be reckoned as a future crisis in waiting. We just don’t know when that flood will overwhelm us with another crisis. In the 20th century, we have gone through all kinds of ideological fads to organize our economies. We had communism, capitalism, socialism, and mixed economics. Nothing worked forever. We’ve had big government, small government, Keynesian quick-fixes, monetarist predilections, and what-have-you. What we don’t have is one effective economic silver bullet to solve all our problems.
Corporate jargon On the corporate side, the kind of management fashions that have come and gone are simply too many to enumerate: we have gone through re-engineering, downsizing, rightsizing, de-layering, kaizen, lean management, Six Sigma, diversification, horizontal and vertical integration and then divestment. We’ve also had the mantras of globalization, localization, glocalization, outsourcing, in-sourcing and a zillion other ideas—each of which has had its time in the sun and then been consigned to a lesser existence. 22 Intelligent Entrepreneur March 2013
What we don’t have is one management idea or strategy or technique that will work for any company all the time.
Success stories As individuals, we have found success and failures even more difficult to predict. A school dropout will become the world’s biggest millionaire, the guy who topped in class will be a clerk in some back office or audit assistant. Success, effort, IQ and excellence may have some correlation, but it is increasingly hard to explain why someone succeeds or fails. Bill Gates had success gifted to him by IBM and never looked back. Steve Jobs flopped in his first try, but in his second coming took the world by storm. Other good guys failed merely for being in the wrong place at the wrong time. As for lesser folks like you and me, despite thousands of self-help books to guide us, success or failure seems fairly unique and arbitrary—or even whimsically determined by fate, with God playing the fool all the time. So what am I driving at?
Prediction impossible You can’t predict who or what will succeed with any degree of certainty since success needs a whole lot of elements to come together at the same time for the individual or company or economy. So should you leave it all to luck and develop a kind of fatalism about success and failure? Nassim Nicholas Taleb, author of two brilliant books, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets and Black Swan: The Impact of the Highly Improbable, has come up with a new insight in what he considers the final and most definitive work in this trinity. It is called Antifragile. Photo Joshua Navalkar
You call something fragile if it can be impacted negatively by every passing wind or even a strong wind. In short, a fragile thing is something that may fall apart if it receives some kind of shock. ‘Antifragile’ is the opposite. Let’s hear Taleb on this: “Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk and uncertainty.” He calls this phenomenon antifragile—which is not the same as being strong or robust, since something that is robust is only less fragile, it is not antifragile.
and external to the firm, and it is not possible to hold most variables constant and identify the effect of just one.” Moreover, “in business, a firm’s performance is relative more than absolute, so that even if a company does things well in an absolute sense, it may still fail if rivals do things better.” Rosenzweig’s conclusion: “If we look over time, the strongest pattern is of temporary success— high performance tends to regress to the industry mean. Very, very few companies avoid this pattern—and just as you think you have found one, wait a few years and you will likely find that it, too, conforms to the pattern of regression. I Temporary rewards am not saying that high performance is random, A large farm that produces one very high-yieldbut it is fleeting.” ing crop variety may be very productive in To which Taleb’s antidote would be to make a one season, but very vulnerable if a super-pest firm not robust, but antifragile. And what would emerges and destroys the entire crop. But a farm that mean? It could mean preparing for volatilthat produces several different varieties of crop ity, not putting all eggs in one basket, investwill find that at least some ing in ‘options’—that is in crops survive the pest. This What we don’t have is smaller startups or competifarm is antifragile. In fact, with or ideas that may or may one management idea tors every pest attack, it will grow not take off, where success can more pest-resistant strains— or strategy or technique be scaled up once it is visible, that will work for any and failures quietly written off which is how evolution worked for us, through trial, error and company all the time. at small cost. retrial. By constantly mutating and responding to stressors Make your company scalable in the environment, the weak The essential point is this: it is species were eliminated and the stronger ones best to fail quickly and small. But if something survived and prospered. smells of success, it should be scalable. In fact, the survival of Hinduism in India— As an individual, this advice is sound. Take despite all its flaws—is the result of the whole of small risks to grow your wealth, but not such a society being antifragile. The profusion of castes, big one that it will ruin you, if you called wrong. each in some antagonism to the other, ensured For governments, antifragility means investthat even when some succumbed to invasions ing in lots of things that make its people producand conversions, the others survived and prostive; encouraging smaller firms and small, pered. Many other monocultures could not stand well-capitalized banks. the onslaught of stronger religions. This is not to Nothing should be too big or so all-powerful eulogize caste blindly, but just to point out that that one failed business or economic experithe collection of castes gave Hinduism an antiment can ruin the prosperity of an entire popufragile character for thousands of years. lation. This is what happened when the US In the corporate sphere, we know how book created banks that were too big to fail—and they after book on excellence has gone wrong in trying almost took their governments down with them to predict the right ingredients of lasting success. when they did. The truth is there is no one formula for winning, Unfortunately, this is exactly what the world and no formula, even if it results in a win, will is doing even now. Governments are making the work forever. As Phil Rosenzweig, author of The world economy fragile by taking on excess debt Halo Effect, told a writer and a colleague from and making themselves too big. The world econthe DNA newspaper in an interview some time omy is heading back to fragility. ago, success factors are difficult to nail because “there are so many things going on, both internal R JAGANNATHAN is the Editor of Firstpost.com Intelligent Entrepreneur March 2013 23
Vision Inc. Entrepreneurship demands more than just self-motivation
[ RICHARD BRANSON ] IF YOU AREN’T GOOD AT motivating yourself, you probably won’t get very far in business— especially as an entrepreneur. When you’re starting up a company, for the first couple of years afterward, there will be stressful days, and a heavy workload. You have to be able to give the job everything you’ve got every day, or it will easily get the better of you. The ability to tap into your determination and grit is not just an innate skill. You can teach yourself to get up every day and try to keep a new business going despite long odds, partly by structuring your life and job to make sure you are working toward your larger goals.
Outdo yourself I always wanted to go out there and prove myself, but I was very shy when I was young. And it was clear that I would have to master this, if I was going to succeed. My timidity could have easily held me back if she hadn’t helped me come out of my shell. My mother taught me to dive into situations even if I wasn’t completely sure about my abilities, and solve the problems that came up as I went along. When I was almost 12, she once sent me alone on a long bike-riding expedition to another town, knowing that I would be fine, but also that I’d have to find water and ask for directions along the way. Before I left school at 16, I was already working on launching what became one of my first businesses, Student magazine. Then my friends and I put ourselves in a position that forced the issue, by moving into a basement in West London that served as both our office and our living quarters, and gave our magazine everything we had. There were times when we struggled to pool together enough money to afford a proper meal—that in itself was a great motivator to follow through on calls to potential advertisers. 24 Intelligent Entrepreneur March 2013
We were willing to live with such uncertainty because we wanted to give our generation a voice on issues that we felt strongly about, such as the Vietnam War; this shared goal meant a great deal to everyone involved. Understand what your main motivation is so that you can focus your efforts on reaching those goals. Structure your job—by delegating some work—so that you can spend as much time as possible turning this energy to your company’s advantage.
Share a vision These days, one of my goals is to keep challenging myself. I see life as one long university education, in place of the one I never had—every day I learn something new. I’ve found that I often learn a great deal from the people I meet, and some of them have inspired me. Meeting Mick Jagger and Steve Jobs had a big impact on me. They accomplished so much in their respective fields that spending time with them made me think about what I might do in mine. Afterward, I was more motivated than ever to do the best possible job in my own business. You should work on building a business you’re proud of. This has always been a motivator for me. If money is your only motive, then I believe you shouldn’t launch the business at all. Once you know what your own motivations and aspirations are, talk to your employees and colleagues about theirs, if you haven’t already. Structure their jobs in a way that allows them to tap into this energy, too. With you and your employees approaching your work with renewed energy and commitment, you’ll find that there’s little that you can’t accomplish together. ©Entrepreneur Inc. All rights reserved. RICHARD BRANSON is the Founder of the Virgin Group
The Valuation Discussion Decoded Key points to obtain a better deal from your potential investor
[ NANDINI MANSINGHKA ] IN THE FIRST MEETING WITH a prospective investor, entrepreneurs should only spend about the last 25 percent of the allotted time on the valuation discussion. More time should be spent on the team and business (50 percent) and the rest on financials and operating plan (25 percent). The investor would have made up his mind, to invest or not, through the first two segments itself. Here are some key concepts decoded for you.
Discounted cash flow is irrelevant During early stage, investors invest in you and your idea. While we have that great looking Excel sheet with fantastic growth plans and discounted cash flow (DCF) valuations, for the investor, it’s precisely that: a great looking Excel sheet. DCF-based valuation will mostly not be used!
Investment by promoter shows commitment The investor will evaluate your commitment to the business based on the money you have invested. More than the exact amount invested, what is critical is your investment as a proportion of your ability to invest.
Customer traction is critical Except for a technology product business, both consumer-focused and B2B businesses will require demonstrated traction for the valuation to improve. A business, which has demonstrated customer traction, will command a higher valuation than a high potential plan on paper.
Last drawn salary is a non-issue The valuation of the company is dependent on what you will earn next. While most investors understand the promoter’s right to a reasonable salary, the discussion will fall through if you are either looking to draw market-level salaries or build that into the valuation. 26 Intelligent Entrepreneur March 2013
Relative valuation and people The promoter looks at the valuation of similar but larger companies in the recent past. The investors are focused primarily on how they or their peers have valued companies of similar stage or sizes in the past few months.
Pre-money and post-money valuation Pre-money valuation means the valuation of the company before the investor invests in the company, while post-money valuation means the valuation of the company after the money has been put in. When you as a promoter discuss your valuation expectation with the investor, you are always talking of the pre-money valuation.
Are you thinking equity stake or valuation? There will be a huge gap in valuation expectations between investors and promoters. A way to solve this is to arrive at a valuation number acceptable on both sides. Another is for the promoters to raise a smaller round of fund, diluting stake they are comfortable with.
General thumb rules for stake sale Seed round: After 25-40 percent sweat equity, rest of the equity is to be split between promoter and investor on the money invested by each. Angel or Early VC round: Angel investors or early stage VC funds typically look to owning between 20-40 percent of the company. Series A round: Investors will look to own 10-20 percent of the company. Delay looking for external funding as far as possible. A business with demonstrated traction will always bring in a higher valuation than a concept stage company with several investors competing to be a part of your growth story. NANDINI MANSINGHKA is a seed stage and angel investor
Fixed vs Growth Mindsets Having a growth mindset plays an essential role in taking a company ahead [ MANISH SABHARWAL ] THE FINALE SONG I AM WHAT I AM in the Learning to grow Broadway musical La Cage aux Folles carried an This brings us to a wonderful book called important message about accepting people as Mindset by Carol Dweck, a professor at Stanford. they are. A higher tolerance of diversity has made Professor Dweck believes that companies and the world a better place. But how do we, as compapeople have two views of the world: Fixed or nies or individuals, know what we are capable of? Growth Mindsets. I know many individuals who talk fondly Fixed mindsets believe that individual or about their teachers or companies who talk corporate capabilities are like shoe size or height; about board members who pushed them to be something given that cannot be changed. But more than they were. In fact, the most imporgrowth mindsets are people and companies who tant management and self-help book in the world view capabilities as muscles; something that can may be Pygmalion by George be developed with hard work, Bernard Shaw (better known High expectations give determination and time. by the movie, My Fair Lady). It It is not surprising then that you the permission to is a book about the power of Dweck’s research suggests push yourself beyond high expectations. better outcomes for indiwhat you are. When High expectations give you viduals and companies with the permission to push yourgrowth mindsets. you do that, you self beyond what you are. In fact, a growth mindset become who you could When you do that, you become is nothing but another word or should be who you could and should be. for entrepreneurship. Because entrepreneurs know that Set realistic goals entrepreneurship, like science, Most companies recognize the power of goal is hypothesis testing: You can’t prove anything setting. However, too many companies sabotage right but have to prove it wrong. their future by taking too short term a view of A growth mindset gives you permission to themselves and their people’s capabilities. think about a future different from the past. It For instance: ‘We are good at engineering, but creates high expectations. bad at marketing.’ ‘She is not good at selling, but Most importantly, a growth mindset makes great at operations.’ ‘Don’t ask him to do someyou responsible for what happens to you. thing he is not good at or he will leave.’ ‘Focus on Of course, companies cannot become exceppeople strengths rather than weaknesses.’ ‘We tional in everything they do. Hence, much of their are not good at handling small accounts.’ successes is beyond their control. Of course, individuals and companies have Companies with growth mindsets recogcore capabilities. But there are very few companize that fate is what happens to you. And nies which are successful in the long term, for destiny is what you do with fate. And this is an some areas of their operations are not performing unfair advantage. well. In contrast, most successful companies are great at a few things by continuously trying to be MANISH SABHARWAL is the Chairman of good and moderate at other areas of operations. TeamLease Services 28 Intelligent Entrepreneur March 2013
Dilemmas and Blessings Learning to let go of talent brings in new individuals and presents new opportunities to organizations [ ANURAG BATRA ] BEING AN ENTREPRENEUR IS LIKE growing up. You confront and learn a lot as you go along. Like in growing up, entrepreneurship presents many dilemmas for entrepreneurs. However, once in a while, stopping, looking back and contemplating facilitates ideas and foolproof execution.
Vexed situations The action and doer orientation of entrepreneurs presents unique situations and hence, dilemmas. What if the entrepreneur and his or her organization have witnessed many employees quitting, to later become their competition? Shouldn’t the entrepreneur be happy that he/she is an institution which has been the ‘birthplace’ of many new entrepreneurs? In the knowledge economy that we operate in, talent grows enterprises. How do we de-risk the enterprise from the talent? How do we make sure talent is a catalyst and not a hindrance? Some of these initiatives have chipped away from the entrepreneur’s own venture; some may have been unlawfully stolen databases, people and Intellectual Property Rights. How does an entrepreneur prevent this phenomenon from happening again and again? I have looked at Zee Group and Subhash Chandra who has built the Group from scratch, facing these dilemmas from time to time and coming out a winner, stronger at that, each time. Zee and Chandra created the category of TV broadcasting, be it in general entertainment channels or news; but as he grew, a number of his ex-colleagues and ex-employees went on to start similar or competing ventures. Chandra and Zee marched on creating bigger successes, thus raising the bar. I was thinking of this issue when I recalled a story that Chandra told me which provided answers to the questions on entrepreneurial dilemmas.
Chandra started out early as a 16-year-old working with his grandfather. His father believed that Chandra was liberal in his attitude with the people he dealt with. Chandra told his grandfather that his father’s belief was not true as being liberal-minded, he and his enterprise were gaining so much more. Four decades after this idea was articulated, Chandra’s belief still holds true.
De-risk your business The second thing that I have seen Chandra and other entrepreneurs do is to be calm in all situations, i.e. detached. Pursue excellence, but be detached. The third lesson I have learnt from entrepreneurs, especially from those in the media, is to de-risk the business from individuals. While talent is important, the brands are bigger than individuals and bench strength is a must so that there is a pipeline of talent. My personal view from having faced this situation more than once is that this is part of growing up and destiny. Entrepreneurs have to live by a fourfold credo in relation to these dilemmas: Do the right thing for the right reason in the right manner, and not for individuals; Learn to accept co-existence as a way of life and learn to appreciate it and thrive on it. Create a bigger line; grow your business with even more vigor and vitality having learnt new lessons, and; Every change presents an opportunity and brings fresh talent to the fore. When you have these guiding principles, these dilemmas disappear. ANURAG BATRA is a first-generation entrepreneur who was Much Below Average (MBA) at the prestigious Management Development Institute, MDI. Anurag is the Founder and Editorin-Chief of exchange4media Group which includes exchange4media.com and Co-Founder of Governance Now Intelligent Entrepreneur March 2013 29
A New Series of Sovereign Bonds It’s time the government thought of an option which will serve as a self-funded retirement plan [ BHARAT BANKA ] HERE ARE FEW PERENNIALLY PROBING questions that the Indian economy keeps facing with differing responses from various quarters. Let’s look at a few of these statements: India lacks state-sponsored social security benefits, in contrast to those available for the likes of baby boomers in the western world. Leaving state-sponsorship alone, even viable long-term private avenues for an Indian citizen to plan social security benefits for her retirement are almost negligible. The market for long-term sovereign securities is concentrated with commercial banks and arguably, the longest tenure gets saturated at a 10-year paper, with shallow depth for 30-year paper. The Indian saver, a significant 30 percent plus of annual GDP, being constrained for safe and secure long-term avenues to deploy his savings, is forced to park it in deposits with banks. Interestingly, the liquidity generated by the banks arising out of such deposits from Indian savers is invested by the banks in Indian longdated government securities, partly due to mandatory requirements and partly due to lack of better arbitrage avenues for surplus liquidity.
Creative policy Now, just imagine if the government got somewhat more creative and could come out with an on-tap issuance of long dated sovereign bonds with the following indicative features: Sovereign bonds: The sovereign guarantee to ensure zero risk on defaults or fear of default. Investors: The series to be offered only to noninstitutional or non-corporate investors in primary issuance with PAN numbers. The investment by ultra high net worth investors should not be a concern. Liquidity: The bonds to be listed on stock exchanges to provide liquidity to primary 30 Intelligent Entrepreneur March 2013
investors, whereby secondary purchase will be open to all, including institutional or corporate investors to add depth to the market. It will also allow the government to buy back these securities from the open market, if it chose to do so. Terms of the bond: To keep the coupon around 6 percent, make it tax-free and with a monthly payout option. The investment should be kept outside the definition of net wealth. Ideally, the bonds should be offered only in dematerialized form and those who don’t have one, can be provided one almost free of cost. Why the yield? Why tax-free and why monthly?: A sovereign rate of 6 percent is sustainable for levels of growth and inflation in an economy like India, even for as long as a 50-year tenure. Keeping it tax-free will avoid hassles of TDS for individual investors, and monthly interest option helps individual investors meet their expenses. Long tenure: While the longest sovereign bonds, though illiquid, are 30 years; this series can be perpetual bonds with tenure of 50 years (call option at the end of 30 years can be added). Why such a long tenure?: In the absence of state-sponsored social security or retirement benefits, it could serve as a self-funded retirement plan. An adult of 18 years starting to invest in this bond will be able to see through the first series till the age of 68. The bonds would help the government to open up a recurring avenue to borrow and for a much longer term than today while freeing up the mandatory investment in G-Sec by banks to a large extent. It will provide an avenue to retail savers to plan long-term 100 percent secure returns. Any thoughts? (The views expressed here are personal) BHARAT BANKA is the Founding CEO of a leading private equity firm
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