Three months after I started WhiteHat Jr in 2018, my ex-colleague from Discovery came to visit me at our “first office” late in the evening one day. We were seven people working in the living room of my house in Mumbai. We’d just launched our first version of the product – kids built an app of their choice with a teacher, over eight live classes on an open-source video platform. We’d shared the details about the course on our personal Facebook pages, and I was calling the first 250 users who’d completed a free trial class one by one.
Each call was similar. Kids loved the creative activity in the class and the warmth of a live teacher, but parents were confused. What was coding? How do live classes work? Will this help with school grades?
I’d explain to parents the research on how coding made kids creators for life and why having the confidence to build things from scratch was the single most important skill that would matter in the new world. I made 70 calls that day. Most parents put the phone down in the middle of the conversation. Others asked me to call back in an hour and never picked up the call. Only a few expressed interest to know more about the classes. In the middle of these calls and making diligent follow-up notes on Google Sheets on whom to call back, I would fix the computer audio and video settings for new people joining our trial classes, since I was also our very first call-centre employee.
My ex-colleague from Discovery looked at the frenzied activity in our living room with puzzlement.
He had the same unasked question in his eyes that I’d seen in the eyes of friends and ex-colleagues who’d visited me in the early days of WhiteHat Jr. Why would anyone in their right mind leave the role of the head of Discovery India to do a dead-end job like this one?
“This is going to take a while to work, isn’t it?” he finally said aloud, without much hope. “How long will your savings last?”
I didn’t have a convincing answer for that unasked question, except that I was following an instinct of magnitude and depth with full energy once again. For his question spoken aloud, however, I had a mathematical answer: 22 months. I would give it my all for 22 months. Then, I’d look for a job again. Until then, I’d keep diluting my savings to fund WhiteHat Jr.
Can you quit your job to pursue your net impact idea? Use the salary/14 lakh quitting rule to answer your question objectively. (Your annual salary)/(Rs 14 lakh) is the number of months you need to find a job if your net impact plunge doesn’t work out.
First, calculate your total liquid savings – cash, equity, bonds, fixed deposits, anything that can be converted into cash easily, not fixed assets such as houses, land or cars, unless you’re ready to convert them to cash immediately. Now, divide this with your all-in monthly expenses, including your household expenses and the cash you need to fund your idea, if any. From this, subtract the number of months you’ll need to look for a job if your venture doesn’t succeed, using the salary/14 lakh quitting rule.
The number of months your savings will last for you to pursue your net impact idea uninhibitedly =(Liquid savings/Monthly expenses) – (Salary/14 lakh). For example, if you have Rs 80 lakh of liquid savings in cash and stock, and Rs 5 lakh as all-in monthly expenses, your savings will last 80/5 i.e., 16 months.
Now, you don’t want to be out of money when you’re looking for a job. That’s where the salary/14 lakh rule comes in. If your salary was Rs 42 lakh per year, then it would take (42 lakh/14 lakh), i.e., three months to find a job. So, deducting this from the earlier calculated 16, you get 13 full months, which is the time you have to uninhibitedly pursue your idea without fear or regret. Then, pivot completely to look for a job. If you want to be more conservative, as I became once we had children, you can use the worst-case scenario of salary/7 lakh rule to find a job. In the example above, change your time to find a job to (Rs 42 lakh/7 lakh), i.e., six months. So now, you have (16–6), ie, ten months to pursue your idea.
I started WhiteHat Jr with my own savings in July 2018. With no co-founder, I covered the founding team’s salary, office infrastructure and IT server and membership costs for four months. We were spending Rs 10 lakh per month.
Without the rule, I would have panicked at my savings depleting rapidly but with the rule, I knew I had 22 months to make a go for it. I was still tense every day, micromanaging each expense, from buying the lowest-quality bean bags to not shifting the office from our living room until the neighbours complained about the throngs of chattering, excited kids, who were testing the first version of our product, coming in and out of our house. But the rule gave me the comfort to dig in and keep making the product in the face of venture capitalist (VC) rejections.
I’d reached out to each of the top thirty VCs in India immediately after our prototype was done. We were rejected by 20 of them within a week without their meeting the team or hearing our presentation, since they didn’t think the market was big enough. Most of these twenty rejections were quick after one phone call, but once a top VC from Bengaluru made me wait for seven hours in her office reception area before rejecting my idea within a few minutes of meeting. You learn to accept the idiosyncrasies of VCs in the pitching process. We kept pitching enthusiastically to the remaining ten, going through the lengthy process followed by all top venture capitalists.
First, one had to present one’s case to a junior analyst. The analyst built conviction by interviewing one’s employees and customers and running detailed analyses on one’s business model. Then, one met the partner, who developed the same conviction after repeating a shorter version of the same process. If one made it this far, one made a presentation to the Investment Committee (IC) members. After more follow-up analyses on the business model and team, they decided whether to fund the company or not. Once they green lit the investment, legal and audit teams of the VC would audit the company structure and financials. Finally, the money would be wired to one’s company’s bank account. The end-to-end process from initiating contact with a VC to the funding being deposited in one’s bank account could take from three to six months for an early-stage start-up like ours.
Seven of the remaining ten VCs rejected us at various stages in this process. I continued to invest in the team and the product during this period. A functioning product in the IC meetings helped us get term sheets from the remaining three VCs, out of which I went with Nexus Venture Partners and Omidyar Networks. We got a seed investment to get the company started. Despite funding, I took a 90 per cent salary cut from my salary as the country head in Discovery, given the small scale of our venture. Now, I was funding the company with investor funding but still diluting my personal savings to cover our household expenses. Again, the salary/14 lakh rule kept me calm enough to not make any drastic and distracting changes like shifting our home to a cheaper location or downgrading our kids’ schools. Each month, I would sell off our stocks to meet our household expenses for the month. I was making an investment in increasing my net impact. My savings were a small trade-off for that.
Excerpted with permission from The Freedom Manifesto: 7 Rules to Live the Life of Your Calling, Karan Bajaj, Harper Collins.