It was October 1996. At the IT Asia Exhibition in New Delhi, Sanjeev Bikhchandani gazed at the “www” on the stall front. What did it mean? He had spent the last few years of his life searching for trademarks for big pharmaceutical companies and on salary surveys – he had been struggling for a breakthrough. The “www” piqued his curiosity.
He asked the stall owner what it meant and was told that it stood for “world wide web”. This was the moment Sanjeev learnt about the internet. The promoter pointed out the Yahoo! website to Sanjeev and showed him how to search, browse, and check other sites. Intrigued, Sanjeev wanted to know how many users of the internet were there in India.
The answer was, “Fourteen thousand”.”Wow! That’s a lot of people,” Sanjeev told himself.
He called his brother, a professor at the UCLA business school and expressed his desire to start a website and needed his brother to hire a server. In return for the server payment, Sanjeev offered his brother 5 per cent in the website and called it Info Edge. Info Edge eventually became a publicly listed company with a market capitalisation of Rs 15,000 crore (about $2.3 billion). So, at $25 (Rs 1,000 back then) a month, his brother definitely got a good deal for the server.
I believe that dumb luck plays a huge role in a company’s success. I always ask an entrepreneur whether luck and chance have played a role in their success. A chosen few disagree, but I genuinely believe that an entrepreneur’s capacity for risk-taking can paradoxically lead to success.
That said, most of us have had chance encounters. Those who become successful in their chosen businesses are the ones who manage to keep an eye out for opportunities, believe in them when they show up and seize the moment. They intuitively understand where their control ends and the power of the universe takes over.
After a few years down the unexplored path, Info Edge began to take the shape of a business that could turn profitable for Sanjeev. In 1997, he launched the Indian job portal, Naukri. com as a subsidiary of Info Edge. By 1998, having reached extraordinary heights in the United States, the dot-com frenzy arrived at the Indian shores.
Sanjeev says that his first round of dumb luck started around the year 1999 when he received calls from various investors inquiring about investing in his business.
Sanjeev says, “I was completely baffled. I had no clue about the dot-com bubble, valuation or venture capital. We made approximately Rs 36 lakh in revenue that year. Things were moving fine and I had never thought of raising external capital. Still, I went for a couple of meetings and said, “Boss, I don’t want to raise money.’ I refused!”
Sanjeev knew about building a business the traditional way – pay as you go by earning revenue and managing every dime as if it were a dollar. But having seen three cycles of investment frenzy in two decades – the first one in 1999, the next one in 2008 and then in 2014 – as an internet entrepreneur and angel investor, I can tell you that it’s not easy to hold back. Half the time, you wonder, “What is it that others have realised but I haven’t?”
A few months later, Sanjeev heard about a company called JobsAhead.com that was being launched as a competitor. JobsAhead.com’s advertising budget for the launch itself was Rs 75 lakh – twice the size of Info Edge’s annual turnover.
Sanjeev and his team did a quick U-turn and raised $1.7 million (approximately Rs 7 crores then) from ICICI ventures in late 2000.
“But by March 2001, the dot-com meltdown had begun. No one officially acknowledged it till September-October. Everyone kept saying that it’s a technical correction. We received the funding on 8 April and put it in a fixed deposit. We had been in the business for three years and knew how tough it was to survive in the internet world, so when the market crashed, we knew that it was a real crash.
“We knew that six months before it happened, I told ICICI that this is a real crash and that the business should be built slowly. If we had raised the money six to eight months earlier, we would have spent it foolishly. Instead, we put the money safely in a fixed deposit just as the bubble burst. The timing was sheer dumb luck.”
When JobsAhead.com was launched, it created quite a buzz. It had better user experience and was hipper than Naukri.com. For some time, JobsAhead.com gave tough competition to Naukri.com. By 2001, it had raised Rs 11 crore of funding in three rounds, their last round being valued at Rs 33 crore. It continued to grow aggressively using sales and marketing techniques. Investors and internet companies had not even begun to recover from the 1999 burst when 9/11 happened. Similar to other sectors, the Indian jobs market also came under further pressure. While JobsAhead.com was expanding in a hurry, Sanjeev was building his business slowly and profitably.
Sanjeev says, “The first thing we did was hire four sales guys in Delhi and asked them to go out, meet prospective clients and make sales. And we discovered that by employing a decent sales guy who would sell subscriptions within three months, we would make a profit of Rs 50,000 per month. It’s a fully loaded cost including his salary plus commission, conveyance, mobile phone expenses, depreciation on PC or laptop, office rent, air- conditioning, furniture etc. which came to about Rs 22,000 then. We were still making Rs 28,000 per sales guy. This way we had found our repeatable profitable unit – keep on adding more and more sales guys.
“We had brand traction, we had the right strategy, and we had the most jobs. We had insider knowledge and learning curves that helped us. When 9/11 hit, JobsAhead.com realised that their last round of ₹11 crores funding would need to last a very long time, so they started laying off employees. And a lot of these well-trained people ended up at Naukri.com, further fuelling our machine. We made two years of losses and then we broke even and made a one-crore profit.”
There is an interesting story behind the conception of Info Edge’s 99Acres which became a competitor of Housing.com.
Sharad Malik, an NRI, and one of Info Edge’s shareholders and advisors visited India every year on vacation. During one such visit, he shared his nightmarish experience of trying to sell a piece of property at Kashmiri Gate, New Delhi with Sanjeev and his team.
According to Malik, one could never know the right market price of a property and had to depend on hearsay and real estate agents. It was Malik who suggested that they launch a real estate website that would cater to consumers directly. It was a largely untapped market in India. Info Edge’s team studied the market and launched 99Acres.com in 2005, right after acquiring the matrimonial website Jeevansathi.com.
Sanjeev says, “We knew that we had the better product. But there was a myth that Housing.com is better. There was an internet craze, and bankers found the perfect candidate in Rahul Yadav of Housing.com, who was the new player in the game. People believed it was a better product. The truth is that Housing.com was a better-looking product. It was art for art’s sake.”
When Housing.com was launched, it had a map based interface rather than the standard text-based interface. Everyone hailed it as an innovation in user interface design. Sanjeev differed from day one, “When you are buying a house, you don’t look for the house on a map because you are not arriving here from Mars, and wondering, ‘Where do I buy a house?’ You are driving by that place a hundred times in a year, thinking to yourself, ‘This colony looks reasonable. Maybe I should look for a house here.’
“You are familiar with that area. You won’t buy a house without being familiar with the region. It’s not an impulsive purchase. You look at the options offered by the broker catering to your budget. People prefer text-based listings instead of a map-based interface. When we launched our own map-based interface, we discovered that only 12 per cent of traffic went there. As many as 88 per cent of our customers preferred text-based listings. So the better product is what the customer wants rather than what appeals to your aesthetic sensibilities.
“Other young competitors, like Commonfloor.com were managing things like Housing.com. When you invest a lot of money in a company run by a group of young entrepreneurs, they will build a great engineering product. But running a sales team is quite different. At Info Edge, we are a strong sales force consisting of 600 employees. We were churning out 70-80 crores of revenue around 2014-15, so our growth was being funded not by the investors’ money but through our customers.
“I believe that the customers’ money is a hundred times better than investor funding. If a customer uses your website, then it means that you have a good product. The investors’ money will undoubtedly follow. But having the investor’s money does not ensure that customers will follow. You may not have a good value proposition. If there is a tezi (speed) in the market, then more money will flow in. But market tezi comes and goes. Beyond a point, the investors might feel that there is no cash coming into the company.
“That’s what happened to many other ventures. We don’t know how much revenue is being generated by Commonfloor. What we do know is that we did a business of ₹120 crores at 99Acres. We did lose money, but we lost very little as compared to companies that were positioned at a revenue of ₹5 crores.”
Sanjeev puts it correctly. The core of any business is the value of its proposition and its ability to sell itself to its targeted market.
Does it have what it takes for a customer to loosen his purse strings? Does the business have the viability to get a customer to pay up by reaching out to him with service and a sales pitch and then living up to the promise? Several real estate websites failed because they couldn’t deliver on these fronts. They pumped in the money without ensuring a profitability model for generating revenue, which is a risky strategy, to say the least.
When Rahul Yadav raised the money for Housing.com from SoftBank, he called Haresh Chawla, one of its first angel investors and told him that SoftBank had assured him that investors don’t worry about the revenue for ten years. This meant that 99Acres’s competition had access to infinite capital, while 99Acres’s business was completely revenue driven.
“I got five phone calls from Housing.com investors saying, ‘You’ve got the business’ (because 99Acres was already generating Rs 70-80 crore of revenue). They said, ‘We’ve got the product right with Housing.com. Why don’t we merge?’ And my answer was, ‘If you’ve got the product, how come we have the business?’ I will tell you something interesting. You merge with the complementary product, not the substitute.”
Excerpted with permission from How I Almost Blew It: Incredible Lessons From India’s Most Successful Digital Entrepreneurs, Sidharth Rao, Westland.