Lot has been accomplished, more to go…
It has been eight months now since I took over the reigns of Hyderabad chapter. We have been able to initiate majority of the programs that I wanted to implement, but the progress hasn’t been to my satisfaction. Whatever programs we initiated, re-energised or redirected, I want to make them sustainable over a long period. I am glad that Suresh Reddy, our Vice President is also on board, on all the programs and together, we are aligned on the continuity plans for coming years too. He is quite committed and available anytime that I need help. In this post, I wish to elaborate what we are currently doing at TiE Hyderabad and what are the plans on cards…
We have changed TiE Newsletter significantly and rechristened as TiE Today. We are now running it as a monthly magazine with lot of quality features and I want to develop it like a professionally run magazine and create lot of additional features benefitting Charter Members. Bhat Dittakavi is spearheading this initiative, we are looking to add a professional content shop to improve the magazine. In addition, we need the involvement of all the CMs to make it a community magazine by sharing the news and events from their own organisations and also by contributing articles.
Another example is TiE Eagles. Murali Bukkapatnam and Bhanu Cherukuri are putting significant efforts to make TiE Eagles an elite and aspirational golfing group in the city. Murali has been able to get two good sponsors for the program and I am sure he will manage to get more and any help in this regard from our CM community will be truly appreciated. Our aspiration is to make this a global program and Murali is on a hunting spree to spot a company which can commit upwards of one crore for this event.
Murali Kakarla is doing a phenomenal job in putting together a line up of great speakers for monthly Mentorshops and increasing the inflow of new startups / AMs and candidates for MentorAdvisor and MentorAngel programs. He is finalising our annual Entrepreneurship Development Program with Woxsen School of Business TiE-Woxsen. Sanjay Jesrani is working with Murali to make MentorAdvisor and MentorAngel programs successful. Basis the key feedback we have been getting from Mentorshop participants Murali is working to create a platform for finding / hiring Co-founders.
TiE-Global signature program, TiE Young Entrepreneurs (TYE) is into 6th year and it has become a big brand in premier schools in Hyderabad. Thanks to Venkatesh Narasimhan’s leadership, we have completed a first ever TYE-summer program very successfully this year, in addition to the regular annual program. Viiveck Verma as Co-Chair and many CMs as faculty and mentors, making this program a great success. We should be proud that our teams are doing fabulously well in the global competition, too.
I am particularly proud of what we have achieved so far on TiE-Grad 2018 program and Phani is putting great efforts to sign up at least 20+ Institutions this year. I am really happy to see the Committee, Bhanu Varla, Nandita Sethi and Subbu Pericherla are taking the lead and involving more than a dozen CMs to participate and contribute to this program as mentors. We have planned an innovative Grad Premier League (GPL) a marathon hackathon this year and it will be a game changer for TiE Hyderabad. You will start hearing lot of noise shortly on this front. The flagship program, TiE Idea tournament is our most popular B-plan competition, which qualifies top teams from Hyderabad colleges to World’s richest student B-plan competition at RICE University (RBPC)
We have started regularising Leadership series and My Story Sessions and we are getting tremendous response with record attendance to these programs, each time we bring marquee speakers to Hyderabad. We need your active suggestions to refer any good speakers so that future lineup is even more exciting.
Manohar Reddy, as Chair of TiE Socials, has introduced theme based events this year. The last event with cooking as the theme has been a great success with many teams participating in live cooking competition. Participation by professional chefs and prize distribution by Shekhar Kammula elevated the spirits of CM families. Manohar promises to make the next social on Retro 80s theme even more exciting.
We used to do Investor Connect program as part of TiE ISB Connect (annual conference). This year Srinivas Satti has taken up the task of making it a regular program. The first program went of very well with more than 100 start ups signing up initially and a short list of about 36 have been put through a detailed workshop and mock pitch session etc. A final list of 20 have been connected to multiple investors and 6 of them have been selected by investors for further round of discussions. Preparations are on for launching the next batch.
Have you noticed the trend of flash and fun events this year? Unplanned events like Member Mixer– watching football finals in a pub, having a crowdsourcing innovative ideas session in a restaurant and tête-à-tête with a visiting veteran on a trendy topic, ‘Spotting the Dragon’ in the brand-new hotel, ITC Kohenur, makes it more engaging & a fun place too, our Hyderabad chapter. I believe fun & celebrations should be an essential element of what we do.
TiE Hyderabad’s flagship program, TiE Cohorts is awarded as the Most Innovative Program is making tremendous progress and we are going to form the 5th Cohort very soon.. We conducted two orientation sessions in the last few weeks and the people who attended the workshops are quite enthused about joining the Cohorts. We are in the process of filling the gaps in the existing Cohorts and we should be able to announce the new Cohort very shortly.
I am somehow not able to make much progress on TiE Verticals. Attempted to form a few Special Interest Groups to chalk out sector related programs, but the response has not been very encouraging. I had requested one of the CMs to organise a conference on Technology and Design trends in Real Estate and Infrastructure industry. He expressed his inability to organise the same. I hosted a dinner at HGA a few months ago for CMs in Real Estate and Infra sectors. Out of about 13 CMs, 8 confirmed and only 2 turned up. After that I decided to get a study done on making “Hyderabad – A Complete City” and commissioned JLL to be our knowledge partners to prepare the report. We can do a lot more on this in other sectors, particularly in deep technologies and life sciences.
A few other initiatives have been at concept and / or strategy stage are TiE Entrepreneurship Awards, TiE ZenX, TiE Corporate Connect, and TiE Café’. We need to do more on member engagement and lot of effort is required to make the Tie-Connect app very effective and useful for the members. Lot of CMs are suggesting that we should develop a formal induction program for all CMs which should include Cohort training and it should be made mandatory. I am quite inclined to do that and I need support from more CMs.
If you have noticed that our marketing messages have become sleek and effective, it is because of Suresh Reddy. A marketing committee is constituted, he and his staff are helping us design those campaigns and they are producing great results. More digitisation & marketing initiatives are being planned for roll out.
My call to all the CMs is to take part in various programs and make the chapter a great place for all of us to belong to. It’s your chapter and you have to make it great. As Gandhiji said, “Be the Change that You Wish to See in the World.”
Deep Dive versus’ Test Waters
When it comes to quitting your job and starting up, just deep dive. Only when one is left with no options, the real fire gets ignited. Testing waters is indicative of risk-averse thinking. If you are not ready, wait until the fire in you gets ready to get ignited before you deep dive. If you are ready, no dip test is required. Some founders think they can juggle corporate job with startup. Never do that. It not only burns you out but also will make you to further risk-averse. You may know the growth curve of a startup that takes a hockey stick shape. Having the comfort of a job on the side will make you walk away as you approach the bottom of the V of the hockey stick or what experts call it is the valley of death. When you have a corporate job as a rope to pull you out of the valley of death, would you ever take the risk to cross the valley?
Once you have done deep dive into Startup, that is the first and last time you do it again. You can’t deep dive into a product and go for big bang deep dive on it. Testing waters is the skill you need here. Build something small and ugly very quickly. Take it to the potential customer and test waters. If it is rejected, you hardly lost any time or money. You can come back and do the necessary changes to the product. Go back and test the waters again. Iterate till you get it right. As you test waters more, you go deeper. Yet, go deep enough but not the extent to trust that customer with all of your business. Businesses that have one or two large customers limp the moment their big customer cut the cord.
If you go all the way, you may end up diluting early for the funds you never needed to begin with. You need to raise funds cushioned enough to take unexpected expenses but not excessive enough to drown you in the comforts. Remember, lean means doing more with less.
When you are ready to hire talent, don’t do deep dive. Like culture, teams are built over time and not overnight. Start as a small team with high synergy. Validate, build, sell and iterate. Lean teams suit lean development. Hiring is not a step-wise process. It is a continuous process and as a founder, you are always on to spot talent. Hiring in deep dive and bulk lead to suboptimal performance.
When it comes to chasing a market, start small. Don’t deep dive. Test waters locally. Conquer your town. Be known for your niche. Outrun your competition in that town. One geography at a time. Going big bang means, you have no flexibility for doing mistakes and course correction. Start with a small market.
Deep dive for starting up and testing waters is for getting the startup going.
Magical Wand of a Superangel
Bhat Dittakavi of Variance.AI interviews Ashok Rao, serial investor, serial entrepreneur and former TiE Global Chairman, as part of TiE Today at ITC Kohinoor, Hyderabad on 24th Aug 2018
Ashok is a serial entrepreneur, serial investor, and a member of the GOOSE Society of Texas. He is a start-up investor, super angel, Hollywood movie producer and Chairman of many startup boards.
Ashok is a fun loving gentleman with a lot of warmth in his talk. Whatever he states is backed by numbers and facts. An engaging personality with lots of humour, Ashok is very meticulous and objective in his approach. As a former chairman of TiE Global for four years, Ashok, along with TiE CEO PK Agarwal, worked hard to foster entrepreneurship across the TiE ecosystem. Under his supervision, TiE expanded its presence from 13 countries to 18 countries. During his term as Chairman, Ashok made sure he personally visited 80% of all the TiE chapters across the globe.
Daughter Kavita Rao, 34, is a popular Hollywood choreographer, dancer, model and actress. She is an entrepreneur and her company Karmagraphy is into performing arts. Son Siddhartha, 38, is a successful litigation lawyer. Wife Sheela Rao runs a non-profit called “Daya” for victims of domestic abuse from Southeast Asia. Ashok and Sheela have been married for 42 years.
Bhat) What is GOOSE Society?
Ashok) It is a Superangel Investment Group. I didn’t form GOOSE. Membership is by invitation only. I was the 9th person to be invited to join. GOOSE currently has 20 members with an average age of 70. GOOSE was co-founded in 2005 by Rod Canion, founder of Compaq and legendary VC Jack Gill. GOOSE stands for “Grand Order of Successful Entrepreneurs”. In order to be invited to join GOOSE, one needs to be successful entrepreneur with a proven track record. We target early stage young entrepreneurs, typically in their 20s. We are what people refer to as “Super Angels” who readily cut a big check if we spot an opportunity in a startup.
The best way to describe Goose mentors is with a “Bowling Alley” metaphor. When kids go bowling we raise small lane guards (walls) along the bowling lane to prevent the ball from rolling into the gutter. We mentors are those lane guards that prevents the Company (the ball) from going into gutter. The bowler bowling the ball is the entrepreneur. We try and prevent them from making the same mistakes we made in our careers. And finally, we don’t take credit when the entrepreneur knocks down the pins or makes successful strikes in a row. That success truly belongs to the entrepreneur.
Bhat) When do you exit?
Ashok) No hard and fast rule. In a successful start-up, there are many opportunities for exits. We could exit before or soon after Series A. For example, FDA approval in medical devices is an inflection point for exit for a medical startup. Generating first revenues is another.
Bhat) When you negotiate with the Series A investors on behalf of startup founders, what information do you share?
Ashok) Everything! An open kimono.
Bhat) Do you use any specific negotiation skills?
Ashok) Nothing specific. But it is important to know your walk away number before you get into any negotiation. Then it is about the body language, specifics of the deal, and how sexy the offering is. I always say that a deal delayed is deal betrayed. And the best deals are made at the point of indifference, where no one is ecstatic, and both parties are slightly unhappy with the deal.
Bhat) Are you a big fan of golf?
Ashok) I love all sports. Cricket, squash and golf. I have made some of my best deals on the golf course. This is the only sport where you play the sport with the opponent alongside you, not across from you. I try and compete wholeheartedly and I won’t throw a game to make a business deal come through. Similarly, I won’t do business with a partner who intentionally loses to make me look good. However whether one wins or loses, one has to be gracious about it. It is the competing that matters, not the winning or losing.
Bhat) When did you start your entrepreneurial journey?
Ashok) I became an entrepreneur at 40. Kind of late. I was a caged animal for the first 18 years of my career. Then I had my epiphany. I would say that “Turning 40” was the trigger. I started as an entrepreneur in 1990 and I took my telecom company from 0 to $250 million through an IPO in 1995, just within five years. Then I worked briefly for a year as President of Enron North America, before starting my next venture.
Bhat) What makes you unique as an entrepreneur? Why are you different from other entrepreneurs?
Ashok) Not sure. All entrepreneurs have something unique about them. If I had to try and analyse my own skills, it is that I think I can handle quantum leaps. But at the same time, while making that leap, I try and bring everyone with me, while drilling into details. The classic “entrepreneur’s paradox”.
Bhat) You worked as Chairman of TiE Global for four years. Talk to us about it.
Ashok) The first three years were fabulous. So much harmony. We went from 12 countries to 18. Great retreats we had – Bali, Lisbon and more. We visited so many chapters and I was fortunate to have PK Aggarwal as my partner in everything Tie. I personally visited 49 chapters and we expanded TiE to 18 countries including the likes of Belgium, Bangladesh, and Israel.
Bhat) You talked about “Power of one” and how visionaries have left the world as a better place. Are you already a power of one or are you on your way to becoming one?
Rapid fire with Ashok
Bhat) Describe yourself in three words
Ashok) Hopefully, a good Father, Husband and Friend. If you let me say more, I would say “lucky and successful even after I made some mistakes”. One of my favourite sayings is “Don’t shave superman.” Which means don’t get carried away with yourself. The man looking back at you in mirror every day when you shave is not Superman. Stay grounded irrespective of any success.
Bhat) What would be your lifelong dream?
Ashok) I don’t dream much. At this age and stage of my life I try and help young people, and try and make them more successful than I was. Try to help others, not as charity, but as an endeavour.
Bhat) If you are stranded on an island, what two things would you take with you?
Ashok) Bunch of books to read. And all of Mozart’s works to listen to.
Bhat) What compliments do people give you the most?
Ashok) Ask them. Answering it would be self-serving.
Bhat) What have you done that you are most proud of?
Ashok) Great kids who are successful. Friends around the world. I was one of the first Indians to take a company to the public in the US on NASDAQ.
Bhat) Leader or a follower?
Ashok) Tough question.. I try to be both. Rise to the occasion and be a leader or follower, as the situation demands.
Bhat) Define happiness?
Ashok) Funnily enough, that is the meaning of my name: A-Shok – the absence of sorrow. If I reach the state of Ashok, the adverb, not the noun which represents the great emperor, I am happy.
Bhat) When was the last time you laughed out loud?
Ashok) I do it every day. Today I laughed a lot at the golf course with Pradeep Mittal and Murali.
Bhat) Four things you would change about yourself?
Ashok) Stay more fit. Be nicer. Remember to be nicer every day. There are a lot of small things. Always be respectful to people. Don’t blame anyone even momentarily. My best advisor and sounding board for all of this is my wife.
Bhat) What is the first thing you think of in the morning?
Ashok) Got to brush my teeth. Haha. But seriously, it depends on the events for the day.
Bhat) What will you never do?
Ashok) Never is a difficult word. The word “never” really straps me. Remember that James Bond movie “Never say Never”.
Bhat) What did instil going big in you?
Ashok) I enjoy risk. The adrenaline rush. Either you have it or you don’t. Hard to make entrepreneurs. My dad was an army doctor, retired as a general. He was not an entrepreneur. Neither are my 2 brothers. One does not inherit this bug. You either have it or you don’t. The bug of entrepreneurship kept on building till I told myself I had to try it before it was too late. Turning forty was the trigger. Never too late.
Bhat) The next big thing?
Ashok) Self-driving electric vehicles.
Bhat) What do you fear the most?
Ashok) Being incapacitated and becoming a burden on the family. You never know. Fate can be capricious.
Bhat) One final message for first-time entrepreneur.
Personal board vs Mentor
A lot of times, we find a mentor or a coach who takes a personal interest in making sure we succeed in our endeavors. It’s definitely helpful to have a fresh set of eyes review what we are doing so that we save more failed attempts in life. Right from the days of Alexander having an Aristotle or Chandragupta having a Chanakya, the idea of having a mentor has been a known way to avoid pitfalls in the lives of the rich and powerful.
However, the latest trend has been to recruit a group of people who will swear to confidentiality and be your personal board. This idea has wings, as you are distributing the responsibility to a number of people as opposed to one person, who may get carried away with personal prejudices in some cases.
The fact of life is: we have plenty of choices and loads of data available to us to make our choices. Business, family or personal areas of our lives are filled with these decisions we have to make against these choices. It helps in talking these through with someone who does not judge you and consider the pros and cons of all the possibilities.
This concept is borrowed from the corporate world, where institutions are required to have a board of directors or trustees to guide the firm in taking strategic decisions. The same idea is being extended to the individual level.
The logical question to ask is, how does one go about putting their own personal board of directors (PBOD) together? There are more than one ways to skin the proverbial cat. That being said, broad guidelines for putting together a good PBOD is to have accomplished individuals from various areas of expertise making sure the group is diverse enough with respect to age, education, profession, and gender. All these to make sure you get as many perspectives as possible. While you need people who will encourage you along your journey, it’s also essential to populate your board with people who are entirely different than you. You will be able to eliminate a lot of blind-spots, that would otherwise impede your growth.
As an example, I am in a group, where eleven of us are part of a personal board of each other. It is a mix of people, who have all done their bit in life to be worth their salt. Some are like me, and others are completely different in their attitudes, approaches and ways of life. We all meet on a set Saturday each month to update each other about our personal, family and business aspects of our lives.
Once you have your board in place, there are some sure shot ways to get the best out of them.
- Be honest in articulating your aspirations and goals clearly to all of them.
- Be open to suggestions and criticisms. Encourage some amount of constructive criticism from them.
- Update them about progress made and roadblocks that come up.
- Take time to thank them along the way.
The best part of putting this kind of a board together is that it’s a lot of fun to have a group of people who are concerned about your well being and success. So, what are you waiting for?
A Smart Businessman
The entrepreneurial journey of Kishore Kothapalli, MD of MRL Posnet as part of TiE Hyderabad initiative “His Story” on 8th August 2018 in Hyderabad
Do you know the traits of a smart entrepreneur? When a good opportunity knocks on his door, he grabs it with both the hands and makes it his/her own. What makes a smart entrepreneur great? When he/she rightfully credits the success achieved to the ones who walked in with that opportunity. Do you know what makes a smart entrepreneur super successful? When he/she lets the teams drive the business keeping the focus on the big picture. Kishore Kothapalli of MRL Posnet brings those three dimensions.
Another poser: What is common between Kishore Kothapalli of MRL, Satya Nadella of Microsoft, Shantanu Narayen of Adobe and Ajay Banga of Mastercard?
All of them went to the same school – Hyderabad Public School.
Kishore, a business graduate from Kelloggs, is a Hyderabad-based serial entrepreneur who sold MRL POSNET, a company he founded with his friend, to Worldline a global leader in POS systems for an all-cash deal valued at $105 mn. MRL Posnet sells and services Point of Sale (POS) terminals.
In a freewheeling discussion with Suresh Reddy, Vice President of TiE, Hyderabad chapter, Kishore some of his perspectives on business strategy, and what the future beholds, besides sharing vignettes from his entrepreneurial journey of 20 years.
The demon is in the news
While most businesses and businessmen struggled to adopt to the change brought about by the sudden announcement of demonetization, Kishore saw a life-changing (almost, he says) opportunity, and quickly scaled his business and tripled its valuation in four months. Kishore presents very high clarity regarding strategy, execution and communication, and likes to simplify things rather than deal with complexity. Add common sense to it and you will know what makes Kishore stand out in the crowd.
Initiating the discussion, Kali Prasad, President of TiE Hyderabad chapter introduced Kishore as a lively person, who has chosen to live his life to fullest.
“Most of my interactions with him have been full of smiles. When some of us met him recently for lunch, I was nicely surprised by the traditional lunch arrangements he made with the help of his malayali cook. Kishore is man for his friends. Relationships are important for him,” he said. Prasad also acknowledged the presence of Vijay Menon, ED of TiE Global who was visiting.
Suresh moderated the discussion in his inimitable, curious style. “The Payments space suddenly caught fire after the demonetization in November 2016. A Hyderabadi accomplished a $100 million exit and we are very proud of him,” he beamed.
Suresh: What made you take the exit? Why did you sell?
Kishore: The business that we were in was payment processing. It is in the financial space with the growth curve showing a steep climb, and valuations going through the roof. We asked ourselves the role we play. Are we B2B or B2C? All the success you see in the market is around B2C. In B2B, the fundamental question is to build versus buy. Multiple is the derivative of several factors, including perception. We arrived at a value based on how much investment was needed for someone to build our business.
Suresh: Please tell us about your upbringing.
Kishore: I always considered myself as a blessed child of God. I seldom had to deal with hardship, coming from a family where my father got his education at the expense of his brothers’ sweat. I went to a boarding school in Guntur, and then to HBS in Hyderabad before joining the IIT Benaras Hindu University. I then earned an MBA from Kelloggs. I developed deep rooted friendships with everyone I grew up with and they are part my foundation for life. I am not sure if I am a serial entrepreneur but I am a serial businessman.
Back in the 90s, I was working in USA making $85k per annum with $12K guaranteed bonus and I spent so much that I never had any money left to pay off my year end taxes. But I had a promise to fulfill My dad founded Modern Roofings Limited (MRL), a building materials company. I promised him that I would take care of MRL atleast for a couple of years.
One day, in the middle of a packed four week schedule, I realized I would never fulfill the promise I made to my dad. I quit my job, and three months, later, was helming MRL.
Kellogg gave me the wherewithal to help me grow MRL eight fold in under two years. Along the way, I married but cant quite put a finger and say when. With the changing market, we realised MRL’s core business was not feasible anymore. So we decided to switch, and we decided to focus on making transactions easy. The idea was proposed by my boyhood friend, and current business partner, Pratap Pingale.
In the US, payment processing was the domain of the Independent Sales Organizations (ISO). ISOs typically sold off their businesses for a few million dollars when the owners didnt want to work anymore. Pratap wanted to bring this to india. He showed me an executive summary. I connected him with a friend in Mumbai, who was seasoned in this business, and agreed to take care of the backend process. Together we built a network of POS terminals.
Suresh: Some of the stuff you did was quite technical yet you only had 140 people. How did you it?
Kishore: First I tried to validate my business model. I met the Khaitans, who have been into these for a while. They cautioned me that this was tough business, take long time to make money. We needed 50,000 POS terminals to turn cash surplus. I told the Khaitans, I have neither the resources nor the patience. I told them I would attempt to breakeven at 10,000 units. we got back to work.
We looked at global players in this space were looking to innovate. Everything is geography-dependent in the payments business. If you have an engineer to support, you need density to utilise the engineer fully. We realised we didn’t need a lot of engineers to services them as the machines were quite sophisticated.
Then, we went after a target of 100000 machines, and estimated a cost of $18 mn. Including customization, we needed $20mn. At $170 a peice, we bought the software rights for the machines. This was risky. But with a switch, which cost $2mn, we controlled the management of the terminal completely. It took away the need for a lot of engineers on the field and drastically lowered our maintenance costs. We automated a lot of processes. Our first client – Karur Vysya Bank was quite pleased to partner.
Our three tenets:
– Whatever we do shall be scalable
– Whatever we do shall be tech-enabled
– Whatever we do shall be profitable at unit level.
We shipped the terminals, called the customers and trained them over phone and with videos. So no inbound calls and no service engineers.
Suresh: Whenever you start a business, do you start with a structure?
Kishore: My intelligence is average. A classmate became managing director at Reebok India and we got talking about retail. Invited him to come over and talk to our teams.
When I listened to him, I decided to invest in retail. My approach was to make ourselves indispensable to our principal. That is how we add greater value.
Suresh: What about ATM real estate?
Kishore: I friend was visiting me in Hyderabad, and while talking, he called another friend, Sunil Jain, who is part of Kesoram Cements. My friend asked Sunil Jain’s sonhow to decide where to setup an ATM. The subsequent conversation made me travel to Mumbai, initially with a plan to spend a few hours. We stayed on for four days because we figured we are paid per transaction for setting up an ATM, not for the real estate. We converted this into financial play. We bought ATMs for Rs 10 lakh, and sold the cashflows for Rs 13 lakh.
Suresh: How do you manage time?
Kishore: I am like a quarterback in American football, where my job is to throw the ball and stay back. I don’t run day by day. I never get into operational responsibility. This is my day one requirement and I have the team in place.
Suresh: Do you have periods of nothing to do.
Kishore: A lot of times. All my private time I spend on individual sports. That is my personal time.
Suresh: Advice to B2C?
Kishore: Either you build scale like an Amazon or build niche. Your business is defined either by the financial or social balance sheet
Kishore: I tend to stay away from marketing as I don’t have any experience.
Suresh: You have bootstrapped. Success is in value to business than investment. Right?
Kishore: Entrepreneurship is all about maximizing the metrics between opportunity and resources. At MRL Posnet, the opportunity was to break into established POS market of India. Resourcing required us to get into deep technology and we could afford to buy the terminals. When both are under our control, you can take risks. Our CFO declared a profit at 13,500 terminals, in our second year of operation. We managed to maintain strong growth.
Are we building this for exit or growth? We told ourselves exit or retain makes no difference to the business and we decided to make it a cash cow. Then we had to choose whether to spend more and grow faster, or infuse equity. But either would have to repay while surrendering control. We did receivables financing by borrowing from our bank, who was also our customer. We could do it since we operated at 70% gross margins. Technology and processes enabled this.
Suresh: How about VCS knocking on you?
Kishore: At the end of 2015, we had 30,000 terminals. The market was growing at 8-10% and we were marginally above it. A slow market made us wonder if the business was going to be sustainable. But I had the technology, and people with me. We chose to go international. it was risky and we decided to reduce our risk. We started to look to divest partially.
- We were to sell out a chunk of equity by 15 November 2016.
- But on 8 November, the government announced demonetization.
- On 10 november, I flew to Hong Kong, and signed an order for 100,000 terminals.
- But on 15 November, the PE investors backed out as they panicked with the demonetization.
- However, Karur Vysya Bank agreed to loan out Rs 30 crores.
The PE investors came back to us in February. With 35,000 terminals, we had138 employees. By March 31st, we had 185,000 terminals and 140 employees. That’s when the investors gained confidence in our ability to scale. While the whole market grew by 400,000 and we added 125,000 terminals. In all fairness, those PE guys have new valuation. The whole story started again.
Nandan Nilekani had said ATMs and POS would be dead soon. I argued against that. I believed people don’t change overnight. It was only a form factor difference. But change is seldom abrupt. All these things that people talk about but nothing is disruptive. My friend heard my argument and mentioned the same to Nandan.
Hearing my views from my friend, Nandan toned down on how disruptive UIDAI can be. A few months later, first president of YES Bank went to Nandan. Later Nandan talked to me to reach out to SignalHill in USA. I went to the US to get them to sign with us. By this time the other PE firm upped the valuation to $45 million. Chairman of SignalHill advised me that it was time to sell at $100 million. We took it and started a global process. We paid them 3% success fee.
There is great value in paying these big brands like Amarchand Mangaldas and Ernst & Young because they don’t compromise on the quality of the people around you. Don’t worry that they are a big expense.
Suresh: Tell me about bootstrapping?
Kishore: I aways believed in marking to the market. We have always brought people at market pay. Upside is ESOPs. We didnt want them to doubt their decision to join us.
Bootstrapping is about viable product at minimal cost. Doing high tech work at low cost is bootstrapping, People should feel proud to work, else how do you attract the talent? The best of the brains are all over the world. Hire the rural ones and teach them how to dress and polish their English. They get super confident.
WorldLine aquired us. They are 1000 times bigger. But our EBITDA is closer to theirs. Our company is not built on human arbitrage but on technology and sustainable business.
Q) Were you cash rich when you started first?
Kishore) We needed three crores. We started with it. We jacked it upto 8 crores and we lost it all. We had a retail model. We created a pre-paid wallet by working with a bank. People recharged it at Rs.10 and to resolve it we spent Rs.5-10 rupees. We realized we were making losses through value added services. This is how we lost 8 crores. Then we reinvented. We started offering this B2B2C directly to banks that don’t have digital business. This is how we turned into profitability. After I burned Rs 8 crores, I pumped in more. At Rs 15 crores, I told my CFO, I would infuse Rs 5 crores more and after that I would not give up.
Prasad) Are you spiritual?
Kishore) I don’t think. I think I am a happy, blessed guy with no issues in life. My associates or friends are the reason for my positivity.
Jesrani) My brother was your classmate. Nature versus nurture? What made you what you are? What transformed you?
Kishore) People like Pratap. I am a village guy. Everyone in Hyderabad talked and dressed differently. The fact I could blend in made me confident. When I was in Banaras, I was Banarasi. HBS taught me structure. In Banaras, I learnt about life and I matured there as individual. Kellogg gave me turning moment. 396 out of 400 got 4 years of average experience and I got no working experience. They talked about difficulty in work environment. Seeing them gave me confidence. A priest was one of our best friends there. He came in to study how to manage people.
Q) What was your eureka moment?
Kishore) Demonetization. I knew it was a rough ride. When I saw the new bank note, it was big trouble. ATMs needed physical recalibration. The only fallback would be debit cards. We knew cash would be back in three months with full force. That is when I picked on my entrepreneurial moment.
Sunil) Any regrets?
Kishore) Our tensions were about growth, technology and obsolescence. Our catchphrase is “we are not legacy”. Pratap knew the difference between marketing and revenues.
All of our presentations are on cutting-edge high-tech elements but the revenues were on brick and mortar. I never let my tensions seep into my leadership team. I always walked into the room cheerfully. Someone told me we lost 3 crores in a meeting and I controlled for a second and told them let us move on.
Q) How disruptive is UPI?
Kishore) UPI, debit card, credit card, Paytm and American Express are all fundamentally the same. They authenticate the consumer. On the backend, I ask the bank to transfer money between two parties. No one has created anything new except the method of payment with technology. Nothing has changed in payments. UPI might be dominant payment mechanism. MRL is about recurring revenues of 30% and 70% non-recurring. 30% comes from value-added services.
Q) Where is the disruption except in the form factor?
Kishore) We built a company that I thought is worth 300 crores but 700 crore we landed in. We got signed by large customers and also long tail. Future value got captured by the sign ups by large firms after demonetisation.
Q) Why did you want to exit?
Kishore) I wanted to retire. Focus on growth without creativity is not my strength. Micro teams is my strength. It means I got to replace myself with a CEO. Then I got options of partial divestment or full. I chose full. This is what I told the chairman of World Line. One year since the acquisition, MRL Posnet still runs with the same team. None of WorldLine employees joined in.
Fantastic session by Ashok Reddy of GrabOn on “growth hacks”. Explained so very well for our Hyderabad startups
Knowledge Series – Entrepreneurship and Technology, Storytelling for Social Impact
A fabulous learning session under “Knowledge Series” on social entrepreneurship by Cynthia Hellen from SMPLCT in conversation with Prof Ajit Rangnekar, DG RICH hosted by Indian School of Business TiE Hyderabad & NASSCOM. We thank the US Consulate General for the reference.
Knowledge Series for Deeptech Startups
Prof Peter Kabel all the way from Germany explained investment opportunities and Do’s and Dont’s to Hyderabad Startups. Thanks to Telangana State Innovation Cell for the reference and IIITH-CIE for jointly hosting the talk.
Mentorshop – Startup Sales – B2C Sales – Selling Through Channel Partner
Useful session by Sunil Gulati of Invomed Cotab on channel partner “selection criteria”
His Story | Kishore Kothapalli | Centimillion USD Exit
Who inspired him ? What aspired him to become an entrepreneur? Straight from the horse’s mouth, Kishore Kothapalli shared HIS STORY and spoke about his journey of becoming a renowned entrepreneur
TiE Nizamabad leadership team meets TiE Hyderabad
Spotting the dragon
FiresideChat on spotting the dragon and taking investing to a nextlevel. Special thanks to Mr. Ashok Rao and all the Charter members for gracing this event