Source : www.paagalguy.com
Bit lengthy but an interesting read from Paagalguy
Contest2win Founder and CEO Alok Kejriwal joined his father’s profitable textile business, expanded it and then left it only to start all over again to build India’s first ever contest portal. In a conversation with PaGaLGuY.com, Alok Kejriwal divulges more about Contest2win, founding successful companies, venture capital funding and more.
You come from a background in textiles. How and when did the idea of an online contest portal come to you?
There were startling differences between the old world economies the brick and mortar, which had a regulatory framework around it and the new age business culture. The old economy had for example licenses, labour policies, lockouts, and strikes. It didn’t make any sense for a new age Indian who wanted to start something afresh with so much of corruption, bureaucracy prevalent in the traditional business model. I loved the business but I didn’t quite like the environment in which the business was conducted, whereas the Internet business was the exact opposite of the conventional business models. There was no licensing, no questions asked and there was complete freedom. One could deliver what he or she wanted to do. The inspiration came from breaking away from the brick and mortar to the virtual world.
Honestly, the Marwari family business system also dismayed me. Like any other family business system the decisions flowed from the top, my dad would do whatever he felt was right and everyone had to follow him. In short, there was no appetite for ambition. The whole system was very hierarchical and the rebel in me completely refused to go on with this kind of functioning. At that time the Internet was the best thing that was happening. It was the web 1.0 era, the time when Sabeer Bhatia had unleashed hotmail.com and at that point everything seemed to fall into place for me. Therefore I decided to take up something involved with the Internet.
Once I knew that I wanted to be a part of the Internet, the business plan came around. Brands always spend money and they are in the business of spending money because they want to attract customers. So if I become a part of the brand spend then I knew I was on the right track.
I have always seen contesting run in India but the problem was in the method used which was cumbersome. Individuals had to cut competition slips out of paper, fill them, then put their post box number and post it. According to me any business is born when you can identify a gap and are able to fill that gap; there has to be a consumer requirement that needs to be fulfilled. Thus this was also a consumer need but I decided to innovate with it by making it digital. Thus the idea of contest2win was born.
When you started out your revenue model was completely different from what it is currently? How did you build upon your revenue streams?
I will answer your question in two parts. I would like to quote what Mr Marc Andreessen said when he launched Netscape. He said, ‘it is free but it’s not free’. Whenever I was attaching or tagging myself to brand media campaigns, I was actually getting multiples of the money I would have otherwise got. The web page would cost Rs 20,000 to make but I would be carrying approximately 10 to 20 crores of advertising on my site. I was earning enough virtually as my brand was built for absolutely nothing. In my mind I had a clear target that the day we reach 10,000,000 users I will shut the free advertising model and move on to a paid model because by then I will have a community to whom I could recycle the contest to.
The day we reached our milestone we informed all our clients about the new model. The transition was from one value to other, we did not subtract any value but what we did was we notified our clients not to carry us in their advertising campaigns but pay us for being on the portal. The brand owners acknowledged the fact that we had become smart, nevertheless at the same time they agreed to work with us on our new model.
What was your big idea with respect to your other ventures Mobile2win.com, Games2win.com and Media2win.com?
Like all businesses we also wanted to grow and expand. One of the lucky events in our life was that we got funding from Softbank. Softbank Capital is one of the largest venture capital firms in the world. As a matter of fact we broke-even within three months of funding and that shocked our VCs. According to them we were a weird company, as most VCs were losing money in dotcom ventures. Here not only had we recovered our initial investment but also started earning good amount of profit. After our initial success they then offered us to come to China where they asked us to replicate the earlier business model.
Honestly our first step to go outside India came to us because of our partners. I would like to mention this is one reason why VCs are important; they are like a window to the world. We alone can do only little but the VCs are trotting all over the globe, hence we get an opportunity to view the actual world through them. Thus China happened but the learning out of the experience was we were late in entering China. I would say late because the Internet bubble had already exploded in China, so we had a situation where either we existed in the services business by making websites, hosting websites or doing something related to that field. Therefore when we saw a large opportunity in mobiles in China we created a company called mobile2win.com. There was another VC called Siemens mobile who wanted to invest in a non-dotcom venture.
The aspect highlighted here is adaptability, one has to adapt to the changing environment. One can’t get stuck with a particular notion that I’m a dotcom company and I can’t do mobile or anything else.
Then in 2004 I began to realize another interesting scenario, wherein all my existing clients really appreciated my contests and our creativity but they felt they needed something other than typical advertising in terms of reach. An ad film can be very beautiful but if it is not presented well then it has no impact, so the perception and impression I got from my clients helped me create a media and creative solution company. I did not have media professionals in my company so I hired another entrepreneur called Kay Kay and I told him lets create a media company, which will only buy media for clients and the creative will be handled by us because that something you shouldn’t burden yourself with. The best part of our business was finally we realized that clients wanted to do more than contesting. Now companies not only wanted us to design their contests but they also wanted us to do branding and lead management for them. The relationship was so pure and unadulterated that we would be punishing ourselves by not doing all this.
Since one year I have been observing the youth and I feel the young male or females are very interactive in nature. They are living in a culture of Internet, mobility and gaming. Gaming because it gives you a sense of instant gratification, as one can win or lose. I grew up reading books and novels but I don’t think any youngster even reads the newspaper today. I realized that gaming is slowly becoming one of the biggest entertainment formats in the country. So we decided to get into the gaming business and we formed games2win.com.
When according to you is the right time to seek VC funding for one’s venture? How do things change when a VC comes in?
According to me for any entrepreneur any time is the right time. If your VC is ready to give you money then take it, it’s always a good feeling of money in the bank. An entrepreneur is a person who will build 100 companies in a lifetime. He doesn’t have to worry about issues like equity, stake, did I dilute too fast? There are many other ventures one can venture into to make up for that one mistake you must have committed. I believe the experience of building a company with external money is very demanding so don’t wait too long and be prepared for VC funding.
As far as ones creativity getting hampered due to VC funding, it is completely false. VCs play a very important operating role from company’s perspective and not from the viewpoint of the business. They can guide you regarding various business models; I agree at times there are some interfering VCs who don’t allow you to do what you want to do. So I would advise entrepreneurs that the way a VC does due diligence on an entrepreneur, the entrepreneur also has to be attentive on what the VC is capable of. I ask my VCs can you give me ten names of companies I can approach in order to talk to the CEO and find out whether you are as good as you claim to be. If a VC has a right to question and examine, you also definitely have the same privilege.
Basically VCs are interested in multiplying their money so as long as they know your working and performing they won’t interfere. They are not interested in ruining any company because at the end it’s their money after all.
Definitely things do change when a VC comes, one has to learn corporate discipline you cannot run your shop just like your own fiefdom. One has to be very careful and alert because it’s institutional money, the VCs are answerable to a lot of other people. All this really makes you aware of the corporate theme and commercial side of life. Ultimately it’s all about profitability and money, sometimes a sensitive entrepreneur can get slightly disturbed as he maybe in love with his business but not in love with money making and in that case a VC can distort that perspective.
Therefore the point to be kept in mind here is that there is always going to be a conflict of interest between the VC and the entrepreneur . Thus one should be prepared for a conflict in terms of ideas and interest. An entrepreneur should always be open to the idea of VCs coming and being a part of their business.
Even in my presentations nowadays, believe it or not, my last line is ‘who will we sell this company to?’ Hence the entrepreneur is already saying I will sell my company to someone and here are the suitors that are fine for you, it’s actually a paradox now as we are already prepared for external funding before any VC approachs us.
What was the reason behind selling your stakes in the China division of mobile2win to US-based Walt Disney Internet Group even though it was a profitable venture?
Very good question! There are two reasons to it, firstly it’s like a relay race, a company and entrepreneur can run up to 400 meters, then you need to give the baton to someone else. That is because the scale changes, China as a market has become so expensive and competitive that to compete we would require huge amounts of money and more than money I don’t think we had the next level of wherewithal to take mobile2win to the glory that it will go to with Disney. We could have still subsisted on a particular level but if you want to go from 10,000 to 30,000 you have got to let the stronger player take over.
The second and most important thing is money; we are all here to make money. We got money back home, gave dividend out and shared the profits with our employees. Some of my team members are working with me since seven years, right from the day we started the company. So now they see money coming into the bank they are inspiring the others to stay on also. Hence its a great motivator, you have got to go and tell people, “look I had the will to build a company from scratch on an idea and take it to a market so hostile like China make it a profitable business and sell it to a company like Disney”. There is a story there and that is how you start few more of your other ventures.
You have made your presence felt in India and China, which other countries do you plan to start shop in? What is your future plans with respect to all your ventures? Are there any new endeavors in the pipeline?
It’s only India for me! The Indian market is buzzing right now and I think it will be foolish on my part to not look at this place. We have the youngest population; the most literate to be and going to be one of the most spendthrift. We have been in this space for the last eight years so we have seen the worst of the trade so why should we not enjoy the best of it? Currently we are focusing only on our existing three companies because we have got our hands, mouth, teeth all tied up, We can’t set ourselves beyond this so this is it.
But we definitely plan to take these three companies to the next level. Professionals run each of the companies, I run games2win, two other gentlemen run contest2win and media2win. They both have their independent business plans and they will fund themselves to move ahead. They will grow to whatever destiny they have to grow and exit when they have to exit.
ICICI was your initial lender. What kind of relationship do you share with them?
ICICI is still a part of the private equity at contest2win. The experience with ICICI has been a great experience. Look at the way ICICI has grown and evolved and what Mr KV Kamath has done to get where ICICI is today. To be a part of the investees of that company is matter of great privilege and learning. They have taught so much about entrepreneurship that we have learnt from them. They also provided us with a very solid backing in terms of funds and credibility. If a company in India is funded by ICICI it connotes a very positive effect on ones image.
The other important thing is to pass the rigor of ICICI because it doesn’t touch anything and everything. Thus when we passed their rigor of evaluation we knew we were up to something right.
What is the organizational culture you practice? What are the qualities you judge before hiring?
The culture is very transparent and we follow an open door policy but if there is one word to describe the feature of the group it is transparency. There are no rooms, cabins and there is just one meeting cum conference room. It begins by saying there is no hidden agenda. Whenever I go for vacation I give my mobile phone to my colleagues and my email is directed to my CFO. The CEO has absolutely nothing to hide, he is not hiding any mails or SMSs or any phone calls. It starts from there. Whatever we do with our clients it is documented and opened out. Even if we have a problem we go and inform our clients about the problem.
One most important thing in the DNA of this organization is the entrepreneurial dream. We want individuals to become entrepreneurs here, we want individuals to come with ideas and tell us they want to do something big. We will probably fund it or make it happen for them. I think a lot of young people are very driven and they have lot of talent. But they want to think, they want mentorship because they need a mentor and they do not want to lose out on a lifestyle. One can’t be punished because he or she is an entrepreneur so you can make your lifestyle comfortable not like a maharaja but at the same time given the upside that you can do your work.
As far as hiring is concerned I think I am the world’s weirdest interviewer. Unfortunately I have not had a formal training and I have worked in my family business thus never had a job before so I never knew how an organization culture was supposed to be. Therefore for a long time I used to feel a deficiency but now when I look in someone’s eyes and I find that streak of passion that’s all I want. For example an individual has a background in HR but he wants the job in marketing but if he has the passion I will give him that job. I am all for passion and committment.
If risk taking ability is a given, what according to you are the top prerequisites one should have to be an entrepreneur?
First and foremost one should to become an entrepreneur for the sake of creating a real business not because it’s fashionable to be an entrepreneur. I’m getting a feeling that nowadays it’s a fad among youngsters to be an entrepreneur. Being an entrepreneur is not wearing a fashionable shirt. In fact it’s the toughest job on the planet. Individuals have no background and no financial backing; one is literally surviving for oneself. One is working hardest among all professionals and one doesn’t know if they are going to be successful in what they doing. In today’s age and time every year that gets added up to your age and you don’t have job that takes a toll. Later when you go out you are lost because you are not learning any skill, you are being the entrepreneur.
I had recently been to an entrepreneurial meet wherein a VC was throwing away some ideas in the public and few of the entrepreneurs got motivated by all that and built a business plan around it. I questioned them,” would you be the consumer of the business you are creating?
I always question people, “Will you ever buy paan on the net? Then why sell paan on the web. The pleasure of eating a paan is by going to a paanwala and eating it along with the age-old mannerisms. Thus like I stated before one needs to answer a basic question ‘will you be the consumer of the business you created?’
The third important thing is one should be ready to die. If one is ready to die and to be reborn only then take the plunge. If one is scared, actually putting it optimistically there are a lot of people who need to build a comfort level and a background to take that plunge. There is no hurry, it’s not a 100-meter race thus one needs to relax and take their time before jumping into anything. Mr Dhirubhai Ambani started Reliance in his forties so I believe one is never too old to become an entrepreneur.
Do feel an MBA degree is important to be an entrepreneur?
According to me any kind of education is important and useful. But one should know how to use it moderately and adapt to the changing environment. Honestly I regret not doing an MBA. I consider an MBA degree of immense value; especially if an MBA is powered by a certain amount of work experience this becomes a very powerful combination. Education is always welcome and constructive and that’s why it can never be questioned. Three years ago even I use to feel MBA is not imperative but I have retracted now. Knowledge is always of use and the earlier got the better.