Sanjeev Bikhchandani & Peak XV’s Rajan Anandan on Info Edge, and Turning Problems into Opportunities

Show notes
The making of Info Edge [03:09]
Achieving product-market fit before it had a name [10:47]
Assessing product-market fit [15:16]
The best way to de-risk a company [23:21]
The single biggest risk for entrepreneurs [25:18]
People management: A key requisite to stay on track [29:10]
A legacy of wealth distribution at Info Edge [30:50]
Risk management: The heart of entrepreneurship [32:38]
What does it take to build trust in the market? [34:43]

Transcript 

Rajan Anandan: So it’s my great pleasure to welcome Sanjeev Bikhchandani. Sanjeev is the founder of Info Edge and now is vice-chairman, and [he] also runs Info Edge Ventures and many other things. Info Edge is a pioneer of the internet ecosystem. I think you’ve been profitable from the very early days. And for those of you in Southeast Asia, Info Edge is basically a bunch of different consumer internet companies. It has a leading job portal. It has a leading matrimonial portal. They’ve got EdTech businesses. They’ve got a real estate listing business and that’s Info Edge. Sanjeev started it many, many years ago so this isn’t an overnight success that is 30 years in the making and we’ll talk about what it really takes to build a truly enduring company. 

But in addition to having founded Info Edge, Sanjeev is also a very good investor. He’s actually a Midas Touch Award winner in India, which is actually given to the best investor in the country. Info Edge basically invested in two companies that are public. He’s got many companies. One is called Zomato which is a leading food delivery platform and restaurant listings platform, and the other one is called Policybazaar, which is the leading insurance aggregator. So those are two companies that are already public, but he’s got many more. So that’s the second thing that he’s done. 

But, it doesn’t end there. He’s also a very serious philanthropist. He co-founded Ashoka University. So Ashoka, those of you who are in India, you’re familiar with it; it really very quickly, at almost at record speed became a truly world-class liberal arts university. So, Sanjeev co-founded the university there and was very active there. And he is also extremely active in the startup ecosystem to make sure that we build the Indian ecosystem, in the right way. He’s also been, you know, awarded the highest, fourth highest civilian award. And he’s also been a very big supporter of us. Thank you, Sanjeev, from the very first cohort. And we thought it’d be good to start with Sanjeev for several reasons. 

Sanjeev Bikhchandani: And one thing I like to add. Most people don’t know in India, but we are also a former Sequoia (now Peak XV) portfolio company. 

Rajan: Yeah, I know, thank you. So, I thought it’d be great to start with Sanjeev, because Sanjeev, in many ways, epitomizes what it’s going to take to build a truly enduring company, especially in today’s context, where you have to be very frugal, you have to be very capital efficient, you’re going to have to manage through the cycle, which we don’t know whether it’s going to be a few quarters, maybe it’ll be a few years, in terms of where what they’re going to do as a global economy. But most importantly, he’s seen so many companies over the years in our region. 

So Sanjeev, let’s start with the beginning. You kind of got started when there was no internet. I don’t know why you started an internet company, but like [when] there was no internet. There were no users. But maybe tell us about your early days. How did you get started and the early days of Info Edge?

The making of Info Edge [03:09]

Sanjeev: So, I’m 59. I’ll be 60 next year. And I quit my job and became an entrepreneur in 1990. So I’ve been an entrepreneur for around 33 years. And somehow, ever since I was 12 or 13 years-old, I had it in my head that one day I’d be an entrepreneur. Although in those days, you know, in the 70s, we didn’t use the word entrepreneurship much. We said, “I’ll start a business one day.” That’s what going into business [meant], as opposed to going for a salaried job. 

Now, I grew up in a family, my father was a doctor and my mother was a homemaker. So, you know, there was nobody who had ever been an entrepreneur in my greater (extended) family. So we have essentially a government job family, and you know, typically the middle-class parents in India would bring up their children, to study hard, get into the right colleges, write post-graduation, clear the right entrance exam. So we have an entrance exam mindset. So we were brought up to clear exams, right. And then pick up a good job. And somehow I got it in my head that I don’t want to follow this approach, and maybe, so this is a fuzzy dream that stayed with me, which I was never encouraged to act upon. You know, one day I’ll be an entrepreneur, one day I’ll start a company. One day. And I just kept at various entrance exams. 

Rajan: But you were only 13 at the time, so it’s ok. 

Sanjeev: Yeah, yeah. But from 13 to 27 is 14 years, I kept talking [about being an entrepreneur] and wasn’t doing it. 

And finally when I was 27, in 1990, I quit my job, and along with a co-founder, I started two businesses. So the first business was a salary survey of what companies were paying MBA graduates at the IIM campuses. IIMs are the Indian Institute of Management, like the Indian schools of management. And, the second was a trademark service in the 1990s. There’s no internet, the computer is frightfully expensive, there is no venture capital, and we had no money. We started the company with INR 2000, which then was about maybe $100. Now it’s about $30, or less than that. 

So, you know, I had graduated from college in Delhi, I studied economics, I’m not a techie, and I had decided to work before going to do my MBA. I wanted to do an MBA but I said, “I should work for three years,” because my brother who did an MBA before me, in the same place that I eventually went to, he and his friend had told me that it’s a good idea to work for a few years before you get an MBA because you’ll get more out of your MBA. Otherwise, you can’t relate to it because you’ve had no real-world experience. You can’t relate to the stuff they taught you.

So, I worked for three years in advertising and I went to IIM Ahmedabad. And when I was graduating from there… So in those days, companies would come to the IIM campuses and only hire management trainees. You get prior work experience, you have to write it off and start from the bottom again. And I had three years of work experience and I was not prepared to write off. 

So I went outside of the placement process and started my own job [search]. And I got a job, and I came back to campus, with an offer letter in my pocket. And I went to the placement chair, and I said, “Sir, I’d like to drop out of placement.” The placement season had just begun. So [I said], “I’d like to drop out of placement and I’ve got a job.” And the guy said, “Okay, sure thing. I hope you haven’t violated any rules.” I said, “No, I have not violated any rules. The company I got a job from is not coming to campus. So, it’s clear. I can approach it.” 

And he said, “Great, so you are volunteering to help me in placement.” And he commandeered me and said, “In the placement week…” Now placement week (in India) was, for those who are not familiar, placement week was when a lot of companies come to campus and within a week or so, two weeks maybe, everybody got a job. So he said, “Your job is to be a concierge. You… When the recruitment teams of companies come, you have to be at the gate, when they come into the airport, be at the gate, receive them, escort them to the interview rooms, and make sure tea and coffee biscuits are being served.” 

The people who apply and the students who apply for this company are scheduled on time. They’re turning up, right? And you take them for lunch, the team for lunch, which was the best part for me actually because it’s not the students’ lunch, you’re getting better food, which was the attraction to me. 

And then in the afternoon, for the interview [we offer] tea, coffee and biscuits, and at 4 pm they wrap up for the day. Then you take them to the placement office, they’ll give the list of students they are making an offer to, and so on and so forth, and then go. 

Now, as luck would have it, for day one of placement, the most preferred companies come on day one, it’s all done by students voting. So in 1989, this was prior to the economic revolution in India when there were no consulting companies, there were no VC firms, there were no hedge funds, and there were no investment banks. So, what happens when you get a job is [that] you throw a party. So the guys who got jobs threw parties. I had already got my job, I had been placed, so I was very objective. I was moving from party to party, sampling. And it turned out that everyone at the town hall was quite happy, and I was watching all of this, but there was utter chaos. But from this, I got my first product idea. If somebody would do a salary survey of what companies are paying to fresh MBA candidates, then the product will sell. There will be demand for it. I had seen the customers. And that’s what we did. That was our first product.  

The next year, I went back to campus. I looked at all the placement notices in the library, noted them now, and we produced a salary survey. We mailed it out. And we got checks in advance. And, so that’s how we built our first product. We mailed out, and within three weeks, we had 23 checks in advance. And we shipped out the report. We mailed it out again. So we were selling a product at 93% margin, 100% advance, negative working capital and we hit a hot button. And we hit a hot button because I saw those guys fight for talent. So I knew this thing would sell. 

Second product: So we had this money sloshing around in the bank. So now placements are seasonal, right, [they] happen once a year. So we got this money, and we were idle. So we bought a second-hand computer, we even got some second-hand furniture, you know, we were operating out of the servant’s quarter in my father’s house. So my co-founder then—we went our separate ways in 1993, he’s not with us anymore—his uncle had been an intellectual property attorney for a while, he passed away now, but he was there. And Kapil Varma was my co-founder then and he had done a summer internship at his firm. He said, “Look, so, the thing is that there’s something called the Trade Marks Act. It is administered by a trademark registry in India. Now, if you get your trademark, which is a brand name, registered with the trademark registry, you get an exclusive right to use that trademark for that product that you use in India.” 

Achieving product-market fit before it had a name [10:47]

So it makes a lot of sense for companies to get their trademarks registered. So, the problem with India was that it took five years, after you applied to the trademark registry, to get your registration done. So companies when they are launching the product can’t wait five years. They want to launch within a year or two years or six months or whatever. Now, one of the reasons why your trademark registration application will be rejected is because there was already an identical or similar trademark which has been applied for or registered before you. First come, first served, a simple rule. 

So in order to figure out whether this trademark is likely to get approved or not, companies would hire trademark lawyers to go and search the record that was available for public inspection for registered and pending trademarks at the Trademark Registry Office in Port in Bombay. And these lawyers have come up with a search report, a written, typed up report, which said that, “Okay, so this trademark, it has the following 24 things which could be construed as…they’re not identical, but they might be construed as somewhat deceptively similar, all that. So you take your chances. You at least [know] the lay of the land. 

So, Kapil was sent by his uncle to Bombay to do free-trademark searches, to search for free trademarks. And Kapil came back, and he said, “Man! This is crazy, the system is broken.” So I said, “How so?” He said, “Look, the trademark library is in shambles.” So first of all, there were 600,000 registered or pending trademarks, then in 1999. These 600,000 are divided across 32 categories. The single largest category is Class V, which is pharmaceuticals with about 80,000 trademarks. The maximum chance of a conflict is in pharmaceuticals. Now he says, “It’s impossible.” He says that there is…the record is not in alphabetical order, in indexed cards, or registers. It’s in files. In reverse chronological order of date of application with two pages to an application. 

So if you want to do the check for a pharmaceutical trademark search, you’ve to do the check 160,000 times. For this, the extremely low-tech junior lawyer who’s doing this at the front, he’s being paid INR 150. There is no way it’s going to be reliable. And companies are unaware of the situation. And they’re going to spend crores of rupees to promote a brand, and after five years they could be told, “I’m sorry your application isn’t accepted, please change your brand name.” So, if you are somehow able to transfer just the pharmaceutical records, just the pharmaceutical records, and we sell searches online on a computer, we will make money. 

Rajan: So that was idea number two: a digitizer.

Sanjeev: Yeah. Now, the point I want to make is nowadays we have jargon, product-market fit. 

Rajan: Yeah, right. Tell us about that, product-market fit. 

Sanjeev: So this is product market fit. Here’s the first point I want to make: that successful companies are built on deep customer insights. Deep customer insights about what, about some unsatisfied need, some unsolved problem. The market, the customer gives you a cue that this will work. I will buy this. For the life of me, it would have never occurred to me that [there was a need for] ultra-niche products, like trademarks services, [and that too] only in pharmaceuticals, [that] only needed computerized, [and we could be] sending students to transcribe it, who the hell would have thought of it? But Kapil had that insight because he’d gone and done the search himself, and he felt the pain. Product-market fit, if it’s based on a customer insight, customer insight of unsolved problems, you typically get it faster.

Assessing product-market fit [15:16] 

Rajan: And how do you know you don’t have product-market fit? Because today, you know, you can raise capital. Everybody’s raised some capital. You could theoretically spend money on marketing or you can hire salespeople [who] try to go sell it. Then maybe you get some early success. How do you… Because, you know, you’ve looked at… you’ve built so many companies, you’ve invested in so many companies, how do you figure out, is it real?

Sanjeev: So look, the problem about investing in the idea stage is that there are lots and lots of assumptions. The customer will want this. You don’t know if the customer wants it. You’re assuming. You have a couple of young MBAs on this side, doing the investing. You have a guy over there, if he has not got domain experience, he is in the market with those customers, he is also assuming. So, Zomato was called FoodieBay. It changed its name around 2010 or 2011.

Rajan: Deepinder Goyal is the founder of Zomato.

Sanjeev: So I was using FoodieBay. I am a bit of a foodie, and my sons are [also] foodies. We would look at FoodieBay, you know. There were several restaurant websites but FoodieBay was the only one that had got all the menu cards. Everybody had reviews, everybody had pictures, you know, addresses all of that. But FoodieBay was the only one that had every menu card of every restaurant that existed there. There were several hundred that existed there in Delhi. So I used to use it. 

And I found the menu part very useful, you know, we could discuss, “Okay, a burger costs this much here, this much here, [let’s] figure out where we wanna go.” What is the value you get? You look at the dish names. And, we had begun to invest in companies, and so I’d done Policybazaar, we’d done a couple of others. 

And one day Hitesh (Oberoi) who’s CEO and MD and my business partner at Info Edge, he sort of…we were just discussing, and he said, “Have you looked at FoodieBay?” I said, “Yes, of course, I’ve used it all the time, it’s very useful.” And he said, “So do I.” And he said, “How come we’ve not reached out to them for investment?” I was handling the investment piece, and Hitesh was handling the operation part of the business. And I said, “Yeah, man, why not?” It [had] never occurred to me. 

So, I went to Network Solutions, I did a full search [to see] who owns this domain name. I found Deepinder as the admin contact. I did a Google search on Deepinder Goyal and I found an e-mail ID and a number. So, I sent him a cold email saying, “Can we talk? This is my number.” So, he called back and he came and met me. And, I asked him, “Where did this idea come from, to get all the menu cards because it’s really compelling.” And he said, “You know, I was working in Bain, consulting, in Gurgaon [near] Delhi. In the office, there were maybe 50 or 60 people. Mostly young, mostly male, mostly single, many [of them] living away from home. What this meant was they would not bring lunch from home to the office. 

Consulting hours were long, so physically we ended up having lunch and dinner at the office. And he said to make lunch…also at the office cafeteria, they did not serve food, but you could bring your own food and have it. So to make life easy for all the employees, what the admin team had done was they had gone and collected the menu cards, the delivery menu cards of maybe 70 or 80 restaurants that would deliver to that location. And they would keep them in file folders in the cafeteria. 

And Deepinder said, “Man! It was a huge pain. At 1 pm if you want to go down, you go to the cafeteria, you stand in line, you access your file folders, because everyone is coming at 1 o’clock, right? Then you get it for about 30 seconds because the next guy wants it. You quickly decide what you want to eat, and then you call the restaurant, and you come back after one hour and the delivery comes, and you leave the money with the guy [saying] that, “Please pay for this.” And he said, “You know, I’ve got deadlines to meet, I’m hungry, my boss is on my head and all those things.” So, it was a huge pain. 

So one weekend he [Deepinder] came in, he scanned all those menu cards, and he uploaded them on his own personal page in the office intranet. So, within 48 hours, the IT infra guys came to him and said, “Man, what have you done? Why is 95% of internal traffic going to your page?” And the penny dropped there. He said, “I figured out that the aggregation of menu cards has a value. And on weekends, I’m going to go out and pick up menu cards. And when I had 800 or so I launched a site. And I quit my job. And the day I launched it became a hit.” [This was] product-market fit and customer insight. The market gave you the signal.  

Where did I get the idea of Naukri dot com from? I used to sit… In my last job, I was in the company that made Horlicks, HMM, now called GlaxoSmithKline (now GSK), and I was the brand manager. I was a product executive on the brand Horlicks. And the company had other brands, you know, Boost, ENO etc. So the marketing team, the brand management team would sit in an open hall, something like this room. And, I could observe my colleagues, and I could hear what they were saying on the phone, because it was an open hall. 

And I observed something very weird, which I thought was weird. I observed that when the office copy of Business India—Business India is a fortnightly business magazine in India, and at that time was probably the leading business magazine in India—I used to observe that when the copy came, it moved from desk to desk, all of my colleagues would read the magazine to the back, because in those days, there were 35 to 40 pages of appointment ads in the back, and many of them would just read the appointment ads and pass on the writing, not reading the rest. 

And I found this to be weird behavior. I said, “This is strange.” I thought people read magazines for the editorial [content]. And I realized that job ads are a high-interest category of information. And these are people who are happy in their jobs. You know, if you wanted Delhi, if you wanted FMCG (fast-moving consumer goods), if you wanted MNC (multinational corporation), if you wanted marketing, not sales, there were just two companies in 1989 that were big at the time. HMM and Nestle, and they would not hire that easily. So, you were in the best job you could be.

Rajan: But they’d still look for a job. 

Sanjeev: They were looking at the jobs. So people are always benchmarking, and comparing, “Am I doing okay? What are my batchmates doing? What are our salaries? Which company? What? Where?” So, it’s a high-interest category. 

The second thing I noticed was that every week, two or three headhunters would call up and try and headhunt one or the other of my colleagues, because see 10 or 12 people in one place, all from the IIMs, [working in] in FMCG, MNC, marketing, a good talent pool had formed, and I could hear the conversations. 

And I realized that every time it was a different headhunter, with a different job, in a different company and these jobs were not as bad. Which meant that what appears to be great was the tip of the iceberg. There were hundreds of headhunters working with thousands of companies, there were tens of thousands of jobs that were not advertised, and jobs were in high-interest categorization. I had figured it out by 1990. I didn’t know what to do with it. It became one of the final great kinds of insights. 

Six years later, when I saw [how] the internet [works] for the first time, I said, “Why not just take job ads from newspapers and magazines and put them up and see what happens?” And that’s how Naukri dot com was launched. Got traffic on Day One, product-market fit, customer insight, unsolved problems, unmet needs. [I told myself] you’re on to something, most probably.

So, customer insights: Are you in touch with the customers? Are you getting a sense of it [what the customers want]? Do you know what problem you are solving? I think that’s the key product-market fit. 

The best way to de-risk a company [23:21]

Rajan: Got it. So, let’s build on that. So Sanjeev you raised $1.7 million. That’s all you raised in venture capital. And when they went public, they had $1.2 million of that in the bank, right? Is that right? 

Sanjeev: No. We had used $1.2 million. 

Rajan: So you had the $500K in the bank. One of the things you talk about is the best form of funding is your customer’s money. And you’ve talked about all these examples of customers sending you… but talk to us a little bit about what that means. And, why is it important, and how do you think about that? And also capital efficiency. Like you’re not… but on the other hand one of your companies, Zomato, has raised over a billion dollars. So maybe, you know…

Sanjeev: So I think the best way to de-risk your company is to make a profit. If you’re making a profit, fundamentally, you keep getting revenue, the customers want your product, they are buying it repeatedly. You are not dependent on external capital to survive, because external capital can be fickle. 

It may be available today, but may not be available tomorrow. Now if it’s not available tomorrow, and you build up high-cost structures or bad unit economics, you will not know what to do, right. It will be traumatic. And you know, one can of course say… It’s very easy to sit outside and say, “Shut the company.” But is it really…? A) It is legally hard to shut a company in India. B) It is personally, and emotionally traumatic for a founder to sack people, and for a founder to sack people in a downturn, it’s even more traumatic for the founder. The hardest thing I’ve ever done in my life is sack people and therefore I don’t do it. Because… 

The single biggest risk for entrepreneurs [25:18] 

Rajan: You have never restructured Info Edge in 30 years?

Sanjeev: No. Never. 

Rajan: Never! That’s amazing. And you’re in a business that is quite cyclical, meaning, when the economy turns, doesn’t your revenue come down a bit?

Sanjeev: So, let me explain to you. So, in the year 2000, we raised $1.7 million. We raised in April 2000 and the market tanked almost immediately. There was no hope left now. We put the money in a fixed deposit, tore up the business plan and said, “Now what?” 

So, we had bootstrapped for 10 years. In those 10 years, for six years, I hadn’t taken a salary, on and off. So, we knew the value of money. We knew we’d got lucky, in the sense that, we got the money, we got it at a normal valuation, and the meltdown happened almost immediately [after that], which was even luckier. We didn’t have time to spend the money fully. So, we just put it in a fixed deposit and said, now what? This is the only money we’ll ever get. We have to do it all in this. We know we won’t get it. 

Now, when a meltdown happens, typically the believers are in denial for six to nine months. You know, the junta (public) was saying then, “It’s okay, It’s a technical correction. It’ll come back.” It took six to nine months for the market to understand that…

Rajan: It’s going to be a long downturn. 

Sanjeev: But we knew on Day One. We knew on Day One because we had never believed in this anyway. You know, people were having eyeballs. And you know, we were doing 300,000 rupees a month in revenue and we had got INR 44 crore pre-money valuation and I said, “Man! This is unreal, but you’re getting money, take it.” That’s the market. You get the money, but we weren’t going to spend it foolishly. 

The smartest thing you can do is not spend your money foolishly, today. Those of you who are the founders and you have got it right now, spend it very carefully. Make sure you’re reaching the place you want to reach with the money you have. 

Now, if the place you want to reach is a place where you are not yet making a profit and essentially some operating metrics have improved, then you better be sure you’re getting your next round. 

However, ideally, if you can get to profit, it’s fantastic. Now, it may be a tall order with the kind of money you’ve got today, in this environment, to make a profit. Because $1.7 million could make something else in the year 2000 and it would mean something else today. These are much more expensive times and you have much more competition. 

So, you’ve got to make your money go as far as possible. And you’ve got to be in a place where either you don’t need more money, or you’ve got to figure out where all of it is going to come from. The single biggest risk, according to me, for the startups today that have raised money, is needing the next round badly and not getting it.

So, one of the key things we look for when we go into a company is, is it showing evidence of what I call ‘natural attraction’. Which means [are] you’re getting traffic, you’re getting app downloads, you’re getting users without having to spend money like that, and ‘that’ includes without spending money. If you have that, it means that when you spend money, you’re getting more traffic. 

Hopefully, you’re selling something to somebody and getting some revenue, or you have a good idea of how you’ll do it. 

Rajan: By the way, three out of the top five most valuable public tech companies [in India] are…one you did at the pre-idea stage and one you did at seed. It’s pretty good.

Sanjeev: No, we got lucky. 

People management: A key requisite to stay on track [29:10]

Rajan: So, Sanjeev, let’s shift gears. You’ve invested in so many companies, and you’ve had that journey yourself, how do you evolve as a leader? What’s difficult about the evolution of going from starting a company to running a multi-billion dollar company?

Sanjeev: When we raised, when I started Naukri (dot com), I was 34. When we raised venture capital, I was 37. So, it’s not… I had 15 or 16 years of work experience. I had been in jobs which involved people management skills. I had been… So my first job, I was in Lintas (now Lowe Lintas), in client servicing, and I was a trainee which essentially means that you had to… I was at the bottom of the food chain. So as a client servicing trainee at an ad agency, you are the bottom of the food chain. You are responsible and accountable, you have no authority. You have to get the work out of a lot of people, who are much older to you, who are not reporting to you, and if they don’t do the work, it will not be realized. You’ve got to learn to beg and crawl, and cajole and coax, and make them want to do your work.

It took me about two years to figure out how to do this. So once I did that, I became much better at [managing] people than I was when I started the job. So I think people management is key, right, and if you’re able to get people to vouch to work with you and for you, I think that’s half the battle won because you know… 

A legacy of wealth distribution at Info Edge [30:50] 

Rajan: Most of your original team, almost all of them stayed with you. How… What’s up with that? Because in Indian startups at least, we have this revolving door, the average tenure of a CXO (chief experience officer) is like eight months.  

Sanjeev: So, we believe in people we are in a relationship with. 

Rajan: Yeah. So talk a little bit about that, like some practical things that our founders can do. 

Sanjeev: You’ve got to listen a lot. You’ve got to go the extra mile. You’ve got to share the wealth. 

So, I must have… if I take out the IPO (initial public offering) dilution, the follow-on dilution, and the venture funding dilution, if I go back to the original company and the cap table without these dilutions, I must have given away 35% of the company to people who made things happen. 

Rajan: That’s amazing.

Sanjeev: I was a solo founder. I have had other people as co-founders, but I had taken the full risk, you know, the financial risk. When we launched, it was my idea. So, I gave 7% to the founding CTO (chief technology officer) who was working part-time from his house, because he was doing other stuff. I couldn’t do it by myself. I gave another person, I think, 8% or 9%, for running the operations. And both these people, I said, “I will, in addition, give you a share of the revenue.”  So, zero fixed charge. I had no money, right, I was broke, so, zero fixed charge. I gave stock, and I gave a percent of revenue. I said, “If revenue doesn’t come, too bad,” and they said, “Okay.” And we did it. And, you know, we got the revenue within six months. The revenue began to come. And they were getting a reasonable sum of money every month. It’s about just being good to people. 

Risk management: The heart of entrepreneurship [32:38]

And see, the entrepreneur’s biggest quality is the ability to create trust across the table. If you create trust across the table, with your co-founders, with your employees, with your investors, and with your customers, chances are… I mean you have a much higher chance of success. 

And I’ll make one last point. See the difference between a very good entrepreneur and a great entrepreneur is not opportunity identification. I mean that’s important, that’s part of the opportunity. It’s about management of risk. And nobody talks about the management of risk. How do you manage risk, especially in troubled times. 

Between 2009 and 2021, money was mostly available. So people’s understanding, assessment, and ability to manage risk were not really tested. But today in this new environment, it is back at the center stage, how do you manage risk? Now, this could be the risk of money, risk could be investing in a restaurant, risk could be whatever. Covid [19] happened, how do you deal with it? Ukraine happened, how do you deal with it? So we are in riskier times [now] than we were five years ago, so how you manage risk is really important.

Rajan: And any thoughts on how you manage, like the next level of managing risk?

Sanjeev: So, what we have done is, number one, we have kept excess cash with us. We make money. We don’t just invest in businesses, we invest in companies, but we don’t invest more than INR 250 crores a year. So cash availability… So profitable businesses generating cash is a great thing against risk. Because if you have cash, not spending money foolishly is a good idea.

Rajan: Not spending money foolishly. 

Sanjeev: So under-commit and over-deliver.

What does it take to build trust in the market? [34:43]

Rajan: Under-commit, over-deliver. You know, you talk a lot about corporate governance. By the way, Info Edge is the gold standard for corporate governance in India. At least in the tech ecosystem, internet ecosystem, and startup ecosystem. Talk a little bit about your views on corporate governance. And also, touch on this, you know, you talk a lot about trust. What does it take to really build trust? 

Sanjeev: Trust is something that’s… Look, by now, at this age and the experience you have you are either already trustworthy or you are not. And it’s going to be hard to change. If you’re fundamentally not a trustworthy person, you have a problem. But the first aspect of building trust is being conscious of what it takes to build trust. If you don’t continue to do it, then, you know… Trust is about, I think, consistently meaning what you say, and saying what you mean, and then doing it with whoever. Trust is about understanding the other person’s point of view and then responding to it appropriately, it’s about empathy. Trust is about honesty. So when you talk about corporate governance, I think, corporate governance actually begins and ends in the founder’s head. Everything else that is done is done to support that. But if fundamentally it does not exist in the founder’s head, then no amount of external support can help you fix it.

Because we have seen in the past, in listed companies, in unlisted companies, that no matter how many levels can be put in, auditor, internal auditor, shareholder agreement, if the guy is… I mean, you are not in the company 24×7 as an investor, an independent CFO (chief financial officer)… But I will tell you one thing, in the final analysis, your only asset is your reputation and everything depends on that. If your reputation goes, then I think, it becomes very, very difficult.             

So, I’ll give you this example… And if over the years you build a reputation of good governance, you will get a higher valuation also. So, I’ll give you an example. So, I was invited by Deep Kalra, the founder of MakeMyTrip. 

Rajan: It’s the largest OTA (online travel agency) for those of you in Southeast Asia, online travel.

Sanjeev: [I was invited] between 2004 to 2005 to join the board as an independent [member]. And I spoke to my board and they said, “Good idea. You’ll learn something new.” And I said, after talking to Ambarish (Raghuvanshi) who was our CFO then, I said, “Look, I’m going to get an ESOP (employee stock ownership plan) as an independent. What I’ll do is, I’ll transfer the ESOP to Info Edge to make sure all shareholder interests are aligned. So, when I’m taking time away from here, put it there. The shareholders are in for documentation. Now, this was a sort of handshake understanding. You can’t really transfer ESOP to a company. ESOP is mine. 

But when MakeMyTrip went public in 2010, I exercised the ESOP and I transferred it to Info Edge, those shares. We sold it immediately after the IPO and that became a windfall gain that quarter. We had listed by then. 

So, I had at least… I had several investors calling me up saying, “What is this?” I said, “No, it was my ESOP that was transferred to the company because I was taking time away from the company. So I wanted shareholder interest to be aligned.” 

So, these guys said, “You know what? This is unbelievable. Nobody does this.” And then they said, “You know, Info Edge has consistently gone at 25% higher market cap than it should, simply because of corporate governance, 25% premium. There is 25% corporate governance built in your market cap. 

Rajan: 25% premium. 

Sanjeev: [Yes] premium. If you find a company that has good governance, almost always, you will find a premium. 

So we know we can lose money in your stock, but we know it won’t be because you deceived us or you hid something. And so we don’t have to watch our backs. Now if your investor believes that he or she doesn’t, they don’t have to watch their backs, it’s a big deal. So, if you work hard to build a kind of relationship and disclosure. Prior disclosure is 80% good governance. Just disclose.

Rajan: Great. Sanjeev, thank you so much for coming. 

This transcript has been edited for clarity.