Listen to the podcast to learn about:
00:50 – How the Internet landscape has evolved in India
08:45 – Fending off large global competition from Monster, Indeed and LinkedIn
14:00 – Learning from Info Edge’s other investments
21:00 – Specific things to look for while making investment decisions
24:51 – Trends in the startup world
27:38 – How to deal with the scarcity of talent
39:08 – Hitesh’s advice to Hitesh of 20 years ago
Read the complete transcript below:
AMIT SOMANI 00:45
Welcome to the Prime Venture Partners podcast, today we are delighted to have with us Hitesh Oberoi, co-founder and CEO of Info edge group. Welcome to the show Hitesh.
HITESH OBEROI 00:55
Thank you, thank you for hosting me.
AMIT SOMANI 01:28
Hitesh, I’ve known you for many years, although we’ve been a little bit out of touch. You guys are the blockbuster flagship internet company in India. You went IPO I think, almost 20 years ago, just had another blockbuster IPO of one of your investi companies, Zomato. Can you talk to us a little bit about just the whole internet landscape and how from your vantage point it has evolved in the last 20 years?
HITESH OBEROI 01:25
Well, actually, it’s almost unrecognisable from 20 years ago. 20 years ago, most people didn’t even understand what the internet is all about. And I remember when we raised money from ICICI ventures, back in 2000 May, there were just 2 million people on the internet. But of course, there were no smartphones.
And within a month and a half of us raising money, there was a big dot-com bust in the US. And in fact, venture capital, which was very new in India at that time, and till 99. I think most people had not even thought of venture capital. So that was a relatively new thing in India, there were just a handful of VCs.
Most of them disappeared from the scene for the next few years and hardly anybody got funded. In fact, we raised one round only. And, luckily for us, we became profitable and we didn’t have to raise money again. But the first round we raised, the money was supposed to come in trenches. And in three tranches in fact, there is just one and a half million dollars, but it was supposed to come in three tranches. Luckily for us, we got our money, ICICI was very kind.
But we later discovered that many of the companies which got funded at that time, were not able to actually get the entire money even. So those were very, very difficult days, of course, Internet penetration was low, and there were no smartphones. And PC penetration in India was low, nobody expected the Indian internet businesses to become very, very large. And we also had a very different mindset as entrepreneurs. We were like, it’s okay, if you build a small business.
I mean, nobody was thinking about an IPO. Nobody was thinking about unicorns, nobody was thinking about any of those things at that time, we just wanted to be a good, profitable business. And we had given up our jobs and became entrepreneurs. For the first time in my family, something like this had happened.
So that was a very, very different era. Of course, once Flipkart happened, and then of course, we had smartphones and Jio and all those things sort of maybe happened at the same time. I think things changed, and things changed permanently.
AMIT SOMANI 03:15
Amazing. And talk to us a little bit about the IPO day, I saw your tweet the other day, which got us chatting again, privately, which is that, you received more messages for the Zomato IPO, you know, hot off the press than you did for the naukri IPO back then, even though that was quite a blockbuster event, I’m sure.
HITESH OBEROI 03:37
Yeah, so we went public in 2006. And actually, that was also a great time in the sense that the Indian economy was doing really well. India was doing 9%. But, you know, the big story was Indian IT service companies. They were the big daddies of that time. They were all growing at 30-40%. In fact, it would not be wrong to say that we were built on the back of Indian IT services companies and the hiring they were doing at that time.
And Infosys, TCS, Wipro these were the big daddies in that time, and they were large, and they were super profitable by the way and they always made money. So that was a very different era when in fact, we went public. We were tiny. Firstly, when we went public, our value ,the market cap of the company was 800 crores, even though we were profitable, etc.
We have been growing 100% year over year for the last few years. And our market cap was 800 crores and most people didn’t really understand how to value internet companies. So we were benchmarked to IT companies by most analysts. They said you are like another TCS or Wipro, so why should you get a multiple which is higher than what TCS and Wipro are getting? And stuff like that.
And we were tiny in comparison to them, not just in revenue, but also market cap. So that was a very different era. Not many people understood what was really happening, still we’re one of the first companies to go public in the internet space in India, there were a couple who were listed on NASDAQ and the US stock exchanges, but they had not done well.
So the jury was still out on whether we would make it or not and how big we will become and how big the internet will become. Internet penetration has also plateaued in India, it was not growing rapidly. So a lot of the theories had not come true. And most other companies which were funded along with us were either folded up, or we’re struggling as well.
So I think that is a very different era, I think we were, of course, very excited because we were going public and so on and so forth.For our employees, like I said that was a very different time. Nobody wanted ESOPs at that time. But we had forcefully given ESOPs to some of them. We were like, you should take this up, who knows what, they were, of course really excited, because once the company went public, but other than that, there was very little interest in the Indian market and in the IPO.
AMIT SOMANI 06:00
Fascinating and tell us whatever you can about the Zomatos IPO. Not just the messages, but supremely oversubscribed. We don’t have to talk about stock prices or whatever. But nonetheless, just the appetite for people to want to participate at a retail, institution at every kind of level?
It’s been amazing. I think zomato has been through its ups and downs. And it’s been a great business, but it’s been through its ups and downs. And it still has some way to go. And there is, of course, a lot of competition in that space. But just the sheer excitement around the IPO, I don’t think anybody expected it.
I think it has to do a lot with the fact that zomato is a true consumer product. It’s used by millions of Indians, especially the millennials. I think they’ve grown up on ordering from zomato for the last few years, as a cult following amongst that audience. So I think that’s one. I think the second thing is the social media business.
Because I think, till we went in the IPO, nobody could sort of even message us if they wanted to, it was not easy. They had to pick up the phone and talk to us and congratulate us and so on or send an SMS. Today, thanks to Twitter. Thanks to WhatsApp, there’s so much sort of discussion and so much conversation around the IPO.
And, you know there are people who are backing zomato, there are people who are negative on zomato. So there are all kinds, but it’s just amazing to see that conversation. And, of course, even when we went public, by the way, enough people told us, you should list in the US and not in India. But here again because people did not expect us to get the kind of investors we ultimately managed to get at that time.
And even now, I think there was that sort of doubt around whether an Indian sort of listing, or an Indian stock market would support a company, which is not profitable, and so on and so forth. But I think everybody’s been proven wrong. And I know, it’s still early days, it’s just been a few days since zomato went public, and it’ll take time for the stock to settle down, etc. But just the whole energy excitement around it, the startup community also, I think it’s maybe 100 times bigger or 1000 times bigger than it was at that time.
I think zomato has given everybody hope that we can also now go public and we can, and there is space for us. And there are people willing to back us, there are investors willing to back us, there are retail investors willing to back us, not just institutional investors. And I think it’s a big moment, in my view.
AMIT SOMANI 08:30
Absolutely. It is definitely a historic moment. And I remember because Mr. Bikhchandani was on the board of make my trip where I used to work back when we went IPO on NASDAQ. And I remember some of those conversations. And I remember how euphoric that was when Deep and the other founders rang the bell in NASDAQ back in 2010, late 2010. So we will come back to that in a sec.
HITESH OBEROI 08:52
Only thing I can say is if we were to ring the bell, in the stock exchange physically in 2006. Because of COVID. I don’t think zomato would have been able to do so.
AMIT SOMANI 09:00
That’s right, this is the work from home era, and we will talk about that as well. So I want to talk about building brands and we will come back to your investment in zomato. And their own journey and their ups and downs. But you guys also had to kind of fend off against large global competition on an open Internet sort of model.
So whether it was monster.com, or LinkedIn, or indeed, and so on, and so forth. And yet you won. I mean, it’s always a battle. But nonetheless, you are a large standalone, profitable growing company. So can you talk to us a little bit about that, in terms of, what were some of the lessons learned, some of the secret sauces, because our listeners here are young, early stage entrepreneurs, maybe even growth stage ones now. So maybe some lessons and some thoughts from that journey?
HITESH OBEROI 09:50
Yeah, we’ve always had the competition and it’s always been global competition for us. And for a while, it has always scared us. Because in the early days, we had monster and monster was a big global daddy in those days, they were in 32 countries, they were a leader in all, I think 28 or 30 of them.
And they were at that point in time, valued at $6 billion. And they were very profitable and growing. And they came to India, very early on. I mean we had raised money just one and a half, two years back and we had not even started we had not even become a decent business and they were already in India and they acquired the number two player at that time jobs ahead. They were very acquisitive.
And I think one thing, one call we took at that time was one to not sell to Monster. We said, maybe this is something we wanted to build. I mean, like I said, We were not thinking of unicorns, we were not thinking of valuation, we were just thinking we are building a small business for ourselves and making it profitable. We said, Listen, what will we do if we sell? Let’s build our business.
So that was one call, which went our way, it turned out to be the right call. In the end, for a while, there was a lot of action. And monster was, like I said, they were aggressive. They were a hardcore sales and marketing company. And they spent a lot of money on advertising, they acquired the number two player.
But luckily for us, some things worked out, we kept growing, we became profitable, we went public. And then in 2008, when Lehman hit everybody, I think in the short term, we were seriously impacted, we were growing at 40% per annum, let’s say before Lehman, and we went to minus 25%, for three quarters after that, but on hindsight, monster was impacted even more, because it was a global company, and they got impacted in every market.
And we realised that it was a good opportunity for us to gain market share, the monster slowed down, and then they went through a couple of management changes, and so on. And we became a big leader in India by a wide margin, till then we were almost like 5-7%, ahead of monster and so on, and then come 2011-12, when there’s a big gap between us and them.
But then you have LinkedIn, and then you are indeed, and, I remember the very early days, indeed, was when it was an independent company. It was not being acquired by recruit of Japan, which is a very large company. But when they were independent they were an aggregator,
and they had approached us, because an aggregation model was to take listings everywhere and become the largest listing site. And they approached us, and we thought very hard about it.
And I think one of the best decisions we took at that time was not to give them our listings, but there was a temptation to get more traffic for free, because that’s the promise, they sort of make ,we’ll get traffic and, and you’ll get that traffic for free. But I think it was a wise decision, because in the end, they got sold to recruit, after a few years, and recruit, sort of became a traditional job word, they converted indeed, into a traditional job word. And luckily, for us, we had not one we did not give them our listing.
So we learned from them on how they were getting their traffic from SEO and a few other things that they were doing that we were not so good at. And so that was I think again, in my view, a narrow escape, because in our kinds of businesses, if you lose even 5-10% or 15%, share, it can really hurt, and one of the reason we get the valuation we get and the reason we get the pricing, the reason we command, the price we command and muck with customers is because we are a clear leader.
And then when LinkedIn happened, you know, again, it was a seminal moment because LinkedIn was very different. And for a while, we didn’t know how to react with LinkedIn. Because we were a networking platform, not a listing platform.
And we had no answer. And we did a few things. We tried our hand at networking, etc, loads of different brands, it didn’t work out. And there were enough people, there were enough noises in the room, and they said, maybe Naukri should transform itself into a LinkedIn kind of site.
We should become a networking site, etc, etc. Luckily for us, again good sense prevailed . And we said, Listen, that’s not the answer, we can’t become a LinkedIn. So let’s invest in product and technology and improving the user experience on the Naukri platform.
That was the call we took a few years ago. And then that’s how we ramped up our lessons of technology and user experience. And I think it really worked out for us again. So competition, every time there’s competition, there is the fear of the unknown. But what we’ve learnt is, if you stay the course, over time these things do work.
AMIT SOMANI 14:10
Wonderful. You also have a lot of organic investments in various properties, jeevansathi and Shiksha and so forth. Maybe other acquisitions too. So you are like a big portfolio of companies. And we’ve talked a little bit about zomato, we’ll come back to the ups and downs of zomato.
What has the learnings been from all of those other investments, organic or otherwise, in terms of what has scaled what has not. I don’t think it would be disrespectful to say that the parent group Naukri itself has done incredibly well. And now, Zomato and the other ones have probably done reasonably well, but they haven’t really broken out at a mega scale.
HITESH OBEROI 14:50
So hindsight is 2020. But I think to start with, what we’ve realised over time is that there is nothing to beat natural traction. And I think now different sort of jargon or terminologies, again, the product market fit, like what is now called product market fit during our time is called traction, does the product have traction?
Does it have natural users or do we have to market or do we have to work hard to get people to sort of discover it or use it. So, even when we invested, Naukri had natural traction because everybody’s looking for jobs. Even the matrimony business, even if we wouldn’t have known it’d become a large business for us. But the category itself is really large in India and always had traction, there was always a demand for matrimony services. And then online happened, people moved to online services from print.
If you look at Zomato also, when Zomato first came to us, the product was pretty solid. I mean, we were actually using the product ourselves, Sanjeev and I had been using the product, and we liked it, and that’s why we invested in it, because we said, this looks good to me. It’s a useful product. So it was getting traffic on its own, Zomato had not raised money.
So I think one big thing is if you are a consumer business, maybe not so much for B2B. Does the product have traction? Is there a product market fit? And it has often to do with timing, you hit the market five years early, there is no traction, you hit the market three years later, there are 20 other players already doing so. So timing also becomes important.
The other thing we’ve seen is that, I think it helps if the founder or the person running the business has a deep understanding of the space if he has clarity on how this thing is going to play out in his or her head. I think that’s very important.
And why we invested in policybazaar is because when we met the founder, even though he was a classmate, and many other things, but he had seen the space play out in England, in the UK. And when he came to us, it felt like this guy has complete clarity around how this thing is gonna play out over the next 10 years, I’m sure that there will be challenges, execution challenges, regulatory challenges, but the guy had clarity.
So it helps, I think if the person, you may call it vision or you may call it whatever, has clarity on how things will play out over the next few years. Because what happens as a result of that is you make fewer mistakes, you’re not struggling to figure out things as you go along.
And then the other things we’ve learned, and some things which we have not been very good at by ourselves at the company, but I’ve seen some of our investi companies do a better job than us is their ability to make quick decisions, course correct if things don’t work out,take action, shut down something, open something, pivot, much faster than we are able to do as a company.
In addition to this I think, if you want to build a large business of the addressable, opportunity also matters and a few other things matter and the ability of the founder or the business head to attract and retain talent and build a good team. Some of these things of course matter a lot.
But in the end your product has to be unique, your product has to be relevant, as well as scalable.
AMIT SOMANI 18:15
Absolutely. So as you’re looking to invest now, from your balance sheet, and you have made investments, like you mentioned in several companies already and more. What is it that you guys typically look for? Is it mostly financial returns? Are there some intents to be a strategic investor, maybe a potential future acquirer? And beyond these things that you summarised, natural traction, founder clarity, are there other things you look for in investments you make?
HITESH OBEROI 18:50
So see, when we started investing outside, we were investing mostly from a balance sheet. And the idea was to make strategic investments, meaning not strategic necessarily, as in not adjacent to our business necessarily, but to own more and more of the companies we were investing in overtime.
But this was a different era, this was pre flipkart. When the number of internet users were few, and we thought our company could be built with 3-5 million dollars, because Naukri was built with one and a half million dollars and that was a different era. That’s how it all started.
But over time, we realised that the cheque sizes were becoming larger. And we didn’t have the financial muscle to cut 100 million dollars, 200 million dollar checks. And therefore we sort of willy nilly had to let other investors in because we wanted the company to succeed. And over time, all the other investments we were making, whether in zomato or policybazaar, or the 20 others we made over time became financial investments.
It took us a while to sort of digest it and realise it, for a while there was a lull, we didn’t invest in too many companies also because just the valuations were too much for us. And then we took note and then realised that this is here to stay. And then we change track, we change our strategy and today the way we look at it is, we do acquisitions.
So that’s one bucket, acquisitions in areas in which we already have a business, in jobs, real estate, matrimony education. So in these areas, we acquire startups, we’ve acquired maybe five or six companies over the last three, four, five years. Two, we have a fund which we’ve set up for making financial investments.
So now the financial investments are rooted to a fund, an AIF in which we have put in some money and that AIF has its own partners, and they run the fund. And then we also do some strategic investments from our balance sheet, which are again, mostly in the areas in which we have a business, an operating business. And here, we go to these companies early, we take a significant chunk. And the goal is to acquire more and more of the company over time.
But again this we’ve been doing for the last two, three years, and the learning is that companies change. So you may invest in something, or thinking that they’re going to build something, but companies, especially in the early sort of days, their model changes, they enter new areas, and that is hard to predict. So it’s very possible that some of these strategic investments may also turn out to be financial over time. Who knows? But we like to do all types even now.
AMIT SOMANI 21:20
We’re very glad you do. I think India needs all the capital it can. And certainly large companies like you also need to be good acquirers. So it’s good to see. You guys acquire, now the Tatas are beginning to do it, the reliance Of course, the global guys are always doing it, like the Google, Facebook and Twitter.
So I think it’s good to see large Indian internet giants begin to do that or even other conglomerates. Any specific things you look for in terms of the founder, or the market addressable and otherwise, I mean, we’ve talked about some of these already, but any nuance things that you look for that has helped you as you make your decisions?
HITESH OBEROI 21:50
So, normally we like to back up, what we’ve understood over time is, it takes at least 8-10 years to get anywhere in India to build a business, so we like to back people who are in it for the long run.
Number one, number two, like I said, we like to back people who, of course, have integrity. I mean, you don’t want to back teams where you have doubts, right? Number three, like I said, you want to back a team, which has a good idea, which seems like a good idea to you. So we don’t have a very top down approach to listen, we want to take one company in financial payment, one company in e-commerce, that’s not how we work.
We go bottom up, we see what is bubbling up, we see the quality of the entrepreneur, the quality of the founding team. What is their idea? What is that insight they have? And then of course, we apply our knowledge of our understanding of the Indian market, our understanding of the Indian consumer, our understanding of how large that company can become in India.
And then we say, Okay, it looks like it could become a decent business. And it looks like these guys will build a moat, the business, right? If they will, will they hold on to something which if they get, will be hard for others to enter? It’ll be hard for others to compete with them. I think that’s an important one in my books.
See, what we realise in Naukri, also, is that there are some moats which are too hard to make. And there are some moats, which can be easily made. So I think this is the very thing here, the business could have serious competitive advantages over time, once it sort of becomes successful. We like that.
The last thing we also keep in mind is that like I said, we don’t have hundreds of millions of dollars or billions of dollars to invest. So if it looks like the business is gonna be very, very capital intensive from day one, then we would rather stay away. But having said that, things are now beginning to change.
Because the market is deepend, there are many more investors in the market, there are enough companies who are willing to invest, co-invest with you today than was the case five years ago, ten years ago. Some of these things might change, earlier we would restrict ourselves to only Indian companies, only companies targeting Indian market, only companies targeting the consumer internet, because that’s what we understood best.
But now that we’ve added more people to our investing team, they brought in new skills, we are willing to go a little bit outside the box as well, compared to a year ago. But ultimately, you’re backing the founding team and the idea. And that has to give you confidence.
AMIT SOMANI 25:42
Absolutely. Well, that’s the business that we are in at Prime Ventures as well. And probably a very similar playbook we look at differentiation at entry and defensibility. Over time, we look for capital efficiency as an early stage fund. So lots of things so hopefully we can do things together as info edge and prime over time. So we gotta get that account going.
Switching gears, since you also said you do things bottoms up, what are you seeing as bubbling up or things that you think will be interesting? I don’t mean specific companies, but any kind of trends or ideas or categories that you see like is bubbling up a lot in your mind, or as you guys see for prospective investment.
HITESH OBEROI 25:22
So I think this is a sea change in the last 24 months, and maybe COVID has sort of accelerated whatever was already happening in the economy, but right now, I think there is action everywhere on every front. Earlier it used to be e-commerce and FinTech, then this, then that, now it seems to be every sector of the economy is ripe for disruption.
There is action in health, there is action in edtech, there’s action in sales tech, HR, tech, whatever tech, everything has a tech element to it. Everything is up for disruption. How many of these companies will be successful? I don’t know. But clearly, for example, we are seeing a lot of companies in education.
Because we do shiksha, so some of these companies also come to us. So clearly, we are seeing a lot of companies in education. Unlike two years ago.Clearly, even at HR, we are seeing a lot of companies. And because, again, that’s the space we sort of operate in.
Other than that, I think if you look at our AI, we’ve been making all kinds of investments, logistics companies, FinTech companies. And then there are all kinds of options. The other thing, there are all kinds of deals now in the market, going to pre IPO rounds, we’ve been to series A Series B round, you can do early stage, it’s a very much more structured market than it was 10 years ago, 15 years ago.
So you have all kinds of different companies going international, so those kinds of companies, there are deep tech companies, the deep tech and other things are bubbling up now. I don’t know how much time these companies will take to become large. But clearly there’s a lot of action in that area.
So I think EV is another area where there is a lot of action now. So my sense is, what I’ve also noticed over time, is that every time there’s a new technology, it opens up opportunities for entrepreneurship and disruption. So the internet was hot technology 25 years ago, 30 years ago, and then you had a bunch of other things happening over time, then you have social media, smartphones, and AI and machine learning.
For all, you know, over the next 10 years, we’re going to see maybe another three or four very hot new emerging technologies, which will open up opportunities to disrupt everything out there.
So my sense is, this is only going to accelerate, this is only going to get worse. In that sense or better, depending on which side of the equation you’re on. But there’s action everywhere.
AMIT SOMANI 28:05
Great. Switching gears, let’s talk about talent. And the scarcity of talent globally. In tech, since you’re saying everything is tech now, Asterix tech. And in particular, in India as well, I mean, the inflation of some of the salaries for tech engineers, not just in AI and ML, but pretty much even a react developer, everybody.
And now with all these monster rounds, and monster IPOs, it’s gonna get worse. So if you are a young entrepreneur today, building a tech startup and need to hire 10,15,20 engineers or more, what would you recommend? Because you have some access to data that the rest of us don’t? And how should one think about it? And what can we do both at an entrepreneurial level for people who are wanting to build companies, but maybe even a little bit at a policy and a sort of government or industry level?
HITESH OBEROI 29:00
Yeah, see, it’s a tough one. I don’t think I’ve seen a hotter talent market for tech in the last 15 years. The early 2000s were hot because of IT services. Like I said, this is a different level of hotness in the tech market. And unfortunately or fortunately, it coincided with COVID. So it’s not as if the economy is doing well, the economy is still struggling.
There are parts of the economy, which are like, below what they were three years ago and then they have this hot talent market, which has its own problems, problems for companies. And I was just reading the other day that it coincided with a number of engineering schools going down in the country.
So what happened in India was that, because of the IT services boom in the 2000s, thousands of engineering colleges were set up to cater to that boom. And many of those guys got employment, they got placed cetera, et cetera. So over time, the number of seats kept going up and up and up. And then the IT services companies started slowing down.
And it took a while for the education market to correct and because hiring was not so great for the last few years, a lot of these colleges shut down, and the number of seats actually went down. And now we’re in a market, which is a hot market once again, and it’s coinciding with the number of engineering seats going down in the country.
So what should we do? See one is of course from a startup standpoint. At least every startup needs maybe 5,10, 20 30,40 engineers, so they, frankly, not just startups, but even companies like ours need to work very, very hard to retain our top talent. So retention is the first thing.
Listen, in a market, it’s impossible to hire, you have to retain whatever you have. So you throw whatever you can at the problem. If you are a startup, you have a lot of stock to throw at it. If you’re a cash based company, you throw a lot of cash, somewhere in the middle, you throw both.
So I think whatever currency you are sort of rich in, you sort of throw at the problem, because that’s what you have. And that’s what others will find hard to replicate and hard to beat. So retention becomes very, very important. Because in tech, we’ve seen, you lose somebody or an X guy comes in every six months to figure out what the other guy was doing.
And then six months to get it right. And before you know it, you’re behind by a year or two. And that’s all it needs for for some of our competitors to move ahead. And then it’s hard to catch up.
So the stakes are very high, especially for startups. And therefore they have to throw whatever they’re rich in at the problem. Number one. The other companies, I think the bigger slightly bigger players, I think we need to do what the IT services companies did in the early 2000s.
Initially, they used to go to IIT and hire engineers, then they relaxed and said okay, any engineer from any IIT will do. Then they said, let’s go to any institute to hire computer engineers, then they said we will go to any tier two institute and hire an engineer, then they start hiring BSc also.
But then what they did was they invested massively in training and onboarding, and in many cases, unlearning and relearning, because Indian education being what it is. So they did that, and they were very successful at it. So I think bigger companies need to sort of maybe grow the talent market a little bit and work hard.
If all of us continue to hire only from IITs and NITs, there’s only that much talent out there. There is no way that we can grow our companies like that. So I think we will have to work harder to spread the net, while they’ll get more people in, maybe be patient with them, train them a little bit.
Three, this remote work opens up new opportunities. So I think, maybe companies will have to be a little more flexible on this front as well to attract talent. Now, long run? I don’t know. I mean, what can the government do? I don’t know what the government will do.
I think what the government is saying is, listen, we have freed up education, there’s edtech, we have a new education policy, we have already done whatever we could, figure it out. And I think it opens up new opportunities, also, because the old system is also dying, because all said and done while there are 5000 or 4000 engineering colleges where quality of education is horrible at most places. So they graduate, whatever, six, eight, like nine lakh engineers every year, but only a handful are employed.
That’s the number one complaint on naukri. From all our customers from day one, for all jobs, listen, we have a lot of people who don’t have the right skills. So if these edtech companies are more connected to industry, and they can help train people with the right skills early on, so that they don’t have to wait for an engineering degree.
And then again learn and it becomes a five year process, if that moves, you start learning what the industry needs from day one, online, and then you go back and learn again, if required. And that is, I think, already happening as we speak. It’s just I hope it just accelerates going forward, that could again, help in the medium term.
AMIT SOMANI 33:30
I can’t help but plug in one of our investi companies called Sunstone Eduversity. So they are exactly in this business. Of course, they are focusing more on business school, so MBAs and BBAs and so forth, but they literally make you job ready. That’s the whole curriculum.
So the day you graduate, you’re going to get several jobs and they’re getting an infinite amount of demand from both sides from the employers, as well as from the student community. But for that reason, I think we have to get more accountability in education that way.So that’s the only way.
HITESH OBEROI 34:30
Think about it, you spent four years, you don’t earn for that period, then you spend on education, then in half the case, what you learned is not relevant. And then you go back and learn again. It’s very inefficient.
AMIT SOMANI 34:40
So let me double click on that a little bit more. I do want to come back to the talent market, but is credentialing as we’ve always known it. You know, I went to IIT, went to IIM, went to whatever, you know, NIT, etc. Is that kind of dead? Not in the classical sense.
Obviously, if we went to IIT there is some sort of pedigree attached to that. But is it now going to be more skill based, knowledge based, learning based thing, and are you seeing that even on the naukri platform, like are employers asking you for ability to screen that way as opposed to this person went to IIT and graduated in 2008? and so on and so forth?
Saying all that is fine but tell me how good are they at Python or tell me how good are they at this? Can you bring all of that out? That doesn’t matter even if they didn’t go to college, or fancy college or even are a college dropout? Are you seeing that or it’s too early here so far?
HITESH OBEROI 35:30
No, I think it’s beginning to happen. And this is one reason why we acquired a talent assessment platform. Because enough companies, for example, even if the person has been to a good college, they want to do some sort of tests, they want to run some sort of tests.
And especially if a person hasn’t, is not pedigreed, so to speak, is not from a good college or has not worked for a good company, they want to be doubly sure. And therefore, they are investing in running these assessments online. It has become easier also with all these platforms.
And what we’ve seen over time is that whenever the market heats up, the demand for such things will increase, because when the market is not hot, you go to your regular colleges, you get whatever you want, and you train them. But when the market heats up, do you want to buy 50% More? 100% More?
Or would you rather do the hard work of figuring out some of the smarter people are the best amongst the rest , like some people got saved. So I think, if the talent market continues to be hot for the next few years, then this will only increase. Now, if it’s a short term thing, what we are seeing if it is a short term phenomena it is not sustainable. If you know demand crashes after a year, it is likely the company will go back to hiring.
Having said so,see the demand for top talent from top universities will remain because there’s a lot of like you said, the credential, that there’s a lot of signalling in that, you know that you’re hiring somebody who’s like, top notch when it comes to academics and has worked hard all his life, is very bright.
So those sort of, there’s a signalling value there. And you know when students also go to these colleges, they get a lot more in terms of experience exposure than just academics. Which I think is great for them in the long run.
So it may so happen that you end up with a market after a while where the big schools actually get bigger and then they even move online. And then you have the big education online companies who are skilling a lot of people on the go every year and the other colleges etc.
Amit somani 38:00
Makes sense. Just going back one quick question on that. Are you seeing new hotbeds of talent geographically? I know there’s the work from home which is anywhere but cities like Jaipur or Baroda or Aurangabad or some such like these, are you seeing talent density pop up or is it really still the big places and then it’s all the same?
HITESH OBEROI 38:30
Well, it’s mostly still the big places. And it’s mostly still Delhi, Bombay, Bangalore, Chennai, Hyderabad, Pune. Now, within these big places Also, if you want top tech talent, you go to Bangalore, if you want sales, talent, it’s more available elsewhere, if you want high quality business talent, often it is available, but if you want financial talent go to Bombay.
So within these cities, also there are nuances, there are differences. Some small cities have good talent, but the numbers are still very small. So if you want a good finance talent, CA etc, you go to Jaipur, you get them in Rajasthan.
You want street smart talent, you get them in Gujarat. So there are some pockets like that, but still very tiny. Not significant. It is still in the big cities.
AMIT SOMANI 39:20
Great Hitesh. So as we sort of bring this to kind of a close.What would you I mean, this is a personal question for you, the Hitesh in 2021 advice the Hitesh of 20 years ago,15 years ago? What would you, I mean by all means you had a blockbuster, successful entrepreneurship and otherwise sort of impact, what would you advise yourself from 20 years ago?
HITESH OBEROI 39:50
If I look back and again, like I said, hindsight is 2020. We have always underestimated how big things will become, and how much things would change in the long run. Starting with the size of the market, when we first wrote the business plan for ICICI. We said we will do 20 crores in five years.
They said Listen, this is not aggressive enough. We said we can’t even think of doing 20 crores. We are doing 30 lakhs a year. We don’t think the market is that much. And like I said we were doing in 2006 within six years of raising money. So we have I think, for some reason, always underestimated many things, how much things would change in the long run. Maybe that’s how we think.
We have also overestimated, so every time there was a big competitor, we would worry a lot. And like I said, things blow over, if you just stay, stay the course and keep doing what you’re doing.
But if I look back, we were frugal, we were starved of capital, there was not much capital available in those days, the kind of ecosystem which exists today, the kind of funding which is available today was not available then. So we were very conservative. We over invested in sales and under invested in product and technology.
For the longest time, of course, talent was also not easily available. So if I were to look back, what would I do differently, one, invest more in product and technology, invest early and spend more time to understand new trends. Because we’ve seen every time there’s a new trend, it changes the game.
And if you’re able to ride the trend, it benefits you, if you’re not able to understand the trend, it hurts you. Trends meaning mobile, for example, social media, AI and machine learning. It takes time, sometimes to figure these things out, but you have to invest, you have to invest early, and at that time data is not available, you also don’t fully understand, you don’t fully appreciate you make mistakes, all that happens, but you have to do it. And you’ll be aggressive about it.
The third thing, again we made mistakes, we understood late. So you have to continuously infuse new talent into the company at all levels. In all areas. So don’t do that,If you become lazy about it. If you say listen, we know it all, our guys know it all or the company’s culture becomes such that it’s hard for new people to come in and get assimilated to the company and make a difference.
Doesn’t work. So that’s something again, we’ve learned over time. And you got to believe that the market is large enough and you’re only limited by your imagination. Because if you don’t think like that, you will become very, very conservative. And Like I said, what we’ve learned the hard way in India, is that, India surprises. It’s not China. But it’s not Africa, either. So it’s somewhere in the middle. And if you become very conservative in India, it’s not a good thing. I don’t know whether we should become more aggressive in India. But that’s what seems to be working.
AMIT SOMANI 42:45
Absolutely. Who knows 10 years from now somebody listening to this might be like, they weren’t thinking big enough. We are probably underestimating it in the long term and maybe overestimating it in the short term. I love that. So with that, we will bring it to a close. Thank you so much for being on the prime Venture Partners podcast. It was a delight to have you. I have many more questions, but we will call it a wrap. Thanks again for being on the show.
HITESH OBEROI 43: 00
Thank you Amit. It was a pleasure talking to you. Thank you so much.
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