In this conversation, they discuss raising funds, customer insights, capital efficiency and international competition.
Sanjeev Bikhchandani is the Co-Founder and the Vice Chairman of Info Edge, the owner of Naukri.com India’s largest job portal. He was recently named as one of the recipients of the Padma Shri award.
Listen to the podcast to learn about
1:20 - Capital efficiency & building Naurki.com
4:45 - How entrepreneurs can increase their odds of not being beaten by money
7:00 - Customer insights that led to formation of Naukri & Zomato
12:00 - Crowdsourcing customer feedback in real time
14:00 - How naukri built a virtuous circle as a moat
16:44 - Customer-led innovation Vs Competition-led Innovation
18:30 - Why Indian Businesses need Feet on the street
24:20 - Why customer’s money is more important than investor’s money
Read the complete transcript below
Amit Somani 0:50
Good afternoon and Welcome to Prime Ventures Partner podcast. Today, it is an honor and privilege to have with us Sanjeev Bikhchandani Founder and Vice chairman of Info Edge Group, a parent company for Naukri.com. Sanjeev Welcome to the podcast.
Sanjeev Bikhchandani 1:06
Thank you for inviting me, Amit. Thank you so much.
Amit Somani 1:08
So Sanjeev let’s get on with it. I think the way you guys started Naukri and one of the things that still sticks with me, even after all these years, is how little capital you had raised back in the day. It was about seven crores which at that time was $1.7 million, even lesser now. So maybe you can talk a little bit about the starting of Naukri and capital efficiency that you were thinking about as you build that business. Of course, things have changed since with respect to other companies and the internet ecosystem.
Sanjeev Bikhchandani 1:38
Yeah, so look, I quit my job in 1990. And for the first seven years, we drifted into a whole lot of small things, many different things, teaching, training, reports, databases, salary surveys, and so on. Whatever came our way to survive, and we were bootstrapping. And in ’97, we launched naukri as one more small idea or seemingly small idea among the string of small things we’ve done. We just simply took jobs from newspapers around the country and put them in our own words on the website and launched it. We had no money. There was no venture capital in those days, very little, I have never heard of it. I’ve never actually met a venture capitalist. So really, you had to, you know, sort of live on customer money. So you have to sell to survive and break even. And that’s how we started. And I think those 10 years of bootstrapping, of which the last three years naukri was bootstrapping, I think that taught us a lot. So capital efficiency was built into our DNA simply because we didn’t have a choice. We had to make do with less. And we had to get customer money to survive, and that, quite sort of got embedded in our DNA. And when we raise money, which at that time, we thought of a lot of money. In hindsight of course it’s a very little money compared to what startups get today. We figured that we had to do it all in 7.29 crores which is what we had raised from ICICI venture in April 2000. And we got lucky, you know, shortly after we raised money or we signed the agreement, maybe within two weeks, the market melted down, the.com bubble burst. Quite honestly, you know, we didn’t have time to spend the money foolishly, we simply put it in fixed deposits in the bank and said, Okay, what do we do from here? We tore up the business plan on which we raised the money and said, rethink, reboot. What do we do from here? And this is the only money we’ll ever get. We knew that. And we got to break even on this, roll the company on this and this is it. So when you don’t have a choice, and you don’t have options, you do it the way you got to do it.
Amit Somani 3:24
Very interesting that we’re sitting here in this COVID time frame. And a lot of entrepreneurs are probably listening to this podcast, who are also in a situation where either they don’t have enough money, or maybe they have less money than they anticipated. Yet I’m seeing that this is actually leading to some positive behavior in terms of unit economics, in terms of capital efficiency, in terms of managing it. So clearly, here, you’re hearing it from one of the legendary entrepreneurs, that necessity is the mother of invention. So you have to figure it out. Now, on the flip side Sanjeev, a lot of companies have raised and raised lots of monies, right and I remember you vividly as one of the active board members on MakeMyTrip from the early days, as well as Zomato where you are an investor and a board member, can you talk about the new kind of world companies perhaps that also doing well, but with a different path.
Sanjeev Bikhchandani 4:11
So the Times have changed. That was the year 2000. This is 2020, 20 years later, clearly in the intervening period, especially the last 10 years access to capital has multiplied manifolds. Equally importantly, competition has increased, and even competition has access to capital. So even if you want to do it with less money, you know, chances are your competition will raise more money than you and then force you to spend that kind of money. But having said that, my recommendation would still be while you should raise money, you should spend it carefully, and spend money as if it’s the last money we’ll ever have. And focus a lot on innovation, customer satisfaction, building IP, building a network effect, so that you can’t be beaten by money. So if capital is your competitor’s only strategy, and you build a good network effect to defend your business. I think you’re in a good position. But right now, in the midst of this covid crisis, I would say number one, first assess your situation, which is what’s your runway? How much money do you have? If you’re fortunate in having just raised the money, and haven’t yet built up high cost structures, you’re very lucky, you can pivot very fast. On the other hand, if you build this on a large workforce, high cost structures, it’s painful to sort of sack people. It is painful to scale down, it’s painful to pivot. If you know if you are in that sort of situation, then you have a harder task. But either way, I would say conserve cash and focus on revenue, focus on cash flow, focus on the customer.
Amit Somani 5:37
Sanjeev, one of the things I remember vividly I’ve heard you speak at some event many years ago. Saying one of the critical things in a consumer business in particular is you know, organic demand. And you often cited both Naukri and Zomato as two of the maybe 15 or 20 businesses that you’ve been involved in over the years either as an investor or or mentor or an entrepreneur that have this notion of organic demand. So does organic demand just sort of go through the roof when people are just raising money and burning money and marketing, discounting, etc. How do you get that early sort of assessment of real demand in this era?
Sanjeev Bikhchandani 6:12
So, look, if you are solving an unsolved problem, if you are a first mover and solving an unsolved problem, chances are you won’t have to sell, the customer will buy. It happened in Naukri. And you know, you get an idea of unsolved problems from just observing customers, talking to them, you know, what we call deep customer insight. So I got the idea of Naukri way back in 1989-90. When I was in my last job in a company that is now called GlaxoSmithKline. And then it was called HMM, I was in the marketing department and I was working on a brand called Horlicks. And there was an open hall where the marketing team would sit maybe 8-12 people, all of whom are highly qualified from the IIMs and who were in a marketing job in a multinational corporation, FMCG. So this is ’89-90. This is pre liberalisation, Delhi had just two companies, two MNCs, which were in consumer marketing, and so if you were in Delhi, you wanted an MNC, you wanted consumer marketing, and you wanted marketing, not sales, you were probably in the best job you could be in. And yet I noticed that when the office copy of Business India would come in, everybody would read it from the back. And because there were 35 to 40 pages of appointment ads in the back of Business India in those days, it was the number one appointment ad medium for professional managers. Now, I found it strange behavior, because I said, Look, I thought people bought magazines to read the articles. But here are the guys just reading the ads, and then discussing the ads and talking about jobs all the time. And they are in the best job they can be. So it’s not as if they’re looking. And that’s when I realized that look, jobs are a high interest category of information. And seven years later, that insight came back to me when I saw the internet for the first time. And when we launched Naukri saying that listen, jobs are a high interest category of information. Lets just aggregate jobs, from all public sources, and put them out and see what happens. And sure enough, traffic came without us having to advertise. We had no money to advertise anyway. But traffic came, people began to apply, people began to apply from Naukri. Then recruiters got to know about us, they began to put the jobs on Naukri directly. And that’s how the virtuous circle was built up, likewise, it was based on a customer insight. Likewise, one of the first questions I asked Deepinder Goyal of Zomato when I first met him was where’d you get this idea from? Yeah Idea kha se aya? Basically, at that stage, Zomato was called Foodiebay and it was a restaurant listing site. But they had all the menu cards. They were the only ones who had menu cards. And because of which I would visit them, my son would visit them. And we would discuss and that’s when we got the idea. Why don’t we look at Zomato or Foodiebay for investment. So that’s when I reached out to Deepinder Goyal. I didn’t know him from before just sent him a cold email. He came and met me and I said Where did you get the idea from? And he said, I was working in Bain consulting in Gurgaon. And it was an office where there were a large number of young people working mostly male. Many of them single, they would work late nights, there was an office cafeteria that did not serve lunch, but you could get your own food. And to make life easy. The admin team had put in one file folder, all the takeaway menu cards of all the restaurants that would deliver there. And Deepinder said there would be a long line at 1pm in order to access that file folder in the cafeteria, and I used to get impatient. So I came one Saturday, and I scanned all the menu cards and put them up on my office, my personal page on the office intranet. And within two days, the IT infra guy came to me and said, hey, what have you done? Why is all the internal traffic going to your page? And he said, that’s when the penny dropped and I realized that aggregation of menu cards has got value. And so on weekends, he went out, and he aggregated menu cards of all what maybe 800 restaurants all over Delhi NCR, and he launched the site FoodieBay and immediately began to get traffic because people valued menu cards. So it is based on that insight that if you aggregate menu cards, you will get traffic. That FoodieBay which is now called Zomato was launched. So really know if you want what we call natural traction, that you’re getting traffic without advertising, you’re getting repeated traffic when positive word of mouth is going viral, you’ve got to be solving an unsolved problem or hitting a hot button. If you hit the hot button, half your success is ensured, you don’t have to spend money to get traffic. And that’s a big one. So I would say look for customer insight, talk to customers, meet customers, observe customers, maybe you’re a customer yourself, maybe it’s your own pain point you’re solving. But either way, you have to have customer insight. So I would say customer insight is key.
Amit Somani 10:31
Absolutely. Let’s build on that. You said several things there, Sanjeev. So one is deep customer insights. And there’s the original one and then as you build the company, whether it is Naukri or Zomato or what have you. And in particular, you said you talked about a couple of things, one is more on the innovation side and building moats and the need to solve interesting customer problems and the second is managing your cost structure. So can you talk about customer insight on an ongoing basis does initial spark an initial organic demand.
Sanjeev Bikhchandani 11:00
Look, the original idea of Naukri was simple in 97, take jobs from newspapers from around the country, rehash them in your own words and put them up and you get traffic. Once traffic came, people began to apply. Once people began to apply from Naukri, recruiters began to hear about us and began to contact us directly and say, Hey, I’m wanna advertise. But can you take these jobs and put them up, and that’s when you began to charge. And that’s how we got our revenue model. Now, all this is fine. You know also, in the beginning, you know, you had a couple of ideas and you did them, you did a reasonable job of executing them, I wouldn’t say outstanding, but reasonable. And you would have a hot button. But over time, you gotta keep on listening to the customer. So when we raised venture capital in the year 2000, we said, hey, why not add a field salesforce, and go out and meet clients? We’re earlier selling by direct mail. And so we began to hire field salespeople. And, you know, within a year or so we had over 100. Within two years, we had over 200 across, 9 or 11 offices around the country. And what we did then that time was that we started a Yahoo group of all the salespeople, and the tech people and the product people and the senior management. And we told the salespeople, whatever the customer tells you, you please put down on this group. So we had 200 sales guys, each posting messages, I met this customer. He’s happy with the product. But he said, Why don’t you add this feature? What about this, you know, it’s not solving this problem. So we were getting continuous feedback from clients, from customers from the salespeople, saying, this is what happened today. And that gave us a repository of ideas. And if the same idea was coming from 8,10,12 different people consistently, we would go out and execute it. And therefore, essentially, customers are telling us what to do and what they wanted, and we just did it. Okay, and that’s how the product improved all the time. And so a lot of the subsequent innovation that we did was simply customer feedback. And almost live customer feedback, same day feedback, next day feedback from salespeople on this Yahoo group, saying it’s a simple idea, but it really gave us a lot of new ideas on product improvement, which we executed well.
Amit Somani 13:07
That is a wonderful hack. I think I’m going to try and recommend every entrepreneur try that, saying crowdsource customer feedback on a real time basis and use that. How about building moats and defensibility into your business because things keep changing all the time in tech.
Sanjeev Bikhchandani 13:21
So look, if you have a good network effect going for you, it’s gonna be hard to dislodge you as an incumbent. And what is our network effect, we’ve got the most jobs, therefore we get the most traffic. I think this is crucial. This is where the customer insight comes in, that people want to know about jobs so make sure you get the most jobs. Now getting the most jobs means it impacts a lot of your strategies. For example, it impacts your pricing strategy. So to get the most jobs first you’re taking jobs free from newspapers, then when we get a charge. In addition to that we said we priced really low 350 rupees a single job listing or 6000 rupees annual subscription, unlimited number of jobs in the year, our goal was to get the most jobs, because that’s how we get traffic, we knew about that. And if we didn’t have the customer insight, we would not have adopted that pricing strategy. So we’ve got the most jobs, therefore we get the most traffic, we get the most traffic, therefore we get the most response. We get the most response, therefore we get the most clients, we get the most clients therefore we get the most jobs. And it’s a virtuous circle that snowballs in our favor. Now competition came in, but they didn’t have this insight. So they priced their listing 10x of ours, and they simply wouldn’t get enough jobs. Now, if you wouldn’t get enough jobs, you had to advertise a lot to get traffic and then you won’t get repeat traffic because you didn’t have enough jobs. So without this insight, informing our strategy, we would not have been able to build this virtuous circle, this network effect. And once you have this network effect, the truth is in media markets and you know, job listings, job classifieds is the media market, in media markets, it’s well known that it’s a winner take all market and the number one will get 70% revenue and number two like 25%. And the three, four and five will fight for 5%. But when it comes to profit in the industry number one who has got 70% revenue, we’ll get about 120, 130% of profits. Nobody else will make money. If you’re making money, you can reinvest that money into sales teams, into servers, technology, new product, innovation, advertising, customer service, all those things, which will only go to strengthen your virtuous circle. Now, if you’re not making a profit, you can still do it with investor money but we didn’t have that luxury. We had only 7 crore rupees, 7.3 crore rupees and we had a meltdown in our hands and we did with the money we had.
Amit Somani 15:39
Wonderful. You also did one very unique thing, which is that looking at basically international competition, a lot of times people say, hey, the Google of you know, India’s gonna be Google, or the Facebook of India’s gone be Facebook, you guys had you know Monster you guys had LinkedIn later you had so many other international say online digital marketplace. And you could have done it. So I’m sure customer insight was one. But as you guide and mentor, you know, the new set of entrepreneurs who have global competition, whether us building SAAS companies globally or vice versa, doing digital things that international competitors can come in, how do you think about international competition? And how would you guide some of the younger entrepreneurs in that area?
Sanjeev Bikhchandani 16:20
So look, if you’ve got a good solid network effect going for you, if you build good IP, if you’ve got stuff that can defend your business, then chances are no amount of money can displace you. That’s the first learning we had, you know, there were times when he got really apprehensive that we will be beaten by competition by deeper pockets. But because we had this network effect going in our favor, we will not. And in hindsight, I think that’s what kept us ahead. So focus on innovation. Now, innovation has been informed by customer insight, which means you’re always talking to customers and listening to them. Now, Second is that if your innovation is customer lead, as opposed to competitor lead, then hopefully you will produce something which your customer will actually want. So keep one eye on your competition certainly yes are you missing a trick but 80% of your focus should be on customers and what they are saying what signals they’re giving you and what they’re asking for because that innovation will satisfy the customer better and he will stay with you even if it means a higher price even it means you’ve got lower ad budgets even if it means you know your salespeople are paid 30% less than competition. It will not matter just produce a better product and better product is what the customer wants. And that’s how we define a better product.
Amit Somani 17:28
I absolutely love this. You know make your innovation be customer lead and not competition lead, sort of keep an eye on the competition, but really you know, two eyes on the customer. Let me ask a slightly controversial question here which is on, what do you think of feet on street distribution in this age versus digital distribution, thanks to all the mobile internet, WhatsApp, whatever.
Sanjeev Bikhchandani 17:48
So it varies from Market to Market and customer to customer. Right now, if you take a business like Naukri your clients, the people who pay you money, right, our recruitment managers, HR managers, HR departments, corporations Now, even now, you will not find too many HR managers or recruiting managers who have a corporate credit card. So, if your solutions are going to be priced at you know 50000 rupees one lakh rupees five lakh rupees 10 lakh rupees or more, right, it’s very rare to find an HR guy who is going to put on his personal credit card and claim a reimbursement. Now, what this means is that the customer behavior is that he will demand a proposal, he will demand a couple of meetings he will understand all the products he will demand a proposal he will negotiate price, he would ask for some add ons here some minor thing there and then he will pay by cheque or bank transfer usually cheque even now, and to do that you need a Salesforce there is no getting away from that in India, this is India and this is the reality right now we try to sell in the US when you first sell in the US we put two people there nobody wanted to meet them because the US is a different market. They said listen, just we talk on the phone and I will pay online. So that’s a different corporate culture. India has a different corporate culture. You got to understand the local Customer culture and understand the customer. And so India I think for a while, at least will stay a feet on street kind of market. So today we’ve got a three tiered Salesforce we’ve got a key account Salesforce, which is above a certain value fewer clients per salesperson, different kind of selling. We’ve got named account selling, which is the next level is the next highest clients. And then we’ve got a retail sales retail clients which are smaller clients, which is below a certain you know sum of money per annum, it is sold to via a telesales force and beyond that, it is a geographical salesforce on the key account sales and named account sales. But you do need in our business, we believe and we believe it will be there for a while you do need a Field SalesForce. The other thing is that look, you know, you can if a client has a recruiter budget say 10 or 20 crore rupees and left to himself is buying online, he might buy something for 50,000 rupees, you have the option of going face to face upsell him to maybe maybe 50 lakh rupees, and why would you give that up. So I think there’s value in the field Salesforce, it is one of our many moats. It’s a barrier to entry for competition. And clients seem to want it, they want the product explained to them, they want training, they want the replacement guide, the new recruitment trainee who was joined, he wants to be trained, they want that kind of servicing. So again, it’s a market demand.
Amit Somani 20:12
Great. So Sanjeev, a lot of things have changed because of COVID. Like you said, you have a multi tiered sales force that may be more digital distribution and feet on street is not going away. What is going to remain unchanged. I’m looking across a large spectrum of businesses that you get to various entrepreneurs you deal with. What will remain unchanged?
Sanjeev Bikhchandani 20:31
So it depends how long this COVID thing lasts. That if a vaccine is out by September, and is universalized it’s one thing if it takes three years is another thing. If a cure is found within two three months. It’s one thing if the epidemic subsides, for whatever reason, whether it’s Indian heat, Indian immunity, Indian spices, in diet, I do not know what So, it depends on when COVID recedes and how long it is there for, will determine what changes and and how long lasting the changes will be. So as of now, I would say fundamental human nature has not changed. You look at China, it’s open back. People are saying the pandemic has receded. And it’s business as usual. If there is early opening up and early control of the pandemic, and the solution in sight, I would say, not a lot will change, except businesses that have been hurt badly because of three, four months lockdown may find it harder to recover. So there will be a slowdown, there will be a recession, but habits may not change. But if the pandemic stays for two years or three years, then you know a lot of things will change. And it’s right now it’s hard to imagine all that will change if you can’t meet people face to face. So take a look at you know, people are talking about work from home. I think work from home is great, but look, how do you induct a new employee working from home? How do you onboard trainees into working from home? How do you build company culture working from home? You know, what’s the company culture like? Well we don’t have a culture actually, we all work from home, we don’t meet up , that’s not how an organization is going to run. So the physical workspace I believe will come back. I believe companies be more open to work from home, which means that you will work from home maybe one or two days a week sometimes, but you will still meet people. I mean, fundamentally, you know, human beings are social animals. You want to meet people, you will, how do you brainstorm on zoom? I don’t know. How do you have a cup of coffee, how do you park in somebody’s cabin and say, kya chal rha hai bata. On zoom you can’t do that. So those things, people will want them back. So I suspect less will change when people think. Right now, of course, we’re in the middle of COVID. And so people are saying everything has changed, everything has changed. I’m willing to bet a whole lot of things will not change.
Amit Somani 22:39
Absolutely. I think fundamental human nature is not going to change, like you correctly said, We are social beings, the behavior and the mannerism might change a little bit. Sanjeev, what if you were to give advice to yourself, like, you know, 10 years or 15 years ago? What would you do differently and likewise, if you see a young entrepreneur starting out today, like you were in 97-98, what sort of advice would you give them?
Sanjeev Bikhchandani 23:02
So one of the big mistakes that we made in hindsight was that there was no tech person sitting at the top table in our company. Okay, when we started out, so in 97, we didn’t have a full time tech head, we had a part time person who we gave equity, he was on the board of the company, and he would work from his house while doing other work. And we managed with that. And we did not realize to what extent we were under invested in tech till about 2002-2003, maybe five years after we launched. So I would say that we were great at sales and marketing and communication. We understood data very well. We understood the customer very well. We should have been better at Tech and more interested in tech 20 years ago, maybe 23 years ago when we launched. The advice I’d give to young people today starting out is that I see a lot of people who are good at product and tech but for them sales, especially face to face sales, Field Sales, B2B sales or even telesales is a bit of a black box. Somebody else has got to do it, you know it’s not really my area of interest. So very often sales is not at the top level, the way tech was at the top level when we started the Naukri. I would say you need a combination of all skills, you need product, you need tech, definitely, that’s really important. I mean, you are a tech company in all likelihood. But you also equally importantly need the ability to generate revenue, and generate revenue at a price that’s above what it costs you to generate that revenue above cost of goods, and especially if capitals would have been short supply in the post covid era. You gotta do it on customer money. What I tell young people, who I meet today who are starting out as entrepreneurs. I emphasize that the customer’s money is more important and better than the investor’s money. Reason being if you’re getting the customer’s money, and you’re getting it repeatedly from the same customer and you’re getting it at a price that’s higher than your cost, then chances are you have a viable business. And if you’re getting the customer’s money, the investor’s money will almost certainly come because investors love businesses that are getting customer money. On the other hand, if you get investor money without getting customer money, you have no idea if you have a viable business, I mean, you’ve got good PowerPoint and you are able to persuade a couple of young investors across the table who never actually probably run a business themselves. They give you money, but you don’t have the customers work yet. And that’s a problem. So focus on the customer, get the customer’s money, the investor’s money will come. And customer’s money is more important than the investor’s money.
Amit Somani 25:23
That is a fantastic, fantastic note as we wrap up here, Sanjeev. You’ve accomplished so much. And I know you’re very, very probably to entrepreneur, and you help them a lot. So what drives and motivates you now, right, I know you’re aCo-founder at Ashoka University, one of the trustees there, you do a lot with TiE, just a little bit about Sanjeev the person, like what motivates you and excites you at this point in life.
Sanjeev Bikhchandani 25:46
I love new ideas. I love listening to youngsters with their ideas. I love you know, they remind me of myself at their age. It fires the creative side of my brain, my creative juices, and I love to experiment with new ideas. So you know, I can’t do it myself because I’m doing what I’m doing. But if I can help and support people who are doing something good, smart people doing something good, committed people, hard working people I’d happy to do it.
Amit Somani 26:07
Wonderful Sanjeev. It has been just fantastic. Lots of interesting insights. Thank you again for sharing your precious time during this time. Thank you for being on the podcast.
Sanjeev Bikhchandani 26:16
Thank you so much for inviting me.
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