‘Excess VC money is dangerous’ – Shaadi.com CEO
You come from a background in textiles (his family business), how and when did the idea of an online matchmaking portal come to you?
Coming from a background in textile I was exposed to business from a very young age. As soon as I joined college I started working with my father. From thereon I went to the office and factory where I started handling part of the textile business. I even went ahead and initiated a new company for manufacturing and export of cotton made ups to Germany but in the process lost a lot of money. At the end of it I did realize two things, firstly I did not like the textile business and secondly I needed to learn a lot about business. After a couple of failed attempts I spent some time in Europe and USA, where I did all kinds of odd jobs. Finally I decided that the best way to hone my skills would be to do a course in management and that’s the reason I did an MBA. So I started studying and it was during that time I came to India for a very short visit.
During my visit in 1997 there was a lot of buzz about the Internet in India. Thus we decided to initiate a company called Satyam and Solutions, which would mainly explore potential opportunities and build web businesses for other individuals on the Internet. Immediately after launching the company I knew that building consumer businesses is what really excites me. While we started a technology company, which basically provided solutions to other companies to get on the web, this business was merely to get revenues. Along with that we started thinking what consumer service to launch but the first idea was to start a portal.
However we quickly realized at that time there wasn’t really a revenue model and on the Internet the switching costs are so low that we figured we should build multiple verticals and brand them very strongly. Incidentally at that point I met a pundit and got really intrigued by what he did, but soon realized that he could visit only a few people and carry a limited number of biodatas in his bag. Thus the choice for a life partner depended solely on the number of Biodatas he could carry and the number of individuals he would meet. This is when the idea of taking all this and putting it on the Internet came around and we launched Shaadi.com.
What was your big idea with respect to your other ventures Mauj.com, AstroLife.com and ShaadiPoint?
My other ventures happened much later, as I said earlier we wanted to launch multiple verticals and brand them in each space. The reason behind having multiple verticals and not just one was because of growth and scalability. One could be the largest player in one segment but you can grow only to a certain level in that particular division. We wanted to follow the FMCG pattern wherein they have multiple brands in various segments. They basically use the same core competencies of distributional marketing for each brand in each category. Hence we thought why cannot we be FMCS (Fast Moving Consumer Services) and use the core competencies of marketing, brand and technology to build up separate businesses.
When you started out what was your strategy in order to build your organization? Has it changed over the years?
I did not know how to do programming hence I hired technical professionals who helped me build the entire portal. At that time I did not really have a strategy but we just had an idea about what we wanted to do. We had initially decided on having multiple verticals and consumer services business but did not know why, what, when and how which was the firm which would do well. Therefore with the help of some thinking and luck we launched Shaadi.com. We did not even have a revenue model in place still we went ahead with the idea because we felt there was a requirement for such a service. As we went along we learnt a lot through consumer feedback and advice and accordingly we built it up to what it is currently.
In 1997 there was really not much of a competition as there were not too many sites. Also hiring programmers was inexpensive. In the beginning we did not need too many resources to start a small site. Hence we did not need to invest large amounts of money in hiring and running the website.
Initially what was your revenue model and how have you improvised on it? What was your conviction with respect to Indians paying online? How do you sensitize your consumers in order to build trust and make online payments?
Initially the revenue model was subscription that is an individual pays a particular amount for receiving a certain number of boidatas. What we learnt along the way was that subscription model works but it depends on how and when you get the consumer to subscribe. Originally when we offered subscriptions nobody paid for the service. So over the years we learnt ‘when’ and ‘how’ to get the users to pay. Thus the revenue model is still the same but in the future we expect a healthy mix of subscription and advertising for Shaadi.com. In terms of my other ventures we expect E-commerce and not products but services, information such in the case of Astrolife.com.
With respect to e-commerce there was no conclusion or resounding belief that people would pay online. It was basically a theory according to which there was a requirement for such a service and people would pay for it. I have spent a lot of time in USA, therefore I am aware that there are several Indians living abroad who are disconnected from home and they needed a way to meet like-minded individuals. Hence there is lot of information, experiences and analysis that led us to realize that there is a potential business model.
I agree it is harder to get Indians to pay online but we need to realise that Indians are very value conscious consumers. For example when they go even to a supermarket they deliberate a lot before they make their final purchase. Online one cannot have a sales person thus it is harder to convince them. Hence the way we sensitise them is by providing them a lot of services free, the reason being only when you provide them with a lot of value will they be willing to pay. So for example lets take Shaadi.com one can come there, look at profiles, click on the best-suited profiles and send in your proposal but only when someone accepts your offer is the time when we ask our consumers to recompense. After one shells out the money they can continue with the communication with the interested party.
Even in case of Astrolife.com we provide our consumers with free horoscopes, sun signs everyday. We assume most people read their sun sign everyday so as one gets further involved we offer them with various suggestions such as buying articles. Whereas on Mauj.com it’s even simpler, it is transaction based which people are used to paying.
After so many years of online presence what was the reason behind moving offline and starting Shaadipoint?
Starting from 1997 to 2001 our company was running at a very slow pace. There was no development and growth at Shaadi.com during this period. The year 2001 is when I started spending some more time in India and taking keen interest in the functioning of Shaadi.com. We came out of the web development business and focused entirely on Shaadi.com.
In 2002 we built the Shaadi.com brand and in 2003 started focusing on the original vision of building multiple verticals and making the company grow much faster. During that time we also launched Fropper.com as a dating website. Today of course it is very much a social networking site. We also launched Mauj.com as a separate vertical but now it’s spun off into a different company because the business drivers are very diverse. At the same time we started thinking of how to expand the market for people looking for a marriage. Our analysis and realization was that the Internet targets only a particular sector of the market and most of the people coming to us were from the age group of 21 to 35. This age group majorly included individuals who were searching for partners themselves instead of having their parents or siblings looking for them. Thus even after having newspaper classifieds and marriage bureaus there was still a need for match making solution. In India most of times the decision is made by the parents, so we wanted to come out with a solution which would encompass the traditional rituals and the modern culture. Therefore we launched shaadipoint, which basically caters to the parents. It’s a wonderful solution because it does away with the limitations of all the other previously existing solutions.
At shaadipoint we have kept all the aspects in mind such as longetivity, space and unlimited information. If one looks at marriage bureaus, reach is a problem whereas with shaadipoint we have solved that as well, as we have a backend wherein all the biodatas from across the region are stored.
How did you spread the word about your brand? What advice would you give to a budding entrepreneur in order to build a brand for his products and services?
What I did and what advice I would give to individuals to do is very different. What activities we did was during a period when there was no competition. At The time we started out the Internet was worn out no one was ready to put their hands in a dotcom venture. But at that time advertising on the Internet was inexpensive because Internet was not doing well and so we considered the option. Also companies like Yahoo and MSN were selling space at meager costs. Buying an entire homepage cost pittance at that time as compared to what it costs today. What we quickly did was we used this opportunity wisely and cornered our distribution on the Internet. We had partnerships with Yahoo, MSN, Rediff and more. As a result anywhere one went on the Internet they would see Shaadi.com as the matrimonial partners. I believe distribution was the key therefore you get to see the brand all over the place. One more thing we did was that we kept very quite about our business model so most people did not know that we were doing. Well, they all wondered if we were just burning money in the business.
Once the distribution was taken care, the second thing we did was that we went mainstream very quickly. We launched television campaigns in USA and India. Perhaps a lot people sat up and took notice of the concept also Shaadi.com is a powerful brand thus the name stuck with them. A lot of individuals started writing about us PR became our best friend. I feel a brand is built on quick moves firstly being present everywhere on the Internet secondly having a strong word of mouth thirdly PR and last is adverting. According to me advertising can just support brand building it cannot build a brand. While we did spend a lot of money on brand building and advertising and we continue to do so. In fact my advice to them would be to not to insanely spend money on advertising and doing campaigns because that does not facilitate building a brand it simply helps create awareness. According to me what really helps creating and building a brand is consumer experience, which then leads to word of mouth and buzz. Creating a buzz is a key factor in order to build a brand for your product or service.
The first time when you received venture capitalist funding how did you plan your spending? And when an entrepreneur gets funding what all should he keep in mind?
We raised capital for the first time this year and I think its still early because it is the first time I have raised VC funding so I do not understand all these things well yet. According to me VC funding makes you more accountable and it forces you to think about planning, organizing, allocating resources, which are truly very important aspects of managing a business. So we continue to engage in exercises of determining how to grow at a break neck speed. The money that we raised will be utilized for marketing and creating awareness. We also plan to set aside some of the amount for capital investments such as infrastructure, offices, hiring. We are also looking at opportunities for investing in new businesses.
In terms of what entrepreneurs should do when they get VC funding? Well, they must definitely celebrate. On a serious note one needs to think exactly how much money one wants to raise because one can end up raising too much or too little. Too little is fine as that teaches you to be smarter and wiser the next time. Whereas raising money in excess is very dangerous as one starts substituting capital for revenue and making it your business model. One needs to think a lot before deciding how much money is required, as a VC will always want to give you more than you need, as that will give them a bigger part of the pie.
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Do believe that the situation changes when a VC comes in? Each online business has its own unique points and requirements but according to you when is the right time to seek VC funding for any online venture?
According to me one has to be more participative at the board level. I think one needs to make sure about the quality of VC that you get because VCs can be your best friends or your worst enemies. Ultimately it all boils down to what type of VC you are getting on board as they can be of incredible help. One of the most of important things a VC brings to the table is it makes your company more credible and trustworthy. If one has a big name or one of the top five VCs it always helps to make your company credible. We too were lucky to get Sequoia Capital who is considered the Rolls Royce of the VC world when it comes to digital business. Once your credibility is established it helps in a lot of ways by opening doors to several big companies and various other opportunities. Secondly it helps in recruiting good personnel’s. My VCs keep telling me jokingly “you are making us head hunters” and I keeping telling them that recruiting good individuals is the most important aspect of running a company and I have given that to you.
In terms of a right time, firstly one has to figure out what kind of funding one is looking for because there are several types like seeding funding, growth capital, and public market capital. If one is just starting out then one requires a viable business plan and good start up team I assume that should be enough with respect to today’s markets.
If one is looking at growth capital then one should have a certain amount of scale. Also the capital requirement should be of a certain sum. One needs to keep in mind that VCs are not interested in giving you million dollars because if they start doing that they will have to do several of such deals. One needs a feasible business plan and certain amount of scalability after which you need to plan how are you going to make use of the capital for the growth of the firm.
Whats your take on the whole debate between web 1.0 and web 2.0?
In my opinion whichever company says we are a web 2.0 and an Ajax company is going to die. I do not understand all this, a company who says we are a social networking website is going to crumble. Businesses and companies are built around certain products and services, which have a clear advantage to the user. If someone has built a web 2.0 company it does not mean it is going to provide any benefit to the user. It is simply a technology that one has used and it is important to know how it is going to provide benefit to the users.
I’m very hesitant to call what has happened till date as web 1.0 and what is going to happen from now as web 2.0. In my mind there is no debate. According to me all good and successful companies will incorporate new technologies as and when they will feel the need.
If risk taking ability is a given, what according to you are the top prerequisites one should have to be an entrepreneur?
Determination is probably one of the highest valuable trait required for an entrepreneur. I mean determination to the extent of being stubborn but not being closed minded and rigid. If you ask me determination without perseverance is not that valuable because one can be all determined to do something but if you don’t persevere there is no point.
One needs to be persistent as bad things may happen but still one has to continue to strive, work hard and come back into action. An entrepreneur should be prepared to accept failure, get up and take another punch of failure. Thus both perseverance and determination go hand in hand.
Drive is another important quality and it’s a combination of perseverance and determination. Rather I wouldn’t call it drive lets call it …energy. The main responsibility of an entrepreneur is to get the best out of other people so the energy has to be infectious. Another attribute is resourcefulness where he should be able to provide necessary resources to his team as and when required.
An entrepreneur should never take no for an answer and in fact he should always be ready for any adversity as well as come up with newer and creative solutions for doing things when there are none.
There have been numerous debates on the value of an MBA for an entrepreneur and how MBA creates great managers but bad entrepreneurs. What is your take on it, having both an MBA and a successful venture?
According to me doing an MBA does not guarantee success. But doing an MBA helps entrepreneurs become better managers but I do not believe it helps a manager become a better entrepreneur. Entrepreneurs are basically restless, big picture thinking and target oriented people. An MBA can only help channel that energy and enthusiasm in the right direction. Management education also helps an entrepreneur hone its skills and organize their thoughts and creativity.
What is your take on the Indian entrepreneurial scene? What is it that in your opinion, entrepreneurs from India lack/have? How are they different from the hotbed of entrepreneurship- the bay area!
There are two scenarios in case of the Indian entrepreneurial scene. Firstly there are individuals who have the capital to fund their business plan and secondly there are those who build and work upon their business models with the help of institutions. According to me both are fine because earlier there was hardly any capital available so only individuals who had the fire in the belly, perseverance, determination to go against all odds were the ones who managed to accomplish their goal. Whereas the others are concerned they required money and certain resources without which they could not really do anything much.
The IIT and IIM models are very typical of the Bay area model of entrepreneurship wherein individuals first prepare a business plan and then seek funding. The qualities I mentioned earlier are very important for any entrepreneur to achieve success because when resources become more expensive it becomes tougher to run a business as the risk levels also increase dramatically. Today it takes a couple of million dollars to run a business while earlier it was easier and inexpensive.
In my opinion entrepreneurs who learn it the hard way probably attain wisdom and maturity. They learn a lot from their experience, which makes them wiser and sensible. When one interacts with them one can mark the difference between an entrepreneur and a regular individual as they exude astuteness and maturity.
According to you what is the future of social networking in India? What is the probable revenue model for such websites? What is Fropper.com doing different to provide benefit to its users?
Personally I think most of the social networking websites will collapse because they are not providing any benefit to the customers. Most of the sites are not mentioning the reason for which they stand for and why should anyone use them. If you ask me the sites that will survive will be the ones that provide one of the key tangible benefits to the consumer. The business model that will emerge for social networking sites will probably be advertising supportive. The sites which move towards entertain they will have subscription and transaction based model. But one cannot expect these sites to generate much revenue from these models except through advertising.
I cannot give that away but will definitely assure you that you will get to see a lot of new and different things from Fropper.com by the end of the year. But we know one thing that people do not come just to network; there is not much of value in people coming and only making friends. A prime example of this is Friendster.com. One thing is for definite that there is a need for individuals to have a virtual identity and virtual home, which they may use to connect to other people. We are trying to build services around these two insights that people want to have a virtual identity and home and the potential to use this to make friends. The novelty will come depending on the type of services we build around it. If we provide what every other site is offering we will not go any far.