Netflix clicked. Back here we have ClixFlix, SeventyMM, Cinesprite, HomeView, Catchflix and one particular company that I will call Madhouse. Quite a few of these are VC funded. SeventyMM in Bangalore and ClixFlix in Mumbai are considered the top of the ladder at the time, Cinesprite in Delhi is considered not very far behind. I agree its too early to even think of rankings – they are still evolving and not widely accepted. And there would be other companies in various phases of idea/implementation.

With so many players, and more to come, I can’t help but think about competition. Consider a hypothetical (but probable) scenario – VC funded SeventyMM moves to Delhi for expansion and meets Madhouse (which we will assume for now is operating in Delhi and is not VC backed.) What happens?

Scenario 1. Since Madhouse is bootstrapped, it didn’t have the luxury of expensive advertisements, or huge inventory, or iconic brand ambassadors (Bollywood stars/ Cricket personalities) and hence they haven’t built up any defendable base yet. SeventyMM (with its VC money) runs huge advertising campaigns, launches free trials, and hires scores of talented developers to build the best delivery system. And heck, it even launches a price war – offering the same service at much lower rates. Soon Delhites are hooked to the new guy in the town sporting his Merc – SeventyMM. Madhouse withers along the way and eventually closes down a year or two later.

Another scenario. Suppose Madhouse guys were an absolute ‘magic’ – really innovative – and even with their limited money they have built a strong defense to competition. This defense could be in various forms – a huge customer base, or a trustworthy brand, or a better technology, or a good distribution channel or something else that matters. SeventyMM being not only rich but also intelligent figures out (luckily) that even with all their money they will not be able to woo customers on their Merc – Madhouse’s minivan is old and noisy and leaks as well, but people are happy with it. Perhaps because all their friends are there, or due to some other reason. SeventyMM offers a premium for Madhouse – there is no other way Delhites will be friends with him, not even if he has the Merc. Since Madhouse (as assumed) is self-funded, the owner agrees if he finds price ‘right’. It is what an entrepreneur generally is after – to build something which would get acquired at sufficient premium. SeventyMM gets to be friends with Delhites, and Madhouse guys buy a yacht, and go vacationing in Maui islands before coming up with their next startup.

So far, so good. But what happens if Madhouse is also VC funded?

Acquisition becomes a distant dream for either. Why? VCs are not after petty gains – they want waterfall returns. That’s their business model afterall. A entrepreneur who bootstrapped might be happy to sell for $5 million, but a VC who has invested $2 million won’t settle for $5 mil. He will rather invest $5 million more and continue the competition for the possibility of higher returns later. So what happens in Delhi now?

SeventyMM does X Rs in ads, so Madhouse does XX. SeventyMM ropes in Irfan Pathan, so Madhouse ropes in Mahendra Singh Dhoni. SeventyMM raises $2 mil in VC, Madhouse ups them by raising $5 million. SeventyMM offers Rs 199 a month, Madhouse responds at Rs 159 a month. Its money against money.

Since money is no longer a differentiator, and ideas are public, and replicable (given sufficient money) – hence the deciding factor now – is – execution.

That much about the ‘spectators’ view. Now think from the entrepreneur’s angle. As a startup entrepreneur you have a choice – bootstrap or VC funded. Infact, you may not have this choice if you are in a captial intensive business. But suppose you are not in that kind of business, and do have a choice.

You can bootstrap and remain self-funded – being self-funded you are more easily acquirable when competition comes along. (Its a conservative strategy – you are building a strong fort in one ‘area’, which a national player will be interested in and hence pay you for.)

Or you can raise VC money. And pray that another VC funded startup does not opens in your neighbourhood. (This is an aggressive strategy – you are building a bigger army, to pan out nationally and acquire others on the way.). The problem is when you meet another company who is not willing to join forces – then you have no option but to fight it out.

So much about the dynamics that VC money can play in competing startups. Now about the online rental business. Personally I am not very upbeat about DVD rentals per se, I am much more bullish on allied businesses that can be built around it. Recently I had a conversation with Madhouse CEO, Sameer. It only reaffirmed my faith – Madhouse is the dark horse to watch for in this race.

But yes, execution matters – so much that I can say – only execution matters. And I believe they need to step on the gas there.


Alok has an interesting question. An ‘average’ person is more likely to perform better in a small team.

He nails it right with this observation – ‘a person’s work is easily noticeable in small teams’. Small fact, bigger ramifications. And worth sparing a thought.

I think the surprising thing about humans is that when time comes, most of us who are otherwise average can rise to be a ‘hero’. Think school days, college days, office days. Its likely that the time when you rose to the occasion and performed beyond your normal capabilities was a time when you believed in the greater cause and your work would have made a critical difference to that goal.

This ‘criticality of ones contribution’ is more evident in smaller teams. Throw two people down a well and each will do his best to climb out. There is no other way. They cannot look to others or blame others for not finding a way out simply because there are no ‘others’ – its only two of them. And each person’s work contributes in a significant way.
But throw fifty people and each of them will wait for someone else to come up with a solution.

Try the reverse. Throw 50 people down a well. Now the more resourceful among them will try to find a way out. The lesser ones would talk among themself and throw up an idea at random to these resourceful ‘leaders’. And there will be a few lazy ducks who will find their best use of time in cracking jokes and talking about the latest Bollywood scandal while the ‘leaders’ come up with a solution. Take 2 of these lazy ducks and throw them in another well. What do you think will happen? Jokes and scandals? Or, ‘Man, we need to find a way out’.

Maybe as Tom Peters says, it arises from man’s duality to be a part of something bigger and to stand out at the same time‘. A smaller team allows this psychological contradiction in human beings to be satisfied better, hence the avg person puts in better efforts. And hence (statistically) the performance of an ‘average’ person is better in smaller teams.

Please note – we are not talking about results. Maybe eventually ‘the fifty ppl’ will climb out and ‘the two ppl’ won’t – but we are really talking about motivation for putting in your efforts, not the actual outcome. Two people thrown in a well will put in all their worth to climb out. And the fastest rower in a 100 man boat race will think, ‘What difference can I make alone when there are 99 others to slow me down!’

How often have you come across star performers suffocated and feeling frustated in a bigger team, and how often have you seen average people performing better when put in smaller teams. Any thoughts?


Just after I wrote the post below (Finishing Line), I read Paul Graham on Kiko.
Its a thoughtful post, check it out..

Google in = Kiko out. So real.. so near.. US or India, I think it must feel the same..

Yesterday we finalised the sell off deal for S&D Retail.

Some recent developments helped us decide in favour of it. This sell off comes at a time when we are not even infinitesimally small compared to what we had set out to do. So why are we selling it off? Reasons are aplenty – mostly its the lack of funding (in the wake of) and entry of players like Reliance.

Its been a nice learning experience – and a journey of self-discovery. I will briefly talk about them. (If you are interested in our story, or want to talk about retail industry, or food manufacturing – knowledge or contacts – you are most welcome to take it up offline with me.)

Some personal thoughts (For budding entrepreneurs or for anyone who cares to spare a moment) –

1. The first business you get into should not be highly capital intensive.
There is nothing wrong with Starbucks or Walmart, they are a great business, but the only way you can expand is by setting up one more shop. That means ‘capital’ – lots of it. Unless you have other businesses generating money for you, its not the kind of business you should be into. Reliance and ITC can do it, coz both have huge cash cows pouring money for them.

2. This applies even more if your margins are low (as in Discount Retail).
Self-explanatory – With low margins, there won’t be enough of internal accruals to help fuel the (‘capital-intensive’) growth. The only way you can grow is by raising external funding.

3. And even more if the industry/sector is opening up.
If the business is highly capital intensive, and has low margin as well, then growth will be organic in absence of external money. Now in addition to the above two, if the sector happens to be one that is just opening up, then there are companies (well known and well established) with tons of cash who are waiting for the sector to show potential before they make the classic ‘land-grab’ move. Microsoft waits till Blackberry proved that mobile does have the kind of potential that would interest Microsoft, and now they are moving in. Here in India, Reliance and ITC are in a Microsoft-like position – lots of cash and highly agile.

There will be exceptions. But as I said, just thoughts – not to suggest that it must not be done, but to suggest thinking before it is done.

Ok, what else? As we draw near the end of this 2 yr stint, there are a few things that I can be blatantly proud of. Three things come instantly to my mind –

1. Feel Proud of – The fact that we set sail and went ahead.
Back then it was a big step for me – to leave a nice-paying job in US and return to India. From a field I loved to an industry completely unknown to me. But as they say, the only way you learn to fly, is by leaving the ground. Two years back it felt like venturing into an unknown world – software to retail, Charlotte to Chhibramau. Today I think, it was the most important journey I have taken.

2. Feel Proud of – The brand we built.
Believe me, getting into the mind of the rural customer is a formidable challenge. If you think its easy then either you have not done it yet, or you are a superman, or a case study for the IIMs & the ISB.

If you can sell to rural customers, then cities are a breeze! Its not just easier in cities, its easier by an order of magnitude. We always felt good about this fact. We thought, “We are honing our sales skill on rural customers, while the bigger guys (Big Bazaar, Food World etc) are doing the same in cities. When we move out into the cities, it will be much easier for us, and when they move to rural towns it will be much difficult for them.” Sales people from any FMCG company will vouch for that. But we did it. By turning some well accepted norms upside down, we did it. Not surprisingly, it is the brand name we have built that we are getting the premium for in this deal. 🙂

3. Feel Proud of – Our negotiation skills.
Actually it was something we had to learn – we had no choice. Initially we managed discounts from our margins, but soon had to negotiate our way through. Today our discount are fuelled by our ability to purchase inventory at prices significantly below the market rates. Most of our competitors have often wondered ‘How can they sell so low?’ Negotiations; it has helped us sell at discount while still maintaining the same (and at times even better) margins.

Next few days, work. Then one month vacations!

Reliance Retail moves in. And we find ourself at a decisive juncture.

My partner thinks there is nothing to be worried about. It will be another five yrs before they move into towns like CBR, and that gives us enough lead time to grow S&D to the point where it would make an attractive acquisition for Reliance. Or for other players like Pantaloon (now Future Group), Subiksha (provided they are not acquired by Reliance itself before that) or Trent etc.

Given the highly focused individual he is, he is very much right. Yes, he wants to step on the gas and go into overdrive. He wants to run bigger promotions, launch more aggressive schemes, and set up twice as many stores in coming months than initially planned, (which means hiring employees and building up inventory twice as fast at a capital outlay of atleast twice as allocated) and things like that.

Unlike him though, I find myself thinking. Given my knowledge of Reliance and the way they operate I have an uncanny feeling that we are hitting the end of it. I won’t really go into exact details of why I think so, except this – Reliance is only like Reliance. They dream up large-scale, truly gigantic projects. And then execute them with utter ruthlessness in record times at globally competitive capital costs. That is what I admire about them.

So what is the difference between then and now. I guess only this much – VCs are suddenly wary of anything Retail. You give the best presentation, and show them the biggest market opportunity to be cashed on, and a growth record with impressive profits but the moment your slide shows Reliance as one of your competitors, the water dries up. ‘Reliance! Forget about returns. If I don’t invest, I will actually have saved my money!’ – That’s the effect of Reliance.

And it is no surprise. Who will bet on you when there is a Reliance Retail charging ahead with a pan Indian roll-out in 1500 towns, with multiple formats ranging from neighbourhood convenience stores to hypermarts, integrating the chain all the way right from farmers in Punjab, Haryana and UP to end consumers across India, and covering an entire spectrum of goods including services. That they are pumping Rs 15,000 Crores in their venture makes any VC money look like petty change. If Biyani is worried by this $20 Billion monster in the making, maybe I should also be. 🙂

Though I pride myself for being one hell of an optimist, I think that speeding up things at our end won’t help. Infact it will only make it worse. Should I listen to VCs and save myself, or – fight it out. The problem is, howsoever glamorous and adrenalin pumping fighting out seems, if it reaffirms my thinking then it will have done that at a greater cost of time, effort and money.

Plus everytime we have been aggressive (for ex, by offering really steep discounts for a limited period of time or giving away free gifts to customers) we have faced not-so-kind resistance from the local shop owners. These are people who have been here for 20 years, and suddenly they found an ‘outsider’ eating their pie. There have been various manifestations of this resistance, from trying to form a union to get us ousted, to threats, break-ins in the shop and other forms which are better not listed here. But we have managed it. Given the software background that I come from it has not been easy. But with an ear on the ground, and an eye on the speedometer, we have somehow managed it till now.

Now what I am wondering is this – if offering deep discounts, running huge promotions, or giving gifts to customers can draw this kind of resistance, what would expanding twice as fast mean. I think then we will need to be prepared for anything.

In the meantime, over the horizon Reliance Retail is emerging. How will Reliance change the retailscape (ah! new word?!) of India? Inspite of all the competition that Pantaloon, Trent, Pyramid, Lifestyle etc may offer, I have just one thought about Reliance Retail.

Where does an 800 pound Gorilla sleep?

Anywhere it wants to.

I can either be transparent or happy.

What happens when trust is broken?
A heart is shattered.
Someone dies.
Another person is born.

I can either be consistent, or human.

One of my closest buddies and partner from IITK, Ajit got married yesterday. Apart from being excited about it for the obvious reasons, I was also looking forward to it coz I had a chance to meet with few people whom I haven't met for quite a long time. Some snippets –

  • Met Atul after a gap of 5 years. Spent the night talking about his business. With 550 students Momentum is the No.2 institute in Jabalpur in just 3 years of existence. We talked about the growth and the issues he is facing – personally as well as professionaly. (Btw, if you know someone who is good at teaching Chemistry for IIT-JEE and is looking for work then let me know. From what I gather, Momentum has a vacancy and pays quite handsomely)
  • Met Abhijeet Bhandari. He has joined Techspan, the company I was in a few years back. We talked about his career plans about the work at Techspan, and the changes between the time I left and now.
  • Met Niraj Nandan – he shared some of his 'wants' in life. My advice, give some time to yourself and figure out what makes you happy. You'll do well in that. Also know that there are more than one things that will make you happy.
  • Met Mayur. An easy-go-happy person. I hardly had five minutes to get him talking about his plans. He likes the concept of Tendulkar's and the way they have named the tables (after famous cricket venues – The Oval, The Eden Gardens and so on). I shared my idea of a "War Theme" with him. I want to see how exciting it will be to eat sitting inside a bunker, night time battle scene, dim lights, with tanks rolling and grenades exploding around you, and enemies crawling behind thick bushes. I am very much for a theme restaurant, I have some ideas in mind ("War" being one of them). And I am willing to discuss it with anyone who is putting up a theme restaurant. When Mayur has his food business up and running, I am surely going to give it a shot. Esp if he has a War Theme in it 🙂

And now some memories from the marriage.

  • It was the first day-time marriage I attended. And even though the barat was out in the sun at 1pm I liked it more than I had eariler thought I would. It was the first time I saw Lalitpur and met all of Ajits family (brothers & sis & jiju). The marriage was warm, the closeness – very visible.
  • I 'met' Romi. Why 'met' (quotes) and not just met? Actually its a bit strange. One year back we had chanced at a mall in Gurgaon, where we had both bought books at Galgotia's, didn't talk anything except the customary 'Hi' and that was it. Really that was it. Back then I had left the mall with a feeling that I will want to talk to her some times in future. Many months later I spotted her on Orkut, dropped in a line and things took off nicely. Now about fifteen months later from our technically first meeting, we met at Ajit's Marriage. The first words she said, 'Hi. We met again,.. finally!' Yes, we did. And I liked the way she put it – with all smiles. Picture perfect, kodak moment.
  • Atul tells me – 'Ajit means one who cannot be won. Vijeta means someone who won.' Ajit – jisko jeeta nahi ja sakta hain. Vijeta – jiseny usey bhi jeet liya. I liked the idea. Later I learned it was obvious for many people there. How come it didn't strike me? Dumb me.
  • Saw a cute little girl. Wanted to talk to her. So I just make a wild guess, 'Bete, tumhaarey chachu ki shaadi hain?' She says in a defiant tone typical of a small child, 'Nai. Chachi ki shaadi hain'. DING!
  • 'Okay, I'm wrong. She is from the ladki waala side', I thought. And carried on with the gang. But something was amiss. Chaachu is a blood relation. Chaachi is by nature a matrimonial relation. Then how can anyone's chaachi get married? A chaachi is only when you are already married. Half an hour later, when 'saat fere' was over, it struck me, if Ajit is her Chachu, then Vijeta is her Chachi.
  • Ajit and Vijeta on stage after jaymaal. Photographer to Vijeta – 'Thoda smile kijiye please'. She smiles a bit, still maintaining that poised demeanour of a 'dulhan'. Someone says something, and she slips into a wide smile, then a hearty laugh, then hides her face in her hands, and then back to normal smiling again. I liked the drama.
  • We on the stage with Ajit & Vijeta. Atul hands over his handycam to the guy who is doing the video recordings for the marriage, and asks him to take a 20-sec shot for us, before he takes the 'official' version. A minute later we all descend after wishing the couple, and see the recording on Atul's cam. Its a simple recording, starts with all eight of us on the dais. Zoom in. Atul, Mayur and myself fall out of frame. Zoom more, Abhijeet and Neeraj are out. Keep zooming, and move the focus next to Vijeta. Ajit & Vijeta also knocked out of frame! But the photographer doesn't seem to be worrying about that. He focusses on the prettiest face in the party – Romi! Haha, 'Nice photographer, perfect focus', we chuckle. 'O that means, I haven't lost my charms', she entertains. Too good!
  • After the 'saat feres' Ajit puts sindoor on Vijeta. The moment he applies the first bit, tears well in her eyes. Ajit takes some more sindoor and applies the second bit. Tears roll down her face. Why? I wondered. I still don't know, but I was moved by the moment.

The Delhi gang left at 9pm. One day in life..  one final goodbye, and some memories for a lifetime.

Few minutes later my train arrives. As I lie down on my berth, and stretch myself out, Romi's introduction appears in my mind. 'I am I, and there is no other I'.

So true. Closed my eyes, and tuned into Echoes.

'Strangers passing in the street
By chance two separate glances meet
And I am you and what I see is me…'