Naukri.com Founder Sanjeev Bikhchandani: What Does It Take to Start a Company?

11:22 | Kamla Bhatt | Jan 8th, 2007 2:05pm |

Info Edge (India) was the first Indian Internet company to go public on the Indian stock exchange in November 2006. It owns internet properties Naukri, 99 acres and Jeevansathi.

CEO and co-founder Sanjeev Bikhchandani was a featured speaker at the recently concluded first TiE India entrepreneurial conference in Mumbai. We caught up with Sanjeev at the conference and spoke to him on a whole range of issue ranging from what it takes to go IPO on the Indian stock market, and what are the similarities and dissimilarities when compared to an American IPO.

Info Edge was founded in May 1995. Sanjeev and his team bootstrapped their company before they landed their first round of funding from the venture arm of ICICI. Sanjeev talks about how the environment for entrepreneurs has changed in the past 10 years, and how organizations like TiE help foster entrepreneurship.

Sanjeev also offers advice to first entrepreneurs and some of the do’s and don’ts when starting a business. Sanjeev holds a bachelors degree in Economics from St. Stephens College, Delhi and an MBA from IIM, Ahmedabad.

Transcript:
Host: Kamla Bhatt - IndiaTech
Guest: Sanjeev Bikhchandani - Info Edge (India) Ltd.

Kamla Bhatt - IndiaTech
This is Kamla Bhatt for PodTech. Today, we have Sanjeev Bikhchandani, Founder and CEO of Info Edge (India) Ltd. Info Edge recently went IPO. It was the first Indian Internet based company that went IPO. Info Edge owns properties like Naukri.com, which is a job portal, Jeevansathi.com, a matchmaking portal, and 99 acres, a real estate portal. Welcome to the show Sanjeev.

Sanjeev Bikhchandani - Info Edge (India) Ltd.
Thank you.

Kamla Bhatt - IndiaTech
Congratulations on your fantastic IPO. You are the first Indian Internet company to go IPO.

Sanjeev Bikhchandani - Info Edge (India) Ltd.
On Indian markets.

Kamla Bhatt - IndiaTech
On Indian markets.

Sanjeev Bikhchandani - Info Edge (India) Ltd.
Rediff and Sify went earlier in 1999-2000, on NASDAQ.

Kamla Bhatt - IndiaTech
What was the process for going IPO in India?

Sanjeev Bikhchandani - Info Edge (India) Ltd.
There are a lot of similarities between IPOs in India and the US. There you have the SEC here you’ve SEBI, which is Securities and Exchange Board of India. There you have Sarbanes-Oxley, here you have Clause 49. You have investment bankers in both places. Many of the investment bankers here are also there in the US for there are Morgan Stanley, Merrill Lynch, anybody. So, therefore, there are many similarities, but you know listeners (ph) in the US, there are a couple of differences, which I’d like to point out. The first difference is that by law in India, any Indian company — any company incorporated in India has to list in India before it lists overseas or at least, it cannot not list overseas before it list in India.

So, therefore, if you’re incorporated in India, you would IPO in India first. The second big difference is that there is no open auction process in India for IPOs. There are silos, so, for example you have two IB component of 60%. In the book-built IPO you have a retail component of 30% and a high net worth individual component of 10% and therefore, within these silos there are levels of subscription, under subscription, over subscription, and therefore allocation. The third big difference in IPOs in India versus the US is that there is no discretionary allotment of stock among institutions.

So, the banker and the company cannot decide whom to give how much allocation to. It is all pro rata, all proportioned allotment depending on how much you applied for, you will get a certain percentage of that in case the issue is over subscribed you’ll just scale back. These are three differences that I’d like to highlight, but otherwise road shows, investment bankers, process, DRHP, RHP are very similar.

Kamla Bhatt - IndiaTech
What was the initial offer that you had?

Sanjeev Bikhchandani - Info Edge (India) Ltd.
Well, we raised about $37 million of capital. Although, the IPO was open for 4 days, we had gone in with the price band of 290 to 320.

Kamla Bhatt - IndiaTech
Rs 293

Sanjeev Bikhchandani - Info Edge (India) Ltd.
Rs 290 to Rs 320 and that Rs 320 for delivering about 19.5% of the company, we would have raised $37.5 million, which is what we did.

Kamla Bhatt - IndiaTech
What is the trading at today?

Sanjeev Bikhchandani - Info Edge (India) Ltd.
Well, today, I don’t know, but it fluctuates between somewhere in the 500s.

Kamla Bhatt - IndiaTech
So, it doubled.

Sanjeev Bikhchandani - Info Edge (India) Ltd.
Well, it slightly less than doubled, yes.

Kamla Bhatt - IndiaTech
What are you going to do with the money that you’ve raised?

Sanjeev Bikhchandani – Info Edge (India) Ltd.
This is more or less — we’ll stick to what we’ve committed in the prospectus. This is basically growth capital, so we’re looking at new businesses and new markets, potential acquisitions. We’re looking at consolidating our Noida operations into one premises, therefore, possibly a campus. These are some of the uses of this profit money.

Kamla Bhatt - IndiaTech
You’re not a young company. You founded your company 10 years ago, so, it took you 10 long years before you went IPO. What does it take to run a company in India?

Sanjeev Bikhchandani - Info Edge (India) Ltd.
Well, I think if I go back to the early days, clearly the struggle was we didn’t have enough capital. That’s different now, I mean, there is a lot more venture funding available now. There was only one or two venture capitalists maybe in India, when we started out in ’97 and the second is the — because you don’t have capital you don’t have access to good infrastructure, office infrastructure, connectivity and so on. So therefore, almost every business in India would start on a bootstrap mode, self-funded mode or your family is already in business and therefore, is able to fund you.

So, you’ve either access to capital, which is personal capital. Clearly, for ventures like ours debt was not an option, so, while India did have debt available from banks, but, the banks would basically do asset based lending, which is that you‘re buying land, building. Okay, and then they will lend you money, but they would look at your cash flows. Can you sustain the repayments? So, for startups, it is very hard to get money.

So, clearly, access to capital was one thing. I think that’s changing. I think entrepreneurship as a career choice for educated white-collar youths who are not from a family business background, whose family is not in business, it was a brave and bold decision in the ‘90s. I think that is changing because there are enough success stories now. I think the presence of an entrepreneurial network like TiE, mentoring, meeting other people, I think that is a big help. We had nobody. So, it took a lot of bootstrapping when actually — while we started Naukri in 1997 — I have been an entrepreneur since 1990, and the first 10 years we struggled. Then, finally, we got venture capital from ICICI venture in early 2000.

Kamla Bhatt - IndiaTech
What was the first venture you started?

Sanjeev Bikhchandani - Info Edge (India) Ltd.
The company was still the same, it was Info Edge and it was in various avatars. First there was a partnership, then there was proprietorship and finally, there was a private limited company in which we launch Naukri. We were doing salary surveys, databases; we were basically selling information — ideas, whatever came over, we were struggling, we were running out of servant quarter after paying 800 rupees rent. We had one employee, then two employees, finally we had nine employees when we launched Naukri. So, there was 10 years of sort of struggle out servant quarters.

Kamla Bhatt - IndiaTech
So, the inspiration for Naukri, which is a jobs portal, I am assuming came out of the online job portals in the US?

Sanjeev Bikhchandani - Info Edge (India) Ltd.
Well actually, no. I didn’t visit any online job portal on the Internet till about two years after we launched Naukri. This was an idea, which came to me when — in 1990 I was working in a company, early in 1990 late 1989, which is now called GlaxoSmithKline. I would observe my colleagues — we were sitting in a hall and I’d observe my colleagues would always look at appointment ads in business magazines before reading the rest of the magazine and then they would discuss.

So, I came to the conclusion that jobs are a high interest category of information and the next thing I noticed was that every week five or six headhunters would call and try and hit at one or the other of my colleagues. These jobs were never advertised and they were different headhunters each time with a different job. I figured there’s a whole fragmented database of jobs out there, which is not advertised and jobs are a high interest category of information.

So, if somebody would compile a database of jobs, keep it live and current and a national kind of archive, which is current, it would be a very powerful product. The only thing I didn’t know was how to implement it because there was no Internet that time. So, when the Internet came in ’95 in India and I saw it the first time in ’96 is when I revived this idea and I said look we can do this. So, the initial sort of Website we launched in March ’97, was something which was pure job listings. There was no resume database, so, we didn’t have the benefit of looking at other job sites around the world otherwise, we’d have launched with a much wider range of products, initially.

So, that’s how the idea came out. Of course, we evolved as we looked at competition, we looked at customers, we’d began to speak to people, we saw what’s happening. So, now it’s a very different product, but initially, it was an idea we just got by observing job seekers.

Kamla Bhatt - IndiaTech
What is the status of the job market today? What percentage of the classifieds does Naukri have?

Sanjeev Bikhchandani - Info Edge (India) Ltd.
You know, market share figures are — there is no sort of industry documentation. Market share figures are therefore are hard to come by, but if you look at online classifieds and you look at data like comScore or Alexa, on traffic share if you define the market as consisting of Naukri, Monster Plus Jobs and TimesJobs. You define traffic as total page use. According to comScore, we’re somewhere in the 50%-ish range, 54%-55% and according to Alexa, we’re in the 60’s. So, this is the kind of percentage we have. So, we’re definitely clear leaders with higher than 50% market share.

Kamla Bhatt - IndiaTech
You’re also running AdSense on your Websites?

Sanjeev Bikhchandani - Info Edge (India) Ltd.
We’re running AdSense on our Websites.

Kamla Bhatt - IndiaTech
So, that’s also a big revenue.

Sanjeev Bikhchandani - Info Edge (India) Ltd.
Well, I won’t say it’s big revenue, but it is good revenue. It’s passive revenue, it doesn’t require sales force and therefore it’s very good margin revenue.

Kamla Bhatt - IndiaTech
How has your company changed the online jobs market, the matchmaking and the real estate market, because all three are in many ways fragmented, they share a lot of characteristics in common?

Sanjeev Bikhchandani - Info Edge (India) Ltd.
Well, see on the online jobs, obviously, we’re clear pioneers and leaders in India, on matrimonials, we are the Number 3 player, also we started early in ’98, but this is a company we acquired in 2004, so, Jeevansathi started in ’98. We had a minority shareholding from 2000 to 2004 and then in 2004 we bought it from the other partners and began to run it ourselves. We’re Number 3 there. So, clearly, you know, but we’re catching up and it’ll be hopefully in the next — we’ll have some good news to report in the next 12 to 18 months on Jeevansathi. As far as real estate is concerned, see nobody did anything significant on real estate, right from the midst down. There were no prior players prior to the met down who succeeded.

So, this is a huge empty space and when we looked at the amount of money being spent in print media, on television, on radio, on outdoor in promoting real estate project, we figured there was a better way of doing this and if we did something on the Internet we’d be able to get some share of that ads spend (ph) and that’s what the target is. Having said that, it’s a bit early, it’s very new. Right now what we’ve is proof of concept, we’ve got a few clients, we’ve got traffic, we’ve got people getting – getting enquiries and leads. So, that’s happened and that’s good news, but it’s still a long way away from being called a large category on the Internet.

Kamla Bhatt - IndiaTech
Final question is, what advise would you give to young entrepreneurs today who have stars in their eyes and are looking for — because there are many VCs who are out here? There’s a lot of money chasing very few ideas that’s something that I keep repeating.

Sanjeev Bikhchandani - Info Edge (India) Ltd.
Well, a few things. First is, get some experience first. While there have been a lot of success stories of people who succeeded in businesses without working anywhere else, my recommendation is get some experience. It’s a good idea to have good reality check before you start a venture of your own because it’s kind of harder to lead large team, in the organization scales unless you‘ve had some experience from being at the bottom of the organization. Second is, start businesses in those areas where you’ve domain expertise. The third is, don’t just copy an idea either from the US or from anybody else in India; be different.

Ultimately, it’s the differentiated ideas that will succeed and become big. Being different also enables you to sort of learn early and to make mistakes when it’s cheap to make mistakes before competition comes in and that’s what helped us also, because we launched in ’97 and there was no competition. First competitor came in 2000, by that time we’d learned the business. Competition took a lot longer to learn.

Kamla Bhatt - IndiaTech
But today, though you may not have that luxury of learning the business because things are evolving so fast, so, what do you do?

Sanjeev Bikhchandani - Info Edge (India) Ltd.
Well, that’s not true, actually, if you’re focused on the customer and you know your customers really well and you know what his real needs are. You’ve got to base your business proposition, your value proposition, on some deep customer insight. You’ve got to solve the problem that is currently not being solved or in a method that it’s not being solved and it will take, possibly years for competition to get that insight. So, build your business around focused customer insights.

Kamla Bhatt - IndiaTech
Thank you so much for your time.

Sanjeev Bikhchandani - Info Edge (India) Ltd.
Thank you.

Kamla Bhatt - IndiaTech
You were listening to Sanjeev Bikhchandani Co-Founder and CEO of Info Edge. This interview was recorded at the TiE conference in Mumbai, on December 18th, 2006. This is Kamla Bhatt for PodTech and as always, thank you for tuning in.

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Tags: Info Edge, Naukri, 99 acres, Jeevansathi, Sanjeev Bikhchandani, ICICI, entrepreneurs

This entry was posted on Monday, January 8th, 2007 at 2:05 pm and is filed under PodTech, Enterprise 2.0, India, Entrepreneurship with John Furrier, Technology. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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