Feeds:
Posts
Comments

Archive for November, 2010

Founder and CEO of Fieldglass, Jai Shekhawat has more than 20 years of experience with software development, information technology and management consulting. Jai is ranked 7th on SI Review’s 2010 “25 Most Powerful People in Staffing.” He is also a two-time Supply & Demand Chain Executive “Pro to Know” and currently serves on the Mayor’s Council of Technology Advisors (MCTA) for the City of Chicago. Jai has been profiled in publications such as Silicon India, Entrepreneur and Chicago Tribune. Under his leadership, Fieldglass received a Stevie Award for “Most Innovative Company in North America” in 2007.

Prior to starting Fieldglass, Jai co-founded Quinnox, an IT and Business Process Outsourcing firm located in Naperville, Ill., with development and sales operations worldwide. Previously, he was a strategy consultant with McKinsey & Co. in Chicago where he served clients in various industries in the areas of corporate strategy, sales effectiveness, marketing and cross-border alliances. As head of operations at Syntel, a software services firm, he helped build the company to nearly 700 consultants as well as create an international sales and service delivery organization to provide application management services to the Global 2000.

Jai holds a master’s in business administration with specializations in finance and strategy from the J.L. Kellogg School of Management at Northwestern University in Evanston, Ill.; and a bachelor’s degree in management science from the Birla Institute of Technology and Science, Pilani, India.

India@Kellogg drilled deeper into the relevance of networks in the life of an entrepreneur during the interview with Mr. Shekhawat. An edited version of the interview follows:

 

From a management consultant to a very successful entrepreneur.  While most people would be more than satisfied with a career as a management consultant, how did you make the leap into entrepreneurship?  What are the key factors that you considered in making this leap?

I was working for McKinsey and company at a consulting engagement for a financial services firm where I was responsible for redesigning a large portion of the business.  At this time, I wanted to see if I could amount to something valuable without the McKinsey label and the purest way to do so was to create something all by myself.  This decision was not an easy one; however I used a framework which consisted of 4 categories to evaluate the risk of jumping into an entrepreneurial venture:

  • Career Risk: I was giving up my job
  • Financial Risk: Business school debt
  • Social Risk: Coming from India, cultural beliefs would lead people to believe that I had lost my job and had no other alternative
  • Personal Risk: Self doubt

When viewed in this manner, I was confident I could handle the first 3 risks.  It was self doubt that I struggled with the most.  One knows that dark days are inevitable in the world of entrepreneurship.  I wondered if I had the strength to whether such days psychologically.

When considering starting a new venture, how do you find the opportunity that is right for you? How does one objectively identify the risks in deciding whether or not to pursue that business opportunity?

When you are looking for an entrepreneurial opportunity, try to solve a problem that someone will write a check for.  Pick an area that you already know and that will drive insights leading to the germ of a business idea.  Ask people about their problems. Find out which product, if one existed, would they be happy to see.

While knowing the space that one is entering into is important, self knowledge that one is biased is most critical.  You need a way to break your own biases.  It is important to kill the bad ideas early.  The first warning of a bad idea is the moment you get attached to the idea.  Remember that the idea is just one more musing.  Put these ideas through a filter of a business plan and ask yourself which specific problem are you solving?  Another way to test the viability of the idea is convince someone to buy it.  These filters will support pursuing an idea.

How has having a presence in India contributed to the success of Fieldglass?

We have a cost advantage.  From Day 1, we incorporated an offshore strategy into our business model.  This allowed for a speed advantage where we worked out bridging mechanisms.  The fact that this strategy was advantageous for us was proven by the fact that our funding needs were significantly less than our closest competitors, $38M vs. $50M and $90M, respectively.  This is attributed to the offshore strategy.

What are some mistakes that you have found either you or other entrepreneurs make at the initial stages of launching a new venture?

Every entrepreneur makes several mistakes, however 2 that come to mind are:

  • Lack of focus in managing cash flows.  Treat your cash like blood in the blood vessels.  Accounting statements don’t matter as much as cash flows.  If I could do this again, I would find a way to raise less money as there are significant pressures to spend it.
  • Over hiring in anticipation of business. In business, nothing happens as fast as you think it might.  Your quest for readiness comes at a price.  I suggest hiring a ‘human swiss army knife.’  In other words, someone like a strong general manager with a peak skill.  I liken this to a decathlete with one peak event.  The entrepreneur can swap them for different functions within the firm very easily.

How important is the role of networks in your career as an entrepreneur?  Could you give us an example of a situation where you have leveraged your network?

Networks are very important for an entrepreneur.  My Kellogg network was extremely helpful.  A classmate helped set up my first meaningful meeting.  My McKinsey experience was also useful as I would get the courtesy of an opened door.

One vital tip is that your network can be positive or negative depending on how those in your network remember you.  Every interaction that you have with everyone in your network including your classmates and your colleagues must be considered.  These people in your network are putting their necks on the block and vouching for you.  Your network is not static, it has a memory.  Cultivate your network just like a living garden.

How did your network help you in raising capital for your venture?

My network was integral to raising capital.  In the first venture round, the person who invested was a classmate’s contact and my first hire was also a classmate.  We raised $26M via angel funding leveraging our network of friends.  This network effect was positive because we closed one deal 3 days after the fall of major banks.  This may have been primarily due to ‘relationship capital’ which was very strong in our case.  When someone respects you as a professional they are willing to invest in you.

How did you balance the needs of first round investors with later private equity investors? Was there any conflict in balancing those relationships?

We went through 4 rounds of raising capital and had our fair share of significant conflicts.  During the first round when investors put conditions, the entrepreneur must negotiate as much as he can.  As we know, in the next round, the latest money always dictates the existing guys.  This process is rather painful as management of the funding entities becomes a full time job for the entrepreneur.  It takes a lot to bring a capital structure to life and manage investors.  I managed to keep the peace with the 5 venture firms that invested in us for 10 years.  Last month I gave them all returns and sold the firm for $221M representing a 5X return.  The key here is to show your investors the future vision and your commitment to the outcome.

What advice would you give to students interested in entrepreneurship?

For students, there are 2 ways in which they can fulfill their entrepreneurial dreams:

  1. Consider joining a young firm. Believe in the mission of the firm and take on any customer facing role.  This is for those who don’t have a burning idea that they must execute upon graduation.
  2. Start Something: Find your area of expertise and don’t stray too far from your sector.  This will be your comparative advantage.  Ask open ended questions to customers such as what are your big problems? Dig deep and figure out what your customers are looking for.  Keep chasing this idea further and further until you are ready to launch it.
Advertisements

Read Full Post »

Micro finance institutions (MFIs) have in recent times been a hot topic when discussing how to provide the right resources and opportunities for the poor to escape poverty. These organizations have come a long way since Nobel Prize Winner, Muhammad Yunus, pioneered the microfinance concept in 1976.  A multitude of MFIs have sprung up in recent decades, some of which have developed into larger, sophisticated financial institutions. Most notably, SKS Finance, India’s largest MFI, made headlines in July 2010 by going public.  In recent months, the MFI debate in India has again intensified following reports of coercive recovery practices from lenders.

India@Kellogg recently caught up with Rangan Varadan, CEO of MicroGraam, a recently launched Bangalore based MFI. We talked to him about MicroGraam, the changing role of microfinance, whether it can truly help alleviate poverty, and the delicate balance of running a for-profit entity that has social change as its main objective.

Could you start by telling us a bit about MicroGraam?

We founded MicroGraam in 2009 with a vision to provide microcredit to the financially excluded at an affordable price. The living standard for the Indian middle class has improved significantly over the past 20 years, aided in part by the development of the banking sector.  We are excited about the challenge to replicate this success for lower income groups by offering them access to low-cost credit.

It was our experience that the existing suppliers of credit to the poor, primarily banks and smaller moneylenders, were unable to offer neither widespread nor fair service.  Banks were only able to reach a small proportion of the target population, while moneylenders were unscrupulous and often charged very high rates – from 50% up to 100%.  MFIs have since appeared and addressed the gap in the market, but we felt that we could offer loans at lower cost to the borrower.

How are you able to bring down costs for the borrower?

We wanted to be able to reach out to the remotest of places without sacrificing on costs – the following 3 initiatives allows us to do that.

Peer-to-peer technology platform

We have developed a peer-to-peer technology platform, which links individual borrowers directly with lenders. This platform cuts costs by decreasing the involvement required from other actors in the supply chain. As the first MFI, we are currently adding a GPRS mobile element to the platform, which would essentially allow lenders and borrower to check the real-time status of their loans, payment and repayment schedules from their cell phone.

Leveraging existing channels

On the demand side, our strategy is to leverage existing channels and partner with grass roots organizations, similar to the model followed by Kiva. We developed our own rating system to rank the credibility of the potential NGO partners, and have been successful in developing close relationships with the NGOs, that we have chosen to work with.

Extending the concept of microfinance

A key differentiating factor for Micrograam is the concept of “Microventure”, that allows social investors to invest in complete business ventures, such as artisan business or dairy farming. Providing a loan for a Microventure allows the lenders to invest in whole business ideas.

Can microfinance really help alleviate poverty?

The MFI activity has focused heavily on providing short-term credit, often at high cost, and less on building capacity and skills for the future.  Our focus from the beginning has been on providing low cost loans (at 18% interest rate or less), which will continue to be a cornerstone of our business model. However, it is becoming increasingly clear to us that we can also provide significant impact through long-term capacity building through the same channels that we offer credit. Capacity building is essential to making sustainable quality of life improvements.

There are different ways to do this. For instance, we are looking at expanding the role of the field officer from simply an information provider to a role model and teacher, who can provide practical lessons in microenterprise, marketing and management. The facilitation of microloans for educational purposes is another way make long-term impact. We recently raised social investment that will provide financial support for 31 students taking a graduate course at Vidyaposhak, a Karnataka-based educational NGO. The graduate course has a historic 100% job placement rate, hence carrying a high potential for improving their living standard and for repaying the loan with interest.

Do the recent events in Andhra Pradesh call for increased regulation of MFIs?

In answering this question, it is worth distinguishing between broadly two types of MFIs. The first group, the so-called non-banking finance companies (NBFCs, MicroGraam included) are well regulated by the Reserve Bank of India (RBI). The other group consists of NGOs focused on microcredit that are not registered as NBFCs.

The recent developments have shone a light on the importance of regulating the latter group and there has already been discussion around the National Bank for Agriculture and Rural Development, a subsidiary of RBI, taking a greater role in regulation.

The monitoring undertaken by the RBI is, however, of a generic nature not targeted at MFIs. There is also a need for an independent regulatory body tailored specifically towards the microfinance activities of both NBFCs and non-NBFCs.

How is the appetite for social lending in India?

Though there is a willingness to help those who are disadvantaged, individuals are still hesitant of making social investments.  This is in part because social investing is still a relatively new phenomenon within India and few have had exposure to it so far. We are trying to create greater awareness and trust around the concept of social investing through the creation of MicroGraam “Chapters” in the major Indian cities. The chapters will essentially be run by volunteers who want to take a greater role in the work of MicroGraam than simply making the investment.

Can you comment on the balance of running a for-profit business with a social objective?

We think that, in order to be successful in this field, we need to operate on a for-profit model. However, for-profit can mean anything between normal profit to excessive profit. At MicroGraam, our goal is that the interest cost cannot be higher than a certain level – currently averaging at 15%, though we expect the cost to go down in the future – and in keeping the profit level sustainable. MicroGraam currently charges 1%-2% on the loan amount, but we are aiming to get this down to 0% and are looking at alternate revenue sources, including online ad revenue, to make that happen.

Read Full Post »

R. Ramakrishnan serves as President and Chief Operating Officer of Bajaj Electricals Limited. Mr. Ramakrishnan has been an Executive Director of Bajaj Electricals Limited since October 26, 2006.  Mr. Ramakrishnan was awarded the “Indira Super Achiever Award” by the Indira Group of Institutes, Pune in August 2004. He holds a B Sc (Rons) and PGDBM from XLRI Jamshedpur.  Our intrepid interviewers Nikita Mody-Patel and Anand Shekhar seized an opportunity to have an intimate conversation with Mr Ramakrishnan when he visited Kellogg.  We gained insights on wide ranging topics from career advice to perspectives on working in India. Extracts from the interview are provided below.

 What is your view on building a career path towards CEO ? What are your recommendations for students at Kellogg ?

 

There is one school of thought that recommends changing jobs quickly, moving across the organization, up different levels and make it to the top as fast as possible. I have followed a different path.  I spent 17 years with Asian Paints.  It was a $15M company when I joined and became a $300M company by the time I left.  I then joined my second company,   Bajaj Electricals.  I came in here when were $60M and this year our market capitalization will be $600M.

If I look back, I believe depth of varied experiences is most important. While it is important to move across functions, it is more important to build depth in each area whether it is manufacturing or marketing.  I came in as President, then Chief Operating Officer and I am now Executive President.  All three positions gave me an opportunity to build indepth experience.

Satisfaction comes from creating something.  Your heart has to be in it.  You need to add value for others and for yourself.  Ultimately, these qualities will help you move ahead in the organization.

What are your views on working in an Indian family owned business versus a multinational corporation?

I have worked in two family owned businesses.  Both have been highly ethical, with great respect for professional management.  I have experienced the right blend of qualities a professional brings as well as those that an entrepreneur brings to the table.  This has truly allowed the firm to grow tremendously.

I also believe that working in an Indian family owned business gave me the opportunity to make a difference through speed of decision making, speed of acquisition and speed of implementation of new ideas.  Indian companies tend to be more caring and more personal in their approach than multinational firms.  On the other hand, multinational firms are more structured in processes and methodologies.  This allows them to survive centuries, but they often get straight-jacketed by their own policies.  Once they decide on a direction, they head towards it like a bullet.  This approach has inherent limitations and constraints.

I personally believe that working for an Indian company is a fantastic opportunity.  There is greater independence, autonomy and an opportunity to be an “intrapreneur”.

Where do you see the future of Bajaj Electrical in the next few years ?

The Bajaj group  has  moved  away from being a scooter company to a ‘two  wheeler’ company.  Bajaj is also coming up with an economy car – priced slightly higher than Tata Nano through a partnership with Nissan Renault.  Bajaj has also made a thrust in to the insurance business as most indians typically lack insurance.

There is a tremendous opportunity in the financial services space to bring better products and better value to Indian consumers.

Bajaj Electricals  is riding the crest of  the domestic consumption story.  Our consumer business takes advantage of this dramatic increase in domestic consumption in India.  On the infrastructure and industrial side, our Luminaire business is delving into areas like rural electrification.  We are uniquely positioned to take  advantage of the rural growth story.

How do you see your domestic business penetrating the rural sector?

Only a few FMCG companies have gone truly rural. In India, the definition of rural is 75% of the population practicing agriculture or a population of 1000  – that is really rural.   Bajaj Electricals gets about 20% of revenues through what we call ‘close to rural’ markets.

There are three key challenges I see in penetrating the rural market:

  • Value proposition needed in this market is different from the urban proposition
  • They need a lower price point (affordable)
  • Difficult to access in terms of distribution

We are thinking of creating a group special business unit that will address the rural challenge.  It will cut across business lines to address the products and price point value proposition in the rural sector.  One example is that we are entering the LED torch and lantern businesses because the rural segment  needs it.  We are bundling other stuff with it such as economic mixers and fans hoping to increase sales of regular consumption.

It has to be bottom up thinking and a different model of distribution.  That is the only way we can succeed.

What is your parting advice for students here?

I would encourage students to take a philosophical perspective.  Those who are significantly better off need to look at the have-nots and do something about it.  Not everyone needs to get into the social sector directly.  There is so much poverty and economic deprivation resulting in several issues for us to address. There are too many eyes with tears that need to be wiped.  Too many stomachs go hungry.  There are too many people with far less.  I would strongly recommend giving one’s time.  Spend 10% of your time in giving back to the community – the rewards of doing that far outweigh any other material benefits.

(Photo Courtesy: The Hindu)

Read Full Post »