A 1971 alumnus of IIM-Calcutta and the son of a doctor, Ajit is a first-generation entrepreneur. Besides Rediff.com, he also co-founded Rediffusion-Dentsu, Young & Rubicam, one of India’s largest advertising agencies, at the age of 22. Ajit, who is also the chairman of the board at IIM Calcutta, shares his insights into entrepreneurship in a conversation with DARE.
Founder and Chairman of Rediff.com
What was your family background like? Was it entrepreneurial?
My father is a doctor and so was my grandfather. They had private practices of their own, but you cannot call ours a business family. In fact, I did not know the word entrepreneurial till much later, but I was always into starting college magazines and things like that. When I graduated in 1971, it was a grim period in India’s history. The Naxals were bombing, Nehru had died six or seven years ago, there was inflation, the China war.
We were going through crisis after crisis. My friends at the time were joining the Levers and the Tatas. But when I asked myself, is that what I wanted to be, I couldn’t say yes. I did not want to be a cog in a big wheel. I wanted to do something with media, communication, technology. I joined an ad agency. The technology companies had not started at that time. If you look back, technology and media have always been my areas of interest. I worked for about ten months there and then Arun Nanda and I left to start our own creative ad agency.
What prompted you to leave your first job after just ten months and start on your own?
We thought we knew better (laughs). The folly of youth. Arun was several years my senior and had been in Levers before joining the agency. We were partners for six or seven months and understood each other. At that time, there was very little creativity in ads and people used to imitate ads from abroad. We thought we could do better, start a ‘creative’ ad agency, and do original things. And I don’t think we were very wrong. By the 12th month, we had won all the awards at that time. Some of our ads, like ‘whenever you see colour, think of us’ became big hits.
How did you start Rediff.com?
Rediff.com was started in 1995, when I was 42. I was always in the technology, media and communication space. I had been associated with technology companies, so I could read code as easily I could read an article. So I told Arun, you run it (Rediffusion), I will start something else. It was easier then because I had personal cheques to write.
How much did you invest in Rediff.com?
I wrote cheques for Rs two crores and had zero revenue for three years.
What do you think is the role of a professional investor (VC or angel) in a startup? When should an entrepreneur look for funding?
Depends on which type of investor it is. The first role is for an angel investor. This is typically someone who has a job or is a businessman, but keeps investing five or ten lakhs now and then in businesses. They are the ones who have the time to go deep [into your company and plans]. That allows the entrepreneur to build his mousetrap [the product]. It’s a concept risk. This stage can be seen through with an angel or savings. Angels can also be very valuable in other ways. You can get a lawyer or an ad agency through them. They can give you informal advice on how to structure the company. But the problem in India is that we don’t have enough angels.
Once you have made the mousetrap, it is the stage of the early market risk, when an investor should look for an early stage VC. We have around 20 or so in India, but we need 200 to 300. Once you start selling your product, you can look for a normal VC—to scale up, to build a factory, hire people. We have plenty [of investors] at this level.
If the choice is between relatives and an outside investment, in the early stage, which one should an investor choose?
Taking funds from a relative is not a good idea. At an early stage, the entrepreneur needs someone to push him to get early results, but at the same time, not hurt you too much. Relatives tend not to have the expertise and understanding [to do this]. In India, however, we do not have enough angels. We have fraternal capital. For centuries, some communities have been pooling their resources to help out one of their youngsters. So, if you are a Gujarati, you get help from the Gujarati community, if you are a Marwari, from the Marwari community and so on.
Do you interact a lot with young wannabe or actual entrepreneurs these days? If yes, are they very different from their compatriots one or two decades ago?
I do. I keep an open door. Every week, I meet three or four young entrepreneurs. They just call and sit and chat. I also often go to the functions where entrepreneurs congregate. Fundamentally, today’s kids are far brighter than they were in the 60s or 70s or 80s. They are a different class and style of entrepreneurs.
Are you saying Indians have become smarter in two decades?
No. The type who would have gone to research or gone abroad, who would not have considered entrepreneurship as a viable career option 20 years ago, are today looking at it as acceptable. Society and the system too is saying it’s the right thing to do. The culture of the times is to lionize successful entrepreneurs. Earlier, [the bright people] would have gone for safe jobs. The second factor is that you are seeing a lot of technologically oriented people [in entrepreneurial ventures]. In the 21st century, the success of a new business would have technology at the center of it. In the 60s, it was largely your ability to get licenses or scarce resources. Now it’s much less asset or license based. Young technology entrepreneurs today have a chance. So, you can see a different quality of entrepreneurs who are coming in.
What have you noticed to be the innate characteristics of a successful entrepreneur? Are they different from normal people?
Definitely. They are very self-reliant. They take on a problem and assume personal responsibility to solve it. They take the job and see it through. They are relatively less daunted by adversity. I often go to these entrepreneurial functions and sometimes I am asked “What should I do if I fail?” That person is not going to make a good entrepreneur. A true entrepreneur knows he may fail, but that is not part of his primary focus. He is always thinking of what happens if he succeeds.
Is this quality taught or inborn? What percentage of the general population would you categorize as entrepreneurial – 5% ?
Self-reliance is taught at a very early age. It is part of the way your parents brought you up. It is culturally acquired. In India, the entrepreneurial population is much higher than 5%. The organized sector gives jobs to only 18 or 20%. Everyone else is on his or her own. The pan-bidi wala, the small farmer—they are all entrepreneurs. It’s only a small minority that works for others. In India, a deep well-spring of entrepreneurship exists.
Does a formal education, especially business degrees such as MBA determine one’s success as an entrepreneur? Did your MBA from IIM Calcutta help?
It doesn’t make a difference one way or the other. However, most ventures today are technology based. So the important ones come out of technology institutions. In addition, within a product’s lifecycle, there are different stages offering chances for different kinds of people. Early on in the lifecycle, it is the product or technology. Later, it becomes more the style of business. For example, early on, the PC market was dominated by players like Apple, and later you have players like Dell, which are based more on the efficiency of the business model. So, while an MBA is not necessary, a technology degree helps in having a better understanding of your business, like when you have to think about scaling up. Of course, if you are from one of the premier IIMs, your peers and investors will tend to view you differently. In that sense, you have greater access to talent and a network to tap into. In my own case, I used a lot of what I learnt at IIMC. But if you ask me if I would not have become an entrepreneur if I hadn’t gone to the IIM, I can’t answer!
written by suresh kunte, July 10, 2010
written by ivy, December 25, 2009
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