Recent Forbes India conversation with Sanjeev Bikhchandani, the founder of InfoEdge. Some notes are below (these are for personal reference only, any mistakes in transcription are my own):

On the origins of InfoEdge – he left his job back in 1990 to pursue entrepreneurship. Started out with salary surveys, moved onto other reports, consulting services. Basically did whatever came his way in order to survive. He was operating out of the servant’s quarters above the garage of his father’s house. Started without a computer, used to go to his friend’s office at night to use his computer. Had no big idea or vision, but just didn’t want a job in the large corporate sector as a professional manager. He had done it for 5 years previously and it was not the life he wanted, so he quit and decided to pursue 1-2 small ideas. In 1997, he launched Naukri as another small idea. At the time there were only some 14,000 internet accounts in the country, assuming shared accounts, maybe a few hundred thousand users. It was a small number, but to him it looked like a large number back in 1997. He had a limited goal – if he could get 500 companies every month to pay 1,000 rupees to list 1 job for a month, he could make 5 lakh revenue, 60 lakhs a year. His company’s turnover was 12 lakhs at the time, so would be 5x if they achieved that goal.

As things happened, they were in the right place at the right time, the internet grew and VC money came into India. They were able to raise ~US$1.7m from ICICI Ventures for ~15% of the company, 2 weeks before the dotcom bust. They didn’t have the time to spend the money foolishly, were very cautious as they assumed they would not get any further money. Spent no money on advertising, began to grow the company slowly, added some people, servers, product improvement etc. Made small losses for 2 years then broke even at a much higher revenue base. Since then they have been profitable, eventually listed in 2006. Naukri is still the foundation of the business today.

On the environment for entrepreneurs in the 1990s – he became an entrepreneur in 1990, but only took VC money in 2000, 10 years later. He had vaguely heard of venture capital, but it was still a new concept in India, had never met anyone who worked in the space. There were only 2-3 firms in India at the time – ICICI Ventures, SIDBI, GVCL. Venture capital was not really part of the consideration set for an entrepreneur. He remembers it took him 6 months of struggle to get a 30,000 rupee OD limit from a nationalized bank in 1992 because banks would not lend without collateral, which basically meant services companies could not get bank financing. You either did it with your own money or you got customer advances and lived off that. He didn’t draw a salary for 6 of his first 10 years as an entrepreneur, was a struggle financially. You basically kept your costs low, head down, soldiered on and hoped for the best.

On forming a team, convincing people to quit their jobs to join him – in the first 8-9 years, he hired 2 kinds of people: people who could not get a job elsewhere and people who were dropouts like him and didn’t want to be part of the corporate sector. For the more expensive resources, he would do a revenue / equity share deal, could not afford to pay a fixed salary. For the junior staff that depended on a fixed salary, he would pay a few thousand rupees a month. When they eventually received VC investment, it got slightly easier, but after the dotcom bust, no one wanted to join. What happened was that other startups were shutting down while they were carrying on and possibly had a future, so they were able to hire good talent from these companies. Gave them equity and/or a high variable, low fixed compensation structure.

On when technology became a serious enabler for Indian businesses – it wasn’t a one day thing, happened gradually over many years. There were a few watershed moments in his opinion though (when the internet went mobile, when Jio came in and dropped data prices, when BSNL came in before that and dropped voice prices). He recalls getting his first mobile phone in 1996, cost him 16.80 rupees a minute to make a call, but inbound was free. Why do you think Indians invented the missed call? Have seen a huge transition over the last decade. 10 years ago, 93% of their traffic came from the desktop/laptop, today 97% of their traffic is from mobile. Video on internet, mobile, local language, social etc. are all things we take for granted now, but each was a significant development.

On creating a culture of innovation – in the first 3-4 years of launching Naukri, every idea they implemented was his. Some succeeded, some failed. Luckily, the ones that succeeded did well enough for them to stay afloat and eventually become a bigger company. In 2001, Hitesh (now the CEO of InfoEdge) joined the company. Before that, they were selling via direct mail. They sent out letters and brochures with forms for job listings, did not speak to or talk to customers. Most of their customers did not have an email or mobile phone. Companies would have 1 shared email address, so you had to communicate via hardcopy letters, fax or landline. Soon after joining, Hitesh suggested they hire 4 people to go sell face to face. Started out as an experiment, but they finally started to speak to their customers. They discovered that within 6 months, a sales person was making, on average, sales of 50k rupees a month. The product had no variable cost, so this was almost all margin. Total cost of a sales person was about 22k rupees a month. So you had 28k profit per sales person and this was increasing. They had found a repeatable profitable unit and that allowed them to scale profitably. Within 2 years, they had about 240 sales people across 11 cities. Around 2001, he started a Yahoo group and added all the sales people in the company (+ senior management, tech/product, marketing); told them to put whatever feedback they got from their sales meetings on the group. This became their funnel of ideas directly from customers on how to improve the product. The more you speak with and listen to customers, the more they will push you to innovate. Customer-led innovation is a very good way to innovate, at least in some industries.

On leadership lessons from startups – it is easy to say the right things, but harder to walk the talk. The startups that succeed, raise funding, get large etc. typically build a collegial culture where anyone can come in and challenge you. It is not a family business. People are there based on their merit and competence. Someone might have a larger shareholding because they started the company, but that doesn’t necessarily make them smarter. Good ideas can come from anyone and anywhere, so you should be open to being challenged as a founder. At InfoEdge, you will not get sacked for telling your boss he/she is wrong.

On the process of going public in 2006 – an IPO was a distant dream, he always thought they would do it at some point in the future. He wasn’t interested in a strategic sale, so he told his VC investors the only exit they would get would be from the company going public. After they went through the dotcom bust, they kept growing and were profitable. In 2005, he got a visit from a banker friend based in HK who told him the #1 job site in China had just gone public, it could be time for the #1 job site in India to go public as well. This planted the seed in their head that the time had perhaps come. They visited HK to meet investors, analysts, lawyers etc. Came back convinced it was possible. Went to the board and said the time has come, began work to prepare for an IPO. He got ready to delegate his responsibilities a lot more and Hitesh became the de facto CEO ahead of the IPO so he and the CFO could spend time working on the IPO. Took 11 months to get everything ready in terms of SEBI clearances, auditor signoffs, getting their systems, compliance in order etc. Was not an easy undertaking. Companies can probably do it faster now. They started talking about an IPO in Feb 2005 and went public Oct 2006.

On what has changed (e.g. with the Zomato listing) – each era comes with its own challenges. They are listing a not yet profitable business in a market like India, not something that investors are used to. Zomato had a clear offer to list in the US with substantial financial inducement to the founder to make that decision. They talked about it and said they would list in India even though it was not as lucrative. The SPAC route may have been faster, with more money for him personally. Tougher road listing in India, but thinks it was the right decision. The response to the IPO has been very good, and interest from the retail segment was unprecedented. Has shown the way to market for other Indian startups. He thinks that it is often the wrong decision to redomicile and list overseas for most entrepreneurs. If your market is in India, operations are in India, you are often getting into regulatory complexities you don’t even understand. Investors pitch what is convenient for them but they exit after a few years, while you will be holding forever.

On what makes Naukri unique – in his view, the most successful businesses are often built on deep customer insights. In his last corporate job before becoming an entrepreneur, he used to observe that every time the office copy of Business India would come in, everyone would read it back to front. That was because, in those days, there were 35-40 pages of job ads at the back of the magazine. People often didn’t read the articles, they just read the ads and then passed on the magazine. Even though he was working at one of best multinational companies in India, his colleagues would talk about jobs all the time. He realized that even if you are not looking for a job, you are looking at jobs because it is a high interest category. The other insight he had was that he would often see his colleagues get calls from headhunters for jobs that weren’t even advertised. He realized that advertised jobs were only the tip of the iceberg. He thought that if someone were to build a database of jobs and keep it live and current, it would be a very powerful product. At the time he didn’t really know what to do what that insight but 7 years later when he saw the potential of the internet, he launched Naukri based on those two insights.

He also realized they were sitting on a variant of the network effect, or what he calls a virtuous circle. If you have the most job postings, you get the most traffic and therefore more responses, in turn leading to more clients and job postings – it snowballs. That is the moat. Their competitors did not have the insight that job aggregation will lead to traffic. Naukri’s entire pricing strategy was built around aggregating jobs – a single listing cost 350 rupees, but a 1 year subscription (unlimited listings) cost 6k rupees. Competitors priced single job listings at 3500 rupees, because they were comparing it to display ads. Without that insight, you will not not get enough jobs, traffic and the flywheel doesn’t work. Over time, they have been able to also reinvest profits into product improvement, better service, brand etc. So the competitive position has become stronger.

On the transition to investing in startups – a few things happened. One was that the company was listed and Hitesh was increasingly running it. Only a matter of time before Hitesh transitioned to CEO and he would be unemployed! But also the business couldn’t absorb / reinvest all the cash flow it was generating. They initially thought they would look to acquire another company, but found the M&A route too expensive. So they started making small investments as an experiment. Investing is a business where the lemons ripen early. So you will get your blow ups in 2-3 years but to succeed takes 6, 7, 8 years. After some of their early investments, there was a period (2012-2015) where they did not invest, just watched and waited. The board was saying you have invested 160 crore rupees, what’s come out of it? 3 of the companies had blown up. In 2015, they started to invest again. By then it was somewhat clear that Zomato and PolicyBazaar might be breakout successes.

On their investment checklist – just using common sense, they don’t have investing experience outside the company. All homegrown talent. 2 years ago, they got 1 person who had been an investor somewhere else. They have mostly learnt by doing, forming their own heuristics and valuation parameters. Just focus on backing good founders. One key thing is if the product is getting natural traction (visitors growing without spending money on marketing), it often means the founders are on to something. Second, they like to ask where did you get the idea from? The answer often tells them a lot. Third question, after we fund you, what is the salary you want to pay yourself? No right answer, but what the founder says tell you a lot about them as a person, their motivation, goals etc.

On the Zomato investment – asked the founder where did you get this idea from? He was working at Bain’s office in Gurgaon; lots of young people working very long hours, typically eating 2 meals a day in the office. Most people wouldn’t get food from home and the cafeteria didn’t serve food, was just a place to sit. To make things easy, the admin guy at the office had collected the delivery menu cards of 80 restaurants in the area and put them into 5 folders. At meal times, people would have to queue up for a long time to go through the folders, choose, call up the restaurant to order and then the food comes after an hour. He came to the office on a Saturday and just scanned all the menu cards and uploaded them to his personal page on the office intranet. Within 2 days, the office IT guy came to him and asked what he had done, as all the traffic was going to his page. Started to figure out that the aggregation of menu cards had value. So he started going out on weekends picking up menu cards from restaurants across Delhi. When he had 800 menu cards, he launched a site with the restaurant info and menu card. Immediately started to get traffic.

On being a billionaire and on what wealth means to him – his lifestyle hasn’t really changed much over the last 15-20 years. He finds talking about it embarrassing. The public market decides the valuations, the job of the entrepreneur is to run the business. You always doubt whether you deserve it. But you also start to realize it is not your wealth and you are just a custodian of it. Forbes simply takes the founder stake x the share price when they do their calculations, but the imperative for institutional stability means that you can’t actually sell it all. You can try to do good stuff with some of the wealth, try to start giving back. That is what he has been doing in a small way, with Ashoka University as well as various other charities/projects that he supports.