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India is in the middle of an entrepreneurial renaissance. Yet, the secret sauce needed to build enterprises of scale and impact isn’t as widely known. What goes on inside some of our breakout firms—after they’ve been funded—to take them to the next level isn’t always well-captured. How entrepreneurs and venture capitalists (VCs) team up to build high-performance enterprises remains a bit of a black box.

Founding Fuel, together with Boom Live, conducted a special Hang Out on Air on 24 July. The panellists included Sanjeev Bikhchandani, vice-chairman and founder of; Ashish Hemrajani, founder and chief executive officer of BookMyShow; Haresh Chawla, partner at India Value Fund; Sandeep Murthy, partner at Lightbox Ventures; and R. Sriram, founder of Crossword and adviser at Seed Fund. The session was moderated by Indrajit Gupta, co-founder of Founding Fuel. Edited excerpts:

In the US, it’s been a common practice to replace founders with professional CEOs. But in India, we’ve been a bit reluctant to do that so that the firm is well placed for the next stage of growth...

Bikhchandani: I don’t agree with that. I can’t think of too many examples in India where a professional CEO came in, the founders quit and the company went on to succeed. Likewise in the US, I am not sure how many companies have gone on to achieve enduring success under that model—some have, but there I would say, the professional CEO came in at a later stage, the founders possibly stayed on and they continued to work for the company. I think if there’s a competency gap that the founders have, it may make sense to get in a professional CEO, but not otherwise.

In the US, (entrepreneurs are) very clear that in two years’ time if they are not delivering results, they have to hand over the reins to a professional CEO. Ashish, you’ve had a long reign as a founder CEO. Have you ever had a conversation with your investors about handing over charge to a professional CEO?

Hemrajani: When you don’t (deliver results), you start having self doubts and you raise questions. In our case, we’ve delivered results. On the other side, I think the real issue in India is that we have not had an ecosystem long enough to have a talent pool at the scale and size and the industries that we all operate in, which can take on the CEO’s role.

We’ve also noticed the more recent phenomena of consultants being hired. How are they best placed to deliver growth and scale?

Sriram: For a really successful company, you need both (strategic thinkers and those who like getting things done). The reason they are getting these professionals or consultants is because they want (the strategic thinkers) to figure out what is to be done, how it is to be done. And they have talent to execute that.

But in India, we don’t have a lot of experienced people who built and scaled businesses, and who are available to take on other businesses.

Haresh has very strongly argued for a transition in some cases where the model may not necessarily be working, where founders need to give up the reins...

Chawla: I agree that the ecosystem is not developed here. The Internet has been around for only (about) 10 years in its full mature form and, therefore, you clearly don’t have access to professionals who have done some of the things that the founders are doing in the Internet companies. But equally that holds true for the founders as well. You have a lot of young people who’ve probably not spent enough time learning how to build organizations, how to craft out roles, how to scale companies. My real issue is not that the founders should be replaced. I think the founders need to be supplemented with professional managers.

As investors, shouldn’t we help (the young founders) out and supplement them in whatever areas they’re missing out on with professionals, and shouldn’t that be something that is done upfront when you invest?

Haresh, when you advise entrepreneurs, what are the two-three important areas where they need the maximum help?

Chawla: I don’t think we can be entirely product-led, which is what a lot of young founders coming out of the Indian Institutes of Technology (IITs) are good at—technology and product. Unfortunately in India, I think the ecosystem from the consumer end also has to get developed. Therefore, most of us land up into a situation where the model becomes a bit hybrid—it’s not pure play Internet, it’s not pure play offline. You end up doing a few things where the business complexity goes up and hopefully goes down as your business matures. At that phase of offline-online or whatever hybridization that’s needed for the company to survive or to excel—at that moment founders clearly need help on, let’s say, finance, in sales. If you get a professional who’s done that for 10-15 years in some of the offline businesses—that will be a great way to supplement. Largely, you’ll find that the young founders coming out of colleges are very good at technology, very good at product thinking, very good sometimes at marketing and creating a buzz, but the other functions of the company, especially support, which are needed to convert that opportunity from an “outfit" to an “enterprise"—that needs to be supplemented.

Sanjeev, what are some of the issues that you find among the slightly more mature entrepreneurs?

Bikhchandani: The flip side is, if you invest behind an early stage company, which is being led by a bunch of 40-plus-year-old founders, you’ve got to understand that from inception to IPO (initial public offering) in India can take 10-12-15 years. So, by the time the company scales, matures, is ready for your exit, the entrepreneur is probably 50 or 55. That becomes a different kind of challenge. Somewhere along the way, will he lose steam? So there’s no actual perfect age of an entrepreneur to invest behind.

In general, I agree with Haresh. For a 26-year-old engineer out of an IIT, it is very hard to build and scale an organization, and lead it—you need grey hair there. In the Indian context, for a 35-40-year-old to report to a 25-year-old is also culturally hard. If you need experience in stuff where the rubber hits the road—on consumer, on judgement, on dealing with government, on running a sales team, running a back office—all not-so-glamorous stuff, you do have issues.

Ashish, I’d love to hear what you’ve done to build a cadre, a talent pool?

Hemrajani: I’ve been doing this for 16 years. A lot of people forget that money is not the only thing that can solve problems of scale. There’s a big challenge today with this bubble that if you raise a lot of capital, you’re going to solve a problem, you’re going to get talent, and you are going to scale and grow. The guys who get you from point A to Point B cannot get you from point B to point C. And that’s where it becomes extremely important that as you climb the ladder of success, (you identify) what gaps you need to fill through a talent composition. I have somebody who is 55, who is the VP (vice-president) operations and I have somebody who’s joined us as our business head who is 49.

And then, on the other side, we’ve got these product and design guys who come in straight from design, engineering sort of backgrounds. I think it’s very important to have that balance. For a company that’s been around for so long and we’ve seen these two boom-bust cycles, we’ve seen that this is the only thing that can get you by.

Sandeep, what are the practices that have worked with the companies that you’ve worked with and advised?

Murthy: The cost of talent is going up, the quality is improving, however, and you are getting a chance to see people who have experience. That being said, as you are scaling up the business, finding the talent that has been there before is all unchartered territory. That’s continuing to be a hurdle. The best we can do is continue to train and work though it. We’re getting people returning from the US who bring different experiences on scaling and I’ve seen some of those aspects which helps.

Haresh, how do you position a firm for innovation?

Chawla: All the people sitting on this panel have built big businesses, but I am sure all of them are paranoid about the next bunch of young engineers who’ll come and create an overwhelmingly simple product to use. The core challenge is how do you keep yourself paranoid, and not take any comfort from the fact that you’ve raised funds. A lot of start-ups mix up raising funds with success.

Murthy: You are absolutely right there. Raising money is no guarantee for success at all. The size of companies that are shutting down after raising large sums of money is a true testament to the idea that unless you have a value proposition for the user and a sustainable one, it doesn’t make a difference.

Agree or disagree? The ultimate goal of investors is to find an exit, not building a sustainable enterprise.

Chawla: I disagree. If you don’t build a sustainable enterprise, you won’t get an exit.

Murthy: Why are investors investing? Because they have to give someone else a return. Why are entrepreneurs building a business? Because he wants to change the world in some way. If you decide to take money from an investor, you’ll have to balance both of these priorities. So yes, the investor’s aim is to get returns and the only way that will happen is if they build value.

Bikhchandani: Smart investors who are in the business of investing and will be at it for decades, cannot get return on their investments unless they are backing entrepreneurs who want to build a sustainable enterprise.

Sriram: This is a prime reason of conflict between VCs and entrepreneurs. What’s the way to growth in the next level? For entrepreneurs, the journey is not over when the investor exits; there must be further growth in the business otherwise a new investor cannot come in. So for an investor to successfully exit a company, they must create a situation for another investor to come in.

An unabridged version of this article can be read on

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