Young Turks Master Class: How to trust your gut and focus on the end game

Q: How did you guys meet? What is the story behind the introduction?

Bajaj: The interesting thing is, I think the guy who introduced us one degree of freedom away – I don’t think I have ever met or he has met us, this is the classic IIT network. We met in New York, he was doing some random, which he claims was not random, film-making stuff and sourcing things on Craigslist and we were talking about whether this model makes sense for India and stuff like that.

Q: Your first instinct on that?

Bajaj: The first instinct was that his conviction was more than mine and that – I will not say that that has been my model at that time. I have realised that that is what you are supposed to do. You are supposed to back people whose conviction is greater than yours, hence Founder First. Then it was quite a long courtship. At one point, I became clear, then he was playing very hard to get, so then I became unclear, and then there is this email, maybe six-eight months after the engagement had started, which was just one of those where you read and you say I am done, I want to be in business with the guy. There is this line that I always remember, ‘I am still your guy for this’ and that was it.

Q: So what triggered the writing of that long email, what were the things that you checked off in your mind when you sent that email and then finally decided to come back and take the plunge?

Chulet: I think somebody said about all good businesses and technology business in general, which is all the things in great businesses are overestimated in the short-term and severely underestimated in the long-term. So I think for the first two-three years it was not easy. My entry back in the country perfectly coincided with the shutting down of the Lehman Brothers and the world we really knew. That is when I also saw the other side of the venture capital industry.

Bajaj: Next round was very tough. He pitched to everybody for Series B, ultimately Omidyar bought into the vision. Nobody else bought into it. His conviction was not shaken; frankly even my conviction was getting shaken.

Q: I was going to ask you that?

Bajaj: There is a phone call where he said -- I cannot use those words here, but he asked, ‘Why is your conviction getting shaken? It is still the same thesis, we are still going to make this happen.

Q: I am just going to press on one point here from an investors perspective, you have your doubts, how do you not pass that on to the founder and still deal with maybe lack of conviction that is creeping in on your part as well?

Bajaj: It is very hard and I don’t think I knew how to handle it at the Quikr time. I have since learnt over a period of time and one of the investors I respect, later stage investors, mentioned this to me in every investment that has made money for him, his conviction has been tested. So just like the founders conviction is being tested, yours is being tested.

Now I think the trickier part that you said is first level how do you not let that insecurity come out because you are also trying to give the founder confidence. Second of all, it can result – I have seen people where it results in very ‘bad behaviours’. They start calling the founder too much. Today when I look back and in fact I have spoken to a couple of my founders about this, I think every company goes through a phase of two-three years where it is very unclear what is going to happen.

What I have realised that my model in that period is going to be which I am practicing now is to tell the founder I am behind you, I have full conviction, but yes, there are questions. So we have to be real also, for example, the company may need to cut burn significantly. So you have to be real but say we are still fully behind, here are the steps we need. I will tell them I am always a phone call away, but I will never call you. When you feel that they are in the zone, just leave them alone.

Q: We are of course now talking about a phase which is 2009-2010. Just to complete this part of our conversation where perhaps getting that early growth and traction had now become crucial, right, you couldn’t just keep pitching a deck, you had to show that some of that deck was becoming a reality even if it was slowly and steadily so. Talk to us about some of the strategy then to just put your head down, get users on to the platform, create a stickiness, what were some of the things that you did back then?

Chulet: I think it is a very good question because the world was very different then, especially India was very different in our industry. I still remember, we are in a business that is driven by – it is a market network, you need both buyers and sellers. If you don’t have enough buyers, you don’t get enough sellers and vice versa. So the thing is India was a tiny internet market back then and I had this notion at that time of how do we get – so let us say there is a guy who wants to sell his car on Quikr. Only very few buyers come in a day, just to take an example, let us say only 10 buyers come for that car and some of the respond but nothing really happens. So we just stumbled upon this idea of how can I get all the older buyers, older meaning buyers who have visited me in the last one month, most of them would not have bought a car yet and that is where we started inventing things, That is where we started almost combining the online capability with some offline touches.

For example, we would – and this is very early days, so we used to literally SMS each ad that came on the platform to people that we thought it was relevant to. This is a very -- and by that time we had some competition from global players and there was this conventional wisdom, we had a digital company and so we shouldn’t be doing that and so metrics that get reported in the industry always are only digital, pageviews and things like that but ultimately at least my view has always been I am in the business of making transaction happen. Whether I am a digital company or a digital plus something else company, ultimately if I deliver transactions, I will be a good business.

Q: At what point in time did you decide that just growing organically as a platform was not going to cut it, at what time did you start thinking instead of Quikr being like a melting pot of just one thing let me verticalise, what was the thinking behind that?

Chulet: It was an idea that started germinating in 2012-2013. I would say I kind of flirted with this notion for almost two years before we actually did something about it. The second part was I think almost a cause of annoyance to me which was Quikr was very big by then, in terms of user base we were very big, we were often getting very large number of people coming and looking for jobs on Quikr or coming and buying cars, or real estate, but we were still getting called as this C2C only player, buy-sell player and the reason is that is a good way to build your brand initially to get a lot of people to use you.

I would often see the verticals talking about how they are a vertical and we are a horizontal and I knew that if I look at our metrics, whether it is in real estate, in cars, in jobs, or wherever, we are probably bigger than most of the verticals out there. I sat one day and I just thought about it, why should we not be creating this structure ourselves.

Bajaj: I think he would have done it much sooner.

Q: But for?

Bajaj: But for the investors! Remember, this was when there was a lot of global competition for Quikr and the playbook and the thesis articulated by the competition and articulated in other parts of the world was very different from what he was articulating to us. Again I have told you that he is always a courage of conviction guy, so he said verticals, and we would all say we have heard that you get this C2C going and then it just starts happening. His view was that this is not the end game, the end game has to be -- I remember once he said we will be horizontal of verticals, not a horizontal.  We used to debate that.

Q: What was your first reaction?

Bajaj: No. Fortunately, they don’t listen to my first reaction. I said this is the playbook we know. Now, as it turns out and let us not name people, but the people following that playbook are now following this playbook. However, as investors we are connecting dots globally and we are saying but that is what works. That works but it doesn’t monetize and that was his point that we are bigger than the verticals, look at the verticals revenues but then we have to play this differently.

Q: So we know the investors said no, what did your team say?

Chulet: We said yes. We had to fundamentally rewire the company from inside. Looking back, a lot of things are clear, but we have also learnt as we have gone through the journey. However, if I was to just name a few things where we have changed things completely, we changed our branding from just one Quikr to Quikr Jobs, Quikr Cars and Quikr Homes and so on. We changed our products, when we say products we mean our website, our apps and so on.

Now you go to Quikr Homes, it looks like a real estate platform and you go to Quikr Cars, it looks like something else. It changed the way we would look at our business in terms of our own performance. We started looking at revenue a little bit more, we started looking at each of these businesses more in individuality and last but not the least in fact the most important is we needed to change the organisation from inside.

You have to recognise at this time Quikr was already probably thousand plus people and we are taking a functionally organised company where you have head of technology, head of marketing, etc. and then we are also -- obviously they still need to be there and play even more important roles, but you also are creating this new set of people who are going to lead businesses and it ends up with a matrix organisation type structure where you have business heads and functional heads and I think it is a balance which is hard to get right.

Bajaj: I would say two things, but underlying the same theme, which is ultimately he carried people along. One of the most able teams I have seen in the last five-six year, one of the most senior internet company executive teams.

Chulet: Coming to the mistakes part, we could have thrown the global playbook aside even faster. That is the one thing I would almost reemphasize because it is just obvious

Bajaj: I think in that context we should talk a little bit more about this full stack thought that you have had before anybody else had it and maybe how the acquisitions fit into that

Chulet: A full stack in our business, we have taken what conventionally has been a pure digital business and it orally makes money from premium listing, buyers and sellers come to list a lot of things or buy them and you as a business make money from premium listing, its advertising, and leads and so on. In my view, that is not something that is going to make any business into a big company in India anytime soon and the reason for that is the online advertising market in India is very small.

Bajaj: The way we have taken this forward, I have shown in the deck that we pitched to our investors and I said this part of the thinking is what you call full stack. What that means is India’s GDP per capita is still small. We are were China was 15 years ago, our consumer spending is where China was 10 years ago. Now some digital transformation we are probably 6-8 years behind. So what does that mean? Instead of relying on incremental digital spends, which would be what as he was saying, advertising, you need to disrupt existing spends digitally. So that is more tech led than necessarily only tech.

Q: Give us an example of how this works.

Chulet: We started thinking more about what will it take to really solve the problem of making a transaction happen and then will come the point of how we will make money from it. It was obvious to us that just a pure digital layer, and I will may be take a couple of examples, let us take real estate, so real estate we have had multiple companies overtime, we also built our vertical, it was much later, we started our vertical three or four years ago, but it was I think from very early on it was obvious to us that if you want to create a real big digital real estate company, you cannot be just purely digital and you cannot just say I will be in the business of selling listings or leads. There is a great place for that in the world and we also do that and others also do that and that is fine.

However, I think if you look at real estate transactions in India, it is a very intimidating transaction for a consumer and they are looking for a complete solution. They are not looking for a broker to call them only. In some cases transactions happen, but if you are willing to take a complete offering to the consumer, I think they are more likely to believe in your offering. So we started getting into transactions in real estate.

We have two parts to our business. One is, and we have not made a big deal of it yet, but we are probably the market leader already in that which is this co-living or shared accommodation space. We have about 40,000 tenants already and we will be touching 50,000 soon. The other part is the actual buying of apartments where again we acquired a company from HDFC. Now these are not conventionally seen moves in a classifieds company but we are not just a classifieds company any more.

Q: Let us continue the conversation around the verticalisation of Quikr as a platform and the acquisition strategy. To put it in context, there have been about 15 odd acquisitions or more over the last few years as Quikr has verticalised.

Chulet: Our objective is to make our five businesses bigger and for that wherever we feel that we can grow on our own faster, it is great, but sometime we can gain more scale by acquiring another company. Sometimes we can gain maybe more speed by acquiring another company, which happens in younger companies’ cases, it is the learnings you acquire.

Q: Just to play Devil’s Advocate here, it seems like the entire strategy over the last few years has purely been on M&A. How much are you proprietary-tech, for instance are you building in-house versus acquiring smaller tech first companies to bring that piece in. How much of your growth is organic from within what Quikr is able to do vis-à-vis growth that has come in because of an acquisition?

Chulet: M&A certainly has been an important component of our growth, but if you look at our strategy, we had a lot of supply and demand in multiple areas. We identified models that we thought would scale well, often these models were not able to scale very well on standalone basis because they did not have a brand, they did not have as much volume. We brought those models in and we plugged it into our supply and demand and that combination of two has what has made it special.

One nice mathematical way to put would be, if you look at the revenue of our acquired companies when we acquired them, that would be 10-15 percent of our total revenues today but because of this combination now it has scaled to half of our revenues. They were not at half our revenue when we acquired them.

Bajaj: I know it was a non-judgmental question but I disagree with the characterization because very clearly what we could see was, although sometimes we were not as clear, but there was a strategy and that strategy had nothing to do with M&A. The strategy -- acceleration was the M&A and then it is all execution, it is all Quikr execution.

If we talk about Grabhouse, let us take that as an example, it is co-living, today I think most people would agree Quikr’s co-living is larger than the largest co-living company. However, that company that we acquired would not have gotten there. It is this plugging it in and then actually executing to that. So I would say as more in the context of masterclass, acquisitions are not bad—Facebook acquired Instagram for USD 1 billion. There are people who say it is worth USD 100 billion. WhatsApp was acquired for USD 19 billion was considered to be crazy, today probably it is worth USD 200-300 billion of Facebook’s market cap.

I think you have to be very clear where does it fit into your strategy. It was very clear to him, somewhat clear to us, and clearly unclear to outside, but then execution is what is and then you have to give credit if it is working, then that means it was thought through. We have seen acquisitions in Ola, we have done FoodPanda, Practo has done three-four, some work and some don’t.

However, in general my own bias has been that acquisitions don’t work but I have been very positively surprised. So if you are thinking acquisition, think first strategy. What is your strategy, how does it accelerate your strategy, how will you execute better with it and then you can make it successful.

Q: You want to articulate for us in that context, what is the strategy, how does it accelerate, maybe you want to pick up an example of one of your verticals and do it?

Chulet: Let us talk from a few different examples, some of the ones that have been covered very extensively and some maybe not so extensively. I think Grabhouse is a good case. When we acquired the company they had about 600 tenants and today we are approaching 50,000 tenants and this is virtually without marketing because there is already lot of supply and demand for shared rentals on Quikr. So we don’t need to go and do lot of marketing and that is why the industry may not know us but the consumers already knows us.

Let us take the example of CommonFloor, another great acquisition. When we acquired it, it was the first large acquisition we had done. The industry was going through a very interesting phase in itself, things were turning. So in some ways our internet industries relationship with the coverage it gets is a bit like cricket team, either they are the best or they don’t deserve to be around. So it was not covered very positively initially. However, CommonFloor if you see, since we acquired it, it has been a great acquisition. I am still great friends with the founders there and we worked at integrating these two things together. Today our revenues is probably three times. In spite of the softness in the real estate industry, CommonFloor’s revenue today is probably more than 3X of what it was when we acquired it and it is a profitable business.

Our real estate portfolio overall also is now profitable which I do not think any of the other large people in this space can really say.

Q: So in this what has been some of your learnings as far as getting teams to work together are concerned, culturally fitting founders from other companies into Quikr and so forth? Have there been learnings there, do you think if you could go back you could have done some things differently?

Chulet: One of the things we have learned is that there is no hurry to integrate on day one, otherwise you end up with maybe a little more dissipation of value than otherwise you would. I would say it is important to know going in if people that you are deciding to work with, and it is okay if they want to move on and it is okay if they want to stay. It is good to have that clarity and sometimes it is not there and they want to figure it out and that is absolutely fine. There is nothing wrong in moving on but lot of them have also stayed with us and built either the original business or are doing something else.

Bajaj: One comment I will make specifically on CommonFloor because I have seen this in multiple situations. Remember sometimes companies are really fighting each other in the trenches, now you expect them to come and like you and you are putting them inside. It is just not natural human behaviour and then if you have layoffs as part of that, who are they going to blame, they are going to blame the acquirer. To me that becomes part of the cycle that you should be prepared to go through.

Q: The best piece of advice you ever got?

Bajaj: It started with Paul Ferri who was the founder of Matrix, which I wish I had understood enough at that time when he said ‘when in doubt err on side of the founder’ that is the big difference between founders first, our whole philosophy which I think today we practice better.

Chulet: One of the best ways an investor can help the company is by brining learnings from outside. For example sales force management – it was a new thing in Quikr four years ago, but people and our investors said, including Avnish said, they had seen other companies that were managing sales force from before us. There are certain set of learnings that you can go through on your own, but it can help us accelerate our execution. So bringing those learnings from a wider ecosystem has been a very valuable piece of advice overall for us.