Secret Diary Of An Entrepreneur

"Entrepreneurs Don't Retire... They Die"

Secret Diary of VG Siddhartha

  • I owe my success to My Dad
  • Eternally grateful to Mahendrabhai
  • Most relaxed when At our ancestral home in Chikmagalur, walking through the plantation
  • Most peaceful moments At Ramakrishna Mission, Calcutta
  • The day I felt really low Dec 31, 2007. When I was serving customers at a Café Coffee Day in Calcutta
  • Most important decision Creating the Coffee Day brand
  • Sleepless nights When Starbucks was coming to India
  • Miserable moment Listing 18% down. Quite an ego blow
  • Greatest gratification To be employing 43,000 people
  • My dream now To be among the top three coffee brands in the world
  • Advice to Ishan and Amartya Pursue your dream. Think positive, work hard. Take chances in life. No risk, no reward. Train yourself to be a shock absorber
  • Bliss Malnad cuisine, made by mother.Havelock in Andamans. Cappuccino


I so wished for it!

I can’t forget Azra Miss. The day she held me and started howling. I didn’t know how to react. I remember asking her repeatedly what happened. She was inconsolable. Raghu and Ashok came along, and asked her again, she was still inconsolable. Then she looked up at us and asked, “Why can’t you all put in more effort and study well?” We were so stunned. We stared at her, then at each other. We didn’t know whether to laugh or cry, but we reassured her we would study well…that calmed her. All of us had a mixed feeling that day. Azra Miss was very progressive – at a time when Muslim women were not allowed to study, leave alone stepping out for work, she started a school in Chikmagalur. As the founder and principal of Mountain View it was important to her that we studied well. Her crying probably made a bigger impact than if she had simply yelled at us. It made us take classes seriously at least for a few days – or may be a few hours. But the lesson that stayed with me was – pouring your heart out is better than screaming your lungs out.

Being home is great when you are away for a long time – that’s the one advantage of studying in a boarding school. School days were fun, but the time I used to visit home was even better. When I came home for the holidays, Amma used to shower all her affection on to my plate. How I loved that attention. I would play cricket all day with friends, come home dripping in sweat, notwithstanding the breezy weather, and mother would tell us a dozen times to wash our hands and feet before laying the mat on the floor and serving curd rice and pickle.

I was very depressed when I didn’t clear the NDA entrance. After NCC, I was so sure that I wanted to be in the army. I didn’t know what life had in store but that day it felt like nothing in life would make me as happy as being in the army. I wanted to fight for the country.

Instead, here I was, studying economics at St. Aloysius College in Mangalore. The subject, slowly, grew on me, but what really kept me interested was the Communist Party public library next to the college…the membership fee was Rs 10 and you could borrow a big book every week. Das Capital made me a huge fan of Karl Marx. Those days, I was totally convinced the communist system was the best way forward. Then came the U-turn. I read about Stalin, the Russian administration…all those men lived like kings, that wasn’t fair.

I wanted to be Robin Hood – rob the rich and give to the poor! But then I realised, India was a really poor country. There was nothing to rob, really. It was better to make your own money – to get into business. When I told my father that I wanted to start my own business, he reacted instantly: “foolish”. “What are you chasing?” he asked. “This is a good life.”

In the family, too much money was never seen as a good thing. Too much spending, outlandish living was seen with some disdain – it never invoked respect. The most respected – and loved – people were ones who did good for the society. I heard so many stories about so many men around Chikmagalur who were dead and gone but had become legends because of their good deeds. One gentleman who had started a bus service in 1920 was among the largest coffee growers…people never tired talking about him. That man became my role model. There were so many other moneyed men, who helped out with marriage, education – they were the admired lot. Everyone talked fondly about them, they were respected. I grew up hearing these stories from my dad, uncles, just everyone around. My father always said, “Name is more important than money.” I keep repeating this to my kids, Ishan and Amartya.

It’s sort of funny – when Dad came to admit me in St. Aloysius, the principal, it seems told him, “If you have too much money, burn it; don’t give it to your son. If you burn it, you’ll lose only your money; if you give it to your son, you’ll lose the money and your son.”

My father gave me money anyway when I wanted to set up my own business. Of course, he wasn’t too pleased when I decided to go to Bombay to pursue trading in stocks – what could be more blasphemous than stock market trading when you money is not your main pursuit! But it was nothing short of an adventure for me.

It was 1983. I had never been to the city of the rich and the famous – where big money was made. I took a bus to Belgaum, and then another to Bombay, got off at Fort, walked into a hotel that rented rooms with a shared toilet. Next day, I went to meet Mahendrabhai Kampani – I had read about him in an investment magazine. I was sure I wanted to train under him. But I had never spoken to him earlier.

I did not have an appointment when I landed up at his office in Tulsiani Chambers, Nariman Point. I was mesmerised by the tall building. When I entered the building, I felt intimidated by the two elevators. I had never taken an elevator in my life. I climbed the six floors and met his secretary. As luck would have it, he was a Tamilian from Bangalore…he let me meet him. Thankfully, Mahendrabhai didn’t throw a fit – he asked me to sit, offered me a glass of water, heard me out and then asked me to take the rounds of the research department before meeting him again in the evening. I met him again, and he was gracious enough to accommodate me.

Trading in stocks was exciting. Every day I learnt something interesting. I would get to work at 7 AM, and would be the last one to leave along with Mahendrabhai, invariably after 9 PM. I was committed, I had no qualms carrying his files and dabba to the car or just about anything he would ask – he trusted me so much, was so open, he taught me everything about investing. It was an unlikely bond – a Gujarati Seth and a South-Indian rookie – that’s not a combination you hear of often, but we truly connected. The people I befriended in my two years of working in Bombay – Durgesh, Nimesh – are some of the best people I have come across.

I remember the morning I went to Mahendrabhai and said I am leaving – I had completed two years…I had told him on the day of joining that I wanted to work with him only for two years… I thanked him profusely, said how indebted I was to him…But he said, no, I owed him nothing, on the contrary, he had to pay me back for some past life debt.

Mahendrabhai believed in karma. I can’t forget the story he told me: In Rajasthan, there was a Jain guru, who was walking along with his disciples – Jain sadhus are known to walk thousands of kilometers barefoot, with little to protect them from harsh weather. The king was passing by, carried in a palkhi by his men. A disciple asked the guru, why he, being such a noble man, had to go through this tough ordeal of walking through this treacherous path while the king was travelling in ultimate comfort. The sadhu replied – the king and his comfort was his fruit for his sukarma during his previous janam. In his last birth, he was a Jain guru and did exactly the same.

Over the years, I have come to realise that our actions, many a times, take a long time to show their true outcome. That’s true in business, but even more in real life. I didn’t feel like parting from Mahendrabhai but I wanted to do something on my own. I didn’t know that Mahendrabhai would say goodbye and leave us so soon. It was a pity I got to know about his untimely accident only three days later – that day I cried the most in my life. It was unbelievable, unbearable…

Mahendrabhai was a great guide, and I loved talking to his father Naveenbhai even more. I used to go see him during lunchtime and quiz him about the stock market. He used to say, ‘you got to be patient, you can’t be in a hurry otherwise you’ll burn your fingers.’ If I hadn’t taken his advice to take a portion of whatever I made in stocks and put it somewhere else, I may have been badly stuck after the Harshad crash. Thank God, I had the good mind to take him seriously, and start buying plantations right then.

When I went home and asked my father for capital to set up my own firm, he didn’t bat an eyelid – he gave me Rs 7.5 lakh – that was quite some money in 1985. But he added, “When you lose it, you can come home!” I couldn’t lose the money. So I bought a plot for Rs 5 lakh – that was my security. My idea was that I would trade in stocks for five years, and if I did not succeed, my property would have grown to at least Rs 7.5 lakh. So I could sell that and payoff at least my father’s capital. With the rest, I rented an office, furnished it with computers and phone lines, and Sivan Securities was up and trading. My god, those were some days – such easy trades. The inter-market arbitrage was so high you could make tonnes of money and that’s what I did thanks to my friends in Bombay. Buy something for Rs 10 in Bombay; sell for Rs 11 in Bangalore, Rs 11.50 in Jaipur and so on.

Those were the days of quick gains and quick losses. There was never a dull day. I was lucky to have made money in stocks because none of it was because of any higher order thinking – they were just easy trades. The one call that would have ensured I retired rich doing nothing else I managed to throw away…Infosys! I remember Vallabhbhai, Nimesh and I went to meet NRN in Bangalore. Vallabhbhai was impressed, even though none of us knew anything about technology. He said, “I am going to price the issue at Rs 105”. Nimesh said that’s really expensive, I said who the hell will apply. But Vallabhbhai decided to price it at what he thought was right, and underwrote the issue. Underwriting was a good deal because you got a 3.5% commission. The next thing I hear from Nimesh was “issue bhara nahi.” I laughed. “Yeh to hona hi tha – we all knew it, right.” Nimesh said, “Baat mat kar, paisa laga!” I bought 60,000 shares. But I promptly exited in six months. I had only paid the call money, and thus ended up making about 6x my money, netting off interest expenses. But goodness gracious, if I had held on, that investment would today be worth Rs 1,000 crore – 1,500 crore.

By 1993, something else was brewing. I had already accumulated about 3,000 acres of plantation by then. Back in 1985, when I had started buying plantations, it sounded like a no-brainer – coffee prices averaged around $1.20 for 17 long years between 1970-85. In a frost year, it would hit $3 and if you had a bumper crop it would fall to 75 cents. But Indian farmers were getting only 35 cents because we were not allowed to export directly. If this changed at some point, the realisation would go up phenomenally – the payback could happen in a year’s time. I went with my gut and kept buying bit by bit.

But natural, I was delighted when the regulation changed in 1992. My father, being a wise man, wasn’t as overwhelmed. Finance minister Manmohan Singh didn’t waste time – apparently he asked the delegation that presented the case, “Why did you not come with this proposal before?” Allowing direct exports was far more efficient than for the government to buy coffee through the Coffee Board and sell it on barter to Russia and other countries. But my father could see how things would unfold. “It was great for the big guys but not for small growers, we will face the music soon. The Brits had created the board system only to save the growers from the clutches of the traders,” he said.

I was least interested in coffee trading – it was pale compared to the stock market. But then, we set up Amalgamated Coffee Bean Company to export coffee beans from our estates and from other growers. If there had been no frost in Brazil in 1994, maybe we could not have distinguished ourselves so early on…Coffee prices soared from 75 cents to $3, but we honoured all our contracts at the agreed prices and became the darling in the international market…people knew we will keep our word under all circumstances. In 1995, we became India’s biggest unroasted coffee exporter.

I did not expect that one dinner meeting, where I was dragged by my trader friend Raghu would change the course of Amalgamated Coffee the way it did. I forget the name of the person, but he belonged to the Herz family, the owner of Tchibo, the German coffee chain. I presumed the family must be in the business for at least a couple of centuries to be the second largest in Europe, so I asked how many decades they had been in business. He said his grandfather started selling coffee in a 10x10 store in 1948. That startled me. Between 1948 and 1995, they became the second largest in Europe!

I knew that very moment we had to go retail – there was no point selling a commodity. I hurriedly set up small retail stores to sell freshly ground coffee. I knew branding it was the only way to extract better realisation. We soon had 450 outlets and were going great until I figured out the real future…

Narendra rubbished my idea of setting up a café on Brigade Road. I should have known – you can’t expect anything better than linear thinking from MBA folks! All he asked me was what price would you sell the coffee? When I said Rs 25, he said, “No chance, period.” Brigade Road was still a posh place in Bangalore but there was great coffee being sold for Rs 5 there. Why would anyone pay Rs 25? I chickened out.

Some six months passed. I was having dinner at Singapore’s Boat Key area with my friends Gopi and Rajneesh. After we stepped out, I saw this brightly lit store where people were sitting with beer mugs. I excused myself for a few minutes, peeped into the store, and it was like I had hit a jackpot of an idea. I knew what I want to do next.

I told Narendra I wanted to put up an internet café, when I came back from Singapore. He dissuaded me again. But this time I said, no, we’ll experiment. It would cost us about Rs 1.5 crore – we’ll try, no sweat, even if we failed. I put in Rs 50 lakh in deposit, Rs 50 lakh for furnishing and Rs 50 lakh for computers – IBM computers were very expensive and so was internet connectivity. People came because it was something new and novel – they were enamoured by large screens and internet itself…everyone was curious. In 1996, internet was just catching on – it was a big thing!

All my friends – Nimesh, Durgesh – would say don’t take too much risk. But I have realised one can’t really be an entrepreneur without taking those calculated risks. You could fail spectacularly but if you didn’t take those risks you would not have given yourself a chance to succeed.

The fun part of setting up the café was, I would wind up from office in the evening and at dot 7 PM, I would pick up my wife and sit on the top floor of the café. We would peep out of the window to see people on the footpath, trying to guess who’ll step into the store. We kept guessing all evening. As I learnt in the stock market, no venture can continue to make money if you do not have a moat. We had none – everyone copied the idea eventually and we had to look elsewhere.

We decided to focus only on coffee – retail was picking up at the time. We quickly rolled out 22 stores in the South by 2000. We did not go to Bombay or Delhi. Suddenly, something hit me. Competition had put up 10 stores in Bombay and 10 in Delhi. I felt left out…How can somebody copy our idea and do better than us? I felt miserable. We had to expand rapidly. That meant we needed money…

I went with what the bankers advised – without much thought into whether I could have raised money myself. We raised money from AIG and started expanding.

I had little clarity about their exit, had no clue if we would list…And then, one day, Nandan and I were having lunch at the Taj West End. Nandan asked me how much I had raised from AIG. I said $12 million. He asked, “Was it necessary? Could you not have managed it by selling any of your own investments?” I said, yes, I could have, but I thought it might be good idea to have a good investor. Nandan looked disapprovingly, “Did you really need to dilute? Are you sure you want to go public?” We didn’t speak much after that…

I was in Hong Kong the next day literally, and negotiated to hand back the money with some reasonable return – that was April 2003. Since then, Nandan has always been my go to man for clarity in business. For moral support, Durgesh is standing by. For everything else but business, Malavika is always there.

Coming to think of it, that fund-raising was so unnecessary. We managed to expand, by the very next year we had rolled out 200 stores. And kept growing steadily before we thought of raising funds again in 2007 – this time our need was higher, we had a good story to tell, and at some stage we knew we had to go public if we had to pursue our ambition.

I can’t forget that day in 2007 – the mood was exuberant those days, everyone around was bullish, and we did a deal with Deutsche Bank to raise $100 million. I came back home happily after signing the dotted line, the day after next, the money would have hit our bank account, but there was a nasty surprise waiting…I plunked myself on the sofa and switched on CNBC to see that the central bank had just notified to disallow dollar inflows to rein in the strengthening rupee. There went our deal for a toss! It was a depressing day but thankfully, having been in the stock market you are prepared to deal with any surprise.

Nothing has deterred me from doing what I have wanted to do, but nothing motivated me to do better for myself than what Mike Moritz of Sequoia Capital told me.

I remember the dinner meeting with Mike at Belvedere in 2007 in Bangalore. Mike told me something fundamental that had a profound impact. He said, “In 1992, five people came to me and asked for money, and everyone said don’t because IBM will eat them away, they became Cisco. Then three people came to me and asked for money, everyone said Microsoft will swallow them and they became Google. If you believe your idea is good, you got to pursue it. Dream big for yourself.” If Microsoft and IBM could not kill some company, which other company in the world could? I thought. I had to chart my own course. Another memorable meeting was at a Hong Kong golf course with Ada Tse from AIG Global Investment Group. I remember her asking me, how big can Coffee Day get? I replied, “One coffee company in the world is valued at $30 billion, we should be at least $10 billion.” That other company has since rerated to $80 billion.

I was reading about Elon Musk those days. When he came from South Africa to the US, his first job was cleaning a boiler at $18 an hour. Now that man has created Tesla and SpaceX. Hailing from a family of coffee growers, creating a coffee chain couldn’t be as difficult, could it?

I was lucky to have private equity investors who didn’t sit on my head, allowing me to build my business peacefully. I guess when they see the passion and commitment; they don’t question every step anyway. Parag, Nainesh and Sanjay were great friends – they would just make suggestions or express their point of view and leave it to me – and that actually would make me think and rethink their view and take it more seriously. That was even when we were facing the biggest challenge in our corporate history.

Having read Howard Schultz’s biography – he’s always been an inspiration – and then having to be on the other side of what Schultz immortalized was stomach churning for me personally.

I was spending sleepless nights when I got to know Starbucks was coming to India. I knew we had won over competition in the past but that was also because they got it wrong, not just because we got it right. This time, I was nervous and paranoid, but I made no pretensions about how I was feeling. After all, Andy Grove wrote an entire book – Only The Paranoid Survive. We were busy gathering market intelligence, guessing their strategy, and of course sprucing up our act. But only when competition actually came in did I realise that it was a good thing to have happened – they made us think hard about our format, store size, interiors and so many other things…we are still only a start-up, learning and adaptable. I have stopped worrying…

Even otherwise, in a dire situation, I feel we’ll somehow get out it. As an entrepreneur, you just can’t afford to lose hope. Your body better be like a shock absorber…

Every morning, when I open my cupboard the Vivekananda poster reminds me “strength is life, weakness is death.” I have been a believer in the Ramakrishna Mission – the family has been a believer in the Mission for a couple of generations. Shubha Akka – the day she finished her doctorate in astrophysics, she joined the Sarada Math. Her move inspired me to go and experience what she was talking about…I have been a regular ever since. When I am feeling low, the destination is Calcutta – the Math gives me peace and Kali the courage.

I look back sometimes and marvel at what we have achieved – I never had a business plan, just went with the flow and took the next steps. Whenever something looked like an opportunity, we jumped in. It is all about circumstances; it’s a function of being at the right place at the right time and doing the right things. I feel lucky…

Not everyone is. That realisation hit me at the Café Coffee Day outlet near Calcutta’s Woodburn Street – it was 31, December 2007. I had decided to play barista that night – proudly wore my uniform, was busy greeting customers, taking orders, serving them coffee, settling bills and wiping tables just like thousands of diligent employees. I couldn’t believe how indifferent customers could be. Many customers ordered coffee but didn’t even greet back and once they were done; there was no ‘Thank You’, no tip, and no ‘Happy New Year’. It felt miserable.

That made me realise how hard it is to be a team member at a store. There is no motivation to do any better – most of us need some appreciation. The irony is that store staff has to deliver irrespective of how the customer may behave. What the founder of Four Seasons, Isadore Sharp said is so bang on – in the hospitality industry, people expect the best service from the lowest paid guys – the doorman, the bellboy, the house keeping staff…no one cares who is the head of HR or head of marketing or for that matter who is the CEO. The girls and guys, who make up the tail, have to say a hello and smile.

There are so many times when I land up in a store and find the boys are not really running the store the way it should be. They may not be engaging with the customers, working sloppily, wasting stuff, not taking care of food – it hurts when you see it. These are boys often my son’s age – I put an arm around them and tell them, buddy, would you run this store the way you are if this was your father’s store? It works like magic. Still, not everyone, everything is ever perfect.

I was on my usual official travel, visiting a store in Manipal. My friend went up to the girl at the counter and placed the order. She did not know who I was – she just went about her work with a straight face. I was watching her all along without making it obvious for she seemed to be in a grim mood. After we finished our coffee, I went up to her and told her politely, she could make people’s day if only she smiled a bit. She smiled back at me reluctantly.

On my drive back, I kept thinking about the girl and many other similar faces came to mind. I thought to myself, it’s so hard to smile. Life isn’t easy for so many people. These girls and boys in the stores – they work all day long for a Rs 10,000 salary, travel about an hour of two to get to work, come from tough family circumstances, may be put in a lot of work at home too – surely you can’t expect them to smile all day, I thought to myself. That’s truly the challenge – bringing that smile on people’s faces. Our destination was still a couple of hours away and we were horribly hungry, so we pulled over the car at a small highway dhaba. Both of us enjoyed the rice and fish curry, before we hopped on to the car again and blissfully dozed off.

At times, I wish I could be less harsh on people. Being in business makes you tough, sometimes heartless. You have to take difficult decisions, push people to perform and sometimes put them out of jobs – if you don’t, you could succumb to the same fate because that’s the nature of business, that’s the nature of competition.

That’s why my father was perhaps against me becoming a businessman. At 92, he hasn’t lost his humility one bit. He still gets up to greet people who come to see him, no matter who it is. I wish I always remain my father’s son – despite being in business.