Being an entrepreneur takes guts. Facing endless red tape, an ocean of uncertainty and unfathomable devotion are just a few prerequisites. In this panel, Ajit Isaac shares his story of going out on a limb with Quess; Patu Keswani describes his experience in setting up Lemon Tree Hotels; and Pramod Bhasin opens up about the rather inconspicuous beginning of Clix Capital. These are real-life stories of ‘Never say die’ entrepreneurs
N Mahalakshmi, editor, Outlook Business: A famous Woody Allen line goes, “If you want to make God laugh, tell him about your plans.” Entrepreneurs know this to be absolutely true. Whatever plan you make, it almost always goes flying out the window. Tell us about your plans going awry. How did you build resilience throughout your entrepreneurial journey?
Ajit Isaac, founder, Quess Corp: In 2000, I founded a company called Go4careers, a careers vertical in a horizontal called Go4i. It was built with capital from JP Morgan Chase and had a high-profile launch but, when the website went live, we found that if we searched for a doctor in Nagpur, we would get an engineer in Calcutta. The algorithm just wouldn’t work. A website with a search engine that does not work can’t make any progress in the market. So, within one month of going live, we actually turned offline and turned it into a human resource company. We found people through the physical process and did fulfillment offline. Today, we are India’s largest human resource services company. That was the first trip-up, and we learnt that we don’t always end up with what we start.
Patu Keswani, founder, Lemon Tree Hotels: I wanted to retire when I was in my mid-30s with the Tatas. I was posted to Taj and got very bored and I experienced male menopause. For men, it’s menopause of the mind — it’s called andropause and I decided to retire as quickly as I could, but I had no money. So, I met my two very close friends. Those days, single malt was very expensive for us, but we got two bottles of single malt and went away for a weekend to a forest lodge and decided that we need 50 million to retire. That’s because, if invested well, we would get 5 million per annum. So I had 10 million — 7 million that belonged to me and 3 million that I borrowed from my wife. I invested during the dotcom bubble and in nine days, it became 300,000. That was my first entrepreneurial experience and that’s how I learnt resilience. I learnt to never bet the bank, no matter what happens, no matter how sexy the opportunity. The second lesson was to always have plans B, C, D, E and not get a swollen head.
I was broke, looking for a plan B and AT Kearney was coming to India. They offered me a senior director partnership and the only question I asked them was “can I make 50 million in two years?” The CEO looked at me oddly but felt I was showing great signs of intellect by asking such a direct question and said yes. I joined and, two years later, I had 50 million. Because I had run all the Taj Business Hotels, I had learnt what to do, and what not to do. I knew which mistakes I should avoid. I went on to build a small hotel and luckily a dozen people joined me from the Taj. The hotel was enormously successful… Lemon Tree now has about 8,000 rooms and 10,000 employees. Bottom line is that the company did very well and the instinct to retire was overtaken by desires and aspirations of the first 20-30 people who joined us. It’s been a wonderful journey, even with all the ups and downs. My broad view on a downturn and upturn is very simple. By nature I am an optimist, every one of us is an optimist or a pessimist; what I have learnt to be is neither. I assume everything will pass and, if you plan for that, you can be reasonably successful.
Pramod Bhasin, founder, Clix Capital: I don’t know about Isaac, but Patu is being amazingly modest because he’s been enormously successful in what he has done, in a very short period of time. He’s done that in an industry that I always thought was never going to survive very long.
My story is actually of necessity. I used to run GE Capital Asia in India and had come here looking for the mythical Indian middle class, which I never found. We weren’t making enough money. I had also worked with General Electric under the Jack Welch era, which was truly a remarkable company — the most admired in the world for many years. Naturally, we were expected to find ways to make money. And in India, as we all know, the future is bright and always will be. So, you are always going to make money at some point of time.
Keswani: What I love about India is something President Ronald Reagan said about Brazil in the late ’80s. Somebody asked him what he thinks about Brazil, and he said it’s a country with great potential and it will always have great potential!
Bhasin: Of course, it always will have great potential. So, I needed to do something to make money. Therefore, I came up with this idea of doing back office business processing for the world, out of India. That was my idea, standing in a hot parking lot in Chennai with my boss and scratching my head and saying, “What the hell do we do?” We were running an operating centre, but there was a singular problem. The plan was to do this over phone lines, in homes with digital technology, trained people, lots of people who understood US GAAP, mortgage accounting. The only flaw in the plan was that phone lines didn’t work, there weren’t any people, there were no trained resources and there were no office buildings in Gurgaon at that time! So, apart from that, it was a very good idea. That’s how we started!
Mahalakshmi: Ajit, I did not find a low point in your story at all, except for the first venture, which is Go4careers. It was just that you started as an online portal, it didn’t work and you quickly shifted offline. It sounds like it’s been a very smooth ride.
Isaac: Sometimes we tend to simplify our journey a bit. When we founded Quess Corp in 2007-08, which is 11-12 years ago, we were a product of the then-global financial crisis. We realised that variable costs in a company — advertising, recruitment, staff welfare — are discretionary in nature, which companies would put a lid on. So, the first two years were very difficult. To be in play, we needed to look into things other than human resources, such as managing services and that’s when we ventured into facilities management. In 2008, our revenue was actually about 80 million for the first year. This year, it will be about 110 billion. There have also been some pivotal moments. We had a private equity investor on board with an investment time-frame of five years. That investor wanted to move on in 2013. This was also when the Indian economy was showing a blip — there was policy paralysis and it was the year before the election. That’s when we decided that we don’t want another private equity fund; we would like to have long-term capital, somebody who does not have to return capital to their LPs (limited partners). Thus, we connected with Fairfax in Canada, which is an insurance company that invests off its own balance sheet. In retrospect, that has been a big decision for us. Our outlook to business and decision-making became more long term, not just creating value in the short term.
Mahalakshmi: How easy or difficult was it to get Fairfax on board?
Isaac: The first hurdle was Toronto. -12 0C made for a very unwelcoming climate. But a gentleman called Prem Watsa runs Fairfax. He went as an immigrant and built what is one of the top five insurance companies in the world today. He is also known as the Warren Buffett of Canada. He has invested about $5 billion in India and has promised to invest another $5 billion. To get a meeting with him was terrific because his value system synced with ours, and he backed us completely. He ran a decentralised empire — he had 40 odd investments and each CEO would get space to do what they want. You meet him (Watsa) maybe once or twice a year. To get Fairfax on board was an easy decision and, after that, we decided to go public. But it was June 2016 and Brexit drama had just begun. Our bankers suggested that it could be improper to go to the market and raise money. A week later, ‘Rexit’ happened. Raghuram Rajan resigned, so you did not have a Reserve Bank governor in the country and the markets were very jittery. In spite of that, we decided to go ahead, listed our stock and it was oversubscribed 145x. We had to sell the story of a services company in the business service space, which nobody understood; it was the first market offering of this type. We listed it for a billion dollars or so and went on to do a follow-on round. At various stages, we have had to take decisions that moved the needle. Today, we have 380,000 employees. Last year, we added 56,000 people. This year, in the first six months, we added 59,000 people. This slowdown in India actually pushes companies to variabilise costs, to process more of their transactional work outside their company. Companies like us have more of an opportunity in such situations, which we are riding on today.
Mahalakshmi: Patu, you faced a lot of issues with bureaucracy when you were building various hotels. Please tell us that fun swimming-pool story.
Keswani: When I built the first hotel, my father, who was a hardcore communist said, “I am very uncomfortable with you making money because there is so much poverty in India. So, promise me two things — never give a bribe and always focus on your employees.” When I went public last year, someone from the press asked me, “Is it true you said **** the shareholders, employees come first?” and I said yes, and my investment banker freaked out because, obviously, it was a big story — that I told my shareholders to get lost. So, when I built my first hotel, I had 50 million. I had to borrow additional money, but nobody was willing to lend me money because I used to wear jeans, which I still do. I had to call a friend I knew from my Tata days, who loaned me 40 million on my personal guarantee. I built the hotel and the pride and joy that I had as a middle-class guy, because my father was a government officer and my mother was a doctor in the army, was that I built a very small pool in this hotel in Gurgaon. I had never seen a pool and I could not believe that I now owned a pool. Now, India is full of wonderful laws. In 1888, in undivided Punjab, there was a drought... 131 years ago, and the British introduced a rule that there would be a water inspector to approve any waterbody in Punjab, which then included Gurgaon. One day, I go to my office and my general manager calls me to say there’s a guy with a bandolier, in a jeep with a red siren. He happened to be a nephew of one of the ministers, and his job was to take a bribe. He comes and tells my general manager that his approval is needed for the pool, and asked for 5,000 a month, threatening to shut our hotel if we didn’t pay up. I said, “Okay, come back next month.” So, I went and swam in that pool, and told my staff to drain the water and fill the pool with mud and make it a lawn. A month later, this guy came back. He asked for the money and I refused. He said, “You shut down a 1 million pool for 5,000!” When it comes to taking bribes, the officials are so efficient in valuating an asset, to determine ‘the rent’. Interestingly, no one ever came back, because they thought we are mad, but I learnt these things from another mad group — the Parsis — because I was part of Tatas and they behave like this. By the way, I told this to the chief minister later and they eliminated that rule.
Mahalakshmi: Pramod, which was the moment when you transitioned from a professional to being an entrepreneur? Has there ever been regret, wondering what you had done?
Bhasin: One, I think we did this under the radar; Jack Welch never wanted us to do this. So I had to do this by myself, experimenting along the way. Then we spun off and raised capital with General Atlantic, Oak Hill. Genpact, today, with 500-billion market cap, is not doing badly. One lesson is: Do succession planning really well. If you do it well, it washes away a thousand sins you may have committed. I learnt two important lessons along the way. For the first, I was privileged to be with GE, but not for the second one. The first one was during 9/11. It had the power to destroy businesses all over the world. You had no idea where things were going. Planes weren’t flying, people weren’t going back and forth, businesses stopped completely overnight and you were trying to figure out exactly what you were going to do with your life. The impact was cataclysmic for countries that were doing cross-border movements, particularly with movement of people and resources. We did the huddle, came together. I must have talked to 5,000 people that day, about how to manage the crisis, what we were going to do, the level of uncertainty we were facing, and then we continued to do that over one month. It took that long for the airspace to be opened up, for people to be able to go back and forth and start thinking about business. To me, that was an enormous example of how to handle a crisis. The next one was when Lehman Brothers went down; 50% of our business was financial services and the financial services market imploded in front of our eyes. Our share price on NYSE went from $15 to $4. We were facing enormous bad debt because our clients could not pay us. There was absolute turmoil and to climb out of that, when we were an independent company and running as an NYSE company, that took a different level of resilience from the team. It was up to us to galvanise the team, because losing spirit would be the easiest thing we could have done, but maintaining that energy level and that resilience was the toughest. I would never forget that lesson in my life, especially as I watched Lehman Brothers come apart on my television, knowing that all hell was going to break loose in the next weeks.
Mahalakshmi: If you were to give one advice on how to build resilience and what it takes to be a successful entrepreneur, what would it be?
Isaac: Two things build resilience in a company. One is culture. It flows from the DNA of the entrepreneur. One quality all entrepreneurs need to have is to be stoic. You have to be able to meet situations with pragmatism and you have to be dogmatic in your approach. You have to be singular in your approach. You can’t dither and fret over what’s coming.You have to be an optimist and have to work with people. That has to be the organisational culture and only then will you attract the right sort of people. The people you built your company with make the business.
Keswani: One of the two things that I have learnt is to be patient, it is very easy to be otherwise. I have learnt to remember that ‘this too shall pass’. The second thing is to be balanced in my perception of reality. I am an optimist, so when everything is going well, I try to become as pessimistic as possible. It is difficult for me, but I try. When things are going badly and there is pessimism all around, I just have to be me. I don’t believe there is much to worry in India. If your business can sustain 2-8% growth, and you haven’t done anything catastrophic, I think you are fine.
Bhasin: One of the two biggest lessons is to surround yourself with people who are significantly better than you and you must do that with open-mindedness. I think very few people end up doing that. Tiger (NV Tyagarajan) is a better CEO than I was at Genpact and it is showing. Surround yourself with diversity of thinking because this brings ideas to the table. This team will do a thousand things that you could never do. Second is a word I learnt from Ram Charan, who used to come to teach us often at Genpact and GE, was the word ‘altitude’. Just climb out of the daily morass and think big. One of the great things about the Chinese and the US companies is that they think global. They want to go out and rule the world. They are not happy being market leader in just northern India. You must build things of global scale and size, and I think that is something India Inc must do, because we remain local fundamentally, even though we have some great companies.