While we continued to grow, I was being squeezed by a regulatory constraint that meant I could not go below 51%. So, whenever we needed capital, if someone was willing to give me money, I still needed to bring in my own! If I needed 100 crore, I needed to bring 50 crore myself! I did that for a while, by piling on debt. It was a draconian regulation, completely anti-first generation because how do you keep bringing in capital?
All the biggest entrepreneurs in the world have diluted capital…. Steve Jobs owned very little of Apple. Did not the Infosys founders pare down their stake to 5-6%? E-commerce guys can come down to less than 10% and still call it their company, telecom can do it, banks can do it, but news channels can’t! It’s crazy. You have to dilute to grow. If you are a first-generation entrepreneur but have a regulation that needs you to have a 51% stake at all times, then there are only two options: either you remain tiny or you sellout to a large business conglomerate or industrial group.
We were badly in debt when Reliance stepped in as a white knight in 2012 with non-voting rights…I still had operational and management control with 51% stake. But in 2014 when they converted their shares into voting rights, I did not see any reason to stay on as a minority partner. Had I been allowed to go down to 10%, there wouldn’t have been a crisis. But then as an entrepreneur you can’t keep blaming others.
In hindsight, a situation did present itself earlier, where I could have turned things around. That I did not was my cardinal sin. In 2011, when the market went up, because Colors, Homeshop18, CNN-IBN were doing well, I managed to raise 1,000 crore in equity. Our debt was 2,000 crore. Had I used that 1,000 crore to pare the debt to half, it would have given us headroom and time to sell some of the non-core assets. We had Yatra, Bookmyshow (BMS), Homeshop18. These are lovely assets…Today, BMS is making a placement that values it at half a billion dollars and that is still not reflecting in the stock!
I missed that chance to reduce debt. Like a fool, I believed that the upturn in the market was for real and ended up reinvesting in growth. That was a huge mistake, If only I knew, we would have been flourishing today. Network18, today, on the old assets is generating 500 crore of cash…we would have been sitting so pretty…
We did create a lot of wealth for our shareholders but ended up destroying it. People would say we were growing too fast, but we did what we had to. Even if I had a mentor, I wouldn’t have listened to what he or she was saying because ambition can sometimes blind you…At the end of the day, I have to own up to my mistakes…
Truth be told, though I am a great pal at work, I am a recluse in the sense that I don’t socialise too much outside of work…I am not a regular at industry get-togethers and seminars. The problem with being a recluse is that you are misunderstood, people think you are arrogant, that you think too much of yourself. But it’s just that you prefer to be with yourself. People who work with you know that…perhaps you are the most approachable guy in the whole world; you enjoy your joke as much as you enjoy your drink…you are just another regular Joe.
But being distant and aloof means when you do something which is a little bit adverse, the comments are much more vicious than if you were a “networker”. I have faced that all my life. If TV18 would lay off 10 people that would make screaming headlines but some of my competitors, who are better “networkers” than I ever could be, would do much more than that and it would still never make news.
But being a recluse means you don’t care what the world says because you know what you are doing. So, when we laid off people, it was not because we wanted to lay them off, but because there was a financial crisis or a business got folded up…we gave six months of salary upfront, one of the highest severance packages in the media industry - that never got reported. But when my competitors didn’t even pay one month’s salary and sacked people, they got away with it.
When you choose to be a loner, you have to pay the price…
You tide over a crisis, once you decide to let go. Losing what you created is more than a financial crisis. What I was dealing with was an emotional crisis and a work-related crisis - the vaccum that gets created.
A first-gen entrepreneur is inseparable from the company he sets up. Raghav Bahl and Network18 were used interchangeably. The thing is there is no distance, your balance sheet is the company’s balance sheet, your relationships are the company’s relationships, your identity is the company’s identity. Your sim cards are on the company’s rolls, so are your club memberships. Maybe the car that you gifted to your child…one could be on your personal account, the other on the company’s. It’s a tough moment. What has to be really untangled are not the material things but the identity.
I did that the very next day of stepping down from Network18, I moved on to my next innings as the founder of Quintillion.
The lessons I learnt will stay with me for good though…
I do believe in empowering colleagues but my biggest learning from Network18 is that capital allocation and strategic decisions should be yours alone. These are inter-related and as an entrepreneur you have to take that call because ultimately the liability devolves on you.
Operating autonomy, though, should be given 100% to colleagues whom you trust and respect. My mistake was that I allowed colleagues to take even capital and strategy calls and ended up making a lot of mistakes. You can take every advise and go through hours and hours of scenario planning but the final call has to be yours…don’t delegate that call! My mistake earlier was that I let others take that call, little realizing that the balance sheet did not support it. If someone very close and whom you respect wants to do something ambitious which is not in sync with an entrepreneur’s objective, then one should not be emotionally mollycoddled into doing that because down the road it will create problems.
I am a consensus builder but you have to draw the line if a discussion is becoming interminable. I remember when CNBC Awaaz was being launched, we were entering into a new domain - Hindi programming. CNBC TV18 was a profitable and overwhelming market leader, so much so that a lot of my senior colleagues came and told me that by going into Hindi we will be cannabalising our English audience.
“Look at how profitable we are!” “Look how powerful we are! Look at our dominance! If you enter Hindi, it will cannabalise our offering.” I heard the arguments for a while, but my thinking was, “If cannabalisation is the price we have to pay to expand the market. So be it.” Allow consensus to go to a point where it is sensible and relevant. Don’t let it become dilatory or turn into a talk shop.
If you distance yourself from several key decisions then you won’t realise the level of incompetence you have built up. The realisation will hit only when it becomes a crisis...like it did at Network18.
In a manner of speaking, can I be called successful even if I haven’t been able to retain control of what I built? Thankfully, the world at large and my new partner have chosen to look at what I did create. What went wrong is a question that I ask myself…
“Pain is my destiny and I can’t avoid it,” says Amitabh Bachchan in Kaala Patthar. That’s my favourite movie dialogue. In real life too, an entrepreneur cannot escape pain, but he surely can avoid inviting one! I have always heard that an entrepreneur is a risk-taker, but, actually, I believe he is a risk minimiser. He or she has to take risks but minimise them. Never expose your flank so much that you are absolutely defenceless. Never have an ambition way outside of your balance sheet.
Today, I won’t say that I have tempered my ambition, but it’s more realistic. It says build the balance sheet first and then layer over your ambition on that, not the other way around. I am not a serial entrepreneur… I want to be an institution builder.
Even in my role as a venture capitalist, besides all the regular traits such as honesty, integrity and character, what I now look out for is resilience and the tenacity of an entrepreneur…the ability to ride through adversity, the ability to be honest about one’s mistakes, the ability to learn from one’s mistakes and, above all, the gumption to say, “I will overcome the odds.”
This is the second of a two-part series. You can read the first part here.