PC Musthafa on iD Fresh Food and Harvard | Secret Diary - Part 3 | Outlook Business
Home  /  Specials  /  Secret Diary 2019  / "Finding the right investor is like finding the right girl, you have to be smitten" | JAN 21 , 2020

RA Chandroo

Secret Diary 2019

"Finding the right investor is like finding the right girl, you have to be smitten"
Secret Diary of PC Musthafa — Part 3

Kripa Mahalingam

In 2014, we got our first institutional investor, Helion Ventures. When we were looking for our Series A round, we had three term sheets. Helion’s valuation was about 15% lower than the other offers, but we still went with them because we believed we shared the same vision. Getting the right investor is crucial because the relationship is a lot like marriage. You have to like the girl and not the wealth she comes with. And, with Helion, we were smitten. So what if the girl had a beard! Kanwaljit (Singh) has not only influenced my thinking a great deal, but he has also supported us with all our major decisions.

Premji Invest was our second institutional investor that came on board in 2017, when we raised our Series B round. We shared a lot of common ground in ethics, so this was also an easy decision to make.

Building a great business is like putting together a fabulous recipe. Every ingredient has to add value. 

Of course, making idli batter is no rocket science, and since there is no towering entry barrier, anyone with a little capital can open shop. That’s why we knew that we had to scale-up our business fast, to protect our market share. We needed to innovate quickly and we started with the business model. 

While the whole world was looking to increase the shelf life of products, we went the other way. We focused on selling fresh batter. It’s easier said than done, since first you need to build a distribution channel that supports this. It has to be one that is refreshed daily and everyone, including the retailers and us, maintains zero inventory. 

Next, we focused on improving manufacturing efficiency. When we started out, we could only produce 5 kg of batter/hour, with a traditional machine. As we scaled up, it wasn’t practical to have so many machines. It was an engineering problem that we had to solve. 

The Germans have the genius when it comes to engineering but, unfortunately, they don’t eat idlis. Our quest for solutions took us to the US, where we discovered that mustard paste is made pretty much like idli batter and the machine used to make that works the way a grinder does. So, with a German company, we co-developed a machine that can grind 5,000 kg of batter/hour. 

iD runs on technology today. About eight years ago, we started using a mobile app that tracked store and item-wise sales and wastage on a daily basis. Using the data that we have generated over the past eight years, we can predict demand accurately and reduce wastage to as low 2-3%. This is gold for any company in the fresh foods business. Innovation requires one thing and one thing only — common sense. 

We are very proud of the nozzle we created for our vada packs. Everyone loves to have a crispy vada with idli or dosa, only the snack is messy to make. The batter sticks to your hand, leaves trails on your kitchen counter and takes ages to be washed off. We wanted to make that process easier and it took us three years to come up with a solution. Let me tell you, it wasn’t easy.  First, we couldn’t get the shape of the nozzle right, which means wonky vadas. Then, the size of the spout would be either too big or too small. And, if all of it fell in place, the vadas wouldn’t taste right. It was frustrating at times, but Naseer, whose pet project it was, didn’t give up. We finally we got it right three years later and introduced the product not only to India but to the world during my speech at Harvard. What a proud moment it was for team iD! While this segment may not have earned us a lot of money, it helped us position iD as a smart, cool and innovative brand, and that’s what we want to be known as. Today, you cannot build a brand with money alone.

Money is important, but success comes from various quarters. My father, my superhero and mentor, taught me that. I have seen him work hard all his life but not once have I seen him take a shortcut to make money. He would always tell me, “Never do anything that goes against your values.” To this day, I have stuck to that advice, even when it meant that the business would take a hit or I had to let go of revenue. 

When I was little, he used to take me for prayers with him five times every day. It was our time together and often he would tell me a story or two, life lessons if you will, using everyday examples. I understand many of them a lot better now. One day, he pointed to the mango tree in our house and asked me which branch is the closest to the ground and I pointed to the one on the right. He asked me why and I looked at him blankly. He patiently explained to me that this is so because the branch had the most mangoes. While I understood the logic of what he was saying, the spirit of it hit home only recently. 

Last year, I was lucky enough to be invited to an event where I met some of the world’s greatest philanthropists, including Bill Gates and Azim Premji. I spent much time with them that day and what struck me hardest was their humility, despite being so immensely powerful. That was when my father’s words really made sense to me.

I am proud of my parents and I believe I have made them proud of me too. The one memory that stands out is when I was awarded IIM-B’s ‘Youngest Distinguished Alumni’ award. It had been my dream to study there, but to have that institution honour you in front of your family was truly special. That would be one of the best days of my life. 

When I was in junior college, there were days I would come from the hostel and there would be no food at home. I realised that they would rather skip meals than miss an installment of my school fees. Their determination is what spurred me on.   

When you work tirelessly, I strongly believe that the universe, too, conspires to help you every step of the way. I was given teachers who changed the course of my life at critical junctures. Right from Mathew sir in school to T Mohammed sir who paid my fees for coaching classes — they believed in me much before I started believing in myself. My mentor DVR Seshadri, who was my professor at IIM-B, taught me to think big. 

In 2010-11, when things were getting difficult, we got a buyout offer from a manufacturer of ready-to-eat foods. They were ready to offer 240 million, almost 2.5x our turnover then. Not in our wildest dreams had we imagined that our business could be worth so much. We had decided to sell and even finalised the deal with the CEO. However, just before signing on the dotted line, I told him that I needed to check with my mentor at least once. So, I called Mr Seshadri about the deal. He asked me what I would do with the money that came from the sale. I had no answer. Then he asked me, “Why 240 million, why not 10 billion?” And from that day, the number has stayed with me. I want iD to become a 10-billion company. 

Today we are clocking monthly revenue of 250 million with a valuation of 10 billion. 

I believe that it is okay not to know all the answers. But you must be able to admit that to yourself and not hesitate to ask people who may know better. 

Two years ago, I was invited to speak at Harvard. I was flattered, but also anxious; public speaking was not one of my strengths. In fact, during my engineering days, I had to present a paper on cryptography, a subject I knew really well. I was well prepared for the presentation but, when the time came, I couldn’t speak a word. I cried that day and swore to myself that I would overcome this fear. So when the Harvard opportunity came, I decided to act. 

I reached out to Rakesh Godhwani at IIM-B, who coached me for the speech for two months, which later went viral across social media. He still coaches me. Failures are good, as long as we learn something from it and don’t let it go to waste. I could write a book on the number of mistakes I have made in our journey of building iD. But, the good thing is that those slip-ups are now helping us make the right decisions. 

The entrepreneurial spirit is there in everyone. It just boils down to your risk-taking ability and willingness to move out of your comfort zone. I wish I had become an entrepreneur about 10 years earlier. But I guess it was frightening to give up the financial security that comes with a job. I should thank my wife Sajna for standing by me through all the decisions, whether it was to come back to India or become an entrepreneur. I don’t think I could have done it without her. I tell my three sons, who continue to keep me young, to follow their passion. They want to become professional soccer players. That’s how we excel in life. Even the most mundane tasks become pleasurable and the fire within never dies out. Our dream now is to become a fully organic company. We want to make organic affordable and accessible to everyone. We are what we eat and I have lost far too many people close to me to lifestyle diseases and even cancer. It is time to go back to our roots and keep our food preservative and chemical-free. I am also focused on finding a sustainable replacement for all the plastic packaging that we use, even if it means lower margins. I believe that idli could be the answer to solving the world’s hunger problem. It is probably one of the most nutritious meals you can have and iD has all the technology for mass production of idlis, and I’m willing to share it with the world to solve this problem. We did start the company to create employment for the youth in remote villages, and perhaps we have achieved that to a degree. Never had we imagined that we would one day be touching a million lives by providing them healthy breakfast. For someone who couldn’t afford breakfast growing up, life has come full circle.

 This is Part 3 of a three-part series. Click here to read Part 1 and Part 2.

Here's your chance to read the latest issue of Outlook Business for free! Download the Outlook ​Magazines app now. Available on Play Store and App Store