The Startup Diaries: Ordinary Entrepreneurs, Extraordinary Journeys
Neeti Jain & Gagan Jain
248 pages; Average reading time 3 hours 30 min
This bookbhook summary will take not more than 11 minutes
The reality of entrepreneurs is that they are people like us-capable people. Media builds them into the superheroes that we see them as. Thereby making the successful entrepreneurs a different breed altogether-people who are not like us. People who come in with special powers that we do not possess. This book contains six stories about the entrepreneurial journey of people who are like us, but with courage, struggle and persistence have reached a stage where we would like to believe that they are superheroes. This handcrafted bookbhook summary picks up two of the six featured stories. Do buy the book using the links to go through the other four awe-inspiring stories of Eko Financial Services, Yo! China, Colosceum Media and The Loot Chain.
How Vijay Shekhar Sharma built PayTM (One97)
A young boy in Harduaganj village of Aligarh district in Uttar Pradesh scored 72% (distinction marks) in his Class 10 board exams. He was only 14 years old. He then went on to excel further in Class 12 higher secondary school leaving exam as well. The boy then decided to pursue engineering and discovered two roadblocks:
- He was underage for joining any engineering course
- He could not comprehend English as he had studied in Hindi medium school
Vijay Shekhar Sharma, the boy, decided to overcome the English obstacle by studying the same subject both in English and in Hindi to better comprehend English. Vijay also discovered that the Delhi University Vice Chancellor had the authority to approve engineering seats for extraordinary students. So Vijay appeared for the engineering entrance exam at Delhi College of Engineering, despite being underage. At an age when most students are in senior school, Vijay scored 9th rank in the engineering entrance. With a special recommendation from the Vice-Chancellor of Delhi University, Vijay Shekhar Sharma joined the Delhi College of Engineering. He decided to go for electronics branch as the probability of getting a job was higher in electronics. After all, Vijay just wanted a job after engineering.
In engineering, Vijay’s struggle with English comprehension continued. He found it difficult to follow lectures in class and in moments of introspection, he would remind himself that he was doing this to get a job. He also realised that knowledge of computers would improve job prospects and he decided to understand computers better. Every decision of Vijay’s was focussed around his sole objective of getting a job after engineering. By 1997, having read about Silicon Valley in old copies of Forbes and Fortune magazines, and with recently introduced internet access at Delhi College of Engineering, Vijay built his personal HTML page http://vss.tripod.com/old-index.htm that says ‘Hi.. Vss here! I am an open-minded, fun loving guy having HUGE interest in computers and Internet. I love to bunk classes and sitting in the computer centre whole day long.’ Vijay Shekhar Sharma was transforming into VSS.
The financial situation at VSS’ home was not getting any better and he realised that he could not wait for 4 years to become an engineer and get a job to send money home. The money was needed now. He roped in his batch mate Harinder and started a web hosting company, while in college. They named their newly minted company XS Corp with their hostel room in college as the address of the company. XS Corp helped VSS and Harinder make some money, though they struggled with their engineering studies. During a term break, while VSS was at home in Harduaganj, he broke the news of his own company XS Corp to his parents, who flipped! His parents were not happy about VSS not following the convention of taking up a job after engineering. Given that there were family responsibilities that VSS’ father alone could not cope with, VSS agreed to take up a job after engineering and provide steady income, only till his sister got married.
Back in college after the break, VSS figured that the highest salary offer for campus jobs came from a company called RiverRun. He decided that he had to ensure a job offer from RiverRun, and he got the job! But VSS’ heart was already into entrepreneurship and within six months he quit his job at RiverRun (promising his parents to send money home every month till his sister got married). Together with Harinder, VSS decided to step beyond building websites for others and built their own website indiasite.net which would focus on links for searches related to India. They discovered that over 40% of traffic for India related searches was being received on the website owned by a powerful media house Living Media. VSS and Harinder, despite their much lower status in the hierarchy of business corridors, reached out to Living Media and managed to schedule a discussion with Living Media’s internet business head Arun Katiyar. An overconfident VSS proposed Arun share Living Media content with them, and in turn, they would provide increased traffic to Living Media website. After a couple of tense moments, a deal was reached and Harinder & VSS partnered with Living Media to set up a website www.indiadecides.com
Soon VSS convinced Living Media to offer some of its office space to XS Corp from 11 pm to 5 am, in return for some free work that VSS would provide them. VSS and Harinder now had an office of their own, albeit from 11pm to 5am! Soon VSS got to strike deals-he sold his share of indiadecides.com to Living Media for cash and XS Corp got bought by Intersolutions India Pvt Ltd, and VSS became Intersolutions technology manager with a monthly salary of Rs100, 000. VSS’ parents were glad about this and soon all family debt was paid off. With sister married now, VSS resigned from his job at Intersolutions when he was less than two months away from getting an annual bonus of Rs 16 lakhs and some shares of the company. His manager urged VSS to hang in for two more months to get that substantial amount of money, but VSS saw the bonus as a golden handcuff that might hold him back in the comfort zone of job security. He said, ’I have made up my mind. Leaving 16 lakhs rupees will push me to create something bigger and better.’
VSS’ manager from RiverRun, Rakesh Shukla, reached out to VSS to understand VSS’ plans. VSS explained how, inspired by Yahoo’s acquisition of Four11 Corp, he was setting up an online directory and people search business. Rakesh decided to join VSS in this new quest. They agreed that VSS will handle technology while Rakesh will manage business development. One97 Communications, the parent company of PayTM, was born. Things did not turn out to be easy and VSS faced an uphill challenge rolling out people search service that he had planned. Airtel, a leading mobile communications company, offered a small project to One97-a service where Airtel customers could dial in and get updates on horoscopes and astrology. VSS would need to hire a few astrologers and a small call centre to provide this service on behalf of Airtel. This was clearly not about people search-something that One97 was trying to build-but VSS was strapped for cash and agreed to offer the service to Airtel. One97’s astrology service to Airtel customers was rolled out in 2001. At this time, Harinder-who had taken up a job after XS Corp buyout-got in touch with VSS and joined One97.
While the astrology service took off, VSS realised that this was not a scalable service-after all how many astrologers could One97 employ? He was looking for something that could be automated, and astrology required customised response for each caller, thereby not making it scalable. VSS & Harinder came up with the idea of providing cricket scores, songs and jokes to callers using a recorded Interactive Voice Response System (IVRS). Using the dial pad on their mobile phones, callers would be able to select their service choice and get what they wanted-a joke, latest cricket score or may be a song clip. Since this would be totally automated on the IVRS, this was scalable but required investment in terms of backend server. The Airtel executive to whom VSS proposed this idea was not enthused. One97 had not been paid for its astrology service for almost three months, money was running short for VSS and his IVRS based content download idea had not been taken very kindly by the client. Things were looking pretty bleak.
Hope, in the form of Punjab circle operations team of Airtel, sprung up when in selling its already running astrology service to the Punjab team, VSS was able to convince them to try out the IVRS based platform. The Airtel team agreed to try out the idea on a 50:50 revenue share basis, with all infrastructure costs being borne by One97. VSS and Harinder were not drawing any salary, they had not been paid for 3 months of astrology service, cash was dwindling and here was an opportunity, though loaded with the condition to invest more funds. They, however, agreed to the proposal from Punjab Airtel team. VSS started looking for a second hand server to set up his IVRS content service. When he realised that he would not be able to afford a second hand server, he decided to rent a second hand server. One97 began its IVRS content service with the ‘songs on demand’ service and soon reached a top line revenue that allowed them to breakeven on the server rental cost. However, the deal with Airtel was 50:50 revenue share so the entire revenue was not going to come to One97. VSS and Harinder had planned cricket scores and ringtones services as the next set of IVRS services, and they decided not to stay locked with Airtel, but to offer this platform to other telecom operators as well on a 50:50 revenue share basis. This would go on to become the foundation of an innovative business model that would build an industry of Value Added Services (VAS).
For the time being, however, with receivables piling up One97 was facing a severe working capital crunch. VSS had to take personal loan from the family his sister had married into, something that did not go down well with his parents. In the meanwhile, OnMobile-backed by the might of Infosys– had also started getting bigger in the VAS space and soon the intense competition in the space started impacting One97 in terms of lost revenues and market share. At this juncture, Harinder-under strain from his own family-decided to quit One97– a big blow for VSS emotionally. He was now the lone ranger leading One97 reeling under severe cash crunch. He had run out of day-to-day cash and struggled to make his ends meet. VSS started taking computer classes to generate some cash. ’Could life get any worse than this? I am alone. I have no money. To top it all, I have to repay a loan’, he mused to himself. He wondered if he needed to get back to a regular job.
In mid-2006, VSS was able to arrange for another server and he began again-this time deciding to diversify and built a roadmap to move One97 from a content provider to a service provider. His earlier connect with Airtel helped him get contracts to manage backroom services like 121 & 111 on behalf of Airtel. By mid-2007, One97 was in better financial health and in a category growing at a scorching pace, VSS was soon approached with lucrative buy-out offers. VSS went against convention yet again, and instead of selling One97, he decided to look for funding through venture capital to create the next wave of growth for One97. SAIF Partners soon agreed for Series A funding in VSS’ One97– the money was used to build a skilled team and develop new products like caller-back ringtones.One97 then introduced a brand PayTM–Pay Through Mobile– a mobile based payment solution. One97 was now looking at revenues of Rs 120 crores (~USD 18.5 million).
VSS had now set his sight on making One97 a billion dollar company by entering the space of M-commerce. The One97 office was peppered with motivational posters. One of them said ‘Let’s make a dent in the universe’. VSS was doing exactly that.
How Phanindra Sama and his friends built redBus.in
On the eve of Diwali 2005, a young engineer working with Texas Instruments in Bangalore was desperately hunting for a bus ticket to go back to his hometown, Hyderabad. Despite his best efforts and connecting with many bus operators, he was not able to get a confirmed seat on a bus to Hyderabad. Dejected, he resigned to the reality of spending Diwali alone in Bangalore, away from his family. The young engineer, with all the time in his hand, decided to apply his old habit of diving deep into one subject or problem and mastering it completely, to understand why he could not get one seat in the hundreds of bus that left Bangalore for Hyderabad that evening.
Phanindra Sama, or Phani, decided to meet his travel agent to understand how the bus tour category worked. Phani got to understand that there are three players involved in booking a bus ride from one city to another-the bus operator, the travel agent and the customer. The bus operator allocates tickets to operators who then sell to customers. But there is no information exchange between the operators to connect the ones who are running short on tickets with the ones who are not able to exhaust their allocated quota of tickets. This set Phani thinking, given he was all alone on Diwali day.
‘Why can’t commuters travelling between two cities on a bus not be able to book and choose a seat of their choice, just like those travelling on trains and airplanes do?’, Phani thought. He had started building a solution for this real problem (after all he did miss out on celebrating the festival at home due to this information gap among travel agents) in his mind. His visualisation of the software solution that would solve this problem now occupied almost all his thinking time. Phani decided to meet a couple of tour operators and mentioned the proposed solution to them. The response from the operators was encouraging and that got him to work out a concept note, which he mailed to six of his friends.
Phani’s friends got excited about this idea, and soon weekends were being spent on thrashing out the concept note and building scenarios. There were two, in particular, Charan & Sudhakar, who were particularly keen on converting Phani’s idea into reality. Charan took up the onerous task of learning the software that would help them build the solution platform. He would miss office and meet tour operators trying to sell them the idea of the solution that the friends were building together. Over the next five months, as the idea of the solution platform converted into an actual software, the response of the tour operators turned from lukewarm to negative. In the interim, seeing lack of response from the tour operators, some of Phani’s friends had moved out, leaving just Phani, Charan and Sudhakar on the project. Motivation was low and the road ahead seemed rocky. Sudhakar happened to spot an advert on Entrepreneurship Acceleration Program (EAP) conducted by The Indus Entrepreneurs (TiE). The EAP platform provided mentoring by industry experts to the winners. The trio decided to pitch their idea for EAP.
On D day the three friends took the EAP panel of judges through the unorganised nature of bus transport industry in India, the information asymmetry among travel agents and bus operators leading to real problems like missed bookings despite seat vacancy, no option for choosing seats and cash flow problems for the bus operators because the travel agents would delay payments on tickets already booked. Phani then took the panel through how their software would solve all these problems. The trio were adjudged the best plan by the jury and so began the journey of Phani, Charan and Sudhakar to build a business out of a real problem. As per the EAP construct, the trio were attached to Sanjay Anandram, who would be their mentor. Sanjay went through the trio’s journey over the last few months and learnt how they were struggling to sell the software to the bus operators. Sanjay asked Phani and his friends, ‘Tell me one crucial thing the bus operators really want?’ They replied, ‘increased sales’. Sanjay then took the trio through the bus operators’ predicament-the bus operators will not buy the software till they get to see the actual benefit, and they will not get the benefit till they buy the software. Do not focus on bus operators, Sanjay continued. He advised the trio to instead focus on selling the benefits of the software to the customers buying bus tickets.
The trio set up the domain www.redBus.in to reach out to bus ticket buyers and the site went live on 18th August 2006. Armed with two week inventory of bus tickets from bus operators, and the rebus.in website, Phani and his friends quit the comfort of secure jobs to begin their entrepreneurial journey. They did everything that redBus.in needed to do-maintained the website, met the bus operators, distributed leaflets and delivered booked tickets to the consumers. Bus operators started seeing the benefit of partnering with redBus.in as customers trickled in to the website to book their bus travel tickets. But this was till a far distance from the salaries that the three earned in their jobs. To increase revenue from the site, more people needed to come on the site-which meant the trio had to spend money on marketing the website-which they did not have! A moment came, three months into the EAP mentorship, when Phani actually thought if shutting down redBus would be a better idea. Sudhakar, however, prevailed and asked the other two to stay patient.
The time had now come to seek funds for redBus from venture capitalists. Before meeting the VCs, a charter was drawn out between the three friends that appointed Phani as the CEO and the three agreed to split the shares equally. The three decided to set aggressive target and planned to ask for Rs 3 million funding on a projected revenue of Rs 10 million. After two rounds of discussion, the VC asked Phani to revise their revenue projection from Rs 10 million to Rs 1 billion! The trio were jolted out of their senses,but pleasantly so. The final investment happened for Rs 30 million on projected sales of Rs 100 million. redBus’ scale-up journey had begun. The VC funding enabled them to settle the debt they had accumulated in the past few months of operations and open new offices in Bangalore, Delhi & Hyderabad.
While growth for redBus continued at a frenetic pace, the world around it collapsed in the financial meltdown of 2008. VC funding dried up and when redBus tried raising another round of funding, its valuation was halved. Infrastructure costs were building up and employee morale was not at its best. Phani reasoned that employees did not take pride in working for redBus as it was not a well-known brand or employer. To solve the infrastructure and backend related costs, Charan proposed moving the entire backend to cloud computing. After some initial hesitation in terms of data security, the trio agreed to move the infrastructure to the cloud, thus becoming one of the first Indian companies to do so.
redBus continued to grow with new bus operators as partners. The benefits of the platform that the trio had difficulty in selling not so long back, now attracted bigger bus operators like the Goa Road Transport Corporation and other state transport organisations. It was soon Diwali 2010, exactly five years since Phani missed getting a bus ticket to go to Hyderabad. In these five years, redBus had moved from an idea into a Rs 3 billion revenue company. A journey the three friends had undertaken without knowing where it would lead them to.
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