My next goal: Leading a successful IPO

My next goal: Leading a successful IPO

At the time, IT services companies in India had already built a name for themselves. The likes of Infosys, Wipro and TCS had already made a dent in the sector. After evaluating multiple ideas and business models for Bangalore Labs, we decided that it would be a training institute for professionals, who could work in the IT infrastructure management space.

The blueprint

I decided to meet with a friend of mine, C.N. Ram, the then chief information officer at HDFC Bank, to bounce the idea off him. I thought that since he headed information technology for a large bank, he would be someone who could give me valuable insight on the need for such a company. Ram loved the idea and decided to quickly bring in Aditya Puri, CEO of HDFC Bank, into the meeting. Puri loved the idea and advised us to take the business model one step ahead. He suggested that after training these professionals, we should also hire them into our company and then, place them at various client companies. He even said HDFC might be willing to invest in the venture. We thought to ourselves, ‘This is great. Let us go back to the drawing board and modify the business plan.’ The newly conceptualised Bangalore Labs was born in 1999. We raised US $4 million from ICICI Ventures to get started.

Most of this funding was used for hiring. We then immediately recruited over a 100 people from various blue chip companies. A leading business daily even wrote an article about how, as a startup, we were able to attract people from the likes of Infosys, Siemens and Boston Consulting Group. For us, getting the right people on board was paramount. This team would be responsible for creating the processes to deliver best-in-class IT infrastructure management solutions to client companies. It would be a process that was extremely efficient with minimal human intervention.

Crucial lessons

In our first year, we did fairly well. Our processes were set and we had signed up two pilot customers. Investor attention, to raise our next round, was phenomenal. We wanted to raise about US $20 million and had term sheets from Warburg Pincus, Oracle and a few other investors. However, we made a mistake when we raised our first round. There was a clause through which ICICI Ventures could invest at a discount in round two. Now, Warbug Pincus told us, ‘We’re okay with investing in Bangalore Labs but on one condition: you guys have to go change the contract with ICICI Ventures.’ Now, this process took some time.

Unfortunately for us, over the next 60 days the telecom bubble burst. In mid-2001, NASDAQ came down crashing. Large companies like Lucent and Nortel were hit. Our customers lost the appetite to take risks with startups. Investors, who gave us those term sheets, were no longer interested in funding us. We were in trouble. Finally, a Singapore-based infrastructure management company found us to be a good strategic acquisition as our company could serve as a good delivery centre in India for them. We sold out and came out without knowing what hit us. It was my first stint as an entrepreneur and the lessons were tremendous.

Second wind

I decided to take a little break. I got interested in wildlife and photography, and it became a routine to visit the nearest wildlife park regularly over weekends. I travelled to Africa multiple times to spend time in wildlife resorts, and till today, it is an annual ritual.

In mid-2002, I got a call from G.M. Rao of the GMR Group. Then, Rao used to own Vysya bank (today ING Vysya). It was a well-run bank with over 400 branches in the country. Also, Bank Bruxelles Lambert (BBL) used to own a share of Vysya Bank. Coincidentally, ING happened to buy BBL and it was excited about BBL’s stake in Vysya Bank. Rao, an extremely sharp entrepreneur, knew that a core banking software that would link the 400 branches would definitely increase the valuation of Vysya Bank. He setup Ideaspace, a company that was formed with all the IT professionals who worked for Vysya Bank, to develop the core-banking product. I used to know Rao’s sons fairly well through Entrepreneurs Organisation’s (EO) Bangalore chapter. Rao’s sons suggested that I talk with their father about how we could work together. When we met, Rao asked me about my future. I mentioned to him that I was looking at starting a BPO next. He suggested that I become the CEO of Ideaspace and this could serve as the starting point of my BPO business. The plan was to slowly clinch a financial operations outsourcing deal from ING (since Rao knew the board of ING fairly well) and build a BPO business for the GMR Group. He would play the role of an investor and I was the entrepreneur for the group’s BPO business.

Around the same time, a good friend of mine, Phaneesh Murthy had left Infosys and was running Primentor, a consulting firm for the IT industry. We spoke a little bit and after some discussions decided that he’d be the CEO and co-founder for the new BPO business. We formed Quintant Services that acquired the business of Ideaspace. Rao invested US $30 million in the company. It was a BPO focused on the financial services space. With top-notch processes in place, we were making quick progress.

After a few years, iGate Global Solutions, then a US $100 million company, was looking for a leader and ideally a whole new management team. iGate acquired Quintant Services in 2003 and Phaneesh took over as CEO of iGate, and I served as the president.

The next step

After being president at iGate for over two and a half years, I decided it was time to do something else. In 2005, my passion for wildlife drove me to start a chain of eco-wildlife resorts under the brand name Cicada. The plan was to build a chain of small resorts – say, 20 rooms each. Over the next two years, I setup resorts in Bandipur and Kabini. Azim Premji invested in the company in his personal capacity. In terms of our offering to customers, we were doing really well. However, the problems caused by government agencies and NGOs were just not manageable. The nature of the business is such that managing such people, who interfere with your business and day-to-day operations, became really tough. As someone who came from the IT industry, where there is no such interference, these challenges turned out to be very difficult. I decided to sell out and eventually Café Coffee Day Resorts bought over Cicada.

If I were to rate my entrepreneurial life, I’d say Bangalore Labs was a failure, Quintant was a success and Cicada was neutral. I had obviously learnt tremendously from all these stints. I thought about my options and decided I wanted to get back into the IT industry. I knew I had it in me to start a business and take it to a certain level. But I hadn’t built a really large company. When the opportunity to head CSS Corp came up, I thought it was a chance to use my knowledge from all my entrepreneurial stints and apply it to a senior management role.

In FY 2013, we’ll be at a revenue run rate US $200 million and I am excited about continuously growing CSS Corp. This is my tenth month in the company and already, profit margins have doubled. Coming from the entrepreneurial world, the way you look at things is completely different. I would like to see if I could apply these lessons and make a mark in the IT industry. I’d like to take the company through to a successful IPO. The work in front of me is different from what I have done in the past, but this is what excites me today.

Ramesh on Mobility and Cloud

Mobile is certainly the future of the IT industry. However, I am not sure if apps (applications we download into smart phones) are the way forward. To me, it doesn’t make sense that we’ll have to download so many apps, each one performing a different role. With the advent of 4G, mobile-enabled applications that can be accessed through a browser will be the future. According to me, if you want to access Flipkart in your smart phone, you will use your mobile browser to access it on the web, not use a Flipkart app.

Cloud, to me, is old wine packaged in a new bottle. We’ve always had private data centre companies like Exodus. We’ve bought bandwidth from telecom companies and we’ve had application service providers (ASPs) who’ve offered, in some sense, cloud services. However, with cloud being packaged as cloud, we’re seeing a lot more companies willing to adopt cloud technologies. 

Ramesh on entrepreneurship

I think I have learnt the best lesson on entrepreneurship from Phaneesh Murthy. He compared writing a business plan to that of driving in a winding road with several curves. The idea was to keep driving, to stay alert on the road, to know your destination and to tackle one curve at a time. At every curve, you peek some more and try and get more insights. But you don’t try to tackle the third curve before crossing the first. The advice is don’t ever believe your five-year business plan.

The second and probably the most important piece of advice for entrepreneurs is to focus on generating cash and staying focused on cash flow management.

Prem Sivakumaran is co-founder & CEO of Growth Mechanics, a leadership and entrepreneurship-focused business content company in India. Growth Mechanics publishes The Smart CEO, a publication focused on enabling peer-to-peer knowledge exchange among C-level executives and board members. The platform reaches over 1.2 lakh CXOs across its website, app, print publication & CEO Round Tables, and has featured on the cover India’s leading business leaders/founders from Infosys, Mindtree, Tata Sons, ICICI Bank, Biocon, Yes Bank and several others. In addition of Smart CEO, Growth Mechanics also organises the Startup50 Conference & Awards, an annual event to recognize India’s top 50 startups every year. Startup50 Alumni include Freshdesk, Oyo Rooms, Urban Ladder, Capital Float, Paperboat Beverages, among others. Growth Mechanics’ primary business model revolves around linking CXOs and Brands around engaging content and has worked with India’s leading companies including Mahindra Group, Godrej & Boyce, BASF, Airtel, Tata Docomo, Fiat, IDA Ireland, Yes Bank, Prestige Estates, Frederique Constant, Indian Terrain

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