The drive to go through the hardship of starting up multiple times is one key reason why Krishnan Ganesh, founder and CEO of TutorVista, is a four-time entrepreneur. He shares with us experiences from his entrepreneurial journey
A cartoon by Jeff Koterba in the American newspaper Omaha World-Herald in 2002 in which a father tells his daughter, ‘No, you cannot outsource your homework to India’ was Krishnan Ganesh’s eureka moment for his remote tutoring business. As he sold Customer Asset, an international call centre and BPO to ICICI Limited (renamed ICICI oneSource and now Firstsource Solutions) in 2002, he already had a few business ideas in mind. He mulled over healthcare and education as potential big opportunities and finally setup online tutoring to students across the world through TutorVista in 2005.
A post-graduate from the Indian Institute of Management, Kolkata, the 50-year-old’s first brush with entrepreneurship was in 1990 at the age of 29, five years after his post graduation. In the last 21 years, he has founded four companies and successfully exited all four of them. In his fourth venture, TutorVista, he made a partial exit in January 2011 and will fully exit by January 2014. He has also successfully raised capital for all his ventures and given returns to investors and employees. Ask him how his management style has changed since his first venture and he says, “I have become more mature, tolerant and patient and that has more to do with age than anything else.” But he adds, with four successful ventures comes more credibility and better acceptance of what he says. So, he is more cautious about pronouncing his judgment nowadays.
He is raring to go even after Pearson, a U.K.-based publishing and media group, bought over 80 per cent of TutorVista, his latest venture. He is already a part of the founding team and a co-promoter of a few ventures that are ready to take-off.
“This is obviously not the only way to start a business, but my preference has always been to look at areas where there are no large players.”
In 2000, during the dotcom boom, email support seemed critical and could be done from anywhere in the world. He started Customer Asset with funding from U.S.-based venture capital firms, Softbank Venture Capital and Newscorp to address the international call centre and BPO sector. In May 2002, ICICI OneSource acquired Customer Asset. After serving a one year contractual exit period, it took Ganesh two more years to set up his latest venture, TutorVista. In between, in early 2004, he invested in a Data Analytics firm, Marketics, where he was the sole investor, mentor and chairman (and in 2008 he sold it to NYSE listed WNS). He was then advising and scaling Marketics and simultaneously pursuing his new ideas.
He spent a good portion of 2004 doing due diligence on the TutorVista idea by conducting surveys amongst the target audience in the U.S. The survey findings not only reaffirmed his belief in the business model, but also gave him an idea of the challenges that he would face. He incorporated TutorVista in 2005 with a personal investment of Rs. 50 lakh to provide online tutoring to students across the world, by leveraging the advancements in technology.
The Greenfield preference
A first generation entrepreneur, Ganesh’s entrepreneurial ventures have all been Greenfield ventures in nascent sectors. “This is obviously not the only way to start a business, but my preference has always been to look at areas where there are no large players,” he shares. Ganesh likes this strategy as there is scope to create high growth and profitability due to the uncontested space he operates in. “There is a long rope and people are more forgiving in a new sector,” he says.
He believes that one can create disproportionate value for all stake holders if they are able to open up a market that is yet to be served. For instance, when he realised that personalised tutoring in the U.S was affordable only by the economically affluent, he setup TutorVista that offers online personalised tutoring to make it affordable and convenient to everyone in the U.S. Also, when Ganesh started IT&T as a bootstrapped company, the concept of an independent IT infrastructure management company did not exist. “Ours was the first company that offered single point maintenance for all brands. All I had to do was to go and sell, though it was not easy,” he shares. He adds, “Once you sell the concept, customers could not compare IT&T with anyone else as we did not have any competition. I did not have to take my market share from another competitor.” Be it TutorVista, Customer Asset, Marketics or IT&T, Ganesh found that there was no pressure from day one to be in a comparable matrix.
Lessons from IT&T
His maiden venture, IT&T, was during a period when neither venture capital / angel funding was popular, nor was the services industry (which was IT&T’s business model). It was also a period where only manufacturing businesses were mushrooming and whose requirements were different when compared to the services sector. “We did not think about monetisation or raising money then. The whole focus was: can I pay the salary of all employees at the end of the month?” says Ganesh. For an entrepreneur it is not about EBIDTA (earnings before interest, depreciation, tax and amortisation), EPS (earnings per share) or profit margins, but about having a positive cash flow. “If at the end of the month, I have cash to pay all my expenses, then I have a successful business. If I delay salary or vendor payments, then it is an unsuccessful business,” he adds. His first lesson on entrepreneurship was on how to manage cash flow successfully.
The second one was to select the right co-founders and partners. At IT&T, Ganesh had five partners with different backgrounds. But over time, they had to buy the share of a couple of partners as there were differences. “I learnt that you need to choose your partners carefully and also build a strong team right at the beginning. Having a team of founders helped, but not having the right people was also frustrating,” says Ganesh. “In my subsequent ventures, I took care in selecting the co-founders and partners, and it was a great experience as I partnered with right people then,” he shares. Ganesh believes in having co-founders with diverse skill sets who can meaningfully challenge each other rather than always be in agreement.
My worst fear is what if the customer or consumer rejects us and what if we are making a product or service that the customer does not want?
His third lesson pertained to business strategy; one always starts with passion and a lot of excitement. But it is equally important to build a business towards an objective. Without that objective, it will be difficult to exit, scale or monetise any business. “I did not do that in my first venture. But in all the subsequent ventures, I had one eye on the goal and we progressed towards it,” says Ganesh. IT&T was incorporated as a computer hardware maintenance company. Between 1990 and 1998, the software exports sector was picking up. While Ganesh entered the computer hardware maintenance business at the right time, he and his team completely missed the software exports sector, even though IT&T was developing software. “I did not realise that software exports would be a valuable business. Had we been open enough to see the opportunity like how Infosys and Wipro did, be it Y2k or software exports, I could have got multiple times return in software for a fraction of the effort I put in hardware maintenance,” says Ganesh.
The experiences that followed
When Ganesh started Customer Asset, the dotcom boom was at its peak. While it raised US $3.3 million in VC funding during the early stages, it could not get any customers after the dotcom bubble burst. This was when Ganesh learnt how to rejig a business model completely, right from infrastructure and capital requirements to the sales team needed. “We shifted from an email support company targeting the dotcom companies in the U.S. to selling to old economy companies in the U.S.,” he says. He also learnt that despite the best ideas, plans and great spreadsheets, when it comes to execution , it rarely works as per the original plan. This ability to handle the ground reality is something an entrepreneur should thrive on.
Ganesh also did his due diligence when he chose investors or VCs for his subsequent ventures. Customer Asset had three investors and all investors shut down and went out of India when the dotcom sector crashed. “This did not help us. If we had one strong investor then, we could have taken Customer Asset to the next level and sold later, instead of going to ICICI at the time that we did. I am not blaming the investors, but the choice of an investor is important,” says Ganesh. When he started TutorVista, he had a lot of investment offers due to his track record. “I went with Sequoia Capital as it had stability,” says Ganesh. Sequoia invested US $2 million in series A funding in the company in 2006. In December 2006, the company raised US $ 12.75 million in a series B round led by Lightspeed Venture Partners. Lightspeed contributed US $7 million, Sequoia Capital India and Silicon Valley Bank contributed US $3.75 million and Manipal Education and Medical Group contributed US $ 2 million.
In the case of Marketics, Ganesh helped the company scale up in the high-end analytics space that it was operating in. “In 2003, when the company was set up, it could not attract funding as the investing community felt that analytics was a niche and profitable business, but not scalable,” recalls Ganesh. When Ganesh invested in the company, the one thing that he clutched on to steadfastly was to remain focused on a high-end analytics business to define and differentiate it from other BPO and IT enabled companies, and not just pursue topline growth. Marketics was faced with many opportunities during the initial days to take up lower end data cleaning and data entry business for the same clients it was working for. “We stayed away from it then, otherwise we would have been compared to a normal BPO company. Our decision to stick to high-end analytics made Marketics an attractive acquisition target later,” shares Ganesh. Until the time Marketics was sold, it maintained a margin of over 50 per cent, which would have been around 20 per cent had it taken up data entry work.
Two years after TutorVista was setup, Ganesh seized the opportunity in the Indian education market by acquiring Edurite, a company that developed digital content mapped to Indian curriculum. Today, business from India contributes significantly to TutorVista’s total revenues. Ganesh says, “Despite what you tell investors, when you see an opportunity you should be able to seize it. You just have to convince your investors.”
Getting things done
Ganesh always builds a strong team and delegates certain key roles to them. “I was fortunate to hire people with better capabilities and corporate executive skills than what I possess,” shares Ganesh. At two of his ventures, his wife, Meena Ganesh, was the co-founder and she took care of operations and delivery, which are her strengths. But that said, he believes that there are certain important functions that cannot be delegated.
The most important function is that of driving strategy. “Entrepreneurship is very tough business with a very low probability of success. Less than five per cent of Greenfield startups actually succeed. It is important for an entrepreneur to be able to ensure, that despite having 95 per cent odds stacked against him, he is able to make a success out of it. And that role cannot be delegated,” says Ganesh.
When he started IT&T, computer maintenance was a large industry and users paid approximately Rs. 10,000 for maintenance on a cost of Rs. 1 lakh for a computer. “This was a great business for the first two years,” says Ganesh. By mid 90s, computers were more reliable and annual maintenance contracts started to dwindle. This industry’s life was just two years. Realising this, Ganesh branched out into networking, systems integration and started authorised service for international brands like Compaq and Digital. “Every second year, we were rechecking and rejigging our business model. That is an entrepreneurs’s job,” says Ganesh.
An entrepreneur cannot delegate building the core team. “This team is very important and there is no secret recipe for putting together a team. You just have to be able to attract, sell the dream to the founders or senior management especially at the early stage, where you do not have money. The challenge is to get the best of people to work for you,” adds Ganesh.
Raising capital is another aspect that an entrepreneur must prioritise. Investors put in their money at a premium, based on the entrepreneur and his ability, and one cannot delegate this job to the finance head. “You can do that when you are a major conglomerate, where you are raising funds based on certain metrics. As a startup, you are raising funds on a dream, strategy, and the ability to pull it off,” states Ganesh.
The exit strategy
“Fortunately, all four exits have been profitable for me. Often, entrepreneurs exit a business when the market conditions have changed. It was not so in my case, even though levels of success could have been different,” says Ganesh.
There are multiple reasons why he exits a venture. One, he identifies if he can continue to create further value for all the stake holders (investors, company, business and for himself) by holding on to the venture.
Two, he believes that there are people who are good at running a business from scratch, that is ideating to developing it into a viable business and those who can take that business from one level to another (scaling up). These are two different skill sets at play. He enjoys starting up a venture than running a large business. “It is like someone who maintains an orchard versus someone who runs a nursery, whose job is to plant seeds and saplings,” says Ganesh.
Three, some businesses require a different kind of size and scale to go to next level. “A few of us defined the call centre and BPO sector in 2000,” says Ganesh. And this was when the big IT companies did not want to enter this space as it was a low-end business for them then. “But when the dotcom burst happened and the IT industry slowed down, all the big IT players entered the call centre business,” adds Ganesh. TCS entered the BPO sector through Intelenet, Infosys through Progeon Limited and Wipro by acquiring Spectramind. “Suddenly, the call centre startup business that I was in, became a big boys playground,” he says. The business dynamics of the call centre business changed and Customer Asset could not compete with them in this space. Ganesh sold the company and so did the rest of the startups. He did not want to continue in this business as it required a much stronger balance sheet and corporate credibility, which startups cannot afford.
Next on the cards
A major portion (80 per cent) of TutorVista was recently sold to Pearson. Ganesh has a three-year period with TutorVista out of which a year is over. For the next two years, he has the responsibility to run the business and achieve scale, after which Pearson will completely takeover the company. While he looks forward to a continued association beyond this period with Pearson in a non-executive capacity, his entrepreneurship journey will continue. He will be a mentor and investor on the board of companies that he is promoting and incubating. He is currently involved in Bluestone.com, an online jewellery business, which is going to be launched officially in the last week of January and Bigbasket.com, an eGrocery venture, that went live across Bangalore in December. He is also involved in Bookadda.com, an online book store that has been functional for the last one year and Mustseeindia.com, a travel destination site that was launched six months ago.
Ganesh’s belief that one should have a strong passion for an idea and a conviction that the idea will work is what made him a four-time entrepreneur. His motivation and drive to go through the starting up hardship multiple times is his key success quotient. The clarity of why one is doing what he is doing, the desire to keep doing something new without looking back at the achievements that lead to complacency, and the ability to burn what’s done in the past and start from scratch are some important traits in a serial entrepreneur. And that’s what drives Ganesh to continuously recreate an organisation after he exits one. As he signs off, his advice to aspiring entrepreneurs is: “When you are attempting entrepreneurship, which is hard, try something really big. So, even if you fail, you fail spectacularly. Don’t attempt something small and fail.”
HIS ENTREPRENEURIAL JOURNEY
1990 – Started IT&T, a hardware maintenance company
2000 – Sold IT&T to iGate Global Solutions. Started Customer Asset, an international call center and BPO
2002 – Sold Customer Asset to ICICI OneSource (now Firstsource Solutions). Served a one year exit period in 2003
2004 – Invested in data analytics BPO firm Marketics. Spent 5 to 6 months firming up the business idea for his next venture, TutorVista.
2005 – Started TutorVista, an online tutoring firm
2008 – Sold Marketics to NYSE listed WNS
2011 – Pearson, a U.K.-based publishing and media group, bought over 80 per cent of TutorVista in January. For the next two years he has the responsibility to run the business and achieve scale, after which Pearson will completely takeover the company.
Note: He worked for HCL from 1985 to 1990. He was the CEO of Wipro/ Bharti British Telecom between 1998 and 2000.
• Starting with low chances of success
• Raising capital
• Getting the business model right and proving that the model works
• Attracting smart people to leave their secure jobs and join a startup, which may shut down in a year or two.
• Getting a consumer to trust a startup with lack of systems, processes and questions of stability
WHAT EACH VENTURE TAUGHT HIM:
• How to manage cash flow successfully
• Select the right co-founders and partners
• Build a business towards an objective rather than getting caught up in day-to-day operations
• Rejig a business model completely, right from infrastructure and capital requirements to the sales team needed
• Due diligence while choosing investors or VCs for the subsequent ventures
• Don’t take VC/PE money if you don’t really need it – scalable and valuable businesses can be built by bootstrapping ( less than US $ 500,000 invested in the business returned over US $ 63 million in five years without VC participation )
• Remain focused on the high-end analytics space and not just go after topline growth
• Aim big and go for large , uncontested spaces with a disruptive business model
• Even if you have to fail , attempt something big so that you fail spectacularly
• Despite what you tell investors, when you see an opportunity seize it. You just have to convince your investors.
THEN AND NOW OF TUTORVISTA
Before setting up TutorVista, Ganesh spent a few months in 2004 conducting consumer-focused research, where he spoke to almost 100 people from his target audience (students, teachers and parents) in the U.S. While he knew he had a business idea, he wanted to strengthen his conviction about the opportunity, and also identify and address the concerns that parents in the U.S. had. “I found that they were open to the idea: courtesy the history of the Indian software industry,” says Ganesh. However, Ganesh did realise that their concern was whether their children will be able to adjust to the overall system with a change in teachers’ accent, cultural differences and the new online education concept. He built TutorVista taking into account these challenges and offered free trials to its users so that they understood the concept. And subsequently, its cost effective model appealed to the audience in the U.S.
The company also invested heavily in teacher training and certification. It trained the teachers remotely and helped them changeover to the U.S. curriculum and method of teaching (from rote-learning to example-based learning). The teachers were taught to be more interactive and exposed to Internet etiquette. While this was an operational challenge they had to overcome, teacher retention was really not an issue. “We appeal to a different crowd; the one that is highly qualified and has taken a break for some reason and would like to work from home,” says Ganesh.
Two years after Ganesh and his team started online tutoring for the U.S. market, they saw a huge opportunity in the Indian education market. But Ganesh realised that India was not ready for 100 per cent online teaching and could not replicate the TutorVista model. “We decided to enter India with a technology-leveraged model but not a 100 per cent online or virtual model,” says Ganesh. In 2008, TutorVista acquired Edurite, a company that developed digital content mapped to the Indian curriculum. Edurite, an eight-year-old company then, had good content but did not scale well as it was only selling CDs at book shops. Ganesh changed its go-to market strategy after the acquisition. “Our strategy was to use the core content of Edurite and build additional layers to take it to market for after-school tutoring,” adds Ganesh. While CDs continue to contribute a small portion to its revenue, its model today appeals to schools and tutorial centres.
WHAT MAKES A SUCCESSFUL SERIAL ENTREPRENEUR?
• He / she should have the passion for an idea. Unless you are passionate, you are not going to do it again.
• One needs to be stupid enough to believe that against all odds, the idea will work.
• One is not satisfied with what he/she has done in the past and has a deep desire to keep creating something new.
• One has the ability to erase the past and start from scratch.
Remember not all businesses are about exits. One can build a challenging, satisfying and a profitable business, and run it without venture capital funding or sale. But if you want to exit, make sure to:
Build a business from day one with the notion of scaling, building value and exiting. And you can exit a business only if it is scalable.
Always think about what the ultimate end-game is and build a business according to it. Do not make the mistake of taking any path thinking it will lead you to your goal. Then, you will not be able to scale and exit the business. Right from day one, answer what is going to be the end-state, plan for it and build your company along with it.
Show value for the buyer or investor, which will happen if you reverse engineer the business and build attractive elements based on what they value.