Alok Kejriwal -On the High

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The toughest decision of my life…

Posted on August 11, 2011 by Rodinhood

Mobile2win- China and India

By 2005, a company I had co-founded called Mobile2win (originally started in China in

2001 and then brought into India in 2003) was sailing…

We were first movers in the India Mobile VAS (value added services) space and things

were looking up – thanks to all our learnings in China. The first Indian Idol votingplatform had been successfully handled by us (and ever since) and Sony India had made

us a long-term partner. We were partnering with lots of media companies, selling our

mobile games on Vodafone and creating creative marketing platforms. Rajiv

Hiranandani – head of the business was doing a great job.

The success was also creating a sweet problem:

The business needed a series B investment to scale and my existing investors – Siemens

Mobile Acceleration from Munich and Softbank Ventures from China were not at the

best of terms with the management of mobile2win.

Just a month earlier I had come back from Shanghai and attended the most

bizzare board meeting ever in my memory. The meeting started at 9 am and by 9:30 am,

there was war in the boardroom. 2 Germans (Helmut Struss and Oliver Kolbe from

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Siemens), 1 Indian (Gopala Krishnan (GK) – the CEO) and 2 Chinese (Peter Hua and an

Observer from Softbank) were all screaming at each other simultaneously in German,

Chinese and in Hindi (me telling GK to control himself). The issue was typical start-up

stuff – scaling up, finances, hiring, firing etc, etc, and while I let them go at each other

(Softbank shouted at GK for pointing fingers with this hand – a very „disrespectful‟ act in

China), clearly this was a board that was not going to co-operate with me for raising

money in India.

Back home, when I started showing mobile2win around, there was massive interest.

Sandeep Singhal of Sequoia India was kind enough to stay up late night in his room at

the Taj, Mumbai and hammer out a term sheet for me the next morning.

All these and more got no responses from Softbank and Siemens. So I asked them whatthey really wanted?

Softbank was not going to put money in and Siemens wanted out. They were non-Indian

VC‟s and only Indian VC‟s would understand Indian Mobile VAS space and hence invest.

This was going to be a tough deal to close out.

One afternoon, I met Pramod Haque and Vab Goel of Norwest Venture Partners. ( I later

learnt that Anupam Mittal of shaadi.com fame had turned down a term sheet of Norwest

for funding Mauj.com).

Norwest stepped on the gas and took an active interest in talking to Siemens and

Softbank and understanding their motivations. They engaged with mobile2win

management and also spoke to other investors.

A few days later, late afternoon I received a phone call that precipitated into the

„toughest decision of my life‟ :

Vab indicated that he had settled all issues of valuation, exit and new investment

between Siemens and Softbank and the management of Mobile2win (GK and Rajiv), and

that Norwest and another VC was ready to go ahead in massively funding mobile2win at

great valuation terms.



Except, there was one condition:

Alok (me) had to exit the company!!!

At first I thought he meant Alok had to be distanced from management and I told him

that I was barely involved. “Exactly” he told me – “You have no role to play, do not have

the capacity to invest more money and your chunk of equity will free up lots more space

for new investments”. Essentially Norwest wanted to buy out the promoter, make the

company totally VC owned and then drive the management themselves.

Over weeks, I understood that this was a non-negotiable stance by Norwest. Also, the

other 2 investors – Siemens and Softbank were sold on this solution and began to

pressurize me to exit (For the innocent – if most VCs want an exit to happen, they canforce the promoter to do the same using the „drag out‟ clause).

So, here I was – someone who had founded a good company, sitting on the brink of VAS

value explosion in India, and now being offered millions of dollars to walk out. It

became a very puzzling and difficult situation to handle..

Since the Company was structured in China, I took a legal view from a historic law firm

in Hong Kong called Haldanes and I remember the very polite British accented lawyer

talking to me for 1 hour non stop till I interrupted and asked him – “Do I have a case to

stay in”? He replied “No Alok”.

I then consulted my most supportive VC and guardian of all these years – ICICI

Ventures. Bala Deshpande and Nandini Satam were so objective in their advice and

mentoring – I still regard ICICI Ventures as the best thing that ever happened to me as

an entrepreneur.

Late night at 2 am, I got up and sat in my living room and brooded about the exit frommobile2win. I would be rich, the company (contests2win) would receive substantial

cash to do other things etc, etc … At the same time I would also have to sign a 3 year non

compete from doing anything mobile in the world (!!) and have to live without what may

become a billion dollar company without me.



Legally, I could battle it out… A „drag out‟ would take months to execute and kill the deal

and also the funding – so it would finish the company. I would have at the most won a

Pyrrhic victory…

The next morning I called Vab and said „ I‟m selling‟.

The deal closed within 4 months. It made me a dollar millionaire and more importantly

put cash into the mother company (since share were held by contests2win) that allowed

us to pay a 1250% dividend to shareholders. We invested 1 million US$ into games2win

that jump started the business and received funding from Clearstone and Silicon Valley

Bank.

The months that passed were dark. VAS continued to haunt me and I would wonder if Ihad lost the biggest opportunity of my life… Mobile2win India hired big wigs from TV

and elsewhere and moved into a 10,000 sq feet office (from the 1500 sq feet office I

had). They hired over 200 folks and seemed to the hottest company around…!

So, what was the outcome you may ask?

In 12 months post the deal, the cracks in the VAS business began to appear in the Indian

Mobile space. Operators were unrelenting to share more than 20-25% revenues,

payments were delayed by months and the business became strangulated with lots and

lots of wannabes giving away content and revenue share for free.

24 months later, mobile2win was flipped over by the VC‟s to a Chandigarh company

called Altruist for a non-cash deal. The business had collapsed and this was clearly the

VCs saying it was over.

For me, this was not sweet revenge but just the toughest decision (to sell or fight) that

had turned out so positively!! Added to this was the fact that the non compete got overin 2009, so I became free to do anything in VAS!

And what happened to Mobile2win China? GK left and a smart Chinese called Nick

Zhang was hired by Softbank and Siemens as the CEO. Nick turned the company

around and then astoundingly sold it to Walt Disney (USA) in a multi million cash $$

transaction. Softbank China, Siemens and my group got lucky again!



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← The toughest decision of my life…

So, what are you looking at? →

The Seven Subjects I learnt at Marwari Business School(MBS)

Posted on August 15, 2011 by Rodinhood

On the last day of my ICSE exam (10th standard finals), my Nani (Grand mother) offered

me a free seat into the Marwari Business School. I was 16 and I had the opportunity to

go and sit in my Nana‟s (Grand father) office.

I took up the offer.

These are the seven subjects I learnt:

M = Monetization Mentality

Monetization above everything else!

For Marwari‟s, money pretty much means everything. It‟s the „currency‟ of success –

pun intended. People are sized and measured not by their waist sizes but by the width of

their balance sheet. A Marwari‟s religion is making money and they meditate on it.

What Monetization and its terms means is also unique for Marwari‟s.





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For instance, I learnt that Revenue was not what you „bill‟ or „pass-thru‟ or „recognize‟.

Revenue was always what you „net-net‟ earned that came in your coffers.

Revenue is bottom line for a Marwari – not top line.

Also, the facets of revenue became very clear to me. Every capital investment (be it land,

or machine or even cars and computers) had a „monetization expectation‟ attached to it.

You could spend on things only if they made money. Hence ordering flowers for office

tables in a typical Marwari office would be disallowed (despite the plea that they

enhance profitability).

This „monetization mentality‟ made me create what I believe was the most detailed

costing breakup of any socks factory in the world. I took 3 years to „post mortem‟ the

cost of everything we incurred (whether real or notional in terms of interest lost) andlink it back to revenues that were being earned. So, I could tell you that if you ran extra

air-conditioning in the office building, then „X‟ was the revenue that needed to be

generated to make a PROFIT on that extra spend.

Also, I learnt that revenue was something to be always ‘improved’ – not just by price

hikes alone. If collecting money from debtors were improved by 3 days, then there

would ‘X’ reduction on bank overdrafts and hence extra income to the firm etc.

A = Accounting Archery

Have you tried accounting Archery?

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All successful Marwaris really know their accounting. Trial Balances, P&L statements

and Balance sheets are the juiciest novels that a Marwari reads. What they clearly

understand is the concept of „Capital‟ & how Capital gets generated at the lowest cost

and how that same Capital then needs to be exploited to the fullest.

„Creativity‟ in accounting was the highlight of what I learnt. I remember when I was 17,

an uncle sent me to his Chartered Accountant (CA) to finalize and close my Uncle‟s

books. Like a good student, I prepared the P&L and presented it to Mr. CA, along with

the „tax‟ liability. He chuckled and then called up my Uncle in my presence on a

speakerphone. I expected Mr. CA to tell my Uncle what I had prepared. Instead Mr. CA

asked my Uncle „Babu (Sir), how much tax do you feel like paying this year‟? My Unclegrudgingly muttered a number and that was the end of the call. Then Mr. CA took my

P&L and completely re-crafted the numbers (and believe me legitimately) to perfectly

match the tax outgo my Uncle wanted to pay!

R = Righteous Rigor.

Each month, there would be at least a couple of instances when a very old worker (you

know the ones who look like grand dads) would hang out near the factory cashier with a

couple of his relatives. At the right opportunity, the worker would gently knock on my

fathers cabin door; enter nimbly; gently walk together my father and then bend down to

touch his feet. The first time this happened I was stunned. I mean it was very demeaning

to see such an old man behaving in such a subservient way. My dad of course would

immediately stop the old man from bending further, do a „Namaste‟ (fold hands) and

greet the man. I would almost always notice the tears in the old worker‟s eyes.

I learnt later that these workers had worked for 30 -35 years in our factory and this was

the „D‟ day they had withdrawn their Provident Fund account (saved in the factory for all

those years) to be used for marrying their daughters or for buying a house etc. Theamount they received was largely disproportionate to their monthly salary (lacs of

rupees) and they solely relied on our Company to safeguard their moneys, banked safely

for an important day.

If you have read how corrupt many companies have been with PF accounting and the

fact that some of them have NOT even maintained accurate PF accounts and have



squandered what was not their own money, you will realize how damaging this is .

Imagine telling this 60-year-old worker on the eve of his daughter‟s wedding that his

fortune of 30 years will be paid „later‟ (meaning never).

This taught me a lot. It taught me morals, ethics and righteousness and how to actually

live up to others people‟s TRUST that they have placed in us.

Most People are naïve and innocent and very trusting. We have to honor their faith in

us.

W = Wait, Watch and Win

When I sauntered into my father‟s factory on a bright Monday morning on my first day

at work, I thought the world would be at my feet. In my mind I had a desk to myself, lots

of papers and files, a huge telephone on my desk with lots of blinking lights (rememberthe EPABAX) and a constant stream of visitors to meet and greet me.

Quite the reverse of that happened.

Have you learnt how to Sit?

When I entered my dad‟s cabin, he pointed me to a rather uncomfortable looking

„corner‟ chair, and asked me to SIT. I remember his words so clearly even today. He said

– „Alok, learn how to sit. If you can just master sitting, you will have learnt a lot‟.

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Grrrr…I was exasperated! I mean I was a rock star supposed to gyrate and prance all

over the stage. Instead I was being locked inside the backstage changing room?

Slowly, the concept of „waiting and watching‟ began to sink in. For almost one year I sat

like a flower vase on a pedestal in my dad‟s cabin just watching him function.

I was not asked for an opinion and was even barely noticed! Being completely ignored

became a normal emotion for me, and I spent the hours just learning.

And how I learnt! From everything about machines to finance to production planning to

inventory management.

I guess the biggest lesson I learnt was that winning comes from waiting. In the first seven years of starting contests2win.com (my first independent business),

this „waiting‟ training bore rich fruit. I became the expert at waiting outside client‟s

offices for hours just to meet them for five minutes. Never once did I even feel bad or

humiliated. I became best friends with these busybody‟s personal assistants and

secretaries and learnt a lot about the way their business functioned. In fact, I even

found a long-term partner in Rajiv Hiranandani while waiting for hours in the Shaw

Wallace office in Mumbai! Rajiv was the head of sales of Yahoo at that time and after

many „sofa‟ meetings at Shaw Wallace, he agreed to head mobile2win India – a mobile

business that I was just starting up then.

All good things in life take time. One has to learn to wait, watch and then win.

A = Attitude Adjustments.

Marwaris generally have little ego issues. We are trained to do business and not to

pretend to be the Queen.

In 1994, my father and I traveled to Germany to attend a textile fair. That was one of the

busiest fairs in the world, and all the hotel rooms were fully booked. My father and I were sharing one room.

In the hotel lobby, while eating breakfast we met one of the largest textile Barons of

Hong Kong – who was a Marwari and had emigrated there many years ago. He was

hugely successful and very well known globally.



While all of us were eating together, a rather disoriented looking man in a crumpled

shirt and Hawaii slippers came across and stood next to Mr. Textile Baron. Mr. Baron

smiled at him and excused himself and arranged breakfast etc for the man. Later he

came back and explained that this man was the chief jobber (mechanic) in his Indian

factory and had never traveled in a plane before or ever stayed in a hotel. He did not

know how to operate the bathtub shower. However he was the heart of the factory and

Mr. Baron was sharing his room with him to make sure he was comfortable!

That trip I learnt a lot about attitudes, and how to adjust them to be a very successful

entrepreneur.

R = Risk and Reward

About 4 years into having started the export division of my factory and having executedmany successful orders, I was on top of the world. I guess I was enjoying the sweet „high‟

of success.

Retrospectively put, I think I had become over confident.

As scheduled, I met my buyer from C&A (An erstwhile large European retail clothes

store) in my factory showroom and began discussing new orders. My buyer winked at

me, retrieved a bundle of socks from his bag and laid them on the table. The yarn color

and texture of the socks caught me my surprise. This was that „heather mixture/grey

flannel‟ type color (like the t-shirts that look like a blended grey). My buyer said „Alok,

this new yarn is a rage in the EU. I am happy to give you an order that will be 5 times

larger what we have ever done with you – if you can ship your socks in this type of new

yarn in various color tones‟.

I asked him what this yarn was and he very casually said „oh, it‟s a cotton mélange. All

global socks manufacturers are working with the same yarn in their country; I‟m sure

you will find suppliers for it in India without a problem‟.

I looked at him, and the socks and said „yeah, I‟m doing it‟.

What I never realized was that I had taken the biggest risk of my life. I also think that

greed had blinded me. I could have agreed for a trial order rather than one that was five

times the usual size.



But I also learnt that what entrepreneurs do for a living is to leap without looking.

Once I received the order sheets, I began scouting the market for mélange yarn. None of

my regular suppliers made that type of yarn. A couple of the suppliers in Hyderabad (the

south of India) were large producers of Mélange, but their yarn composition was

synthetic not cotton. Quickly I began to panic because I could not find a single yarn

supplier of that yarn in India. What haunted me was that non-fulfillment of the socks

orders meant severe penalties and a black listing to ever work with C&A.

Melange, Melange, Melange!

Added to the problem was that I had accepted the orders in 5 different types of yarns.

The standard colour in Melange was grey and not „sky blue‟ and „camel‟.This order was

looking like a train wreck for me.

After an agonizing search and hunt operation, the Hyderabad Company agreed to spin a

special Cotton yarn for me in their regular 2/40‟s count. (In cotton, the larger is the

count, the finer is the yarn – so 40‟s is good for garments and 200‟s is what we wear in

shirts. „s‟ stands for single yarn). I actually wanted 20‟s which is used for socks.

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Now, 2/40 meant that 2 yarns of 40‟s would be twisted together to make it as thick as

20‟s (which is what I wanted), but the cost was double of what I was paying for 20‟s

yarn. So buying 2/40‟s was a no go.

Finally, I convinced them to spin the yarn in 20‟s (20 single count) and they sent me a

few spools to test.

When I got the yarn and spun the socks, I had a heart attack. Because the yarn was

mélange and a single thread (20‟s), it was „twisting‟ and „turning‟ like a top and making

the socks look like they were „wrung‟ to death. The 2/40‟s yarn would not have that

problem because a „S‟ twist and a „Y‟ twist were spun together giving the combined yarn

a „neutral‟ spin – but as explained earlier, I could not afford that yarn!

When I explained my agony to the mill, they asked me to „heat‟ the yarn via a specific

process to „kill‟ the spin. I did just that and enjo yed my second heart attack – the color of

all the 5 yarns dramatically changed when „heated‟.

In the end, I got a „duller‟ 20‟s custom cotton yarn made, got that yarn heated to kill its

twist make it look like the original colour ordered and even „washed‟ all socks to kill the

little spin left behind. Because the washing was shrinking the socks, I had to redesign all

socks specs in a way that after they were washed and shrunk, they came back to the

original size the buyer had ordered!

I made my shipment just on time and that execution paved the way to tripling our

exports in the next few years. Interestingly, most of the orders that came in those next 7

years were mélange yarn orders.

I had learnt the very difficult lesson by taking on Risk; but more importantly

managing risk carefully and with perseverance to make it rewarding.

In 1999, when I walked out of my factory doors to launch contests2win.com – I had noclue about the Internet or promotions or marketing. I just thought of my European

socks buyer and chuckled. Intriguingly, that day I was wearing a pair of „mélange‟ socks!

I = Innovative Ingenuity

When I pitched to my father that there was a massive opportunity to export plain white,

navy and black socks to Europe but at ridiculously cheap prices, he took up the



challenge and worked back to back with his technical team to „refit‟ Indian knitting

machines bought from Punjab to make socks worthy of European feet.

In essence, he innovated and created a sock that was the same in quality as a European

sock, but knit from a machine that cost 1000$ in India vs. 20,000$ in Italy.

The trick that really mattered was treating the „Toe‟ portion innovatively. In Italian

socks, the toe was knit „within‟ the machine and very finely, so that it did not cause

discomfort to the consumer while wearing. In Indian sock machines, the toe portion

came out unstitched; to be manually „sown‟ over the open ends to close the toe. The

process of sewing Indian socks caused a thick seam that always created discomfort while

wearing the socks over the consumer‟s toes.

Sock toes that are ‘Granny’ finished!

My dad fixed the problem by using an external machine to sew the thread into the

Indian sock almost needle on needle (like granny‟s knit sweaters) using a slow manual

process that yielded a finish that was better than the Italian machine. Labour was cheap

in India, and the outcome was perfect!

You can imagine how profitable the business became since we were getting paid for

socks priced at EU costs whilst making them with Indian machines, yarn and labour.

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This experience embossed the passion to reinvent in my mind. I have observed that

there is a constant drive in all Marwari companies and entrepreneurs to „re-think‟

business processes, concepts and change „this is how it is done‟ to „this is how it can be

done profitably‟.

In 1998, after spending 7 years in the socks factory, I quit and started contests2win.com.

The day I left the factory premises, I think I had graduated with merit from the Marwari

Business School.

This post is dedicated to my Dad.

*****

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Alok Kejriwal -On the High

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