Rajesh Jain is an entrepreneur with many feathers in his cap. Known as the dotcom pioneer of India, Jain began his journey in the 1990s establishing IndiaWorld. The company was one of the first Indian online portals that had news, email, and chat.
He is also the founder of Netcore Cloud, a global marketing technology company that offers AI-powered marketing automation and analytics solutions. The company is headquartered in Mumbai and has over 15 offices across the world in places such as the US, UAE, UK, Germany, Singapore and Malaysia.
The Core’s founder and editor Govindraj Ethiraj spoke to Jain about his journey as an entrepreneur which is marked by successes and failures that have shaped his perspective on business and growth. Jain’s first venture emerged in 1995 that coincided with the early rise of the internet in India.
"If I look back at my 30 years as an entrepreneur, I have probably succeeded twice and failed more than 30 times. But that's what I like," Jain said.
Speaking to The Core, Jain said that Netcore did not grow for the first seven or eight years. "I was coming to with lots of ideas and failing. In 2007, I decided to hire a CEO. Then we got serious about creating business solutions to solve real problems that businesses have," he said.
Here are the edited excerpts from the interview where Jain talks about his approach to capital raising, focus on profitability, evolution of Netcore and his future aspirations:
Back in 1999, you had a cheque of Rs 499 crore and you sold your company. It was the time many people called you the most successful dotcom entrepreneur of the time. And perhaps you were because you actually exited a company at a valuation which was stratospheric to say the least. Before we come to your fresh journey, tell me a little bit about the first company which started in 1995. In some ways also maybe foresaw the architecture of the internet itself, which was IndiaWorld.
IndiaWorld started early 1995 and it came out of multiple years of failures after I'd returned from the US. I keep thinking that if any of those previous ideas would have worked, there would have been no IndiaWorld. That's the life of an entrepreneur. And it came about because I was looking for success in my life. I had come back from the US and failure after failure I was wondering what to do next. And it emerged out of two things. One was that the internet had just started rising. And second one was my own experiences in the US where I realized the internet could be a great bridge of distance. So it could essentially serve information, other kinds of content to Indians globally. And I think it was the right idea, right time. And we were the first Indian portal to launch in March 1995.
We launched very close to the time Yahoo and Ebay did. And someone was telling me that if you had focused exclusively on the US market, you probably would have ended up with one more zero in the money that you got after you sold. But I think I understood the Indians mentality. I had lived in the US, I knew what the gaps were and that's how IndiaWorld began. And the four sites that really worked incredibly well for us were Samachar, Khoj, Khel, Bawarchi, the verticals for news, search, cricket and food. And we had the website business which got the cash flows in. So I didn't need to raise capital. And the advertising then started taking off in 1997, 1998.
And you seem to have, at an early stage mixed B2B (business-to-business) and B2C (business-to-consumer). Many people wouldn't allow you to do that today. They'll say you focus on B2C. I mean, what is this B2B thing doing in your portfolio?
Absolutely right. I mean, we could do that because we had no investors and we had to make money. We had to be profitable because there was no other source of capital for us.
You were in Nine X, which is a telecom company. Was that what, in a way, gave you the introduction to the Internet? Or was it just by looking around in the US? And this is the 90s. I mean, it's a very different time.
Actually, when I left for the US for my Masters at Columbia, my father had told me to finish my masters’ nine months, work for two years and come back.
So for me, the sort of decision that I had to come back to India was done. Once I finished two years at Nine X, my father called me up. And I wanted to be an entrepreneur. I had worked two years at Nine X. I was very clear that I'd seen my father do multiple things in his life as an entrepreneur. I was clear about the fact that I didn’t want to work for anyone else.
So, when I came back, I was with a co-founder at that time and we tried multiple things – image processing, multimedia databases. Unfortunately, none of those ideas worked. And then late 1994, I was back in the US. I spent two months at a friend's place, trying to figure out what to do next in life. I'd gotten married, and was barely talking to my wife because I could see my company collapsing at that time. And it was that time that when I went to the US in September 1994, my first experience of the Internet was through a dial up connection. And I said, this is incredible.
You're sitting here and you can access pretty much anything anywhere in the world that people are creating every day—new sites, new pages were coming up. I said this could solve a problem which I faced when I wanted to come back. How do I get information about India? How do I get the cricket scores? How do I get news? How do I get what's happening in India? Because the only option was newspapers, which used to come ten days later, or India Today, which was again a couple of weeks delayed.
And from there came the thought that the internet could really serve as the bridge. And I had an audience which was very similar to what I had lived through at that time. And that's how IndiaWorld originated.
You had a few other options to sell, and you waited for something, obviously, which was the big one, but what made you not sell earlier and then sell finally?
Yeah, so I had this habit that I would talk to lots of VCs and investors and potential buyers. I had this habit of telling them in the first meeting pretty much what my valuation expectation was. Most of the meetings ever would not go to the second round. Every time I failed, I would keep upping the expectation. So there were multiple rounds which had not worked. The last term sheet that I had got was from Bank of America for $13 million. And on the day they were supposed to sign, they said that, look, we'll put in $4 million, which was agreed on, but you need another $4 million because everyone else was raising lots of money. I said, but where can I go and get $4 million more. Now I don't have anyone else I'm talking to. They said, no, then we'll have to wait.
And as it turns out, in those two months, as I was wondering what to do, we got two incoming offers. One was from mail.com, which owned India.com, a US company, and they wanted to merge IndiaWorld or some Indian site and take it public on Nasdaq six months later. I mean, that was the time everyone wanted to go public. And then SIFI, Satyam Infoway had just done an IPO in India. Merrill Lynch had managed the IPO for them. So they had a lot of capital. They were like an ISP in India with a very small content business. And the story that investors and they were thinking about was an AOL of India. So connectivity plus content. They were looking for potential acquisitions and Merrill Lynch was my banker, and I think in three weeks time, the valuation went up from sort of 40 million, again, higher than the 13 million I had from bank a month ago.
The dollar was at a different rate those days.
It was around Rs 45 at that time. I think that was the time when the stock prices used to go up a few percentage points every day. Money was freely available. The internet was like the hottest thing out there, and time was seen as the sort of constraining factor, not capital. And yeah, those were the times in late 1999.
You mentioned a conversation with Hemandra Kothari in your book where he says that you basically think about when you want to exit, as well as you think about when to get into a new business. And was that the piece of advice that made you decide that you had to sell at that point? Because if it's 499, why couldn't it be, let's say, 999?
To put it in context, we were Rs 3 crores in revenue. So even at 499, 166 times revenue now in today's multiples, when people think about it. My wife and I had really built the business up over five years. For us, this was our passion. I asked Hemandra what I will do after I sell. This is for the last five years and we couldn't think of anything else besides this business. And he said, Rajesh, you will never get this kind of money again, what the money will get you is freedom in your life, you are a person of ideas, you can do lots of things. He told me not to get so emotionally attached that I can’t make the right decision And then he said this line, which I still tell so many entrepreneurs, “More important than knowing when to enter a business is knowing when to exit.” And thankfully, I took his advice and we sold.
The point where you had that money in your hand, how were you charting your life back then?
This was completely unexpected because for the last few years before that, all I had known was sort of failure and disappointment and capital raising. And if you think about it, at some point of time, money is just a number. And the next morning, my wife said, “If you think about the money that you have, you will never do anything again in life. So what's done is over. Forget about the money. You like to build new things and just go about doing that.” I think she kept me completely grounded, otherwise it's very easy
.And luckily at that time, there was no social media, nothing. I went to work the next day, barely anyone knew where I was— a small office at Raheja Center at Nariman Point.
I think her words stayed with me and then I said okay, what do I like to do best? It is about coming up with new ideas. So I spent the next couple of years with SIFI and we had to do the merging of the content businesses.
And even after that, the thought that I should retire or should do sort of investing, et cetera, wasn't that I was not very keen on it because what I knew myself as is coming up with new ideas and building things out. And if I look back on my 30 plus years as an entrepreneur, I've probably succeeded twice and failed 30 plus times. But that's what I like. Even I tried investing briefly around 2005-08 in multiple companies, and I said, I don't like it. I am the builder. I love coming up with ideas, making them happen. Failure is part of this terrain because most of the ideas don't tend to work. But that's what gives me joy.
Tell me about Netcore now. This is obviously a different path from IndiaWorld, which was clearly more consumer-facing and this is different. So how did you choose this? And within that too, you seem to have constantly looked and found newer fits within that.
So Netcore basically came again, it sort of came out of IndiaWorld just before I sold because we were doing a Linux mail server business. What was happening was a lot of companies would come to us saying, okay, the website is there, we're getting all these emails now, how do we reply to them?
They didn't have an internal mail server and we created a Linux-based mail server as an open source alternative to Microsoft Exchange, which used to be very expensive at that time. And that's how Netcore started because I separated these two businesses because it was very hard to explain to investors. I'm running a tech business and a content business together.
For the first at least seven years, Netcore didn't grow much. I was coming up with lots of ideas and failing. And then in 2007, I think I made the smart decision of hiring a CEO in Netcore. Then we got serious about creating business solutions to solve real problems that businesses have. One of the key problems businesses had at that time was communications, communicating with their customers. So email, SMS were just rising at that time. And that's the path that Netcore has been on over the last 15 years. The core focus has not changed much. It's about businesses, large B2C, companies wanting to interact, engage, communicate with their brands, with their customers.And what has changed are the methods of those interactions. But the core problem solving that we do for brands has remained the same over the last 15 years for Netcore.
Let me touch upon some of the themes that seem to accompany you and as you focus on them. So one is not raising money or not taking money. So why are you so steadfast about that?
I'm not steadfast. I have to thank all the investors who've not invested in me. I was just counting recently and I said there are 50 plus times I've been rejected by VCs and PEs. What happens is that my terms for getting in capital, I put forth right up front. And I can do that because I'm profitable. I'm not desperate for capital. This drive for profitability has been there since I began because that was my father’s advice who told me not to get external capital. In his mind it was debt because he knew that debt could destroy businesses because of whatever interest payments and all of those things put together.
If I'm not taking external capital, then the only option is I've got to be profitable. So even though I didn't plan it that way, it turned out a little bit like this. And then I realized that if I'm profitable, and especially if I could get a flywheel going in the business where I could combine growth with profitability, I didn't really have to worry about being desperate for external capital.
Now because of that we have freedom. We can decide what bets to make, what not to make. Think about the long term, especially when troubles come, crises come like the pandemic period when revenues sort of collapsed for lots of companies. We didn't fire anyone.
I had this line where I said, unicorns fire, proficons hire. And that I think, helps build a better business long term because employees now know that you're not fair weather partners in their lives. Brands know that because you don't have investors breathing down your neck you're not going to just randomly make pivots or just lay off 10-20 percent of the workforce. So you become a stable partner for both customers and for employees, which I think helps us also take what I call the infinite mindset. Like the Simon Sinex phrase that you can think much longer term beyond the immediate quarter for a business, you can make longer term bets and it's I think, a happier life for everyone. But it comes from the fact that, A) you have to be profitable and you have to have growth. Just one or the other doesn't work.
Are you trading off on two things? One is, let's say, maybe what you're arguing against is institutional capital and everything that comes with it. The other is just going public, which gives exit maybe to you to some extent, if you wanted to. And of course, employees who in your company have ESOPs, which I know you're buying back, but could that have been a bigger option? So how do you see how you play off against that?
Last year, we were looking to do an IPO, and Netcore is 25% owned by employees. So we have a very large ESOP pool. And for me, the purpose of an IPO was two-fold. One is, of course, liquidity for employees. Second is a currency for acquisitions, because today, if I have to do acquisitions, I have to do it completely in cash.
With Unboxed, as we did last year, and we've done a few others but Unboxed was a large sized acquisition. So of course our plan is to look at an IPO. Then the markets changed. It was very hard for tech companies to actually list. So I said, let's leave that aside for some time till market conditions improve.
Also, for us, what's happening is now we are investing aggressively and expanding in the US and Europe. I think if we can do that, maybe wait for a little while till conditions improve, till we are able to show good traction on our international developed market expansion. I think that would be a very good story also to take to markets because there are very few global Indian product companies in Software as a Service (SaaS) companies and Software which have a very strong domestic base and an international presence. And that's the part that we want to combine for a very solid story to the markets down the line.
Since you mentioned software as a service, you've admitted in your book that you made a mistake there, that you thought that selling could be direct face- to-face. And in some ways, you seem to have missed this whole SaaS revolution at least early years.
Earlier we were selling in India and emerging markets like Southeast Asia, Middle East, Africa, all of the selling was largely face to face. So we knew a lot of connections because of our presence here for over 20 years. Everyone wanted to meet in-person. That's how the sales would happen. But what we had missed was the fact that there was this….so even though the software was on the cloud, we were a cloud company in that sense. But the fact that sales and marketing could actually be done through the Internet was a pivot that we missed. And what opened our eyes was when Kalpita, my CEO, Netcore CEO, and I attended Saastr, and we realized that, hey, this can open up opportunities beyond what we are seeing, because building a sales force in the US sales team would have been very, very expensive. And that's why we had never done that.
I saw an interesting contradiction there because the companies that you're selling a product to are doing exactly this, which is selling directly, whereas you yourself were not.
Since it was B2B selling, in my mind, we always had to be in front of the person because the decisions are big decisions. But what we missed out was that even buyers were changing for maybe $20 to $50,000 spend per annum. They were willing to make decisions through the internet. This was even before the pandemic that was starting. So you don't really need a very large sales force. Companies like Freshworks and others had done a very good job reaching out to global customers with their SDRs and the selling teams, marketing teams, et cetera, in India with a very thin team, almost replicating what the IT services team had done, but they had done on the delivery side. Now it was the sales and marketing side for products. So that was the pivot, which II think we had missed out on and luckily, we sort of Saastr opened our eyes to that opportunity.
Coming back to the capital for a second. People could argue that if you want big growth, you need big capital. Or alternatively, is it that the architecture of the Internet is such that you have to fundamentally build and grow in that sort of bootstrapped way rather than go gangbusters.
So both the options are possible. Now, the question is, what do you use capital for? I think in B2B SaaS companies, the primary purpose of capital is largely sales and marketing. Companies have done that well, and they have succeeded with that kind of approach. For us, really, how I look at it is that, capital also comes with its own constraints – as in you have investors and they have certain expectations. It forces you down to a narrower mentality. Not that we are averse to raising capital, but having ended up without capital, but with profits, which have been growing, what it allowed us to do was to combine, in a way, the best of both worlds.
We knew we had to succeed in the US and Europe, but we also realized that just spending on sales and marketing would not make it happen. It's a bottomless pit iin terms of what you can spend. So our approach was to look at acquisitions. That's where Unboxed came in. Unboxed is an Indian Company, but all the customers in the US, very good revenues, very good marquee customers, and exactly identical to the ones we would have wanted to sell to ecommerce companies and so on. So we said that that's another alternative where we could use our cash flows.
Having said that, of course, if there was additional capital available to me, what I would love to do today is look at acquisitions. Because I think there are lots of struggling Martech companies globally who are in the 15- 25 million range, raised money at a high valuation, and very difficult for them to probably get the next round unless they're willing to accept very much lower valuations. But there's a good time for acquisitions. That is what I would use capital for.
If you think about it, you have a core business which is generating cash. The cash can help with incremental acquisitions, it'll help with good growth. But this is a sort of breakthrough model of using external capital for doing Mergers and Acquisitions (M&A). That's what I think we are missing today.
Your book is called Proficorns or about startup to Profit Corns, which is obviously a dig at unicorns. So tell me about how you see the unicorn model and in the context of raising capital.
Of course there's the B2B type and the B2C side of it. SaaS companies tend to not require as much capital also if they do it right. Now on the B2C side, I think what has happened is that the single largest killer for companies really has been the cost of customer acquisition.
So I think there have been a couple of mistakes which a lot of companies have made and many investors have made – the belief that India is a billion person market. I think not for the first time, they've been happening for 25 years. Effectively it's probably, depending on the product, it's probably anywhere from 20 to probably 100 million customers. We are eventually still a two and a half thousand per capita country income country.
Now, I think from that perspective the capital that has actually been used up for companies becomes sort of disproportionate to the market opportunity—that's first.
Second, is what a lot of free capital, free as in just unlimited capital at an early stage does, is I think, it puts the founders and entrepreneurs into a bunch of bad habits: indiscriminate hiring. there's no control on spending which happens and you can never build a business like that. See Fred Reichheld in his book Winning on Purpose said what's the best business you can build? It's about bringing back, making sure your customers come back and bring their friends and family. There is no reference to spending billions of dollars on what I call ad waste on the customer acquisition side. But that's what people ended up because that's what the investors wanted.
Every Monday you want to show growth in new customers. But what's missing out, and this is what I call sort of the folly of many entrepreneurs and marketers… has been ignoring existing customers. And that's how, in a way, when I was doing IndiaWorld, we spent almost no money on advertising, both on the B2B side. On the B2C side, I would build good websites, I would get references: Hey, my friend who's running this business would like another website, why don't you go and talk to them? And that's how we grew because we had no money. It forced us to take care of our existing customers.
And in a way, I think if unicorns actually thought about it, that if I have to build a lasting business, the only way I'm going to do it is by being sustainably profitable, or how I like to put it is how do I think of exponential, forever profitable growth. And that requires a different mindset, it requires a different model than having a constant inflow of investor capital, which is basically then meant to show certain metrics on every Monday morning meeting.
There seems to be a fight of two kinds of thoughts. One is that many entrepreneurs are not thinking of businesses in a long-term sense, which you're clearly describing. And second, if you are thinking short-term, then this is the way to do it. Acquire those 100 million customers or show 100 million downloads and then sell and then move on to the next thing, whatever that is
.Short term doesn’t work, I think. It may work for a few entrepreneurs but it's never a sustaining business model. I mean, in my mind, what entrepreneurs have to do is to run the business as if you're going to run the business for life. Of course, you keep looking at opportunities which come. So you're on a highway where there is no exit because that's how you bring in the passion, that's how you make the right decisions on a daily basis.
Otherwise your half your mind or 80% of your mind is just sitting on what metric do I grow to make it attractive for a buyer? But what if those buyers don't show up, which is what's happening right now. Or what if those investors don't show up? Then you're in trouble and that leads to the death of a business. So the aberration was the easy availability of capital, which many entrepreneurs took as the normal. That was an aberration because businesses have to be built on fundamentals. Fundamentals are about taking good care of existing customers, growing the business profitably and then reinvesting those profits for further growth.
Some businesses do require initial startup capital, but that cannot be the norm. That after ten years I'm being called a startup and I still need like another few hundred million dollars of raise. That doesn't make sense to me.
You worked on the India 272 campaign. It was a very interesting digital intervention in outreach to potential voters. And this was in 2013, a year before the Lok Sabha elections. You were completely into it. You obviously were aligned and part of the BJP in that sense, and you wanted the party to win. Things have not gone very well after that, but tell me about that project itself for a little bit. And this is really one of my last questions.
As an entrepreneur, I like to look at big problems to solve. In 2008-09, when I started thinking about a big problem, one of them was that why is India poor. A friend of mine brought this question. He said you should think about it and when I started thinking about it and reading and understanding one of the things was that the political scenario that we had in India was not very conducive for creating prosperity.
I mean we had limits on economic freedom, property rights, the things which have made the West rich.Indians do very well there but we don't do well sort of in our own country. So there are rules which hold us back. And at that time my thinking was that the BJP with Narendra Modi as the head was the best option for a pivotal shift in India. So I thought of myself as a political entrepreneur.
All politicians are entrepreneurs.
Absolutely. I think there's a lot to learn by the way from politicians because see in their case it's a binary outcome. There are no prizes for getting 49.9% market share if someone else has got 50.1. So, I decided that if I could use my skills from the outside, I invested my own capital. I put a 100% team working on media data analytics and volunteering to basically pivot the thinking from the BJP getting sort of the highest seats to getting a majority on its own.
So that's what I called Project 275, which I wrote publicly about in 2011, saying that the strategy for 182 is very different from 282. And it's exactly how an entrepreneur would think that if you are going to spend your time, why think incrementally when you can be completely disruptive.
I think it was a great experience and I always believe that in our lives we have to try out many different things. So for people who are working, try and become an entrepreneur.
In November 1999, you had 499 crores and you were obviously much younger. Today, if you were to sell whatever the price might be, obviously it's going to be a lot. You are looking at an IPO in any case but obviously would continue to run. But assuming you were to do an outright or someone else would take over would you start again?
I would start again. Entrepreneurship is the only thing I know. This is what I've done for the last 30 plus years but probably in a different domain. Today being an entrepreneur in the tech space et cetera is a five to ten year commitment. So I'm not very sure I will probably have that same level of commitment for the long term. But I think there are different areas.
One of the areas which I'd love to spend time working on is that India needs great institutions for freedom and prosperity, like the kinds which have been built in the US. A lot of institutions which are there, whether it's in the sociopolitical space, academic, educational space or even the cultural space, they are all with very small budgets and which don't give them the skill.
But what if we could think of whether it's think tanks, whether it's departments at universities with 100 million dollar budgets each. So my dream is that maybe for the next ten years, after some point of time, can I take one big idea a year with the 100 million dollar budget and build it out to just make the next generation of Indians richer and more prosperous, which should be really they shouldn't have to leave their country to become free and rich.