NEA India CEO Summit – Lessons from the Founder of Naukri
Last week, I traveled to Mumbai for NEA’s India CEO summit. We brought together a number of our CEOs who are either based in India or are directly playing in the Indian market. We also had two speakers: the former Chairman of SEBI (India’s version of the SEC) and Sanjeev Bikhchandani, the founder/Vice Chairman of Naukri, India’s first public internet company.
Naukri, an Indian job listing site, has a remarkable story. Unlike many companies in the west, Sanjeev wasn’t used to the notion of spending for growth and taking a short term loss to set the company up to make a long term, larger profit. Eventually, he was convinced that in his situation, because he hadn’t yet turned on any marketing channels, there was a reasonable line of sight to spend short term dollars for long term gains. The company raised $2 million from ICICI Ventures and the timing was perfect: a few weeks later, the dot com bubble crashed and the venture markets dried up. Naukri then had a loss for two years before getting back into the black, after which it effectively doubled profit year over year. Today, it is a public company (under the holding company InfoEdge) and is on a run rate of 120 crores in profit this year, or $24 million.
He gave an inspiring talk with unique pointers to our team of CEOs. I took some notes and wanted to post them here:
- Every once in a while, a business or sector will have tailwinds. Recognize them, use them, and exploit them.
- The best businesses are built on deep customer insight.
- The question that you must ask yourself is: are you solving an unsolved problem?
- The best CEOs are those who are able to build trust across the table. That could be to customers, to partners, to investors, or employees. It doesn’t matter.
- Share recognition, power, and wealth with your best employees. Sometimes, you may have to dig into your own ESOP pool to make that happen. Your employees are not working for the company, they are working for you.
- Create convergence of interest, not conflict of interest.
- Often superior corporate governance gets a 25-28% premium. That means transparency, disclosure of full financial statements (not required in India), and can even mean a non-executive chairman.
- People get hooked to freedom more than to compensation.
- Once again, give massive, massive ESOPs to the right people.
- It’s always a collective decision when things go bad. Rally the troops together and don’t put the blame on someone.
- Hire for commitment, character, and competence.
- The way to beat western companies is to be more customer driven than competitor focused. Plus, US companies are often scared of headcount. If you have better customer insight and an army of people, you’re tough to beat.
In the middle of his talk, Sanjeev told a story that brings together a lot of his advice on recognition, aligning incentives, and creating a convergence of interest. During his tenure, he wanted to increase the salaries of his best people during a rough patch for the company. He went to Bala Deshpande, now an NEA Partner but at the time at ICICI Ventures, who initially disagreed with his proposal, until he offered to cut his own pay. She then agreed, but also gave him a separate incentive: if sales were above a certain number, he would receive a bonus equivalent to a percentage of the sales. He told the rest of the team about this plan, who then volunteered to cut their salaries by 30% (instead of having them raised!) and also participate in the variable sales incentive plan. Suddenly, everyone was aligned to drive the company forward and a year later, the team crushed their goals and everyone made significantly more money than they could have under their original plan.
These aren’t principles that will work only in India, or in Asia, or in emerging markets. Rather, they feel like universal principles and universal values that can apply to any time of business anywhere.