While starting up, keep your passion aside and see if the idea has potential to make money: Sam Santhosh

Sam Santhosh, Founder of MedGenome
 
Sam Santhosh is a self-made entrepreneur who has spent 20 years in the software industry followed by 15 years in biotech. He started his entrepreneurial career with US California Software Company Limited and took it public in India. He then wanted to go deep into genetics and through his incubator SciGenom Labs in Kochi and San Francisco, he has incubated and launched several companies leveraging next generation sequencing and bioinformatics. He has also incubated MedGenome, a genomic diagnostics and research organisation in India, that has helped many pharma and biotech companies with targeted therapies and innovation. His latest book, Sam's 12 Commandments for the Indian Entrepreneur, draws upon his extensive experience in business to offer timeless lessons to young and first-time entrepreneurs. Edited excerpts from an interview for From the Bookshelves podcast:

Q. You speak about how the Indian psyche of doing business is very different from say, entrepreneurs in the US or in other countries. How have you understood that to write this book, which caters specifically to entrepreneurs in India?
I'm a hardcore Indian, though I have been living in the US for the last 30-odd years. But my entrepreneurial journey started in 1987 when this was not a big fad as it is now… I spent the first 20 years in the software industry and the last 15 years in the biotech industry, and obviously there have been a lot of learnings.  

One thing that I noticed was that we Indians tend to take certain decisions in business very much based on our psyche. So, I try to define that Indian psyche in the first two chapters of the book. Part of it is the way society is too. In the Indian society, we don't have much of a room for failure. So, I start with dealing with questions like, ‘Should you be an entrepreneur? Is the timing right? What’s your risk profile?’ Risk is a much more critical point to think about in the Indian context because in the US, for example, you can quickly go bankrupt and start again. Here, it might take many years. And even after that, many of the baggage may not go away. Second, a lot of funding becomes very important, so how you take the right funding and get the right team together [is important]. Indians, typically, do not bring in the chief financial officer (CFO), so I harp on that very strongly.  

Similarly, there's a tendency to bring family members, which I think is pretty bad for the first-time entrepreneur. So, these are some of the initial things. Then there is share equity, or your share percentage in the company, which is another thing we seldom discuss, as the Indian culture is often at odds with really demanding your share. We feel that if we do the right things, we get the right things appropriate to what we did, but in real life, that is often not so. You have to really make sure that the agreements and many of the things you enter into business are really put in properly and you can take care of yourself before you can take care of the company.

Many people do not think about exits, so that also becomes very difficult, especially if you take outside money. So, if you are a traditional family business, the question of exits doesn’t arise, but now if you are going out and getting funding from angels and VCs, you have to be very clearly prepared for the exit because otherwise you're not really being fair, first of all, to the other investors, because they need an exit whether you want it or not. Secondly, it's very good for you to get a second innings in the next company. So those things also I think become very important to think about, since we are not trained for that as Indians.  
 
Q. You have a degree in mechanical engineering and you followed it up with an MBA from IIM-Calcutta. Then you started a software company, you were also into product engineering and then somewhere in the early 2000s you completely shifted focus and went into genomics. You had no prior professional experience there. Do you remember the first time you came across the concept of genomics?
Absolutely, because it was so important and big. I forget which magazine it was, which had the front page with Bill Clinton, who was the president of the US, and Tony Blair, the prime minister of the UK, and it was a global effort to sequence the genome, along with two other main people, including Craig Venter [American businessman]. I was shocked—what is a human genome? And then it sort of struck me that it is the source code of life. All living beings share the same code, the same DNA. And it had been working on the system-level code, right, for the previous 10-12 years, so I knew the power. It did not take too long to strike me that this is what I want to do for the next 10-15 years. So that was the moment. Then I had to learn, because I had never looked at biology after my 10th grade, and had forgotten the little bit I had learnt.  

Q. How long did it take for you to learn?
Five years, just the basics and fundamentals. But I still can't go into a lab. 

Also read: From the Bookshelves: Family business historian Sonu Bhasin on entrepreneurs who built India

Q. I mean, a lot of us come across something that we think will make for a good opportunity, that will become big in the future, but not a lot of people act on it. And act on it in a way that requires investing serious money and effort. Or going back to school, like you did. So what was the trigger that made you invest so much into something that you came across casually while reading the newspaper?
Well, it’s sort of love at first sight. Just like software in 1986-87. Sometimes, you just know. And I don’t know the specifics. If somebody asks me, what are you going to do in genomics, I have no clue. Even in the 2000s, I had no clue about what I was really going to do. How am I going to build a business, I didn’t know. But suddenly it hits you that it is not a fad. You have to really differentiate between what is a fad and what is going to be a wave, or a tide that is moving up. If you are able to identify that, you are in the right direction. Then you might make mistakes, but it won’t pull you down. But if you’re in the wrong industry or you’re fighting against the tide, one or two small mistakes are enough to kill you and drag you down. So, the ability to differentiate that and then really do the groundwork to figure out that you are in the right direction… that’s important.

Q. So following your passion isn’t always the key...
Yes, keep your passion aside. The rule is first, start up. Assuming you’re not wealthy. I mean, if you are from a big, rich family, it doesn’t really matter, go for your passion. But people like you and me really need to think through whether this is really something we can do now, and is this the idea that has the best potential. Not which I am most passionate about. You might be very passionate about saving the blue whale, or whatever, and you might think of some fancy way of reducing global warming, or reducing carbon concentration, which are all very nice. Nothing wrong about any of those things. But you shouldn’t have to go around begging for money or other people’s CSR budgets to do what you want to do. I think that is pathetic.
 
So go out, find a nice opportunity and really make sure that it’s a good one and make some money. Then you can follow your passion. I went into software because I can code. I wasn’t dependent on anybody when I started a business in software. But when I went into genomics—I cannot do lab work—but I am in a better position (I have more money, I can attract more funding) because my profile has changed. So build your profile, build your skill set. For example, if you come from a little risky profile, why not go for a good job in the industry that you want to? Work for two-three years so you learn the skills and you’ll make some money, make some contacts and make friends who can be your co-founders, and then jump into it and start your company later.  

In fact, when you spoke about the environment, I wanted to point out that you are passionate about conservation and have undertaken projects in that space. Could you give us a glimpse of that?
Like I said, there are many things I am passionate about – like history or conservation—and there are multiple ways I like to look at that. One is through business itself. I’m really pushing my next business activities in furthering what I call the “bio-wave”. Genome sequencing was just the first step. Now, there are more good technologies (available) of genome editing, creating new genomes. So, the bio-wave is happening and in the next 20-30 years, this will be a tsunami in slow motion. There are a lot of opportunities in that, in helping the world. Industrial technologies, which was great in the last 200 years, and enabled us to get where we are, cannot go forward because it is already spoiling the planet, polluting it, polluting us, we’re already getting diseases. Many things that were considered good have become bad, because of their level of use, like plastics. And we cannot go forward with that. But the bio wave can fix that.
 
On the non-business side, I like to conserve our history. One thing that came as a mix of history, heritage and biology was when I came across this book called Hortus Malabricus, which is Latin for ‘Gardens of Malabar’. When the Dutch were in Kerala, my home state, in the 1600s and 1700s—they were here for about 100 years after they displaced the Portuguese—the commander of Cochin fell in love with Kerala plants. So he made a 12-volume treatise on medicinal plants of Kerala. I was amazed not only at the concept, but also the way in which the books were made. Luckily, a group of professors under Dr Manilal had translated it into English and Malayalam in the same format of 12 volumes. So, I felt that this should be recreated. All these plants should be brought in one place, to be protected, conserved and also propagated, because some of these are also endangered. Some of these plants are maybe even extinct. We want to build up a garden with these plants and also other endemic plants of Kerala and the Western Ghats. So that is the project I have started as part of my non-profit foundation called the SciGenom Research Foundation. We started that in 2016. In a year, I will open it to the public. And then, I want to use it as a leading bio bank for other studies.  

Q. That’s quite an ambitious undertaking, which also brings me to back to genomics. What is the kind of technology required for genomics and where does India stand? I think right now the government has undertaken the sequencing of 10,000 Indian genomes...
We are about 20 years late, but it is good we started these initiatives now. Because when we’re talking about genomics, we’re just talking about the first part of reading the code, which we call as genome sequencing. You are taking the DNA or RNA out of any organism, or organic matter, and then you’re sequencing it in a machine. But technologies are moving further much faster. India is very far behind. We need to catch up, but this is a step in the right direction. Many companies, starting with MedGenome, which was the first company I spun out of SciGenom, have already started many years ago, but it is good that the government is also stepping up.  

There are so many other things that can be done with the first part of genomic sequencing itself… we can eradicate many diseases in children, we can get better medicines. So a lot of things can be done if we push genomics research hard. I am hoping that the government will do that. They are in the right direction. They have already announced the plan to eradicate sickle cell anemia, a major inherited disease, in the next 10-15 years. They also have some roadmap for how India’s bioeconomy can grow. But we are very much lacking in research. Like I said earlier, we have a lot of Indian scientists abroad. We can establish collaborations with them and with the institutions to push research up. So, India can have a much clearer strategy on how we can become a powerful player in the bio-revolution, leveraging all genomic technologies, not only sequencing, but also genome editing, creating new, synthetic genomes and moving on in the field of synthetic biology.

Also read: From the Bookshelves: India's economic history told through stories of Finance Ministers

Q. Do you see investment in research, infrastructure and capabilities be a priority right now?
From my visibility point of view, I don’t see it as that big a priority for India. I don’t blame them, so don’t take it as criticism. India is a large country with a lot of problems, right? There is hunger on one side, so much poverty and lack of facilities on the other. So, there are a lot of compromises that leaders have to make. What do you focus on? Sitting from here, we have a narrow view of what can be done. I don’t think I’m really qualified to say how a good, balanced policy should be set up. But as a person with a vested interest in the field, I am sad that more efforts are not being done here.  
 
Q. Coming back to the commandments for entrepreneurs in your book, you’ve dedicated an entire section on why it’s important to get the CFO into the business early on. Have you seen things change lately? Because when we speak to many of these young startups, they seem to give a lot of prominence to the CFO...
If they are coming up now, that’s great. But from the companies I had interacted with 10-15 years back in the software industry, I was struck by the fact that Indian entrepreneurs, and Indian-origin entrepreneurs in the US, Japan or Europe wouldn't have a good CFO. And that really affected the company, not only the growth, but also when they were trying to sell, because of the environment in which I met them… trying to acquire them and while doing due diligence, we saw that their value actually came down. They were getting hit because of not having proper accounting procedures, agreements with employees and vendors in place. Somebody taking responsibility of CFO is not the solution, because if they are not well-trained, they might not do things the right way. So, it’s not like earlier they did not understand the role of the CFO, many-a-times, the CEO would be playing the role of the CFO, but that is not right. It does not give the right checks and balances needed in the company, and putting in the right processes is tough. So a qualified CFO, even if not full-time, is very important to put things in place, like how the company is structured, how stock options are put in, how equity structure is laid out, what the shareholder agreement is etc. The list goes on. All of this will come to bite you, if after eight years in business, you are trying to sell but do not have a proper shareholders agreement, for instance, and people are at loggerheads.  

Q. And why do you think entrepreneurs or businesses in India do not value the CFO enough?
I think it’s the lack of understanding that the way of business is different, because many first-time entrepreneurs are just trying to solve the immediate problem and do not realise what they have to go through later. A good CFO is expensive, and there are not too many out there, so you are just trying to conserve costs. But they know it’s important, so the CEO says, ‘I’ll do it’. Secondly, in the traditional family business model, many later-level intricacies do not come in. What is a shareholder agreement in a family business? You never think of fundraising or exposing your books to someone else, or merger, unless your family business is down and you’re getting near-broke. So, our culture and background never needed us to think too much of the CFO as a big, separate function.  

Q. When you were writing the book and looked back at your career spanning three decades, what was your highest high and lowest low?
Highest high has always been learning. Whenever I was able to learn anything new or have that ‘aha’ moment when I realised why something is happening in a certain way and convert it into opportunities. Low moments are always there, in parallel. When an idea fails, I don’t feel low, I feel like I don’t need to waste more time on it and can move on. The low comes mainly when there is disagreement or misunderstandings with your partner or friends. That brings you really down. When you are working closely with someone for eight-10 years, and then you have to part or have misunderstandings, that becomes a very low moment for me.