Sanjeev Bikhchandani, Founder and executive vice chairman of Info Edge
Image: Madhu Kapparath
“If I look back, our best investments—PolicyBazaar and Zomato—were made just around the global financial crisis or just after it, or maybe just before it,” Sanjeev Bhikchandani, founder and vice-chairman of Info Edge said in the Q4 earnings call of Info Edge in May this year. “These are actually good times to invest if you have a 7, 8, 10-year perspective, which is what we do have. So, for us, actually, it's quite good,” the seasoned entrepreneur and investor underlined.
On being asked about the slow speed of investment in startups, Bikhchandani preferred to take a cautious approach. “We want to take our time and be very selective given the state of the market,” he said, adding that he would be careful about valuations and enterprise. Here’s his take on a bunch of issues around the startup ecosystem and entrepreneurs, which he outlined over the last four earnings calls in FY23. Edited excerpts:
On why it's not easy to find another zomato and policybazaar
The truth is it's not easy to find a Zomato or a PolicyBazaar. You invest today. Hopefully, [in] five, seven years, one or two become highly successful. And while we can exit from these investments, from both Zomato and PolicyBazaar, the truth is if you ask us to deploy that amount of money productively into early-stage companies within two, three years, we will end up making some optimal investments in all likelihood.
On why it makes sense to hold on to stocks of listed startups
We are in no hurry to sell those stocks. It's not as if we vowed to sell a company the moment it goes public. If the business has got legs, perhaps we should hold on. And there's an ongoing conversation report all the time. It's not written in stone. It's up for review periodically. What I also believe is that if the business has got legs and you hold on, you have a future. If you sell, you only have cash, and cash is valued at 1x. Future is valued at a multiple of whatever the future is.
On ESOPs and founders’ skin in the game
If founders have been diluted too much, will they have an incentive to stay for three, five years post the IPO, seven years post the IPO to at least run the ship? And if they have incentive, maybe some amount of ESOP is justified, and this may not be just in tens of thousands. It could run into 1, 2, 3, 4 percent of the company. And if the dilution was forced upon them simply because of the competitive environment and competition raising too much money, and you have to raise in response, then perhaps a more sympathetic view can be taken, which is what has happened in a couple of cases that we were involved in. Also read: Why Info Edge lost faith in 'bijnis'
On why being ‘less trigger-happy’ makes sense
We are going a little slow. So if you look at our Fund 1, we deployed in double quick time because the market was booming. We went in early and got our upround. That fund is looking good, at least on paper, given the following rounds that have happened externally, post our going in. In this fund, we're going slower, we will take probably a full three years to deploy first cheques, and we are taking our time. And we are going into smaller rounds initially and then doubling down. So we are less trigger-happy I'd say. And that is the case for the market.
On thinking about the ‘next’ round and fomo
One big risk thing that's happened is that you want to start worrying a little bit more about where a company will get its next round from. And you want to think long and hard about that before you go in because all people might lose if you have that much conviction.
We are now not worried about missing investments, we are more worried that we don't do the wrong one. Especially since we don't know if there'll be a follow-on round for another investor or not. There might be, but there might not be. Because everybody is being more careful. So we are investing, but we are being a little slower and more careful.
On cutting expenses and layoffs during crises
Let's go back to 2000-01. There was a dot.com meltdown, bubble burst. Around that time—partly out of ignorance, partly out of misplaced confidence—we did not sack people. In fact, we hired 80 salespeople in 2001 at a time when our competition let go of 80 salespeople. Now, a decision like that really helped us because we continue to grow and we came out of that meltdown profitable, as compared to when we went in.
Then you go to the global financial crisis. There, we had a 40, we had a 43 or 44 percent traffic share at the beginning of the global financial crisis. Three years later, we had a 63 percent traffic share in Naukri. And that's largely because our competition, Monster, Times Jobs, they all let go of salespeople. We did not let go of people. We simply did not sack. We were happy to live with lower profits for two or three quarters. We said we will keep our capabilities alive and intact. Competition cut advertising by 60 or 70 percent. We cut advertising by only 15 percent. Once again, we said we'll take lower profits, but we will keep the business capability and the brand salience intact. That paid rich dividends and therefore when we came back, we came back with a roar.
Let's take a look at 2020. [Through] Covid, lockdown, Naukri was minus 44 percent YOY in quarter one of 2020-21, April, June 2020, minus 44 percent billing growth YOY. We asked internally… can we stress test our P&L balance sheet and our cash reserves? If we have zero revenue, and we cut marketing, zero increments, how long can we live as a company with the current cash reserves? And the answer was three years. We said, okay, that's enough runway. And we simply did not downsize. At a time during Covid when everyone, when a lot of other companies downsized, we simply said, listen, we are a people's company. This is the wrong time to let go of people. There’s no light at the end of the tunnel. If you let go, then we don't know what will happen to them. They never get a job. At the same time, this thing will turn around and we'll start growing again. We don't know when, but we'll start. And, you know, preserving our capabilities in times of recession and not cutting back on investments too much has paid us rich dividends on three separate occasions, 2000, 2008- 2009, and again, 2020.
You've got to cut the expenses, but keep the right ones intact, be a little more careful about how you're investing. And if you manage that right, hopefully it will help.