How Netcore Cloud Reached $100M Revenue as a Bootstrapped Proficorn (Rajesh Jain, SaaS Open 2023)

Show of Hands: Bootstrapped, Profitable, $100M

Rajesh Jain

00:00>> Good morning everyone. Good morning. So show of hands, how many of you all satisfied three criteria in your companies? Bootstrapped, profitable, and over 100,000,000 in valuation, probably maybe 15,000,000 in ARR.

00:17>> Okay, so we got probably three or four hands. Okay. So

Defining Proficorn vs Unicorn

Rajesh Jain

00:24>> for everyone else, hopefully what I'm gonna talk about next will inspire you to take the road less traveled. A Proficorn, I coined this word few years ago because I was fed up of listening to all the unicorn stories. I said we are profitable. No one writes about us in the media. We don't have venture capital. We don't have great investors on our on our cap table. And so I thought about it and I came up with

Two Proficorns: IndiaWorld and Netcore

Rajesh Jain

00:51>> Proficorn to as a counter to Unicorn. So in a Unicorn you get a billion dollars valuation. Founders probably end up owning 10% of the company, that's a 100,000,000. You build a Proficorn, you build a $100,000,000 revenue valuation company. If you own most of it, that's the same thing. And it's much easier to get to 15,000,000 than probably 200,000,000. So I'm going to talk to you about two Proficorns that I have done both from India. The

01:21>> first one I sold for a 100,000,000 plus And the second one, we're still running, netcore, we'll talk about that. That's 100,000,000 in revenue.

01:32>> So we'll go through all of this in the next twenty minutes. So this is netcore's story. We are 25 years old. The first ten years we did not grow because I was running the business. And then I realized I am the bottleneck. I got a CEO, we'll talk more about that. So the growth journey really started from 2008. And this is in dollars. The Indian rupee where most of our revenues come from depreciates 3% to 4%

01:59>> every year. So the metric I like to use, it's from a book, The Outsiders by William Thorndike, is price growth per share. And if I look at the last ten years, the per share value of netcore has grown 25% CAGR. That's 10x in ten years.

IndiaWorld: The First Proficorn

Rajesh Jain

02:19>> So my first Proficorn was India World. So I'd gone back after doing my masters from Columbia. I worked in The US two years, went back. My father had told me to do that because he had done the same in the sixties. He said, you're not staying in The US, you come back, do whatever you want here. So my decision to go back was made first two and a half years after I went back I failed at

02:38>> everything I tried. I thought I was God's gift to the world. Know IIT Bombay education, Columbia, US and then I go back fail fail fail fail. Luckily

02:50>> came, Internet was just about starting at that point of time. I recognized the problem of Indians in The US wanting access to Indian news and other information. I had the same problem when I was living here and I wanted to go back. And so I thought the Internet could be a great bridge of distance. That's when I started India World. My wife and I, we had just got married. I had to shrink the previous company stuff.

03:18>> I asked her to arrange marriage, like happens in India. Barely knew each other. I said, why don't you come to work and work with me? Because I don't have to pay you. I don't have too much money. So one of the best decision I made for thirty years, we've been working together.

03:36>> So India World started as a bunch of Internet portals out of India, targeted at Indians outside of India. We were the first started very close to the time Yahoo and eBay did. And I sold it five years later for a $115,000,000. 166 times revenue. And like Nathan said, if I'd probably been a few years, a few months late, I don't know what we would have got out of it. But what's fascinating is how in the space

The VC Term Sheet That Never Got Signed

Rajesh Jain

04:09>> of one month my valuation went from $13,000,000 to $115,000,000. So VC had just decided not to invest at 13,000,000. I had signed the term sheet. It was on the VC's table. They are just signed. We had done three months of due diligence And then he says, look, we are investing 4,000,000 but you know everyone else is raising a lot of money. You need 8,000,000. We are not gonna invest another additional 4,000,000. Go find someone. I said,

04:39>> where do I find someone now? I thought I was very depressed. I said this is like the end, everyone's raising money. And then a month later, there's something good which comes out of everything. If that signature had happened, my life would have probably taken a very different time. A month later, I've sold. Now the trick was two things. First, I had a banker. I had one of India's best bankers on my side. So when you're doing

05:05>> deals, it's worth that extra 2-3% to get the best banker that you can. Makes a world of difference. As founders, we are just unable to negotiate. My banker told me you talk about India world and then keep your mouth shut, we'll do the rest.

Two Bidders and the $115M Sale to Sify

Rajesh Jain

05:20>> And then the second thing was they got two bidders with plenty of cash wanting to buy netcore. One was a US bidder, one was an Indian company which had just done an IPO done an IPO on Nasdaq. And that was like we saw in probably some part of 2021. Money was free at that time. So they said whatever money we need, we can raise it from Nasdaq. So they bought us 115,000,000. That day their stock price,

05:45>> Sify, were listed on NASDAQ. Their stock price went up a billion dollars. And in fact in the three months after the deal, the stock kept going up. It went about 7,000,000,000. They did a secondary offering to raise another 150,000,000 at very small dilution. So I got paid. Most of it was all cash. So at age 32, I ended up with 115,000,000.

06:07>> Thank you.

06:11>> After almost five years of failure after failure, right? You never know the outcome when you're running a business. The next day when I wake up, I mean, it wasn't easy for us to sell it. Okay, my wife and I had put in five years of work. We were 20 people out of a small office in Mumbai. And

06:28>> the person leading the bank, Hemendra Kothari, Medal in DSP, Merrill Lynch in India. He said, Rajesh, I I was having some doubts still. I said, look, know, we've put five years of blood and sweat building this business. He said, Rajesh, more important than knowing when to enter a business is knowing when to exit. So this is the perfect time. You'll get the money. You have freedom. You're a person of ideas. Do whatever you want in life.

06:53>> Very PC and words, and that's what I've done for the last twenty five years. We'll talk more about that. The next day morning, I wake up and my wife says, she says, you are not going to think about the money in the bank. Because if you think about it, you will never do anything again in life. The past is over. Get back to being an entrepreneur. Get back and start afresh. And that was the origins of

07:20>> netcore.

Netcore Origins and the CEO Decision

Rajesh Jain

07:22>> So netcore I launched in just about '98-'99. We just started a small separate entity because we're doing tech rather than portals. And we initially grew doing SMS and email services in India. And this is by the way after the ten years where we did not grow. So I'll leave that aside. It's all there on my blog. I'll talk about that later. We generated cash. Because we are doing enterprise services, we generated surplus cash. I realized I

07:47>> was the problem, so I got a CEO. And once I got the CEO I said there only has to be one leader in the company. It cannot be me, it's the CEO. So even if I disagree, I have to tell the CEO privately rather than publicly because a company cannot run with two power centers. And then we started investing in geographical and product expansion. So through the last fifteen years, we've plowed back all that we have

Three Acquisitions and the Netcore Stack

Rajesh Jain

08:12>> made into either expansion or in acquisitions. We acquired three companies. Two were small, tuck in tech acquisitions because that's the faster way to really expand the product that you're doing. And then we had a very large acquisition that we did, Unbxd. Again, all from internal accruals close to $100,000,000 last year. Again, we paid cash for the business and solves the problem of site search. And we then we expanded globally. So this is netcore stack today. So

08:47>> we had started with email and SMS at the top. We built customer engagement on our own for b2c companies. And then we added personalization product experience search all through acquisitions. So we built the full stack mix of organic and inorganic. And then combined that with some investments that we made. So the idea is this idea of a constellation of companies. So again, using some of our cash to invest in adjacent areas to help with fulfilling all

09:18>> the needs of a marketer with fewer touch points, fewer products.

Geographic Expansion: India, Southeast Asia, Middle East, US and Europe

Rajesh Jain

09:24>> This is geographical expansion. We started in India and then we went to Southeast Asia, Middle East. And the last few years, a couple of years, we've working to expand in US and Europe. Today, netcore is, like I said, 100,000,000. Close to 90,000,000 of our revenue comes from India and emerging markets, 10,000,000 from The US. So the India emerging markets gives us a very solid cash stream, which can then we are using to invest for expansion in

09:52>> US and Europe. This expansion is very important because The US market is 50 to 100 times larger than India. So while the India market gives us a great advantage, we have wonderful marketers who are willing to tell us what's wrong with our product. We are close to them, so we build that out. They are mobile first companies, very large companies now. Probably India and US are the two largest fastest growing markets globally from a future potential

Profitable Growth as a Non-Negotiable Principle

Rajesh Jain

10:18>> point of view. And then now the goal is to take that and sell it US and India. Do we have the advantage of a back end product development, back end support with a thin front end in The US. What IT services companies have done for many years, we wanna do it from the product side. Okay, so next, the three what I call the DNA really of netcore. The first one is profitable growth and I've never raised

10:46>> capital in my life. I've tried many times. A few years ago I tried to raise PE in funding and that was the time when people the PEs basically said look we want more growth, we won't want your profits. And I said the profitable growth is one thing I will not compromise on. The same P's are now talking to me again saying we love your profitable growth. That's life. The second is this idea of an infinite mindset.

Infinite Mindset and the 75/25 Ownership Split

Rajesh Jain

11:11>> Simon Sinek's phrase that if you control your own destiny, you own, I mean in our case 75%, I'll talk about that, 25% is employees. If you own your own destiny, while you should worry about quarter by quarter, you also can take the long view. What does the world look like in two, three years? What's changing? What are the new marketing trends which are there? You're not worried about sending MIS statements to some analyst at a VC

The Three B Framework: BAU, Boosters, Breakthroughs

Rajesh Jain

11:36>> or PE fund who's gonna come and raise five questions about some decimal points that you probably missed out on. The third is employee centricity. I'll talk about that. I have a three b framework which I sort of use in my company that you have to balance today and tomorrow. So there is the BAU, business as usual, that has to be done better and better. Okay. So that's your daily, monthly rigor, discipline, because you can't compromise that.

12:02>> That's what's going to generate the money which you can then invest into the future. The second is, and especially this is important for all of us as founders, is what are the boosters in our business? What are those next horizons that you can look at which will give you the the next sort of product uplift whether it's a it's an acquisition, whether it's a tuck in tech acquisition, whether it's a new geography that you need to

12:27>> expand. You've got to keep thinking what where the where is the growth coming next year beyond the immediate one. And then there are the big breakthroughs. Which what is the partnership? What is that big acquisition that you can look at doing which can completely change the trajectory of the future business? So it's sort of similar to what McKinsey calls the three horizons. I think the three b's is how I look at it. And as a founder,

12:50>> I think if you can delegate some of the BAU stuff to some of the other leaders, it gives you more time to think about boosters and breakthroughs because there are tons of competitors who are out to kill you. So you've got to keep thinking about what you're gonna do next. And the future is about how do, in the words of Jim Collins, how can we build an enduring great company? So a few in between I'd spent

13:15>> about seven years on the periphery of Indian politics. Netcore kept growing through those years, different experience for me. And when I came back, I told my CEO that look, you get bored running the business, you can sell. We'll sell it. And then a funny thing happened. Last two, three years pandemic, I started having conversations with marketers and I fell in love back with my own company. And then I said, look, we've done all the hard work.

13:41>> We've built it to this level. Now let's take it to greater levels. Let's build a global company, our global products company headquartered in India. So the CEO decision, which I mentioned earlier, I think is a very important one in business. Because you have to look at what you are good at. As as a founder, I just don't like reporting to people reporting in to me. So I realized that early on and that's where I brought in

14:09>> a CEO who could worry about the day to day, which gives me time and freedom to look at new ideas, to look at what's coming tomorrow. Because as founders, half of our lives is about imagining the future.

14:24>> At this stage, we're also looking at how we can look at PE and IPO possibilities down the line. We'll see about that. And I think it's a great opportunity now with what's happening. With the slowdown which is coming, with companies distracted with layoffs and with a lot of changes like generative AI to reset industries. So I'm gonna talk about two ideas. This idea of ad waste in the martech industry as opposed to ad tech and B2C.

$200B of Ad Waste and the Shift to Existing Customers

Rajesh Jain

14:52>> And in ad tech actually there's there's a lot of there's $200,000,000,000 of waste and on reacquisition and wrong acquisition. And if we can shift focus from new customers to existing customers, it opens up a five x bigger TAM for brands focused on existing customer relationship. That's really the only way brands can build profitable businesses. So it's what I call profit excel. How can we go out and supersize profits for brands? I'll be writing about this on

All-In Email: Layered Innovation

Rajesh Jain

15:19>> my blog very soon. And then the other idea is what I call all in email. And there's a great opportunity to transform email, very little innovation in email. So how can you use new technologies? And not just one innovation which can be copied by someone else, but how can you layer two innovations or three innovations together which makes it harder for someone else? So imagine your inbox, emails in your Gmail, give it no landing pages, no

Employee Stock Options and Perpetual Buyback

Rajesh Jain

15:44>> click throughs. Conversion funnel moves right into the email. It's an incredible breakthrough. We are seeing 10 times increase in actions that of consumers interacting with such mails in India. I mentioned about employee centricity. We had 25% stock options in netcore since 2007. So employees are a very integral part. So we look at employees not investors as our shareholders. And we've introduced perpetual buyback. So we every year, every six months I set a price, which is of

16:20>> course lower than probably the external value. When we give out ESOPs, so if someone leaves today or down in the future, they can get the difference. So the ESOPs are not illiquid for them. So there's perpetual liquidity. We started this six months ago. We have done a couple of buybacks also. So this is very useful for employees. Doesn't put pressure on us to do an IPO in not so good markets. So we've seen a lot of

30 Years of Entrepreneurship: Lessons from Failure

Rajesh Jain

16:43>> stuff in the last eighteen odd minutes. Couple of things to end with. In my thirty years as an entrepreneur, I've succeeded two times, I failed 30 times. That's an average of one a year. Failure is never easy. Every failure I should have when I look back, I should have ended it ended that thing much earlier. I didn't listen to other people. So three thoughts for you. The first one is the life of an entrepreneur, and you

Three Thoughts: Mountains, The Crux, Long-Form Writing

Rajesh Jain

17:08>> have to be ready for it. I'm sure a lot of you all are running this is mountains beyond mountains. You're climbing one mountain, you see a next one. Sometimes when you're climbing a mountain you slip and you have to then climb back up and you have to like that feeling. That's a phrase from Dan Bricklin. Second is the crux. This is from Richard Rumelt's book, The Crux. So when you're facing challenges, I think he has a

17:29>> very simple idea. What are the most important challenges you are facing? Pick the one which is the most doable. Now that's really what you got to focus on. That's what's gonna help you take your company to the next level. And third is to long form writing. Okay. I'm not I don't do much on Twitter or LinkedIn, but I write a blog. I've been writing for almost twenty years. The seven years when I was doing my political

Daily Blogging and the Proficorn Book

Rajesh Jain

17:52>> stuff, did not write. I started back in the pandemic. Everyday, I publish everyday.

17:58>> Write my eponymous with my name, rajeshjain.com. There's got a lot of writings on marketing entrepreneurship India. I have a book coming out later this year. So hopefully start up to Proficorn by the same name. Thank you.