Discover more from The Signal
A lesson in profit and politics
A successful entrepreneur says Indians are not richer because of interventions by governments
Good morning! Rajesh Jain, founder of marketing tech firm Netcore Cloud, was a frontrunner among the early Indian internet entrepreneurs back in the 1990s. Jain cashed out when the dotcom wave at the turn of the century hit its high watermark, selling his IndiaWorld Communications to Satyam Infoway for $115 million or ₹499 crore. The media company was valued at 384 times its topline and 2,000 times its March 1999 profit. Jain has authored a book, Startup To Proficorn, chronicling the lessons from his journey as a serial entrepreneur. He also became invested in politics, rare for an Indian entrepreneur, helping the 2013-14 Narendra Modi-led Bharatiya Janata Party campaign, and later writing a manifesto, Nayi Disha or New Direction, advocating “political entrepreneurship”.
Jain spoke to The Signal Daily podcast about his entrepreneurial journey and his take on contemporary politics and policy-making. This is an edited and abridged version of the interview. Head to Spotify, Apple Podcasts, Amazon Music, Google Podcasts, or wherever you listen to podcasts to listen to the whole conversation. Plus, we've shared a list of long reads for you.
The Signal is now on Telegram! We've launched a group — The Signal Forum — where we share what we’re reading and listening through the day. Join us to be a part of the conversation!
Rajesh Jain, Founder, Netcore
Rajesh, what made you write Startup To Proficorn?
So, Dinesh, conventional wisdom is that the only way to really build a business is to go out and raise venture capital. Venture capital, angel, money, whatever it is. The reality today is that 99.9% of businesses are self-funded. You know, you look at the kirana store, you look at very small startups, they're not raising capital.
The challenge for a lot of these bootstrapped startups, which are private, is essentially: how do they scale? And that's the problem I try to address in the book, how can you build what I call a proficorn. So it's private, it is bootstrapped, it is profitable, and most importantly, it's highly valuable. And I define “highly valuable” as a valuation in excess of $100 million, because if you look at a unicorn, which is typically $1 billion, founders end up owning 10% of the company.
And if you do that with a proficon, which is valued at $100 million, it's pretty much the same outcome for the founder. That's the core message, that you can actually have an alternate approach to building the business where the founder is in greater control, there's a lot of freedom. And you can build valuable large businesses. I've done it twice.
Can you talk a little bit about profitability, value, and valuation? You sold IndiaWorld at a stratospheric valuation and it barely survived 10 years after that.
I think for entrepreneurs, there's a great piece of advice, which I write about in the book, from Hemendrabhai Kothari [chairman, DSP Investment Managers].
He says that more important than knowing when to enter a business is knowing when to exit a business. A founder must have a long-term mindset, long-term horizon. But it doesn't mean that you get so emotionally vested that you ignore what are very good offers on the table. And if you're profitable, you can actually afford to reject incoming offers that are not very good, which is what I did through the years. I would be very transparent in what I expected from a deal, and I could afford to walk away.
So, what is your take on today's startup scene? I mean, today's business mantra seems to be scale over profits.
So, Dinesh, I actually get pretty surprised when I hear about startups that have been in business for five, seven, 10 years, and are still not able to make money every month.
We have started to celebrate e-commerce companies that have been around for a decade. And they're just making their first ₹1 crore in profit. Now, what is the essence of what business is about? It's about how you build a customer base. And really, I believe that entrepreneurs should be completely focused on what customers want.
That's the only way to build a lasting business. If you can create a model like this, where there is unit-level profitability. Where your dependency is not there on an ongoing basis for new funding to continuously acquire new customers who are essentially coming into a leaky bucket. So, that's the problem.
I think somewhere down the line, Indian entrepreneurs lost the playbook, whether it was of their own making or because of external capital coming in too easily into their companies. I think they're seeing a return to basics: the fact that you have to have a DNA of profitability as you build your business.
The heroes of modern businesses are not productivity hackers like Jack Welch or Carlos Ghosn. Those seen as real disruptors are entrepreneurs like Steve Jobs, Jeff Bezos, Mark Zuckerberg, Elon Musk. Why do you think that we don't have entrepreneurs like them in India?
I think, for a long time, India had the problem of not enough capital and not enough of a large market. Even today, if you think about it, the per capita income in India is just about $2,500. What's happening is that there are two things that are taking place simultaneously. One is the availability of capital. That is starting to happen because first-generation Indian entrepreneurs are doing well, they are exiting, they are able to take their companies to IPO, and we'll see a lot more of those happening in the coming years.
And that creates a virtuous cycle of domestic capital also coming in for investments into startups. Okay, so that's number one. Second is that as the economy grows the disposable capital keeps growing, and that then creates opportunities for newer companies to emerge and the market to grow. So, I think in India, for the first time, we have a foundation for entrepreneurship, again, in a flywheel effect.
You also devote a significant section of your book to failure. Why do you think failure is important?
For the very simple reason that most startups actually fail. Okay, so most new ideas tend to fail. The entrepreneur thinks there's a 70% chance of success, and optimism is very important, because otherwise you will not even start the journey. But the reality is that 0.01% or one in 10,000 startups will actually succeed. By succeed, I mean, achieve significant scale. So, failure is part of the terrain in the life of an entrepreneur. I have made probably 35-40 attempts at different ideas in my 30-plus years as an entrepreneur. I succeeded in two.
I never set out to fail. But I would make sure that I didn't lose a lot of money in trying to fail. I knew what my worst-case scenario was. Even in Netcore [Jain’s company] today, we try a lot of ideas; many of these things don't work. But there are a few which work very well and give us that multiplier every so often.
Your focus on profits sort of reminds me of a recent Morgan Stanley report, which said this decade will belong to India, and it will be the world's third-largest economy and stock market by the end of the decade. It also said that the trend began when India shifted its policy focus from redistribution to profits. What do you think about that statement?
I don't fully agree with that. I think there's a lot of redistribution still going on in India. There are 800 million people who still get free food every day from the government. We have an education system that is not state-of-the-art. I think we have government after government…we have lost a lot of…time on the education system.
Women's labour force participation is still low. And jobs. I mean, good factory jobs. You have a lot of jobs at the lower end. You need jobs that can pay ₹30,000 a month and then go up.
If India has to realise its true potential and get on the path to prosperity, I think we still have a long way to go. There's no doubt that the top 10% of India is going to do phenomenally well. They are well educated, they have a high quality of life, which is equivalent to some of the top of the pyramid people globally.
The problem is what happens to the other 90%-95% of people, and it falls off fairly rapidly after that.
So that brings me to another question, which is about creating the right environment for businesses to thrive and ideas to flourish and bloom. I know that you are a member of the Mont Pelerin Society (MPS), which laid the foundation of modern neoliberal thought and free market economics. The society will hold its annual meeting in Delhi next year. It's the first time it's being held in India. Rajesh, you have attended previous meetings and you are advising the organisers of the Delhi meeting. Could you tell us what's in store?
So, the theme of the MPS event next year in Delhi is freedom and prosperity for the next six billion. I think to understand the importance of a society like the Mont Pelerin Society, we've got to understand why a lot of people in the world are not rich.
Poverty is the default state. The world was pretty much universally poor till the 1750s, when the industrial revolution happened. I mean, the whole myth that India was this Sone Ki Chidiya (golden bird) et cetera, once upon a time, I think is all wrong. Because, at that time, the GDP of the country was directly proportional to its population.
So, the key thing to understand really is that we have to explain prosperity. What makes some countries rich? That foundation comes from freedom, economic freedom, personal freedom, civic freedoms. It comes from rule of law, it comes from the freedom of trade, property rights and so on. And in most countries, the governments basically intervene in the lives of people and chip away or prevent people from being prosperous. Mont Pelerin Society is really built to spread the ideas of classical liberalism, which I just spoke about, worldwide.
And if you see, there's a direct correlation between economic freedom and the levels of prosperity in our country. We need to just let entrepreneurs flourish. In simple language, that's really what needs to happen. Because people are great problem solvers. You do not need any help from the government to make these things happen.
Our hope is that, you know, India stands at the cusp of a phenomenal opportunity. And hopefully some of these ideas that we discuss over the four days of the event next year will result in, you know, the spread of prosperity, the spread of freedom to the six billion people who should really be positive contributors to innovation, to entrepreneurship globally. And that's how many of the countries which have prospered, where people vote with their feet. That's where people want to emigrate to,
So one of the things which you wrote after the last meeting was that unless they demand liberty, it is going to be a difficult path ahead for most Indians. Here’s what you wrote: “Having lost 75 years to Illiberal and interventionist governments, we are in danger of losing many more years.” Why do you think we are in danger of losing many more years?
See, in India, what has typically happened is that while the British left in 1947, a lot of the rules that they left actually persisted.
Fundamentally, it's the relationship between people and government. If you look at a country like the US, the people are supreme, and the government is an agent of the people. If you look at the First Amendment, for example, it basically guarantees freedom of speech. In India, it's the opposite.
And it's not just in India, it's in many countries of the world that are not wealthy and not doing very well from an economic standpoint. The governments tend to have a lot of powers. And with these powers, they basically intervene in people's lives. They put hurdles, they put obstacles.
What we need to think about in India is that we need to focus on the rules rather than the ruler. In India, the rulers have changed, but the rules have remained the same.
Each of us must be asking why we are not five or 10 times richer than we are now. That’s the real question to answer. And it is a non-obvious answer. It is because of the interventions that are made by the government.
So, essentially, we need to reimagine our country. Where the relationship is changed, where the rules are changed.
Is it something you expected when you joined the BJP and then prime ministerial candidate Narendra Modi's campaign in 2013-14?
Yes, I did. Because I believe that while every government does its bits, you know, so everyone can claim that they've built this, they've done that… all of that is there. But I really believe that what India needed was a dismantling of the controls that are there on entrepreneurs. And that was my hope. That they will shift direction.
When you say that “was” your hope, it seems like you're quite disappointed.
Yeah, because we had a leader in Narendra Modi, who has the ability to persuade a billion people. Now, could that have been used for creating an economic revolution in the country? For creating a freedom revolution? We could have had a distinct break, a step function growth. It's what Deng Xiaoping did. It's what Lee Kuan Yew did. It's what some of the South Korean leaders did. It's what Poland actually went through after it broke away from its Communist past. It's what the founders in the US did, the rules that they laid down.
But I think it's a sort of half-done revolution. I think there's a lot more that could have been done, you know.
In India, generally, businessmen and entrepreneurs tend to stay in the background and not step into the hurly-burly of politics. You are one of those rare entrepreneurs who did that and then wrote about your ideas of transforming politics. One of them is that India needs “political entrepreneurship”. Could you elaborate?
I think entrepreneurs can apply their mind to solving some of the big problems. I thought one of the biggest problems in India was the political system in India. Now, my approach in this was to think of the problem just the way an entrepreneur would do. For example, when I started (helping the BJP), I looked at the numbers and I said if the BJP had to win a majority on its own, it would have to think very differently.
And that's exactly what an entrepreneur would say. Instead of looking at incremental growth from the previous elections, where they had a maximum 182 seats, if they had to get a majority on their own, it would require a very different approach.
Instead of an aggregation of state elections, they would need a national wave. They could aggregate because they had won about 300 plus seats once. They needed a 90% hit rate. That's what entrepreneurs are good at. And I thought I could apply some of that in the political space.
The dating game: September 2012. That was when Tinder, formerly Matchbox, unleashed itself on the world. Lexicon such as “swipe right” and “swipe left” ingrained itself in popular culture, and we haven’t looked back since. According to Business Of Apps, over 300 million people worldwide use dating apps, which have proliferated in the thousands. As the likes of dating conglomerate Match Group and its niche counterparts prioritise engagement over trust and safety, Rajneil and Roshni indulge in some crystal ball gazing and discuss where hookups, companionship, and love may be headed. Available on Spotify, Apple Podcasts, Google Podcasts, Amazon Music, or wherever you get your podcasts.
Life as we don’t know it: Now that India has created history by landing near the south pole of the moon—a region rife with ice craters that potentially harbour microbial life—the Indian Space Research Organisation is gunning for similar missions to Venus and Mars. Other countries are also eyeing the next frontier. Nasa and the European Space Agency have launched/are launching missions to Europa and Titan, the icy moons of Jupiter and Saturn, respectively, that also have conditions ripe for hosting extraterrestrial life. But this poses a question as old as humanity itself: what constitutes life? Is it the presence of building blocks like proteins and DNA? Or the combination of complex processes that birth an object? This fascinating story in Quanta Magazine walks us through a pathbreaking theory in astrobiology called Assembly Theory. Proponents reason that life is “far too complex to be assembled by chance”, because molecules encode their histories. Molecules remember. In other words, Darwinian evolution and traditional physics fall short of offering answers. Science nerds (rather, anyone with a keen interest in space) will love this one.
“Show me a hero…: …and I’ll write you a tragedy.” David Zaslav had a hero’s welcome in Hollywood. Studios, struggling with dwindling linear TV earnings and unprofitable streaming arms, hoped he would show them the way to a new normal. Instead, as this profile in The New Yorker shows, he has become a deeply divisive figure in year one as CEO of Warner Bros. Discovery. Zaslav’s detractors variously describe him as apathetic, a social-climber, prejudiced in favour of white men, and an abject micromanager. His proponents say he is a sharp, dedicated business leader with a knack for cracking tough deals. He’s also eager to be accepted by the show business’ creative-types as one of their own. But ordinary creatives—most currently on strike—bristle at his massive compensation and the way he has ruthlessly pulled the plug on countless shows and films. So, will Zaslav be the hero he wants to be? Or is he overseeing an expensive tragedy? If Warner Bros. Discovery pays off its debts and generates cash in the long run, Zaslav is assured a celebrated legacy.
The rise and rise of memes: "Chuck Norris makes onions cry." "Chuck Norris can divide by zero."
You've probably come across a Chuck Norris meme at some point in your life. Incidentally, such memes, which riffed on Norris’ tough-guy image and thronged the internet in the early 2000s, were a happy accident. It was all thanks to Ian Spector, creator of the forum Chuck Norris Facts. Few know that these forums were initially obsessed with Vin Diesel. Tired of poking fun at the bald action hero, Spector put out a poll to find another candidate, where Norris emerged as the clear winner. Memes referencing the actor's exaggerated abilities were shared on various platforms and became a pop culture phenomenon. This fascinating read chronicles the birth of the modern meme.
Elon’s world: In Douglas Adams’ The Hitchhiker’s Guide To The Galaxy, “hyper-intelligent pandimensional beings” disguised as mice commissioned the construction of Earth as a supercomputer to calculate the ultimate question of life. Initially motivated by curiosity, they eventually end up demolishing the Earth in the name of commerce. Over in our real world, one of the richest men on Earth has a similarly expansive influence on a lot of things… really important things: the Ukraine war, the future of energy and transportation, space exploration, social media, and now, artificial intelligence. Elon Musk’s power is only continuing to grow. In this profile of the eccentric tech billionaire, The New Yorker writes about how the US government came to rely on Musk—and how it is now struggling to rein him in. In the words of OpenAI CEO Sam Altman, with whom Musk has worked and sparred, “Elon desperately wants the world to be saved. But only if he can be the one to save it.”
Not buzzin': Bees are integral to food production. They contribute to a third of America's food supply in the US, aiding apple, peach, lettuce, squash, melon, broccoli, and cranberry harvests, among other produce. Their pollination accounts for about $17 billion in crop value. But the bees are dying. Thirty-one billion honeybees pollinate over 2.5 trillion flowers in California’s Central Valley. But for California's forecasted almond crop to bloom, it requires 60% of US bees. In the 1960s, that number stood at just 5%. The insects need a balanced diet, but monoculture farming is depriving them of that, as this story in The Ringer highlights. The result: beekeepers such as Andrew Coté and Bill Crawford are having to carry hives to farms across the US to ensure that the pollinators have enough varieties of food to feed on.
Dragon’s fist: That China is the world’s biggest exporter is a fact. But that is mostly products. The Communist country has also been quietly exporting an unusual item: thought. Beijing has set up the Mwalimu Julius Nyerere Leadership School in Tanzania to train African leaders and political parties in the ways and methods of the Communist Party of China (CPC). Conferences and short courses, which are not available to opposition party members, teach “party governance, party discipline, anti-corruption methods, Xi Jinping Thought, and poverty alleviation”. Participants are trained in maintaining the party's dominance over the state.
Across the globe, China is fuelling a small but vocal independence movement in Okinawa, an island prefecture of Japan hosting several US military bases. Okinawans are opposed to the bases and consider themselves independent of all three countries. However, to the US, the bases are on the frontline in the event of a face-off with China over Taiwan, which is a mere hour’s flight from the island. It also considers it critical to the security of Japan. But it’s clear China will not remain quiet. The two stories are part of an Axios series on China’s attempts to rebalance global power.