The Journey of building OfBusiness – Part 2

In today’s Matrix Moment episode Asish Mohapatra, Co-Founder & CEO – Ofbusiness opens up to Vikram Vaidyanathan, Managing Director, Matrix Partners India, about transitioning from an investor to entrepreneur, building OfBusiness from ground zero, co-founder relationships & dynamics, his thoughts on profitability vs growth and much more.

Rajinder:

Hi and welcome to Matrix Moments, I am Rajinder Balaraman and a Director at Matrix Partners India. Todays episode is special as it covers aformer colleague Asish Mohapatra’s journey of building Ofbusiness. Ofbusiness is an innovative SME financing platform that solves for SME’s need around purchase finance, raw-material fulfillment and new opportunity discovery. They now have over twelve hundred and fifty crore assets under management, growing 100% year on year, while generating four and half percent pretax ROA. Joining Asish on this podcast is Vikram Vaidyanathan, Managing Director at Matrix Partners India, who led this investment. Asish and Vikram have known each for 15 years, starting with Mckinsey then Matrix and now Ofbusiness, they share a fantastic camaraderie and I hope you see some of that through this episode. Tune-in to learn more.

Vikram:

Yeah, no, I think that's well said, but I do think people lose sight of the customer centricity as well as technology led. And you've humbly said that though, those are hygiene, but I do think that they can be differentiators. So, we talked a little bit about underwriting how you guys built underwriting capabilities as well as a collections mindset throughout the organization. But I know none of this could have been possible without the extraordinary culture that you've built and the extraordinary org that you built. So, I want to start from the top and start from the beginning with the cofounders. And you found a cofounder, not very far from inside your home with Ruchi, whose you're significantly better half, like you said, and an old friend in Bhuvan. So, talk a little bit about both. And I know we're going to talk a little bit about the relationship of having a wife as a co-founder, but I'd like to quickly introduce Bhuvan and Ruchi. Bhuvan I know you guys know each other from a while back, and I know you guys were swapping a story about startups for a long time.

But you actually didn't think of Bhuvan as your co-founder, but you were talking to them about finding co-founders and finding other tech guys, Bhuvan was at that point of time, the head of tech at Snapdeal before that he had led tech at hike and it was probably one of the best engineering and tech guys around, so that’s Bhuvan. Ruchi, i've forgotten partner or associate partner at McKinsey?

Ashish:

She was a partner at McKinsey

Vikram:

She was a partner at McKinsey and Ruchi actually joined McKinsey at the same time as I did. Both of us joined at the same batch so phenomenal career going for her. And I think you had to convince her to become your co-founder at that time. Because I think he had a bigger opportunity cause then you at that time.

Ashish:

She used to earn more than me.

Vikram:

Yeah, both of our wives did. And so, talk a little bit about that early journey of, how you made some of those two choices. And then we'll talk a little bit more about having friends as co-founders wife’s co-founders?

Ashish:

Yeah. So, there were the three of us who actually happened to join, but other than that, we have other co-founders like Nitin Jain, Sridhar who actually came in probably a month into a journey and that are as essential as the others. So, I will start off with a phrase that I actually heard when I was a kid. I was probably in class four or five, I read it in my textbook. It was Isaac Newton saying “I can see further than others because I stand on the shoulder of giants”. One of Isaac Newton's most portable choruses. He's very electronic, hardly says anything. But this is one thing that has stayed in my head that if you stand on the shoulder of giants, you can always see further ahead and hence, probably build something which is far more valuable and far more differentiated. So how do you build a giant, how do you build a co-founder is one what he comes up with, plus how you create an atmosphere for him or her to be successful along with you, is how I think about it.

According to me, there are four mantra’s :

• The first mantra is the following, that you have to select somebody who fundamentally has a capability that is different from yours, that is complimentary to yours. And you respect that complementary capability. For example, Bhuvan apart from being great at technology, as you rightly mentioned is always very right yes. Whenever it is an ethical question in my head, I go to Bhuvan and I know he'll come up with the right answer. If it is Ruchi, it is about team building. She always is the glue in our team. She always binds everything together, apart from what she does in her job, which is around finance, debt raising, equity raising and stuff like that. If it is about Nitin, he has so much energy that he can probably wake up a dead man who's been dead for a year. He has, he has that passion and energy, which is infectious apart from what he does in sales, right? When it comes to Vasant, he has all of us to put together any as has that South Indian flair, which according to me is a very important ingredient. If you want to conquer 50% of India, which is South. Similarly we had a couple of other cofounders who are great in their own respects and brought something onto the table, which I truly valued. They've now become co-founders of other very successful startups. So, first and foremost, they have to have a complementary capability, both tangible and intangible, and you have to value them, that's where it starts. That's number one.

• I would say the second is to actually create a space for them and a very clear space, which is demarcated for them, which is very differentiated from yours. And they own that as an empire that is completely their space. This is completely my space. They run their own space. I run my own space and you don't really go and, and you don't interfere with each other professionally, so that’s second.

• Third is to create a platform because everybody wants to bounce off ideas and stuff like that. And they merely need a person to listen. So, third is always create a platform where people can share their experiences. People can share, what their interferes are and stuff like that.

• And the fourth, according to me, is celebration of winning, to make sure that each and every person, whether it is a co-founder or a, you know, or even a management trainee, who's just joined you, you celebrate their efforts beyond what beyond what you can do ever in a platform, which actually makes them much more committed to the effort. If these four mantras are true, according to me, you can find a great co-founder in the journey. First is about he having it for three is about you investing in it and they investing in it as well. And if you can find them in a spouse, your life is bliss, because fundamentally, if you're spending 12 hours in a day with a co-founder, you're probably spending 16 hours with your wife. So, you'll have more time. Second the lines between a personal and professional life fundamentally become so blurred that you're probably living one life. You don't have to live that Dr Jekyll and Mr Hyde to discuss work at home, the best ideas when, but probably not that stressed at work. And, I can tell you that I have been very, very lucky to have these giants around me, but particularly Ruchi, who has been my partner in both personal and professional life. And I'll end up with the same quote that Isaac Newton said, I can see further than others because I stand on the shoulder of giants. I think that fundamental belief that people are is something that I believe all of us treasure.

Vikram:

Yeah, just one quick comment on Ruchi and Ashish’s relationship and I've just found them being able to compartmentalize also so well where, you know, for almost anyone, any person new who does not know that relationship exists, they would just find a unique level and, and pristine level of professionalism in almost every interaction, whether it is at a board level or whether it is at an org level. And I think the cause you've created that almost no one ever questions that what the personal relationship is because of professional relationship, at times I feel comes even ahead of the personal relationship or at least that's the way the external world perceives it. So I think it's very hard to pull off and it's commendable that you guys have been able to, I'll also say, I think kudos goes more to Ruchi, than to you because she has to deal with you, and I know that you're not the easiest person to deal with them professionally life for sure.

Ashish:

No, I am a Maverick, I'm a door to door salesman. I'm a Maverick. My job is to just, you know, destroy things to the, to the net level that we get outcome. Her job is to put it back.

Vikram:

Yeah, you have a creator and destroyer, so you only have a Bhrama and Shiva. Oh yeah. So talk a little bit about finding other co-founders. I know you mentioned Nitin and Vasant, you also have others in the team who behave as co-founders almost the entire top team. And I don't know who I will miss out in this, but you know, Nalla, Lokesh, there's a bunch of guys.

Ashish:

JV.

Vikram:

JV, there are so many guys who I think are co-founders that you found along the journey. And so what do you think differentiates people who in your mind have that co-founder mindset and when do you start thinking, okay, this is somebody who is my co-founder along this journey? And I'm asking you to, in the context of, there's been a lot of people who have now gotten elevated to co-founder at much larger companies in your five years, six of a companies. And so give me a, you know, primary founder view on how, when you decide this person is now my co founder?

Ashish:

Yeah, well, so in my opinion, co-founder is merely a tag. It is about treating somebody with so much respect and trust that you do not need to even think behind your shoulder once you've you know, and entrusted him with that responsibility and vice versa, having entrusted with that responsibility, that strong bonding is something that should be treasured. And that's the co-founder bonding. I personally think that person is somebody who shares a shared value of what is very, very important to you as an individual. So for me, for example, things that are very important to me is now as you know, profitability, he has to think profit first, second company first attitude, at any point in time, if there is ever a struggle in the company, we'll have to think what is right for the company then for a team or for an individual. So second is company first in every action that you do. The third thing that is important is to actually have the mindset to do everything by yourself. Like today Ruchi does her own Excel planning, Bhuvan does his own coding, Nitin today still goes and sells to own customers. So does Vasant, JV and stuff like that. So hands-on is very important for me. The fourth thing that is very important for me is about training young individuals to, into our culture. So as long as these homogenous values are there, the necessary condition is ticked off. Now let's go to what is sufficient for sufficiency. They have to bring in something which is incredibly valuable, both to me as an individual or to other co-founders as an individual. And at the same time, be extremely valuable to what the company's outcomes or pers or planned outcomes are that their contributions are so important that I not only treasure that as an individual, because probably I can't do it myself and the fact that without them, the company will probably not be able to achieve that outcome as long as they bring in those capabilities and have those homogenous set of values. I believe that they are qualified to be somebody who's very, very senior and is completely trusted in the organization. I think that tag co-founder is more a, the fact that some people joined a little early, some people joined a little late, but I can tell you that at least 30, our organization, and definitely 10 in our organization, behave, think, and act completely as co-founders. They will sacrifice anything of their own personal needs for doing whatever is right in the company. Other than the five names that we mentioned, there are people like JB Joseph, people like Lokesh Kark, people like Pratyush Nalla, and in-fact, a lot of our other early members who have actually behaved and acted like ones.

Vikram:

Yep, No, and I think there is something highly entrepreneurial about the culture. And like you said, Ofbusiness alumni have now gone on to become founders and co-founders of companies and have raised money from actually from us and from other VCs and become quite successful. So I think you should be very proud about that entrepreneurial culture and the alumni network that you're creating. One quick thing on the larger org culture. And I think everybody in the org proudly calls themselves Ofbians and you'll made that phrase matter. And people are very proud to call themselves that. And you and I were both part of this culture at McKinsey, which is a caring meritocracy. And you have actually flipped that. And to say it's a ‘meritocracy that cares’. So talk a little bit about that culture. And you know, how this meritocracy that cares has really worked to get very young folks and you recruit a lot of pressures and management trainees really get imbibe the Ofbian culture very quickly?

Ashish:

So these are early thoughts because frankly, I have spent my time in two organizations, which fundamentally used to be known for actually incubating young minds and make them leaders. One was McKinsey, which was the caring meritocracy that you talked about. And the other was ITC, wherein the entire organization was actually built through freshers who were hired from engineering collages and B schools. I was truly inspired by how they could take young minds and just develop them over a journey. They were negative towards it. There were stereotype trends, stuff like that, but every single guy used to look the same. And in my mind in a young mind, it actually got formed as an ideology, that one of the big things that you can do is to create an identity for yourself as an organization. And if you have an identity, you can actually achieve the outcome. Whatever you say, like for example, the Germans are extremely disciplined, the Japanese are extremely industrious. The Chinese can work their balls out, It's an identity.

So, I wanted to create that identity. And, and the word that I kept in my mind was this stuff that you talked about, caring meritocracy, but what I had seen in other organizations, particularly the ones that I had worked with is that they were either more caring or they're more meritocracy, right. And people who have more caring were not very meritocratic. And it was a very, rosy tinted glasses, I'm your brother, you're my brother. The performance really doesn't matter kind of a culture or my own alma mater, wherein performance was all that mattered, caring not so much and it ended up being a rat-race. So, in my mind, the balance between caring and meritocracy was important to have. And in my mind, what actually got figured out is that caring is relatively easier to have. So I actually thought that if I can push meritocracy more than caring, I will always achieve the balance. And hence the terminology that ‘meritocracy that cares’ is what came into our collective minds as co-founders very early into the journey. And then we developed a theory, we said, okay, let's make it even more colloquial, meritocracy that cares sounds like two bombastic words.

So, let's make it very simple for a layman. So, we invented two words, and those two words were both ABC. We said for caring, three things are important and are ABC, A is altruism, B is brotherhood, and C is camaraderie - Nitin Jain actually invented this phrase they're not intrusive if selflessly you want to help.

The other guy, brotherhood is basically you like spending time - camaraderie, you enjoy doing stuff together, right?

And meritocracy is about ABC, wherein you are graded as ABC because we all came from B-schools and engineering colleges where we used to get grades, and those grades are real time. They can be seen on your mobile. They're almost a wallpaper, they're a demonstration of your real time performance. And having that ABC and this ABC, which is meritocracy, ABC, relative grading within your batch of how you're doing. And at the same time, having that ABC value as posted through the organization, everybody talking about altruism, brotherhood, camaraderie, celebration, and stuff like that, those two things pushing both together with the same amount of intensity. And if any choice had to be made, it was more, the meritocracy that pushed is how we got there. I think the balance of this ABC, with that ABC is what we've been achieved and what we've been able to achieve quite well over a long period of time. The question is, how did we do that? You're right. 80% of our people are freshers. How did we achieve that balance? I personally think that the way we achieve it is through homogeneity. So, 80% are freshers, but they have a very simple homogeneity between them. Most of them are from business backgrounds and hence they think profitability first, they think capital deployment. Most of them are from middle class backgrounds. Most of them are from tier two destinations. Most of them are from tier two MBA schools and aspire to become tier one. And hence they are hungrier. So, homogeneity in the workforce. The second is about giving them platforms, which actually create equal opportunities. I was very inspired by Liberty equality fraternity. So I said, everybody will have the same platform, the same goal, as long as you're joining the same batch, you have to demonstrate something which is a multiplier of what costs company has given to you. It's your CTC. That's what you have to give me. Right. And the third thing is, is the concept of celebration. So, homogeneity then creating equal opportunity sets. And third is a concept of celebrating small, small wins. You won't believe it. If a management trainee gets one order, I'm a fan of poetry. I write poetry. I always write a poem for him. A poem that I have written specifically for that man's new journey because he's won his first order. He looked forward to it. He frames it, he puts it away and the way it is celebrated, it's team emails where there are hundreds of people telling him, Hey, you’ve arrived, you’re the next guy, please, you know get us out of where we are, take us to the next level and stuff like that. So that concept of celebration is where we, I think where we kind of have exceled.

Vikram:

No, I'll call out two artifacts of the culture that I've personally seen - one on the performance side, whenever you know, it's been time to elevate someone or give a new opportunity to someone and so on and you had that discussion with me. It's only about the performance. It's not about whether, you know, someone is liked and its always only about the performance. And second, from the performance is almost everyone always knows where they stand, not in a negative sense, but in a positive sense, they will know, that’s why It's just very, very clear. And you know, the grading culture while it sounds very back to college. But actually, I do think works because it's very transparent in terms of where everyone is.

Ashish:

But it works because actually, people are not unlearning stuff. People are learning, they are much more moldable when they're available as freshers, they want to imbibe a new set of culture. They want to get apprenticed. I personally think if you take people from a lateral background, the amount of unlearning that they need to do actually makes the fit into the organizational culture much more difficult.

Vikram:

No, that's a great point. So, I think the balance of that performance culture with, I think two things, one is every celebration, I think everyone is there and whether it's a small celebration or a big celebration, I can just see everyone is involved in that celebration. And whether it's a small win for somebody in the tech team or some big win on the liability side for the finance integrity team. And if somebody is in trouble, I can just see everybody goes there and there have been many moments or people that are times of personal trouble and people are always there for each other and once that becomes habit, I think this culture has started to take shape. So, congratulations on building that. I'm going to go to our last section and also save the contentious debate for last – there’s always this I would say tug of war between profitability + growth, and the pendulum always swings. You've always been centered on profitability first and then growth. And just so that people get a sense of numbers. You've grown like clockwork more than 3X, year on year at very large scale, and at close to 25% PVT and we were profitable year 3 ?

Ashish:

14th month

Vikram:

And then we went back to PAT profitable soon after, and so I think that profit centric mindset, where does it come from for you? And now it's become more fashionable given that we have this extraordinary environment with Covid and so on. So everybody has gone back to saying control of their own destiny while you had said, you know, profit gives me control of my own destiny. I want to build a company that's ready for IPO from the start. And you and I have had many debates on this. Should we be sacrificing some profit for higher growth, is this particular adjacency or space that we should get into because that might give us growth, but it doesn't give you profitability. Whereas you've been highly centric on profit. And I think it's been a fantastic strength and define the core of, Ofbusiness. Where did that initial focus come from and how do you today evaluate new spaces that you can get into with that mindset?

Ashish:

Okay, so we never spoke about what we really do. We are essentially a lender plus wherein we provide a lending to SMEs in the form of working capital, but we never give them capital, essentially we give them raw materials that they can use for their businesses. So, lending plus other services that we provide is our core model and services actually make us more profitable. At the same time, they make us deliver more value to the customer that is always engaged with us.

So, we probably are the most engaged SME platform in India apart from probably being the highest growth. So that's what we do for a living. According to me I think there are four things that are important in any business. One is process and controls. First, you need to have processes and controls because everything otherwise will slip away one day and you wouldn't be able to know that's what you have to build.

Second is the profitable mindset. Why is profitable mindset important? Primarily because to me, it's the single largest calling card that you can have. If you can go and tell a person, Hey, you know what, I'm a startup and within 18 months I'm profitable. And now when we say after 4 years, we do our ROA well in excess of 5%, people say, wow, that takes organization 20 years. So, it's the biggest calling card that you can have. So that's the second, the third is growth because anything that has good tight process and controls and has a profitable mindset, and always money will chase them and money once it comes in, will always make money. And hence you will have growth. So, growth is an outcome. According to me, after you have the first two and the fourth is around building a sustainable model so that no natural calamity like a COVID or a big guy with a large deep pocket, like let's, let's say Reliance can come there and take away your business. In my opinion, that's the order in which we have built our business. I'm sure pretty much that other orders are also true, but those are orders that are very, very crucial and centric to us. Coming to profitability, because it is the largest calling card.

The way I think about it as the following, is that there are two things that are important when it comes to profitability. One is this notion of obsession. You cannot say, Hey, I will be profitable in 18 months that you, that you'll never be. You have to say that you are essentially a profit-making organization like for example, I don't have the tag of CEO. I call myself the CPO, the chief profit officer, every single guy, you go and speak to even an intern in our company will be able to tell you that this company has one vision to deliver profitability in everything that it does. So obsession with the word, with what it means and being aware about it is the most important one.

And second is this is this notion of saying that you have to hate a portfolio approach when it comes to profitability. So for example, if a company is profitable, it doesn't make sense. Within a company, are all regions profitable, within a region, are all teams profitable within all the teams are all individuals profitable. So, if each individual is profitable, then obviously the region will be profitable. Obviously, the team will be profitable. Obviously the company will be profitable. According to me, thinking about portfolio profitability is the worst thing to do, and it is not true about just the way I described it. It's also about transactions. You could say my, ‘this’ product is profitable, or my company is profitable because these three products will become profit. No product profitability is not important within a product, each transaction has to be profitable. If each of your transaction has to be profitable and each of your person is profitable. That last basic detail of understanding what is the last unit currency of your organization, if that is profitable, right? That will make you always profitable. Like whatever you do, or your numbers will speak for themselves. Those are the two things. One is obsession and hating the portfolio approach. So when people come and tell me, Hey, I can do this thing at a loss because you know, I'm anyways making profit. That's the portfolio approach, that you have to kill it right then, and there - each single transaction, each single individual, each single team is what is important to deliver that organizational obsession.

Vikram:

I'll tell you how you've given the underlying philosophy with which the entire organization operates, I’ll tell you how it manifests itself for an investor. Whenever we're talking about new categories and new geographies, new business areas, I find everyone in the organization first started talks about margin. They don't talk about the market size and how fast growth can be informed. They all always talk about gross in the business, second, they are highly cost centric and every single person is thinking about what is the cost of the action that they are taking, whether it is marketing, whether it is ops or that it is tech, how are they delivering to a lower cost? And how are they measuring themselves to lower cost? And third is everybody talks in that language of profit, like you said, but even the fact that everyone just talks about gross margin first and cost in every conversation I think has led to this profitability mindset across the, across the hall. You and I can go on talking forever. But this has been like a thoroughly enjoyable conversation. I think there are lots of nuggets of wisdom for young founders because you built this company in your own way and very different from where you know, the collective wisdom of the startup ecosystem is. So thank you for sharing that with us. Really enjoyable conversation. I don't know if you have any final thoughts for our listeners, especially in this COVID environment.

Ashish:

So, my final thoughts would be that COVID is here to pass, don't think about it. It's a pit stop, refuel and move on. Please as you are starting your business journey, the first 6 to 12 months is going to define what you will build as an enterprise for the next decades. And hence you need to get the first 6 to 12 months right. This is when the entire culture is built out. Your visions are defined, your goals are defined. So, when you're in your first six to 12 months over invest in what ideas you want to stand for in the long-term than just thinking about performance, because that will probably do anyways, given what you dreamt of.

Vikram:

That's well said, congratulations, man, on the journey so far, and it's been a privilege to be on the journey. Thank you.

Ashish:

Thank you, thanks Vikram. Thank you for having me.