SPARK OF THE CORPORATE
Today we will be putting some light or rather should I say grab some light from a man called Shantanu Prakash, founder of Educomp, who is responsible for bringing the much-awaited change in the Indian education system.
Shantanu was from a regular middle class upbringing. He went into business while doing his BCom. The entrepreneurial streak continued after the MBA from IIM Ahmedabad. His company Educomp is today the leading provider of digital content for schools across India.
Shantanu Prakash was born in Rourkela, a small town with only one notable feature - the steel plant. Dad in SAIL, mom a school teacher, an upbringing no different from thousands of steel town kids in the 1970s. After class 10, the family shifted to Delhi and he enrolled in DPS, a "shiny, big city school." A reasonably good student, Shantanu joined Shri Ram College of Commerce. And that's when it first became evident, 'this guy is different.'
Shantanu recalls "Whenever my dad used to travel, he used to buy me books. In fact, I don't remember getting any presents except books. I used to read voraciously. And probably that unlocked something in the mind. "Big thinking, big horizon and so on"
When his dad retired and wanted to come and settle down in Delhi, he found that he didn't have enough money to buy even a DDA flat. So somewhere at the back of his mind he thought that if "I need to make money, then working in a job is probably not going to do it for me."
Shantanu Prakash grew up in an 'absolutely typical middle class background'. But he knew entrepreneurship was his calling, early in life. He founded a company while still in college and started another one right after graduating from IIM Ahmedabad.
The business was organizing rock music concerts. Not that he had any particular fascination for rock music but it was a good opportunity.
Shantanu got into IIM Ahmedabad although he was actually keener on FMS Delhi. Shantanu joined IIMA, even as the event management business back in Delhi continued to flourish. A contract had been signed with Thumps Up to do a series of concerts all over India. A concert in Bombay was yet to be staged.
Shantanu recalls the time spent at Ahmedabad "Every weekend, in the first year of IIM Ahmedabad, I used to go down to Bombay and work with my friend organizing this concert. It was a great hit. We got Remo to perform, it was held in a hotel in Bombay and one time when I came back, I had this board outside my dorm room in D-14, saying 'Visiting Student'. So I had a complete ball during the two years in IIM Ahmedabad."
"Honestly, I didn't take it very seriously in the first year. Then in the second year, I said okay, let's see the curriculum, what it's all about. Why are these kids studying so hard, what is there to take so seriously here?"
And at the time salaries from campus weren't exactly stratospheric. Shantanu recalls that 17 of his batch mates joined Citibank at salaries of Rs 7-8,000 a month in 1988.
He with his friend and partner from the event management business launched a company focused on education. The idea was to set up computer labs for schools. The business model was innovative - the schools did not invest. They only paid a monthly fee for every student who used the lab and signed a multi-year contract.
That was the time when IT was coming into schools. So there was this whole mystery around IT. They actually got off to a great start. Lots of schools in two years, the company did 50-60 schools and boasted a couple of hundred employees. The turnover was Rs 4-5 crores.
But, there were ideological differences among the partners. Shantanu wanted to go on one direction, which was not quite acceptable to the other partner. But after all they are thick friends.
Shantanu decided to do something on his own. The partner kept the company and pretty much all the money, while he made a fresh start. The year was 1992.
And this is when, he thought of doing something innovative and worthful to the education system on the whole. As he has seen and worked closely with the schools his ideas were revolving round the education only.
Finally the spark - Educomp
Educomp has started very small. And with a different focus. Instead of hardware, Educomp went into software. The first product it launched was a 'School Management System', an ERP of sorts for schools which took two years to build.
Shantanu says, "On paper it seemed like a phenomenal market to automate schools - there is a real pain that you are trying to address. But it wasn't a very successful product". After getting the product into 10 schools Shantanu realized that every school wants customization. And they don't want to pay for the customization.
He quotes "Not understanding what running a business means, you later relearn all those lessons the hard way."
Educomp started its life with zero capital base. He had just two employees in the very beginning. "A few school computer lab contracts kept some cash coming in" he says.
"But the focus was on building this piece of intellectual property. Even before it was fully developed, he started going to the market and selling the product. Shantanu is quite a good salesperson. So he managed to convince a number of schools to buy it and business started growing.
Eventually the product was abandoned and Educomp expanded into digital content for schools, and subsequently into e-learning.
Today if you look at the product portfolio, the company has footprints in almost every space from KG to class 12.
When asked what was the process that you went through? From 1992 to 2006 (when Educomp got publicly listed) Shantanu replies, "Honestly speaking, for me it wasn't a difficult process at all. And I think it's more a mindset issue than anything else."
"I remember, the first office didn't even have a fan. But I didn't seem to mind at all at that point in time. I was so completely obsessed with what I was doing and what I was building. So every single year of my life when I look back, I thought, that was the coolest year of my life. That I was doing the most significant things that I could ever hope to do."
"And that basically translates into being happy. So one way to describe myself would be, you know, an eternal optimist. When you are an optimist some of the external environment stuff doesn't really bother you. It never bothered me."
Getting into the details of how the company grew, initially it was slow. Very slow In 1998, six years after starting, Educomp's revenues stood at Rs 3.5 crores. Then the company started growing. In the year 2000, the top line was around Rs 12 crores. Then it really took off and in FY '07-08, Educomp clocked revenues of Rs 276 crores, with net profits of Rs 70 crores.
Shantanu believes there are two questions which need to be asked:
Shantanu answers "In our case, the solutions that we were offering were technology based, so they could easily be scaled up. Secondly, the universe of opportunity in India is phenomenal. There are 220 million kids going to school. There are one million schools, five million teachers, all of that stuff. So even today, the market penetration levels are less than two per cent."
"And Educomp can keep growing 100 per cent over the next 10 years. Without reaching a saturation point" Additionally, the market started responding favorably to digital content.
Shantanu says "It could have happened 3-4 four years earlier, it could have happened 3-4 years later. As far as we were concerned, we were passionate about it and believed this was the way to improve the quality of education." 75% of Educomp's revenues today come from licensing content to schools - helping teachers do their job better.
He always wanted to work with high quality, smart people. But the problem was, the high quality smart people didn't want to work with him. So it was a lot of struggle.
One of the many reasons Educomp was eventually able to attract talent was because people easily become passionate about education. There are 4,000 employees at Educomp but the attrition rate is amazingly low, at less than three per cent.
When asked why?
Shantanu replies "People are happy, I would like to believe that. And the company is growing 100 percent a year; we are now five times larger than our nearest competitor in India in this space. So where do you want to go!"
With the company going public, Educomp today has at least 25 employees who are dollar millionaires. Like all new generation entrepreneurs, the secret sauce of stickiness lies in sharing the wealth. And the heat of growth is fuelled by a timely dose of venture capital.
Educomp received $2.5 million of venture capital in June 2000. It wasn't much of a struggle given the IT and dotcom boom at the time. The funding was wrapped up in two months.
The canvas was always large. With more money you can just buy more paint and do a better painting. Six years later when more funds were needed for expansion, Educomp decided to raise the money through an IPO.
The company had reached a critical size, and thought that capital markets are ready. They are very happy that they took the company public rather than take private equity money.
The important thing is that Educomp went IPO at the right time in its growth curve. Since then the company has been growing 100% a year.
Shantanu changed his role all the time to avoid the risk of getting fatigue, the company was changing too, and they had a phenomenal growth opportunity in front of them.
Educomp is valued at about one and a half billion dollars (as of May 2008). They can be a ten billion dollar company in the next three years. So he is certainly there, in charge, driving growth for the company.
There are new thrust areas. For example, Educomp is now building schools. The company will invest Rs.3,000 crores in the next 2-3 years to set up 150 odd schools in India. The company is planning to get into higher education as well as making acquisitions outside of India.
There's the whole romantic aspect of taking the company, the creation to new heights. The desire is to see your company doing better and better and better. And there is always a 'next milestone' is what Shantanu believes in.
Here are a few of his learnings from his life journey in the corporate field.
"Milestones certainly keep one active and moving. But I think for me personally, understanding how value is created is a very fascinating subject. Studying consumer behavior, getting new products out into the market, working with really smart people, it's a rush."
"Every single day of my life, I experience that and I go out of my way to create those experiences that give me the challenge of being alive, driving something, doing something meaningful. Especially in the business that I run, which is education, it's so easy to feel that you are contributing to society."
"I think my family said this guy is crazy. So let him do whatever he wants. When I got married, certainly I was an entrepreneur at that time, my wife was understanding. But business every year has become more and more demanding of my personal time. More than the monetary sacrifice, it is really the sacrifice of time when you are an entrepreneur. And that is a much more expensive sacrifice than money."
"My life is completely unidimensional. Had I been working in a job, I would have been very conscious of leisure time, very conscious of how much I am working. Here I am working for myself. I had decided a long time ago that the next 10 years of my life I am completely going to devote to building up my company. The family has learnt to be okay with it. But you don't see it as a sacrifice as such?" he persists.
"It is a sacrifice, no doubt about that. Maybe I am not intelligent enough to balance or do this right, I am not proud of the fact. I think the ideal situation is to be successful professionally and take out enough time for your family and for other vocations, hobbies."
"I have this nice little picture, it has not happened to me. That's something that I guess I will have to learn." We all have to, actually.
Recently, Educomp invested in an online tutoring company. This company, Three Bricks E-Services, was started by three very young IIMA entrepreneurs- Chandan Agarwal, Riju and Mohit. They were in business for a year and a half and then Educomp acquired a 76% stake in their company.
In a short period of two years, each of these people, if you value their 24% stake in the company, would be worth at least Rs.15-20 crores each.
Shantanu on Young entrepreneurs
"Two years you may struggle. If the average salary is Rs.15-18 lakhs p.a. (gross) how much do you make in five years? 18 x 5, right? After tax, you make some 50 lakhs. In 5 years, I can guarantee you, any business you do, will earn you that. Assuming that you are at least a little bit intelligent, within a year, the valuation of your business itself will exceed fifty lakhs. No matter what you do.
So if a 24 year old entrepreneur comes to me, I would say choose anything that you want, that interests you, the internal passion you have.
How to choose what to do? I came from a background where I did my Bachelors in Commerce from SRCC and then my MBA - no 'skills', So I could have chosen any domain, but you have to keep some of those key principles in mind - 'Is the opportunity big enough, are you able to make a contribution and fundamentally change something that generates value?'"
Certainly inspirational words from the man himself!!!