Building a Bootstrapped Unicorn from India: Rajesh Jain, Founder of Netcore Cloud (Part 2)

Sramana Mitra: At that time, it was the beginning of the market. Today, things are much more complicated. So, in 1997, what are we talking about? Where were you getting the ads from? Were you working with a network? Were you actually having to sell the ads to corporates? How were you getting the ads?

Rajesh Jain: I had one person in India, and we would basically reach out to companies in the US like AT&T or some of the Indian banks. At that time, a lot of these calling card companies were very popular because telecom was very expensive. You’d buy these call cards if you wanted to call from US to India. They’d target Indians in the US and we had the eyeballs at that time. By the time I sold the business in 1999, I think a few million people were coming to our network of properties.

Sramana Mitra: You were selling directly to the advertisers.

Rajesh Jain: We were selling directly to the advertising companies. In AT&T’s case, I think we had to go through an agency, but in almost all cases, it was direct.

Indian banks also got interested because they realized that non-resident Indians (NRIs) could be a very good source of investment back into India and their accounts.

Since the audience we were targeting was a prized audience, travel agencies, telecom companies, banks, etc. became our clients. I think that actually worked out quite well for us.

Sramana Mitra: How much did you get to revenue-wise within your world?

Rajesh Jain: By the time I sold, we were just about $700,000 or so in revenue.

Sramana Mitra: And it was all bootstrapped?

Rajesh Jain: All bootstrapped. We had to be profitable very quickly. In the first couple of years, we were doing websites. We did about two hundred websites over four to five years. So we’re managing the web presence of two hundred plus large Indian corporates including the hosting and the website development. I would also convince them to spend some money on advertising. That got a good flywheel of money coming in, and we kept our costs very low.

Sramana Mitra: We have a name for this track of bootstrapping. We call it Bootstrapping with Services. It’s a very effective way of bootstrapping. It’s something that is used extensively. A lot of great companies have been built using this mode. It’s a tried-and-true mechanism of bootstrapping.

Rajesh Jain: It worked very well for us. Otherwise, I would not have survived. Advertising took quite some time, I would have been probably dead within the first couple of years. We had done the bootstrapping with the services model.

Sramana Mitra: So whom did you sell to in 1999?

Rajesh Jain: So in late 1998 or early 1999, internet craze had started gaining globally. Yes. There were a lot of Indian portals coming in; they were all raising tons of money. I actually spent quite some time in the US in 1999 trying to raise capital from many people. We had a couple of term sheets also at that time. However, the deals did not work out.

Around August to September 1999, I was wondering what will happen to us because others were raising money, they’re putting out ads on front pages of Indian newspapers. We were still bootstrapped, but we had the traffic and the websites business. We were not desperate for a deal, but I realized that if I had to scale this, I would need capital going forward.

Suddenly in October 1999, I had two inbound offers. One was from a US company called mail.com, which owned the domain india.com. They were very keen to acquire a content property, and then, as was the hot thing that time, do an IPO on NASDAQ. It seemed very exciting. No one worried about revenue at that time. Some of the Chinese portals had gone public at that time, there was nothing from India.

The second offer had come from Sify, or Satyam Infoway at that time, which offered a ISP service in India. They were looking for a sort of AOL type play – connectivity plus content. They were the first Indian company to go public on NASDAQ. So, they had capital and had a stock price, which was rising quite rapidly. They were also looking for a deal to augment to the connectivity play. So I engaged DSP Merrill Lynch as a banker. In about 15-20 days, the valuation went up from $40 million to $115 million for our $700,000 business.

Sramana Mitra: My goodness. Wow! Dot-com was a complete bubble time.

Rajesh Jain: Absolutely. One of the good things was that because of our profitable foundation, I had the ability to say no to various offers before our Satyam Infoway deal. Because I was profitable, I was not in a desperate urgency to sell. I knew we were the best in terms of traffic and content. So eventually, we accepted the offer from Satyam Infoway for $115 million, and it was predominantly cash. Their stock, by the way, went up $700 million the day our deal was announced.

Sramana Mitra: Wow. My goodness. So it paid for itself.

Rajesh Jain: Yes, it paid for itself. It actually went kept going up after that.

Sramana Mitra: Was this a cash offer? Or was this a stock offer?

Rajesh Jain: It was pretty much all cash. 10% of that was converted to Sify stock.

Sramana Mitra: I see. So you had some more upside also on top of it.

Rajesh Jain: No. The stock fell close to 90% or more some six months later.

Sramana Mitra: Yes, because the dot-com market crashed.

Rajesh Jain: We had stock in the Indian company. Sify was listed on Nasdaq. So it took us quite some time to basically sell that in the US. So I didn’t get much from the stock, but the cash was good.

Sramana Mitra: The cash was very good, good enough anyway.

This segment is part 2 in the series : Building a Bootstrapped Unicorn from India: Rajesh Jain, Founder of Netcore Cloud
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