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Old script, new screen

Old script, new screen

Midway through a thriving career, Raghav Kher ran into a business opportunity. He exploited it with passion and came up with the Rs 25 crore Seventymm.

BASIC INSTINCT

Raghav Kher
Raghav Kher, 49

Education: ME, M.Sc (University of Missouri); MBA (University of Michigan)

Previous work experience: Microsoft, US

Last salary: $110,000 per annum

Time spent as an employee: 12 years

Age at starting seventymm: 46 years

No. of years as an entrepreneur: 9 years

Investment for Seventymm: Rs 4.5 crore

Source of funding: Personal savings

Company’s name: Seventymm Services Pvt. Ltd.

Turnover: Rs 25 crore (2007-8)

No. of employees: 600

Superman or Batman? For superhero worshippers, the loyalties help forge new bonds or reduce old friends to fisticuffs. For Raghav Kher, picking Superman over Batman marked the beginning of Seventymm, a Rs 25 crore online movie rental business.

“In 2005, during a vacation in Bangalore (from the US), I drove around for hours, but couldn’t find a Batman DVD for my nine-year-old son, Rohan,” says Kher. There was no good provision for hiring films in the city. That set the wheels turning in his mind: was there a business possibility here? Kher hired a professional agency to conduct a small survey. The response corroborated his gut feeling—people were unhappy about the choice of movies, the high price of DVDs and the lack of time to search for their favourite films. To Kher, there seemed to be a single remedy for all these ills: an online film rental service.

Not everyone sniffs a business opportunity in a compromise. So what prompted Kher to think this way? The impulse lay dormant in his genes—Kher’s father was a businessman. While he credits his father with teaching him the business basics, his academic achievements—masters in mechanical engineering and computer science in 1985, and an MBA, all from the US—also had a role to play in his success. The most crucial, however, were the nine years at Microsoft, where he acquired networking skills and learnt to formulate and assess business plans.

FIRST SUCCESS
Initially, Kher applied these skills not to Seventymm, but to launch a software company called Rendition Networks. “After years with Microsoft, I was equipped to follow my entrepreneurial dreams,” he says. So in 1999, he quit his job. But wasn’t he afraid of failing, given that he was married and had two kids? “Not really. I had enough savings to tide me through a year, and I could always go back to a job,” he says.

So in 2000, he launched his company that focussed on building a software solution for network crashes caused by human error. Kher teamed up with a former colleague, who pooled in technical expertise and Rs 4.5 crore, while he handled the business end and contributed the same amount from his personal savings. The duo spent the first few weeks making nearly 40 cold calls a day to potential clients to understand the features they wanted. “We had one room with one telephone line and six engineers,” says Kher.

Initially the clients were small, but the business grew steadily, inviting venture capitalist (VC) funding and soon making big profits. In 2005, however, he sold the company to Opsware Technology because “the offer price was good and, most importantly, they had a better sales network than ours.”

PLAN AND RESEARCH
Then came the vacation in India and Kher found himself on the road to launching Seventymm. As with Rendition Networks, Kher stressed on research. He dug out information on potential competitors, market size, etc, and found that India had 110 million households, of which 90% were projected to own a DVD player in a few years. Also, there was a lot of scope to add value to the existing mom-and-pop DVD rental stores.

Kher also studied the business models of US-based movie rental biggies like Blockbuster Video and Netflix. In fact, he sent an e-mail to Eric Meyers, a co-founder of Netflix for insights into the business. During one of his trips to America, he invited Meyers to lunch and convinced him to act as adviser to Seventymm. “Meyers taught me that technology should be constantly updated to meet growing consumer needs,” Kher says. Even the name of the company was chosen on the basis of a survey among his target customers in four cities. Funding this groundwork was his savings of nearly Rs 4 crore.

BACK TO BUSINESS

TIPS FOR ONLINE ENTREPRENEURS
 

• Research all aspects of business thoroughly.

• Focus on what the client is willing to pay, not on what he wants.

• Do not compromise on the quality of your team for the sake of money.

• Constantly update technology for the convenience of the customers.

• Incorporate customer feedback into your business.

Kher began by building a good team as Rendition Networks had taught him that talented and passionate people were the key to a successful start-up. Simultaneously, he approached a VC to fund his company. While convincing a VC usually takes several meetings, Kher succeeded in his first attempt because he chose one which had financed similar companies like Skype. “Convincing” a potential financier, says Kher, involves salesmanship and passion for the idea.

Kher received Rs 9 crore from the first round of VC funding. He spent it on developing the Website content and buying DVDs, hiring a team and marketing the company. As the money was limited, Kher advertised the company through outdoor campaigns. The gamble paid off—on their first day in Bangalore, Seventymm registered about 200 members. By October 2005, the Website was ready. In March 2006, Seventymm was launched with a library of about 1 lakh DVDs. There were two pricing plans of Rs 200 a month for four movies and Rs 549 for an unlimited number every month.

Despite the preparation, it wasn’t smooth sailing. In the very first month, he was assailed by myriad logistic problems. “We couldn’t depend on the Indian postal service to deliver the DVDs on time. So Seventymm would have to be Netflix and Fedex in one,” he says. That meant they had to set up a courier service, recruit more people, organise delivery and pick-up of both the DVDs and cash, and revamp the software in just a few weeks. Now, they have localised delivery as there is a warehouse in every city that they operate in. Kher says it is nearly impossible to anticipate how a business will evolve—an important lesson for wannabe entrepreneurs.

EXPANSION
Today, Seventymm operates from six cities, has more than 70,000 members and 18,000 titles in English, Hindi and 12 regional languages. The company is yet to break even, but individual units are progressively becoming profitable, says Kher. Even as this story is being written, he is set to announce a fresh VC funding of Rs 50 crore. And instead of worrying about firms like Moserbaer, which offer cheaper DVDs, and about Websites downloads, he is set to expand Seventymm’s user base. In the next 12-18 months, Kher plans to spread the service to 40 cities. Scaling up is challenging, but Kher has an eye for detail. More importantly, he doesn’t lose sight of the big picture.