The trio of Raghu Bhat, Manish Bhatt and Arunava Sengupta gave up their cushy jobs in the WPP-owned Contract Advertising to set up their own agency, Scarecrow Communications, in 2010. The company has become the first Indian agency to make it to the list of the world's top 15 independent advertising agencies. In a conversation with BUSINESS TODAY, Bhatt and Sengupta talk about their journey, competing with big networks and why they don't want to sell Scarecrow. Excerpts:
Q. Could you step back a little and tell us when and how the entrepreneur bug bit you?
Manish Bhatt: We started freelancing in McCann. In Contract, we were handling lot of big accounts and we not only pitched for accounts but also retained existing ones. We had full confidence that we could win businesses, retain and sustain them as well. We realised we had an opinion not only about the way the work should be, but also how the organisation should look like - whether our company would have been better off doing a project rather than signing a retainer deal and so on. This was dangerous as we were becoming a mini agency within an agency in our mindset. If we have our own philosophy of how to run a company, then there would be a clash with the company we were working for. That's when we decided to start our own company. We realised that since we had our own thinking, we should create an outfit where we could imply our own thinking.
Arunava Sengupta: We never had a friction with the agency we were working for, but we realised that a time is going to come when our point of view will be so strong that we will need to have a place where we can do things the way we want to do.
Q. It is well known that you have never wanted to be a part of a larger advertising and communications network. Why?
Sengupta: When we spoke to networks we realised they are not going to be as open as we wanted them to be. That's when we decided we won't be part of any network.
Bhatt: We thought we should have the full liberty of taking the brand Scarecrow to a certain level. We can't just not institutionalise our thoughts and get into someone else's larger business. We were serious about what we were doing. We were never into the game of creating something and selling off. We wanted to start something that will exist for the next 100 years. We took a corporate loan from Vivek [Vivek Suchanti, Promoter of Concept Communications] as a working capital and we paid him back.
We hate the term 'creative boutique' and have always behaved like a full-fledged agency. We have senior people like ECDs (executive creative directors) who have been working with us for the last four years. We have invested in senior talent from the beginning and we kept on empowering them. Most independent agencies don't have a second line. We have a total strength of 70 people.
Sengupta: Most independent agencies have founders and a team of juniors. Here we have senior brains. We first brought in the seniors and then the juniors. We know from day one that it would be team work, hence we invested in talent without being bothered about profitability.
Q. Who was the first client you pitched for? Did you compete with the large networks?
Sengupta: Religare Macquarie was our first client. When we pitched for that client we didn't even have the name Scarecrow in place. Our visiting cards just said Raghu-Manish-Arunava and the address was Cafe Coffee Day, Bandra-Santacruz-Khar. We actually won the account. We were pitted against Lowe, Ogilvy and quite a few other big agencies.
Bhatt: By the end of year one we had 12 accounts - Rupa, DNA, Quikr and so on. We strictly followed the retainer model, unlike other independent agencies who worked on projects. They (those agencies who only do projects) may have a very healthy profitability from day one, but we chose a retainer model and since retainer is a recurring model, we could hire more people.
Q. Are you profitable?
Sengupta: We were profitable from the eighth month and whatever financial investment we had made, that was returned within the first 12 months.
Q. Are you still averse to getting acquired?
Bhatt: We have been financially stable from day one, we never had working capital problem. Even now we are not running out of cash flow, we are not looking at more working capital to grow.
Sengupta: We don't want to cash out and retire. We are young, we are here for the long.
Bhatt: Even the people we have invested in, we can't just think of encashing and leave them to people with whom they may not have aspired to work with. Encashment is not our aspiration.
Sengupta: If there is a partnership where there is substantial growth for us and helps us to go beyond what we are currently, then we are open.