I am sure you’re aware of unicorns – startups that have crossed a valuation of a billion dollars. You would also be aware of the fact that most of these companies are loss making, and have been so for years. However, there are a few unicorns whose founders dared to be different. They insisted on being profitable. And since they are unicorns that “earn” money, it’s natural to call them “EARNICORNS”.
But how are earnicorns different, and what makes them profitable? Well, one of the main differences is the way they build their teams.
Let’s take the example of Dream11 – the leading fantasy sports player in the country. Now, when Covid hit the world, there were no sporting events. And as you are aware, fantasy sports can only take place when there are real sporting events. But during Covid, there were no events – and therefore revenues were down to almost zero.
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Now when internet companies are not doing well and revenues are low, what’s the first thing they resort to? Mass layoffs, isn’t it? But hold on. Even during Covid, there were no mass layoffs at DREAM11. The founders, Harsh Jain and Bhavit Sheth, made it clear, “In good times, you guys have supported the company. Now in bad times, the company will support you. There will be no job losses.”
Dear reader, if you wanted to build ownership in your team, can you think of a better way? And as you can imagine, the attrition rate of people in Dream Sports is an unbelievable 4%. That’s right – for a company in the internet space, for a company that has had so many ups and downs – it’s almost a world record.
And now for another Earnicorn – InfoEdge, better known for its biggest business, Naukri.com. You would remember the global financial crisis of 2008, when the world went into a tizzy, and large companies such as Lehmann Brothers collapsed. And of course, it impacted companies in India as well. Obviously, recruitment hit a new low, and Naukri’s business went into a trough.
But here’s the key: Once again, there were there no mass layoffs. But in addition, the senior people in the company took a voluntary cut in salary, so that the junior people could get an increment.
That’s right, in that crisis, when the world was melting down, the founders, Sanjeev Bikhchandani and Hitesh Oberoi, realized that senior people could afford a cut. But for those earning low salaries, their families were heavily dependent on their monthly pay-checks. And therefore, not only were they given their monthly salaries, but their increments as well, when they were due. Wonderful gesture, wasn’t it?
And now for another earnicorn, namely Zerodha – a giant in the online brokerage space. Of course, you are aware that giant companies are hierarchical. So they would have analysts reporting to senior analysts, who would report to managers, who in turn would report to assistant vice presidents, and then vice presidents, and senior vice presidents, and so on. And the most commonly heard phrase in the corridors of power would probably be, ‘You’d better listen to me, because I’m your boss.’ Isn’t that the way large companies are run.
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But that’s not the way Zerodha is run. You see, Nithin Kamath, the founder, has always believed in small, close-knit teams. Rather like a family. Where everyone is involved in decisions, rather than being forced to accept what the boss says. That creates ownership. That creates bonding. And since they avoid hierarchies, decision making is quick.
So there is a small core team which looks at products, and works closely with Nithin. The tech team is also tiny – just 30 people. And the total size of the Zerodha team? Well, guess what – it’s just over 1,000 people. That’s it. For a company that is a market leader. And before I forget, everyone in the company gets ESOPs. Yes everyone!
So you’ve seen three different earnicorns, all of whom have built teams of people who are happy and motivated. But how does all this affect profitability? Well, when people are happy, when they trust the management, they don’t leave. Which means the company saves on recruitment as well as training costs. In addition, teams are highly motivated – and therefore productive.
Costs down and productivity up. Isn’t it obvious why companies such as these have been profitable? Isn’t it obvious why they are all earnicorns?
One last comment. All successful startups follow the well-known PERSISTENT model. Where ‘P’ stands for PROBLEM, ‘E’ for EARNINGS MODEL, ‘R’ for RISKS, ‘S’ for SIZE of the MARKET, ‘I’ for INNOVATION, the second ‘S’ for SCALABILITY, ‘T’ for TEAM, the second ‘E’ for ENTRY BARRIER, ‘N’ for NICHE, and the final ‘T’ for TRACTION.
You’ve just seen how focusing on the TEAM can help make a business successful. But the other components of PERSISTENT are equally important.
This article has been written by Prof Dhruv Nath, PhD (IIT Delhi), B Tech (IIT Delhi), Director – Lead Angels Network
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of Times Network.)
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