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Running a business is exciting and challenging at the same time.  There are many decisions one has to make and live with the consequences if they turn out to be wrong. In the past year or so, we at NetCore have faced many such decision points. I want to share some of these  moments and the thought process that went into each of those decisions. Hopefully, this can be good learning for entrepreneurs and managers.

Last November, we faced a moment of truth. The burn rate (revenue minus expenses) was very high. And one of our revenue streams (mobile ads) slowed down dramatically. October was our highest revenue month, and November was our worst month.  The next month wasn’t looking good either. And all around, there was talk of the impact of the economic slowdown hitting India.

Continuing on the same trajectory would have meant that the burn rate would have gone higher, and it would have put a lot more pressure on the other revenue streams. While we had a certain business plan, it was time to re-evaluate quickly and do a significant course correction. Else, we could just end up becoming a black hole for investment money (which in this case was my own).

Continued tomorrow.

I wrote this about a year ago:

What will be the dominant model on the mobile? What will create the $30 billion global market opportunity in the next five years?

…On the mobile, VAS 1.0 was all about generating revenues from consumers. In India, this is a billion dollar business. VAS 2.0 will be using Free SMS Subscriptions as the anchor for monetising the right of way to consumers in multiple different ways. What will be valuable in this case is the Subscriptions Engine. What Search did on the Internet Subscriptions will do on the Mobile – generate an audience and create revenue streams.

This week’s links:

• Game Theory and Politics: from the New York Times Sunday Magazine, about Bruce Bueno de Mesquita.
• Real-time Distribution: An essay by JohnBorthwick (via Michaela). “Over the past year there has been a rapid shift in social distribution online.    I believe this evolution represents an important change in how people find and use things online.”
• Why AT&T Killed GoogleVoice: by Andy Kessler. “There is no such thing as voice or text or music or TV shows or video. They are all just data.”
• Smartphone Wars: from Fortune. About how RIM (Blackberry) plans to win. “Locked in an epic battle with Apple’s iPhone, Research in Motion has managed to grow bigger and more dominant than ever. But the competition is about to get tougher.”
• Solar Power: from National Geographic. “Sunlight bathes us in far more energy than we could ever need—if we could just catch enough.”

The Digital Services Operator idea has been something I have talked about on many occasions in the past. (I used to call it the VAS Operator.) It basically combines three things – a direct-to-consumer reach on the mobile and Internet, a payment/billing relationship which creates a cash balance, and an open publishing platform for services across multiple bearer channels (Net, email, SMS, MMS, voice).

While mobile operators have done a phenomenal job in capitalising on a variety of value-added services (caller ringback tones, voice portals, content downloads, SMS subscriptions, premium SMS) to create a Rs 5,000 crore marketplace in India, there is much greater potential for this business in India.

We have been working over the past few months to put together a simplified payment mechanism which allows people to create a cash balance (just like they do for voice minutes with mobile operators in prepaid accounts) and a publishing and discovery platform to enable a variety of services to get created and flourish.

I wrote recently that in the Indian digital space there were two things which were critical for survival and value creation: a multi-modal strategy which combined the Internet and mobile, and a multi-monetisation strategy which diversified the revenue streams. One of the reasons few companies have thrived in the digital space in India is because they have not followed both these dictums, and have thus created narrowly focused businesses. This is what needs to change – and my hope is that we can do that via our Digital Services Operator business, which we will launch shortly.

This business group currently has two elements: MyToday SMS and Profiled Database Push.

MyToday SMS comprises the 40-odd channels that we run, which offer free daily updates ranging from news, cricket and stock market, to astrology, health tips, a new word a day, jokes, and more. This service has grown to over 4 million subscribers in India, almost entirely via word-of-mouth. People subscribe by sending an sms (eg. START NEWS to 09223050606) and they can opt-out anytime by sending an equivalent STOP sms.

All content is editorially created by an in-house team. Over the past year, we have partnered with multiple media companies to broaden the content channels. Monetisation is via ads that follow the content on these SMS channels. So, content is typically about 75 characters, and ads are about 75 characters in the 160-char SMS that is sent out.  SMS Ads are still a new media category so it will take some time for this business to achieve scale. This is where the second element comes in.

We have a large profiled database of mobile users in India which can be used to send relevant messages to people. This business has shown very good growth over the past few months. Much of this is due to the segmentation and the targeting that can be achieved. SMS is a powerful communication medium, and as long as the communication can be made more relevant to people, it is welcomed by most people.

We also have a set of mobile internet portals (MyToday.mobi and NayaNaya.mobi), but this requires a lot more focus for growth. Though we get a few million page views each month, it is not a business that has achieved scale. It is something we will be looking at more closely in the months to come. Mobile internet portals will become especially important and monetisable once 3G is launched in India – which I think will only happen a year or so down the line.

Tomorrow: Digital Services Operator

As part of Enterprise Messaging Services in NetCore, we focus on two areas: Mailing and Mobility. Both deal with two forms of messages which are integral to our life – email and SMS.

In Mailing, we have a number of products and services for enterprises:

• Emergic MailServ: Linux-based mail server
• Emergic CleanMail: Cloud-based Anti-virus, Anti-spam solution
• Emergic FlexiMail: Cloud-based mailboxes
• Emergic MassMail: High-volume mailing
• Emergic MailArray: Mail archiving
• Emergic Mail2SMS: Push mail sent as SMS to mobiles
• Hybrid Mailing Solution: Emergic MailServ seamlessly integrated with Microsoft Exchange or Lotus Notes to help bring down total cost of ownership in the organisation
• Managed Mail: Complete cloud-based mail management

Of these, MailServ and CleanMail have been our bread-and-butter business for many years. We have about 2,000 organisations in India using these solutions. The two new products that have been doing well are MassMail and MailArray.

In Mobility, we were a late entrant into what is commonly called the “SMS Aggregator” business. SMS usage has grown dramatically in India as organizations use it for both transactional and promotional messages. My estimate is that there are about 3 billion business-related messages (commonly called A2P, or application-to-person) sent each month in India, about 20% of the overall SMS traffic. The industry size is estimated at about Rs 200 crore annually, and it is a very competitive market.

Over the past 18 months or so, we have made good inroads into the market, especially in some of the larger organisations. Our own SMSC infrastructure at mobile operators (a rarity globally) combined with superior technology via our SMSHNG platform has helped in making this our single biggest business line. The focus has been to convert what is essentially a “dumb push pipe” into a “intelligent service pipe.” We are doing this by adding multiple solutions to the standard SMS bulk push:

• mConnector: For rapid database integration and customised 1:1 SMSes
• Invertising: Hotline via permission-based publishing to customers
• mCoupons: A solution that can help the retail industry
• mBiz: An online, do-it-yourself SMS publishing platform (coming soon)

Looking ahead, I see the combination of email ID and mobile number becoming the digital identity of a person, and the combination of Push, Permission and Profile becoming the differentiator as businesses seek to deepen relationships with existing customer and acquire profitable new customers.

Tomorrow: Mobile Media and Marketing

I have been running NetCore Solutions for more than a decade. For the period from 2000 to early 2005, it was a place where I could experiment with new ideas (Thin Client-Thick Server as a software solution, Visual Biz-ic as building blocks for enterprise software, Pragatee as an all-in-one business server for small businesses, Digital Dashboard, BlogStreet, RSS Aggregator).

I did not spend much time focusing directly on the business that we then had – Linux-based mailing solutions for small- and medium-sized enterprises. As a result, we did not grow much during those five years, even though we tried out many different ideas.

Things changed somewhere around April 2005. We focused on mailing growth with product enhancements and extensions, and also started working on ideas in the mobile space. It was in late 2006 that we launched the MyToday SMS subscription service. From then on, both the mailing and mobility groups within NetCore have grown well.

In the next three posts, I will detail what we do, and what we would like to do going forward. I believe that we now have a strong foundation to build upon. The slow growth in the first part of this decade is now behind us, and there is a strong focus on a limited set of areas with great potential going forward.

The NetCore of today has a staff of about 160 working in three business areas: Enterprise Messaging Services in mailing and mobility, Mobile Media and Marketing and a new business that we call Digital Services Operator. Together, they create the foundation for multi-monetisation: ABC (Advertiser, Business, Consumer) pays.

Tomorrow: Enterprise Tech Services

In November, it will be 10 years since I sold my Internet portals business to Sify. It has been a long journey. Even as I have spent a significant time in NetCore, I have made about 15 investments in early-stage companies as part of what I call the Emergic Ecosystem.

One of the disappointments at a macro level is the lack of scale that Indian companies have achieved in the digital space. That needs to change. And for that to happen, the thinking needs to be different.

In NetCore, we have both enterprise and consumer businesses. For a typical venture capitalist or external investor, this would be anathema. (Maybe, that is why I still don’t have an external investor!) But given the realities of India, it is very important to build multiple related revenue streams. The enterprise business creates a cash cushion and also creates business openings. It allows a company to go and talk to potential customers across other forthcoming streams. It also ensures that the management is not isolated from the market.

Over time, it will be the consumer-centric business which will create the large value. But for that to happen, it needs a technology, customer and cash base on which it can allowed to nurture through the years that it takes for it to achieve scale.

In NetCore, while we have had some clear long-term goals, we have had to adapt our interim strategies on multiple times. We have reversed business decisions because of feedback we got from the market. We have tried to make sure that we continue to focus on revenues and costs to ensure the gap between them is minimal ensuring business longevity. And as long as one is there in business, the new ideas and opportunities will keep coming. At those points, one needs to make bets on the path to take – which is not always easy.

The journey through the years has had many ups and downs – probably more downs, than ups. But that is the life of entrepreneurs and early-stage companies. I have always focused more on blue-ocean opportunities (“uncontested marketspaces”) than entering in existing businesses. Many a time, these decisions don’t pay off because one may be too early. With the coming Digital Services Operator business, I am hoping we are at the right time and place!

Tomorrow: A Brief History of NetCore

This is what I wrote two years ago:

Here are three things I’d like to do in the rest of my life and which will require investments of hundreds of millions of dollars. This is not about philanthropy, but about building the right systems and foundation – in a sort-of self-generating way. Ideally, the Indian government should have been the enabler – but I don’t see that happening with the politicians we have. Indian business has started taking the lead but is not doing this fast enough – and in some cases, is not even doing it right.

First, ensuring access to quality education for hundreds of millions of Indians. Education is a life-enhancer – and nothing comes close. My father was helped by his education to get out of the village he grew up in and created opportunities for himself. How can we do the same for millions in India who are otherwise resigned to a life devoid of opportunity? This is not about trying to build the world’s best school or college, but ensuring that a sustainable and scalable system to provide quality education for everyone in India. For more, read Atanu Dey’s series on Doing Education Right.

Second, we need to build hundreds of new cities to house the hundreds of millions of people who we need to get out from the villages. Our current cities are bursting at the seams. Creating urban slums in not the answer. We need 600 new cities of a million each or 6,000 towns of 100,000 each – or a mix of both. But there is no way we can provide any reasonable future to pockets of 1,000 people living in 600,000 villages. In other words, India cannot afford its villages – and needs to urbanise fast. Else, the demographic dividend will turn out to a big nightmare. Creating these new cities right – in a clean, green, and self-sustainable way – is what I’d like to see us do. For more, read Atanu Dey’s series on Creating India’s New Cities.

Finally, I want to create a Santa Fe-like institution in India. It should be a place where multi-disciplinary thinking is the norm. It should be a magnet for smart people to spend time interacting with the best in different areas so they can forge multiple mental models which can then go out and solve problems right. We go wrong in solutions because we have partial knowledge and so we do not understand the real problem. This leads to what I call brain-dead decisions. An institution like this will ensure that we make the right decisions for the future. It will create a platform for the innovations we will continue to need.

The day after we had sold IndiaWorld for $115 million in November 1999, my wife, Bhavana, told me: “We are custodians of God’s money. If God has given us money at such an early age, there must be something He has in mind for us. We have to utilise this wealth for the greater good.” These are words which have formed the bedrock of my life since then. Till then, I was an entrepreneur trying to prove that I could, even after repeated failures, be successful at least once. Since then, I have come to believe that what good we need to do, we have to do in our present life – while we still have the physical and mental energies.

This week’s links:

• Gov 2.0: by Tim O’Reilly. “With the proliferation of issues and not enough resources to address them all, many government leaders recognize the opportunities inherent in harnessing a highly motivated and diverse population not just to help them get elected, but to help them do a better job.”
• $100B US Market for Hyperlocal News: “Community-driven news services have been the next big thing online for years. Can The New York Times or AOL find the $100 billion local-advertising pot of gold?”
• CRM Iceberg and Social Software: by Ross Mayfield. “When it comes to Social CRM, we have only discovered the tip of the iceberg.”
• Digital Classrooms: from The New York Times. “Textbooks have not gone the way of the scroll yet, but many educators say that it will not be long before they are replaced by digital versions — or supplanted altogether by lessons assembled from the wealth of free courseware, educational games, videos and projects on the Web.”
• Betting on the Real-Time Web: from Business Week. “No one knows how the microblogging site and similar online social networks will make money, but investors see a new Web revolution.”