TIME TO GROW UPThey are no longer startups. It’s time for a clutch of new firms like

Flipkart, Mu Sigma and Inmobi to start thinking and acting like large companies. Pankaj Mishra finds out how they are making the transition

into the big league

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Darkness has its uses. Last December, four co-founders of Bengaluru-based InMobialong with a dozen top executives were huddled in a pitch black room in PhoenixMall in Whitefield, Bengaluru. “It was the first day of our annual strategy meeting,and we were completely blind,“ said one person who attended the meeting. Theywere asked to identify colleagues by touching them, and even picking their foodplates. They were later divided into several groups and each was asked to buildparts of what could make up a complete flyover.“It's one thing to work together,navigate challenges in a team when things are visible. In the dark, it's a real test,“the person added.

The idea behind the unusual exercise was to help top leaders of InMobi prepare forunseen challenges the company will come up against as it sheds its startup tag andpushes forward towards its goal of becoming a billion-dollar company in revenues.

Last month, ET reported that Google was in talks to buy IMmobi. Founder NaveenTiwari denied this in an email to employees the same day . But highly-placedsources confirmed Google is interested in InMobi.

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Should Tiwari choose not to sell to Google, as he told his employees he won't, he needs to leadInMobi into the big league, teaching it to think and act like a large company . Big enough to competewith Google and keep living. Its days as a startup are over.

The mortality rate on the journey from a startup to a large, established firm is high. Sometimes ashigh as 6070%, says Shikhar Ghosh, a Harvard professor who also advises growing startups onstrategy . “In the US, only 10% of the VC-backed companies that go public are able to cross thebillion-dollar revenue mark,“ he adds.

InMobi is not alone in this journey . Flipkart also stands at this very cusp. It needs to clean up itsaccounting and improve governance, induct seasoned independent directors, build a second line ofleadership and along the way learn how to do business at 10 times its current scale more efficiently.

Zomato needs to weave its operations in 20 countries into one cohesive global organisation andperhaps also needs to hire a head of global operations. Mu Sigma needs to groom nextgen leaderswho can help manage new complexities, own and grow clients and help it scale beyond its current$250-million annual revenues.

In the midst of all of this, each of these companies also needs to reinvent themselves all over againto remain relevant in the rapidly changing technology and consumer expectation landscape.

Growth Pivots

Companies need to reinvent themselves at every Scurve, even discarding drivers that hadmade them successful earlier. “Initial success comes from having improvisational flexibility. Not merely about which route to take towards a predetermined objective, but also awillingness to change the destination itself,“ says Sharma. But even this will last only till thenext S-curve emerges on the horizon.

For new-age companies such as Flipkart, the journey of Elon Musk's Tesla offers a lot oflearning. “(Tesla's) brilliance lies in the fact that they postulated a series of S-curves right atthe start of the company . By doing this, they will be able to motivate capital investmentsat the right time and avoid a feast-famine investment cycle,“ says Sharma.

An Indian example of this is MakeMyTrip (MMT).It started off selling international airtickets to the Indian diaspora in the US. In its second avatar, MMT captured the domesticair ticket battle. And now, it is in its next frontier--building a one-stop meaningful holidaypackage solution.

But some things shouldn't change. “The key is to never drop the ball, stay focused onbuilding something great while trying to ensure that you don't dilute the culture--theessence of who you are as an organisation,“ says Zomato co-founder Deepinder Goyal.

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They have to figure out their next billion-dollar bets soon, says Sharad Sharma, co-founder ofsoftware products think tank iSpirt. “That growth is linear is a myth. Growth is instead a series of S-curves. Think of each S-curve as a new innings that the startup has to play . Great companies areborn when they win each new inning,“ adds Sharma. “Hypergrowth companies like Flipkart,MuSigma and InMobi have to navigate a series of growth S-curves to achieve greatness.“

Over the past few years, at least 30-40 ad-tech companies have either been gobbled up by Google,Facebook or Yahoo, or have died. InMobi has survived and thrived for seven years partly because ofits products and partly owing to luck. “You can't discount luck,“ says Tiwari.But luck can get you onlyso far. Now, these companies need to put in place processes and architecture that will supportcontinuous breakthrough innovation and rapid growth. And last, but not the least, InMobi's Tiwari,Sachin, Binny and Mukesh Bansal at Flipkart, Dhiraj Rajaram in Mu Sigma and Deepinder Goyal ofZomato also need to grow in their stature as leaders.

“Usually , most entrepreneurs are OK for the first $5-10 million. Then a lot of them run out of steambecause it's a different ball game--you have to serve multiple locations, globally . All of a sudden youneed different skillset,“ says Pramod Haque, senior managing partner, Norwest Venture Partners,referring to how entrepreneurs need to raise the game as their companies scale up.

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It is important that founders also evolve with the company through every S-curve. “Even if you see agrowth pivot, rebuilding the company is not that easy .By now the company is usually too big tobark out instructions as the captain of the ship,“ says Sharma.

Infosys and Wipro are classic examples of how tough it is to bring about large-scale transformationonce a company reaches a certain scale. “Murthy and Premji made the shift from being captains tobecoming coaches. Yet they did not step back to just running the company by looking at theheadlines. Both picked a few areas where they got fully involved so that they could inspect theculture, set standards, and teach,“ says Sharma.

Experts point out that the key trick to managing growth pivots is by making many thoughtful bets-most small and a few big ones. This is what Vishal Sikka is now attempting to do at Infosys. “Thehard thing is to quickly cull failures,“ adds Sharma. “ A certain ruthlessness is needed.“

But, in the context of these companies, the CEOs will need the full backing of dominant investors.Except Mu Sigma's Rajaram, most of the others are already diluted to less than a quarter of totalshareholding.

“The CEO needs the clout to first make many bets (of which most will fail),“ says Sharma. “This`power capital' comes from having delivered results in the past and from the culture that the CEOowns.“

Building a Good Board

While mercurial founders often take such calls, they can be more successfulif they have access to good, timely advice. Investors often play this role in theearly days, but building a strong board of directors becomes crucial ascompanies mature. “There are some boards which add a lot of value, otherswhich always pull things down,“ says Goyal. “ A great entrepreneur mustavoid hubris. Without the right board, it's easy to miss the weak andcreeping stall signals in the humdrum of intense growth,“ adds Sharma.A good, strong board is also capable of taking objective decisions.“Entrepreneurs are not always an ideal choice for becoming CEOs,“ saysGoyal of Zomato.“An entrepreneur should hire a CEO when she can't do itanymore.“ Often, it does take a lot of persuasion from the board before afounder agrees to this. “In the US, by the time a company gets to Series Dfunding, over 60% of the founders are replaced by professional CEOs,“ saysHarvard professor Ghosh. This too is part of growing up.

Zomato

IMMEDIATE CHALLENGES

Globalise leadership in 20countries it operates inTake on much bigger rivalYelp, infuse more funds,get aggressive on product

SWOT STRENGTHS: Strong founding team, early mover from India in restaurant discovery business, global footprint that challenges leader Yelp, financial discipline WEAKNESSES: Large and dominant investor in Infoedge, needs to build deeper expertise in markets outside IndiaOPPORTUNITIES: Its own cashless payment system, mobile advertising THREATS: Dominant social media platforms Facebook, Google and Twitter could build rival product or acquire Yelp

Flipkart

IMMEDIATE CHALLENGES

Sort out pending regulatoryissues including compliancewith FDI norms Establishleadership in technologyand operations that can rivalAmazon

STRENGTHS: Early mover, domestic leader in e-commerce, strongfounding team and leadership depth after Myntra acquisition,focus on in-house technology team, heavy financial backingWEAKNESSES: Young founding team with no experience inmanaging growing complexity and scale in business, growingdominance of investors in decision-making, high cash burns withno signs of profitabilityOPPORTUNITIES:Consolidate leadership in Indian e-commerce,explore unpenetrated markets of South-east Asia, acquiredisruptive tech startups like robotics company Grey Orange,explore public markets next yearTHREATS: Complex corporate structure and subsidiaries,competition from Amazon and Snapdeal

Mu Sigma

IMMEDIATE CHALLENGES Figure out the next disruptive product in analytics that positions it closer to PalantirProfessionalize management, board and raise governance standards by inducting senior leaders

SWOT STRENGTHS: Early-mover advantage in data analytics,strong founder in Dhiraj RajaramWEAKNESSES: Lack of a strong product, not kept pace with thenext frontier in big data science globally, heavily dependent onthe founderOPPORTUNITIES: Hive off, sell the commoditised servicesportion of analytics and build a disruptive productTHREATS: Faces danger of becoming irrelevant as dataanalytics gets commoditised and large services vendorsincluding IBM, Accenture push

InMobi

IMMEDIATE CHALLENGES

Launch cutting-edge productsthat can stand heat fromFacebook, Google Shed slow,organic growth strategy andmake disruptive bets, getbolder

STRENGTHS: Strong founding team, about to break even, pool oftalented engineersWEAKNESSES: India-centric engineering team—the next biginnovations are happening in the Silicon Valley labs of Facebook andGoogleOPPORTUNITIES: Consolidate its biggest, independent ad networkpositioning; explore technology disruptions to unsettle Google,FacebookTHREATS: Aggressive rivals Google and Facebook, lack of investorappetite in independent ad networks, Facebook’s own independentad network—Atlas

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