Smile please, you’re an entrepreneur!
He-Man, Spiderman, Batman…none of the superheroes ever had any currency with Harish Bahl. Interestingly, the software engineer wanted to become a businessman! After close to twenty five years of gruelling entrepreneurial journey — marked by brutal lows, fizzy highs, and countless scars — three things remain unchanged for the founder of Smile Group: a smiling Bahl, an optimistic entrepreneur, and a gritty businessman!
The first step in becoming a founder is to know the ‘knowns.’ Right? This is what Harish Bahl assumed. What many take years to figure out, our software engineer knew it from his early days. Thanks largely to two ‘historic’ events which left a profound impact on the impressionable minds of the young child. “What is profit,” asked the math teacher in one of the classes in the secondary school. “It’s selling price minus the cost price,” he explained to the kids, who were being initiated into the world of business. “A businessman,” the master underlined, “makes profit and runs a business.” A juvenile oversimplification of the definition of a business, and how it is run, excited Bahl. “Mujhe bhi businessman bannaa hai. Ye to aasan hai (I also want to become a businessman. It’s easy),” he rejoiced and proclaimed.
Once at home, the child shared his daring decision with his father. In fact, the young lad popped up a question which piqued him for days. “What is the difference between a businessman and others,” he asked out of curiosity. His father, who used to run a small auto parts’ business, tried his best to keep the answer simple. A person, he explained, who draws a salary and is not running a business, gets paid only for what he or she does. A businessman, on the other hand, gets paid for his work as well as the work done by other people who he/she employs. The child was now convinced that business was the most lucrative thing on the earth, and this is what he was meant to do.
Years rolled by but the determination didn’t fade even a bit. Bahl completed his grad, most of his friends landed a lucrative job in the US, and he too got an offer. “Dad, I have got an annual package of Rs 80 lakh,” the young man called up from the States. “Don’t come back,” his father yelled who perhaps knew that the good piece of news would soon be followed by a shocker. “Just take the job and start your life,” he pleaded. Bahl, though, didn’t disappoint his father’s apprehensions. “I am coming back. You know that I want to become an entrepreneur,” he successfully argued.
Back home, Bahl takes the first step in his journey as a founder by figuring out the ‘known,’ which means what to do. The inspiration, and trigger, came from one of the networking parties of his father that he gate-crashed. Bahl overheard a senior government official talking about the big opportunity in the business of building bullet-proof cars. The wannabe founder’s eyes lit up. The street-smart guy navigated the bureaucratic layers, charmed his way to win the heart and confidence of the government official, and started building bullet-proof cars.
Bahl was now an entrepreneur. Over the next twelve months, he makes brisk progress, rolls out dozens of cars and becomes the biggest player in the country. A big-bang entry into the world of entrepreneurship was an impressive feat from the rookie founder. “It was one of the highs of my life,” he recalls. The second year, though, made him realise about the ‘unknowns’ of entrepreneurship. The business plateaued, and eventually demand vanished. The reason was simple. Apart from politicians and high-ranking government officials nobody would opt for such cars. A dejected entrepreneur learnt the first big lesson in entrepreneurship: TAM (total addressable market). ”I didn’t know this term. It was alien to me,” he confesses. “Nobody made me realise the value of TAM,” he adds. The founder eventually sold his business.
Keep smiling, Ho Jayega
The first entrepreneurial low, sadly, came at a time when Bahl was about to welcome a new member into his family. His wife panicked. “Kaisey karenge (how will we manage),” she asked. The would-be-father flashed a warm smile. “Ho jayega (it will be okay),” he reassured. In the midst of deep uncertainty, Bahl found comfort in his assuring belief which he held to and nurtured over the years. “Kuch na kuch to karunga. Lekin founder hi banunga (Will do something or the other. But I will be a founder),” he said to himself.
A few weeks later, a chance encounter with a magazine gave him the fodder for his next venture. “Internet and multimedia is the future” screamed the cover page of PC Quest in one of the issues which was displayed on the stands. Bahl decides to explore the theme of the internet. There were two small problems, though. First, he didn’t know what to do on the internet. Second, he didn’t have a name for his venture. Bahl again went ahead with what he knew. “I know the kind of company I wanted to build,” he explained to one of his friends in the advertising world who was tasked with the job of finding a name. “Lekin company karti kya hai (But what do you guys do),” he asked. Bahl had an answer. “I want to build a happy company,” he smiled. His friend was quick to spot the wide grin from ear to ear, and suggested a name. “Smile,” he said, “is the name of the company.”
The new venture, though, had an ‘impotency’ problem to begin with. Bahl was looking for business partners, every evening there were many potential candidates, and the intense brainstorming sessions started getting intoxicated as the friends started gulping glasses of wine. Interestingly, all the friends would evince interest every evening and after two-three days, all would back out citing some lame excuses. Bahl was frustrated, but was more intrigued by the behaviour of his abortive-partner friends who had an edge over Bahl in two areas. First, they were more educated. Second, they had bigger earnings. “And yet, they were scared to take a leap,” he wondered.
Bahl soon figured out what maimed his friends. The culprit was a corporate job. “It’s an impotency pill,” he said to himself, trying to make sense of a string of denials. “It’s also a golden handcuff,” he kept talking to himself. Finally, he decided to change his strategy. He reached out to one of his friends who had been struggling in his business. “I want to buy your company,” Bahl made an audacious offer. His friend showed interest, and wanted to know the money on the table. Interestingly, Bahl had loads of them, but they were ‘invisible.’ “I will give you 50% of my company,” Bahl outlined the terms of the deal. “But you don’t have a business,” his friend enquired. “But you do have and it’s not working, and I know that I can make it big,” Bahl countered. The deal was sealed. “I made my first acquisition with zero money,” he says.
The gambit worked. The business scaled, over the next few years, Bahl stitched more deals in the B2B space, and had successful exits. His confidence ballooned, his ambition swelled, and Bahl now wanted to flex his muscle in the B2C space. “Now, I want to become Rocket Internet,” he outlined his aspiration. Rocket was a German internet conglomerate which was famous for copying proven business models in the US and China, and then applying them in emerging markets.
From 2010 onwards, Bahl rolled out a battery of ecommerce bets with a German Incubator in emerging markets which included India, Russia & Brazil. From flash sales site FashionandYou, group buying site DealsandYou, online footwear store BeStylish, lifestyle brand Freecultr and online fashion jewellery shop Juvalia & You, the entrepreneur was playing the new game with the intent of being a venture builder, which meant roping in dynamic partners.
Known and Unknown
Bahl’s next playbook, again, was based on the theory of betting on the ‘knowns.’ There are four things, he reasoned, which made Rocket-kind-of ecommerce model work. First was a big market, which India was. Second was a business model which worked in the US. Third was loads of capital, which was not an issue for Bahl as his initial set of successful bets made him the darling of VCs. And lastly, one needed a well-oiled management team, which meant hiring young consultants from global firms. So everything was in place for a rocking entrepreneurial innings.
There was something else — the fifth missing piece — which Bahl figured out. When it came to building a venture, the balance was tilted more in the favour of the funders, and not founders. So he devised an equitable structure: 33% each for the founder, VCs and himself.
Over the next few years, everything went according to the script. The ventures skyrocketed, Bahl and his team of founders managed to get a battery of global investors who poured in big money, and businesses scaled new peaks of success. So far, Bahl has had tryst with the ‘known’ side of the business. He, however, was yet to face the ‘unknown’ side. And there were two lurking in the dark.
The first ‘unknown’ was capital. “I underestimated the power of capital that could flow into the country,” he says. Bahl had built his ecommerce empire on the one big premise: consumers love value goods. In short, discounts rock. Though the logic was not flawed, Bahl didn’t anticipate that a bigger discount play by well-funded and full-price retailers like Flipkart could capsize his discount boat. This is what happened. In the game who could bleed more and for a longer time, Bahl lost out. ”I spent four-five years trying to make things work,” he says. And he indeed did whatever he could: from pivot to restructuring to shutting down multiple ventures and bringing about a sharp focus in a few. None worked, though. “It was the lowest point of my life,” he says.
The ‘lowest point,’ ironically, came after a string of successful ventures. Sample this. Bahl exited to WPP for Quasar, did a market entry partnership with Yahoo for the ad business, inked two more partnerships with WPP, and then the sale to Dentsu for SVG. In fact, he had a second partnership with AirBnb for AirSewa.
Meanwhile, there was another low and blow. A battery of ‘low blows’ by critics and analysts were quick to write him off. They found holes in the business model created by Bahl — and to be fair, all the businesses built on such models eventually disappeared by 2017 — and reckoned that the entrepreneur had lost his golden touch.
Bahl, though, knew that there has to be something more than a flawed model to explain his B2C debacle. “I accepted that the model had cracks, but I knew it was not just cracks,” he says. It had to be something much bigger.
Passion over everything
He finally discovered what took sheen off his labour. “The problem was with the hired-founder model,” he says. The gambit of picking people with pedigree over passion was a huge mistake. “Nothing can replace passion,” he says. When you go through the downward curve of the sine wave, Bahl explains, you get to spot the difference between ‘men’ and ‘boys.’ Another big realisation was that ‘cloning’ Western business models in India or working on copycat models were destined to fail.
Yet another learning was that the VC model in India is broken. A VC, he argues, spends most of the time in raising funds. The second item on his priority list is deal flow, which means hunting for deals. Then comes managing investor relations. And last on the ladder is taking care of the portfolio companies. “At Smile, we flipped the model,” he says. Bahl started working with passionate and young founders who had deep skin in the game. A brilliant example is how Smile helped launch AirBnb in Europe, Latin America and Asia. He decided to have fewer bets — 3–4 deals — not raise money from outside, incubate ventures and sharply focus on enabling entrepreneurs to realise their potential and dream.
The current portfolio of Zupee, Single Interface and Tyroo, claims Bahl, are profitable and market leaders. “I incubated real-money gaming Zupee with an amazing founder Dilsher,” says the venture builder, claiming that Zupee has emerged as the largest real-money gaming company in India. SaaS firm Single Interface, Bahl goes to on list his present set of projects and achievements, powers over 3 lakh stores, and has a rockstar founder in Tarun. “I have partnered with another fascinating founder Siddharth for Tyroo,” he says, talking about the third lesser-known bet which is into market entry, media partner to global blue chip media platforms like Snapchat. “We have learnt from our past, and all our companies are fast growing and profitable now,” he says, adding that a lot of the credit goes to the founders who he has partnered with. Bahl also runs a fund — Smile Capital — out of Singapore, and has stitched partnership with a slew of big US platforms.
After close to 25 years in the entrepreneurial journey — he started ‘Smile’ in 1999 — Bahl reckons that his biggest learnings have come from his biggest failures. “People don’t remember my B2B hits but they are quick to point out my B2C misses,” he says. A big takeaway, he underlines, is straying grounded. “My failures constantly remind me that one must not try to walk on water,” he says, dishing out two pieces of priceless advice to budding entrepreneurs. First, it’s good to know the ‘knowns,’ but also figure out the ‘unknowns.’ Second, one must have a purpose. “If you know the ‘why’ of your journey, then success won’t intoxicate you, and failures can’t break you,” he says flashing his signature broad and arm smile.
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