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The Rediff Interview/Mahesh Murthy, founder & CEO, Pinstorm
'If you do a typical MBA, you'll never be a successful entrepreneur'
September 26, 2006
"Dream big. The earth's the limit!" says Mahesh Murthy.
Murthy represents the new breed of entrepreneurs who have taken the offbeat and unconventional track to build their little empires.
Murthy has funded 10 start-ups in India and three overseas. Murthy-funded firms -- like Geodesic, Webdunia, EasyBuy, CareerLauncher, Tulleeho and Pinstorm, his latest venture -- are today successful companies.
"Pinstorm has made a place for itself as the leading search engine marketing firm in Asia and among the top five search marketing agencies by size in the world," Murthy says.
Bullish on technology and media-driven companies, Murthy is looking at funding new companies and is set to launch a new fund soon.
Proud to call himself a "college dropout," Murthy attributes his success to being "unreasonable" and "the conviction that the whole world is wrong and that you are right. And, of course, some foolishness."
"No one knows anything. You can discover your own rules and create your own playing field. It is better to move in business as an innovative, na�ve person rather than as a cautious experienced person," Murthy explains.
Is it that simple? Find out more about Mahesh Murthy as he shares his interesting career and entrepreneurship experience in an interview with Manu A B.
Pinstorm has completed two years. How has the company fared in two years?
Pinstorm has made a place for itself as the leading search engine marketing firm in Asia and among the top five search marketing agencies by size in the world. And the rate of growth isn't slowing down.
For the first time, we have an India-based marketing company making its mark internationally, among all the American and European multinationals that dominate the advertising business. Pinstorm started in May 2004 and we've done reasonably well in these 2 years, with offices now in Singapore, Malaysia, New Delhi and Mumbai and clients in 9 countries.
What was the idea behind starting a search marketing firm?
A non-profit firm inspired us to set up Pinstorm. I was advising a charity firm on how to use the Internet to raise funds from overseas and, as a test, ran a campaign myself for six months to see how successful it could be for them. While doing so one discovered two issues: that search marketing worked really well if done right; and, to do it right, one needed to invent technology that didn't exist to help buy keywords for less and to bid better.
The encouragement from the charity firm, Child Rights and You (CRY), was the impetus behind setting up the company -- to solve the technologically difficult problem of picking more effective keywords and buying them at better prices.
How do you help companies with the search analysis? Could you explain?
People use search engines billions of times. When they look for something related to a firm's offerings, we make sure the company gets connected to the customer. For instance, potential customers of Taj Hotels might not just be looking for a 'hotel room in Seychelles' but also for 'whale watching expeditions' or 'honeymoon packages.' This is one critical part of the mix -- we have an in-house database of over 10 million potential search terms that we query and add more from our experience to spread the widest net to reach these searches by potential customers.
We call this the 'long tail' of search terms. Then we study how the client's site does on natural search against these terms. As can be expected, natural search optimisation plays an increasingly smaller role as customer needs fragment over time.
We then estimate the search volumes against these terms, we study the competition and bidding heat on each of these -- then selecting a keyword choice and bidding strategy that allows our clients the greatest return on investment.
And then we add the icing on the cake -- we work on a 100% pay-for-performance basis, unlike any other marketing firm in the world.
We pay for the media and the creatives ourselves and only charge for the results of these campaigns. This allows us to win the confidence of clients in the long term and lets us succeed when they do.
What is the potential of search marketing?
India alone produces about a billion searches a month and the number is growing as people research choices, product details and prices for every sort of buying decision -- from travel to banking to insurance to education to even a film career. Every search to us is an expression of consumer intent.
Marketing will veer around to this mode of communication because one is able to segment finely -- a typical client effort we run may have two dozen or more campaigns and strategies and we are only advertising to stated consumer intent instead of shooting in the dark.
As traditional media increasingly fails to deliver desired target segments, search will increasingly become the prime media weapon in a marketer's arsenal for its sheer ability to target and deliver to an interested consumer.
How was your experience working with corporates and how does it feel to work in your own company?
This isn't my first entrepreneurial venture but it's my first venture in advertising. It's nice to be back with an offering that's broadly similar in terms of strategy and creativity to what I used to do at FCB, Grey and Ogilvy -- but vastly different in approach, targeting and pay-for-performance basis.
Clients have been a dream to work with -- you hear of the death of creative advertising these days and the loss of smart advertising people to other, better-paying professions, etc. But I guess advertising is to blame -- it's the only business where the players work on miniscule margins, while the media can charge whatever they want starving the industry of money to pay its people well.
Pinstorm's pay-for-performance models help us earn more than typical advertising businesses and grow with our clients ensuring that our performers stand to earn a lot when they succeed.
In addition, we also pay for our own creative rather than ask the client to bear the cost: this ensures that we have the final say in the campaign and that it is not watered down by an insecure brand manager. Both these aspects -- the creative freedom and the ability to earn more for better-performing work -- have allowed us to bring back the fizz and the spark in the advertising business.
Personally, it's been great growing an international business in India -- in a parallel role I also manage a VC fund -- and it helps me keep my feet on the ground and look at issues faced by start-ups more critically.
How has your experience of funding several start-ups in India been?
I've funded 10 start-ups in India and three outside India. Of the three overseas firms I funded, all have shut down, while nine out of the 10 Indian companies still survive in some form and several of them, including Geodesic, Webdunia, EasyBuy, CareerLauncher, Tulleeho and of course Pinstorm are thriving.
It goes to show the resilience of the Indian entrepreneur -- we don't give up as easily as Americans do. It also shows that it pays to invest close to where I am so I can oversee things in person instead of over the phone.
Are you looking at investing in new companies?
Yes, I am at the helm of a new fund called Seedfund, along with two ex-Infinity Venture partners: Pravin Gandhi and Bharati Jacob, the people behind Indiagames, Indiabulls, etc.
We're really bullish about technology and media-driven consumer plays that are created out of India. We will be making investment announcements soon.
How do you decide on investing in a particular company?
I think about the idea, whether it will make an impact, can it make a big difference to people's lives? Do I understand the business and can I help in some way other than just money? Is the entrepreneur completely committed to making it happen -- has he/she burnt their bridges? Do we get along well -- the start-up team and the investors?
And, of course, are we limited by the amount of money we can invest and does this suffice for the business plan at hand or should the entrepreneur go to a larger VC?
If all these signs line up, they usually portend that one can make a positive call on the business.
How did you start your career? Did you ever think you would start your own company?
Oh, absolutely! I tried my first business when I was 19! It was a vacuum cleaning service. It never got off the ground. I then set up a TV commercial production company when I was 26. That never did much either.
Later, I was part of a start-up management team at a software company. That did okay and was acquired by Intel. I turned around Channel [V] till it was acquired by Star -- that was almost, but not quite, a start-up.
What is needed to start and run a successful company?
The conviction that the whole world is wrong and that you are right. The ability to resist giving in to the temptation of listening to others or being "reasonable." And, of course, some foolishness!
What do you think are the reasons for your success? Perhaps that I'm foolhardy, unreasonable and foolish!
Where do you draw your entrepreneurial aptitude from? I come from a traditional Tamilian Iyer Brahmin family, so I certainly don't think it was in my genes. My first truly rebellious move to drop out of college was fuelled somewhat by repeatedly listening to 'Time' on Pink Floyd's The Dark Side Of The Moon. The rest is all an adventure. I haven't had too many mentors, but I have role models and Richard Feynmann, the physicist, is one of them. He lived a full life. That's all I would like to do too.
How important is education for an entrepreneur? The content of what you study is completely useless. In fact, if you do a typical MBA at a typical business school, you will almost never become a successful entrepreneur because they still teach complete nonsense like Kotler and Ries & Trout.
You are taught to be an 'employee' and not an 'employer,' and you are actually handicapped compared to someone who hasn't gone through the degree programme. You will typically end up working for an unschooled person like me (I'm not even a graduate!).
But the friends you make at school and college are a really important part of your life -- they are your support system and network into the future.
Where do you see your company five years from now? I can't see that far. Two years from now, Pinstorm stands to be a world No.1 or No.2.
What do you think about the growth of Internet in India? It will happen on the mobile phone, not the desktop, and it will happen in languages, not English. And when that happens we will be the world's No. 1 or 2 Internet-using population.
What do you think is the future of the Indian IT industry? Where do you see yourself in this bigger picture?
We barely have an IT industry, we have an IS (information services) industry and all we offer is lower-cost services. There is very little technology we develop. Over time, our stability and growth will not come from sweatshops like Infosys, TCS and Wipro, but from companies that create brand and market their own products, getting larger profit margins and a reputation in the process.
In this potential future, I think Pinstorm will do very well though we're not a technology company as much as a marketing company that creates and uses an enormous amount of technology.
What are your views on innovation? Do you think that Indian companies lag behind in innovations? How can they be global players?
Well, we have the ability to innovate. Our brains are at least as big as anybody else's. But what we need are not brains but guts and support. The former you have to find within yourself and I'm glad to see numerous venture capital firms offering the latter.
There is no route to be a global player other than to produce the best products in the world -- 'products', mind you, not 'services'.
What are the biggest lessons that you have learnt from your varied experience?
No one knows anything, least of all any supposed management guru or consultant or expert. You can discover your own rules and create your own playing field. It is better to move in business as an innovative na�ve person than as a cautious experienced person.
What would you say to budding entrepreneurs or tech students who might be the next big entrepreneurs?
Don't listen to the Gartners, the IDGs, the BCGs, the KPMGs, the PwCs. They know nothing! Reject the job offers from the Goldmans and the Lehmans. . . Why do your B Tech in Computers and MBA in marketing to become a banker?
Understand the gaps in the market. Create a product that can service those needs better than anybody else can, sustainably and do it at a really low cost.
And dream big. The earth's the limit.