Eruditus: Powering Growth With An A-plus Team

Introduction

Dewi Fabbri: Eruditus is a global leader in the $280 billion global professional education market. The company, which was started in Mumbai in 2010, has partnered with prestigious universities like Harvard, MIT Sloan, Columbia and Cambridge to deliver online executive education courses in multiple languages. Currently, students from over 80 countries are enrolled with them. The company, which employs over 1,500 people globally, became a unicorn in August 2021.

In this episode of Moonshot, Ashwin Damera, the co-founder and CEO of Eruditus, talks with Sequoia India Managing Director GV Ravishankar about what it takes to build a diverse, high-performing team with employees all over the world. This conversation took place during a session at Surge, our rapid scale-up program for early-stage startups.

Patience, faith and perseverance: The path to an enduring company

GV Ravishankar: Ashwin, welcome and thanks for joining us today. I want to start by acknowledging that we are so proud of many of our founders who are building their businesses for the world, in every sense of the word. One of the companies we’ve partnered with, Freshworks, went public recently, and today, we’re here with you – also a special founder, building for the world — on Zoom, of course. I want to start with a story of the Chinese bamboo tree, which actually reminds me of you and your journey and everything you’ve achieved. I don’t know how many of you know about the Chinese bamboo tree. Apparently, when you plant the seed of the Chinese bamboo tree, it doesn’t sprout for the first year. Maybe not even for the first couple of years. You water it, give it fertilizer, give it sunlight — but it doesn’t show visible progress for a period of time. You get to see its real progress from the fifth year, and at that time, when it starts growing, you will see that in a period of just six weeks, it grows by almost 90 feet. So much so that you can literally watch it grow in front of your eyes during the day. I actually heard this story from the former Indian cricket captain, Rahul Dravid, when he spoke about it and asked a very interesting question — “Did the bamboo tree grow in six weeks, or did it grow in five years in six weeks?” Because for the first five years, you’re not really seeing visible action, but you’re seeing very strong roots being laid, a strong foundation being formed, that allows it in the next six weeks to grow so rapidly. And the takeaway for me from the story is patience, faith and perseverance. And while your story, Ashwin, may not be as dramatic, the truth is that for the first five or six years, not many people had really heard about Eruditus as a company. Of course, when we announced the most recent fundraise at $3.2 billion of valuation, the whole world started noticing Eruditus for what it has become. But you were growing silently at your own pace in the early days, up until this big bang. So, for the benefit of those who may not be really familiar with Eruditus in this batch of Surge founders, maybe let’s start with 30 seconds on what our product is and what market we are going after, and then we can take it forward from there.

Ashwin Damera: Eruditus is a two-sided marketplace. On one side, we have universities that create courses, mostly non-degree courses or short courses on new age topics — digital marketing, design thinking, UI, cybersecurity, FinTech, blockchains, a bunch of those kinds of courses. We help them create it. We put it on our platform, we market and enroll students. And on the other side, we have students, the individuals or businesses who are enrolling in these courses. At the end of it, you’ll get a university certificate. In some courses, you get university alumni status or alumni benefits, and in some of our courses, you also get a degree. So, basically, we are helping universities go online and reach the world. 70% of our students are outside the US — about 20% in India, 20% in Latin America, about 15% in Europe, about 5% in China. So, it’s fairly global. We offer our courses in Spanish, Portuguese, Mandarin, also Arabic; now we’re looking to offer them in Turkish and French. So, we offer different languages because our mission is to make high-quality education accessible and affordable, and a big part of access is also language.

Knowing when to let go: Lessons from Travelguru

GV Ravishankar: So, I really want to take you back, Ashwin, to the roots, because most of the learnings are there. I think the excitement is here when we talk about it publicly, but most of the lessons learnt are in the early phase. But maybe we can start by talking about your first entrepreneurial experience and some learnings from that, which set the base for you when you decided to do something in the higher education space.

Ashwin Damera: Actually, the other company you mentioned, Freshworks, also started in 2010. And so, their journey has taken 11 years. These days, we find entrepreneurs who want to become a unicorn or big literally in a couple of years, and some of us have had a longer journey. But my journey in entrepreneurship, like you rightly said, started in Travelguru, and I was the perfect misfit.

I had no travel experience. I had no startup experience. I had no tech experience. I was a banker who decided, “He didn’t want to be a banker”, and I went to business school to figure out what I wanted to do. And it so happened that I was running a business plan contest at Harvard Business  School. We became runners up, we didn’t win, but a couple of my friends who were perhaps as crazy said, “Look, we think you’re a solid guy, good guy, go start this, we’ll give you $200,000.” I had an offer from McKinsey. I had $120,000 of student loans.

Everybody in my family — I come from a traditional family, for those of you who are from India, a south Indian family, and they said, “Look, why can’t you be like your brother? Just take up a job, work for five years, pay off the loan and then do whatever you want”, as though the entrepreneurship idea is going to wait five years for you to pay off your loan and come back. But that’s really how I got started. And Travelguru is kind of a book — I can write a book on all the things that can go wrong in a startup that went wrong. I was living in a far-off place in Mumbai called Kandivali.

I was sharing a room with another friend. He was working the night shift in a BPO (Business Process Outsourcing). So, I would sleep on the bed at night. He would sleep in the morning, and at a certain point, I started questioning, “Bloody hell, what am I doing here?” And I think as an entrepreneur, many times in your journey, you will have that question, “What the hell am I doing here?” And one of the things that I have in my DNA, is perseverance — “I’m not going to give up. I’m going to keep trying, I’m going to keep trying.”

Eventually, we convinced Sequoia to invest. I literally had maybe a month of cash left. I’ve been in that situation many times in my journey. I’ll talk about that later as well. And, it’s a very difficult thing as an entrepreneur, because you can’t tell anybody else in the room that you have only one month of cash left in the bank, because you need them to still build a product, still do the marketing, but you know, you have very little cash in the bank. In my case, my two co-founders had fled. So, I was alone. So, who do you talk to? And I didn’t have an investor at that time. Anyway, ultimately – WestBridge at that time – Sequoia invested.

We started up, and we started building. And like I said, we had many ups and downs. I think the best way to prepare for entrepreneurship is to play snakes and ladders. You roll the dice, you go up one day, and the next day you’re feeling miserable. The next day, you go up again, and of course, in entrepreneurship, there’s some skill in rolling the die. I don’t think it’s all pure luck, and obviously that’s the entrepreneur, but it’s literally like a roller coaster life. You wake up in the morning and would say, “Today I am in a good mood”, and I went through all of that, and none of that is so important.

In 2008, we had a pivotal moment, we were nearly acquired by Expedia for $75 million. The investors would have made a good return, maybe 5X or something, in literally two to three years, or four years. They spent six months doing diligence and they signed on their side of the shareholder agreement, we signed on our side. We went to the lawyers, did the escrow, and then the deal blew up because Lehman brothers collapsed, and they said, “Look, we’re not going to make any global acquisitions.” So, that’s again like a big fat snake gulping me down. I came down. And again, I had literally a couple of months of cash left because, why were we supposed to raise money? We were supposed to be bought. Why raise the money and dilute it? So that was our experience.

Eventually, we sold [the company] to Travelocity. It was one-fifth of the price. I learnt a lot of lessons on that journey. And I think that a second time entrepreneur is obviously smarter than the first time. Some of you are smart enough that you’ll get it right the first time. But, entrepreneurship is a journey. And one thing I’ll tell you, sometimes it’s equally important to know when to let go, because when you’re starting up, you’re so focused on the company. That is everything you’ve put in, literally 24×7, you’re working on that, but sometimes it’s good to let go. And I sometimes joke to my close circle that the companies we were competing with at that time – Yatra and ClearTrip have been sold in the last six months for $40 million and $100 million or thereabouts.

So, if I had spent 10 years going down that path, it would have been a  horrible outcome. We exited that business. And currently, Eruditus and Emeritus as companies are doing very well. And obviously, I think we’ll grow even more from here. Anyway, that is my story, an accidental entrepreneur who started with Travelguru, but I think I’m a better one definitely, at Eruditus. So, GV, you got Version 2.2, I suppose.

But also, one other point I’ll say, is that a lot of entrepreneurship is timing and luck. So as much as I say anything today, there’s luck. You can do all that you want, but there’s timing and there’s luck. And so one of the things that I like to live by in this journey and say is, “You can celebrate your successes obviously, but don’t let it go to your head.” Be outwardly extremely ambitious. Aspire to do great things. And we are all only bound by the limits of our aspirations or our ambition. I never thought Eruditus would be so big. In fact, in our first fundraising round, we had shown a five-year plan of $50 million.

In 2015, when we were raising money, we said, “We’ll have a revenue of $50 million in 2020.” A couple of VCs actually asked me, “Are you missing a zero?” And it’s very funny. We went back to the Excel sheet, put a zero, and we actually raised capital. So, that’s a story for later on, but we are actually getting there. This year, we are getting close to $500 million in revenue, but I never saw that. So, I was limited only by my own — I wouldn’t say ambition, but perspective of life. So be outwardly extremely ambitious, but inwardly very modest.

Go after big ideas and large opportunities

GV Ravishankar: If you guys meet up and have the good fortune of spending time with Ashwin, you will know he is one of the most grounded founders you’ll find. I think he’s ambitious, like he’s saying. But maybe Ashwin, when I met you first, I didn’t know whether you’re outwardly as ambitious. Maybe as the path becomes clearer, the ambition also grows. So, that is one of the things about entrepreneurship, right? You need to kind of clear up your path or point yourself in directions where there’s a much larger opportunity, and I’ve seen you do that many times. But just to round up the Travelguru story and jump onto your second startup, what are one or two things that you’d say, “Hey, I would never do this again, never again.” And then there are one or two things to say, “Okay, I’ve learned this, and I’m going to implement it in my new company.”

Ashwin Damera: One is — you guys have already started up, so maybe you are already boxed into this, but go after large ideas, large opportunities, because I think that even if you execute very poorly but the opportunity is large, you’ll still build a sizable outcome versus if you have a fantastic team, and execute amazingly well, but if your opportunity is small, you’ll have a small outcome. And when I say “opportunity is small”, it’s not just about the TAM (Total Addressable Market). It’s also about who is your competition? How big is the incumbent? What are your unit economics, etc.?

To give you a better analogy, let’s say you’re an expert kayaking person or a rowing person. You assemble one team with a bunch of experts, and you assemble another team with a bunch of novices, people like GV and me, and ask the experts to paddle upstream. So, they’re going against the current and measure how far they get in an hour. Ask GV and me to paddle downstream — we are novices. I bet you, GV and I will get further than the guys who are the experts and doing it,  but they’re going upstream. And so, the talent is helpful, and of course, the ideal situation is you have the experts paddling downstream, but the point is about going after very large opportunities. For us, ‘travel’ in India, online travel in 2005 was a small opportunity. Of course, it’s expanded before, but if you think about higher education it is a US $3 trillion market that is very fragmented with no large incumbent. So, it has all of the elements of those five forces that Michael Porter talks about.

The second thing I will tell you is that cash brings a competitive advantage, especially in this day and age when everybody’s raising so much capital, but it was true even in 2005. When we raised — during our Travelguru days, our first round was US $2 million, but the guy next door raised like US $20 million, and the next round they raised was US $50 million. How do you compete? I mean, it’s just impossible. You know, GV, in our last round, we were going to raise $250 million primarily. We made it to US $450 million just so that we have some more cash, if we make some M&A (mergers and acquisitions) or go in a certain direction. So, cash is important, but the best form of cash is actually from customers.

It’s very tempting for entrepreneurs to think that the best form of cash is from Sequoia, or Accel, or whoever else it is that you have in your list. Sequoia is a great place to raise money, and that is one form of cash. But cash from customers is better because it also validates your model. When you have paying customers, it tells you that you actually have product-market fit. It makes it so much easier to raise money from investors, but also it gives you a leeway to build the company without too much dilution, so that as owners, as founders, you have ownership. And one thing that I’ll also share as a learning, is that at Eruditus, the founding team still owns a significant amount of the company. In Travelguru, my first startup, after the first few rounds, we were down to literally 15%, 20%. But when you have ownership, you think long-term, you can think about “building an enduring company.” It’s a phrase that I’m borrowing from GV and Sequoia, but when you’re 10%, 15%, you’re saying, “Hey, let me do three to four M&A, or IPO (initial public offering)”, and the headline is what is important, but you care less. So, you care about the output metrics, but you care less about building something that is vast, that has moats, that’s substantial.

So just to put it briefly, go after large spaces, uncontested spaces, cash is obviously important, and the best form of cash is from your customers. So, those are some of the things that I would say you should be mindful of. And, one last thing I’ll say is just be careful about funding cycles. You can be caught off [guard]. Today’s funding cycles are very aggressive, so you can raise money, but one day that may change. So just make sure that if you’re a company that’s burning cash, especially – and that’s fine – not every model is going to be unit economics positive, just manage those funding cycles carefully.

GV Ravishankar: Absolutely. And when those environments changed in 2008, we wrote about this concept called ‘a death spiral’, when you start trying to cut costs while trying to do that, you can’t keep up your revenues, and it just keeps spiralling down. So, hopefully none of this happens, and life continues as is, but there is a lot of character built in those times, Ashwin, and I’m pretty sure several of those learnings have helped you as you started with Eruditus later.

So, the first question for you on the new journey. So, for a long time, it didn’t look that you guys even really wanted to raise external capital. And you were building steadily and slowly. What were some of the design choices you made? And why did you choose not to go back and raise and start bigger? Because usually, second time founders are like wanting to do something with a lot more capital, etc.

Ashwin Damera: In the second startup, Eruditus, I was very clear that I wanted to build a business with moats around it. So that it is not easy for somebody who raises a lot of money to come and just replicate what we’re doing, or acquire customers by just giving discounts, because then that’s a shitty business. And so for that, we actually had to work with universities. That was our model. Now, universities are very slow-moving machines. They’re kind of like quasi-governments. So, it took us a long time to convince universities to work with these two guys based somewhere in India, who say they’re going to help them go and conquer the world in some sense, but look, “Who are these guys?” Nobody has heard of them. This is every founder’s challenge. Luckily for us, my co-founder Chaitanya had worked at INSEAD. So INSEAD said yes, but my alma mater, Harvard Business School, took six years to say yes, despite me coming from there.

So, the first year we were able to convince only one school. Then INSEAD and Wharton had a partnership, so that became the second school and so on. But also, GV, we were very deliberate that we wanted to establish product-market fit first before scaling. What that meant was that we needed to understand our customers very closely. For us, it was important that we were able to show value to each university, and that required us to do one program at a time, make it succeed, and then go back and maybe say, “We want to do one more program.” And until we were able to prove that, we didn’t have the need to raise capital. These were classroom programs. We were very careful about unit economics, so we didn’t really need the capital.

The other thing I would say is, we actually preferred to stay under the radar because from my experience at Travelguru, the moment you announce the funding, there’ll be three other guys who are saying, “Hey, I will do the same model”, and they’ll go to three other VCs and they’ll get funded. And then suddenly, it starts to look like a crowded space. So, we were very clear that, “Look, we don’t need that,” because does that help us find more universities? No. Does that help us get more customers? No. Do we need the cash? No. Around that time, around 2015 etc., you started seeing massive fundraisers going on in the Indian ecosystem. And we did sometimes question ourselves saying, “Hey, are we not raising money and is that hurting the business?” But we felt that it was the right decision for us.

I think in 2016, we started to go online. When we went online, GV, we needed to build technology, we needed to build the courses up front, so, we needed a lot of cash up front, and we were marketing globally. So, we had to build our global team. So, at that point in time, it made sense for us to raise capital. Funnily, about 20 venture capitalists said no. I was famously asked a question by one of them saying, “Are you a promoter or an entrepreneur?” And I said, “Look, what is the difference? They said, “You guys own 100% of the company, and you’re growing at 30%, you’re not burning cash. You’re not an entrepreneur. You’re a promoter.” And even today, I try to understand that sentiment, but I think now that same VC will be very proud that we are entrepreneurs because we are burning a lot of cash, we are going very fast, we’ve raised a lot of money. I’m just kidding. But the point is, we really focused on building a solid business with good unit economics, and that has always stood us in good stead.

Even today when we raise capital, it’s not so much for burn. It’s for growth. But I think our relationship with our partner schools, which we took time to nurture and build, which is the cornerstone of our business, is pretty solid, very difficult for other people to come in and replicate. That was because we were deliberate about the partnership and how we built it. But let me also caveat and say, this journey is my journey. It’s A journey. It’s not true for everybody. If you are in a space like, for example, FinTech or some mobile app, you may need to raise a lot of cash up front and go really fast. So, you have to, as an entrepreneur, make that decision on a case-by-case basis, based on what’s sitting in your space.

Assessing founder-market fit at every stage of the company

GV Ravishankar: Ashwin this is great, and you’ve preempted the next question, which was around this concept of founder-market fit, which you’ve spoken about in the past. But when you thought about the next business, did you think about what kind of business would suit you best? And just for the benefit of the team — Ashwin, when I met you, for me, the number one thing was that you were very clear that your partner needs to succeed in your job, and your customer was the university, and you needed to make them successful, and that was the most important thing. And you were willing to be very patient about investing the time to make it happen for them. And to the early example, you mentioned about Harvard taking six to seven years, I don’t see many people [who] will keep the hunt [going] as long. They’ll be saying, “It’s not working out, let’s go hunt the next one.” And you were also clear that you wanted the very best of universities. It would have been very easy for you to go to some university, number 25 or 30 in Miami and say, “Let’s peddle their courses.” You didn’t choose to do all of that. In your list everything is Ivy League, like Kellogg, Wharton and names like Stanford, Morrison. Just talk about what it takes as a founder to say, “Hey, this market is for me, and this market is not for me.”

Ashwin Damera: I call it the ‘founder-startup fit’. So, after I had sold to Travelocity, I had one year to figure out what I wanted to do and I realised given my value system, these highs and lows of a startup is something that I can live with. But at the end of that, I wanted to be doing something that actually touches people’s lives. And I started talking to a lot of people, looking at many opportunities in those two spaces.

Education, specifically, has a very strong emotional connect and fit with me, because I was the beneficiary of a very high-quality education. It was drilled into my head by my family and where I grew up that education is transformational. But also, for the business that I had to build, you have to build deep relationships, trusting relationships with universities. In my DNA doing that – and again, I will let others maybe comment on it – but I believe that I’m an authentic person, I can build this. I would not be very successful in a red ocean market where somebody is buying market share and killing the other person through cashback and this and that. That would not be my cup of tea. But building relationships, negotiating long-term deals, delivering on that, that was my DNA. So, education was my calling. I felt that was a good place to go. And so that was the sector that we zeroed in on.

And then, over a period of time, figured out what the right model for us is. And, it also was mission-driven and that actually resonates well with me. And I was willing to be patient, like you said, to get there. So, it’s important for people to figure out, “Hey, am I doing something that actually fits with my core strengths, my core values?” As you grow, you have to keep asking yourself about founder-startup fit by stage of the company. Some people are very good from zero to one. Some people are very good from one to 10, and not so good from 10 to 100, and horrible from 100 to a billion. So, what I mean by that is, in the first phase of a startup, you can walk up to somebody and say, “Hey, do this, do that”, “Hey, oh, you’re good at that sales pitch, let me figure this out”, “Hey, let’s go and roll up our sleeves and solve this problem.” You get to a 100 people, you’re now in different locations, and then you get to 500 people or a 1000 people, you’re global and now the culture is different.

Sometimes there is this question about — I call it ‘box one’, ‘box two’, ‘box three’. Box one is about managing the present. It’s about, “What do I need to do today to manage the business?” Box three is about, “What do I need to do today to create the business for the future? What new products, what new markets, but also as an individual leader, what new skills do I need today to be developing, to lead in the future?” And most importantly box two — what do I need to get rid of? So, what do I need to forget?” So, every startup founder has to ask themselves a question. Just because you’re successful today, doesn’t mean you’ll be successful tomorrow. What got you here, won’t get you there. This is a philosophy of mine – it’s true for your business model and it’s true for you as an individual. It is better you do creative destruction to yourself first, than have somebody else come, and either creatively destroy, or not so creatively destroy your business, or have your investor tell you, “Boss, it’s time for you to pack up your bags and leave. I need to get somebody else to run the business.” Better you have that conversation, you have that reflective mode on, but that’s something that all of you would need to ask.

Some people are very good street fighters, but they may not make good generals. And some people are very good generals, but if you hire such kind of people in the early stages of your startup, they will hire a massive team under them, and you won’t get what you want. So, you need to have this founder-startup fit also by stage of the company, and always be very aware of that as you grow.

GV Ravishankar: The level of self-awareness that you need to think through and say, “Hey, what do I need for being in ‘box three’? Or for 10 years or five years?” It’s not always possible that people can do it themselves. Do you have any tips on how you do it? And do you use external people? Do you have mentors? Do you talk to people to understand where the gaps are and where are the opportunity areas from your perspective to continue to scale, to be the leader who can take the company to $10 billion, or a $100 billion, etc.?

Ashwin Damera: Even to talk to an external person, you must be self-aware to know that you need to talk to an external person. So, there’s no substitute for being self-aware. And that’s why I say, “Outwardly ambitious, inwardly modest.” Inwardly modest means on a Friday, reflect back and ask yourself, “What did I do wrong?” Or maybe putting it differently – “What would I do differently?” We all can do things differently, but you need to keep time for yourself. So, usually, on a Friday the first half is my ‘box three’ time or ‘box two’ time. What am I thinking about in the future? “Hey, is there a Netflix model for education that we should think about?” Today it doesn’t exist, but if I want to make it exist five years from now, I need to be thinking about it.

And then ‘box two’, “Hey, what should I do differently?” So, there’s no substitute for being self-aware. Once you’re self-aware, the tools are out there — whether that’s a mentor, whether that’s a coach, whether just talking to other people like a co-founder – is sometimes a very good mirror for you to have, because they can call a spade, a spade. My style is to be externally extremely ambitious, but internally, I know when I make a mistake, I don’t need a mentor to tell me I made a mistake. I need a mentor to tell me how to kind of react to this, how to solve the situation. But you should be able to know where your strengths are and where your weaknesses are.

To build a great company, hire A-plus people

GV Ravishankar: This whole idea that you take a block of time and use it for reflection and planning is a really interesting hack. Honestly, even for us, some of us who tend to run from meetings to meetings, just having that block of thinking time either every day or some days of the week is just so useful to just reflect and take a pause and look at what you’ve done, and what you can do differently in the future. So, thank you for sharing that.

How do you attract all these crazy good people? So, you’ve not just done the hiring of very high-quality people, but you’ve been able to do that everywhere from China to Latin America, to everywhere else. And, it’s always mind-boggling to think about that. How do you get those people? How do you convince them to join you? And today, again, unicorns, lots of big names and so on, so it’s easier to understand who Eruditus is and what Emeritus does. But when we didn’t have this, even when we didn’t have this a few years ago, you were able to really attract high-quality talent. So, just talk through your talent philosophy.

First, what do you aspire for when it comes to talent, how do you look for them? How do you convince them? Is there a process? Are there some tips and tricks that they can share with folks that are much earlier in their journey to tell them in the first few years, how do you get that high-quality expert team that’s growing downstream, assuming at least directionally, we’re all going downstream?

Ashwin Damera: I would just say, make the hiring of key talent your number one priority. Ultimately, the success of your business depends on the people who drive that business. Yes, for the early days, it’s maybe you and your co-founder and the core team, but as you become bigger, it’s the quality of the people that you hire. If you’re spending 30% of your time, versus if you’re spending 60% of your time on hiring, you will see a dramatic difference between the quality of people that you have. Why is that? And, it’s easy for me to say this. It’s very difficult to do it, because 60% of your time is still a huge commitment of time.

And there’s a fire every day in every nook and corner of the business that you have to put out. So how do you spend 60% of the time? I think of it as a bitter pill. You spend 60% of your time hiring A-plus people, in three months or six months, they will put out the fires, there’ll be less fires. You spend 30% of time hiring people — let’s say you get average people, you will continue to spend your time putting out the fires. You will not have the time to think about ‘box three’, you will not have the time to do larger things. So, be very clear on your priorities. If you believe you are building a great company in the long-term, you need to have A-plus people – why is time important? Each of you can ask yourselves, look back on a key role that you’ve hired, how many resumes did you look at? How many interviews did you do? If you’ve not interviewed at least 10 to 15 people before you hired for an important role, if you didn’t have three candidates at the end of that for whom you think, “I could hire any one of these three”, then you haven’t actually done the right job in hiring.

I can tell you the difference between an A-plus person, and an average person for a startup is huge, because their impact, their roles are so big in the early days that it amplifies. So, that’s one thing that I’ll say. Now the second thing is, how do you go about doing it beyond just giving time. One is, any hiring that you do the traditional way, it’s a lottery — 50:50. If you’re just doing interview-based hiring, it’s 50:50. And as a founder of a company, you just cannot accept 50:50.

So, the number one thing I would say is hire from referrals. That’s a 90% chance of success. Your investors can be helpful. Hopefully, you have your own networks, but this is the other thing that I think all of us must do — even if you don’t have the need to hire somebody, build your referrals. Talk to people in the industry, talk to people in adjacent spaces. If you get that wrong, it has a negative impact. So, one is to go on referrals.

The second thing I would say is, in some cases, if you’re trying to hire a very senior person, and you’re a smaller startup and you can’t afford them, then maybe even ask them to advise you part-time. They get to know you, you get to know them, and then maybe when you’re a little bigger, you close your next round or you have your first customer win, you may be able to convince them to come on board, because senior people are always difficult to hire. I always say this, “For A-plus hiring, if you make an offer to three A-plus people, two should reject you”, because A-plus people have other things to do. That’s their nature. If you just made an offer to three and all three accepted, I doubt whether all three were A-plus. So, it’s not going to be easy to hire them. So, sometimes you need to woo them, get them part-time, and then get them full-time, etc. Be very flexible on things that don’t matter – does location matter? Do you need everybody to come to your office on a Monday morning and on a Friday? No. Then, you open up the world to hire great talent.

The last thing I would say is, “When you want to hire A-plus people, don’t just talk about money, compensation, role – talk about the mission. For A-plus people if you don’t get them aligned to what you are trying to build — and by the way, as a founder, the mission, whatever the mission is [that’s the reason] why we get up on a Monday morning and feel excited to come to work. I hope that’s true for all of you. There is nobody else who can communicate that vision with that passion than the founder. And, when an A-plus hire that you want to hire hears that from you, they would either buy into it or they wouldn’t buy it. But to me, that is the biggest weapon in your arsenal. But, the mission is something that if you can communicate and articulate well with passion, that actually attracts a lot of good people, because they do want to change the world. They also want to be on a journey where in three to five years, they look back and feel fulfilled and feel significant, in terms of what they’ve achieved.

So, these are some of the things that I would say, spend more time, use referrals, the things that don’t matter, like titles, suppose you want to hire somebody as an AVP, but they want a VP title, just give it to them – what’s the big deal? Later on, when you’re a bigger company, the HR guy will tell you about the policy and all of that, but that’s for later on. Right now, you need that guy on the seat who’s motivated. So, the things that don’t matter, just remove these from the equation, [allow for] advisory [roles] for some time before coming on full-time, and then the mission, that’s very important.

Why you should never make trade-offs when hiring

GV Ravishankar: That’s amazing. Very helpful, Ashwin. One question though, that we constantly see is that there is a trade-off on time. You needed this person yesterday – always – especially in young companies, days and weeks matter so much more. So, you come across this person who is A, not A-plus, but they’re available. They can help you immediately. So, do you have a 100% no-compromise type of thinking? Or do you say, “Okay, some things are tactical, it’s okay, let’s get him/her for the next year or two, then we’ll find somebody else?” Where do you make the trade-off, if at all you make the trade-off?

Ashwin Damera: Make the trade-off on the lower-level hiring, for example, if you’re hiring tele-salespeople, or call center people, or for accounts, etc., those don’t impact the business. But if you’re hiring anybody who you think – for example your head of business development, a CTO, a VP of marketing – not even a CMO – but the VP of marketing, any role that you think has what I call a disproportionate impact on the business, don’t compromise. Because in that one year that that person is there — you think you’ve filled that job, you think you’ve filled the role, but that one year when the person is there, will set you back a lot. Not in terms of the actual setback, but the opportunity or the difference between that person and [an] A-plus [employee]. And then you’ll have to go back and have a difficult conversation. By the way, the biggest challenge with not hiring great people, is that they will not hire great people under them. So, you will then sit on an org – let’s say you hire a very average sales head – you will then, by the end of one year, you will have a very average sales team. Now, try to undo that. That will take one more year to undo. Some of you may be very good at spotting and hiring talent. Some of you may actually figure out early that your co-founder or somebody else is actually better at that. Please make them your Chief Talent Procurement Officer and please step aside, because for example, there are some of us who have conversations and we love the person in just one conversation – that’s the wrong people to be making critical hires. Maybe you can have a panel of five or six people, but figure out very early on who is making the decisions on hiring. It better be somebody who’s got a very high hit rate. So, that’s one thing to keep in mind. Make sure that person at least, or that bunch of people are spending a significant amount of time on hiring, which means take away not so important things from them, remove all of that. Focus on the key thing. Hiring is a key priority. Get it right, because undoing it is not easy.

Focus on input metrics for hiring and managing people

GV Ravishankar: That’s a great point you make. One way I think about this discussion – should you compromise and hire somebody is, what is the time it’s going to take to undo this decision? Usually, when you hire somebody, it’s going to take you three to six months to really know that person is not working — if you’ve made the wrong hire. Then, it’s going to take three months of notice time to get them out, and another three months to find the next person. So, literally we are talking about one year lost, by making a bad hire. So, when it feels like, “Hey, I need this person urgently, and I need them now in one month”, but if you could just spend another month thinking about the right person, you’d actually save yourself 10 months, in case you get it wrong. So, to me, at least having that no-compromise type thinking is a better answer, and of course, in a market like this where talent is just so scarce, it’s easier said than done, but I think to the extent that you can keep the bar high, it is a lot better. Ashwin, one last thing on this topic. Hiring is one thing, but then getting them to thrive is another. So, can you talk about some leadership principles that you have when it comes to managing talent? What are the things that you do well to help them succeed, like holding them, helping them, making them effective within what you’re doing?

Ashwin Damera: The first thing is, when you’ve hired really good people, your job is nearly done. Get out of the way. Don’t manage them. Don’t go and tell them, “This is how you have to do this, this is how you have…” Give them autonomy. And again, ‘if’ you hire good people. And this is, by the way, one more sign of whether you hired a good person or not. If you have to tell them what they have to do, [it’s a] big problem. But, good managers like autonomy. They like regular feedback. What I like to focus on in managing people is input metrics. Don’t focus just on output metrics. For example, if the hire is a Head of Sales, I’m going to look at how many meetings that person is getting. Do they have a strategy? Are they going after one or two industry verticals, are they spreading themselves thin? Are they hiring good people under them? Are they having meetings? Are they getting proposals in? They may not get a dollar, but I can give them more resources to grow. Now, that person is very motivated because he or she is being measured on input metrics and is being asked to grow and create something that’s even larger. So, one of my points to say is, especially when you are dealing with really good people, feedback is very relevant, support and autonomy is very important, and then help them grow.

A great culture is key to retaining top talent

Ashwin Damera: The last thing I’d say is — culture. What is the culture of the organisation? By the way, this also matters as you become bigger and you hire people. Good people that you want to hire in the future will know somebody in the company. They will call them up and say, “Hey, what is it like to work with Ashwin?” or “What is it like to work with each one of you?” And, your reputation will be out there. So, what is the culture that you have in the company?

I’ll give you an example, the sales example. Let’s say my business development guy, Charlie, comes to me and says, “Look, my goal for next year is to make $100 million in revenue.” And, Charlie doesn’t do $100 million, but he does $75 million. Let’s say, I have one more business development guy. He says, “My goal next year is to do $75 million in revenue.” Same role. Let’s assume that it’s the same role. So, somebody says, “I can do $100 million”, but actually ends up at $75 million. The other person says, “I can do $75 million”, and actually does $75 million. Which one of these two will you promote? Assuming a promotion, reward or whatever – which one of these two would you promote? By the way, this will determine the culture of your company. Keep that in mind. You think it’s a very simple mathematical problem. It’s not. It will determine culture and performance. Why? Because when the person who is rewarded on hitting goals is promoted, next year, what do you think the $75 million guy is going to say? “Oh my goal is $90 million, I will hit it 100% so, I’ll get the promotion.”

So, you will attract, or you’ll build a culture, not intentional, by the way. You didn’t think of it this way. Now, on the other hand, if you promote the $100 million guy, you can also have someone who gives you an amazingly crazy goal and never hits it. So, there’s a downside to that also. My own view is, I’ll promote the $100 million person who may have achieved $75 million, but who aspired for $100 million. Why? Because at least aspirationally, he was seeing a larger opportunity. And of course, if every year he keeps doing this, that’s a problem, but I’m just saying for me, from my mindset, that’s the way I would approach it.

But each of these innocuous decisions that you make, will build and affect your culture. Culture is not about what you say in a town hall meeting. Culture is mostly not about what you say. It’s about what you do. 70% of what people will imbibe as culture is what they observe, not what they hear. So, think very carefully about these kinds of decisions — how you mix with people, all of this. But if you build a great culture, you will be able to retain and motivate strong talent.

GV Ravishankar: Ashwin, these are great thought starters. Thank you. So, culture reflects every decision that a company makes and the choices you make, and the way you run your business. That’s something that many founder’s find quite challenging. You mentioned goals and the tolerance for embracing failure. But a lot of people want to create these goals, and actually make sure they hit them all the time, so that they have the credibility about what they say and what they do.

But, how does one remain reliable and predictable with the forecasts that we make etc., without, at the same time losing the boldness to take those big risks, and be willing to fail once in a while.

Ashwin Damera: For me, our business is growing 2.5 times. So, it’s growing two and a half times. Instead of 2.5 times, if we grew 2.2 times, that’s a miss. That’s many million dollars of a miss. But my philosophy is, “Dude, how many businesses worth $180 million are going to grow 2X or 2.2X?” So, I’m going to celebrate that and that’s my view. I’m just giving you my perspective that I’m going to celebrate every businessperson in my team who signed up for that 2.5X, maybe they didn’t deliver.

And then by the way, going one step deeper into that, you have to understand, “Why did you not deliver on this?” For example, if we had to sign up a certain bunch of university partners or courses, but the universities were slowed down because they’re re-opening, because we couldn’t film the faculty because of COVID, those are good reasons. But if somebody came and said, “Look, I just did a very bad projection and therefore, I’m so sorry,” that’s a very different conversation. So, when I’m saying that, “Hey, I’m okay with having aggressive goals and missing them. It really means well thought out aggressive goals, missing that and that’s okay.” What I’m really telling you is what kind of a team do you want? Somebody who’s aiming to hit a home run, but may get three strikes, or somebody who was just hoping to tap the ball and run to first base? That’s the question I’m trying to ask you guys. What do you want? And the answer will vary from company to company.

By the way, just to give an example, three or four years from now, if you’re a public company, I want the guy who tapped the ball and ran to first base, because if you’re a public company and you miss your numbers, that’s brutal. And this is why zero to one, one to 100, 100 to 1000 — you need different mindsets. But for us today, given the growth that we have, I want the home run hitter.

GV Ravishankar: Honestly, every time I talk to you, I am just reminded of what it takes to build a special company, and the founder-startup fit as you talk about, is just so evident. There are lots and lots of takeaways, and different people took away different things I’m sure, but at least for me, the desire to play long-term, the desire to not focus on tactics but focus on principles, and just staying core to that — whether it’s about not budging and hiring A-plus talent, not taking shortcuts when it comes to hitting numbers, etc., are the things that are very special.

And again, I want to say that the tips and strategies you shared in general about how to think about hiring, how to think about managing global teams, even the very simple things like, don’t put location constraints on people that suddenly just takes away the quality of talent you can get from anywhere in the world, these are all very important takeaways, at least for me. I super enjoyed this conversation and thank you really on behalf of all of us. It’s been a wonderful conversation. Thank you so much, Ashwin.

Ashwin Damera: I do want to say to you guys, Sequoia has been an integral part of both my journeys, and I couldn’t have been more fortunate. So, a lot of it is also luck. This is one of the lucky things that I’ve had, and especially with GV, I have somebody whose value system — I think we’ll be friends beyond this startup, and that to me is an enduring value that I have beyond building an enduring company. But Sequoia is literally like that, they’re like an extended family. So, you guys are in great hands. Good luck to all of you. Your journey is your own.

Look, I’m one example of one person who seems to have done decently, but your journey is your own. Enjoy it. It’ll have its ups and downs, but at the end of it, you should be able to reflect back and say you had a journey that was well worth it. So, good luck.

Dewi Fabbri: Those were some great insights from Eruditus co-founder and CEO, Ashwin Damera. He was speaking to GV Ravishankar, Managing Director at Sequoia India. For more startup stories, visit our website (peakxv.com) or follow us on Spotify. I’m Dewi Fabbri and you’ve been listening to Moonshot.