Stay Hungry Stay Foolish_7

16_The Banker who Blinkededitjuly9.qxd 7/19/08 3:11 PM Page 192 STAY HUNGRY STAY FOOLISH 192 THE BANKER WHO BLINKED Jerry Rao (PGP `73), Mphasis A career Citibanker, Jaitirth (Jerry) Rao was bitten by the entrepreneurial bug in his late 40s. He built up a large and profitable company (Mphasis) but recently sold out to EDS because business is about passion as well as knowing when to let go. 16_The Banker who Blinkededitjuly9.qxd 7/19/08 3:11 PM Page 193 THE BANKER WHO BLINKED 193 He built a corporate career. Then he built a company. Now he`s sold it and moved on. Jaitirth Rao, or Jerry as he is better known, does not mix emotions with entrepreneurship. Being attached to the company you create, is “moha,” he says.You have to do what`s best for the business and if that means selling out, so be it.There are absolutely no regrets. We meet at his Alexandra Road residence on a weekday afternoon.It`s a fancy address but not one of those new-fangled skyscrapers. The house is modern, comfortable but rather spartan for someone who`s done really well ifor himself.No moha in that area of life either. Jerry is lingering over his lunch.Perhaps that is what you call true luxury - to have time on your hands. Books occupy the entire room, from floor to ceiling. But not for effect alone, Jerry has read most of them. He is now writing a book and there are other “plans” but he will share them when the time is right. Right now, it`s time to look back and reflect on the journey so far... 16_The Banker who Blinkededitjuly9.qxd 7/19/08 3:11 PM Page 194 STAY HUNGRY STAY FOOLISH 194 THE BANKER WHO BLINKED Jerry Rao (PGP `73), Mphasis “I was doing my BSc Chemistry and of course my dad worked with the government so he was keen that I should go into the IAS. But one had heard vaguely about IIMs.This is in the early ‘70s.And so one applied.” Evidently, the MBA was a pretty unknown commodity in 1971. In fact, Jaitirth Rao landed up at IIM Ahmedabad because of a technical problem. At age 19 he was too young to sit for the IAS exam. “When I am 21 I will definitely write the entrance,” he assured his dad and packed his bags for IIM. Two years later, Jerry joined First National Citibank (later known as Citibank) through campus placement. He went to Beirut for training and even sent for the forms for the IAS but eventually decided to stay on in a corporate career. Because Citibank was a good company. It was a heady place in those days, it had great ambitions. Citibank was then the second largest bank in the world and it was internationalising its management staff. From a purely ‘American’ bank it was becoming more multi-cultural.So it was a good time to be there. “I came back from Beirut, worked for 2-3 years in India, then went to the Middle East.Then I wanted to quit corporate life altogether and decided to go into academics.” In 1979 Jerry enrolled in the University of Chicago to do a PhD Two years later he realised he wasn`t cut out for that kind of life and abandoned the PhD halfway. He rejoined Citibank, but this time in New York, and then South America.In 1984, good friend Rana Talwar persuaded Jerry to come back to India and set up Citibank`s retail and consumer business. “It was within the umbrella of a large corporation but it was very 16_The Banker who Blinkededitjuly9.qxd 7/19/08 3:11 PM Page 195 THE BANKER WHO BLINKED 195 entrepreneurial.Very unusual.We were writing on a blank canvas so it was quite an interesting time.There was no consumerism, no retail at the time.We introduced ATMs, for example. Even though the technology was 20 years old, it was revolutionary for India back then.” Nine years later Jerry moved to Europe, and then he was asked to to head the technology development division of Citibank, kind of like an R & D unit.He was reluctant - after all wasn`t this the job of a techie? “But there was a kind of feeling that in Citibank, technology was getting separated from business. It was felt that someone with a business background would be better to run that division.” It was a very exciting time because the internet was taking off - this was 1995. Jerry redirected a lot of R & D expenditure into the internet. In those days everybody in California was starting a new company and everyday Citibank was giving business to different vendors - many of them in India.That`s when it struck Jerry, “Why shouldn`t I be on the other side of the table?” “Financially I was relatively secure so it wasn`t a high risk kind of thing for me. And if it hadn`t worked I could have always got back into a corporate career.Also my career in Citibank was plateauing. I was in the top 50, but it was clear to me that they were not going to promote me to the top 10 or 15. And I was not excited about pushing my way through corporate politics in New York.” Everything came together. Along with a colleague, Jeroen Tas, Jaithirth quit Citibank and started Mphasis.The year was 1998. “I went to my boss and said, ‘Look, I don`t want people to say that you fired me so I want you to be the chairman on my advisory board. I am not going to give you any money, just lend me your name for exactly one year’.” He agreed, and Citibank gave Mphasis its first small business. Very soon there were other, bigger clients. People often ask whether MBAs have any advantage in doing business? Jerry`s experience clearly shows the how the IIMA network can help. “Early on we acquired a small division of an Indian company called Byzan Systems.Byzan Systems was run by IIMA alumnus Mohan Krishnan.So he became a third founder of Mphasis along with me and Jeroen. Then, when we were looking for money, Citibank Venture Capital was very interested in investing with us and I was negotiating with Latika Monga, an IIMA alumnus also.” The Citicorp venture capital investment didn`t come through. But the next investor who came to invest was from Barings Private 16_The Banker who Blinkededitjuly9.qxd 7/19/08 3:11 PM Page 196 STAY HUNGRY STAY FOOLISH 196 “I should have started it 3-4 years earlier. If you think about it, it could have been much bigger if we had started in `95. But that`s life. You start when you get your break.” Equity headed by Rahul Bhasin and Subbu Subramaniam, both IIMA alumni. When it came to recruitment, again there were IIMA connections. “Among our early employees were Radhika Rajan, Vikram Jaipuria and Preeti Shenoy.” The Citibank and University of Chicago networks also helped.The first investor in Mphasis was Rick Braddock.“Braddock used to be the President of Citicorp and he liked me very much,”muses Jerry. 1999 was a very heady year. Mphasis was growing 100% quarter to quarter. Of course, it was the dotcom boom and everything was growing crazily at that time. And Mphasis positioned itself as a company which did internet based technology solutions for legacy companies - an area where Jerry had been on the other side and knew exactly what a client would want. Besides, he`d been an early believer in the technology itself. “I had started internet banking, internet brokerage and I was chairman of the internet steering committee in Citigroup. So I was very much a part of the internet movement and was one of the founders of something called Online Banking Association. I had gone to Washington DC and testified before the US Congress about internet financial services.” Meanwhile, Barings had invested in a company called BFL whose CEO had quit the year before. Barings had a 25% stake in Mphasis and a 52% stake in BFL. Mphasis and BFL were merged and Jerry became the CEO of the joint company. Actually, it was a reverse merger. BFL was already listed in India. Mphasis changed its name to Mphasis-BFL Ltd and got listed.The valuation was excellent, in fact, the combined stock price went “through the roof.” Mphasis and BFL combined, the fiscal year ended March 2000, had done $34 million top line and had broken even on the bottom line. For the fiscal year ended March 2001, the company did $64 million in revenues. Almost a 100% growth and a 10% bottomline ($6 million). So basically the merger seemed to have worked. ... - tailieumienphi.vn