I’m Aditi Balbir, mom, wife, and an entrepreneur. In building my business, I’ve learnt a lot along the way and I want to use this knowledge and understanding to help other amazing founders scale their business and follow their dreams. So every saturday, I talk to successful entrepreneurs who’ve done just that, in an endeavour to decode the startup world for newbies and incumbents alike.
Every interview has been unique and enlightening for me and I’m attempting to jot down the main learnings from each founder, should the viewers (myself included) need a follow-on.
Scaling with Devita Saraf
I met this unassuming founder several months ago over a zoom webinar where the focus was on Covid and how business shall survive the pandemic. Once I started the customary research before the episode, i was quite blown away. For her business had scaled vastly over the last 14 years and she’d made it to the exclusive and quite coveted 1000 cr club. Applause worthy.
Devita had a clear vision for herself and her company and a winning strategy to scale. Here are some of the key takeaways:
- The ‘J’ Curve — also called the hockey stick — is a map of the growth of a company. From the starting point, the curve first falls and then steeply rises way above the starting point. Meaning? Returns go down or worsen initially because of initial investment, learnings or failures and then once you’ve figured the winning formula, returns go up sharply. A company can achieve this only when they start scaling at the correct point.
- What is the correct point? — When you have the winning formula. The correct mix of product, price and positioning. When one unit / or geography is super successful and all you have to do is replicate. So how do you replicate?
- Cash vs Time — you can either raise funds from outside or grow organically. Lets deep dive into this.
Everyones heard of startups raising large amounts of money from external investors — like Oyo raising $1bn from Softbank. Why do investors give money? because they can see the winning formula. The business that has a great idea, thats been executed and validated and all it has to do is replicate and scale to capture a very large market.
There are business that don’t raise money. They deploy the profits from one unit to start another unit. This means growing organically.
- What are the pros and cons of both strategies?
Growing organically means you don’t give away any part of your company to outsiders. It means you have no investor pressure to grow. it means you focus on profit and not burning cash from day one. It also means you take more time but you build a sustainable business.
Raising money reduces the timelines to scale. But here pressures are great. If you fail, you fail fast and change your model if you have to. It involves burning cash or being a loss leader because your aim is to capture the market quickly even if you keep making losses.
- So which do you choose? I loved Devita’s answer on this one — you can be rich or you can be king. Meaning? You can choose to own 20% of a 1000 cr company or 100% of 100 cr company. The first option means big salary and bonus for the founders, which means they get rich. The second means full control for founders who can choose to grow slowly but be a king in their category.
Interestingly, I chose the first way — to raise money from investors in my business. While Devita chose to grow organically. What would you choose?