Neeraj Kakkar, CEO, Hector Beverages (Photo credit: Astha A)
Most entrepreneurs that we interview here tend to have started their businesses during b-school or right after graduating from one. But how are their startup stories different from those who work in a corporate job for a few years before deciding to go it on their own?
Neeraj Kakkar studied two MBAs spaced ten years apart, one from Management Development Institute (MDI), Gurgaon (1996-199 and the second one from The Wharton School, University of Pennsylvania (2008-2010) before co-founding Hector Beverages, makers of the energy drink ‘Tzinga’, which he heads now as CEO.
In an interview with PaGaLGuY, he narrates his double MBA story and talks about how entrepreneurship is different for those who first spend a substantial number of years in the corporate world.
You did your first MBA from MDI Gurgaon. Why didn’t you start a business right then? Why did you work in the industry first?
I had always been inclined to do something on my own. Before MDI, I actually did a small stint on my own, trying to set up a garment manufacturing unit. But I think the confidence was missing. MDI, though it was good, didn’t give me a huge amount of confidence. So I went the normal corporate way and worked with Coca Cola for a long time.
When I entered Wharton, my initial objective was not entrepreneurship. Wharton was more to speed up my journey in the corporate arena. But at Wharton, I had a very successful stint. I was amongst the top five students in terms of academic performance, in a class of 800. I was heading two important student-run committees — one was the leadership lecture committee and the other was the developmental committee. I was president of both. Then I realised that these were the best students from all over the world. And when youre doing better than them, it gives you a lot of confidence. If you can do better than them here, you can do better than them in other fields as well. It gave me a lot confidence that I could compete with the best in the world. That is when I decided that I wouldn’t like to work with any corporate.
How much time did you spend in the industry in between MDI and Wharton? What made you think of a second MBA?
I spent almost ten years in the corporate world. I had an extremely successful journey at Coke. I was growing at a very fast rate and I became one of the youngest general managers in Cokes system. From there, the corporate ceiling kicked in where if youre not at a certain place or you’re not a certain age, you can’t move to the next level. I wanted to break that ceiling. One way was to spend more time at Coke and go for different functional roles. I decided that it was better if I utilised this time to get more skills. After a lot of discussion with the people at Coke, I took a decision to do this.
Why Wharton? Why not a school for more experienced people in India, such as the Indian School of Business (ISB), Hyderabad?
I think ISB is a great institute in its own sense. Its not that I rejected ISB but I wanted the international experience. I wanted to see what was happening around the world. ISB would not have given me that. It is a predominantly Indian school. For example, Ill tell you the story of my class (at Wharton). We were discussing a case about diamond cartels and there were people from Brazil, China, Korea, India, Portugal, Cuba, Belgium and the USA. We started debating and found that everyone looked at things extremely differently. That experience itself was worth its weight in gold.
Could you narrate your thought process leading up to your decision to start up on your own?
For me, growing in the corporate world was very important. But when I reached Wharton, I realised that it wasn’t good enough a goal and there were bigger opportunities around. I had offers from McKinsey and private equity funds, which are considered as dream jobs in a Wharton environment. I realised that even those were not enough. To sum up, I had been doing so well in my career that in every other setting, there would have been limits put to my growth. You cant grow faster as there is a system in place. I wanted to come out of that system into an open arena where only I can decide how fast I can grow. Thats the reason I became an entrepreneur.
How did you meet your co-founders and how did you come up with the idea of building a beverage company?
I was interning with a venture capital fund while I was at Wharton when I got in touch with Suhas Misra, who was my colleague at Coke. He is an Indian Institute of Management (IIM), Calcutta guy and we had worked together at Coke for some time. This is his second venture. He had exited his first venture and was trying to start something new. We discussed it amongst ourselves and we thought that it was a good idea.
In the meanwhile, at Wharton I met James Paul Nuttall during one of the class social events. We discussed our ideas and he said that he was going to join Dow Chemicals. His primary responsibility there was to bring down the packaging costs. I thought that was very important because in India, a small revolution has happened because of reduction in packaging costs. Once Suhas and I talked it over, we went to James and asked him whether he would like to be a part of it (our company). James then arrived here in March and looked around for a week. And he liked it. He had offers from top companies himself. But he spent a month here and said, This is what I want to do for life. So he said no to those offers and came back to us.
It was during my internship period at Wharton that we took the decision to go ahead with our venture. Once we had finalised the project, I was in a tearing hurry. I wasnt even in Wharton during my second year. I was there for only for 2-3 months in which I took additional courses and finished my coursework. In 2009, I decided to shift to India.
The first one and a half years went in trying to develop the product. As I told you, we were looking to develop the perfect beverage which has the best quality and ingredients from across the world, at a price that is an affordable range for the Indian market. This involved a lot of research. I, James, Suhas and Neeraj Biyani (an ex-Coke guy who joined them) worked to develop the perfect thing.
People find it very hard to believe but Tzinga, on the ingredients side, is actually better than Red Bull. The formulation is better than Red Bull, even though the ingredients are of a similar quality (its the same vendor). And were priced at almost 1/5th the price point.
It took us one and a half years to develop the product. We had all quit our jobs to develop the perfect product. We launched the product in April 2011 and its doing extremely well. In a market like Bangalore, it sells more than any other functional beverage in the market. It sells more than the bigger brands in the market.
How would you contrast starting up right after b-school to starting up after working in a corporate for a few years?
There are positives and negatives to both sides. The corporate world equips you with knowledge of certain situations, and makes you deal with certain problems so that when you face those problems again, youre prepared. For example, setting up a manufacturing plant. I have done that with Coke and now its easier for me to do it if I start a company. If I would have started right after my first MBA, it would probably have been wrong. I wouldnt have been able to do as much.
But at the same time, the corporate world also limits your ambition levels. You cant think beyond a certain paradigm. Coke is a great company and theyve equipped me really well. But when you’re working for Coke, you think that Coke is the best beverage. When I went to Wharton, I realised that it was a great beverage which was made 125 years ago and it was doing extremely well. But its not the perfect beverage for India. And then we went through the whole process of trying to find the best beverage which was possible for Indian consumption. So, I think the corporate world has its positives and negatives.
However, if I had to live my life again, Id like to start earlier and spend lesser time in the corporate world. I wont say that I wouldn’t like to spend any time in the corporate world but Id like to do it with the right company. And Coke was the right company.
What would be your advice to someone who wants to start afresh after MBA?
I think then youll have to choose something in which you have a sustainable advantage over other people. You are bound to make more mistakes as compared to a person who has some amount of experience. But if you have the passion and have strong skill sets, you can make those mistakes and still do a better job.
However, there are examples from both the sides. Look at the biggest success stories in the world. Microsoft, Apple, Facebook, all of them started afresh, right? Their concept was so powerful and their skill set was so good. They would have definitely made some mistakes while growing but they overcame those mistakes. And they went ahead and did things that were totally unimaginable. For me, my idol would be NR Narayan Murthy (of Infosys). He spent a particular amount of time in the corporate sector. He learnt from Patni and then he started out on his own. So I dont relate too well with Mark Zuckerberg or Bill Gates. I relate more with what Mr Murthy is saying.
What about funding? Would you advise people to collect and depend on personal savings or would actually going for a loan be better? How do you compare the two?
Its not easy. You’re not going to get a loan very easily if you start a new venture, even if you have corporate experience. I think the first round of funding always is the best with friends and family. They know you as a person. And they dont invest in the business idea. They invest in the person, thinking that he/she is a good person and will make something of our money. Once youve taken it to a certain scale or have your beta ready, then you can go to an early stage VC company or angel investors to take it to the next level. Not everybody would have the money themselves but you can always go to your friends and family.
What kind of personality changes, both personal and professional, did you feel the MBA imbibed in you, which equipped you to feel confident of starting a venture of your own?
Wharton had three big benefits. The first was international exposure. In a class of seventy people, we invariably had 15-20 countries with students from Cuba, Europe, China, South Korea, USA, India, etc. Everybody had a different outlook and the way they looked at things, it broadens your perspective in what youve been trying to do all your life.
Second was that the professors. They have perfected the art of teaching. The professors have been there for a very long time and have been doing it for over a hundred years. They are very well-rehearsed in the material which they teach you from. The professors are so strong that if they take a class in one year and in the same class a year later, everything in that particular lecture would be the same. Even the jokes would be cracked at the same time. There was a good amount of learning from the classrooms.
Third was the networking. You get to meet so many people from around the world. Today I can make a phone call to Romania and ask for help and itll be available, which wasnt the case with MDI. I was lacking in the technical and financial skill sets. I wasnt extremely good at making balance sheets. On the personal front, I probably lacked the ability to look ten years down the line and see where the industry was going. You can call it a lack of strategy.
In addition, apart from confidence, entrepreneurship enthusiasts should try to look at long-term goals rather than being bogged down by what is happening today. When we started, it was a tough market dominated by Coke, Pepsi, Red Bull and other big brands. What were trying to do is to create a brand in this market. There were a lot of challenges in the beginning, but you have a quest to yourself that you can see this thing happen in the long term in this particular way. So looking at the long term picture is very important and Wharton taught me that.
Did you have to sacrifice any part of your lifestyle in the transition from a salaried professional to an entrepreneur?
I think entrepreneurship is a pretty selfish decision. You’re doing it because you enjoy it. I enjoy my day and an average day is far more hectic than what it used to be at Coke. At the same time, it comes at the cost of lifestyle. For example, youre used to driving high-end cars and living in big houses. Now youre back to small cars and houses.
Even if the funding comes from outside, you cant afford to have the same salary as that of a corporate job. If you’re part of a founding team, your salary is 20% of what you would be getting in your corporate job. That is something Mr Murthy talked about quite often. He was the lead guy at Patni and was one of the better-paid people. From there, he went to zero salary for almost ten years. If youre going to have zero salary for ten years, wheres the money going to come from to run your house? It’s pretty tough because you’re used to people doing things for you, rather than you doing it yourself. But one does it because one enjoys it. Im not doing it out of compulsion but because I enjoy it more than my other job.
But its really tough for families and people around you because they dont get to see you for a long time. Entrepreneurship is far more taxing than a corporate job. There is so much more to do every day. You run around here and there and work for more number of days. But youre enjoying it so much that you want to work on a Sunday because you define your limits. Nobody comes and tells me that I have to do this in this time frame. It’s for me to decide what I can achieve. I would always set far more challenging goals for myself than anybody else would ever be able to do.
How useful do you find the Entrepreneurship electives taught at b-schools?
I think its good. If you decide to do something, you should try to learn as much as you can about that particular thing. If Ive decided that I want to do entrepreneurship, I will try to learn as much as I can about it. These courses are presented in a very concise form. They will tell you about what to do and what not to do. These are the courses which are derived from the experiences of the people who have done it successfully in the past. So I think it’s very useful.
So now youve launched Tzinga and it has a place in the market. What next?
The next obvious step would be to grow the product. The first goal is to have a national distribution and launch it across the country. For the first 6-8 months, it was only there in Delhi and Bangalore. Now were growing in other states and now its available in Hyderabad, Jaipur, Kota, Ahmedabad. Well expand to other big markets like Mumbai, Pune, Chennai, Kolkata, the North East in the next few months. Once we go national, we’ll try to go international and take it to the other markets outside.
How much of the development, advertising and marketing of the product did your team do and how much did you outsource?
We didnt outsource anything. We did it ourselves. My only advice is that when youre trying to do something, you should build a good team. If you have a good team, they will take it forward. If the core team has the skill sets to take it to the next level, its great. Like in our case, we were fortunate to have such a team. The team was decided based on complementary skills that everybody brought to the table. This helped us grow faster.
How would you compare your experience of studying MBA at MDI first to that at Wharton ten years later?
I think I wasnt really prepared to take the best out of the course at MDI. I went straight from college to MDI. For one year, I had tried to do something on my own, but it was nothing concrete. No disrespect to the institution, but I was not equipped enough to take a judgement call. That’s something I strongly advise everybody I meet that one should have some work experience before joining an MBA programme because then you are able to relate more with what youre learning. Otherwise everything looks very theoretical to you. You don’t know what to learn and what not to learn.
When I was at MDI, the Accounting course looked bad to me. I thought it wasnt very important in life and I always wondered why I was doing it. But when I entered the corporate world, I learnt that it was extremely important. Similarly, with case studies. There are a lot of case studies you go through, but they all look like stories to you. But if you have your own experiences, you can learn better. During my second MBA, for every case, I could relate to some situation in my real life. And I always thought about how I could have handled the situation at that time. You take more out of the course and it makes your learning fruitful.
On the other hand, Wharton imparted practical skills that I could relate to from actual incidents. For example, at Coke, I went from Assistant Sales Manager to Sales manager to heading plants. I was heading a bottling unit at the General Manager position. Then there was profit and loss responsibility on ground. So I was pretty good at operations and man management. But I realised that if I was heading the company and I had to look at the long-term picture to see how the company would evolve, what steps would I take? It was difficult for me to imagine myself doing that. Wharton helped me expand at the horizon and look at the bigger picture.
If your expectation from an MBA is that you will get a better job and be at a better place in your career, then you should do it as early as possible. Because your pre-MBA experience is not going to help you get a better job. Some companies do value the experience, but there are some companies have a management trainee rotation period. If somebody has four years of experience and someone else has zero years of experience, they start at the same level.
But if the objective is that youd like to learn and make yourself a better professional which will help you in the long run, then work experience helps a lot.
Any concluding advice to freshly starting out entrepreneurs?
Im a huge proponent of entrepreneurship. If youve not done it in your life, you should definitely do it. My corporate experience has helped me but if youre willing to start as early as possible, you should do it. If one has the passion to start something, one should do it irrespective of time or without thinking too much about it. There are a lot of people who have the fear of what will happen if I go out. My personal view is that youre young and better educated than most people around. What wrong can happen to you? You might end up wasting 2-3 years but in the long run, entrepreneurship would definitely pay more than corporate jobs ever can.
For me, beverages have been my life. Some people are doing better work trying to eradicate poverty, hunger, etc. For me, if I dont see the right beverage, I want to change that to something that is better than the ones available. That gives me a lot of satisfaction.