Blume Beacon Special Edition: The Power of Compounding
Blume Beacon Special Edition: The Power of Compounding
Season Two of Blume Podcast just went live!
Have you ever tried running a marathon? Okay, let’s be a little conservative. How about a half-marathon? No one gets up on a fine morning and coasts through 21 kilometres. The real process looks somewhat like this.
Week 1
Woke up tired. Ran a few kilometres. Took a few breaks, but the early enthusiasm was quickly replaced by a fierce sense of hatred.
Week 2
Missed a few days. Setbacks at work, personal life. Legs have started to give away and you are constantly tired.
Week 3
You have a training system now. Your diet is better so there’s less fatigue. You give yourself rest days and deny yourself any guilt that comes with giving yourself rest days.
Week 4
You’re finally closer to hitting 10K without feeling like death is waiting for you at the finishing line…
And the weeks go on.
For some, the training program would take three months, some might need to start even earlier. But none of this happened with just deciding to run a marathon. You sail through at an enviable pace on some days and drag yourself like a hunted animal looking for safety on others. Over time, you build the muscle that tells you when to conserve your energy, when to pick up pace, and when to expect a hurdle in the path. The easy runs prime you for the longer ones. What’s important is that you get up every day, tighten those shoelaces, and show up!
This entire preamble is meant to tell you how entrepreneurship can often look like this. Every tiny step (and misstep) adds to the compounding flywheel to get you to the finish line.
We like to call this the Power of Compounding, a theme we’re drawing on for the upcoming season of Blume Podcast. Whom should you expect in the episodes? Entrepreneurs who have been at it for decades and those who stayed with an idea for years before actual returns started coming in.
As we see more people wanting to become founders, it's essential to change the story from how to build a unicorn to how to build a company that will last for a long time. The endgame must be that you build long-term value for all stakeholders, not just on valuation or investment returns. How do you do this? By keeping business operations stable so that capital can grow through compounding.
These entrepreneurs are living proof that success doesn't happen overnight but through consistent effort and perseverance. They have experienced the power of compounding firsthand, as their hard work and dedication have compounded into significant achievements over time. Some of our guests may not even be from the tech space, but the patterns that contribute to compounding show through.
Our first episode features Peyush Bansal of Lenskart, the leading eyewear brand in India. The company boasts millions of users and 1000+ retail stores, making it one of the most prominent D2C brands to come up in the last decade. When Peyush decided to set out on his own, he came across this troubling stat: India is the blind capital of the world, and 75% of people in India who need specs are not wearing them. Unbelievable, isn’t it? Here, Peyush had found his market. The marathon had begun.
But there were some side quests. He also ran BagsKart, WatchKart, and JewelsKart, but nearly 80% of his time was spent on LensKart. This was when a visit to Ronnie Screwvala’s house changed his outlook.
“I still remember we were sitting in a corner, where there was a sea breeze coming in Ronnie's sea-facing house, and he started questioning me. He said, what do you want to do? I think somewhere I said to give glasses to people who don’t have them. And he said ‘Then why are you doing everything else?”
Peyush in the episode.
It would be a huge miss if we didn’t use this metaphor in this present situation, so here goes: Ronnie seems to have given the glasses that focused on Peyush’s blurred vision.
There’s another reason why we started this newsletter by talking about running. Peyush mentioned how he was surprised that people no longer limit themselves to talking about just shoes. There were shoes for gymming, shoes for walking. You didn’t just have “running” shoes; you could now buy separate shoes for fast and slow running. To Peyush, it was a leading signal that this trend will permeate other consumer categories and reach spectacles. Why can’t you own five? The host, Karthik B. Reddy, is an early contributor to this trend. “From personal experience, I can see my wife go through this. Once you hit the forties, essentially the market suddenly opens up like crazy.” (Maybe not as much as Karan Johar in the ads though).
As one of the first brands to become a cult favourite, there are a lot of experiments Peyush ran to make it the preferred eyewear brand:
Do customers have too much inertia to get themselves tested? Let’s go to their homes.
Supply chain falling short? Let’s get a factory up in Rajasthan
Customers coming to the website but not buying? Let’s get some stores up.
In this episode, you’ll find more such instances of how keenly observing consumer behaviour helps you come up with incremental reiterations that compound over time. For example, Peyush’s own sister was resistant to getting an eye test and was happy to slide closer to the TV screen instead. Peyush didn’t even understand the word “omnichannel” when he first came up with the idea of offline stores; he just needed to go where the customer is.
Speaking of customer obsession, in another episode of Blume Podcast, Nithin Kamath of Zerodha tells you how even today, he spends an hour every day answering customer queries on a multitude of platforms. In fact, every thing Zerodha does as a company also draws deeply from the founding team’s years of trading.
People would think Zerodha started some 13 years ago, but Nithin had started putting in the work a decade before that. Interestingly, Zerodha was never supposed to look like it does now. It was meant to be a small boutique firm. And the plan was to get that small group of very active traders in online trading communities.
What led to Zerodha’s exponential growth is its focus on the long term. If a customer comes to us, do I make Rs. 3,000 in one month, or is it fine to make Rs. 300 a year for 10 years? You’d know what Nithin would choose when you hear the episode (dropping soon!)
It wouldn’t be a stretch to say how Zerodha has managed to convert a larger proportion of young people into active public markets investors. Zerodha is often quoted as the most prominent online brokerage in the country, and they reached here without a single venture dollar to aid them in the journey. In FY22, the company clocked a profit of ~INR2000 crores with ~11-million strong userbase.
Nithin is a co-investor with Blume in the companies WintWealth and Smallcase, demonstrating his dedication to addressing problems in the investing community.
“We need to help Indians do better with money, and we can't solve all the problems. And we need to partner with folks to do it and partner and collaborate.”
Nithin said in the episode.
To truly understand how far compounding can take you, sample this anecdote from his life: Nithin mentions that he experienced a loss in their trading account in 2001 and subsequently decided to join a call center, where he worked for approximately three to four years. Before working in a call centre, he also dabbled in multilevel marketing. It sounds like a rough time, but this is where Nithin picked up his storytelling skills, a trait we now consider a must for any business.
A recurrent idea in our episodes has been how important the right set of people is when it comes to building a lasting business. To be fair, what even is a business if not for the people? A few incorporation papers here, a little bit of tech there? All of this is junk machinery if you don’t have co-pilots to get you off the ground.
In our first episode, you will hear Peyush talking about how if you find great people and talent and raise the bar, you bring them into the ecosystem. After that, it’s just like a disciplined reinvestment of profits. Remember the compounding lesson in school? The math checks out.
Here’s some trivia from Nithin’s talk. Out of CTO Kailash Nadh's team of 33 people, only two have churned out in the last decade. Peyush, too, quoted Sanjeev Bikhchandani of Naukri.com fame and said, “For people to build something large, they need to share… and they need to get the right people. Lenskart would not be what it is if they were not people joining the workforce.”
All this talk of building formidable businesses can often make one lose sight of the bigger picture by getting enmeshed in the finer details. Our episode with Raamdeo Agrawal of Motilal Oswal Group draws from the experience that can only come from running a business for over a quarter of a century. Agrawal started the business as a sub-broker in 1987 and had a front-seat view of the industry’s digital growth, having grown the firm to INR12,000+ of market capitalization. Every snippet in this story screams long-term.
When considering starting up, it’s important to note that the view above will differ from what it was from the ground floor, but as you move up, you’ll see more nuances. What’s his advice? When you are on the USD 1B stage, build for that stage instead of jumping to the USD 10B stage. In his words, when you are in the first, don’t bother about what happens in the 10th standard because it’s bound to be different. The important thing is to build competencies that compound when you get there.
We’ve given you a brief glimpse of what lies in store in the upcoming season. But stay put; we’ll have more stories to make you believe in the power of compounding as strongly as we do. In case you haven’t followed our previous newsletters, this was also the theme of this year’s Blume Day. We believe that the ability to think through long-term goals, be very missionary in your objective, and not worry about short-term goals is essential to compounding.
To wrap up, we’d go back to the running track. There may be roadblocks on the way, or you might run on empty for some time. But founders, have your blisters on and keep moving. To repeat what our Blume Day tee said: Form is Temporary, Class is Permanent.
