Rajan Mehta, founder of healthcare solutions venture, My Care, has always had a passion for building businesses with a deep level of customer-centricity. For Mehta, customer centricity is not a buzzword, but something that ensures that the business model directly aligns with the goals of every stakeholder including customers, employees, investors, vendors and ecosystem partners.
In his earlier avatar, Mehta, along with a team of co-founders and investors, promoted Benchmark Asset Management, a pioneering financial services venture that launched the first ETF in India. After scaling up Benchmark and eventually selling it to Goldman Sachs, Mehta turned his attention to the healthcare industry.
In this chat with Beyond Basics, Mehta speaks candidly about his passion to build transformation businesses, the role of his co-founders and investors and the key drivers that helped scale up Benchmark Asset Management.
Let me start with the early-stage of your entrepreneurial journey. What was the thought process when you decided to start Benchmark Asset Management? What was the gap/opportunity you saw in the Indian financial markets?
In 1998, during my stint at Merrill Lynch London, I was exposed to ETFs. The simplicity and efficiency of ETF started to amaze me. It was clearly an investment vehicle which one can use to deploy one’s own retirement money as well as short-term tactical money. I started discussing with my friend and colleague, Sanjiv Shah, about the potential ETFs hold in India. The more we discussed, the more we were convinced about the potential. Introduction of ETFs had the potential of a multi-dimensional transformational effect. It had an investment philosophy which never underperforms. It uses a distribution system of exchanges rather than the traditional mutual funds system, thus allowing us to be lean without sacrificing the reach. It has business model that is conflict free for the intermediaries since customers pay to intermediaries by way of brokerage or fees compared to traditional mutual funds where customers pay to push their product.
We were clear that penetration of ETFs will take long time in India. Also, purity of business model was sacrosanct and needed to be nurtured in a ring fenced environment. It dawned upon us that it can be done only if we become entrepreneurs, because it is difficult to achieve this in a large company. So we started exploring and with God’s grace, the rest fell in place. Two friends agreed to fund the venture even without seeing the presentation or a business plan. They also offered infrastructure support and fortunately one of them even owned a company, which could qualify as a sponsor for the mutual fund.
What were key drivers that enabled Benchmark’s growth?
I could feel the blessings from day one. It started with the way we got our name, Benchmark. We zeroed in on this name but it was not available. Through a very rare coincidence we found out that it belonged to the client of a friend and to our great surprise, he could convince that person to release the name for us. Since then, I have felt the blessings throughout our journey.
This apart, the other key drivers were:
• We had a team that was philosophically aligned and had a shared purpose.
• We were fortunate to have investors who believed in us and in the concept and never pressurized us to waver from that.
• We received great support from the National Stock Exchange, which helped us educate intermediaries and investors
• We had a few intermediaries who were our strong well wishers and recommended ETFs to their clients in very passionate manner.
Please take me through the various key phases the company went through – startup through exit?
Like all startup entrepreneurs, we started with great enthusiasm. We had a reasonably good start and launched the first ETF in India called NiftyBeES. After this, the true test for tenacity started. Within a short time of launching Nifty BeES, UTI MF also came out with similar ETF and collected Rs.400 crore. At that time Nifty BeES had only Rs. 8 crore in AUM. Many people in industry started writing our obituary. Somehow, the entire team had the confidence that we will succeed in the long-term simply because ETF was the only thing we are doing while for UTI, it was a very small fraction of their overall business. So, our survival instinct helped us through this tough time.
The other challenge we faced initially was lack of branded pedigree. Many people told us that in the Financial Services industry, one requires a strong brand for success and since we did not have this, it is going to be uphill task for us. However we had the conviction that smart investors look for transparency, integrity and efficiency of investment process and normally, a brand provides association of such traits and make it simpler for investors to identify the right asset manager. Fortunately for us, the structure of ETF itself communicated all these attributes and hence did not need the crutches of any other well-known brand.
After the initial tough years when we performed below our expectations, in the next phase, we did very well.
We launched a product called BankBeES which was an ETF based on the banking index. Many foreign investors developed a liking for the product and soon, the fund became one of the largest equity funds in India for some time. Moreover, at a later stage, we got the approval to launch GoldBeES, the first Gold ETF in India and it helped us to reach many new investors and intermediaries. In fact, soon after, we had investors from more than 600 towns including the Andamans.
Later we decided that some growth capital was required for faster growth. In consultation with our investors we started exploring various options, and at the same time Goldman Sachs approached us. Even though a few of us would have liked to continue the entrepreneurial journey, we decided to proceed with the deal (Goldman Sachs bought over the venture) as it made sense for the other stakeholders who stood by us.
You were among the first few in the world to conceptualize a Gold ETF. What was the thought process?
Gold ETF was conceptualized even before Benchmark was formed. My friend Bhargav Vaidya who is a renowned expert of the bullion markets in India requested me to work with him to create a financial product for providing participation in Gold price, especially for small savers. It was during those days when even commodity exchanges were not around. We felt that an ETF structure is the best strategy for small savers to buy gold in small units at a transparent wholesale price. Physical purchases were not an options because there was a hefty premium associated with buying small coins. Also, being a financial instrument, it did not have any possibility of theft.
Soon after we launched our first ETF Nifty BeES, we started working on the Gold ETF and within one year we could come up with the product and file the offer document with SEBI in 2002. At that time, it was the first time that anybody had filed for a Gold ETF or even any commodity ETF (globally). Even though we tried to fit the product in the existing regulations at that time, the regulators thought it appropriate to have wider consultations as Gold was looked into by multiple regulators. This delayed the entire process and we finally received the approval only in 2007.
Please take me ‘behind the scenes’ into a discussion between you and your co-founders while selling to Goldman Sachs.
We always had a high degree of mutual respect among all working co-founders and investor co-founders. We appreciated our investor founders who put immense faith in us and offered us a high degree of freedom to build this venture. They appreciated our dedication and integrity. So all the issues where there could have been a divergence of interest, this mutual respect allowed each of us to think from the other person’s perspective and resolution was quick and without much heartburn. Overall, it was one of the best decades of my professional career.
Was it tough to let go of a venture you had built from scratch?
If I believe that I alone had built this venture from scratch, it will be far from the truth. It was the combined effort of many stakeholders including other co founders, our team and many well wishers from the industry.
It was not as tough as it should have been since there was a happy ending for all stake holders. For me, the journey was more fun than the destination and this event has provided me an opportunity to start one more exciting journey.
Moving on to the next phase, what prompted you to startup in the healthcare space? Was there a personal passion for healthcare? Take me through the early-phase.
During a vacation, I was a guest at one of my close relative’s place. He has been working in a leading healthcare system in United States for quite some time and during an interaction he explained about how conflicted business models in healthcare, generate solutions which are costly and lack quality. We discussed about a smart, different business model that aligned more with consumers and can lower costs and improve quality of healthcare.
With this backdrop, I started discussing again with a few friends about possibility of introducing such business models in India. Over a period, confidence started growing and, yet again, the potential for a multi dimensional transformational effect was evident. Today, this model has the potential to achieve many goals in one solution.
• It is aligned with the wellness of its customers and it is truly healthcare oriented, compared to traditional fee-for-service models where healthcare providers make more money if their customers remain sick.
• It has contemporary relevance since non-communicable diseases are on rise.
• It will strengthen family medicine which is more holistic.
• It will integrate care.
• It will enable deployment of technology for convenience, quality of treatment and knowledge of members.
This attraction of ability to solve multiple problems with one business model was overwhelming and I decided to take plunge.
What is your long-term vision for MyCare? Where do you see the venture five years from now?
We are in the space of offering health solutions and services and hence our expansion will be guided by issues faced by our customers, be it organizations or individuals. We will progressively look to improve quality of our service to existing customers and look at serving more customers. We will also expand vertically as and when it becomes commercially viable to provide integrated healthcare to our members.
What are some learnings you took along with you from financial services to healthcare? And, maybe a few learnings you left behind?
The common link between the two ventures is customer centricity of the business models. The experience at Benchmark has solidified my faith in such business models. I have learnt that aligned business models are initially difficult to build but once you have customers, they stay with you for a longer period and help you build a great brand. Also, systemic stress is less and employees are happy. Whereas, in the case of conflicted models, there may be higher profit quickly but there is higher customer churn and more heartburn.
Also, I have learnt that when you are trying to take a road less travelled; patience, perseverance and self-belief are an absolute must.
What next? Any other professional passions you plan to pursue over the next few years?
I always get excited with opportunities to create transformational businesses which try to solve issues. Due to a dynamic environment, new issues arise or, one can stumble upon solving old issues due to availability of new tools. The plunge can be taken only if it can be a value addition to MyCare and does not create any conflict, including loss of focus.
Mehta believes that both and Benchmark and Mycare, the common factor is customer centricity of business models. He says, “I have learnt that aligned business models are initially difficult to build but once you have customers, they stay with you for a longer period and help you build a great brand.”