Coronavirus: Expand your runway, try and survive, Kris Gopalakrishnan tells founders
Senapathy “Kris” Gopalakrishnan is a behemoth of the Indian technology industry. As one of the founders of Infosys, along with Nandan Nilekani, Narayan Murthy, NS Raghavan, K Dinesh, and SD Shibulal,he helped set in motion events that catapulted India on to the world IT stage.
A quiet and unassuming man, Kris has largely shied away from the limelight. Along the way, he has built up a commendable body of work, including providing a grant of Rs 225 crore to the Centre for Brain Research.
Kris took over as Infosys CEO in FY08, the year when Lehman Brothers went under. The financial meltdown that ensued wiped out every other financial corporation that had lasted for a generation or more.
But, under his leadership, Infosys emerged strong and paved the way for a new era of IT. The company went on to double its revenues from $3 billion to $6 billion during one of the worst times. The government of India awarded him the Padma Bhushan, the country’s third highest civilian honour, in January 2011.
Kris now chairs theCII’s startup committeeand isChairman of Axilor Ventures, an early-stage startup accelerator and venture fund through which he has supported close to 200 startups.
As the world readies to face the economic consequences of the coronavirus pandemic, Kris spoke to YourStory, explainingwhy leadership must become larger than life during the critical time and what founders must do to survive this unprecedented crisis.
Edited excerpts of the interview:
YourStory: It is now clear that the coronavirus pandemic will destroy businesses. What should leaders do?
Kris Gopalakrishnan: My first bit of advice: this too shall pass. I am speaking from experience; there will be a better tomorrow. Our objective is to be there when the better tomorrow comes.
Since this is a health crisis, we need to first take care of family, friends, and employees. Second, review financials and ensure you have the cash to withstand this downturn.
No one’s sure how long this will last and it’s imperative to save cash for the next 12 months and assume there will be zero revenue for the next year or so. This is how I would think if I was an entrepreneur.
The third aspect is that this is a time when everyone will be frightened and uncertain about the future, so a leader must communicate clearly about the company’s path, responses, and strategy. They have to take people in confidence before they make decisions about cost cutting and communicate clearly how to face the situation. If you are asking people to take salary cuts, be open and tell them why this has to be done.
At Infosys, the senior leadership did not take any salary during the 2008 crisis because we had to bring on-board 25,000; we had already given offers. These are things you can do; they are in your control. What is not in your control is your customers and how they will behave. Most will be affected by the crisis, so assume your revenues from them may not come.
Factor in the fact that there will be delays in payment; do not raise disputes. Assume that these customers will return after 12 months. Lastly, investorsare the best people to help you during a crisis. Investors double down on investments so they don’t lose money. You must communicate with them and get their support.
YS: How did you manage between 1981 and 1989 – the time when you were a startup?
KG: We were living hand to mouth in those days. We would charge in advance; we would raise an invoice on the first of every month. Most of our customers obliged, and we managed. We would plough profits back into the business as we had bootstrapped and there was no venture capital investment.
YS: How did you manage between 2007 and 2011? How did you deal with the fallout of the 2008 economic downturn and help Infosys double its revenues?
KG: I would advise founders to talk to clients. One needs to differentiate between B2B and B2C. You are probably better off with B2B clients if you have long-term relationships. SaaS is stick; you may find invoices delayed, but they will be paid.
Communicate a lot with customers and work with customer challenges to manage payments. For example, try invoice discounting with a bank to advance the revenue. Some will pay; some won’t.
Businesses won’t extend cash runway and this will affect startups. Tell them about your problems and work with them to make sure they pay you. Also, work with investors.
B2C is totally different. If you are making digital content, you may see a spike in business because consumption is increasing. But, the food delivery business can get impacted because you don’t have people ordering and you don’t have delivery boys. You have to expand the runway and try and survive for the next month or so.
YS: What is your take on compassionate capitalism?
KG: I am proud of the startup ecosystem and its founders during this pandemic. They have got together and launched the Act Fund. The Rs 100 crore fund supports innovative ideas to help us manage this crisis better. They have called for applications that can help us make masks and ventilators. Take CCAMP, for example, they have repurposed their product for testing. Some IITs are also taking major steps to fight this pandemic. Investors have put in their personal money to create a small fund to pay employee salaries for one or two months and then ease them in to other jobs. SIDBI is also creating a platform for startups.
The government is aware of the fact that we are the third largest startup ecosystem in the world; it does not want the industry to shut down and the country to stare at job losses.
This is a very challenging time for our country. Ninety percent of people are in the unorganised sector and need help. They don’t have a cushion in terms of savings, and many in the investment community and startups are helping the needy and poorin this difficult time.
I am proud of how the ecosystem has responded, and hope this pandemic will pass soon.
YS: What do you think will be the new normal after the crisis?
KG: IT Services companies have transformed, and are working from home. Behavioural changes are already happening. Now, the major question is should digital companies have own infrastructure when they can meet occasionally in a shared space.
More people will continue to work from home and I see that happening in the IT Services sector. The new normal will be that 20 percent of the workforce will always work from home on a rotational basis.
There will be appreciation of migrant labour and healthcare workers. We suddenly realised how dependent we were on migrant labour; hopefully, we have learnt a lesson on how to manage them in future emergencies.
Many startups will look at profitability in the future and must manage to conserve cash for at least 12 months. On the business side, we will be global but the political side, which believes in self sufficiency of the internal economy, has led to a major blow to globalisation. If you are self-sufficient, you don’t see the blow of the pandemic to the economy because there is a lot of consumption within. But, if our exports were huge, we would have been hurt now.
Coronavirus has also brought to the fore the fact that we need to collaborate on the healthcare side. We are sending medicines to other parts of the world. This collaboration will only increase significantly.
As a country, we are trying to increase domestic manufacturing; this is a clarion call that we need to focus on in the future.
YS: What is the role of the government during the current pandemic?
KG: From startups and SMEs to MSMEs and large companies, they all need support from the government because no one knew that this pandemic would hit everyone so hard.
People in the unorganised sector will be supported under the direct beneficiary transfer schemes. Similarly, the government should help businesses as they create products and services for society to consume.
Many industry bodies are in talks with the government and have apprised them about the economic turmoil that will ensue. Many countries have spent 10 to 15 percent of their GDP on supporting society and industry. India has spent only one percent of the GDP so far and it is not enough to fight the crisis. We should take it to 10 percent.
The CII has set up multiple task forces and I chair the organisation’s startup committee. There is constant communication with the government and hopefully they support us more.
YS: You have helped the sciences in your personal capacity. How do you view scientific research going forward?
KG: We need to increase our spending on modern medical research, including DNA and gene sequencing. For example, is the virus spreading in India different, is it mutating, can we look at the response of different treatments within our country? We need to strengthen our research and invest in the right things.
(Edited by Teja Lele Desai)