S3 E05 | How Anand Deshpande Built a $9 Billion Powerhouse: The Persistent Systems Story

[00:00:00] Anand Deshpande: At Persistent, we see ourselves that we are in the sixth orbit. 

[00:00:04] Karthik Reddy: Sixth now? 

[00:00:04] Anand Deshpande: Yeah. 

[00:00:05] Karthik Reddy: Oh, wow.

[00:00:05.06] Anand Deshpande: And we’ve had five different orbits. Every orbit has been very unique. You can feel the difference between what works in one orbit. Our first orbit was pretty much from 1990 all the way till 2000, almost 10 years. In 2000, we were a hundred people company, just a hundred people company.

We were doing very well. I don’t remember, about 6 million, maybe 5 – 7 million, but we were a 35% profit margin company at that point. And we pushed really hard and we got some amazing growth years during those two years. So, we had 35% growth for two successive years. And the stock got completely re-rated, the market got re-rated, and then on the stock has really done very well.

And I think understanding that market very clearly. And that’s where a lot of startups or small companies struggle. 

[00:00:49] Karthik Reddy: I think so too. They go underprepared or they don’t invest enough. 

[00:00:52] Anand Deshpande: Yeah, they don’t think enough about what is the ideal customer that they are going after. What is the ICP? How are we defining that? Do we have clarity on who the buyer is?

[00:01:15] Karthik Reddy: Today, we have a true pioneer of the Indian IT industry, Dr. Anand Deshpande with us. Anand is the founder, chairman, and managing director of Persistent Systems, a company he started in 1990 with just $21,000 and has since grown into a global technology powerhouse. His journey embodies our theme of Winning Beyond Boundaries in every sense.

A distinguished alum of IIT Kharagpur and Indiana University, Anand has been the driving force behind Persistent’s growth from a startup to a publicly traded global company. His vision has not only shaped Persistent but has also influenced the broader Indian IT landscape. Anand’s impact extends far beyond business.

He is a founding trustee of Persistent Foundation. He has served in numerous positions at various professional and non-profit organizations, NASSCOM’s Executive Council, founding member of iSPIRT, founding member of I4C, and a member of the Dean’s Advisory Council in the School of Informatics, Computing, and Engineering at Indiana University, among others.

His commitment to entrepreneurship and education is evident in his roles as an adjunct professor at IIT Bombay and Chairman of the Board of Governors at IIT Patna. Particularly noteworthy is Anand’s dedication to fostering entrepreneurship at the grassroots level. In 2013, he established the DeASRA Foundation, a non-profit organization focused on creating self-employment at scale.

Through initiatives like the Second Orbit program, DeASRA has helped hundreds of entrepreneurs scale their businesses, truly embodying the spirit of Winning Beyond Boundaries. Today, we’ll explore Anand’s journey from a programmer at HP Labs to a visionary leader. His insights on the evolving tech landscape and his philosophy on winning beyond conventional boundaries.

Anand, it’s a pleasure to have you with us today. Usually, we’d love to hear a little bit of the backstory of what makes a great entrepreneur. So, if you don’t mind, we’ll roll the clock back a little and go to your days in Akola and BHEL Township. And how did that become a story that took you to IIT Kharagpur?

So a little bit of trying to capture what that childhood in that mind that took you to engineering was in the early days. 

[00:03:18] Anand Deshpande: So thanks for inviting me. It’s a pleasure to be here on this podcast. Yeah, I was born in Akola in 1962, but I never really lived there. 

[00:03:26.17] Karthik Reddy: Okay. 

[00:03:27.05] Anand Deshpande: My parents, my father is an electrical engineer and he worked for Bharat Heavy Electricals, BHEL.

And as part of his job, he was in Bhopal and he was working there. And, we lived in the BHEL Township in Bhopal. So, basically I was there pretty much till my 11^th standard, and at that point in MP, we had 11^th as the higher secondary. So, that was my last stay in Bhopal. Bhopal of course at that point was a state capital alright but a very sleepy town in some sense.

In the township, we were relatively isolated from the rest of the city in the sense that in the township, I don’t know if you are familiar, but this was a very large township at that point, and there were several thousand engineers who worked at BHEL, and they were a government or public sector company with quarters that they had provided to all the people.

So the beauty of these kinds of quarters is that all your parents know each other. They know all the kids around, so if you’re hanging out with someone, there’s some uncle or aunty who knows what’s going on. And it’s very interesting today. Even if we meet someone almost 50 years later, they will tell you intricate details about you, what you were doing as an 8‑year-old and a 10-year-old when you visited their house, or things like that.

So, everyone, it was a very nice, comfortable environment. In the township context, what also happens is that you get groups of people who live in similar quarters and typically, they are, co-workers, they work in similar areas. They’re the same age group. Their kids are same age group. Lots of young kids my age around when I was growing up in Bhopal.

And, yeah, so the township was very good. We were all surrounded by engineers all across. All our parents were engineers. We were all working in one of the large engineering companies. And, pretty much it was a science, math, physics kind of an environment, not just at home, but amongst friends as well. Everyone was in that category.

And I went to school, in a school called Campion School, Bhopal. Campion School was an all-boys Jesuit school, and about 30% of the class would be from the township. The rest of them were from the city and otherwise. 

[00:05:49] Karthik Reddy: It’s connected to the same Campion in Bombay? 

[00:05:51] Anand Deshpande: It is connected to them, but this was set up by the same group of Padris.

So they came over to Bhopal in 65 and set up Campion. And I was part of that school, and I did all my schooling there till 11^th. It was a, as I said, very cocooned environment where life was. 

[00:06:11] Karthik Reddy: So I guess like even, a decade later when we were pushed into, 11^th and 12^th grade, it was the old parable of you either became an engineer or a doctor if you were smart.

[00:06:21] Anand Deshpande: Yeah.

[00:06:22.07] Karthik Reddy: I guess you folks are pioneers of that a decade before. 

[00:06:26] Anand Deshpande: I didn’t say pioneers. We were very much in the typecast. From the township, most people ended up becoming engineers as well. So that was pretty much the given thing in a way.

[00:06:37] Karthik Reddy: And then there’s a little bit of research that suggests that you were an aeronautical engineer, then you moved to computer science, you’ve gotten to NDA. So, even today, we have those challenges as an 18, 20-year-old, trying to make these choices which dictate your life but how did you make those career choices back? 

[00:06:55] Anand Deshpande: So, clearly I was very keen on becoming an engineer. That was very clear at that time. At that point, the choices were either local college, which would be MACT in Bhopal, which is a regional engineering college.

And then depending on what grades you got, you got into one of the RECs. Otherwise, you go to IIT. Those are the three options for going to engineering. But what happens is when you are in 11^th and you are trying to figure out what to do, as practice and otherwise, you try to apply to all these competitive exams.

So I applied to several of them. In school, I was a very regular student, I would say. So, I was, quite well organized. And, yeah, meaning I was quite disciplined and I was in the top few in the class always, but not so much because of anything else. But, for the fact that I was very diligent and did all my homework every day. i was a good boy in that sense.

And yes, I did study quite a bit for JEE and then I got a fairly large rank. I also got a rank into NDA as you pointed out, but I really never wanted to go to NDA. It was a good experience though, going to SSB, understanding how things happen and trying competitive exams. So, I highly encourage people to try that experience, but it was not my first choice.

It would have been, many things would have had to go wrong to go to NDA. But I did get into IIT and, at that point, and even now, if you get a JEE rank, what you get, then you choose what you get. So, I ended up, choosing Aero in, Kharagpur. So, I did two years of Aero in Kharagpur because, again, the first two years were common.

But when you start in IIT, you start with a department. So I was in Aero. And after two years, I was able to change to computer science. And then, I graduated from Kharagpur in ​‘84, with a computer science B.Tech. My batch was the third batch in computer science in IITs. And actually, IIT Kharagpur has the first batch of computer science amongst any IITs.

[00:08:55] Karthik Reddy: Okay. 

[00:08:56] Anand Deshpande: So ours was the third, batch in that sense. So, not too many people before us who were doing computer science. So it was quite unique in that sense. 

[00:09:04] Karthik Reddy: And then, I think, we extracted this from one of your interviews, but I’m curious, as much as the audience would be, one of the reasons of all the colleges, I think the two things about your post as you graduated that caught our eye.

One was that you hacked this algorithm to make sure that everybody, got into the universities that they’re most capable of. This became, of course, folklore much later, and now there are consultants and gurus who try to do the same thing. But clearly, a little bit of a pioneer on that front.

How did that idea come about? And, you went to Indiana and it seems to be a choice which was made on the back of a book by Douglas Hofstadter. It intrigued us on how those kinds of choices came to be sitting in Kharagpur, of all places, in the 80s. 

[00:09:59] Anand Deshpande: See, as I mentioned to you, I got into aeronautical earlier because my rank was pretty large. You need a four-digit JEE rank, that’s where you end up going. So many of the kids in the class were much smarter and whatever. And I was one of the last persons to make it into computer science. Because you get through, again, ranking and new departments got started, people got to change their departments, but they were already well-established ones.

So by the time you get out and you’re starting to apply, it was very clear that there were a large number of my batchmates who were going to apply for masters and PhDs. And it was a very easy thing at that point. Everyone pretty much was expecting a call to come through. And it was all about getting a scholarship and going abroad rather than anything else.

Nobody had the ability to pay for it. College education was not a discussion. 

[00:10:50.01] Karthik Reddy: Pay for it. yeah. Those days were all about where you got the scholarship. 

[00:10:53] Anand Deshpande: So, at that point, one of the things that was very clear was that there were 16, 17 people from my batch, my class, who were applying. And if all of us applied to the same place, then it would be a disaster.

So what was important to make sure was to ensure that the professors who were writing applications or endorsements, or what they call the recommendation letters. You want to make sure that they are not sending multiple recommendation letters in the same university for different students because then, it becomes very tricky. Then your credibility of that recommendation is compromised because if you’re saying great things about it.

[00:11:32.15] Karthik Reddy: Everybody’s in the top 5. 

[00:11:34.01] Anand Deshpande: Whatever that would be very difficult. So, I did convince my batchmates to come up with a chart to say, Okay, can you disclose where you’re applying? And we’ll make sure that everyone gets a chance to get choices of their own on their universities, and we’ll make sure that the recommendation letters they’re getting are unique enough that, the professor is not under pressure to rank people from within the class.

And we were quite successful in getting that and pretty much everybody from the class did get a scholarship, without much risk in a sense. I got two, three scholarships, actually, and a couple of them were, kind of, admissions with, we’ll delay, we’ll defer. No, meaning, we’ll tell you later type stuff.

But, of course, those who give you scholarships always want you to commit early. So at that point, Indiana was one of my better choices at that point. And Indiana was a nice place in a sense. I knew some people who had who had lived in the Midwest and had recommended Bloomington as a nice town.

Of course, Doug Hofstadter’s book that you referred was, he was an IU prof at that point and there was a pretty nice book that he had written which we had read at that point. So, it just felt it seemed like a nice place to go. And the other interesting thing that people told me, and I used to swim a lot at that point. IU was known to be a very good swim school.

So at that point, the number of Olympic medals that students from Bloomington or Indiana had gotten way more than any other country by that time. 

[00:13:09.22] Karthik Reddy: Oh, wow. 

[00:13:10.21] Anand Deshpande: And, Mark Spitz was an alumni from there and otherwise.

[00:13:13] Karthik Reddy: Oh, Spitz is from IU. 

[00:13:14] Anand Deshpande: Yeah. And the reason is that there was a coach out there, a guy called Doc Counsilman, who pretty much was the legend from about the late sixties to nearly early eighties.

He was very well known as a swimming coach and he coached a lot of students who eventually went up to the Olympics. Not that I had any chance of being a swim team person at all, meaning when you look at Indian records or anything you can do in India, and I was swimming in IIT, so our numbers were just modestly okay for IIT standards, but the US swim team is completely different.

[00:13:52] Karthik Reddy: Even in this Olympics, I think. There was a tracker of how many medals each of the universities has won. And they could beat countries all over, including Stanford, right? I think they invest a lot even in ensuring the incoming batches have great sports faculties. 

From there to HP labs and the beginning of what would have become the formation of the foundation of what then becomes Persistent, which is what we’re here to chat about today.

What about the U.S.? And what about the experience that HP Labs gave you, became those foundations of what transformed itself to persistent? 

[00:14:32] Anand Deshpande: So Indiana was a very nice experience for me, meaning I said, I grew up in Bhopal, which is very cocooned. IIT was again quite wild. We learned a lot of things there, especially, getting to hack your way through one is of the greatest skills you learn in an IIT context is that there’s always, it’s very competitive. But if you manage, you won’t flunk kind a setup. So you know when to optimize, and how much to optimize.

At Indiana, it was very different. It was a very small number of classrooms. You were working very closely with a professor and an advisor. So, I did a lot of work actually at that point, learning new things. And it was a very interdisciplinary place as such. Bloomington campus was very well known for logic, math, science, and those kinds of things. And no engineering actually. 

Purdue had all the engineering in Indiana and IU was all a liberal arts fine arts type stuff. So I got a chance to be exposed to things that, in the IIT context, you are always like, all those humanities, social studies and all are not for, they’re just a check mark.

Here there was a good opportunity to meet people who are doing, PhDs or working in sociology, physics, economics, whatever else, and got a better appreciation for all these other areas at that point. And I feel, we miss so much because of our unidimensional approach, both in school and college, which was very nice in Bloomington.

I started very early on to work in database areas. My professor, after my first year, he came over to Bloomington and I pretty much latched on to him fairly early on. And I was his first graduate student in a sense. So, it was a young fellow, three years older than me. And he had just joined and I worked very closely with him.

We worked a lot very closely and I really worked quite hard at that point. And it was a very good experience for me to do a PhD while I was there in Bloomington. And I learned many things, but also I was able to network quite a bit while I was in a PhD program. So, I attended several data conferences during that period as a student.

I met a lot of people and I found that, as a grad student in an area, you get a chance to meet advisors, advisor’s friends, and other people. So I really built a good network at that period to the extent that some of those people I met during that time, both helped me for getting business within Persistent and also are still good friends.

And I stay in touch with that community quite a bit. This is typically known as the database community. For example, about 3 weeks back I was in Guangzhou for the 50^th International Very Large Database Conference, VLDB as they call it. And I’m on the board right now there as a trustee and I’ve now made it a point to attend VLDB every year, so it gives me a chance to stay in touch with the data community in some sense and all that.

And my first job that I got was at HP Labs. HP at that point was one of the pioneers in the Bay Area already. It was a 50-year-old company by then, but it was very well known for, being ethical, and being a very special place in a way. And, Bill and Dave, who are the founders of HP were still around, when I joined HP and they would talk a lot about the HP way.

HP was very different from IBM, even in those days, and especially in that time. And I had a paper in one of the VLDBs in Los Angeles in 88 and I was visiting the Bay Area before going to Los Angeles and I visited IBM and I visited HP and there was an opening for doing some data-related work and I got a job from them almost 8 months before I started working with them.

But it was a very nice experience for me to move from Indiana to California. All of a sudden you see very different kinds of action and activity and you see all the hustle and bustle, people trying to talk about various things. Like it’s like a geek paradise to be in the Bay Area at that point.

And HP Labs was a very nice place. Actually, the company was doing very well. it was a very engineer-driven company, no MBA kind of situation in there. And my research lab was very nice. We had mostly, I would say, only PhD guys there. And it was a very fun place in the sense my manager was very enthusiastic about what we were doing.

And he really helped a lot in trying to get the team to happen. And we did some very good work while we were at HP Labs. But while my job could have lasted for a long time, I was very clear I wanted to come back to India. And I actually told my manager very early on within the first three to six months that I would not want to process and beyond my 18 months of a student visa, which I had for practical training to get into a permanent job.

So I was very clear that I was there to learn, but definitely, I was moving on. 

[00:19:34] Karthik Reddy: This was still the time when I think engineers who wanted to stay were very sought after. People would hold you back. But when you said I was very clear I wanted to come back to India, it’s a fairly radical thought for the 80s.

Even now people ask me, how come you came back 15 years ago? and they feel like the U.S. is still the mothership of all opportunity for someone who’s made it there, especially using a good education background and has a good job. What prompted that in the late 80s of all times? 

[00:20:04] Anand Deshpande: No, two things. One was, of course, family and other things. And I just felt like if we don’t come back now, we may not come back later. So that was also another push to say that, let me get back before I get entrenched into the Bay Area. So definitely that was the other factor that was driving it. And I felt that if I had to take a chance, I should do it early.

And of course, there was always the belief in a sense that, And, I talked to my professor as well to say that, okay, if I do come back for some reason, will you give me a postdoc or a teaching assignment? And I knew I could get a teaching job, and I actually liked teaching quite a bit.

So, I was quite okay about that option as well. But yeah, so I had decided I would at least give it a chance to come back and somehow things worked out and, it just, the timing worked for me. 

[00:20:59] Karthik Reddy: And as soon as you got back to India, you seem to have started Persistent immediately. So you knew in your mind you wanted to be an entrepreneur, build something from the ground up, especially, now it’s very easy for someone to throw in a resume, throw IT degree, some work experience and look for venture capital.

But that’s a last 15, 20-year phenomenon. This was an era where it was hardly anything called venture capital. You might’ve seen some of it in the Bay Area and been appalled that there’s nothing like that in India. And again, some of our research suggests you managed to finance this with some form of tax refund.

And never easy to build with no capital. So I would love to hear how those companies of this nature when we feel the relative ecosystem today is spoiled with too much capital. How come it was built with almost no capital and literally $20 plus thousand dollars of capital back then?

[00:21:55] Anand Deshpande: So one of the triggers for coming back also was that N Vittal who was the Secretary of Department of Electronics at that time. He visited the Bay Area and he spoke at a group called SIPA, which was Silicon Valley Indian Professional Association. This was before, TiE became the party.

[00:22:17.19] Karthik Reddy: TiE became in the mainstream.

[00:22:19] Anand Deshpande: So he came over, he did a talk there, he explained that they’re trying to look at India software export. And are trying to set up a software technology park. And one of the first ones that they were looking to set up was in Pune. And that all felt like, yeah, it made sense. So this was happening in February or March of 1989, I would say. 

No, in 1990 is when he came to the Bay Area and he spoke about all this and yeah. So, he was there and we heard him and said, looks like. I should be thinking about exports rather than looking at Indian Markets. So that became very clear to me say, by April, May that year. And, when I was trying to do this, I asked my father to go check out with C‑DAC, which was here, which was the nodal agency for that, to see what would it take to set up a software technology part.

And they said that for you to start into the software technology part, you must have a company incorporated. So my father actually incorporated the company in March of 1990. And I was still in the U.S. at that time. So I wrote to HP, my boss, and told him that, I was thinking about this.

So I got permission to, I just let him know that I was going to join a company that my father had started. And so I got approval from there. So that was how that thing got started. My first two contracts that I got were actually quite interesting and they were I laid the seeds for them, so to say, before I got back.

So when I came back, I had two customers potentially who were willing to work with me, once I got things set up. So that was a good benefit for me. And the first one that I got was a company called Data Parallel Systems. And, this was a friend in Bloomington in Indiana. He was working on parallel computing and functional programming and parallel SIMD machines, as they called it, Single Instruction, Multiple Data and things like that.

And he wrote many SBIRs, these small grants that you get from the government. He wrote seven of them. And he wrote one of those with, which was written with me. And of the seven, only one got funded. That was the one I wrote with him, which was to build a database on a machine of that kind. 

So by the time I was coming back, he had gotten an affirmation that he was going to get the money. And he had identified MasPar as a potential company that manufactured the hardware. So he felt that, okay, I’m not getting money for the hardware, let me build a database for this particular massively parallel 64,000 processor machine, right? So, that’s how that happened.

And then I was going back. I said, Hey, I would have loved to join you in your business, but now that I’m going back, I will still be willing to work with you from India. And he was okay about that. So that is how one contract was in place. And another one that happened was another company called O2 Technologies.

It’s a French object database company. And I had met the founder Francois at a conference in Austin when I was a grad student, and he was doing a summer sabbatical during June, July of 1990 in the Bay Area at HP Labs. And I mentioned to him that I was planning to go back and asked him if he would give me work.

And he said, yes, if I, actually went back to India, then he would find work for me. And he lived to it. So, those were the two earliest projects that got started. Or at least I had assurances that I would get that work going. But before I got things going, I had to get set up. So, I came back to India actually in October 1990 and yeah, from then on, it’s been… but life in 90 was quite tough actually, for a lot of people ask you whether is this a good time to start a business and actually do that.

And a lot of these businesses get set up, not necessarily thinking about all those things. 

[00:26:29] Karthik Reddy: Yeah. You can’t time things too. Yeah. 

[00:26:31] Anand Deshpande: So I came back to India in mid-October 1990. And within a week after coming back, so when I came back, actually, Vishwanath Pratap Singh was the Prime Minister of the country. And within a week, the Ratha Yatra started.

And by the end of October, it was very clear that the government was not going to survive. And early November, the Government crashed, new government which was led by Chandrasekhar started. India was in a pretty sad situation at that point, meaning, it is very hard to imagine to believe at all what India and IT can be.

[00:27:14.01] To give you some examples, we were set up in the first software technology park, which was in Pune. The reason we needed to do these software technology parks, and this was modelled after SEEPZ, is that we had 300% duty at that time. So, importing any equipment, we were completely not competitive. So, they had to create these SEEPZ-like things where you can import equipment and do work out of there without having to pay duties because within that period you are considered being on a foreign territory.

So they were following that model and so you had to work from the place you had to go and customs officials would be sitting outside the thing, at least conceptually. And he has to let you in, check everything, where you go out, all that stuff. 

[00:27:57] Karthik Reddy: Yeah.

[00:27:59] Anand Deshpande: Software Technology Park, Bhosari, which is where it was set up in Pune, they took 8,000 square feet, and distributed it to 14 companies. Okay. I didn’t get any place in that, because we didn’t have a company incorporated when they did the allocations in, March of 1990. But then they took the place, gave everyone a table seat, two seats, four seats, kind of incubators, very small ones. And clearly from that point of view, India’s IT, software, and total India software export is less than $30 million.

[00:28:33] Karthik Reddy: Yeah. 

[00:28:35] Anand Deshpande: For the government to imagine what it would be, small things here and there. So, it was pretty small. And then, if you think about it, India getting a telephone line would take six months to a year or two.

[00:28:49.16] Karthik Reddy: Correct, to get a landline.

[00:28:50.19] Anand Deshpande: I got my landline in three months because I was able to bring in some foreign exchange and there was a foreign exchange quota, which gave priority.

My father’s classmate was the head of Pune Telephone. So double benefit. I could get my phone in three months. So, India at that point was not a very friendly place for doing anything, 300% duty, and software equipment were pretty hard, though I must say that we had a lot of very innovative companies building everything, including assembling PCs to building minicomputers.

And we had our own operating systems. HCL and Wipro and all, they had their own complete systems that they had built from scratch. It was before the PC days. But yeah, it was a very difficult time to imagine doing software in 1990. 

[00:29:48] Karthik Reddy: Again, what we read about you is like you were someone who wrote code, enjoyed it, and shipped to customers yourself.

And, of course, we’ve reached 2024 where you’re like, the founder, but more like a chairman who doesn’t operate. This has been a long journey. Maybe walk us through the first steps of that evolution where you realize that suddenly this is a, I know we’re going to talk a little bit about second orbit down this chat as well, but how did your orbit start shifting from being that original coder mindset, coder CEO to who you’ve become today. 

[00:30:31] Anand Deshpande: As I said, I have a computer science degree. I have a PhD in computer science. I was a coder when I was working in the Bay Area. And I still like coding and I still track technology, I track computing, I track algorithms.

I still read books on pure computer science stuff. And if I get a chance to talk about it or teach, I do pick up on, what is happening in algorithms or other things like that. So very much, still quite hands-on, I am just reading a book that my advisor gave me, last two weeks back, I met him, it’s a deep learning, more like an algorithm-type book.

So I’m trying to read that. So, things like that. Yeah, that’s part of what I do. 

[00:31:15] Karthik Reddy: Yeah. So it’s in your blood. 

[00:31:16] Anand Deshpande: Yeah. It’s what I’m trained to do. And so I’m still very hands-on technology-related-wise. Now, if you look at the company, yes, the company we started in 1990. So, it’s been 34 years and this is a theory that I’ve realized and I’ve found is that business growth is not a sequential thing.

So you can’t just draw a straight line or imagine there are 20 companies that started at the same time. And all of them over a period of time will eventually grow to a certain size. Some grow faster, some grow slower. But the fact is all businesses go through these, S‑curves, as I would call them, you do certain things right. You see growth and at a certain point that growth tends to flatten out and then you have to do something different.

[00:32:00] Karthik Reddy: In your own journey, I think the question I was asking is what, are the usual challenges when you reach that plateau of the first S‑curve before you graduate to the second and the third and so on?

[00:32:11] Anand Deshpande: Yeah. I mean you have these plateaus at all levels. Even large companies go through these plateaus. So if you look at Intel, for example, it’s not growing right now. Boeing is going through some of its own issues. Every company goes through phases when you find that despite doing the same kind of things or doing everything that you might think you were doing always, company growth tends to flatten out, and you run into difficulties.

And at every stage, you have to reinvent yourselves and change yourselves from moving from one orbit to the next orbit. So at Persistent, we see ourselves that we are in the sixth orbit. 

[00:32:46.00] Karthik Reddy: Sixth now? 

[00:32:46.24] Anand Deshpande: Yeah.

[00:32:47.09] Karthik Reddy: Oh wow!

[00:32:48.09] Anand Deshpande: And we’ve had five different orbits. Every orbit has been very unique. You can feel the difference between what works in one orbit to the next orbit.

What you do, how you behave, what team you have to have, and all of those things are necessarily different. And you can feel the difference even within the company. And I can definitely see it, but not only me. If you think about it and ask the people, Hey, wasn’t that different?

People in the company will be able to show you the difference that happened. So every orbit goes through its own nuances and idiosyncrasies in some sense. 

[00:33:21] Karthik Reddy: I know it’s challenging to walk through all six, but if I may request you to use the Persistent context to talk about what the parallels are for early stage founder who’s going from first to second, max second to third kind of a thing. And then I’d love for you to think about the same question as a growth stage founder, which also you’ve been through. Maybe you want to take a pause at when the IPO happened. Maybe that was the true graduation for yet another orbit.

But as a private company, we’ve seen, the biggest challenge for founders in some sense is, when the shifting has to happen, it’s what you said is logical and something they understand is what I sense, but somehow what are the external and internal elements that have to come together to make it happen is not very apparent.

People say coaching, people say look at peers. But it’s not as easy, right? And, so we’d love to hear your experiences on this. 

[00:34:19] Anand Deshpande: Yes, I’ll share with you what happened at Persistent. But, just want to make a comment. So, I got invited by NASSCOM at one event in 2009 where everyone was starting to focus on startups and large companies.

So what happens to graduate small companies? Every company is not going to become a very large company. So what does it take? So I was forced to think about it and I created a program which we call second orbit right now and I run this program quite systematically now. We have more than four or five hundred companies that have gone through this program.

[00:34:55] Karthik Reddy: This is once a year, twice a year? 

[00:34:56] Anand Deshpande: No, so I have right now a one-year program. 

[00:34:58] Karthik Reddy: Oh. 

[00:34:59] Anand Deshpande: So I teach once a month for a year and then through NASSCOM we are doing, two-day workshops that we repeat, after six months.

[00:35:10] Karthik Reddy: So this is something even our companies can access. 

[00:35:13] Anand Deshpande: Yes. Very much. So, that’s what it is.

[00:35:15] Anand Deshpande: Let me comment a bit on what happens in the first orbit and how it starts. So normally what happens is that companies start with founders and their energy and passion. 

[00:35:25] Karthik Reddy: Yeah. 

[00:35:25] Anand Deshpande: So the early stage of a company, your job is to do what comes your way. And you’re basically trying to find product market fit.

So during the finding of the product market fit, you have to respond to the situation and basically do what it takes is really what the goal is in the first orbit. Yes, you have a plan. You go through all of that, but you really are driven by energy and responding very quickly to changes in the market conditions.

And, what happens is that the founder, when he starts the business, he has a network or a set of, easy business that will come his way. And some of that will come his way, but at a particular point, like Geoffrey Moore calls it, you reach a chasm and you’re not able to grow beyond that.

So what happens is that you reach a stage where what the founder can do on his own, he has done. And the company reaches a certain plateau where it can’t grow anymore. The founder has pretty much maxed out. So, the goal is how do we help founders build the capabilities and skills so that they can build the muscle that they need for growing from the first orbit to the second orbit.

Now, let me tell you what are the most important things that you need to do to move from a first orbit company to a second orbit company. So as I said, in the first orbit, your goal is to do what you can or what you must, you’re responding to requirements. 

By the time you come to the second orbit situation, you know that you’re not going to just die that easily. You’re going to be fine. You have a product. You’re selling some things, but you have maxed out. So at this point, sometimes people start to think, Oh, maybe I should do this or that or whatever else. But the reality is that it is very important to be a leader in the market.

And the way I look at it is that in any market and there are enough theories about it from management books to everyone else that say that any market can have three leaders, they get typically 70% of the market share and they dominate the market, everyone else gets the rest. So for any business to be successful and really get the benefit of the market and the tailwinds, you really need to become a leader, you need to be in the top three in some sense.

Now if you’re running a smaller business, what does it mean to be a top three? So we think still leadership is very important. Creating that clarity where you define the market so that you have a 20% market share is what we define as creating leadership. So, what I recommend to companies who are at this first orbit is to be very clear about what is the market that you think you can win in, that you can dominate to establish a leadership position.

By leadership meaning, so let’s say you are doing a $20 million business and you aspire to let’s say be $50 million at the moment. So you say, okay, I need to be clear to understand what is that $250 million market that I’m playing, where I get the $50 million that I’m looking for, where I’m 20% market share.

Trying to go after a trillion-dollar market when you are at that size just doesn’t work because if you know the market, then you know what you’re offering, you know why people are buying from you and why people come to you. So that works out as a very important thing. So leadership is the first thing that we tap.

The other interesting thing that we have found, which is something I saw as well at Persistent, and I can explain the leadership thing. Even in the Persistent context, we had to do that. Not having done that would have hurt us. So when we did the transition to the second orbit, we were very clear that we wanted to establish leadership in a product area.

The second thing that we tell companies is that you have to move from my company to our company. When you are a founder-driven company, everyone works for the founder. It’s the founder’s mission and the founder’s vision. But when you get to the second orbit, everyone needs to work for the company. The founder also must work for the company, and it’s the company’s vision and the company’s mission.

And as you look at that kind of a situation where it’s the company that comes first, you as the founder, if you want to be the CEO of the company, you should be the CEO of the company as long as you’re the best person to be the CEO of the company, not because you’re the founder. 

[00:39:46] Karthik Reddy: Absolutely. 

[00:39:46] Anand Deshpande: So that particular transition where you move from my company to our company is very critical and that’s what we help people by the time you get to the second orbit.

The third thing that we tell companies and we help them do this, is to help a set of governance that is needed because when you are a small, single-person company typically you can hack your way through and you are the board, you are the boss, you decide and if you feel like doing something else you just do it.

And that’s what is the energy that brings speed to small businesses. By the time you get to the second orbit, you want to have a structure, you want to have governance, you want to have a board, you want to have independent directors. All of those kinds of things start to become very essential. And we help companies set those kinds of things.

And of course, there are many other things we tell people, but these are the three, I would say the most important things that I would tell any startup founder about what they need to do to scale. 

[00:40:39] Karthik Reddy: It’s remarkably similar to what we kind of advocate. We’ve learned the hard way as well. I don’t think we knew all this when we started a VC firm 14 years ago.

But as you see through the conditioning of what succeeds, what fails, what your entrepreneurs did well, we didn’t have as structured a framework as yours. We try to teach it, but not in a structured framework. I would love for some of my founders to get exposed to the program. 

[00:41:04] Anand Deshpande: Sure. We have enough videos. And also, we have a course as well relating to Persistent and I think this is relevant here. So, I’d say, our first orbit was pretty much from 1990 all the way till 2000, almost 10 years.

[00:41:19] Karthik Reddy: Took 10 years 

[00:41:20] Anand Deshpande: In 2000, we were a 100 people company. Okay. It’s just 100 people company. We were doing very well.

[00:41:27] Karthik Reddy: Approximately what scale, revenue size? 

[00:41:29] Anand Deshpande: I don’t remember about 6 million, maybe 6, 7 or 5, 7 million, but we were a 35% profit margin company at that point. We had at least 6 PhDs out of the hundred. 

[00:41:38] Karthik Reddy: I’m going to ask a sort of obvious, but delayed question just so that people can contextualize Persistent.

Now, at that juncture, if people ask, what does Persistent do, what does the business that? 

[00:41:49] Anand Deshpande: What we were doing in the early days? So, early days, I had a database background and we were working with Silicon Valley data product companies, building product engineering work for them, but not necessarily knowing that we were doing product engineering.

[00:42:03] Karthik Reddy: And when did the term OPD kick in? 

[00:42:05.09] Anand Deshpande: I’ll explain that to you.

[00:42:06.03] Yeah, please.

[00:42:07.08] Anand Deshpande: So, as I said, my thesis was on query processing and query optimization of database systems. There were a lot of database companies at that point. So I would go and convince people that, Hey, you have this need for a product.

[00:42:22] Anand Deshpande: Your product can be improved if we helped you do this and that. So we were working with many database companies, building components that would go into the query engine or the data processing engines of the companies. We did some pretty esoteric work actually. We implemented bit vector indexes for the first time in Red Brick systems and other places.

As I was saying, we started out building out as a query processor for a 64,000-processor machine. So, a bunch of, fairly complicated projects, but mainly in the database query area. Working with database manufacturers, not users. My third customer was Microsoft. There, actually, we did not start with databases, but we worked with their compiler team.

Or maybe another time I’ll tell you what we did for them. But moving to this sort of thing, what happened in 2001 was two headwinds very strong ones. One was that dot com, so most of the companies I was working with were all Silicon Valley startups or data companies basically. And all of a sudden everyone ran into trouble with the dot com bust.

And all of a sudden market just slowed down. The other thing that happened is that Y2K, which was a big thing for everyone in the industry at that point, Y2K got done. So very smartly, most Indian companies were able to reposition the folks who were doing Y2K to doing other work. And offshoring started to become an interesting idea, IT partnerships, and all that stuff started to become very important.

So when the market started to come back up, everybody was talking IT and all that. And Y2K had been completed. We had not touched Y2K at all. I just didn’t. I just felt it was below my dignity to work on Y2K projects. So, we never touched it. But anyway, so when markets started to come back, we were about 125 people.

And all of a sudden, everybody was trying to come in and say, IT, this, that, I can do that. So, we decided that we had to differentiate ourselves from everyone else. So, we went through a fairly, sort of couple of years we spent, trying to figure out how to do this. And we created this category around outsourced product development and got called OPD and all that.

And we defined the category. We got MR Rangaswami, you might know him.

[00:44:47.07] Karthik Reddy: Yes.

[00:44:47.18] Anand Deshpande: MR was big time in Indiaspora, but he used to run Sand Hill at that time. So, it was, investment plus, marketing plus, he used to run conferences. So he helped in creating a conference called Software. So instead of talking about IT outsourcing, we created product outsourcing.

And we differentiated it by defining it differently, saying that in an IT project, you have well-defined requirements and you do trade-offs between time and money. But in a product, the first thing you decide is when you want to ship the product. Then you decide how much you want to spend and you build the best possible product within the time and money.

So your requirements are the variable and everything else is fixed. Now, if you go tell this to an IT person who is running ARP implementation, he doesn’t get it. But if I go to a product company and tell the product engineering guy that this is how I do product development, he immediately gets it.

And this is eventually got called Agile. In the early nineties, they had other names for this evolutionary software, all these other things. But in the 2001-02 onwards, it started being called Agile development. But software product companies have always been in this model of build to a timeline rather than to the requirements.

[00:46:03] Karthik Reddy: And was it unique to Persistent in India that there weren’t too many shops at that juncture and you took this same approach that you spoke of getting a big market share of something that you could uniquely. 

[00:46:14] Anand Deshpande: It is a smaller market, but a unique and different market where you have leadership and you can claim leadership.

So yeah, there weren’t that many companies. Most companies at that point were trying to sell to banks or to large companies doing the ERP implementations or this implementation or that implementation. 

[00:46:35] Karthik Reddy: Yeah. 

[00:46:36] Anand Deshpande: And it was mostly IT projects. So, we stayed away from completely IT projects and implementation projects at that point.

We were focused predominantly on product engineering. So I’ll help you build a product. So even in many companies, we would work on the product engineering side. So my customer would be a VP of engineering or CTO in the company. And most of the IT in India was selling to CIOs.

And we found that they were two different worlds actually. And that really helped us in creating that. And the other interesting story and this is something that if you look at The Innovator’s Dilemma and all the other places they talk about it. See, what happens is that if I’m a large company, like HCL and Wipro, who were both very large by then.

[00:47:18] Karthik Reddy: Yeah. 

[00:47:19] Anand Deshpande: And also had a much larger presence in the product engineering space, even by any means. They would never go out and say that we are a product engineering company. Because it would have compromised their other business. So, we could claim that we are the leaders in outsourced product development because that’s all we do.

And the other thing at that point was, we were only hiring computer science people. And we were hiring programmers. And we would not talk about being analysts and all those kinds of things. We said we were geeks, we rolled our sleeves. We write code with you. So that was our unique point and that really helped us in positioning us a little differently from most of the other traditional IT companies who were one doing a lot of body shopping, if you might call it that. And, it was mostly driven by IT projects. And, I did my first H1B for a sales guy in 2003, almost 13 years in the company. We were not sending people on H1 visas and all that stuff at that point. 

[00:48:22] Karthik Reddy: And would you say that today as well, the Persistent of 2024 is exactly that?

[00:48:27] Anand Deshpande: No, it’s not exactly that. We are now a $1.4 billion company. 

[00:48:31.29] Karthik Reddy: Yeah. No, meaning that in terms of how you define it. 

[00:48:34.03] Anand Deshpande: But the DNA of the company very much continues to be driven around engineering and product engineering work. What we now do is a full life cycle. We do digital engineering and all that. So the transition in a sense that I must say, I would claim is that, say it was our fourth orbit.

[00:48:50] Karthik Reddy: So going back to the orbits, the second orbit lasted for how long? 

[00:48:55] Anand Deshpande: The second orbit was going, doing fine till 2008 when we ran into another glitch in some sense because of the global financial crisis. During 2001, I had a kind of playbook of how to handle the bad times.

So I picked that playbook and really ran with it. 

[00:49:18] Karthik Reddy: Is that public? 

[00:49:19] Anand Deshpande: Yeah. I will share with you what the simple thing in there was. See what happened, and I’ll give you the story behind it. So in 2000, I was struggling to find new work. All my customers were slowing things down or shutting things down because that’s how what happened just after the dot com bust.

So I was talking to my friend, Ravi Venkatesan, who is now well known. 

[00:49:41.20] Karthik Reddy: Yes. 

[00:49:42.09] Anand Deshpande: He used to be here at Cummins and I was mentioning this to him and he said, you know what, going after new customers right now, you’ll not get them, but you lose your old ones as well. So, I started to think a little differently.

I said that instead of thinking about customers as companies, I should think about customers as people in the company and let me work with them until the end. And basically not necessarily go look after new work, but be more willing to accept what comes from the ones that we already have.

So double down on the existing customers rather than go after new ones. A little counterintuitive, but really helped us a lot. So after the market came back up, all those people I worked with at that point, they felt like we lived with them. So when they moved to other companies or whatever, they took us along with them.

And that really helped us seed up many projects that happened because of that as well. So, in 2008, I very quickly said people are starting to come back for discounts and all that. So I told people that, in the company that don’t give discounts without meeting CEOs. So, I used that to get 150 CEO appointments.

Now, if you had to think through Persistent’s business at that point, our customers was VP Engineering and CTOs, not CEOs. CEOs didn’t know what we were doing for them. Go to them and say, Oh, yeah. It’s great to know that you guys are working with us and yeah, VP Engineering, John is taking care of you.

[00:51:03] Karthik Reddy: Yeah. 

[00:51:04.02] Anand Deshpande: I’m sure everything is fine. 

[00:51:05] Anand Deshpande: But it’s still all the same. I decided to go meet 150 CEOs. 

[00:51:09] Karthik Reddy: Yeah. 

[00:51:09] Anand Deshpande: And I learned a lot from that. And we really transformed ourselves a little bit to move beyond the second to the third orbit at that point. So the learning that I got from meeting 150 CEOs, which I found very interesting, was that CEOs think very differently from non-CEOs.

And how do CEOs think differently? So the first thing that I find is that CEOs are very interested in, one, the top line, not the bottom line. You might say whatever you want to say, but no CEO will say that I don’t care about the top line. I need new business. That is his number one priority.

The second thing I found is that the CEOs typically are very good at picking those small numbers, I’d say 5 to 7 areas that are their personal projects, and everything else they delegate. So if you’re not in those 5 to 7 projects or whatever, then the CEO is not interested in meeting you or even following up with you.

And the third thing I found is that the CEOs want to network and are willing to make introductions and meet people just for the heck of it. Even if, whatever, it may or may not help the business directly, whatever they like. 

[00:52:23] Karthik Reddy: That’s a… 

[00:52:25.03] Anand Deshpande: They like to network. 

[00:52:28] Karthik Reddy: In the middle of things.

[00:52:28] Anand Deshpande: Yes. So, I found these three observations to be very interesting and I said, well, this is good. This is one for me. If I’m the CEO, I need to be aware of these three things. But more importantly, it changed our business in different ways. So the first thing I realized is that the product engineering work, while it’s very important and critical, the CEO doesn’t care about it.

It is the VP of engineering. Only the startups, you get the CEOs who are also VPs of engineering, but large companies typically 

[00:52:54] Karthik Reddy: You won’t find it.

[00:52:54] Anand Deshpande: The VP of engineering is someone else. So I figured what can I do that would be relevant to get the CEOs interested? So we started to move from being responsible for building the product to saying we’ll do everything around the product.

So, we’ll help you deploy it. We’ll take you to customers. We’ll give you information about what’s happening in the market. A bunch of other things that CEOs are more interested in. So that is one important thing that I changed. We said, Okay, we will be full service. We’ll not just do the product engineering part, but we will do the entire life cycle, including deployment, testing will take on end-of-life products.

We’ll do whatever the CEO also cares about. So that was very, very valuable and that I found very useful. The other thing that happened was before that when we would talk about Persistent, I would be very careful about mentioning who we work with or what we do with anybody and the fact that I know other people who are their competitors and all that.

But after meeting CEOs, I realized that they want to know who I know and my Rolodex at times can be far more effective than their Rolodex. Because I’m meeting all my customers who are all the who’s who of the large tech companies. And within a trip of two weeks to three weeks, I would go meet all of them.

So I was in touch with what’s happening at this company, that company, third company and all that. 

So that was very useful for me. So I found that my ability to network with CEOs of mid to large companies was better than other channels that they had. So I really used that also to get to know them. 

[00:54:24.08] Karthik Reddy: Very fascinating.

[00:54:24.07] Anand Deshpande: And the other thing that happened was, I could see what’s happening.

So at that point, I called out that cloud analytics, mobility, and collaboration would be the top areas that picked up into smack later on. And we doubled down on that. So a lot of benefits of the global financial crisis and meeting the hundreds of CEOs that I met. 

[00:54:45] Karthik Reddy: And this was the beginning of the third orbit.

[00:54:48] Anand Deshpande: Third orbit. And the fourth orbit, what happened was that we realized that, product engineering was doing well, but Marc Andreessen had written this article about ​“software is eating the world” and all that.

So everyone wanted to become a software company. So what we realized is that, Hey, we’ve been working with companies whose business is software.

Let us also start doing the same kinds of things. For those who want to become software-driven businesses, so we migrated from being, just working for software companies to working with companies who want to be a software business in a sense. So that’s how the next orbit happened.

[00:55:27] Karthik Reddy: And today you would say that mixes how dramatic, is it gone to 50% this new? 

[00:55:35] Anand Deshpande: I think say we still have about 40% of our business coming from pure product companies, building products for them, for the rest of the companies, we actually, build products or software like a product, but they’re not in the business of selling that software.

They use that software for their businesses. These would be in healthcare, insurance, banking, all these kinds of companies. 

[00:55:58] Karthik Reddy: Interesting. And now, quickly, the one thing that I didn’t touch upon, and I would love to hear a little bit about before we move towards the end, is, that you did actually take venture capital somewhere along the way.

How was that part of the journey? What is the kind of scale? Just to give people a sense of how tiny numbers were back then, early 2000s. 

[00:56:18] Anand Deshpande: So, my first round of VC investment happened with Intel Capital. This was in 2000, 2001, so that was the first orbit or second orbit transition as well. And, we took 3.5% equity from Intel for a million dollars which is not bad, because we were a very small company, 125 people at that point. 

[00:56:38] Karthik Reddy: $20 million valuation back. 

[00:56:40] Anand Deshpande: Yeah, we got a good, branding because of that. We became part of the Intel portfolio. Intel had a lot of companies in their portfolio, so we got to meet a lot of companies.

We will attend their shows. So all that was very, very valuable. And that was my first one. The second time I did the equity was in 2005. At that point, I was again trying to scale and business was good, but we had certain other challenges. I was trying to recruit more in the U.S. and I thought having someone who was U.S.-based who could be part of the board and the company would be good. 

So that’s when I went to Promod (Haque) and Naveen Chaddha. So Navin Chaddha was at that point with Gabriel Venture Partners. He came in and then I said, man, you have to. 

[00:57:27] Karthik Reddy: This was before he went to 

Mayfield.

[00:57:28] Anand Deshpande: Yeah, before we went to Mayfield. 

[00:57:29.28] Karthik Reddy: And Promod was Norwest.

[00:57:33] Anand Deshpande: Norwest. He’s always been Norwest. He was the Midas number 1 that year. And he agreed to be on the board. So he took a bigger chunk of those two. And, we took about, I’d say $20 million or roughly a $100 million valuation. 

[00:57:48] Karthik Reddy: Wow. 

[00:57:49] Anand Deshpande: And, some of it was secondary, some primary 

[00:57:53] Karthik Reddy: Understood. And then you went straight to the public markets. 

[00:57:55] Anand Deshpande: Yeah, we went to the public market in 2010. 

[00:57:58] Karthik Reddy: Yeah. 

[00:57:58] Anand Deshpande: So once we had an IPO, once we had the VCs, which was very clear, we had to do an IPO. In 2008, I tried it and we pulled back. So we were in the midst of the global financial crisis. I’d actually filed the papers.

We were ready to go. But every time I would go to Mumbai to check it, it was the stock price was going down by 10%, 15%. So we just decided to pull it off and we tried again. We were really ready. We were the first company to go IPO after the global financial crisis in 2010 April. Our issue was very well subscribed.

We got 93 times oversubscriptions and all that. And which actually is not a good thing in a way, meaning, you left a lot of money on the table, and that’s the only time you get money in the company. 

[00:58:42] Karthik Reddy: That’s true. 

[00:58:43] Anand Deshpande: But yeah, all the same it was. 

[00:58:45] Karthik Reddy: I’m guessing you haven’t raised ever after that. The company has always almost been profitable.

[00:58:48] Anand Deshpande: The Company was profitable in the first quarter. 

[00:58:50] Karthik Reddy: Yeah, that’s what I mean. 

[00:58:51] Anand Deshpande: We’ve never been not profitable. 

[00:58:52] Karthik Reddy: Yeah. So you just raised for growth along the way. 

[00:58:56] Anand Deshpande: No. So when we did the IPO, there were two or three drivers. One was many other companies were already public at that point. Second, the VCs who were in that were very keen to eventually get liquidity and IPO seemed like a reasonable way to get out.

And overall, there was a belief at that point that, you’re demonstrating good governance. Then, you have access to, you’re better seen by the market as a credible player if you are a listed company rather than a private company. 

[00:59:27] Karthik Reddy: You said you had a phenomenal IPO debut, but then. I was looking at the stock and maybe I don’t know if I have perfect information around this, but it looks like there’s a remarkable compounding journey that’s kicked in over the last 5, 10 years in the company.

[00:59:42] Anand Deshpande: Actually, if you look from that point onwards, 2010, our stock appreciation has been more than Google’s stock appreciation.

[00:59:49] Karthik Reddy: I saw some crazy growth. 

[00:59:52] Anand Deshpande: So let me explain. So, in 2010, we went public, and of course, the company did well till 2018 – 19 things were fine.

And then when the market slowed down, we slowed down as well. And in 2020, I decided to move off from being CEO to chairman. And this was before COVID, 2019 when I moved out. I would say that would be our fifth orbit. So I moved off and COVID happened. And all of a sudden, during COVID, we had a new team, a fresh team in place, and we pushed really hard and we got some amazing growth years during those two years.

So we had 35% growth for two successive years, and the stock got completely re-rated, the market got re-rated, and then on the stock has really done very well. So again, I must not take much credit for it. I was sitting in it all through, but the CEO and the team actually grew up 

[01:00:48.25] Karthik Reddy: No, foundations are amazing.

[01:00:50.14] Anand Deshpande: And we had a good setup and the company was in a good position. We had good capability. 

[01:00:56] Karthik Reddy: So, an amazing transition. Now you are 10,000 crores plus of revenue, 80,000 crores plus market cap. So again, congratulations on the journey. I know you said you’ve graduated out of the CEO role as you transitioned in 2019 to the fifth orbit would love to hear what all it’s been happening in your life post that.

So the one we know of is a little bit of your teaching. You just love teaching. You’ve been educating founders. Second is, I think trying to democratize entrepreneurship at the grassroots level with DeASRA, anything we’ve missed. I would love to get a peek into what’s going on in Anand Deshpande’s head.

[01:01:42] Anand Deshpande: As a founder, I was very hands-on completely doing nothing but Persistent for almost 29 years, nearly 30 years, I would say. And, when you move on and you get a new CEO, you want to give him room to operate because otherwise what’s the point, right? I spent a lot of time talking to other potential CEOs and founders who had made that transition.

And in the IT industry, I’m sort of the one-and-a-half second generation, and so many of the senior people who run companies, I met them and learned a little bit about how to make the transition happen. And one of the key things they told me is that you should have enough other things to do.

Otherwise, you’ll keep interfering. So I had to make sure I had other things to do. And so in 2013, when I was after IPO and all that, we felt that we should be looking at giving back as well. So, I spent some time reading through what was going on with other philanthropists like Bill Gates and everyone else.

And I found that they also suggested that you should pick a problem that is big enough, so big that you’d last for a long time and you don’t have to keep looking for new things. So when you’re doing personal family philanthropy, you want to think about long-term projects rather than activities. 

So sitting from where I was, it was very clear that in India, and I see this even more that see if you think through it, we have about 25 million people at every age in India. We need about 16 to 18 million jobs every year. The statistics on jobs are very kind of very tough in a way in the sense that 98% of all businesses in India have less than 20 employees. 95% are less than 1 crore.

So the Indian economy, 70% of all the jobs that happen in India, are happening in these smaller businesses. So the reality is that you talk about any large business, government, all this stuff, real jobs happen when people find jobs for themselves. And for that, we need job creators.

So how do you have job creators happen at scale? So that was a mission that I could relate to. Of course, we have spent now 13 years working on it. So it’s called the deAsra Foundation and deAsra is D is for Deshpande and ASR, the ASRA, the initials of the family members, Anand, Sonali, our daughter, Rhea and our son, Arul.

So that makes ASRA, so deAsra. And it’s like giving ASRA, so support, is what the Hindi connotation could be, or Indian. But we call it deAsra Foundation, and we are focused on nano entrepreneurs. Nano entrepreneurs being, we define them as those between 5 lakh rupees and 1 crore. And our job, or our mission, is to make sure that we help these small businesses succeed.

And we have so far 300,000 in our network. And the goal is to see how to get to 10 million actually. But the most short-term goal that we have defined is we need to build systems in what we are trying to do so that we can get half a million new businesses to come to the platform every year. So, at that scale, how do we get 

[01:04:45] Karthik Reddy: Could give us one example to highlight?

[01:04:48] Anand Deshpande: Yeah, so these are food counters, beauty salons. 

[01:04:50] Karthik Reddy: And your work would entail actually.

[01:04:52] Anand Deshpande: So, I will tell you what we do for them.

So beauty salons, food counters, dance classes, people selling things all over the place. So those are all the kinds of businesses that we look at. And we want to go with more than 5 lakhs. So that’s sort of the goal. So what we have done is that we find that all these small businesses have five kinds of challenges.

One is access to capital or loans, credit. Second is access to markets, access to technology, access to teams, meaning people who work for them and compliance. Those are the main five issues that we have. And we can distribute them into multiple sub-issues. 

So within access to the market, it could be how do I be online? How do I brand myself better? How do I do packaging? So these are sub-processes in that. So we have identified about 75 to 80 processes across these five broad areas. 

[01:05:44] Karthik Reddy: And you work, with partners. 

[01:05:46] Anand Deshpande: Yeah, so I will explain. So what we have done for all of these is we have four things at every process.

One is a checklist. Are you there? Second, DIY Information on how to get there. Three, partners will make it happen for you. And four, benchmarks. So I’m a photographer. I want to be online. Am I visible on Instagram? this, this, this. When I look you up on Google, do I show up? These are things that we ask in a checklist.

You can go through it and you find that you need to be online. Then we have DIY information to help you get online one process at a time. And you pick what you want, and most of what you get from us is free, but if you want to use a partner, you pay them a fixed price that we have pre-negotiated, so to say, that you can work with.

And since we are trying to scale all across India, we are starting to partner with other groups, such as we have a partnership with AWWA, which is Army Wife Welfare Association. We work very closely with Swadeshi Jagaran Manch, which has a group called Swavlambi Bharat Abhiyan. So these are people who are interested in entrepreneurship, grassroots entrepreneurship all across the country, and we help work with them.

So that’s one big part of what we do. And the mission is that everyone needs to feel like gig is going to happen, all of this stuff is going to happen. People need to feel empowered to be self-employed. So that’s the job creator network that I’m working on and deASRA Foundation. And this is a family foundation.

I’m the only one who funds this. We have a 40 people team. 

[01:07:14] Karthik Reddy: I’d love for an introduction just to see whether some of our companies again can partner. 

[01:07:18] Anand Deshpande: No, I think you guys are much bigger. 

[01:07:20] Karthik Reddy: No. Partner not to be a part of it, but to enable. 

[01:07:22.21] Anand Deshpande: But the ecosystem, fine.

[01:07:24.13] Karthik Reddy: So we actually have companies which help.

[01:07:25.05] Anand Deshpande: Sell these kinds of.

[01:07:28] Karthik Reddy: Independent photographers, for example. Canvara and the Printo does that. 

[01:07:30] Anand Deshpande: Correct. So yeah, those kinds of places we should definitely connect. And then the second part that I’ve been working on has been mostly related to second orbit, which I say, is to help companies scale. What I decided at that point was that I have three broad areas in which I’m working right now.

One is around entrepreneurship because I can relate to that. 

[01:07:50] Karthik Reddy: Yeah. 

[01:07:50] Anand Deshpande: Second, I’ve been a techie data guy, computer science. I like the kujli of doing something. Engineering, research, all that stuff. So that is the second bucket. And the third bucket is that I know I find that, people are too stressed about careers, managing careers, what happens, and continuous learning.

So there are three broad buckets in which I’ve been spending my time. So on the entrepreneurship side, I shared with you about deASRA and the second orbit. 

[01:08:16] Karthik Reddy: Yeah.

[01:08:16] Anand Deshpande: On the research side, I got introduced to a few people and some of the circumstances and otherwise also I got to meet a lot of cancer people and I realized that and see today if somebody has cancer, the kinds of treatment you get is based on data that is coming from Western studies. We have no data of our own. It’s very sad. We are one-sixth of the world’s population. We should be deciding, how the world is treated, not the other way around. So I’ve worked with a bunch of people to set up something called the India Cancer Genome Atlas.

It’s called the ICGA Foundation. So it’s icga​.in. And the idea is to build a data set for cancer data. So we’re starting out with breast cancer. In fact, on Saturday, the 21^st, we are launching the first portal that will allow people to get access to publicly accessed data about Indian cancer patients, a full DNA sequencing of breast cancer patients, and then being able to do analysis and research against that.

I’ve been also working with a similar group around the diabetes folks. So there is a group called the RSSDI, which is the Research Society for Study of Diabetes in India. And I’m trying to see how to help them with technology and data so that we can find cures for our people that are dependent on what we do, right?

[01:09:36.08] Karthik Reddy: Yeah, Absolutely.

[01:09:37.04] Anand Deshpande: We have a different lifestyle, different DNA.

[01:09:38.06] Karthik Reddy: Different genome, different lifestyle.

[01:09:41.11] Anand Deshpande: We do different kinds of things. So we should have our own medicines. We should have real data about our people to be able to answer that. So that’s the other group. And that got me interested in working on it. So what I found is that clinical doctors in India are very different.

They are doing mostly clinical work. They don’t have that much time for research. How do we bring them close to the computer science people that I was connected with through ACM and VLDB that I do? And then bring in philanthropy and government to see how to bring this whole change across this whole stuff.

And, so that got me interested in working with some government people. So right now I’m also the co-chair of BRIC, which is Biotechnology Research Innovation Council. a lot of very interesting research-related work that I’m, I shouldn’t say I’m doing the research, but I’m facilitating, contributing, 

[01:10:29.22] Karthik Reddy: Keeping more than busy. Fascinating. 

[01:10:30] Anand Deshpande: And then on managing careers is another topic that I have been working on. And I have a book I’m trying to write on how to manage careers. And that’s another one that will come out one of these days. 

[01:10:41] Karthik Reddy: Lovely, lovely. Now, great to get all those facets of you out there for our listeners.

I’ll just end with maybe two quick sets of viewpoints. One is we have now plenty of product companies who want to build global globally, and you’ve not only managed to address this huge American opportunity, but also started going to other geographies and built out of multiple geographies outside of India, the Philippines, and Sri Lanka.

[01:11:15] Anand Deshpande: Well, we are in Malaysia. not, in the Philippines.

[01:11:17] Karthik Reddy: Sorry, Malaysia. Got that wrong. Thanks for correcting. And how and when is the right time to think about dealing with multi-country complexity? is it, you have to wait till the third orbit comes, or is it? 

[01:11:30] Anand Deshpande: It depends on what your product is, right? 

[01:11:31] Karthik Reddy: Sure. 

[01:11:33] Anand Deshpande: So I think, it is important to think market. It is important to think of customers. And if your product is such that all your customers are outside India, then you have to sell outside India which was the case that we had when we were trying to.

[01:11:45] Karthik Reddy: That’s why we have you on this podcast. But on the supply side, what prompted you to move outside of India?

[01:11:50] Anand Deshpande: No. So a lot of those came in through acquisitions and other places. So we ended up acquiring a company that would have people already in these areas. So, we were already there. I think for small businesses in the first and second orbit, I don’t think there is any real need to go outside of India for just pure engineering talent.

You can always do it, but it’s not necessary. That adds to complexity. However, if you are selling in a market, then you need to have people in the market who may be, also contributing to the project because you’re also learning what the market is. The market decides what happens in all of these cases. And I think understanding that market very clearly.

And that’s where a lot of startups or small companies struggle. 

[01:12:34] Karthik Reddy: They go underprepared or they don’t invest enough. 

[01:12:37] Anand Deshpande: They don’t think enough about what is the ideal customer that they are going after. What is the ICP? How are we defining that? Do we have clarity on who the buyer is? 

[01:12:45] Karthik Reddy: We joke about it that, post our term sheet, one of the conditions subsequent should be to apply for the L1 visa.

Effectively, if you sit here for too long, you’re building for the wrong audience. 

[01:12:54] Anand Deshpande: But it depends on your product is, right? if you are selling

[01:12:57] Karthik Reddy: No I meant for folks who at least pitches that they’re going to build for the US market. You can’t be here and build for that market. 

[01:13:03] Anand Deshpande: I must say that I did not file for an L1 or an H1 all through.

[01:13:08] Karthik Reddy: Okay. 

[01:13:08.21] Anand Deshpande: I was traveling to the US every other month for two to three weeks at a time. It was cheaper, better, and also it worked well for me. 

[01:13:16] Karthik Reddy: That’s amazing that you put in those many years of that kind of travel. No, I think whatever simulates that is what I mean.

[01:13:21] Anand Deshpande: Yeah. But you’re right. Understanding the market is very critical. In small businesses, you cannot afford to lose deals. You have to win most of the deals. 

[01:13:34] Karthik Reddy: And also you waited for the right time to take venture capital and you’re profitable all through. If you’re not, there’s always this pressure of delivering to those targets every quarter. 

So last question is, I think, given this implosion of new tech, that’s, the buzzword, of course, is generative AI, which is, of course, there’s been AI for 10, 15 years. Nobody spoke about it. Suddenly because you can type into a..

[01:13:57] Anand Deshpande: No, but there is a transformation. 

[01:14:00] Karthik Reddy: Of course, there is.

[01:14:00.19] Anand Deshpande: The current AI is very different from the previous AI.

[01:14:04] Karthik Reddy: And therefore, is there a bigger opportunity or a bigger risk to Indian IT, which was built on the rails of predominantly human arbitrage, I would say?

[01:14:12] Anand Deshpande: So here’s what I’ve been thinking, and I find actually is that it’s not just the AI that’s going to disrupt, it’s people with AI that are going to disrupt people without AI. 

[01:14:22] Karthik Reddy: Sure. 

[01:14:23] Anand Deshpande: So the question is, if we have people who understand AI better than anyone else, then we will be able to do more work.

And AI will give you significantly enhanced productivity, for people who understand how to use that productivity. It’s not a given. So I think that’s really what the key is. So on one hand, if I’m an employee in the company or anywhere, who is already in the business, then I would definitely want to be a good AI.

I must learn enough about AI so that I can, actually get things done using AI and if I do that right, I can be far more productive than everyone else. So that is very clear.

[01:15:06] Karthik Reddy: And from a Persistent lens, you see the company entirely moving to that paradigm. 

[01:15:09] Anand Deshpande: Yeah, absolutely. That is definitely going to happen.

Now, the other question, which is very tricky, is the fact that, yes, if all people become very productive, do we need so many people to do the work? 

And that is a very hard question. And it’s very clear that some jobs will go away. Meaning some people who do those jobs will not be needed. But again, who will be needed and who will survive are those who have better ability to handle the tools and handling AI than those who can’t. 

Now, AI will also create new sets of opportunities, new, things to happen. And I think that’s an opportunity for us in India as well. And, also, if you look at it from the software standpoint, there’s a huge opportunity to refactor old code, redo a whole bunch of things, re-look at my entire asset base depending on how can I take a fresh look at it, considering that my cost of conversion or cost of translation has come down significantly.

So I think the market in the next five years will be very different from what we have seen in the past for sure. 

[01:16:15] Karthik Reddy: Amazing. On that note, again, you’ve given us an incredible amount of insights, and thanks for double-clicking on a lot of things today. I appreciate, I think, the teacher in you, we try to evoke into giving the right lessons for the startup audience who predominantly listen to the Blume podcast.

[01:16:36] Karthik Reddy: Before we let you go quick attempt at rapid-fire question just to get some other facets of you. The most important quality in a winner according to you?

[01:16:46] Anand Deshpande: It is persistence. 

[01:16:47] Karthik Reddy: Persistence. Yes, the perfect name.

[01:16:50.24] Anand Deshpande: It is very true actually.

[01:16:49.12] Karthik Reddy: No, it is true. 

[01:16:52.06] Anand Deshpande: That’s what I really believe. 

[01:16:53.21] Karthik Reddy: It’s a very common answer we get from people who have lived through it for 20, 30 years.

[01:16:59] Anand Deshpande: So what we tell people as well at Persistent is we are not just Persistent by name, but we are also by value and reference. 

[01:17:05] Karthik Reddy: Fantastic. Favorite way to relax after a long day. 

[01:17:08.14] Anand Deshpande: Sleep.

[01:17:09.17] Karthik Reddy: One word to describe the future of tech? 

[01:17:12] Anand Deshpande: Exciting. 

[01:17:14] Karthik Reddy: What’s your go-to productivity hack? 

[01:17:16] Anand Deshpande: Oh, I have lots of them, but, if I want to learn something, I like teaching is the best way to learn.

[01:17:21] Karthik Reddy: Fantastic. Most exciting project you’re working on amongst the ones you chose? 

[01:17:25] Anand Deshpande: So I’m really excited about what I’m doing with the biology-related stuff. 

[01:17:29] Karthik Reddy: Lovely. And your favorite coding language or platform? 

[01:17:32] Anand Deshpande: For the last several years, it’s been Python. 

[01:17:35] Karthik Reddy: And what’s a hidden talent or hobby that you have that not too many people know about?

[01:17:40] Anand Deshpande: I don’t know man, I’m a very boring guy. No, but I think I can make connections. I can network things. I can connect the dots quite well, whether it’s people or other things. 

[01:17:50] Karthik Reddy: It’s what we do, we think we do well at Venture Capital as well. Great to hear that. What’s the most interesting thing that the students in your classroom have ever told you?

[01:18:00] Anand Deshpande: I don’t know. They’re not regular students as such, these are professionals. No, they’re grateful, actually. We have been able to open their minds to think very differently and they’re grateful. 

[01:18:15] Karthik Reddy: Lovely. And favorite city in India and outside India? 

[01:18:18] Anand Deshpande: I like Pune where I am, for sure. Even though it has all kinds of issues, but life’s comfortable. I’ve optimized my distance to work. 

[01:18:27] Karthik Reddy: And when you travel? 

[01:18:28] Anand Deshpande: I used to like San Francisco a lot, but I’m very disappointed with what’s happening there at the moment. 

[01:18:32] Karthik Reddy: They seem to have cleaned up. Okay, in the last year but yeah.

[01:18:34] Anand Deshpande: I haven’t been there for the last six months.

[01:18:36] Karthik Reddy: Yeah. I think that you seem to be holding on to what they did in the last year’s cleanup. 

[01:18:42] Anand Deshpande: Yeah, I was last there in June, but 

[01:18:45] Karthik Reddy: Lovely. Thanks again for taking the time. And it was a pleasure hosting you. 

[01:18:49] Anand Deshpande: And I wish Blume and Blume companies all the very best. 

[01:18:53] Karthik Reddy: No. And we’ll send a few your way, just given the span of things you’re trying to accomplish both with what Persistent does, of course, if there are ways to partner for some of our companies, we would love to, but definitely on all of your sort of endeavors around coaching, around.

[01:19:09] Anand Deshpande: Sure. Happy to help in whichever way it makes sense. 

[01:19:11] Karthik Reddy: Fantastic. Thanks again. 

Anand, much like your pursuits in going after healthcare, we actually have an investee company called UltraHuman. So they’re about 4 years old, but they’ve done remarkable work on using the ring as a proxy for, other wearable devices.

And today, actually following in your footsteps in terms of trying to build a global product and like you rightly said, they’re not going and chasing one market because everybody on the planet needs it. They’re going where the markets are, and today they’ve sold, 150 countries, $60 plus million of revenue run rate. Profitable. So that’s a unique, surprising fact about this startup. And they would to partner with you as a customer. 

[01:19:55] Anand Deshpande: Thank you very much. Amazing. I’ve heard about UltraHuman. So, I’m glad to. 

[01:19:57] Karthik Reddy: No, please, size yourself 

[01:19:59.02]: Anand Deshpande: I would love to meet them.

[01:20:00.21] Karthik Reddy: And, we’ll connect you to them. 

[01:20:01] Anand Deshpande: Sure, I’ll introduce them to other people in my network as well. 

[01:20:04.14] Karthik Reddy: And they’re based in Bangalore and

[01:20:05.25] Anand Deshpande: Perfect.

[01:20:06.14] Karthik Reddy: Building for the world. 

[01:20:07.20] Anand Deshpande: Very nice. 

[01:20:09.03] Karthik Reddy: Some of our portfolio companies inspired this year’s episode and you rounded it off. It’s about Indian companies Winning Beyond Boundaries. And they are a great example from our side. And, of course, it’s time to follow in the footsteps of what you’ve built at Persistent.

[01:20:23.20] Anand Deshpande: Thank you.

[01:20:25] Karthik Reddy: We thank IDFC First Bank for being our annual partner. IDFC First Bank is deeply engaged with the startup community in India. Their commitment to fostering innovation and supporting entrepreneurship has made them a valuable partner in the growth journey of numerous startups, including many, many Blume Portfolio companies.

This partnership helps us in a mission to back the next generation of revolutionary founders in India.