There's Something About Rajesh
…You try yet again
Keeping the mobile industry as the only constant, he started looking for other customers for July’s solutions. The search led him to American media companies, many of which wanted to harness the mobile phone to reach more customers. “They were treated like chipmunks by mobile operators and made to sell wallpapers, games and ringtones. They did so grudgingly. Because their business was running direct-to-consumer channels, not selling wallpapers,” says Reddy.
Nevertheless Reddy figured that media companies still had three huge strengths — premium content that subscribers want, massive brands and marketing muscle, and in-house ad sales teams that knew how to sell audiences to advertisers. Combined with July’s wireless superstructure they could bypass the operator altogether.
“We flew down to New York and went straight for the offices of Viacom,” says Reddy. After managing to corner a few key executives, Reddy presented his plan. To make it sweeter, he linked 20 percent of his fees to revenues generated from Viacom’s ad sales on the platform. Viacom agreed. By early 2007, July managed to get yet another prestigious client — Fox Networks.
But with profitability still far away and operational expenses shooting through the roof, fissures cropped within the senior team and the company’s board. Most of July’s VCs did not find the new model exciting enough. A few even mandated the board to find a buyer for the company.
Reddy turned for help to Venkat Ramaswamy, co-founder of financial services firm Edelweiss and his good friend for close to 10 years. He, in turn, roped in Raj Rajaratnam, US-based hedge fund guru and founder of Galleon Capital and existing investor Sequoia Capital as the fresh set of investors for the “new July Systems.”
Narasimhan, meanwhile, chose to step back from his duties at July. “Rajesh had matured enough to lead the company,” he said. He remained on as an investor and as a board member.
Reddy retained his offices in the US and India and shut the others down. In three months, he reduced the cash burn by 70 percent and focused on getting in new clients. In the US, it now includes Turner, ESPN, Time, CBS, NBA and NASCAR.
In India, too, July Systems has signed up prestigious media brands like NDTV, Network18 (which publishes Forbes India) and Mint. Sanjay Trehan, erstwhile head of NDTV Convergence, says he admires Reddy’s decision to put his “skin in the game” by going with a revenue-sharing deal instead of a fixed-cost one. Trehan claims July-powerd NDTV mobile channels are already generating profits through ad-sales on a monthly basis and are now “self-sustaining.”
Rahul Pandey, head of Mobile18, Network18’s mobile division, says he chose to sign up with July because of the firm’s keen understanding of the media space, and a clear decision to never aspire to become a consumer channel itself (therefore a competitor to a media channel).
Today, Reddy claims July reaches 25 million users through its clients worldwide and generates over 1.7 billion page views (up from 350 million in 2008). Reddy also claims July Systems has, for the first time, started generating cash profits from the current quarter. Though he refuses to reveal his current revenues, he says July will be “in double-digit million dollar recurring revenues” from 2010 from its existing customers alone.
On record, his new investors say July Systems should be considered an 18-month-old company, and therefore its exit horizon is three to five years away. But in reality, there will be pressure to prove to the world that they can create a successful exit like an IPO at the end of that horizon.
“My goal is to complete a karmic cycle of sorts,” says Reddy. “A lot of people have made bets on me. If I can build a successful business and ensure everybody gets good returns, the cycle will complete and validate me psychologically.”
Profile : Rajesh Reddy, 38
* Never-say-die tech Entrepreneur, adept in raising venture capital
* Founded Unimobile in 1996 (as Grey Cell Technologies) offering mobile phone-to-computer communication, at a time when even inter-operator SMS was in its infancy. Introduced ePage, India’s first email over paging service, with Motorola. Started mobile software company July Systems in 2001
* Named in 2002 by MIT Technology Review as one of the world’s top entrepreneurs
* In spite of Unimobile’s failure, managed to draw in close to $30 million in venture funding for July
* He has now begun his third avatar
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