Transcript: Seventymm's Founder and CEO: Raghav Kher

This transcript is from a PodTech.net podcast at:
http://www.podtech.net/home/technology/1605/seventymms-founder-and-ceo-raghav-kher

Guest: Raghav Kher - Seventymm
Host: Kamla Bhatt - IndiaTech

Raghav Kher - Seventymm
We believe this company has the potential to go public because we are addressing a broad market unmet customer need and we have a very good team.

Kamla Bhatt - IndiaTech
This is Kamla Bhatt for PodTech. Today my guest is Raghav Kher, who is the founder of a new Online Movie Rental Company called Seventymm that is headquartered in Bangalore, India. Raghav spends his time between Seattle, which is where he is based and Bangalore, India. This is Raghav's fourth startup. At the age of 21, he started a Machine Tool Company came to the US, where after completing his studies he worked with Microsoft for about eight years and was part of the team that helped acquire Hotmail, a company that was co-founded by Sabeer Bhatia. While at Microsoft, Raghav was also involved with Windows CE and we're talking the early 1990s here. Raghav's second startup was Imandi that he started after he left Microsoft. His third was Rendition that got acquired by Opsware for $40 million and now he is on to his fourth startup, which is in the hot consumer space market in India. Welcome to the show, Raghav.

Raghav Kher - Seventymm
Thank you, thank you for the opportunity.

Kamla Bhatt - IndiaTech
Raghav, Congratulations! Your company is less than two years old, you've already got two rounds of funding. Tell us about Seventymm on the two rounds of funding.

Raghav Kher - Seventymm
Yes, Seventymm is India's first Online Movie Rental Service. We started our company in August of last year that is 2005. We raised about $2 million in November of 2005. Then we launched our service first in Bangalore in March of this year that is 2006 and recently closed our second round of funding of over $7 million led by Matrix Partners. So, today we have raised about $ 10 million and we operate in Bangalore, we also launched in Delhi and we are right now piloting in Mumbai and should be operational by the first of the coming year.

Kamla Bhatt - IndiaTech
Seventymm, strictly speaking not an Online Movie Rental Company because in India...

Raghav Kher - Seventymm
Now, let's look at compare it with Matrix, maybe that will give a better perspective. Matrix today acquires customers on the Web and they ship with the CDs or the DVDs to the customers using US Postal Service. So, it's completely online service, whereas in India, acquiring customer today even happens -- today happens offline also that is also big component because not everybody is online, that is one difference. Second difference is, how the DVDs are get distributed or delivered to the end users. In India, we have our own people that deliver on motorcycles, DVDs to your house and pick it up from your house. In India, the distribution is quite different than how the distribution occurs in the US.

In simplistic way, Netflix meets FedEx. That's what we are here. So, we have team of our own people in each city that actually delivers movies to your house and pick it from your house. This is how it works. You come to your Website, our Website, create a movie queue similar to Netflix sum of 10,000 titles and we cover in Hollywood, Bollywood and Seven other regional languages. Then, we deliver first set of two movies to your house within 24 hours and you're done watching them, either you can call us, schedule a pickup using SMS or schedule it on the Web. Then we come to your house, pickup those two movies and deliver you next set of two movies. It is as simple.

Kamla Bhatt - IndiaTech
Like you've mentioned, you've got $10 million in funding. What is that money being used for, why do you need $10 million to run an Online Movie Rental Company in India?

Raghav Kher - Seventymm
First thing, well, we want to provide the best experience to the user, so we want to have the largest collection of movies, that's one. Secondly, we are establishing distribution network in six of the cities, which requires substantial investment in the infrastructure, and after we are done with six cities, we're going to 25 satellite cities, examples would be Pune, then other example would be let's say, Belgaum or Jaipur or Chandigarh. So, those are the cities we'll be expanding to and that requires capital investment.

Kamla Bhatt - IndiaTech
Okay, because it's an Online Movie Rental Company and since you come from Microsoft and you have a rich experience in the consumer and media space. I'm assuming that you're going to keep track of consumer's behavior. What are you to (Inaudible)

Raghav Kher - Seventymm
That piece of software, actually that is one of our core advantage, we've reached an over 200,000 lines of code that ties in everything, every piece of data about customer, what movies are you renting, how often do you keep them, when do you watch them, when is that particular movie delivered to your house? So, we have a complete integrated system that tracks customer behavior, online marketing and CRM, that is their Customer Care and all the logistics and inventory management and we've built it from scratch, so we have a 360 view of the customer.

So, really then we can personalize and we can tailor it to saying, "if you watch this movie, you might be interested in this movie and that is the piece of software we've built, which is very targeted to what we are recommending in India, and which is also a substantial competitive advantage, can have personalization and we initially started in India. I was not sure whether Indians would actually review the movies and write comments, but since we have been in business Indians are quite opinionated, they'd love to write and talk about movies, which is great. They are actually they're doing that, which is very good because we are creating lot of user-generated content of our site which benefits other customers also.

Kamla Bhatt - IndiaTech
Why did you start Seventymm?

Raghav Kher - Seventymm
Last year I went to India and I looked at Indian market and business in India is booming, especially the Consumer Business. You go to malls, you'll see people are buying spending money and the income levels have gone up. Just to give you an example, when I was growing up in India during 70s, I used to spend maybe 25 cents for a movie ticket. Today, if you go to PVR Gold Class in Bangalore, the charge is about US$12 and for per movie ticket and that is houseful. Then I looked at the entertainment business in India and as you know movies, movie business is a big business in India. Everybody loves to watch movie, this is part of our culture.

I looked at the online DVD rental or DVD rental and looked at that, and I said, "This is very Fragmented Industry in India, just like what it was in the US in during 80's." Lots of Mom And Pop Stores, they do not have the choice customer is looking for, that's one. So, for example, if you're a Bengali living in Bangalore and you want to watch a film, Bengali film of Satyajit Ray is very to difficult to get, or if you are in Calcutta and you want to watch a Tamil movie, it's very difficult to get. So, our really vision is any movie, anywhere, any time in India within 24 hours, that's what really our vision is. The second issue is -- traffic in major metros in India today is so heavy, so if want to get at a -- rent a movie, you have to drive for 30 minutes, it's far, then go find the movie and then you're disappointed half the time because you don't get the movie you wanted.

This is the problem we're solving or addressing for the customers and it's also a consolidation play when you think about like a retail that's what in the Retail Consolidation is happening in India. That is why this is very exciting. Third part, is DVD player prices have fallen to US levels, which is about $60 or Rs.3,000. So, the DVD shipments have taken up. Today, about one million DVD players are sold a month in India and other another one million VCD players. So, it's a big growing market, and that's what makes it exciting, and being in the first player, it's very exciting for us.

Kamla Bhatt - PodTech
Okay, right now you're only doing the DVD Rentals. Moving forward, do you have any plans to have the downloadable option like Movie Zone, is that something that you are doing?

Raghav Kher - Seventymm
We expect that in about in three years time that will become reality. There's two issues have to be solved for India, one, is the Broadband Infrastructure, second is, Digital Rights Management. There are couple of companies in the US are working on that, to make sure that when I download a movie on the Website, I can actually play it on any device I want, and it is still you're protecting the rights of the copyright owners. So, those two things coupled with rights of movies, not all movies today released by the major studios have digital downloadable rights available. So, we think in about three years time, India will be ready for that, and that's the time we expect to introduce digital downloads of movies.

Kamla Bhatt - PodTech
Okay.

Raghav Kher - Seventymm
Today we are distributing the entertainment using DVDs. So, really we think about our business as in the business of Entertainment Distribution. The DVDs will be replaced by bit, that will happen in the next few years, that's how I look at our business.

Kamla Bhatt - PodTech
What about mobile phones picked once?

Raghav Kher - Seventymm
Think of actually Device Independent. Digital Distribution you would be able to come to our Website and say, "I want to download this movie and I want to play it four times on my PC, three times on my DVD player connected to my TV and two times on my iPod and I want to key of -- I want to also play it on my mobile phone." That's really what will happen. Absolutely, --packaging, the rights management, the pricing.

Kamla Bhatt - PodTech
Okay. Now, what are challenges of running an online movie rental company in India because it's a fragmented market?

Raghav Kher - PodTech
That's always a challenge and especially for startup in India because people are risk lover. They prefer to work for a big names like IBM, then new startups like Seventymm, it's just a fact. But so, if you ask me most of my 50% of my time goes just in recruiting because that's how we take our company to the next level.

The second is, distribution in India is complex meaning delivering movies on time within 24 hours to your house, pick it from that. So, it's like creating FedEx in India, that's what we're doing and which is a second challenge.

The third challenge that you talked about is about rights and movies. As you know, it's a very cottage industry, there are lots of producers and lots of distributors in India, so it's a gray area and it is not streamlined. But which we see as actually a big opportunity for us in terms of consolidation and streamlining and creating the distribution channels for the producers and content owners of the movies, so they paid what they deserve in which we see an opportunity.

Kamla Bhatt - PodTech
Let me ask you a question about entrepreneurship; there's a lot of money that is currently available for entrepreneurs in India. What...?

Raghav Kher - Seventymm
So, for us -- I had offers from couple of others firms in the Bay Area. I really have liked Draper partners and Raj Atluru who is in my board and we have built a very good relationship with them from Tim Draper onwards so there are other partners. Second time around when it came, I was India in the summer. We approached couple of VCs and Matrix came to our office on Monday and they loved this idea and we really enjoyed meeting with Rishi Navani and his partner Avnish Bajaj. We thought they had experience in India both of them and within one week they said we are writing a Term Sheet, I really liked that.

They were completely action-oriented and they got it what we are building. My experience with both of them in India has been fantastic. They are very helpful and very good people to work with because I look at it if my partnership with VCs is a long-term relationship and every business has ups and downs. So, I want a team that stays together and we do right things for our business. Second, exit option as like every company possibility is merging with another bigger company or a media company. Those are the two options I would say.

Kamla Bhatt - PodTech
We thank you for your time today and wish you all the best with your company.

Raghav Kher - Seventymm
Thanks for the opportunity.

Kamla Bhatt - PodTech
You were listening to Raghav Kher, founder of Seventymm, India's Online Movie Rental Company headquartered in Bangalore, India. We spoke to Raghav in Seattle, Washington. This is Kamla Bhatt for PodTech and as always, thank you for tuning in.