This article is based on an interview between Mr Sanjay Kathuria and Mr Ritesh Agarwal who explains why it is important to chase customers instead of investors to make your business successful. ## **1. Chase the Customers, not the Investors** You may be feeling that Mr Ritesh Agarwal became very successful because of huge investments from: - SoftBank Group - LightSpeed Ventures - Sequoia Capital - Many Companies This is not the case. This was not the way OYO began. Mr Ritesh Agarwal will explain to you how you should chase your customers and not the investors. If you can chase the customers, then the investors will automatically chase you. He says he meets lots of young entrepreneurs, who say they want to get investors first and then start their business. Golden Statement: **Capital chases those who don’t need the Capital**. This means that investment comes more to those who don’t really need the investments. ## **1. Increasing Occupancy – How Mr Agarwal made an entry into the hotel business?** When Mr Agarwal started his first hotel, he increased their occupancy very fast. Through this, they earned a commission, also known as earned gross fees. This fee was so interesting that many more hotel owners wanted to collaborate with OYO, and this made investors very excited to come and discuss possible investments with OYO. Earlier, Mr Agarwal had spoken to lots of investors, but there was no response from any of them to invest. As soon as OYO rooms, the first hotel started making big profits; the investors started seeing lots of value in investing in OYO and reached out to Mr Agarwal. **For example:** - If you are starting a cloud kitchen business, will you actually pay the rent, invest in the equipment or hire some chefs? His sincere recommendation is that you don’t invest when you are starting your cloud kitchen. - When an investor invests in you, he does that because he has lots of faith in you. Similarly, when you open your cloud kitchen, your first landlord and your first chef are also considered your investors. ## **2. Think out-of-the-box with Profit Sharing** **For example:** 1. If you observe a business, which has lots of value, like a restaurant, building, or mall owner (whose space is anyways quite empty), then you can convince them to share the profits with you. You can also persuade them to do revenue or profit-sharing with you, which is like an asset. 2. If you are opening a cloud kitchen and you can cook food, then this is an advantage. However, if this is not your skillset, then hire a chef and make him your co-founder or partner and share your profits with him. In the second example, there is no investment of money. It’s only your confidence and a business plan that are the main requirements. You may feel that it will be difficult to find a chef to join you. But the fact is that, during these COVID times, most chefs now don’t have a job and if you talk to most of them, they are all aspiring to start their own restaurant business or cloud kitchen. You can collaborate or partner with these chefs to start your own restaurant or cloud kitchen and create value. The moment you start making a profit of Rs. 50,000 with your first restaurant, after this you can go to anyone and give them the confidence to invest Rs. 1 lakh in your business. Similarly, once you create a second, third, and fourth restaurant, you can make profits of Rs—50,000, which will also multiply your investors’ investment of Rs. 1 lakh many times over. ## **3. OYO’s First Hotel:** When Mr Agarwal started his first OYO Hotel: - He increased the occupancy from 19% to 90%. - Made the quality of rooms and photography much better. - Changed the white light into warm white light or yellowish light. - Provided Wi-Fi to the customers. - Free breakfast. By providing all these facilities to customers, his hotel’s listing on websites like []( and similar websites got better. The biggest achievement then was that these hotels that were at the bottom of the listings came on the top 1 or 2. Due to this, the income of these hotels, which was barely Rs. 40 to 50,000 a month suddenly increased to Rs. 3 to 3.5 Lakhs every month. Mr Agrawal made agreements with his partners that out of earnings of Rs. 3 Lakh, 30% (Rs. 90,000) will go to the OYO brand as commission. His expenses or overhead costs at this time were Rs. 30,000 to Rs. 40,000. The marketing costs were about Rs. 10,000 to Rs 15,000. This means that he made a profitable and sustainable business. The investors got excited after seeing this and calculated that if one hotel of Mr Agarwal’s can make so much profit, then many more hotels can fetch bigger profits and give more value to their investments. Due to this, if there is a short-term loss (because of hiring employees and giving them salaries), that is acceptable, because the long-term profits are much higher. Similarly, if you are starting your restaurant business or any other business, if you can set up your business model and prove unit economics, then you will start getting growth investments. ## **4. Investors for OYO** OYO’s first investment firm was LightSpeed Venture Partners, which is a leading investment firm. LightSpeed were also early investors in Snapchat and many more companies. This investors’ biggest attraction to OYO was that it was catering to the common man of India as customers and wanted to become partners with thousands of small hotel owners in India. Before this, Mr Agarwal had spoken to Sequoia Investments, who had admitted that the business idea was interesting but wanted to wait a bit to observe the growth of the business. In about four months, in collaboration with LightSpeed, after successfully scaling OYO’s hotels to about eight hotels, Sequoia and other investors started competing with each other to invest in the OYO brand. Mr Agarwal finally chose Sequoia to be their investing partner. In this way, if you start your business and scale it well, instead of you running after investors, they will approach you and want to invest in your brand. ## **5. Learnings** - Make investors chase you so that many of them come to give you offers instead of you chasing them. - They will even compete with each other to invest in your business, once they are convinced that the prototype of your business is successful. - Collaborate and do benefit sharing with the right investors.