BPCL’s Khadem Mahmud Yusuf reflects on his early career in Silicon Valley, his serendipitous path into entrepreneurship, his first venture Alap Communication and subsequent exit, how our experiences shape us, why Bangladesh startup ecosystem has no similarity with Silicon Valley and why we don’t need to build Facebook or Google in Bangladesh, his latest venture BPCL, his plans to make recycling a thing in Bangladesh and the hard work required to build a business. Bonus: his advice for early stage founders.
Future Startup
I want to dive in at the beginning of your story. Where did you grow up? Tell us about your early career days.
Khadem Mahmud Yusuf
I was born and raised in Dhanmondi, Dhaka. I attended Government Laboratory High School and completed my intermediate from Dhaka College in 1987. In 1988, I went to the USA and attended Washington University in St. Louis to do my bachelor's in Electrical Engineering. After my graduation in 1992, I went to Texas A&M University for masters in Electrical Engineering.
I started my formal career at Advanced Micro Devices (AMD). I joined AMD in January 1994 in Austin, Texas as a microprocessor design engineer. AMD, by then, had finished making 486 class CPU microprocessor project and started to design Pentium Class Microprocessor (Krypton Project)
.
After about a year at AMD, I joined National Semiconductor, located in Silicon Valley, California, as a microprocessor design engineer where I contributed to designing 486 and Pentium class embedded processors.
After that, I joined a startup called iReady Corporation in 1998, which was a brilliant place to work. We were working on cutting edge technologies. We integrated internet on chips for the first time. companies like Toshiba, Sony, Seiko and Panasonic partnered with us to integrate internet functionality on the chipset.
The technology was way ahead of time. It didn’t get the expected market and eventually iReady was shut down.
This made me realize that only technology is not enough to make a product successful, we need to make sure that it has a market and user-friendly. After iReady, I went to work for a company to design Chipset for high-end routers which was acquired a few years later.
The last company that I worked in Silicon Valley was CoWave Networks where we designed pre-WiMAX Broadband Wireless network. It was in between 2001 and 2003.
In 2003, my father passed away. I wasn’t able to be with him in his last days. That tragedy changed me a lot and I decided to do something in Bangladesh.
I started a company called Alap Communication in 2003 to provide the broadband wireless network in Bangladesh. We designed and implemented largest Nationwide Broadband Wireless Data Network in Bangladesh along with managed IP –VPN service.
I was still in Silicon Valley at that time. So, I had to go back and forth to maintain both ends of my career for the next 2 years. At one point the workload became too much to take. I reached a point where I had to either return to Bangladesh or stay in the US.
I chose the former and came back to Bangladesh in 2005.
This made me realize that only technology is not enough to make a product successful, we need to make sure that it has a market and user-friendly.
Future Startup
Well, we will learn more about your journey. Before that, tell us more about Alap Communication. You wrote on LinkedIn, the Company provided 250% return to investors. How did Alap come to exist at the first place?
Khadem Mahmud Yusuf
After my father’s death, during my time in Bangladesh, I attended and spoke at a tech conference and presented the idea to distribute broadband internet service. Surprisingly, many people, including the then VP of FBCCI, showed interest and asked me about the feasibility of the project.I also presented the idea to some of the top CEOs of the country at that time upon FBCCI’s arrangement. The participants were upbeat with the idea and I told them that the most important thing is the spectrum. If spectrum is available it can be implemented.
In January 2003, two applicants were granted wireless spectrum by Bangladesh Wireless Spectrum Board including mine.Later, we decided to merge our projects and thus started Alap Communication.
I was still working at CoWave and had to go back to Silicon Valley. Following two years were extremely difficult for me. I was working harder, traveling back and forth to manage both ends. Despite my effort, I realized that you can’t run a business on the side.
I discussed at length with my partners and investors and finally decided to come back to Bangladesh in 2005.
Right after my return, Alap Communication got a deal from Islami Bank Bangladesh Ltd. to create an intranet network among their 135 branches and it successfully executed the project.
After that, more banks started to come to us for the similar service.
Our main focus was to create a secure system for different banks.
When we started to make profits and our business grew, many companies, previously working only with internet, started to work with Intranet.
BTRC started to provide licenses and the number of the licensed companies stood at around 200 overnight. That was the time I first thought about an exit. Our business was growing and we’re already a profitable company. It was easy for us to find a deal.
Long story short, when a foreign company gave an acquisition offer, we decided to take it but BTRC barred us from selling 100% shares to a foreign company.
Instead, we sold the company to a local conglomerate which was also on the list of potential acquirers and Investors got a 2.5X return on their investment., I joined Nokia as the Country Manager for its Services division. Later, that company sold Alap Communication to another company after a year which is now Ollo broadband.
Future Startup
Please share your key takeaways from Alap Communication journey.
Khadem Mahmud Yusuf
We wanted to provide a service that was not available at that time in Bangladesh but had a great demand. Our nearest competitor company called Tech Valley had an inefficient, expensive and non-scalable technology.
Compared to that, our solution was better in terms of efficiency and scalability and when added bank-grade security features, The solution became very popular among banks and our network grew exponentially.
When we started the company, there was a tremendous scarcity of security expertise in Bangladesh. There were tech talents but mostly in other domains. Talent crunch was a real challenge.
Dealing with different govt. Authority was also another lesson. Getting permissions and licenses were very difficult. The tax authority audited me even before starting our business operation.
I was also surprised at the high employee turnout rate. I came to see that people change jobs for a small difference in salary. It was like earning more money was primary purpose and everything else was secondary.
In terms of working culture, I worked in a flat organizational structure in the Valley and planned to do the same here but employees were both unethical and unprofessional and eventually I had to impose rules and practice authority within the organization.
When Alap started to run quite successfully we had a nationwide network, our service became very lucrative. Soon the competition grew intensely when BTRC was issuing licenses to new network companies at a growing rate and I realized it'd be tough to maintain profitability.
These new companies starting to provide service at cost-price and it made us consider an exit.
But selling the business was quite a difficult job, I must say. First of all, we needed to determine how much our company was worth. Traditional valuation only considers tangible assets, which is not the case for Tech companies. I proposed to evaluate spectrum and number of customer separately, and finally, we sold the company at BDT 300 million. It was 2.5 times of our initial investment.
Future Startup
Tell us about your transition from Alap Communication to Nokia.
Khadem Mahmud Yusuf
When I was almost closing Alap deal, a headhunter from Singapore contacted me and requested for an interview for a position at Nokia. We had two interviews: one over the phone and another in Dhaka. Long story short, I got hired for the Nokia to set-up the services business unit in Bangladesh.
A merger with Siemens happened at that time and I became the combined Country Manager for Services. I also had the responsibility for the Sri Lankan chapter. But nothing substantial was done there.
At Nokia, it was again kind of building a startup for me. We set up everything from scratch and Working there instilled confidence in me that I'm a profit-and-loss leader. I could make a business work.
Culturally, Nokia believed that financial documents give a broader picture of how the organization is doing and I had to present financials to management on monthly basis.
Nokia's philosophy was: hire engineers and train them into the business manager. Since I was from technological background this served me well. I learned that one has to know everything about her/his business in order to run it successfully.
We had a position called cost and progress manager in the company where we would recruit engineers who also had a solid understanding of the cost management of the project and business unit. This is a unique position where an engineer keeps track of project progress and cost. This helps us tremendously to understand the relationship between project progress and budget.
Nokia was a great training platform for me. I thoroughly enjoyed working there.
Future Startup
Tell us about your experiences in Silicon Valley.
Khadem Mahmud Yusuf
I worked for 4 companies in Silicon Valley: one was the National Semiconductor and other 3 were relatively small startups.
Working with the startups was more interesting than working at large organizations.
I think the best company I've worked for was iReady Corp. At iReady, we were actually given absolute freedom to innovate and implement
We were coming up with incredible ideas and innovations. The culture and working environment at the company were great. There were golf courses inside the building. The cubicles were turned into mini-golf fields. We used to stay at the office even at nights. It was a dream job for any engineer.
I worked there for 2 years and enjoyed every bit of my time. But the company shockingly went bankrupt after 2 years and we were laid off.
It was because of the lack of product-market fit. The products were innovative but way ahead of time. Later, a company named Farvey made a toy which was quite inferior to what we were making but it was a super-hit.
This was a great lesson for me that it is not about innovation only but about innovating something that people use.
Afterward, I joined to a company called ZettaCom, a chipset manufacturer for high-end routers. After Zettacom, I moved to CoWave Networks. CoWave was an interesting experience for me. I learned a lot about market dynamics.
We designed a product with the intention that we would provide broadband services to households. We would set up Wireless routers on the roofs of the household/businesses and use beam forming to repeat signals to the subscriber stations.
But some of the households/businesses used to turn off the power supply at the end of the day and the routes would have to change as a result. This was a practical problem for us.
To our surprise, we found out that those who took our devices later were broadband cable operators. They used our device as a broadband cable extender to distribute wireless network to outskirts of the cities. It was a great learning for us because none of us thought it would turn out to be like that.
CoWave is one of the many good things that happened to me during my time at the Valley.
One of my superiors at CoWave is now a partner in a tier-1 Venture Capital (VC) firm in Silicon Valley. Also, my boss at National Semiconductor has also become a partner at a VC firm. I am in contacts with them. Whenever I go to Silicon Valley, I meet them and talk over a cup of coffee. But, unfortunately, they do not have much interest in investing in Bangladesh.
I lived in Silicon Valley for 11 years, from 1994 to 2005. This is the period when Silicon Valley was actually dominated by semiconductor manufacturers and telecom companies. But the scene is quite different now. The social networks companies are now running the show.
Future Startup
In the past few decades, we have seen the emergence and at the same time the disappearance of numerous technology companies. While many new giants emerged, big companies are going out of business at a faster pace. What's your take on this?
Khadem Mahmud Yusuf
I think this is a natural progression. In business, if you're stagnant, you're dead. You've to constantly improve yourself. Valley moved from Semiconductor to Telecom to Social Networking. Everyone has to adopt the transformation.
When I started working at CoWave Networks, I didn’t know much about Wireless protocols. I had to take courses in UC Berkeley Extension because I didn't have much knowledge about wireless networking. You need to constantly adapt and learn. It's the mantra in the tech-based businesses.
Future Startup
In Bangladesh the number of big tech companies, except for the telecom companies, is slim. How do you see it?
Khadem Mahmud Yusuf
There are reasons for it. USA, you see, has been able to build the infrastructure. They have systematically approached technological advancement.
Silicon Valley was not built overnight. It is the result of decade’s long hard work. A number of catalysts have been working on it. Unfortunately, we don't yet have such catalysts here in Bangladesh to create an ecosystem like Silicon Valley.
We are still building the basic infrastructure. Once we have the infrastructure in place, we can begin experiments with technology. The existing infrastructural condition isn't in sync with the constantly developing technology around the world.
That’s probably one of the reasons why people lean more toward trading businesses because we are nervous about the long-term results of our investments in Bangladesh. Moreover, funding structure is not there yet.
We don't have an active VC culture here. We take bank loans. The interest rates are quite nominal now as compared to the higher ones a while ago.
It's easy to pay back the bank loans plus the interest if you run a trading business. But it is hard for a tech company. This is why we have a lot of trading businesses. It is easy, simple, and existing infrastructure is enough for it.
Thirdly, the organizational setup of a startup is very important. When VCs decide to fund a startup in the US, they not only give money, they help founders to run the business, make introductions and more.
When I was at CoWave, for example, there were 3 founders all of whom graduated from IIT, India. But when VCs came to fund CoWave, they said that the founders had very solid backgrounds in Tech but none of them had the experience to be the CEO.
They agreed to provide funding on the conditions that they would bring 2 people of their choice: one CEO and another CFO. And the 3 founders would be the CTO, CMO, and VP for software and would be accountable to the CEO. With these conditions, they, in fact, helped to build a good team.
We seriously lack this type of team composition in Bangladesh. Founders of a company here generally come from the same background.
Secondly, entrepreneurs here often do not have any experience in running a real company. Many of them have degrees in business, but they lack the practical understanding of running a business. Without meeting these requirements a startup can never attain sustainability.
Someone who is to be the CEO of a newly-founded company must have prior experience in running a successful company which I learned in Silicon Valley. Despite all the support structure in the US, only (around) 3 in 100 companies succeed in Silicon Valley.
Our government says that companies like Google and Facebook will emerge from Bangladesh. I appreciate their support and encouragement. But how would startup grow here if we don't even have proper support structure?
And our exposure to the valley and startup is largely superficial. I don't think all this hype about Mark Zuckerberg and other billion dollar startups is right. People like Mark come one in a million. Facebook and Google are not the norm, they are the anomaly. These are exceptions and exceptions can’t be the examples. Our expectation and understanding should be grounded in reality.
Another problem I have faced while examining the due diligence of several startups is that they often do not keep proper documents.
Basically, when a company approaches a VC for funding, they want to know the way it will generate returns on investments. It is not the amount but the way. VCs want to assess how feasible the business plan is, what the risks are and how those risks could be mitigated.
VCs get confidence in investing in a firm when they have these queries answered. But sadly I haven't seen any startup in Bangladesh, not one, to present these scenarios when they ask VCs for funding.
We do not talk about these a lot here.
I don't think all this hype about Mark Zuckerberg and other billion dollar startups is right. People like Mark come one in a million. Facebook and Google are not the norm, they are the anomaly. These are exceptions and exceptions can’t be the examples. Our expectation and understanding should be grounded in reality.
Future Startup
What happened once you quit Nokia-Siemens Network?
Khadem Mahmud Yusuf
After leaving Nokia-Siemens in 2011, I helped my now chairman of BPCL with managing a project at Eastern Refinery building Oil infrastructure.
He was operating a large project in association with Bangladesh Petroleum Corporation. He didn't have a strong project management team and was having problems with managing the project. I am not an expert in managing projects but I know that it needs to be structured properly. I helped his team to put together a process for that.
While working on the project, I regularly visited the Eastern Refinery in Chittagong, only refinery in the country.
I observed a lot at that time and started to realize how important energy is. I found it very interesting and tried to dive deeper into the industry. That’s when I decided to do my next project on somewhere along the line of energy and part of the idea of BPCL came to being.
Luckily, Eastern Refinery's GM approached me at that time and told me about one of their byproducts called Naphtha. They used to export it to Singapore because we could not use it in Bangladesh.
They told me that we could do 2 different projects with this byproduct. We could either turn it into petroleum or use it as a raw material to produce water bottles, polyester clothes, etc. But we realized that the market for PET in Bangladesh was not big enough to build a large petrochemical plant. Our assessment indicated such a plant would cost around 7000 million BDT, as well as the further development of Chittagong Port as the material is highly flammable.
At that time, I also did some research and came to know that PET was being produced in Europe through a reverse process. Italy, Germany, and Austria were producing PET from waste bottles. So, in August or September 2012, I went on a trip to Austria where I visited 2 plants and talked to 2 vendors. Then, I went to visit 1 plant in Italy and 2 other plants in Germany. It fascinated me very much.
When I returned to Bangladesh, I conducted a research to understand what’s happening around it in Bangladesh. The research further revealed that the wasted bottles were being exported to China. And in return, China used to send PET resin back to Bangladesh. The Daily Prothom Alo featured an article on this titled ‘Felna Botoler Chin Zatra’ (Wasted Bottles' Journey to China). That’s when I finally designed a business plan to use these bottles in our country in 2013 and BPCL came to exist.
Everyone was quite skeptical at first. But I was lucky that my investors were convinced and jumped on board. They trusted me. One of them gave me land and asked for equity in return. Another provided funding. So, I started with around BDT 30 million external cash investment, BDT 60 million worth of land and around BDT 7 million from my savings.
At that time, we also got in touch with SEAF, a VC firm. They did the valuation. The results were good and we got 22.65% premium at the seed stage. Our existing investors accepted it. Later, DEFTA Partners from San Francisco, USA approached and expressed their interest in investing in. At that point, SEAF decided not to move forward with us.
We took a loan of BDT 250 million from Islami Bank putting the land up as collateral. It was later increased to BDT 280 million. As we've been able to build it as an environmentally friendly company, IDCOL decided to increase the investment from 280 million to 550 million BDT last year.
Future Startup
Tell us about Bangladesh Petrochemical Limited (BPCL). How many people work at BPCL?
Khadem Mahmud Yusuf
Currently, we are a 200 people team at BPCL. We have 2 collection hubs: Hazaribagh and Basabo, and we are planning to build a third one in Mirpur.
We have already started production from last year October. It is gradually stabilizing. Our customers are mainly the bottle-makers, such as AST Beverage, Meghna, Olympic and some others.
The average capacity of the plant is now 400 tons a month. We also have plans for an expansion to 1000 tons month within the next year. Currently, Bangladesh imports 12,000 tons of raisins per month.
We are now meeting 3% of the total needs of the local market and after expansion that will amount to 7%-8%. In fact, our investors are asking us to make plans for further expansion. We will probably be able to implement the bigger expansion within 2018 or 2019.
Future Startup
What are the biggest challenges?
Khadem Mahmud Yusuf
The main challenges are to ensure quality and maintain safety. The bottles we produce are used for storing water and other beverages. A little carelessness in our process can bring about catastrophes. Food can get contaminated and people might even die as a result. This is why we have to be very meticulous in examining the bottles we bring in for recycling. It takes up a huge amount of our costs.
The third challenge is to keep the strength of the bottles. When the bottles are manufactured from the Resin, they lose some of their strength. As a result, we have to bring back the strength when we recycle them at our plant.
Future Startup
Business-wise, how is BPCL doing now?
Khadem Mahmud Yusuf
We are doing well. There is demand for this. We will be able to reach the break-even point within June next year. It will be possible once we implement the expansion.
Future Startup
What do you think about competition?
Khadem Mahmud Yusuf
We do not have any local competition yet. But we are competing against imported Virgin products.
There is also this problem with people's perception that the quality of the recycled product is inferior as they are made from discarded materials. More critically, people here do not believe that a Bangladeshi company can produce quality materials from waste.
Future Startup
How do you reach to your customers?
Khadem Mahmud Yusuf
Mostly through the personal network. It is hard to go through a formal channel in Bangladesh and succeed. We try to find an internal connection and approach the top management of the company.
Future Startup
What are your future plans?
Khadem Mahmud Yusuf
We are planning to expand our production capacity, as I have mentioned earlier.
We also want to get into packaging. People have become quite sensitive about how their products are presented to them. There is growing demand for packaging of all kinds of products. We have advantages in some areas. We have plans to explore those areas.
Future Startup
Have you had any mentor in your journey?
Khadem Mahmud Yusuf
I didn't have someone as a mentor in particular. My two business partners helped me a lot with business knowledge. I also learned a lot from my superiors and peers at Nokia-Siemens.
I do think that it is very important for a young entrepreneur to have a mentor. But the mentor needs to be very experienced. I believe top business personnel in Bangladesh should come forward and help the young entrepreneurs in this regard.
Recently, I've been to a seminar in India where someone was presenting a business plan. Tata's Chief Operating Officer was in the audience. And he stood up and said that he would mentor the young person himself. We need this type of mentorship in Bangladesh.
Future Startup
How do you manage people? What is your management philosophy?
Khadem Mahmud Yusuf
My first preference will always be flat management if it is possible. I usually work hands-on. I try not to delegate my duties as much as possible. I try to monitor everything by myself.
Future Startup
What would you advice to someone just starting out?
Khadem Mahmud Yusuf
To build a successful company, you need to have a vision. The business plan needs to encompass everything. This is where maturity and experience come in.
In my opinion, everyone needs to do 3 things: 1. you need to sort out the entire cycle of your business; 2. Maintain proper documentation when you have started the operations and 3. A clear understanding of how you are going to make money.
If an early-stage entrepreneur can manage to meet these requirements, s/he can build a successful business.
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Note: Interview by Ruhul Kader, Transcription by Rahatil Ashekan
