Ep607: Amit Kumar – Invest Long-term but Don’t Forget About It

Andrew Stotz 00:02
Hello fellow risk takers and welcome to My Worst Investment Ever, stories of loss to keep you winning. In our community, we know that to win in investing, you must take risks but to win big, you've got to reduce it. Ladies and gentlemen, I'm on a mission to help 1 million people reduce risk in their lives and that mission has led me to create the become a better investor community where you get access to the tools you need to create, grow and protect your wealth go to MyWorstInvestmentEver.com right now to claim your spot. Fellow risk takers, this is your worst podcast host Andrew Stotz, from A. Stotz Academy, and I'm here with featured guests, Amit Kumar, Amit, are you ready to join the mission?

Amit Kumar 00:48
Yes, full on rock and roll.

Andrew Stotz 00:50
Let's do it. Ladies and gentlemen, Amit Kumar is a nuclear scientist turned serial entrepreneur who never thought of being an entrepreneur and now is coaching and mentoring 1000s of small business entrepreneurs through the MSMEx platform, Amid take a moment and tell us about the unique value that you bring to this wonderful world.

Amit Kumar 01:15
Definitely Thanks, Andrew for this lovely interaction. So what MSC makes does, you know, I started my journey from corporate and then became an entrepreneur, I started my own venture, which was a tech startup into home services. And there I realized the way we build tech startup is very different than a traditional business owner is building their own business. And that when I check the stats, I found that there are hardly 50,000 startups in India while there are 63 million SMEs in India. But when we compare the attention to 50,000, startups getting all the attention, and 63 million SMEs, hardly any attention and

Andrew Stotz 02:00
million SMEs are already surviving the startups many

Amit Kumar 02:06
not only surviving, they contribute to 30% of the GDP in India, while the contribution to the GDP from the 50,000 startups, I know we are, you know, today 80 plus 100 plus unicorns and we are doing good, but the contribution in terms of the profit and turnover to the economy is negligible when it compares to MSMEs. And that's why I thought that I will bring in the X Factor of growth, from the startups to the SMEs. And that's where the MSMEx comes in.

Andrew Stotz 02:41
So tell us a little bit more now you've painted the picture. And I love the focus on the small and medium sized businesses, because that's where I've operated for the last 10 years, 20 years before, for the 20 years before that, I was in the big business world, big business world gets everything you know. And they get the friendships with the government, they get sweetheart deals, they hear about all the great things coming along, where the SMEs just get, you know, the small and medium sized businesses just face nothing but trouble government, you know, regulators and all kinds of stuff that are coming down on them. Tell us a little bit about what you're doing through the platform.

Amit Kumar 03:19
Okay, what we do, we coach and train and handhold these entrepreneurs, because we see, out of the 63 million entrepreneurs who are driving these businesses 99.9% of them, they did not get the opportunity to go to the premium B schools and get a commerce education or go through the finance education or marketing education, they just jump into the business. And I say that when you jump into the business, it's like you jump into a swimming pool without knowing how to swim. And somehow you start splashing the water and you survive. But that's not called swimming, swimming is when you have a goal or an objective or a target in mind. And for that you have to learn swimming. Just surviving in water is not called swimming. Similarly, the surviving in business and earning few $1,000 is not called running and building the business. For that you need to learn the business as a science. And that's where we have crafted various courses related to branding, marketing, sales, finance, operations, financial planning, investment, IPO listing, preparing for IPO. These are the kinds of courses which we feel these are practical, the latest and in very, very simple language and content what we deliver to these SMEs and when they learn these things. They also need some kind of support for execution and they're shared the same coaches are available to support and handle these SMEs as well.

Andrew Stotz 04:56
And, you know, in some ways, it's very simple. You got these SMEs You got some good content, you're trying to bring them together. But in other ways, it's really complicated, right? It's hard. First of all, it's hard to get good content and create content that's really powerful and can make a difference to them. Otherwise, they're busy. The second thing is that it's hard to reach them. You know, it's easy to say there's 63 million, but you know, they're scattered throughout India, and they have different, you know, ways you have different ways of trying to get their attention. And then you have people in your platform that are trying to help them, because, okay, let's say you can find them, you get them on the platform, you have the content, well, that doesn't mean that they're implementing that in their business. That may mean that you know, out of the ones that come in the platform, maybe only 10% of them make it to the end of any one course. And then you still haven't really achieved your goal, which is to help them make, you know, make a difference with their business. And so tell us a little bit about like, the challenges that you face and kind of where you are as far as solving those different, you know, challenges. And if my guess about that was right about those challenges or other other challenges that are bigger?

Amit Kumar 06:04
No, you would rightly pointed out, and that shows from your experience, because you're one there is still more number of fears, and you're much more experienced than me. So you have identified the challenges, right? So the first challenge is to bring these SMEs on the platform because they're busy. And why should they trust MSMEx? Acts, it's difficult. So we use lot of content on our, you know, social media. And once we saw that, initially, we were facing the challenge that people who are not are the entrepreneurs who are not ready to believe that something like this exists and whether this will help. But when we saw that block coming and joining the sessions, because we took care of the content, we took care of the the experts who are delivering the content very well, plus, we created this entire platform in a very, very seamless technology. You know, it's like the communique, right, from someone looking for something like this, they land on our platform after the register, they get the communication, then they attend the session within the platform, we have created our own WebRTC channel for delivering the live sessions and one on one interactions and the follow up and everything happens through the platform. So that's where it is unique. And once they find that in social media they attend, then they get comfortable with it, then they refer it and they you know talk about it. And that's where we became popular. So within two years, we have reached out to more than 200,000 SMEs already, we are 100,000 SMEs have already attended at least to one session at MSMEx platform.

Andrew Stotz 07:39
And that's pretty fantastic. Let's focus on that 100,000 Number. The question now is, where's your opportunity? Is it about delivering more value to those 100? Or is it about growing that 100 to a million?

Amit Kumar 07:55
No. So the overall it has to be a funnel approach where we keep adding more and more SMEs, which are interested in taking at least few sessions. And out of that, when we see that there are out of the 100,000 already, there are a few 100, which are closely working with our experts now, because we have 100 plus experts. And these experts have started working with few of them one of the opportunity which we identified that some of these SMEs have very good profitability and growth track record. And that's where we thought that why not list these companies and other retail investors can invest in these companies. Because in India, we have an exchange, which is called SME exchange, where the small medium enterprises can get listed, like the large companies and the retail investors can buy their shares, and they can dilute two to 5%. So we started this also, and recently from that campaign, because we initiated this campaign a year back this month already, our first company got listed from that cohort and got 18 times oversubscribed.

Andrew Stotz 09:09
Wow. And one of the things that's interesting about India within the context of Asia is that there is a massive number of companies that are listed in the various stock markets in India. It turns out that many of them I would call are either small or illiquid, or a combination of the two for this SME exchange. What does it take to come onto that exchange? What amount of shares do they have to you know, what's like, I don't know the minimum amount that they have to list as far as percent of total shares outstanding or something like that.

Amit Kumar 09:46
Yeah. So, you rightly pointed out India's Stock Exchange's largest in the world when it comes to number of listed companies. So there are close to 6000 listed companies overall in both the Stock Exchanges NSE and BSE put together and every second the number of million transactions happen that also is largest in the world. So it's very complicated and number of trades are happening in a large quantity. While that opportunity was always there for the larger companies, the BSE started this initiative around 10 years back recently, they celebrated their 10 year anniversary for this SME exchange, they identified that the rules regulations are very stringent for the large companies. And that's where the smaller companies are not able to leverage that opportunity. While there are people who are slightly more risk takers, and they can definitely invest and look into those opportunities. But the overall process should be easier, the the evaluation criteria should be slightly liberal there. At the same time, as a regulator, they need to take care of the certain aspects so that the public when we public money can be taken care of well, and that's where they can came up with very simple criteria that the company should be more than three year old. In operation, the company should have profitability in these three years. And the company should be ready to dilute minimum 25% of their stake so that the 25% goes to the public and 75% still remains with the founder and the founding family. And then they can go listed, and they can raise as small as half a million dollar also on the stock exchange, it's as simple as that.

Andrew Stotz 11:44
Okay, so that's interesting. So you said, they've got to be in existence for more than three years, they've got to be profitable in those three years. And they've got to be willing to put out 25%, a minimum of 25% of their shares outstanding, which is a critical thing, if they didn't have that, the problem you would face with this type of smaller exchanges that are just no liquidity at all. Whereas in other exchanges, they may allow at the bigger size, because the companies are bigger, they may allow them to list only 15% as an example. But in this case, it's much more critical for that company anyways, that they need to get volume in the shares. And now how many companies are listed at roughly Do you know, on the SME exchange,

Amit Kumar 12:29
overall put together, around 600 companies are already listed in last 10 years. Okay. And it's growing very fast. Every year, if I tell you the run rate every year close to 50, companies are getting listed. Right? This is a run right now. So another five years, if we meet together, once again, I'll tell this could be as large as the main Gold Exchange?

Andrew Stotz 12:53
And what is your expectation about what you could deliver from your audience, your group, the people you're training, on to the stock exchange? Is it two or three a year? Is it a goal of 10 a year or 30? A year? What is your own objectives?

Amit Kumar 13:10
No, so our objective, so internally, what we do what kind of value add we put in there, because the companies are not structured a company when it is going for getting listed, they need to have proper governance in place, they need to have the right business model in place. Looking from the investor angle there, the outlook of the company should be a good story, which the founders are doing, generally, you know, what happens is a small number of companies. Yeah, so they actually they have good product good offering, they have a very loyal clientele base, they have 80 90%, repeat or close to 100% repeat in a lot of cases in terms of declined to ordering the operating limited size, but they're not clear how to scale it what to do with the money. Why should I go listed? What are the advantages? What if I lose my control? What if someone will get into a hostile takeover to they have tons of questions, tons of doubts and the compliances what to take care of so what we do we try to identify by studying the few models that which is the right opportunity, which can be crafted that way? And then we need to coach them, you know, give them the right mindset of why should they get listed. And then we start working on these companies. It takes a year to shape a company it's not possible to do it in few few months. So once we do that, then we connect them with the right merchant bankers and regulators where they can follow the process and then they can you know, complete the listing requirements. This is on the company side. So internally, my targets is this year I'm targeting in next 12 months if I tell I'm targeting to list 10 More companies so first was difficult. I know. It was difficult but now In 12 months, I want to target 10 More companies. And eventually, we see how can we take it forward. So the goal is that a significant percentage, maybe a double digit percentage company should be listed through MSME x.

Andrew Stotz 15:16
That's exciting. And I hear you on because ultimately, it's the small and medium sized businesses that really are the backbone of really, every society, we all see the big men and women out there that are running these massive companies. But we never should forget the value that all of these small, medium sized businesses bring. And what I've learned over the years is that most of them never really achieved success, because they may not have defined what success is. But when I think about success in business, it's about paying yourself and your employees a market rate in salary and compensation, and then making a profit and paying a small dividend to your shareholders. And to reach that level, from a financial perspective as a financial analyst all my life to reach that level is the real success. It doesn't matter whether you're listed or not, it doesn't matter how huge or not you are, but most small businesses are underpaying themselves and non paying dividends out of their business. And that's not success that's back on the treadmill, that's back on the rat race that you're on in a big company. But with a big company, you don't have all the stress of it.

Amit Kumar 16:38
I agree, totally agree. And that's where we see that what is in it for investors, there is a huge growth for the investors because these companies are possibly making few 100,000 profit in a year. And with this action of getting listed, the track record already shows that inferior they multiply their impact. And you know how stock market valuation works. When any company is multiplying Patt obviously, it will boil down to multiplication of the share price. So this is a new asset class, which I am also being an evangelist here to instigate and to motivate more and more investors to participate in.

Andrew Stotz 17:24
One last thing I would say is that I am often times talking to small businesses and groups of small businesses. And I've gotten a question a couple of times, which is what's the best way like they're thinking about selling their business in the future, or a portion of it or bringing in an investor, they said to me, what's the best way to increase the value of my business, I can get a higher price, I always say the best way is to double your salary. Now that seems a bit strange to them. But what I mean by that is that you're probably underpaying yourself. So you may be showing that you're getting a 5% net profit margin, and it's awesome. But if an outside investor looks at that, they say, What if you leave this business, I have to replace you by going out to somebody in the marketplace and pay a market price and bring that management team and leader into the business. And if the business is not profitable for that level of market compensation, then you'll have a hobby. Not a business. Agree. So anyways, I could talk to you all day about that. But that's not why we're here. We're here obviously, to celebrate the work that you're doing, which is fantastic. And as you can tell, I have a definite interest in it. But now it's time to share your worst investment ever. And since no one goes into their worst investment thinking and will be tell it take a few minutes to tell us about the circumstances leading up to it and then tell us your story.

Amit Kumar 18:51
Okay, Andrew? Yes, so I'm not a very active investor, though. Still, I like investments. I've tried all the possible asset classes. In my overall 20 years of experience and diverse investment circumstances I will tell that the first time I left the corporate world and became a tech entrepreneur and started my first venture zimbler into home services. It was a massive project for me. And trust me, I was trying to understand entrepreneurship from project management point of view, because I was coming from that background and I took it as a project. So because I took it as a project, I did it well, but I did not enjoy it. And that led to this that I was putting in so much time into my entrepreneurship stint that I almost forgot my investments. And this led to something where few of my scripts which I bought after three years when I opened my demon At account one day, I was not able to find those things in my portfolio. And that's where I started getting on calls to my D mat account holder and everyone. And then I got to know that it's not there in the portfolio, it's in my ledger because the companies got delisted, I said, What. And I realized that because I was so busy in building my own business and taking care of the investment of my own investors that I forgot my own investment in some other companies. And since similar things, similar thing happened six second time, while doing this, MSM MSME X in the initial years, I got into some crypto investments. And there also I did investment, I almost forgot that I thought, okay, it will grow because I heard the principles of invest and forget, and I started believing in that and long term investment. So here, I, again, you know, one day I needed some return on my investment, I started checking, and I was not able to log into my exchange. And then I got to know that the founder of the exchange actually sold it to someone else that someone else actually did something Hanky Panky, and the exchange is blogged and all the wallets are logged. And then there are multiple groups where people are talking about it. And I'm like, wow. And till that, I'm not able to access those wallets. And they claimed that they sent me some emails, which I never noticed, because you receive 1000s and hundreds of emails. But when you're busy building your own business, you possibly don't pay much attention to that. So once again, I repeated the mistake, I forgot my investments.

Andrew Stotz 21:49
So how would you summarize the lessons that you learned from this?

Amit Kumar 21:53
So the lesson is that while the principle of long term investment is good, but long term is something which cannot be perpetuity, you have to define your long term, you have to define a goal. And you cannot, you know, avoid, or you can avoid tracking your investment. So you cannot forget you invest. But you don't forget, you keep tracking. And if you are busy the way I was busy, because I was on a larger mission, and possibly, subconsciously, my mind was thinking that this investment is, is compatibly. The return here is much lesser than what I'm doing in my own entrepreneurship. In my own venture. Subconsciously, I kind of neglected that. But rather, I should have delegated it to someone else. Even later on my wife told and my son told that Papa, you should have given to us at least we could have tracked it. And I realized Yes. So while you are so busy in a larger mission, at least educate someone else within your family, or delegate it to someone. And that's where the wealth managers and fund managers exist. Because when you are busy, they take care of it. In my case, I almost neglected and I learned the lesson. And when I learned it second time, it was very harsh. And now this is completely in me for the lifetime. I'm not not going to repeat it third time ever.

Andrew Stotz 23:23
Right? Maybe I'll share a couple of things related to this. The first one is that it's not an uncommon story. I have a friend of mine who had a business, he ran it, he built it for 16 years. And I asked him, How are you investing, he says, Every time I get a letter from my investment account, I just put it in the drawer underneath. I haven't looked at those letters for years. Some of those stocks went up a lot. Some of them collapse completely, but I don't have time. And so it is not uncommon to see that also one of the things I see is in, in the financial world, there's many financial people that serve their clients very well. But they don't take care of their own money, or they may bring their money into much more risky situations. And then that goes back to you know, what are we doing here? I like to say that we create, grow and protect our wealth. When you're working on your project, you're creating wealth. That's your objective. If your business is success, ultimately you're creating wealth. growing wealth is when we invest that money in let's say, in this case, let's say the stock market, and then protect that wealth is the steps that we take to make sure that we don't lose that wealth. So those are the three steps that I focus a lot on. And I would say one other thing that I would say is that the problem that if you buy, buy and hold for long term, which is kind of a typical thing that's prescribed and I prescribed that in my book, How to start building your wealth investing in the stock market is very most important thing you have to understand is that we're not talking about individual stocks. If you buy and hold an index fund, as an example, the only main risks you're probably going to face is that okay, that broker or that bank could go under and then, but even in that case, when it's a regulated entity, they still have to have custody of the assets of yours in another entity so that the company that's actually operating doesn't have ability to control. But with crypto, what we can see is the regulators are desperately trying to figure out a way to make sure that if something happens to this crypto company, all the crypto assets don't just disappear. And regulators are struggling here in Thailand, they're struggling all across the world with this particular challenge, because many, many people are running into a situation where they're just that the crypto assets end up disappearing. So there's a lot to be taken away. But I would like to say one thing, I always give the advice to small business, I say the best advice that I can give from all of the interviews that I've done, and people that are lost money from their small business investment is review monthly, financial statements that are on time and accurate. If you can get on time and accurate financial statements already, that's proof of the robustness of your accounting system, and of your business, and then take time, 123 hours a day, to go a month to go over those with yourself and your team, that people that are responsible for that. So that you really understand what's going on. And I would say in our personal life, what a great opportunity to sit down, either alone or with your family for a couple of hours to talk about it. So those are some of the things that I would share. Is there anything else you would add to that?

Amit Kumar 26:41
I think you rightly said. And while because the SMEs and financial discipline, we definitely do this. But when I started thinking that we are coaching and preparing, preparing this content and coaching the SMEs, why not the same discipline at home, why not the same discipline for my own wealth, where I shouldn't be reviewing an MIS for my own wealth, also on a monthly basis and talking to my family, the way we talk about our own company mis on a monthly basis with our team members. So you rightly said

Andrew Stotz 27:15
if you're facing that challenge, imagine how all those entrepreneurs in your network are facing, they're all facing the exact same thing. So I think, in the future, one idea to solve this, just to say that you have a monthly meeting, let's just say on the 25th, you know, the last Thursday, or whatever that is of every month, where everybody gets together, and talks about what's going on. And they and what we do when I have a weekly meeting with my mastermind, when it comes down to it, we also turn off the camera and turn off the microphone and then we stop and we say we write down what are our goals for the coming time and stuff. But yeah, something like that could potentially help. Alright, so based upon what you learn from this story, and what you continue to learn what what action would you recommend our listeners take to avoid suffering the same fate?

Amit Kumar 28:06
Symbol the one action is that the discipline you may be busy in any mission, but you cannot forget your investments you have to keep reviewing at on a regular basis. So you invest for long term for sure. But one is that long term needs to be defined, you need to have a goal in mind that when is the time that you will exit from that investment, investment long term may not mean the perpetuity or the lifetime. And second, you keep reviewing and tracking, you can change your goal maybe did while you review it, but you cannot forget it.

Andrew Stotz 28:43
Great, great advice. So what is a resource that you would recommend for our listeners something of your own or something that's been valuable in your life?

Amit Kumar 28:53
Okay, so these does that depends on the geography where people are in which particular part of the world what is the size of their investment? But yes, definitely the thing what you're doing, I was discussing with my son, and he said, Go, this is some great masterpiece where people talk about successes, but someone is talking about the failures. And it's important to learn from the failures. So people should hear out these kinds of podcasts. What's you're creating? And yes, I went through your website and book so great, great content there.

Andrew Stotz 29:26
Great. Last question. What's your number one goal for the next 12 months?

Amit Kumar 29:31
Number one goal for me is completely aligned to MSME x where I said that I want to list 10 SMEs in the next 12 months because that will create good opportunity for these SMEs as well as at the same time will create opportunity for investors by opening a new asset class and then when I go when I will go and track that in next five years I know the kind of value that will be added to the economy will be will be really interesting. And when I say this, I also want to add that in any asset class, whenever you invest, you need to understand the risk the way we all know. But what is risk risk is that when you try to bet on something which is unknown, and you don't have knowledge about it, so if you start gaining knowledge about something, the risk starts coming down. And that's where, when I talked about the worst investment, I also have the best investment where I have made good amount of wealth, which is because of mind knowledge. So wherever my mind and heart were in sync, and my awareness of that subject or that company, or that domain was good, my investment actually went in the right direction. So if you want to reduce the risk, increase your knowledge, simple.

Andrew Stotz 30:54
Got it? Well, listeners, there you have it another story of loss to keep you winning. If you haven't yet joined the become a better investor community, just go to my worst investment ever.com right now to claim your spot. As we conclude on it, I want to thank you again for joining our mission and on behalf of a Stotz Academy, I hereby award you alumni status for turning your worst investment ever into your best teaching moment. Do you have any parting words for the audience?

Amit Kumar 31:21
No, no, thank you very much and love your listeners by

Andrew Stotz 31:25
awesome and that's a wrap on another great story to help us create, grow and protect our well fellow risk takers. Let's celebrate that. Today. We added one more person to our mission to help 1 million people reduce risk in their lives. This is your worst podcast host, Andrew Stotz, saying, I'll see you on the upside.