It was early 2000. Given the buzz around dotcom, every business plan was getting funding. Neeraj Bhargava from eVentures reached out to me. We met at Crossroads Mall in Mumbai. He liked what he heard. We worked out the term sheet on a napkin! For $2 million, they roughly got two-thirds of the company. It was a fantastic start. I was raring to go. I would stay up through the night combing through Expedia and Travelocity. I wanted MakeMyTrip to be the defining portal for people to book travel to India, from India and within India. I was naïve enough to think that I could do it alone but realised quickly that I needed to get a team in place, and so I did. I don’t believe in luck but I believe that if you work hard, things fall in place and it did, at least initially. Several sleepless nights later, we went live on October 7, 2000.
Much of an entrepreneur’s success depends on the team he builds. You always have to hire people who are smarter than you. I was very fortunate that some of the initial hires were not only incredibly smart, they stood by me through the toughest of times. In fact, how Keyur [Joshi], Sachin [Bhatia] and Rajesh [Magow], who joined as employees, went on to become the co-founders is an interesting story. Six months after the launch, we realised that Indians were only searching but not booking. They weren’t confident of paying online. So one of the smartest things we did early on was to stop our marketing efforts in India. We decided to focus on the NRI market in the US and build a profitable business. It worked out well. We hit our initial milestones and were ready for the next million.
That’s when eVentures decided to pull the plug on us. They told us the LPs (limited partners) wanted their money back. I didn’t even know who an LP was. I was that naïve. They said I could either return the money or buy the company back. I told them that if I had the money in the first place I would have never gone for funding. Anup [Gupta], Neeraj and Sandeep [Singhal] told me that they still believed in me and the business. This was just a business compulsion. They promised to angel fund me to buy back the stake. I had some savings that I had set aside for a house. I met Sanjay asking for his advice and he asked me how much money I had. With all my savings and help from angels, friends and family I could come up with #40 lakh-#50 lakh. He told me that I should negotiate and offer #40 lakh. I thought he was crazy, but I still made the offer. I felt like an idiot when they accepted without a fight! It then dawned on me that I could have bought them out for much less. They weren’t bothered about the price and just wanted a clean exit. This was the biggest learning for me: when you negotiate, you always have to put yourself in the other person’s shoes and understand what they really want. I always kept that in mind for all my future negotiations.
After buying the company back, it was time to talk to my team. We just had enough money to survive for two months. I remember it was a Friday. We were about 42 of us then. I told them that things were going to be difficult for us financially, but I believed that we were still on the right path. While there would be no salary cuts for juniors, senior guys would have to take a pay cut, but I promised to compensate the loss of pay with stock. I told them to take the weekend off, think about it and come back on Monday with their decision. On Monday morning, the team had shrunk to 24. Some had family compulsions which didn’t allow them to take a cut. Rajesh, who was our CFO then, was one of them. He just had his second child and was the only earning member. I let him go on the condition that the minute we could afford him, we would make an offer. He went on to angel fund us and that’s how he became a co-founder. Keyur who was the COO and Sachin who was heading marketing took substantial pay cuts and got stock in return and became co-founders. I decided to go without any pay. Our office occupied the first floor and the mezzanine of a building. As the team shrunk, our office, too, shrunk into the mezzanine.
But I knew I was onto something. The conversion rates were getting better. We were getting a lot of repeat customers; it brought down the cost of customer acquisition. I knew that one year in business was nothing in India, because it takes time to build a business here. So, I had to keep going.
2001 to 2003 was one of our toughest periods. We never had cash that would last beyond a couple of months. Just as we were emerging from the dotcom bust, 9/11 happened. While it did have a significant impact on travel, we survived with minimum damage. I am pretty sure the first person to get on a plane after 9/11 was an Indian! For us, life tends to move on. That was the beauty of the visiting friends and relatives (VFR) segment and we were lucky to be in this segment because demand was inelastic. Customers were visiting parents and friends, coming down for marriages, childbirth, bereavement or travelling for jobs. That couldn’t stop because of 9/11, so we were least impacted. But since we were bootstrapped, we had to make sure that every sale was profitable.
I still get goosebumps when I think of those days. We used to sleep in the office and when our phone lines would be down, because the cables had been bitten by rats, we would go searching for repair guys in the middle of the night during winter, offering them rum as an incentive to wake up and fix our lines! Keyur would teach the guys how to combine fares and sectors to get the best deals and on nights when things were slow, Keyur would talk about rafting. We would put the chairs together and Keyur would teach the boys how to river raft. We did everything to keep our spirits up. We broke down our monthly targets into shifts. So if we had to do 1,000 tickets more in a month, we would break it down to about 35 tickets a day. We ran three shifts with 12-18 people, so we would tell them, “All you have to do is sell one extra ticket.” Our magic was to combine fares and sectors that have never been combined before. You have to be technically smart to do that because the Amadeus system would give you 100 options.
We could afford only 16 lines and couldn’t get the 17th. So, we would move customers from a call to live chat. We had the best sales guys who could handle four customers at once toggling between windows. Jasmeet [Singh] was one of our stars. He joined us, when he was in the 12th standard, as a part-time data entry guy to earn some extra bucks after college. He would observe the sales guys as they worked and one night, when one of them called in sick, Jasmeet stepped in and did better than most of our regular sales guys. He never looked back. Today, he is one of our VPs. The success of MakeMyTrip is built on the hard work of people like Jasmeet. We would celebrate every small win. If we achieved our six-month target, the entire team would go rafting. We would take a bus or a train, just a bare-bones trip but it was so much fun. People would even pitch in if we were short of funds. You can never re-create bootstrap and the bonding it brings. Those days were really special.
Between 2003 and 2004, we got our next round of angel funding. One of them was an existing customer in the US called T Maheshwar who made his money in the telecom era. He used to regularly book his tickets through us. During one of his bookings he told one of my agents that he wanted to meet me. I wasn’t really sure why he wanted to meet me but we met anyway. He told me that he liked what we did and was really keen on investing in the company. So he wrote out a cheque for $200,000. Vinod Dua, a Chartered Accountant I knew, brought in my next angel investor, Raj Singh from Bharatpur. He was one of the best-known birdwatchers in the country. He was living in London then and didn’t even know the T of technology. But he was seeing everyone move online. He told me, “The Internet is the future and I want to be a part of it.” He invested $150,000 in the company.
After the eVentures fiasco, when we were left high and dry, I had sworn to never take VC funding. In 2005, I changed my mind. One thing was becoming clear, India was opening up with low-cost carriers (LCCs) being launched. With the Indian Railways launching online reservations, people were also increasingly becoming more confident about booking tickets online. So we decided to launch our India operations. Air Deccan ads were everywhere but most of the agents weren’t ready to sell Air Deccan because they didn’t make money on those tickets. We solved that problem using technology — meshing the fares of LCCs with the global distribution system (GDS). Now everything was on offer and that was a big hit. It was a big game changer because for the first time, the power was moving from the agent to the customer. The customer now had the power to call the shots. We were probably the first online travel agency (OTA)to sell LCCs in the world. As we scaled up the India operations, it made sense to look at funding again.
We got term sheets from Sequoia and SAIF Partners. It was a tough choice. The terms were better with Sequoia but I still went with SAIF. I met Ravi Adusumalli from SAIF through my lawyer friend Anand Pathak and we hit it off instantly. He was ready to sign the term sheet immediately. You should always pick investors who are quick decision makers and someone you are comfortable with. Sequoia was more process-driven, so I had to go back and forth to Bangaluru a couple of times and for entrepreneurs, time is money. But I went with my gut. Ravi was keen to buy out all the angel investors and he did. Overall they invested around $14 million and kept investing in every round since then. The best thing about Ravi is that he is very pro-entrepreneur. Whenever I wanted to dilute equity to allot stock options, he would always back me. Once the largest shareholder agreed, the rest fell in line. SAIF completely sold out only two years ago making an impressive $400 million on their investments. But what’s more important is that we still remain dear friends.
The next four to five years was a great time for us. Our gross merchandise value (GMV) grew about 20x from about $30 million in 2005 to $600 million by the time we became a listed company. We were profitable. Sanjeev Bikhchandani was on the board and suggested we look at an IPO. He told us that Naukri was at a similar stage when they went in for an IPO. Sanjeev is my mentor, philosopher and guide. I met him when I went for CAT classes where he would teach. He pretty much is the gold standard for corporate governance. He was on the board from 2005 to 2010 but didn’t take any remuneration and when we offered stock, he said it should be issued in Info Edge’s name, since he was consulting on their time. Apart from drilling into us that there is nothing more important than solving customer problems, he also helped us go offline in 2008. Though our foreign investors baulked at the idea, it helped us gain customer confidence in smaller cities and towns. For their first booking, customers would visit our store; they would call us the second time. By the third booking, they were comfortable enough to move online.
While we all agreed that it was a good time to list, our board was split down the middle on where to list. Info Edge’s Sanjeev and Sanjeev Aggarwal from Helion felt it was better to list in India; Tim Guleri from Sierra Ventures and Ravi felt it was better to go for a Nasdaq listing. I took a week to speak to a lot of people including Ajit, Akhil Gupta of Airtel, Mohandas Pai of Infosys — almost everyone who had come out with an IPO in hi-tech — to get their views. Ctrip of China had listed in the US in 2006 and I spoke to one of their founders, Neil Shen. It was clear that investors in the US understood the model really well and rewarded growth without being fixated on profitability. So we decided to list on the Nasdaq. In the run-up to the IPO, Rajesh and I travelled all over the US meeting investors. It was tiring with nearly 10 meetings a day, but also equally exciting to see the response we were getting. We barely survived on three hours of sleep. We were all set to ring the bell at Nasdaq the next morning when our lawyer got a call saying the SEC had a query we had to respond to. We spent all night digging up the information required and finally it was resolved at 7.30 am. We had to be at Times Square at 8.30 am and made a mad dash for it. Phew! That was a close call. It was overwhelming to see the response from our well-wishers and investors who made it there that morning. The floor was packed. I was so glad I had called Amrita the previous day to fly in last minute and join me as we rang the bell. There was no one better I’d rather share that moment with. The dream just kept getting better. The stock surged 90% on listing. Oh! how we partied the next day on the yacht we rented! God knows we deserved it!
The IPO changed a lot of things for us. Fundraising became a lot easier and the biggest advantage was the ability to attract top talent. Infosys was my role model, so when we listed, about 70% of our folks had stock.
In 2015, discount wars were at its peak. It was time to bring in a strategic partner. We had a lot of interest from the big boys, but we decided to go with Ctrip because they had a lot of similar experiences dealing with choppy markets and discounting wars. In January 2016, they invested $180 million in the company.
We were already at loggerheads with Ibibo fighting for market share, particularly in the hotel business. Initially, we did take them lightly. We felt that they were just playing the discounting game and not creating value. But they were really aggressive and kept investing. Their unit economics was terrible but they were private, so it didn’t matter. The bane of being public is that one investor will say “Profit kya hua?” and the other will say “Growth ko kya hua?” so we are balancing both all the time. I realised Ibibo had deep pockets and they were not going to stop discounting anytime soon. I reached out to Naspers through Lee Fixel of Tiger Global to see if we could combine forces instead of bleeding each other, but nothing happened. The service tax case filed against both of our companies in early 2016 brought Ashish Kashyap (Ibibo’s co-founder) and me together. It was such a nightmare. I couldn’t believe that we, as aggregators, were arm-twisted to pay service tax on hotel bookings. We didn’t even get a show cause notice! They came to our office and arrested our VP (finance) for tax evasion. It was one of the lowest points in my life. We fought back hard and eventually won the case in the High Court. The judge not only took the Directorate General of Central Excise Intelligence to task for the incident, he ordered them to pay the money back with interest. But the case moved to the Supreme Court on their appeal. The good thing was that it got Ashish and me talking. I remember we were at an American Express party. We both had deep pockets and could continue the discount wars. However the smart thing to do would be to join forces and stop the cash burn. He was open to it and soon our boards got involved. We finally found some middle ground and the deal was struck. MakeMyTrip acquired 100% of Ibibo and redBus, and Naspers in turn got 40% of MakeMyTrip and also gave us $85 million. It definitely got the market’s approval — the market capitalisation which was $1.2 billion before the merger, is $3 billion now! So we are definitely moving in the right direction. There is never a dull moment in our business. I always believe that you might regret the things you don’t do in life, not the things you do. I am glad that I persevered through the dotcom bust, an investor pullout, an industry slowdown and discount wars. It has been an incredible journey so far, but the best is yet to come.
This is the second of a two-part series. You can read part one here.