BackMakeMyTrip’s bootstrapping period was very educative: Deep Kalra
Deep Kalra talks about how he sustained the business through the crash and his views on the ongoing e-commerce euphoria
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It was a dream start for Deep Kalra when he received a cheque for $2 million (around ₹ 13 crore today) from eVentures back in 2000 when MakeMyTrip was nothing more than an idea. But within a year of operations, the company was rocked by the tremors of the dotcom crash and the fallout of 9/11. Kalra made sure that MakeMyTrip was among the few travel companies that not only survived the meltdown, but went on to list in the US. In an interview, Kalra talks about how he sustained the business through the crash and his views on the ongoing e-commerce euphoria. Edited excerpts:
How and when did the idea of MakeMyTrip occur to you?
I wanted to do something of my own after working for eight years and the Internet was a driving force. So, if it was not for the Internet, I would not have taken the plunge. I was certain that the Internet would change the way people bought and sold services, which today has come true.
The Internet also provided a very egalitarian platform on which it was easier to start up a business. Earlier, it was fairly cumbersome and difficult, and a lot of investment was required. Even in the IT (information technology) sector, one needed scale to attract external funds. I was fascinated by the transformational changes that were going to take place in the ecosystem because of the Internet.
How many ideas did you shoot down before MakeMyTrip happened?
I had two ideas—one was online stock broking and the second was online travel. Online stock broking was somewhat pragmatic and has done well. But I strongly believed this would primarily belong to a financial institution or a bank. I was very fond of travelling; I still am. So, online travel seemed more exciting and for it you did not need the backing of a big company.
What was the vision of the company when you started out?
The first five years we only served non-resident Indians (NRIs) travelling to India.
It was April 2000 when we started. I remember writing the vision document myself. The preferred portal (saying portal was fashionable then) for people to travel, to and fro, and within India. We pretty much lived true to our vision. It was a wide vision statement.
Back then the company was called International Web Travel. There was no brand name. It took us six months to build the website and to have tie-ups with airlines, etc.
What was the Internet experience like during those days?
It was terrible! A very slow connection, it was unreliable, it kept breaking down...it used to be a dial-up connection. I used to write my entire business plan offline, working late nights, and then I would mail it to myself in the middle of the night when the connection was slightly better. It was not like there were no Internet connections, but having one was a big deal. Gradually, things got faster and faster.
When did you have your first tryst with the Internet?
There were two personal instances which convinced me that there was a model out there in the Internet. It was in 1999, when my wife and I had booked a holiday to Phuket. My travel agent showed me brochures, some properties online, but there was a lot of back and forth and it was taking too much time. I decided to go online myself and saw hotels that were cheaper and instantly available. I booked one from Asiarooms.com. We were saving $10 per night, and even though we were quite nervous, we decided to take a chance. But it worked out absolutely fine and that is when I realized that there was a supply chain issue, and there were a lot of intermediaries which the Internet was erasing and that was powerful.
The second was when I was selling my wife’s second-hand car. I got online on Automartindia and got more money than what I was getting offline. It was so easy and convenient.
Both these instances convinced me that there are people who are ready to buy online, and that it’s cheaper and convenient. It was a compelling argument. And I thought businesses being conducted over the phone can migrate pretty soon to the Web.
Was the market ripe for online travel?
Within three months of the launch, it was clear to us that people in India were not ready to book online; they wanted to search and look. However, people in the overseas markets, particularly NRIs, were comfortable buying online. They were already shopping on Amazon, etc. I think a very smart decision we took then was to say “no" to marketing in India. We did not shut down the site, but we shut the marketing completely.
So all the guys who were there…maybe 19 websites including net2travel and Travel Genie ceased to exist because they kept on burning money in India when the country was not ready to buy online. Yes, you can accelerate the market, but I don’t think you can always do a quantum shift in the market.
What changed for travel in India were two big things—first, Indian Railways went online. IRCTC (Indian Railway Catering and Tourism Corp. Ltd) got the average Indian to buy online. People trusted it because it was a government enterprise and it got people appreciating its convenience.
Second, the advent of low-cost airlines. Traditional travel agents did not get their inventory and we saw that as a huge opportunity to leverage technology and give to customers what they wanted. So we aggregated all of it and at the back-end built direct connect with these airlines.
The real take-off for MakeMyTrip was in 2005, when we launched in India.
How different was it to do business in those days?
It was a dream start in 2000. I got early-stage funding on a business plan and got my people in place. I had raised $2 million from venture capitalists (VCs) and I was promised an extra million, which never came because the VCs packed up because of the dotcom crash. eVentures gave us money in 2000, and by 2001, they had disappeared. It happened worldwide and it hit Indian shores, too. In 2001, the bubble burst and everything imploded, and then 9/11 happened.
For travel, it was devastating; we were ravaged. At that time, retaining people was very hard. Raising money was impossible and hiring good people was impossible because we did not have the money to pay. In 2001, we went through our toughest times. It was a trial by fire.
In hindsight, it was probably the best times of our lives...it was a defining period for us. When you are bootstrapped, you really introspect on how much you really believe in your business. I went on for 18 months without drawing a single rupee. Two of my senior colleagues took 50% cuts as they believed in the business. I made them co-founders.
We could see us improving week on week and that is what convinced us that we were on to something. We knew we were moving in the right direction.
How did you survive the meltdown without any promise of future funds?
One way is to raise money, and if that is not possible, one has to cut costs.
When the dotcom bust hit us, senior guys had to take a pay cut...some left us. I urged them to stay, making up for pay cuts with stock. But stock at that time was not convincing and they felt it was too risky. I have no grudges!
It was good they left because we were able to run a very tight ship. We cut people costs, we cut rental costs. We moved from a nice office in Okhla, which was also cheap, to a mezzanine of the same office. It was so small that if I stretched my arms, I touched the roof. It was a long narrow place…like a railway compartment. And we shrunk from 42 people to 23-24 people over a weekend.
The next two years were a sort of jihad till we got two angels who came and invested in 2003-04. One of them was an NRI customer. He just liked what we were doing and gave us $200,000. He had made money in the telecom boom in the US. Another guy was a bird-watcher, an Indian who believed that offline is going to get killed by online. He gave us $150,000.
In 2005, a venture capital firm bought them out when we got venture capital funds for the India launch. I had sworn to myself that I will not take venture capital money ever after my first experience with them. But then I realized I needed money for branding in India, so I took money from SAIF (Partners).
How were your sales impacted during the meltdown?
The NRI market did not get impacted as much as we thought it would. We realized that the NRI market was not the tourist market, but it was a friends and family market. They were coming to India for the annual pilgrimage, to visit parents, deaths in the family, births or weddings. So it was a highly inelastic business. That is what worked for us; the NRI market was like a godsend.
How was the regulatory environment back then?
Unlike e-commerce, travel has always had preferential treatment. Thanks to hotels, the travel industry has always been a 100% FDI (foreign direct investment) sector and we got our approvals under travel and tourism. So unlike what is happening with e-commerce or what has happened with e-commerce, travel was not so bad.
Were there any weak moments? Did you ever think of closing the business?
There were quite a few and one has to be honest. I am a rational person and there were times when I would question myself. I had a good job before it; my wife and I had savings. With a good degree in hand, you knew you could get a new job. But an entrepreneur should not worry about not succeeding. Being a failed entrepreneur is a pretty useful thing.
When such thoughts erupted, I would discuss them with colleagues and they would have similar doubts. So we introduced something that I called “discipline and depression". We decided we will take a call every month whether we are in or out and then the other 29-30 days we will only focus on work. So there was one day which we called depression day—we discussed everything, went out drinking and asked ourselves “karna hai ya nahi?" This way we kept going for months and before we knew it we were nearing break-even.
We started making money in 2003. At any point, we had cash for a month or two at the most. It was quite crazy. Now when I look back, I am surprised. There are some things you can do only in your 30s, but can’t in your 40s. I am 45 and it is very hard to do that kind of stuff now.
What is the new breed of entrepreneurs like?
Phenomenal...much better than before. They are mature beyond their years. Today’s 20-year-olds and 30-year-olds are yesterday’s 40-year-olds. They have got maturity, wisdom, passion and they have got money.
Do you see any from the current set of Internet companies going for an initial public offering (IPO) soon?
It is a tricky time to list because private valuations are so high. They won’t get these valuations when they go public. There will be a little settling down before they list. But IPOs will happen.
If you had to build another e-commerce company, what would it look like?
It would be a people-light company. I would like to create something with double-digit employee strength. I am very impressed with what WhatsApp has done. So it would be essentially a product play.
I would do it slightly differently and, of course, on the mobile.
Any regrets?
It has been a very fulfilling journey. I think the bootstrapping period was very educative and it was the real test of how much we believed in the idea. Maybe if I was to do it all over again, I would have one co-founder to complement by skills. And in my next birth I want to be born a techie.
What is in store for MakeMyTrip’s future?
The market is ready to take off. I think what happened in the air ticket market a few years ago will now happen on the hotel and travel package side. So we are getting ready for it.
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