report redbus

8/10/2019 Report Redbus

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Contents

Table of Contents

The red Bus sale: A cautionary tale..........................................2

Company profile..........................................................................2

Where is started?..........................................................................2

Achievements over the years.......................................................5

ear of chan!es "2#$%&................................................................'

Appointment of (r. Alo) *oel................................................'

Ac+uisition ,y -,i,io !roup......................................................'

mployee reaction post ac+uisition.........................................../

The road do0nhill......................................................................../

The math ,ehind 13s............................................................$$

The 4ar) 1ide of (er!ers Ac+uisitions................................$6

5 non7o,vious 8essons from redBus Ac+uisition......................$5

9eal 3 factor for any firm is people........................................26


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The red Bus sale:A cautionary tale

Company profile

-t 0as founded ,y three en!ineers 3hanindra 1ama Charan 3admara;u and

1udha)ar 3asupunuri 0ho studied to!ether at the B-T1 3ilani and later 0or)ed in

various companies in Ben!aluru.

1tarted modestly in Au!ust 2##5 0ith a fe0 seats from one ,us operator red

Bus today is one of the most successful online ,us tic)et ,oo)in! a!encies. Today

it has one of us had this entrepreneurial ,u! earlier. (y am,ition 0as to ,e an

electronics en!ineer and - 0as happy 0or)in! for Teas -nstruments in Ben!aluru

after passin! out from B-T1 3ilani.

The seed 0as so0n 0hen - couldn@t !et a ,us tic)et to !o ,ac) to ydera,ad durin!

the lon! 4i0ali 0ee)end in 2##5.


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As - had no other 0or) - 0ent to a ,us tic)et a!ent and as)ed ho0 the 0hole

process 0or)ed. - felt there mi!ht have ,een a ,us 0hich 0ent vacant and he didn@t

)no0 a,out it.

When he eplained ho0 ,us tic)et ,oo)in! 0or)ed - fi!ured out that there 0ere

many inefficiencies in the system.

1uppose there are hundreds of ,uses from %# operators runnin! from Ben!aluru

to ydera,ad the a!ents do not have access to all the operators.

When an a!ent !ets a customer he calls a ,us operator to find out 0hether there

are tic)ets availa,le. The operator loo)s at the chart and tells him the num,er of

vacant seats.

The num,er of a!ents a ,us operator can have is limited as he needs to identify all

,y phone. The a!ents also have only limited num,er of operators to 0or) 0ith.

Then the customers cannot al0ays choose the seats as there is no transparency.

Another pro,lem is as the fares are not pu,lished there is no fied fare for the

customer.

But the ma;or pro,lem 0as ,oo)in! return tic)ets. very time you 0ent home you

had to call someone and as) them to ,oo) the return tic)ets from there.


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At that time travellin! from Ben!aluru to ydera,ad 0as li)e travellin! ,et0een

t0o countries.

Bein! an en!ineer 0hen you see a pro,lem you start thin)in! a,out solutions. -

felt computers could solve these pro,lems easily.

At that time it 0as very ecitin! for us to find a solution for such a pro,lem that

involved thousands of people.

-n anuary 2##' 0e " the seven of us& 77 divided the 0or) amon!st us and started

0or)in! on 0ee)ends on the pro;ect.

When the prototype 0as ready 0e 0ent to the ,us operators and tried sellin! it to

them ,ut they 0ere not even 0illin! to ta)e it for free. -t 0as li)e 0e 0ere tryin!

to distur, the status +uo. We didn@t )no0 0hat to do.

That 0as 0hen 0e heard of Ti Ben!aluru and 0e 0ent to them 0ith the ,usiness

plan. They !ave us three mentors to advise on 0hat to do. they !ave us the idea to

start a ,usiness of our o0n. They !ave us assi!nments every 0ee). -t 0as li)e

doin! a mar)et survey. We 0ere very prompt in doin! all the assi!nments as 0e

felt 0hen such ,i! ,usinessmen 0ere ta)in! time out to help us 0e also 0ould ,e

meticulous in our 0or). We collected information such as num,er of ,uses the

num,er of routes the avera!e price of a tic)et ho0 people ,uy tic)ets the profile

of customers ho0 much commission a ,us operator pays to an a!ent etc.


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-t may not ,e comprehensive ,ut it !ave us a !eneral idea of the industry. ven

today 0e continue to study the industry and 0e cannot stop.

By then only three of us 0ere left to do the 0or). As a result of 0or)in! every

0ee)end and collectin! so much information it ,ecame a ,usiness for us 0ithout

even them tellin! us. We started in Au!ust 2##' 0ith 9s 5##### 0hich 0as the

savin!s of the three of us. ne room of the house 0here 0e stayed 0as our office.

-n the mornin! 0e 0ould )eep the other parts closed so that the room loo)ed li)e

an office.By no0 three more people 0ho 0ere youn! relatives of ours had ;oined

us to help out.

Achievements over the years

Business ma!aDine East Company recently released its 2#$2 list of the World@s 5#

most innovative companies. ne of the companies to ,e featured on the list is the

redBus an online ,us tic)etin! company.

Also they 0ere re0arded ,y

F Business World 7 Top % enterprises in -ndia

F Eor,es 7 Top 5 hottest start7ups

F All World >et0or) 7 -ndia@s fastest !ro0in! company

F 1tar a0ard achiever 7 outh (ar)etin! forum


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Year of changes (2013)

Appointment of Mr. Alok Goel

-n cto,er 2#$2 redBus appointed (r Alo) *oel as Chief 3roduct fficer

(r. Alo) Was ,efore 0or)in! 0ith *oo!le as 3roduct (ana!ement havin!

responsi,ility 9esponsi,le for monetiDation of *oo!le@s 4isplay Ad >et0or)

"a.).a. Ad1ense for Content&. Bleedin! ed!e innovations around ne0 Ad Tar!etin!

solutions -nterest Based Advertisin! Advertiser auto7optimiDation products. $2

pendin! 3atents in Ads around interest ,ased advertisin! contetual ads.

Ad1ense. At the time of relocatin! to -ndia he had another offer from e7commerce

retailer Elip)art ,ut chose to !o ahead 0ith redBus insteadGat a si!nificantly

lo0er salary. e too) the pay cut ,ecause of the 13s. 3lus he 0as !iven to

,elieve ,y 1ama and the ,oard that here 0as a company that could ma)e him a

millionaire 0henever it 0ent pu,lic or sold out.

Acquisition by Ibibio group

-,i,o *roup a su,sidiary of 1outh African mass media company >aspers 8td has

ac+uired 3ilani 1oft 8a,s 3vt. 8td for H $%5.i,i,o lar!ely focuses on air tic)ets and

hotel ,oo)in!s. The ac+uisition of redBus !ives the company access to customers

0ho do not travel ,y air said Ashish Iashyap chief eecutive of -,i,o !roup.

9edBus 0ill ,e run independently and operate as a separate ,usiness. -ts founders


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and mana!ement team 0ill continue 0ith the firm. Eounded ,y 3hanindra 1ama

1udha)ar 3asupunuri and Charan 3admara;u in 2##' redBus has !ro0n to ,e the

country=s lar!est ,us tic)etin! service sellin! tic)ets 0orth more than 9s.'## crore

on over $#### ,us routes in fiscal 2#$2. -ts revenue that year 0as 9s.%5# crore.

(um,ai7,ased investment ,an) Avendus Capital 0as the adviser on the

transaction. -nvestors in redBusG1eedfund -nventus Capital 3artners and elion

Jenture 3artnersGhold a little over 5#K in the company and have committed to

invest 9s.6% crore. 9edBus has only utiliDed 9s.L crore of this corpus till date said

3ilani 1oft 8a,s chief eecutive officer 1ama. n the ,asis of the amount that

0ent into the company and the returns offered no0 redBus is !ivin! the hi!hest

returns ever offered throu!h an (A "mer!er and ac+uisition& transaction in the

consumer -nternet space he said. Thou!h other online travel a!encies such as

(a)e(yTrip.com and atra.com also sell ,us tic)ets redBus dominates the

,usiness. 9ival 0e,sites sell a fraction of the tic)ets redBus does. -nvestment

,an)ers say the ac+uisition is an affirmation of the !ro0in! acceptance of -ndian

consumer -nternet companies !lo,ally. This transaction sho0s that -ndian -nternet

companies can attract ,uyers from overseas said 4eepa) 1rinath director

Alle!ro Capital Advisors an investment ,an). Accordin! to 1rinath 0hat is

encoura!in! is the interest of a company li)e >aspers in -ndian firms. >aspers is

)no0n to pic) up mar)et leaders in emer!in! mar)ets. They invested in Chinese


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-nternet firm Tencent -nc. in 2##$ and it has !ro0n into a multi7,illion dollar firm

today he said. -n Ee,ruary redBus launched a mo,ile application for Android and

Windo0s phones under the !uidance of chief products officer Alo) *oel 0ho

;oined the company in >ovem,er from *oo!le -nc. 0here he 0as headin! search

and mo,ile products. The i,i,o !roup=s eistin! travel assets include *oi,i,o.com

a travel a!!re!ator and TravelBouti+uenline a ,usiness7to7,usiness travel

service. We 0ere 0or)in! 0ith redBus and 0ere 0itness"in!& traction !ro0th on a

daily ,asis Iashyap said. We realiDed that if 0e 0anted to scale 0ith a

multiplier effect in the ,us tic)et space (A 0as the 0ay out... We could ,uild

somethin! li)e this on our o0n ,ut redBus has a net0or) effect due to its

relationship 0ith ,us o0ners and operators and ,rea)in! that is difficult he

added. The success of redBus helped precipitate a shift in -ndian start7up investors=

aims from concept modelsGimportin! a 0innin! M1 modelGto start7ups that

are uni+uely local said 3ara! 4hol a partner 0ith -nventus Capital. 1outh Africa=s

>aspers has a trac) record of esta,lishin! ac+uirin! and !ro0in! ,usinesses in

emer!in! mar)ets.

Employee react ion post acquisition


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Alo) *oel the company=s chief operatin! officer "C& had put in his papers. 1o

had 1atish *idu!u the company=s chief technolo!y officer. *oel 0asn=t the only

one 0ho had resi!nedN three mid7level mana!ers had too. At the company=s

head+uarters in Ban!alore the scene 0as one of total chaos of aniety and an!er

G to0ards 1ama and -,i,o ta)in! over. they left 0onderin! if 1ama had really

done it. 4id he consciously deprive them of their stoc) options so that he could

poc)et all the money? 4id he on purpose draft the employment contracts of senior

eecutives li)e *oel and *idu!u in such a 0ay that they 0ouldn=t see a dime?

Why did the a!reement not have an accelerated vestin! clause? An accelerated

vestin! clause provides for employees to receive some or all of the unvested shares

at the time of an ac+uisition or an initial pu,lic offerin! "-3&. An 13 is a

,enefit plan intended to encoura!e employees to ac+uire shares or o0nership in the

company.

The road donhill

T0o 0ee)s ,efore the transaction 0as pu,licly announced 1ama ,ro)e the ne0s to

his top mana!ement eecutives. They 0ere shoc)ed. redBus had ,een in the

mar)et only to raise funds and some of these eecutives includin! *oel had made

presentations to potential investors. The thou!ht that redBus 0ould ,e sold hadn=t

even occurred to them. 3eople 0ere not happy. (ore so 0hen they 0ere told that


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they 0ouldn=t ,e ma)in! money from the deal. A la0yer=s opinion 0as called for

,ut they 0ere told that the proposed sale 0ouldn=t tri!!er accelerated vestin! of

their 13s. >o0 they 0ere really miffed.

-t 0ould ,e fair to say that -,i,o=s Iashyap and 1ama had anticipated this

some0hat. Iashyap particularly 0as )een on retainin! the senior mana!ement.

But !ivin! them cash 0as not an option. They could ta)e it and leave. -nstead he

offered salary hi)es of at least 5#7'#K stoc) re0ards in >aspers and retention

,onuses. The retention ,onuses 0ere e+ual to the value of the 13 a!reements

only that the payment 0ould not ,e made as and 0hen the options vested ,ut at

the end of the financial year in 0hich they vested.

And then there 0as *oel=s promotion. -,i,o told 1ama that they 0ere loo)in! for a

ne0 C. 1ince 1ama 0ould have to eit the company at some point 0ithin the

net t0o years a C should come in early and pic) up the ropes. 1ama thou!ht it

0ould ,e a !ood idea to promote *oel. 1ure *oel lac)ed the eperience havin!

0or)ed at the company for only ei!ht months ,ut he deserved the chance. The

team from -,i,o 0as not very sure ,ut 1ama persisted. *oel himself 0as up for

the assi!nment 0hen 1ama reached out to him 0ith a revised offer. 1ama spent the

net fe0 0ee)s tryin! to push *oel=s case.


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3romotin! a person less than a year old in the company 0ould involve a chan!e in

reportin! structure and could rile a fe0 0ho had spent more time at the company.

As epected some employees protested. 1ama fi!ured a 0ay around this pro,lem

0ould ,e to meet all the people individually and try and convince them. But that

0ould need more time. *oel 0as !ettin! impatient. Another 0ee) passed. A day

,efore leavin! for 8ondon 1ama announced *oel=s promotion 0hich had ,een

effected 0ee)s earlier in an email. 8ess than ei!ht 0ee)s into the position of C

*oel resi!ned. And then alon! 0ith *idu!u he !ot chatty 0ith a lot of people to

share 0hy he had done it. Erom there it 0as all do0nhill.

The math !ehind "#$%s

A company typically reserves anythin! ,et0een $7$5K of its e+uity for 13s. -t

varies from company to company says (ohini Jarshneya assistant vice7

president at Corporate 3rofessionals a 4elhi7,ased le!al and financial advisory

firm. 1o for pu,lic companies it can ,e as lo0 as $K ,ut in start7ups it is

usually hi!her ,ecause you 0ant more people to have o0nership in the company.

When redBus 0as founded in 2##5 1ama had allocated $#K of its e+uity for

13s. And the !round rule for 13s is ris). 1o hi!her the ris) hi!her the e+uity


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offered. This means that people 0ho come on ,oard early !et more. Those 0ho

;oin later !et less. Bet0een the time redBus 0as founded in 2##5 and its

ac+uisition in 2#$% the company had already issued 'K of its 13 pool. To put

this in perspective ima!ine a situation 0here you are ei!ht years old in the

company and 'K is already !one. ou are left 0ith 6K and you don=t )no0 ho0

lon! the company=s life cycle is. 8et=s for a moment assume %# years. To put it

simply that=s 6K for 22 years.

Eor an ei!ht7year7old start7up to have consumed 'K of its 13 pool is fair

says Jarshneya. 1he adds that in nine out of $# cases companies !ive 13s to

people 0ho are directly lin)ed to the or!aniDation=s !ro0th. -nevita,ly these are

people at the top she says. The lo0er you !o do0n the corporate ladder the more

it is a,out cash in hand and not 13s.

-n 2#$% redBus employed a,out '## people. f this 25# 0ere call centre

eecutives. Another $## 0ere employees in the field dealin! 0ith ,us operators.

A,out $5# people 0ere in product technolo!y and mar)etin!. f these $5# people

22 had 13s. That=s rou!hly $5K. 1ome companies !ive 13s to more

employees and some to fe0er. A!ain there=s nothin! unusual a,out the num,er.

Mnderstandin! ,y eample mentioned ,elo0


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Ass&mption'

Total e+uity allotted to 13s scheme is $5####O7 !rants

very year total of $#### !rants are allotted

ence till 2#$% total of /####O7 !rants are allotted "'K of total&

Year 1 Year

2

Year 3 Year Year * Allotted

"#$%

Year of

,rant

10- 20- 30- 0-

200* 2##' 2##< 2##L 2##/ $####

200. 2##< 2##L 2##/ 2#$# $####

200/ 2##L 2##/ 2#$# 2#$$ $####

200 2##/ 2#$# 2#$$ 2#$2 $####200 2#$# 2#$$ 2#$2 2#$% $####

2010 2#$$ 2#$2 2#$% 2#$6 $####

2011 2#$2 2#$% 2#$6 2#$5 $####

2012 2#$% 2#$6 2#$5 2#$' $####

2013 2#$6 2#$5 2#$' 2#$< $####

T$TA 0000

The 4ar5 #ide of 6ergers 7 Ac8&isitions

When companies !et ac+uired founders and early employees ma)e money. At least

that=s ho0 it is made out to ,e. There are many happy outcomes to an ac+uisition.

1ome insta,ility and chaos is part of almost every mer!er ac+uisition. As the

ecommerce industry consolidates smaller deals pic) up if you are a startup

employee it 0on=t ,e a ,ad idea to ,e ready for it.


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-n lar!e firms 9 readiness for (A is ta)en +uite seriously they tell me. 3re

post ac+uisition surveys communication processes and months of plannin!

inte!ration ma)es it smoother althou!h there is al0ays some attrition.

But for startups none of this eists. At an or!anisational level there is very little

readiness. f course in many cases the founders are considerate enou!h ,ut many

mer!ers these days are shot!un 0eddin!s. Time is often a luury no one can afford.

Eounders themselves are helpless in many cases.

This ac+uisition 0as one of the ,est thin!s that happened last year. o0ever

after redBus 0as ac+uired for 9s L## cr ,y 1outh African media con!lomerate

>aspers some senior employees +uit ,ecause their shares hadn=t vested and there

0asn=t an accelerated vestin! option.

-n many cases the effect of an (A on employees depends on the 0ay a deal is

structured. 1ometimes the deal specifies that the employees stay ,ac) for a period

or for!o their earnin!s from the deal. Eor lo0er level employees this hardly

matters.

1ometimes there isn=t much you can do. ou could try and ne!otiate ,etter terms

0ith the mana!ement. r your founder.


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To ,e fair the positive outcome of the ac+uisition for employees is that all redBus

employees !ot a hi!her salary as >aspers levelled their pay 0ith company

standards.

* nono!vio&s essons from red9&s Ac8&isition

The ac+uisition of 9ed,us 0as formally announced last 0ee) it 0as a

,loc),uster deal ,y any metric and predicta,ly spar)ed off reams of print sin!in!

hosannas to the founders "undou,tedly richly7deserved& and eistentialist +uestions

on 0hat this means for the P-ndian startup ecosystem=.

While all of this 0as !reat a sli!htly7deeper dive into the deal contours reveal

some fascinatin! facets. - rec)on that it mi!ht ,e useful to parse throu!h these and

present them as a series of non7o,vious lessons for other -ndian entrepreneurs.

esson 1' :ire a layer d&ring yo&r f&ndraise

redBus had raised H L million dollars over three rounds of fundin!. While this is a

fair amount of money especially so in the -ndian contet it is ,y no means a lar!e

sum and is a fraction of the amounts raised ,y other -ndian startups. et the sta)e

of the founders 0as very small at the time of the ac+uisition less than $5K ,y

some accounts.


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While it mi!ht ,e fair to surmise that they diluted a lot of their sta)e ,y

undersellin! the valuation at the time of the fundin! rounds the real reason is

else0here.

The real reason 0hy the founders ended up 0ith as lo0 a sta)e as they did can ,e

traced to the fact that their first round of fundin! had a full ratchet anti7dilution

clause "Qsource&. Anti7dilution is a fairly standard investment term 0hich

essentially safe!uards the investor if a su,se+uent round is done at a lo0er

valuation.

The standard 0ay in 0hich this clause is enforced is ,y follo0in! a mechanism

called 0ei!hted7avera!e method this is a !enerally accepted 0ay that is

e+uita,le to ,oth the investor and the entrepreneur.However, the Redbus investor

agreement had a full ratchet mechanism which is a death spiral to the

entrepreneur.

- am not !oin! to !o into the minutiae of these clause,ut this avatar of the clause is

0idely re!arded as somethin! that no entrepreneur should accept as this article

eplains as it has a severe dilution impact on the entrepreneur=s sta)e if a

su,se+uent fundin! round happens at a lo0er valuation "0hich is eactly 0hat

happened 0hen 9ed,us raised their second round&.


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- am not !oin! to speculate on 0hether the 9ed,us founders understood and

appreciated the nuances of this clause 0hen they si!ned the ori!inal a!reement ,ut

one thin! is for sure they didn=t use a la0yer for their transaction. The 9ed,us

founder actually 0ent on record to eplain ho0 they did this deal 0ithout a la0yer.

As entrepreneurs 0hile it is nice to trust investors and 0or) 0ith them on !ood

faith it is suicidal to do so 0ithout havin! a la0yer in your o0n corner to

safe!uard your interests. Any half7decent la0yer 0ould have pointed out the

o,vious pitfall in acceptin! a clause li)e this.

esson 2' ;nderstand yo&r investoro0 0hile there mi!ht ,e many reasons 0hy the sta)eholders decided that no0

0as the opportune time for an eit it 0ould ,e an eercise in speculation to fi!ure

out the actual reasonsR,ut 0e do have one clue.


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9ed,us raised their first round in circa 2##' 0hich means that their first set of

investors have ,een 0ith the company for seven years or therea,outs. 1even years

is the avera!e lifespan of most early sta!e funds ,y the end of this period the

fund mana!ers are typically re+uired to provide a return to their investors "83 or

8imited 3artners in venture capital parlance& and 0hile some funds do let 0innin!

horses ride further in the epectation that a si!nificant payoff 0ill come their 0ay

at some point of time in the future as these are unrealiDed !ains it is a far

cleaner option to simply eit the portfolio and provide a cash return to the 83s.

While there is no 0ay to )no0 if this 0as the primary driver for acceptin! the

-,i,o offer there is every chance that the timin! helped line up the stars in 0hich

case the 9ed,us founders mi!ht have ,een prompted to ta)e the offer to provide a

realiDed return for their early investors.

As entrepreneurs 0hat 0e need to )eep in mind is that investors are ,ound ,y a

timeline too and 0e need to )eep these imperatives in mind 0hen 0e ta)e the

decisions that 0e do

esson 3' =ndia>9harat is a to&gh mar5et ;nderstand yo&r mar5et


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There is a lar!ely7held ,elief that -ndia is still in the nascent sta!es of mar)et

penetration for e7commerce and specifically for ,us travel too there is a lot of

headroom to !ro0 "online is only around 5K of total transactions& ,ut there are

t0o points 0hich seem to imply that perhaps at least some of this ,ullishness is

un0arranted:

1lo0do0n in !ro0th: 9ed,us had revenues of 9s. $2 crores "H2 million& in E$$

this !re0 to 9s. %2 crores "H5.6 million& in E$2 implyin! $


20/27

media vehicles includin! TJ ads. This implies that 9ed,us felt that or!anic !ro0th

0as no lon!er sufficient on its o0n and the num,ers had to ,e ,olstered ,y push

mar)etin!.

Both of these points individually and to!ether tell us is that customer ac+uisition

0as not ;ust slo0in! it 0as ,ecomin! increasin!ly harder and more epensive.

While it mi!ht ,e nice to tal) a,out the enormous siDe and potential of the -ndian

mar)et it is pro,a,ly not a stretch to conclude that penetratin! this mar)et is ,y no

means an easy tas) and there is a !ood chance that the immediately addressa,le

mar)et is a sliver of the total mar)et. Also as echoed ,y the state of telcos in -ndia

today it mi!ht not ,e too difficult to achieve early success in a cate!ory7definin!

mar)et in -ndia ,ut it is +uite difficult to )eep this !oin! on an on!oin! ,asis over a

period of time.

The other part of this is that as far as profita,ility !oes 9ed,us has ;ust a,out

!otten started they had a ,ottomline of H$##### in E$2 and less than H2

million in E$%. Eor a company that has 2' offices over 5## employees and

millions of dollars of fundin! these results are certainly not anythin! to 0rite

home a,out especially so as it has ,een the mar)et leader and has ,een in

operations for over seven years. While they could have presuma,ly sacrificed


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profita,ility in favor of !ro0th these num,ers are still under0helmin!. A!ain this

could point to the fact that -ndia is a tou!h mar)et in more 0ays than one.

Eor us entrepreneurs it is a clarion call to assessOreassess if it ma)es sense to

attempt an -ndia7only play and if one continues to do attempt to understand 0hat

the mar)et=s natural limits are and ensure that our per7unit economics ma)e sense

0ithin that canva

esson ' @&ndraising in =ndia is hard very hard

By all accounts 9ed,us is a mar+uee -ndian startup the founders have done

0onderfully 0ell to esta,lish a meanin!ful ,usiness and a 0ell7)no0n ,rand and

the company has ,een lauded ,y everyone from the -ndian and international press

to (-T "0hich reco!niDed 9ed,us as one of the most innovative companies in the

0orld&. 4espite this it ,o!!les the mind that the company started its fundraisin!

efforts for its 1eries 4 in >ovem,er of last year and 0asn=t a,le to actually close

that round in the su,se+uent ei!ht months.

ne 0ould have !uessed that it 0ould have ,een fairly trivial for a company of this

stature to raise a ne0 round if it so desired. The fact that it didn=t actually close a

round in ei!ht months from the time they started loo)in! for it can !ive us an idea

of ho0 hard it is to raise funds in -ndia.


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ven thou!h the company apparently !ot ei!ht termsheets for this planned round

the fact that they chose to ta)e the -,i,o offer instead of any of these options

implies that the offers 0eren=t particularly attractive ,y themselves

and empirically so relative to the -,i,o offer.

The lesson is simple if you !et a chance to ta)e money and if the terms are

,roadly e+uita,le ta)e it even if you feel that other thin!s li)e valuation are su,7

optimalS Also )eep in mind that if you are in the mar)et to raise funds it is a lon!

and time7consumin! process so don=t !et into it in an unprepared or half7hearted

manner and don=t leave it for too late.

esson *' =f yo& are an investor re8&iring traction to invest in a company

carries the ris5 that yo& are already too late

While the early investors of 9ed,us 0ere undou,tedly the ,i! 0inners in the eit

pro,a,ly recoupin! their entire fund corpus in this sin!le deal for the investors in

the su,se+uent rounds the returns 0eren=t +uite as impactful.

Admittedly this is at least partially a function of deal mechanics over multiple

rounds ,ut 0hat is interestin! is that the firms that did invest in the later rounds are

not si!nificantly different from the one that invested in the early rounds. All these


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firms are ostensi,ly early7sta!e firms that ma)e seed sta!e ,ets in promisin!

companies.

The difference - !uess is that the first investor ,ac)ed the company 0hen it 0as

still a fled!lin! entity on the promise and potential that it sho0ed 0hereas the

su,se+uent investors came in only after the company had already demonstrated

traction and eecuted their plans. 1o perhaps there is a lesson in this for -ndian

investors too ,i!!er returns mandate ,i!!er ris)s if all the duc)s have already

,een lined up you are already too late.

eal %" factor for any firm is people

While investment ,an)ers have inducted @3@ factor 7 the price7earnin!s ratio

0hich helps determine the valuation of an enterprise 7 into contemporary

mana!ement leicon the real 3 factor in the value ;ourney of any enterprise from

a leadership perspective continues to ,e its @people@ factor.

@3eople@ is the only 3 factor capa,le of creatin! value for itself and unleashin!

value from the other factors.


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Mnleashin! the @lo0 cost: hi!h value@ potential of the people factor in these volatile

and challen!in! mar)et conditions calls for special attention.

Euture7smart Cs7 the corporate s)ippers and proactive leaders 0ho plan and

insulate their enterprise a!ainst unpredicta,le future volatility 7 0ill have to evolve

and ta)e personal responsi,ility for their 0or)force strate!ies. They 0ill need to

develop a navi!ational map that 0ill help them traverse a uni+ue @value7to7value@

;ourney.

The HRdepartment7led !eneral people pro!rammes ,arely succeed in eploitin!

more than the surface capa,ilities of these hi!h7potential resources. Mnless the

C leads from the front and sponsors !eneratin! value from people resources

chances are that the enterprise 0ill under7utilise these precious resources.

The @value7to7value@ ;ourney encompasses four critical value domains and is lin)ed

to the C@s performance contract: create occasions to offer uni+ue value

propositions nurture critical values to evolve a !enuine and flei,le culture

ener!ise the system to deliver value to customers and en!a!e the system 0ith

relevant drivers to enhance its @enterprise value@.
http://economictimes.indiatimes.com/search.cms?query=HRhttp://economictimes.indiatimes.com/search.cms?query=HR


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realities as defined ,y mar)et conditions. The entire system needs to harmonise to

deliver @value7for7money@ to customers.

Iey success factor >o. % 0ould ,e to ,uild a delivery system 0ithin the enterprise

that !ives customers their desired value for money 0ith an @aha@. The purpose of

,usiness is value creation.

Iey success factor >o. 6 is to ensure that focus on short7term profits does not

ma)e the enterprise lose lon!7term focus on its value creation and that the people

resources are fully en!a!ed in this.

The volatile mar)ets have covertly indicated their preference. nterprises that have

their profit earnin! ratios ,ac)ed ,y competent 3ople and stron! people

en!a!ement succeed in sustainin! and realisin! their lon!7term pro;ected

valuations. thers perish and peter out into o,scurity.


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report redbus

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