We survived dotcom burst, investor back out, industry slowdown & discount war - Makemytrip.com (MMT)

Once searching for affordable housing accommodation, Deep Kalra landed on Asiarooms.com. At the time accompanied with his wife, the duo wanted to book a room in a hotel in Kolkata. Although doubtful about online bookings, Deep went ahead and booked room online. He was surprised and amazed by the seamless service. Once they reached destination he saw, at the reception the staff was directing customers to a nearby cybercafe to avail discounts online as there was no mobile internet.

Amid avid travellers Deep & his wife decided to open an online travel company. In 1999, Deep wrote a business plan & E-Ventures signed a deal & invested $2mn in company for a 70% stake. Deep hired experienced employees as he didn't have enough experience or knowledge of the industry. And so, they began working rigorously from 9 am to midnight.

The Dotcom burst happened in March 2000, e.Ventures declined to fund the remaining $1 mn & wanted Deep to repay previous $1 mn & take back 70% stake. Deep did so by offering his life savings of 46 lakh rupees for a 70% stake, eventually buying it at a distressed valuation. Amid the slowdown, Deep asked the senior management to take massive cuts in their salaries as MMT was struggling to stay afloat. 2001-03 was a tough time when Deep himself took 100% cut in the salary & asked employees to decide the percentage cuts they were going to take. He promised to convert the same in equity. Everyone agreed.

Deep advises start-ups to stay away from media limelight. In media, we often see the news that certain startups are raising xyz funds & hiring abc executives & they keep talking about competition success chart, but it is essential to remember that almost all startups as the name suggests are startups. All in the same boat! Facing the same waters and problems. Do not let the competition trudge you from keeping your head in the game, working on the goal religiously.

It is not good to launch a product very early before the market is ready for the same. Deep Kalra saw India was not ready for an online travel portal. The CAC (Cost to Acquire customer) which was the measure of the cost, remained very high, spending on Indian customers was not turning into profit immediately. Taking the smart route, Deep decided to focus on NRI customers & stopped marketing for Indian customers from 31st Dec 2000.

MMT sustained three blows - Dotcom burst, 9/11 in 2001 & scare of SARS epidemic in 2002. In 2005, Deep saw IRCTC website coming up & the launch of low-cost carriers like Air Deccan and Sahara. Indians were getting habituated to online payment & this soon led to offline agents vanishing as they didn't see much profit in online transactions. This emboldened Deep to relaunch the Indian operations. In 2005, Saif invested total $25 mn in MMT. Next 5 years were great as top line grew 20 times from $30 mn in 2005 to $ 600 mn in 2010.

There was rise in competitor companies like Yatra.com, Cleartrip.com etc. Yatra started duplicating MMT. The only difference was, when issues came up, MMT knew how to correct mistakes while Yatra did not. MMT had previously survived the melt down in 2000, so it survived another 2008 melt down. Sanjeev Bhikchandani who was on MMT's Board advised to go for IPO in India. But Deep thought that the US customers are more acquainted with their model and rewarded growth. Deep & team travelled to USA to meet investors. At last the stock got listed on US stock market with a 90% gain and they partied on a yacht even though rented! The company was valued at $902 mn on the closing day.

In 2009, Goibibo was launched & MMT faced tough competition. It offered lot of discounts and gave an awesome app to hoteliers. Deep decided to take this competition rather seriously and keep a balance between growth and profitability. In 2015, discount wars were at the peak and MMT bought strategic partner Ctrip with an investment of $180mn in MMT. Deep contacted Goibbo investors if they could combine both companies instead of bleeding each other. It did not work out. However, after a major twist- service tax notices to both companies and arrest of Vice president of MMT for tax evasion brought MMT & Goibibo together. MMT acquired 100% of Goibibo + Redbus & Naspers (Investors of Goibibo) in turn got 40% of MMT & gave MMT $85 mn. Market capitalisation of merged entity went to $3 billion.

MMT persevered through dot com burst, investor back out, industry slowdown & discount wars.