At GSF’s #WhereDoWeGoNow conference, redBus co-founder Phanindra Sama and former Disney India MD (Digital) Vishal Gondal talked about their respective entrepreneurial journeys and the current venture ecosystem in the country among others. Here are some notes from the session, moderated by GSF’s Rajesh Sawhney:
On redBus’s initial investment plans: Sama said they were thinking quite small when they initially pitched to SeedFund. They were looking to raise Rs 30 lakh for 30% stake, valuing the company at 1 crore (quirkily inspired by Kaun Banega Crorepati) and were planning to invest the money over the next three to four years to expand to other markets and be profitable. However, Bharti of SeedFund sat with them and made seven iterations of their plans, and they realized that they required an investment of Rs 2.5 crore to spend in the first year and reach a place where they required further capital.
On the venture ecosystem: Citing Karthee Madasamy of Qualcomm Ventures, Sawhney said that Indian entrepreneurs are not solving complex enough problems because the venture ecosystem has gone defensive in the country and they want to now see revenues fast. Responding to this, Gondal said that it depends on who the investor is – Strategic investors who are under quarterly pressure, push companies to show revenues while Investors who were entrepreneurs earlier, don’t push for revenues because getting revenues from services doesn’t help the company. Getting to 100,000 users is more valuable than getting Rs 100,000 in revenue and getting the right quality of revenue or reference-able customers is more important.
On redBus future plans – Ibibo group had acquired redBus.in in June 2013. Sama said there are no changes after the acquisition as of now and redBus is continuing to execute on their roadmap. The company already had a 3 year roadmap in place prior to the acquisition. The bus market is very large and they are currently doing only a tiny part of it. Only now the company has started getting the government partnerships, although there are issues there as well – For instance, they have inventory of a large RTC (regional transport corporation) but they can’t sell it on the website yet, because every time they ping the server, it goes down.
On providing stock options to employees: Sama said its always tricky to figure out if the companies should provide stocks to every employee or restrict the stock options to select employees and how much stock should they give to employees, since they have a limited amount of stocks available.
“We formulated a program to restrict the stock options to only senior management and early employees. However, if we had known we are going to exit after seven years at this price, then we would’ve done this differently and would’ve provided stocks to more number of people, but that’s always uncertain.
Another problem is that the company’s life is uncertain. It could be 20 years or 40 years or 7 years, during which the company management could change several times and you will have to accommodate all of them.”
Phanindra Sama on whether they faced any investor pressure to exit: “We didn’t face any exit persuasions from our investors, since we were doing well. If an investor wanted to exit, there was always other investors waiting to buy secondary shares.”
Responding to an audience question, Sama said that one thing he would like to do if he gets a chance to do the redBus story once again, is spending on getting a senior management team right from the beginning rather than being conservative initially.
Vishal Gondal on running a startups vs managing a large organization – Disney India had acquired Vishal Gondal’s company Indiagames through its acquisition of UTV, following which Gondal was made MD (Digital) in August 2012. He quit Disney India in April 2013. Gondal said – “It requires a different behaviour to be part of a large organization and run that organization versus running a startup. The vision and the plan remains the same but the style of execution changes. A lot of my time was going in things which I wasn’t enjoying doing, like creating five year plans, which is important because thats how large companies are run but something at which I am not good at and there were other people who were good at that.”
Vishal Gondal’s investment philosophy: Gondal has invested in 7-8 startups until now. He said – “80% of the investments are done on the team while 20% of the investments are done by judging the market and the opportunity. I kept away from investing with VC funds and angel groups, since I didn’t want to bias my opinion while validating the market opportunity for a potential investment.”
Indian companies should focus on global markets: Gondal said that just like Google, Facebook and other foreign companies have penetrated here, Indian startups should no longer look at just India as their market, since the same products can also enter other markets where they have similar problems. For instance, he recently tried booking a bus ticket on Greyhound in the United States but the experience was so horrible that he wished redBus was there in the US.