The bigger the pain, the sooner you will get the money: Rajesh Magow

Twenty-four years is not a long time in the life of an enterprise. Japanese construction company Kongō Gumi is said to be 1446 years old. But 24 years can feel like a lifetime if you are an Indian internet-led company that started in the midst of the dotcom bust, braved the economic slowdown that came soon after, as well as the global financial crisis and Covid.

MakeMyTrip ticks all those boxes, and a few more. It started life as an international business and, for its initial public offering, went to Nasdaq, the stock exchange in the United States known for technology stocks. And it did that in 2010, when the average Indian parent would have had a mild heart attack at the suggestion of their child joining a startup.

“Twenty-four years… Depends on which lens you use, but it is not a very long time. But at a young startup, over two decades is a long time. There is one learning. Whoever is looking at starting a business, you cannot think three years, five years, 10 years, or 20 years. You must have a very-very long-term view. It is invariably a long haul,” said Rajesh Magow, co-founder and Group CEO of MakeMyTrip, at a fireside chat during the second day of Business Standard Manthan, in New Delhi on Thursday.

The three-year, five-year, or seven-year view is also legitimate, but looking through the investors’ lens. The investors have commitments to their investors to give them returns within a certain period. And they are right. “But not for the entrepreneur, or the founding team,” Magow said.

So, what has kept MMT going while some of its peers, including a few that started after it, lost their way?

“In our first five years, the one thing that kept us going was the belief in the idea and in the problem we were trying to solve, in the model we had,” said Magow.

MMT came at a time when travellers were at the mercy of agents, who charged high commissions and obtaining a ticket involved a bit of running around. MMT shifted the process to the consumers’ screens and put tickets on their fingertips. Back then, terms such as ecommerce business in travel or consumer travel tech business had probably not been coined, but the problem was there and a possible solution came along.

It was not a cakewalk, though.

When MMT started in 2000, its founders soon realised they were too far ahead of the time. “It was almost like the pre-sunrise status of the industry,” said Magow.

The digital ecosystem was not ready in India. Internet bandwidth was scarce and hard to find. There was only one payment gateway. The original idea was to launch as an India business, but the ground realities sent it outside. It pivoted – another term that was not yet in fashion – to focus on the United States-India corridor of travel. The Indian diaspora in the US and the non-resident Indians became its early customers. They travelled quite a bit back and forth and helped MMT get going and stabilise some of its operations.

Then came the issue of raising funds. Today’s founders, who raise funds in tens of millions, some of them even more, would shake their heads in disbelief at this, but MMT’s first venture capital commitment was for $2 million, in 2001. Only $1 million came, because the VC shut its own shop, realising that the VC ecosystem in India was not ready, either.

The real journey started in 2005, when the focus shifted to India. The digital ecosystem in the country had started to improve. But, more importantly, the Indian sky had started to open up. Low-cost carriers were taking off.

In September 2005, MMT raised its second round of funding, a grand $10 million, which, for all purposes, was like its first round given how small the funding in 2001 had been.

Cut to 2010. MMT was profitable with a top line of $40 million. It wanted to raise funds through a public issue. India’s internet ecosystem had started to open up. However, the stock exchange system, and the analyst and investor community had not really opened up to internet-led businesses. InfoEdge was the only listed internet-led company.

In contrast, the US was already an evolved system with many listed internet companies.

“We did not have to sell our model there,” said Magow.

Was it too early to do an IPO?

“Maybe… India was still a long way to go in terms of the headroom of opportunity. When you go public, you look for the right reasons to go public, but the level of scrutiny goes up,” said Magow. “Maybe we could have stayed private for some more time. But, all in all, it has worked out quite well… All in all, no regrets at all.”

If he were to do it all over again today, would he do it differently?

“If I have to start over again, there are opportunities across the board in agri-tech, renewable energy, electric vehicles. But more importantly, what is the impact this idea will create, what problem will it solve?”

But, will that be enough? Is there a funding winter hovering over India’s startups?

Magow sees this very differently.

“There is no dearth of capital for the right set of team and the right business at the right stage. The difference is that a lot of the funding was coming easy with fewer questions asked. People were going berserk, doing their due diligence a little less seriously before writing massive cheques. It had become a founders’ market. And it did not do a world of good to the founders. They were deploying some of the money in the wrong areas. This correction had to happen.”

How has that changed?

“Today, the only difference is that there are more questions being asked and the right questions being asked.”

And what would be the right answers to those questions?

“If you are solving a problem and have done a proof of concept, there is no way you will not get money. But if you have not tested the waters even a little bit, if you have not done detailed work on it, the conviction will be less. That is where you will struggle. The bigger the pain, the sooner you will get the money.”