Deep Kalra: Building MakeMyTrip Through Crisis, Survival and Scale | The Founder’s Ledger

The visibility was two months of payroll, two months of rent. I think resilience is number one. You'll probably have a lot of regret when you see others doing something probably not half as well as you could have. If we never lived to see 2005,

then it was all in vain. For two years there was darkness. Then things slowly, slowly, slowly opened.

Yeah Rohit, entirely my pleasure. Thank you for doing this with TiE, as you know a very important part of my heart. So I'm so excited to do this.

No, the honest answer is no. I was a 30-year-old and all I was obsessed with doing was taking advantage of the internet which was happening all around us. I really felt it was something which is going to change everything we do, not just communicate but even transact, research various things. And I think I just wanted to take advantage of that and build a business on that. I did try to do it as part of a big company where I was working with GE Capital, and that was because GE Capital made its money from other stuff. This was really a weekend project. So I figured, before the term startup was I think even coined or popular, I figured you've got to be all-in to make anything new happen. And I guess that is what a startup is. But did I think we'd be at this scale, size, or we'll even exist after 25 years? No, I'd be lying if I said I did. I think one takes it a few years at a time. I said give it a good shot, build something, and then you just keep on renewing your focus and your horizons change.

Yeah, of course. So I think that's true for all the founders, all the entrepreneurs. You start with an idea and your venture is like a trek. And with every summit, every scale, your vision keeps on expanding and let's go to that height. It's funny you say that by the way. That is my favorite metaphor.

So your career is also, my favorite metaphor is it's a leisurely trek where you just have to enjoy every step of it and like you said the horizon also broadens it.

No mine wasn't a weekend project. What I was trying to do at GE Capital through the internet, that became the weekend project. And I said this won't work that way, it has to be all-in.

Yeah, it moved pretty fast I think even in the pre-launch phase. So I started MakeMyTrip actually on 1st April, all fools' day of 2000. But for the last I would say about six months, the idea probably came six months ago. One can make a business in the kind of businesses which were being done on the phone. That was my very simple thesis. What are we doing on the phone? Online stock broking, online travel and stock broking were being done. These could move online first. We didn't have rich media. You and I are same vintage more or less. So downloading something itself was a task. Staying connected was a task. So that infamous sound, that modem sound sometimes still comes in my head, 128 kbps and the bips and beeps going on. So I think one had to think of a lightweight kind of model. So the last three months became pretty frenetic activity and once one started, I was very clear that listen we have to make a business out of this and it's not just now an idea, it's not something, I had quit with nothing else. I had quit GE Capital, I was a vice president there, so the opportunity cost was high. Even otherwise you look at your peers, you look at everyone else, they're doing well, they're like this thing, you have a natural pressure. I mean I would be wrong if I said there was just no pressure. One was just taking it one day at a time. No, I was very clear. I want to build a business on this from day one.

Yeah. So early days I think you look for validation of concept. So you know you can call it product market fit and you look at validation of concept because the first thing is will people even like your service. You can put out ads, you can attract them, you can buy keywords etc, but are people willing to risk moving from their traditional way of working? So that was the fundamental shift. The only way people bought air tickets, and we started with air tickets, you had hotels but no one was booking hotels at that time online. Will people move from the traditional way? What was the traditional way? Call up your travel agent.

And some people would actually go to a travel agent. This is 25 years ago. And the travel agent would do all the work for you. You would say and he would give you two three options all on the phone and you'd say and all usual. There were no e-tickets either. So a physical ticket, that booklet would be sent with the self-covered pages. I have one up on my pin board. It's probably the only ticket I physically issued. They would actually send you that ticket. So a runner boy would come and then you would cut a check. So it was very primordial. I mean really, really archaic in a sense and so inefficient. But you didn't have the tools to make it efficient.

The business model was there because actually it was the same travel agency model online. There was no difference. You are in IATA, you get fares from airlines and you sell them, you get a markup. Earlier the markups used to be more, now they're smaller, etc. So I think the big one was will people trust the internet as a medium? Will they drop their credit card online? And I can tell you in the beginning it was a spectacular failure. So in India no one was ready to do that. Everyone used us to get the best price, to fax that price because again they would email it. They would take a printout and they would fax it to their travel agent to prove to him or her this is what I'm getting, match it.

I had a kind of a three-pronged segmentation like the customer we wanted to address: customers coming to India, these were NRIs mainly from the US. There were three million NRIs then in the US. Going from India, overseas, and traveling within India. So to, from, and within. So within was failing, from was failing. But luckily to India, our NRI brethren were buying because they were already used to this medium because they transacted on the web since maybe 1995, 1997. Amazon etc. was there, Expedia was there, Travelocity was there. And there was a lot of protection on credit card. So we had gone and got our Better Business Bureau accreditation. So if something went wrong people would refute charges in the US, it happens all the time, and all the laws are very consumer friendly there. So I think that helped us get validation people are ready to buy online but not in India.

We made within three months of launch, the website was up and running on October 7, 2000. On 31st December, we stopped all marketing in India. We were always looking at the market signals. Hey, the conversion rates are pathetic in India, and focused only US-India. And for the next four to five years that's all that kept our fires burning. So smaller market but inherently more profitable market. And then as luck would have it in 2001 our investor pulled out totally. I had got early stage funding, two million dollars from eVentures, but they were going through their own thing. Their LPs wanted to pull out of all dot-coms. So from 2001 to 2005 it was entirely management held the company. We bought back, we did a very interesting distress buyout. Some angels helped us, some of the, actually two partners from eVentures only were big believers in what we were doing. Until 2005 we were entirely self-funded. We just got a couple of angel investments and in fact I never wanted to take VC money again. I had sworn I'll never take it because of the average experience I'd had. But then in 2005 the India opportunity, India was really opening up. Low-cost carriers had started. Indian railways, IRCTC got people comfortable buying online. So then I said okay our original thesis is now playing out. So we'll need money because they wanted to build a brand out here.

Yeah I like the word pivot but I actually think it's just a smart word for, or it's a buzz word for a smart but tough business decision.

That's what it is, right. It's adaptability at the end of the day.

At the end of the day adaptability, also course correction in a big way. Yeah. So, but if you're not listening to the market, and I've always been a creature of numbers. So, you do believe in that. You look at your numbers, you look at your conversions, you look at what's happening, and it tells you the story. And then you talk to customers, you're close to customers, you realize, listen, you can keep pouring more and more money. And keep in mind, these weren't the days where you ever discounted below your cost. So, that disease had not entered the market. That came much later. Maybe it started in China then came to India. There was a lot of capital. When you have no capital, you have to make money on every transaction. Even if it is one rupee, but you do a million transactions and you make a rupee on each. So I think the economics were clear and also we're all trained with basic business sense. We both started our career in banking. So I don't think we can forget that. So that somewhere was at the back of the mind.

Ah true. So business can only give you money if it is profitable.

2001 to 2005 were definitely the toughest years. One year in the beginning was probably a dream start and then the management buyout, distress buyout happened. Next four years were very hard out of which I'd say two years, 2001 to 2003 were trial by fire. I think about them I still get a little tingle. Now I look back and say that was the best of times because only when you're bootstrapped and you have very, very, very little money, like for most of that period the visibility was two months of payroll, two months of rent. I don't think it ever went less than two months but it never went much more than two months. So you're really tetherng on that, investing whatever you can. Then you cut whatever can be cut. So you start with obviously any frivolous cost. So the first thing we did was fixed costs like rental. So we were in Okhla Phase 1 which is the non-sexy Okhla. We moved into the mezzanine of that office. And it was a very low ceiling, I think it was eight feet, so you could touch it comfortably raising your hand. And it was a long narrow one so we would all sit there and we would work nights because there was US-India traffic.

And we also shrunk from, I think we lost about 40% people over that weekend because I'd actually made it clear to everyone. We were a team of 42. We shrunk to about 24. Made it clear to everyone that listen this weekend we are not working. We would work by the way those days six and a half days. Only Saturday was half day off. So when the woke generation says work-life balance I always laugh, there's no work-life balance in a startup anyway. But that's another topic. So at that point of time it was cut back on payroll. So a lot of people left. I said for seniors you have to take cuts. And the cut in salary whatever you can take but minimum 25%. And the guys who became co-founders took big cuts in salaries and I was able to take 18 months go without a salary because there's nothing to draw from MakeMyTrip.

At the same point of time we did a build-operate-transfer to pay some bills with ebookers, because ebookers was a UK-India-UK platform for online travel. They liked what we were doing. They said we want to buy you guys out. We said we're not for sale but what do you want? So they actually wanted a back office and we'll build you a back office. So shifted people to do that. So did a lot of creative structuring to stay alive.

And every month gave a little bit hope that we are on the right track. And I think for juniors also there were no cuts in salary but there were no raises. So there was a real mission mode going on where everyone was like okay this is it. And to sustain that for a long period becomes hard. So clearly after a while I broke it down, instead of every day to wonder should we do this, should we not, I remember telling Kur and Sachin listen we will now review this every month. And for one month if we are in, we are in. So that really helped break it down and then I think after about a year we could see things are getting slightly better and slightly better. Then we got two slugs of angel capital, one from a customer. A US-India customer who only bought from us business class or first class called one of my agents and said I want to come and meet Deep and he gave us $150,000 which was a lot of money that time. And he just liked what we were doing and it worked out very well for him. And the second was actually a very interesting gentleman, he runs very high-end cruises on the Brahmaputra and Ganga and also does birding, Mr. Raj Singh. So he was doing traditional high-end travel from the US and UK. So really bringing trips from the UK to India to show them the best of India. So as offline as could be but he saw that online is happening overseas. So he told his CA who I happened to know that find me someone here who's doing online and Mr. Vinoda introduced us and next check came from him. So two angels came along but yeah for two years there was darkness then things slowly, slowly, slowly opened up.

Actually both the words you use, sorry Rohit to interrupt, are my both favorite qualities I think in entrepreneurs. I think resilience is number one. And it's very underrated. People talk about innovativeness and people talk about brilliance. All are important, everything is important but resilience is the most important, to be able to take the blows and live another day. So only when you live another day and times change, things change. And in 2005 we saw a totally different India ready to buy online. 2005 to 2010 we grew like 25x and then we IPO'd in 2010 but if we never lived to see 2005 then it was all in vain. And I often say if you pack up too early you'll probably have a lot of regret when you see others doing something probably not half as well as you could have. And you'll be very, very miserable. So I'm so glad that one was able to do it because the team gave a lot of support. So I started alone as a single founder but very quickly I met these couple of folks who were so important and took sacrifices that I don't think the company would be where it is today without their contributions. And today Rajesh runs the company and I don't think for the last few years we would be able to scale up the way we have without him. And the last three years I've happily taken a backseat as non-exec chairman and I wanted to because he's just doing a great job running it. So I think you have to figure that out but it helps. If I was to redo everything, I would go with one more partner. And adaptability is the other one. I think that's so important.

Again because nothing will go according to business plan. This is like maybe a test match on a turning track.

You cannot predict when it'll break, what will change, how it'll change. You just have to adapt and you have to be ready to do it on the fly.

So one, we had to be profitable. If you don't have any money there's no other way, right? You have to break even. I think the whole approach was now that we're getting, so in 2005 we got Sequoia Partners, which is now called Elevation. They came in and they put nine million in the business and they bought out all the angels etc. But nine million, fresh nine million in 2005 was also a lot of money. That's probably 100 million today or whatever. So I think the approach was always we're going to use this money to do what we are doing better, definitely to market, to invest more in tech. But not ever just throw the money in. So I think we were very clear on that. Scale but unit economics cannot go to hell. That's right. They might get stressed for a bit. They might move in the other direction because you're acquiring new customers. But for me the key metric is always, and again it's the most understated hero, is repeat and unaided repeat. And which is great to get your first time user. You can incentivize, you can give all kinds of coupons etc. Get your first time user to induce trial.

But the same person should come back to you not because of a coupon, should come back to you not because of an inducement, should come back to you because he or she had a good experience.

So unaided recall, unaided repeat for me is the most important metric in B2C business. Probably B2B too, but in B2B I think you need to be more focused around what all you can get out of them because the repeat cycle. But in B2C that's the most important, so we are very focused on that. Okay, we've grown the pie but are people actually coming back? So we're always measuring these four or five key metrics and that even till date I think are the most important.

Yeah, it's a great point and actually we did three subsequent rounds. So 2005, 2006, 2007, 2008. Series A was Sequoia. Series B was Sequoia maintained their position, it was Helion and Sierra, they split the round, and then we got Tiger. So we had really great investors all through. The nominees on the board really helped us become a very good board. I always had independents on the board. Sanjiv Bikhchandani was on the board. A gentleman who's been regarded as online travel guru, Philip Wolf, he sadly no more, went too early, but he was on our board. And Frederick Lant, so French-Canadian. So we had a really good board, we would have very good discussions and decisions and debates there.

Not at the board level but at the company level we were always very clear. Rajesh was a CA by training, he was CFO then, so he was very focused, we can do what we want but we have to be very clear that this is hitting the numbers. And whereas on the other side you'd get Sachin with his marketing genius saying we want to grow this. And Kur was probably the most brilliant travel mind I've ever worked with. So we had a really good combination. I think that really helped us take these decisions within the guardrails of stretching profitability. I'm not saying but again not profitability be damned ever, that could never happen.

Naspers was funding Goibibo and they were forcing in the hotels market and they were selling below cost. We'd never heard of that, that as a concept was very new to India. It started in China and then because I think largely these were big investors who had made tons of money in China, they were bringing that playbook here. So whether it was Alibaba with Alipay or it was Tencent, that playbook had worked for them, invest a lot, acquire customers and eventually you'll make money out of them. But carnage that you cause along the line. But as they say, all is fair in love and war and this was war.