Lessons from a start-up that returned from the brink of bankruptcy
Devika Singh February 6, 2016If people were asked to vote for the coolest words of the year in India, no one would be really surprised if the result turned out to be 'start-up'. Indeed, starting a venture is as cool as it can get in India today. The past few years have seen the transformation of hundreds of ideas into companies fuelled by readily available funding.
A lot has been written on this development and many have tried to analyse how this change would pan out in the coming years and whether these companies will be successful. But Reggie Aggarwal of Cvent Inc, a global software-as-a-service company that develops software for events, says he has a 'realistic view' about this 'gold rush'.
"I have been through what is happening right now in India. It's a gold rush and similar to what happened in the late 1990s in America and we lived through it," Aggarwal told Business Today in an interview.
The NYSE-listed company with a market cap of $1.06 billion is undoubtedly a success story today, but its journey to glory has not been smooth. Founded in 1999 by the Indian-American Aggarwal, Chuck Ghoorah, Dave Quattrone and Dwayne Sye, Cvent has seen its share of highs and lows.
"I was working as a lawyer and organising events for an organisation I had started, called Indian CEO Technology Council, when I realised how difficult it was to organise an event. I found a pain point, quit my job and Cvent came into being," Aggarwal said.
"But as we started to grow, the market turned during the Dotcom Boom. We went from six employees to 125, burned through $17 million we had raised and built up a big, fat $1.5 million revenue company after spending $16.5 million," he added.
The company was on the verge of bankruptcy and had to lay off 80 per cent of its staff, when Aggarwal decided to build it the 'old way'. "I didn't take a salary for more than two years and I had a great team who were willing to do the same sacrifice. But it took us 16 years to be where we are today," he says.
According to the CEO, Indian start-ups today are going through a similar phase and in next 12-24 months it's going to blow up and there will be a lot of carnage, though he says a lot of great companies will emerge when the process ends.
Advice to Indian entrepreneurs
"They are burning money too quickly. They have to be more patient as it will take 5-10 years. Don't burn all your money in 18 months because you are trying to compete with each other when your real competition is the customer who is not ready to buy," said Aggarwal.
His first advice to Indian start-ups is "stick for a decade and you will get out".
The entrepreneur who was advised by his mother "to build business in the old way" has the same suggestion for young entrepreneurs. "The lessons I learned is that don't violate the rules of business too long that we have all known for 5,000 years. Build something and sell it for more than it cost you to make it. Number 2: It's a long term investment, it's a long haul, it's a 10-20 year journey minimum. Number three: your competitors aren't your real competitors; it's the market and how long it will take to grow."
He seems to be following the same code for his India business, too. The company, which gets 81 per cent of its business from the US, today has 850 employees in India but its main focus is on the US, Europe, Singapore, Hong Kong and Australia.
It has developed some products for India but is in wait and watch mode for now, till the market is ready for them.
"The market in India will take at least five years to mature. You can push the consumers only so much. We will target India when the timing is right," said Aggarwal.