MakeMyTrip is now 12 years old, having pivoted in 2005 from being an online travel agency (OTA) focused on US-based NRIs to take the first step and eventually emerge as the largest player in the mature Indian OTA business. It was also the time when the Indian air travel market saw its early set of low-cost carriers open up a business opportunity. The firm has moved up from about $20 million in gross value of tickets booked to around $1 billion in FY12, which means over 50x growth in the 7-year period, and has had a successful NASDAQ listing. In a freewheeling interaction with Techcircle.in, Deep Kalra, founder & CEO of MakeMyTrip, talks about entrepreneurship, the startup ecosystem in India, new-age OTAs and more. Here are the edited excerpts.
You started as a banker, had a stint in the entertainment sector and now you are a techpreneur. If we rewind to life before MakeMyTrip, which role did you enjoy most?
I started my career in 1992 with ABN AMRO and worked with them for about three years. After that, I had a very interesting entrepreneurial opportunity with a company called AMF Bowling based in Richmond Virginia. And while working there, I actually brought 10-pin bowling and pool to India. In fact, I thoroughly enjoyed myself during that period. Although it wasn't an outstanding success, I learnt a lot. Next I worked in GE Capital for over a year and there I did something around a business to help retail businesses â€“ it is now known as GE Money.
So those eight years taught me a lot and helped me figure out my interest areas. Also, if I look at all the three jobs, I would say that I really enjoyed AMF Bowling. It was not a financial success but it was really doing something where there were no rules and you actually had to set the course, and that interested me.
Then I really enjoyed working for an internet opportunity while in GE, using the internet as a platform for distribution channel. I combined the two and I knew I wanted to do my own thing. That was really the start of my entrepreneurial journey "the starting MakeMyTrip in 2000.
How has the startup scenario changed in India since you started MakeMyTrip?
There is a huge difference. When we started MMT in 2000, startup capital was hard to get. There were few people who were ready to give you good advice and there were even fewer people who were ready to invest in a business idea. But just before 2000, things were better. It was the heyday for dotcoms and there were people who were funding for early-stage ideas. Still, in 2000, funds dried up and we were among the last guys to get some early-stage funding.
What has fundamentally changed is that now you get the capital and much more as well. A few things which are really important happen to be early-stage capital, mentoring, the ability to hire and the manpower.
Well, early-stage funding has come a long way in India. There are, I think, around 6-10 well-established angel funds in the country looking for good ideas and ready to fund business people. When you say angel funding, it means they are ready to fund something very nascent or very new â€“ be it an idea or a business plan. For mentoring and advice, organisations like TiE are doing a great job. I somehow think this mentoring is more valuable than capital because folks out there will tell you what to do and what not to do, and that can save you a lot of time; plus it also makes sure that you make fewer mistakes. So I do believe things have changed a lot nowadays. Entrepreneurship is not only considered cool and good but is also something which has real potential. A few success stories have made people think that here is something where they can learn a lot and also do their own things.
So is it now much easier for startups to raise funds?
Early-stage has definitely become simple and much easier for passouts from top schools or colleges and for the ones who are from a privileged background. If you are from the top 30-40 business schools or technology institutes or work for an MNC, you will get funding fairly easily. But beyond that, I don't think it is that easy. It is not that others can't raise funding. But the question is â€“ will the early-stage investors have the same regard for a person from a lesser-known college? We worry about that because India is not just these 30-40 colleges; there's much beyond that. So that's still a challenge. But apart from that, in terms of overall early-stage fundraising, it is much easier than what it was a decade ago.
But what about subsequent rounds of funding?
If we see funding in terms of subsequent rounds, it is bound to get a little more difficult. From early stage to final round, it is a pyramid, and very few companies are going to make it to the top. After the first round, people want clear visibility in terms of profit, not just revenue growth. Then during the second round, they want to see both â€“ they want to see very fast revenue growth and operating leverage kick in and also an improving bottom line. There it becomes a narrower set and not many companies have been able to cross that. But in spite of it, we are seeing pretty good examples coming up. The next year is going to stay tough but companies, who can do it, will show the way to many others.
You have been an angel investor yourself. Are you looking to be more active hereon?
I have made some investments but now I am looking forward to investing in angel funds who will invest in businesses. This is for a very simple reason, which is time commitment. It takes a lot of time and expertise to choose and evaluate an investment. I am not sure whether I have all the expertise to evaluate businesses the way specialised investors do.
Online travel booking represented the first phase of consumer-paid internet services in India and now it's a mature business. How do you see the new generation of OTAs and is that the next wave for the business?
Yeah, it is fair to say that online travel has been the bellwether of the internet industry in India, followed by e-commerce. And that is the scenario in other parts of the globe as well. As far as travel goes, there is no real logistics involved in the business and everything is online.
But the coming of the new sites is actually very good for the industry. It is still early days and I really don't know whether all of them are doing good business. However, there are new businesses with nice concepts and bright people. All the new companies in the OTA space are involved in other facets. If you take a close look at online travel, you will find that it is all about planning and research. So that is one aspect of this business. Then again, it is about purchase and it is about niche plays around. The niche plays are also doing pretty well and those new companies are helping the industry grow.
So the next wave will come from the niche areas and not from the generic OTAs. Since a lot of homegrown and MNC generic OTAs are already present, the new and niche players have the opportunity to usher in the next trend. In fact, more and more people are saying if they know where they are going, they just go to MakeMyTrip to book tickets or hotels. But at times, they don't know where to go and that's where some consultancy is required and that's what some of the new sites are offering.
Coming to MakeMyTrip's revenue sources, how is the revenue spread across ticketing and hotels & packages? How does the outlook stack up?
The way we explain it to our investors is that we have one section for air (tickets) that includes domestic air, international air, ex-India, as well as inbound. And that, all put together in the last quarter, was 75 per cent and it is still the bulk. But it's on revenue basis, not on gross basis. As for hotel & packages, together with domestic and international hotels, it generated around 21 per cent and the balance 4 per cent came from ancillaries including interstate bus tickets, cab booking, rail tickets and media & travel insurance.
Our hotels & packages side of the businesses is growing really well. And that is an area we are focusing upon. We have managed to change our product mix very successfully as we have shifted from the 90:10 ratio to 75:25 and that emphasis on the hotels & packages side is growing even more. Our ancillary businesses are also doing pretty well. Air ticketing is tough right now "the environment is pretty difficult and we are aware of it. So continuous focus on the hotel side â€“ online hotels as well as the packages (most of the packages are sold over the phone nowadays) â€“ will help us grow in the same way.
We have seen MakeMyTrip introducing a few new features which go beyond plain vanilla ticketing. What do you think is the next phase of growth for the company?
Instabook, Inspire and TripAlong are some very interesting features which have been launched and these features have helped us grow. Instabook, as the name suggests, helps one book tickets at one click, making it hassle-free for consumers, and it is doing pretty well.
We are yet to see Inspire in full glory but it would also help us grow. This particular feature helps people plan trips and if you look at the combination of Inspire and some of the tools out there, you will soon see something very cool coming out. TripAlong is an exciting thing on the social side where people register and share their travel plans.
You are going to see a lot more innovations coming from us on the hotel side of the business â€“ be it last-minute hotel booking, which is already doing quite well, or hotel booking via mobile, which is already in the alpha. We are going to offer a lot more of these add-on features.
(Edited by Sanghamitra Mandal)