Start-ups need to hack costs to cope with pandemic: MakeMyTrip's Deep Kalra

Says capital has become scarce and only a few businesses in areas such as health and remote learning are getting capital, but they are just 1-2% of the ecosystem

Deep Kalra, the pioneer of online travel in India, who as founder and CEO steered MakeMyTrip since its inception to a successful listing on Nasdaq, has a piece of advice for entrepreneurs to cope with the challenges thrown by the Covid-19 pandemic. Now the group executive chairman of MakeMyTrip, a leading online travel firm, Kalra says that entrepreneurs running young ventures which are on a high growth path need to shift gear and slash various costs.

“There is no question that capital has become scarce. There are only a few businesses in areas such as health and remote learning which are getting capital, but they are just 1-2 per cent of the ecosystem,” said Kalra during a fireside chat with venture capitalist Vani Kola at Global Fintech Fest held virtually. “For everyone else, I would say please hunker down and slash away costs as much as possible.”

He says that variable costs need to be measured very minutely and if the companies are planning to invest then fixed cost is also going to be a big issue. But he was of the view that employees are the biggest asset of the companies. Recalling events such as the September 11 attacks and the dot-com bubble burst in 2001 which had an impact on MakeMyTrip which was founded in 2000, Kalra said the company hunkered down and the employees who believed in the leadership took deep salary cuts.

“Top people converted all their cash into equity and junior people were content by saying that ‘we will move to the next level and get raises only when things get better’. But we kept it very transparent, ” said Kalra. “People should be willing to swap salary into stock, which is delayed gratification and which ironically turned out to be the biggest blessing in disguise for many of my people.”

He said amid this pandemic, entrepreneurs and leaders running companies need to believe in themselves and lead by example. “I am a big believer in ‘what doesn’t break you will probably make you stronger’ and this is going to hold you in such good stead when you will come out on the other side. It is a true test.”

Venture capitalist Vani Kola agreed that there is a funding crunch amid this pandemic. But she said entrepreneurs have always faced funding crunches in cycles and still great companies have been built.

“There are countless examples globally where there are $10 billion to $40 billion companies in which no investor wanted to invest, yet the founders found their way because they had a conviction,” said Kola, founder and managing director of Kalaari Capital. “I feel if you have that, funding will come.”

But she was of the view that timing is very important to determine the kind of ventures that would succeed. Kola who had been an entrepreneur in Silicon Valley said one of the mistakes that she made when she first moved to India in 2006 was expecting technologies like third and fourth generation (3G-4G) mobile networks to flourish quickly. However, most of the mobile businesses she invested in, about 6-7 failed because it was too early to invest in that market.

“So I think it's important for entrepreneurs to do their research, think about where the tailwinds from trends, are headed, and then intentionally build great products,” said Kola, who at Kalaari has successfully led more than 30 investments in areas such as e-commerce, gaming and healthcare. Some of her successes include fantasy sports platform Dream11, fashion retailer Myntra, fitness firm Cure.fit, and e-commerce company Snapdeal.

She said businesses would be in a “tough spot” for getting the funding if their growth and unit economics is not clearly defined. They need to create a longer runway, sustain today to be able to thrive tomorrow when the markets will turn around.

The Covid-19 pandemic is expected to throw up new big opportunities for startups. This includes helping people to work and learn remotely. It also includes building security products that make the hybrid work model (work from home and office) possible at many levels.

“I live two km away from a really small government school. I was talking to them and they said, ‘we want to teach people online’,” said Kola. “It's not just about education. I think we can see the rise of social (platforms) and I think vernacular will be a very big thing in all of that.”

The pandemic has also opened up the opportunities to tap talent from anywhere and build companies. Kalra was of the view that employees have done well in terms of managing the work remotely and keep it going. He said his firm had tried to get a very small number of people to the office on a voluntary basis, but the company found there are still many risks to catch the coronavirus like in transit and through air conditioning.

“If you can keep work going (remotely), please don't expose your people (to the infection). It's very likely that someone will get the infection and then you have to take many steps back,” said Kalra.

He also said that employees can save about 2-3 hours of “frustrating time” on the road which can be utilised for personal activities, family and work.