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Visit to your office.
That was the subject line of an email that hit our mailboxes one day. Sent by the super boss of a large hedge fund (let us call them VC One for convenience), the email was destined to change the course of operations at LetsBuy.
Ever since I had decided to invest in the company, Hitesh had sought my help to raise funds, a task that I had taken to actively. As part of the fundraising process, we visited a few Indian investors and found most of them questioning how big e-commerce could become in India. While we, as co-founders, could see the big picture, we needed the backing of an investor who believed in the future of the industry.
This was one of the reasons why hearing from VC One, the largest in the space, was exciting. This VC was investing aggressively in India’s small but growing e-commerce space and literally shaping it. Flipkart, for one, which was still in its first avatar, selling books at the time, had received a round of funding from them.
The super boss’s email, expressing a desire to visit our small 200-square-feet office at Patel Nagar, had driven us into a tizzy. “Subah 9.30 toh hamara peon bhi nahi aata (even our peon doesn’t come at 9.30 am),” Hitesh said, wondering how we would pull off the early morning visit. True to Hitesh’s fears, when the person concerned made his way up the small winding staircase of the office – reaching 45 minutes before his scheduled time – the office was still being swept and tidied. The young, astute investor, who was at the top of his game, however, didn’t waste any time and promptly decided that we would need a better venue for our discussion. “Is there a hotel around?” he asked politely. The venue of the meeting was thus changed to the nearby hotel, Jaypee Siddharth, where we continued our conversation. Once Hitesh described the LetsBuy journey, the investor pulled out a writing pad from the stack in the hotel’s conference room and drew a pyramid with some deft strokes. He explained to us how he had witnessed the growth of e-commerce companies across the world. “In India these companies can be divided into three tiers,” he said, while dividing the pyramid he had drawn into three parts with a firm hand. “Companies that are witnessing 20 to 30 orders a day; those that are serving 50 to 100 orders a day and those that are at 100 orders plus. I am looking at companies that are in the third bracket with over 100 orders a day,” he declared, with a flourish. “I like you guys,” he added, “but I need 100 orders a day to make an investment decision,” he said, with the confidence of someone who knew his job.
At that time, LetsBuy was serving an average of 30 orders a day. While we didn’t fit into his investment bracket, meeting him had given us a clear goal. We had to reach the target of 100. To be able to scale ourselves up from thirty to 100 orders, however, wasn’t going to be easy. To complicate matters, we only had Rs 30 lakh in our bank account to achieve this. We weren’t ready to give up.
Having quickly returned to the drawing board to figure out some strategies to achieve this number, our first attempt was to try to get some free media publicity for the website. Parallely, we also tried to get the electronics brands we were signing up with, to promote the fact that their products were available at LetsBuy. Hitesh also managed to crack a deal with SBI where SBI not only promoted our partnership at their ATMs, SBI customers could also use their loyalty points to make purchases on LetsBuy. Slowly, we saw our numbers inching up. We were now a 12-person team with Rs 70 lakh in monthly sales and found ourselves breaking even.
At each step, we kept the potential investor updated about our order numbers through fortnightly mails. We wanted him to know how seriously we were chasing the target he had set for us. Whether or not we hit the target, he would definitely know that it wasn’t from lack of trying. It was around the time that our orders finally hit 100 a day, that we received yet another email from him stating that he was visiting India and that he would be happy to meet us. Having learnt a lesson, the hard way from trying to host the previous meeting at our office, we fixed the erstwhile Aman Hotel, at Lodhi Road, as the venue for this meeting. The meeting was also to be attended by VC Two, another marquee investment firm. Not one to beat around the bush, the super boss at VC One started the meeting by telling us that he was now ready to invest in our company and asked us for a number that we were looking for by way of investment. “4 million dollars,” we instantly retorted. He left us with “Let me come back to you,” causing us to wonder if we had gone overboard.
A couple of days went by before we received yet another email informing us that he would like to have another conversation with us. Good news awaited us at the other end of the bridge number that was the norm in holding conference calls in those days. “We have decided to invest in LetsBuy,” came his booming voice over the call. Even before we could heave a sigh of relief, his next sentence gave us a bit of a scare. “We will, however, not give you the 4 million dollars you have asked for,” he said, leaving us worried about what we would be able to achieve with the amount he was about to suggest, e-commerce being a cost-intensive business. “We will give you 7.5 million dollars instead,” he added. For a split second, we wondered if we had heard him correctly. It turned out that we had, as he started explaining that his experience in China had helped him realise that e-commerce required the kind of investment he was suggesting. We were barely able to gather our wits together on this huge upside, to be able to tell him that while the figure of $7.5 million sounded good, it would be hard for us to accept it since we couldn’t look at a higher dilution than what we had already committed to. What he had to say next was something we couldn’t have ever anticipated. “We will offer you 7.5 million dollars for the same dilution.”
However, he put down three conditions.
His first condition was that we should go deeper into the electronics vertical before we decide to expand to other areas. It made tremendous business sense for us to go in for vertical growth, before taking a horizontal growth model, and we agreed immediately. His next condition was that the investment was contingent on the fact that I should continue my role with the business. He was aware that I had invested in the business and was more like a shadow partner. His third and final condition was that Amanpreet, who was then serving his notice period at Ernst & Young, join full-time formally as the third co-founder, something that was already in the offing. We accepted all three conditions. This investment was a huge validation for a company that had been set up by Hitesh at a time when no one had any template for an e-commerce model for India. As for me, it also reinforced confidence in my ownself.
“Why don’t you take on the role of the CEO of the company?” I was approached by VC Two, a few days after this call. “This is Hitesh’s baby. I won’t be the CEO but I will also not shy away from any responsibility,” I said upfront. “I have no problem at all, sir. In fact, it would be great if you took on the mantle of the CEO,” Hitesh, tried to convince me. I, however, stood firm since in my mind, the CEO role was his to take. Besides, I had already given my commitment to lead Tyroo as its CEO. “E-commerce is a much larger game. You should consider spending more time with LetsBuy,” advised my friend, Deep Kalra, the founder of MakeMyTrip. The emotional baggage of Tyroo that I was carrying, however, did not allow me to accept his advice. “I love the digital media sector; I think I will just stick to that industry,” I reiterated. In hindsight, what all of them were predicting about the e-commerce space did turn out to be true, given the explosive growth that the segment witnessed.
Excerpted with permission from Brick by Brick: The Middle-Class Entrepreneur’s Roadmap to Grit Hustle and Success, Manish Vij, Penguin India.
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