Would you consider yourself a potential unicorn?
People say that. Only when someone writes a cheque that values your company at $1 billion or more do you become a unicorn. Until you get that cheque, you are not one. This is a great business to be in. We have over 9,500 magazines across all major languages and we are using technology to personalise the experience.
When you have money from your Series B round in your bank account, why are you in the market for more funding?
Last year, we were looking to raise a Series C round but the time wasn’t right. We became cash-flow positive two months ago so now we have money flowing in. We hope to raise Rs 100 crore in the next three to six months. We have customers coming organically, whether libraries looking to digitise content or airlines wanting to offer digital magazines for flyers. Our focus is to spread awareness in India for which we need to spend money. India contributes 20% of our global business, and we hope to make it our number 1 market in the next two years. Smartphone penetration and lower data costs have made India an interesting market.
Between 2015 and now, the funding scenario has changed dramatically. There was a lot of attention given to funding rounds and valuations. What is your perspective?
VCs have a window of seven to eight years during which they look to reap returns. We were among the first investments from Kalaari Capital’s latest fund so we still have a few years left. I think our investors are happy that we didn’t blow up their money. Today, you see a lot of entrepreneurs who have not paid statutory dues or not kept the board informed. You see several examples of bad governance. Many entrepreneurs come with great ideas, get money in the bank and burn it. You need to assess the lifetime value of a customer vis-a-vis the cost involved in acquiring the customer. If this math doesn’t work, there is no economic sense in running a business. Many people took this approach, took in a lot of money and diluted their ownership. As a result, they have become glorified employees and don’t have the drive to take the company to the next level.
If you have a great idea, you should do it yourself. If you find the right VC who can make the right connections, it is a good break. Your focus should be on making money out of your business. When we set up Magzter, we knew we would want VC funding. With our earlier two ventures, Dot Com Infoway and Galata.com, we managed with our own funds and some bank loans. With Magzter, we knew we would need more funds to scale. Had we not received VC funding in March 2012, we would have shut shop by December 2012.
What’s your view on the startup ecosystem in India? Do you see entrepreneurs rushing towards a sector when they see money being poured into it?
India, unfortunately, has become a copycat story. Entrepreneurs take an idea that has worked elsewhere and ‘Indianise’ it, be it Flipkart, Snapdeal or Ola. We are not innovative. In the case of Magzter, it was a need we had. We had a magazine (Galata), we wanted to make it digital and give it a global reach. And we wanted an app for it. That’s how Magzter was born. You see few innovative moves here. For example, Flipkart brought in the cash-on-delivery model which I thought was apt for the Indian shopper. Only an Indian entrepreneur can come up with such a move. Sadly, it is not in our ethos because we are taught to follow.