Disc : No holding
Why Sanjeev Bikchandani, the Naukri man, wants to be a builder and funder with Info Edge
By N Shivapriya, ET Bureau | 15 Jan, 2015, 02.45AM IST
Every month some 30 million people seeking to satisfy their gastronomic cravings by visiting Zomato, the popular restaurant discovery service, co-founded by Deepinder Goyal and Pankaj Chaddah. In London, people want to know more about the ambience, in Kolkata they want to know more about the food. The nuances are many and Zomato caters to all quirks and palates.
Zomato itself has a distinct global flavour. This week, it took its biggest bite with a $ 52 million acquisition of Seattleheadquartered Urbanspoon, entering the US, the largest and most competitive market. The acquisition also gives Zomato leadership in two other markets, Australia and Canada.
Back home, news of Zomato's acquisition, its global ambition and its huge appetite — six acquisitions in five months — pushed share prices of Info Edge (India) up on a day the BSE Sensex was down. But why the boost for Info Edge? The internet company, founded by 51-year-old Sanjeev Bikchandani, is Zomato's single largest shareholder with a 50.1% holding. Why Sanjeev Bikchandani, the Naukri man, wants to be a builder and funder with Info Edge Bikchandani spotted Zomato early and made a $1 million investment in it five years ago, and followed it up with five more rounds of investment worth a total of Rs 327 crore. Its investments in Zomato are now worth over Rs 2,030 crore.
This is one of the two things Bikchandani is known for. Finding and funding early stage startups and mentoring them to success. Info Edge has invested about Rs 570 crore in backing nine companies like Zomato. Sure, a few deals have gone bad — it wrote off about Rs 35 crore in three of its investments, StudyPlace, 99labels and Floost. But there are more big successes like Zomato.
Info Edge was again an early investor in PolicyBazaar, a portal that helps users compare and choose from different insurance products. At a fund raising last May, PolicyBazaar was valued at $100 million and Info Edge now owns 23% in it.
But the first thing Bikchandani is known for, of course, is his ability to successfully build internet businesses within Info Edge. He is often referred to as the 'Naukri man'; Naukri being one of India's top job portals. 99acres and jeevansathi.com are two more such examples (see table).
Bikchandani is both a builder and a funder. The remarkable thing though is that he has persuaded public shareholders to back him. Info Edge went public in 2006 and non-promoter shareholders own over 55% in the company.
Investors demand that listed companies deliver predictability of revenues and performance. How did Bikchandani get public shareholders to back his plan to build a portfolio of early stage and high risk startups? "Naukri is stable and predictable. The others less so. So it is a blended model with some volatility because of the other businesses.
But by and large, investors are well-informed and well-researched and they factor this in their decisions," says Bikchandani. He expects the top three growth engines for Infoedge in the next few years to be Naukri, 99acres and Zomato.
Bikchandani says that as the company is growing and is of a certain scale, profitable, with a strong brand and a market leader, he sees no reason why investors will not understand the model. Naukri, which contributes more than half of Info Edge's revenues, has a stable and predictable revenue stream. It also contributes more than 100% of the profit — surpluses from this business unit goes into other ventures. By building Naukri successfully, he has earned the right to fund other businesses outside Info Edge.
In the last 12 months, Info Edge's share price has gone up from around Rs 500 to around Rs 850, and its market capitalisation is now close to $ 1.7 billion (Rs 10,385 crore).
Moving in quickly
Zomato has been the most high profile of Bikchandani's bets. It has been growing rapidly. Prior to its US acquisition, last month it acquired Cibando, a restaurant search service in Italy. At last count it was in over 100 cities in 20 countries and investors funding the company valued it at $660 million in December. Only two years ago, it was valued at about $160 million.
Five years ago, Goyal and Chaddah were looking for seed funding and were in discussions with a prospective investor. The discussions dragged on for nearly two months before they got to a term sheet.
Both of them were used to working at a faster pace. Then Goyal got an e-mail from someone he had never met before. That person was Bikchandani and his mail said, "Do you need funding? If yes, you can contact me," also mentioning a mobile number.
"It was basically like cold calling," recalls Bikchandani, who was only acquainted with Goyal through his site, Foodiebay. com, as Zomato was then called.
Within three hours of sending the mail, the two had met and within 48 hours, agreed on the broad contours of a deal. "We went with Info Edge over the others because they were very quick. Speed of execution really mattered to us," says Goyal.
Bikchandani's due diligence consisted of doing basic checks and calling up some customers of Zomato. It was quick, and within few weeks, Info Edge had invested $1 million in Zomato.
"I think entrepreneurs understand entrepreneurs slightly better. Chances are they will be more comfortable with a good entrepreneur than a pure financial investor," says Bikchandani, about why Zomato's founders opted to go with Info Edge. Why Sanjeev Bikchandani, the Naukri man, wants to be a builder and funder with Info Edge
Taking the road less travelled
Bikchandani has challenged many stereotypes without intending to. Despite being an internet venture, his firm, Info Edge, has been profitable since 2003. In 2006, it listed on stock exchanges in India when others like Rediff and Sify were listing on the Nasdaq. Even today it is one of the handful of internet firms to be listed here along with those like Just Dial.
Info Edge is one of the few internet portals and ventures, even globally, that have managed to survive and stay successful from the last internet boom to the current one. "Bikchandani's strongest quality as an entrepreneur is in developing a very robust business model," says Renuka Ramnath, who was MD and CEO of ICICI Ventures, when Info Edge was one of its portfolio companies.
Bikchandani saw Naukri through the dotcom boom and the bust in the late 1990s and 2000 and made a big shift from an onlineonly business model to one which also had a physical presence.
"He felt it was important at that time," says Ramnath. "To have the confidence to change the business model, make a significant course correction, get the buy-in of investors and take the company forward is where most entrepreneurs falter. He did that extremely well," she adds. Ramnath now runs her own fund, Multiples.
When the dotcom bust happened, ICICI Ventures withdrew from many companies but stayed invested in Info Edge. "We had full confidence in Sanjeev (Bikchandani) and Naukri so we stayed invested," says Ramnath. The decision turned out to be right, giving ICICI Ventures a more than 28x return on its investment.
Bikchandani doesn't make any personal investments, though many entrepreneurs of the last dotcom boom vintage have become angels or started venture capital funds. All investments are made through Info Edge. Bikchandani says this is to prevent any potential conflict of interest. "Info Edge is diversifying. If we invest in our personal capacity, we may end up competing," he says.
Onl ine travel booking venture, Makemytrip.com, recently announced a $15 million fund for investing in innovative startups but only for those in allied areas like travel technology. Info Edge, on the other hand, doesn't have a specific corpus from which it invests and target companies need not be related to its core business. The only criterion is they have to be consumer internet firms.
Riding the next internet wave
Similar examples of other ventures that do this are global ones like Naspers, Softbank and Rocket Internet. So is Info Edge modelled on them? Pat comes the reply: "We want to be like ourselves only. We will continue to do what is best for us and our shareholders and our company."
Why did he chose this model? "We (Info Edge) have surplus cash. There are plenty of opportunities out there which smart entrepreneurs are chasing. We can't do everything in-house so we back entrepreneurs who are chasing good ideas and hopefully end up creating value for our shareholders," he says. For Indian investors, investing in Info Edge is one way to participate in the country's booming consumer internet story.
It's also how Info Edge has become a major player in the next internet wave. In September, Info Edge raised a QIP of Rs 750 crore — a large part of the proceeds will go towards building more capability for 99acres. Since then it has acquired 3D design studio and integrated it with 99acres.
Goyal says Bikchandani looks for a return from his investee companies like any other investor but recognises entrepreneurs are best positioned to run their companies. "He's not actively involved in the business but he is always there in the background if you need him. More like an older brother who will always be there to support you through the good and the bad," says Goyal.
When Zomato launched in the UK last year, Bikchandani felt it was too early to enter that market. Over the next three to six months as the struggled in the UK, Goyal realised Bikchandani was probably right. "Still, we never heard, 'I told you so', from him. We were actively thinking of how to solve it and how to make it work," says Goyal.
Bikchandani says being an entrepreneur himself, he understands entrepreneurs need independence. "While we offer our advice, if they don't want to take it, we don't impose it." And that's from a man who has built and funded so many successful businesses.
