The wealth wal­lahs

The Smart Manager - - Trust Deficit? - By shreyasi singh

The world of en­trepreneur­ship is a waste bin for the best laid plans. In De­cem­ber 2014, Raghu­nan­dan G and Aprameya Rad­hakr­ishna, co­founders of app-based cabs ag­gre­ga­tor Tax­iForSure, were busy think­ing up strate­gies and mak­ing ex­pan­sion plans that they would not have a chance to im­ple­ment. Raghu, as he is pop­u­larly known, was work­ing out of cafés across sunny Cal­i­for­nia, while Aprameya was hold­ing the fort in the start-up’s buzzing office in Ben­galuru. In the months lead­ing up to that De­cem­ber, they had ag­gres­sively in­creased their cus­tomer base al­though this had bled their re­serves.

At that time, Tax­iForSure was one of In­dia’s hottest young com­pa­nies, hav­ing raised $26 mil­lion ( ₹174.98 crores) from ven­ture cap­i­tal­ists such as Ac­cel Part­ners, He­lion Ven­ture Part­ners and Blume Ven­tures since it started in 2011. It was also locked in a three-way bat­tle with Ola Cabs and Uber—both pop­u­lar app-based ag­gre­ga­tors as well—to cap­ture mar­ket share of In­dia’s rapidly chang­ing taxi busi­ness.

Raghu was in Sil­i­con Val­ley through Novem­ber and De­cem­ber to raise about $200 mil­lion ( ₹1,334 crore) from in­vestors to power this high-stakes, cash-burn­ing con­test and fuel Tax­iForSure’s growth ride.

On 5 De­cem­ber 2014, a young woman was al­legedly bru­tally raped by an Uber driver. That put a rude brake on those plans. Along with Uber, the Delhi Po­lice banned all app-based taxi ag­gre­ga­tors from op­er­at­ing in Delhi. A few other states fol­lowed suit, lead­ing to sev­eral weeks of reg­u­la­tory chaos and doubts about the fu­ture of these com­pa­nies in In­dia.

The am­bi­gu­ity sharply changed the tenor of con­ver­sa­tions in in­vestor cir­cles in Sil­i­con Val­ley. En­thu­si­asm gave way to deep cau­tion. From a hot start-up, Tax­iForSure quickly be­came al­most un­touch­able. They were forced to bide their time. In­vestors didn’t want to take a com­pany that was pass­ing through such am­bi­gu­ity to their In­vest­ment Coun­cils.

The new cir­cum­stances quickly shaped a dif­fer­ent set of choices for Raghu and Aprameya—ei­ther raise only a part of the amount they needed and wait out six to eight months for the storm to set­tle, or take up the feel­ers for ac­qui­si­tion be­ing sent by both of their dom­i­nant com­peti­tors, Ola Cabs and Uber.

‘We weren’t re­ally plan­ning to sell. As founders, you never want to sell to a busi­ness ri­val but things started to move very, very quickly,’ Aprameya re­mem­bers. The cash in their hold­ing com­pany Serendip­ity In­fo­labs was run­ning out and their

main com­peti­tor Ola Cabs—high on a $210 mil­lion ( ₹1,401 crore) fund raise by Softbank and its ex­ist­ing in­vestors such as Tiger Global, Ma­trix Part­ners In­dia and Stead­view Cap­i­tal in Oc­to­ber 2014—had cranked up the heat. By the end of Jan­uary 2015, Aprameya says, they al­ready had an of­fer from Ola.

The dilemma about right and wrong be­gan jostling for space with the deal’s per­sonal im­pact—com­ing into a large tranche of wealth. In­vestor val­u­a­tions are no­tional pa­per money. Con­vert­ing that to ac­tual money is a dream ev­ery­body has but you’re never cer­tain it will play out that way,’ says the 35-year-old.

Not that their wealth felt tan­gi­ble even then. ‘You don’t re­ally know what that kind of money feels like. Both of us come from mid­dle-class back­grounds, and if you can go to a nice restau­rant ev­ery week­end, or can eas­ily af­ford the hol­i­day you’ve planned, that is enough. It’s the max­i­mum you’ve ever wanted and the salary we were pay­ing our­selves cov­ered that,’ he ob­serves.

Ola Cabs com­pleted its ac­qui­si­tion of Tax­iForSure by March 2015, mak­ing it one of the largest in­ter­net space trans­ac­tions in In­dia till then. The deal was also re­mark­able for the ac­cel­er­ated jour­ney of Tax­iForSure’s young founders. They were ex­it­ing their busi­ness less than four years af­ter they started it, some­thing un­heard of even in the fast shape-shift­ing world of in­ter­net start-ups.

The co-founders are es­ti­mated to have be­come richer by “sev­eral tens of crores”—news­pa­per re­ports peg it any­where be­tween ₹136 crore—220 crore ($20.4 mil­lion - $33 mil­lion) each. Both also hold a small share in Ola that in its last fundrais­ing round in Novem­ber 2015 was val­ued at $5 bil­lion ( ₹33,367 crore).

The money from the Ola trans­ac­tion came in around 15 March, 2015. ‘I opened my bank ac­count on my mo­bile, and couldn’t even com­pre­hend the fig­ure,’ Aprameya laughs. It took some time to count from units, tens and thou­sands and put imag­i­nary com­mas to make sense of the num­ber, he re­calls. ‘When I showed my mother the bank state­ment, she was wor­ried I would get en­e­mies and told me I shouldn’t stop for strangers when I was driv­ing,’ he tells me with a smile.

The sud­den ex­plo­sion of riches was over­whelm­ing, he ad­mits quite frankly.

Even more se­ri­ously, there was an im­me­di­ate need—to man­age this wealth. The money hit his bank ac­count with only sixteen days left for the fi­nan­cial year to end. It was im­por­tant to get his tax plan­ning right be­fore the end of the month. Could help be at hand to deal with his prob­lem of plenty?

dial a for ad­vi­sor

The world’s best con­sult­ing and fi­nan­cial ser­vices com­pa­nies go to re­cruit am­bi­tious, smart man­agers at IIM Ahmed­abad, Aprameya’s alma mater. Yet the young en­tre­pre­neur con­fesses that up un­til March 2015, he had never been in­tro­duced to, or thought about, the con­cept of wealth man­age­ment. It had never come up in their man­age­ment cur­ricu­lum and al­most none of his friends from busi­ness school had taken up such a role. Al­most sheep­ishly, he ad­mits to think­ing that all the rich did was buy things.

His com­pany’s trans­ac­tion had made big news. Soon enough, a swarm of wealth man­agers, fi­nan­cial ad­vi­sors and pri­vate bankers—an en­tire new uni­verse of peo­ple—came calling on him with ideas for eq­uity in­vest­ments and tax struc­tures. He hadn’t ex­pected this del­uge and hard sell. But he didn’t have the lux­ury of time to linger on a de­ci­sion—he had to learn fast. ■

From a hot start-up, Tax­iForSure quickly be­came al­most un­touch­able. They were forced to bide their time. In­vestors didn’t want to take a com­pany that was pass­ing through such am­bi­gu­ity to their In­vest­ment Coun­cils.

Shreyasi Singh

Blooms­bury

2016, ₹499, 209 pgs, Hard­cover

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