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Wednesday, June 19, 2013

7 reasons why you should celebrate redBus acquisition deal 06--19

7 reasons why you should celebrate redBus acquisition deal

By Alok Kejriwal
When I first read that redBus had got acquired for Rs 800 crore, I felt jealous. Yup! I don’t want to deny it. The thought that flashed in my mind was, “Heck man! Rs 800 crore is serious s***! What on earth is this bus booking site? How can you make money from ST bus tickets?”
A few minutes later, I shook my head vigorously and asked myself, “Is this something to feel jealous about, or great about?” And then it kicked in. The many reasons why we all should be celebrating this deal as if it’s our own.
These are 7 great reasons (feel free to add some of your own):
1. There are exits!
Most startups in India have been existing like that Life of Pi guy – adrift in an ocean, on a leaky beaten boat, with tigers, monkeys and all kinds of crazy, dangerous animals for company. We keep telling ourselves – we will see a ship. We will see land. Well, the redBus exit proves that startups with scale, ideas, innovation and traction can exit and how!
And if you are still riding a bicycle (a la doing some silly job in Infosys), then get your own bus and start it up, ASAP!
If you don’t understand the enormity of this deal, trying typing Rs 800 crore in your calculator and you will get the point I’m making.
2. India back on the radar
This deal is going to get reported far and wide. After all, it’s Naspers sending 100+ million dollars to buy something that sounds fancy, and Made in India. People are going to take notice. They are going to ask, “India? Does Internet stuff happen there? Let’s take a trip (maybe during the Christmas holidays) and check it out.”
Yeah! We WANT to be checked out! I want to stand at the immigration counter and garland every ‘checker’ who comes in!
3. VCs get to show that they are ‘Doing Something’.
Most VCs have invested their bucks and have been waiting. They have been waiting and waiting and waiting. It’s as if they have financed Shah Jahans in building Taj Mahals that would take 200-400 years to make (and yet land up being tombs). No offence— I’m merely trying to drive a point home.
Now, they take this deal and send nice, excited mails to their LPs (Limited Partners) saying “Hey! We are doing something! We are alive! We sold some equity!”
If I were that VC, I would write that mail in CAPS and end with a smiley :-)
4. ESOPs prove themselves!
I’m assuming (or let me say praying) that the redBus Cap table has some serious allocation of ESOPs on it. Most startups in their 5-7th year of existence have 10+ percent allotted to ESOPs (at games2win, we have something like 11 percent given away).
So, let’s assume that it’s 10 percent in the case of redBus. That means Rs 80 crore will be given to employees and key team members. Yeah!
For all the folks who said ESOPs were toilet paper (and not even soft tissue at that), this deal is meant to shut them up! For employees who have ESOPs in their startups, this deal brings the smile back (or at least the hope back). And for those who have been promised ESOPs (but have still been latkaoed [Hindi for strung] by the ‘management’), this is the time you must go and buy some grenades and then threaten to toss them at your CFO if he doesn’t do anything.
5. Valuations…bbbb…back!
I love Alan Greenspan just for his invention of the term “Irrational Exuberance”!
Well, this deal is definitely exuberant! (I dare not say irrational). The Rs 800 crore if justified as multiples of earnings or topline or bottomline (or clothes line or any line) will drive CFOs and bankers to consume rat poison.
There is no (?) rationality in the deal, because it’s not being built on silly metrics of some 1957 era accounting.
This is a deal that is shouting a message from the rooftops, “India is hot. India has scale. Internet and Mobile are relevant to India. Values are comparatively cheap (try buying something like redBus in USA or China). Let’s get in and throw some money around – 10 years later it will all be worth it.”
Remember that when Google bought YouTube and later AdMob; and Microsoft bought Hotmail and later Skype; the world was laughing. But all those deals are more or less making sense today.
6. Serial Entrepreneurship will set the tone
The report I read mentioned that that Phani (redBus founder Phanindra Sama) had stepped down as CEO. Maybe he has, maybe he hasn’t. But if I were he, with this kind of dough (and probably after serving out another 2-3 years at the firm as a contract), I would start up all over again!
Also consider the Rs 80+ crore that will go into the hands of the employees (who were semi-entrepreneurial in the first place to join redBus)!
Assuming that even if 100 employees get Rs 80 lakh each, lots of them will start up something of their own, given the spectacular success they have seen. They won’t even need to put in their money – lots of seed capital will be available for them.
Think about it – How the heck is someone from redBus going to work for some Infosys bald boss when the company they helped build was bought for Rs 800 crore in front of their very eyes?
7. Entrepreneurship will become a career.
For years I’ve been observing that Entrepreneurship was considered taboo as a career option for kids in the eyes of their parents. It was like Marwari parents in the 70s not wanting to send their kids to Mumbai because they would get entangled in the ‘Film Line’.
Well, Entrepreneurship is a fabulous “Line”. With the recent exits of JustDial, redBus and a lot more, kids can now point to success stories that their dads will have read in the daily newspaper and get them to bless them when they tell them, “Appa, I’m gonna be an Entrepreneur”.
The redBus deal simply made my weekend!
Be happy for the redBus deal as if it were your own. And if you are still riding a bicycle (a la doing some silly job in Infosys), then get your own bus and start it up, ASAP!

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