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Best of Young Turks: Retracing InMobi’s journey and how Naveen Tewari built not 1, but 2 unicorns
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
In this Young Turks interview from 2017, we chatted with Tewari at a time when InMobi had managed to achieve a record profitability turnaround after a near-collapse in 2015, which taught him ‘The Art Of Sacrifice’.
India’s longest-running show on startups and entrepreneurship Young Turks marks another milestone as it completes 19 years! To celebrate this landmark, we wish to take you through our time capsule, The Young Turks Archive, recounting the journey of some trailblazing entrepreneurial talent over the last two decades.
As India transforms, shrugging off the old cloak and dressing up with the digital debonair, we believe the lessons gleaned from these handpicked stories will be a trusted guide to the next generation of changemakers. Join us in this celebration of ideas, innovation and inspiration!
This week, we feature Naveen Tewari, the co-founder of the adtech platform InMobi, which is India’s first unicorn startup. What’s more, he and his team at InMobi have created not one, but two unicorns with the group’s subsidiary content platform Glance hitting a valuation of $1 billion during the pandemic in 2020. InMobi has been the oldest serving-member of the unicorn club, having been the first entrant in 2011.
In this Young Turks interview from 2017, we chatted with Tewari at a time when InMobi had managed to achieve a record profitability turnaround after a near-collapse in 2015, which taught him ‘The Art Of Sacrifice’. Then, it was all about narrowing and sharpening the focus. “Some of the tough decisions that we felt that we had to get away from were doing loss-making deals,” he said. A valuable statement as critics question the skyrocketing valuations and the line-up of loss-making startups flying to Dalal Street after food-delivery platform Zomato.
Striving in search of profitable growth while operating in a fast-changing digital landscape, Tewari had indicated InMobi may move quickly to make some meaningful acquisitions. After bringing the short-video app Roposo into its fold under Glance in 2019, InMobi has acquired Shop101 with aspirations of tapping social commerce, which is said to be the next big shift in e-commerce. It is planning to go for a U.S. IPO with a listing on the NASDAQ by the end of this year.
Here’s an insightful chat with the founder of India’s first unicorn as 22 new startups have already joined the elite club so far this year. 2021 is likely to be known as the ‘Year Of India’s Unicorns.
Shereen Bhan: Hello, and welcome to this special edition of Young Turks where we bring you the story of a startup founded by four friends who spotted an opportunity in mobile advertising back in 2008 when mobiles weren’t ubiquitous and the Android and iOS platforms didn’t exist. InMobi was building an independent ad network before Facebook and Google began changing the rules of the game. Now, the founders, then, took the tough decision to build a product company out of India. And, the venture has seen its highs, becoming the country’s first unicorn back in 2011, and its lows, with people labelling InMobi a has-been in 2015. But, two years of hunkering down and doing what’s right has helped the startup turn things around. The venture has turned profitable in 2016 and is set for its next leg of growth. Is the story now sustainable?
Joining us today to discuss that is the co-founder and CEO Naveen Tewari. Naveen, thanks very much for joining us on CNBC TV-18. To start with, Naveen, the last two years have been difficult, and that would be putting it mildly. If I look at the headlines and the conversations surrounding InMobi, between 2015 and now (2017), it was all about layoffs, it was about debt, it was about attrition. In fact, even in an email that you wrote to your employees, you called it a “make or break” time for the company. Take me through what the last two years have actually meant for you.
Naveen Tewari: Here’s how I’d describe it. I think the last two years have been tough because we’ve been making a transition from being, what I would call, a startup into an enterprise. And, an enterprise that I at least believe is sustainable, can become much larger. Therefore, we had to solve for certain things that we didn’t necessarily solve for when we were a startup, or where we were at least in the phase of startup. I think the media kind of mistook us, or our changes, to essentially be articulating them as attrition or other things.
I am very, very glad that we as a company, and everyone who works here, has been able to change, take the company through that change in the last two years by making some, what I would call, common sense decisions and tough decisions. The reason I use both of these words at the same time is because that’s probably what’s required to move from a startup phase into an enterprise phase.
Therefore, it feels extremely exciting to be in these times right now where you can now look and plan for things, not just for the next year or two, but for the next five years. And that’s probably why we came into existence to begin with. Therefore, being able to do that truly right now, not depending on somebody else but depending on your own fate, is absolutely a great feeling to have.
Shereen Bhan: Speaking of those tough decisions, Naveen, if I could get you to give us a sense of the financials. Because, what I was looking at, and data shows up, that year-ending March 2015 losses were at about $40 million, the previous year about $44.6 million. So, can you give me a sense of where things stand as far as your current financials are concerned, in terms of revenues, and, of course, you’ve now turned black?
Naveen Tewari: I think the interesting piece within this is not just the fact that we’ve been able to turn profitable. By the way, just to give you a sense, it’s just not merely profitable but it’s at a fairly strong, healthy profitability.
Shereen Bhan: Can you quantify that for us, Naveen? What does strong, healthy profitability mean?
Naveen Tewari: Well, here’s what I’ll tell you. IN Q4 2016, we were on a run rate of a profitability of somewhere between $40-$50 million. Therefore, that effectively would tell you the scale at which we were working from where we were two years ago. And, by the way, I just want to also break the myth in general, where people believe that as you go for profitability, you’re letting go of growth. That also didn’t necessarily happen. We are able to go for growth. Yes, the growth was slightly muted, because you had to get rid of decisions and deals that were loss-making for you earlier. You stopped doing those things. That’s where I use the word “common sense”. You stop doing some of the basics that you were not doing earlier and you started to do now.
Shereen Bhan: Even as far as your revenue picture is concerned, Naveen, and we’ve spoken about this in the past. You’ve had a billion dollar-aspiration for several years now. What is the situation as far as revenue run rate is concerned?
Naveen Tewari: I think that we can see a sight to it, a path to it. I think it might take us another couple of years to get there. But, I think now we will go for it on our own terms. That’s the big difference.
Shereen Bhan: What does that mean, when you say that “you’re going to go for it on your own terms”? Again, I’m looking at data put out by various publications at the end of March 2016. Revenue between $320 and $325 million. So, in the near term, what is the aspiration if we let the one billion dollar-aspiration still lower away or further away on the horizon?
Naveen Tewari: Yeah, look, I think we expect ourselves to grow roughly about 30-35%. And if you take that growth rate, apply that to the numbers that you saw for 2015, I would argue that we could potentially grow over the next three years or so, 30 to 50% growth. That should get us to about a billion dollars. So, we have another two to three years before we get to their billion dollar-mark.
Shereen Bhan: Okay. Naveen, you talked about tough decisions.
Naveen Tewari: By the way, I just want to qualify. I just want to quantify the fact that this billion dollars is not a GMV number, but it’s a true revenue number. We get confused by those things.
Shereen Bhan: Yes, I’m glad to note that a lot of founders have now finally decided to not talk in terms of GMV, but to talk in terms of real numbers. Naveen, take me through some of the tough decisions that you had to take, because, growing from a startup to an enterprise, as you pointed out, is also about the art of sacrifice. It’s about taking those tough decisions. It’s also about narrowing your focus, sharpening your focus, it’s about giving up on this, “I want to be something for everybody” to “I want to focus on some strategic markets that make sense to me”. So, what can we expect now, over the next few years, as far as your growth plans are concerned?
Naveen Tewari: Some of the tough decisions that we felt that we had to get away from were doing loss-making deals. For example, it is very hard when you’re in a phase of growth, to essentially say no to business, to say no to revenue. But a lot of this revenue comes at the cost of that not being marginally profitable for you. And we used to have that business for probably a large portion of our existence. And, I think those were the deals that we basically said no to, or even if we said yes to, they were extremely selective and we were extremely clear on why we were saying yes to it. And yet, by the way, here’s what I would add, we didn’t necessarily see a significant growth dip because of those.
I think the second one was, essentially, to be very, very precise in where your investments would go. Three years ago, given the phase that we were in, we would say yes to all, most decisions. We would say yes to decisions in every market for ourselves. We would say yes to whichever country we were seeing any growth in, we will deploy some share of our incremental investments into that bucket. But, over the last two years, we started to make very tough decisions. We started to give money only to a few countries. We started to call out a few countries where we would not give them an incremental budget, but keep them on the leash. But, everyone appreciates this, once you have that hard conversation. Because, they actually like to see the company succeed.
So, for example, we started to invest a lot more in the U.S. and China in 2015 and 2016. We did not invest in any other market as aggressively as we invested in the US and China. The other markets where we then started to invest from in 2017, in addition to the US and China, were Indonesia, Australia, and India. We said, “Look, these are markets where we now need to essentially go forth and look at investments and scale the market for ourselves. There were a lot of product investments, technology, R&D investments that we’re doing in multiple areas, we’ve cut down and shut down certain areas where we saw that, “Look, this is not going to give us something meaningful over the next two years or so”. We said, “Look, we’ll come back to this, we’ll pick our bets”. So, we have a new framework that we use now, which we call ‘60-30-10’ – 60% of our investment goes towards revenue business or businesses where revenue gets impacted here. Now, 30% goes where we can see an impact over the next 12 to 24 months, and 10% goes towards something that we can see beyond 24 months.
I’ll add the last piece to this, which was that the management bandwidth is also equally important. That’s not a commodity. That’s not something that you can just say, “Hey, I can distribute this over in many, many things”. I think that’s where the people’s side of the story comes in, where we said, “Look, as we do less similar things we will be more focused”, which is what you were also mentioning. I think those are the things that we did, that we’ll be able to take the business to a level where it invests on its own. We don’t have to rely on external capital. We don’t have to worry about external forces. We just have to care about what’s right for us.
Shereen Bhan: Well, time for us to take a break. But when we return, we continue our conversation on this Young Turks exclusive with Naveen Tiwari on the InMobi turnaround story.
Naveen Tewari: People around you will tell you how hard growth would be if you try and force yourself towards profitability – a completely overused argument.
Shereen Bhan: Welcome back, you’re watching the CNBC TV-18 Young Turks exclusive. We’re in conversation with Naveen Tewari, on the InMobi turnaround story. Let me talk about your growth markets. You pointed out that you’ve been investing in the U.S. and China over the past two years. At this point in time, I think that China contributes about 28% to revenues. What about the U.S., Indonesia, Australia, and India? So, that’s the five-market strategy that you have in place for the next few years?
Naveen Tewari: We see ourselves going after these five markets because we see strategies here, whereby we can actually cement ourselves to be one of the top players in these markets. I’ll come to the U.S. in a minute, but in China, Indonesia, India, and Australia, we clearly see ourselves being one of the top two or three players in that market for sure over the next couple of years. That’s why massive amounts of investments are going into those markets. We have a strategy to say, “Hey, here’s how we can be one of the winners in those markets”.
In the U.S., which is a much more complicated and overcrowded market, we think we have areas of niche where we can go in and own those pieces. So, we are going very, very heavy on video advertising, we’re going very heavy on remarketing-based commerce advertising. We think those are niche areas where we can actually own a very significant portion, even in the U.S. as a market.
Therefore we think, even in that extremely large market, we’ll actually have a very strong foothold over the next couple of years.
Shereen Bhan: You know, just a quick point on China, and I don’t mean to scoff at the success that you’ve enjoyed in China, Naveen, but wouldn’t you say that’s largely on account of the fact that the big boys have been kept out of the Chinese market?
Naveen Tewari: Yeah, you’re right. Look, there is no hiding the fact that Google and Facebook are not present there. But, let’s not also undermine the presence of Tencent, Baidu and Alibaba in that market. They are extremely, extremely strong in that market. Frankly, the reason why Google and Facebook are not in that market are because of those three companies. So, therefore, while one can make the argument against Google and Facebook not being there, the reality is, the presence of those three have actually held entrance of Google and Facebook in itself, whether through direct or indirect means, but they have actually been able to do so. So, we actually feel pretty privileged and excited about the fact that we are one of the top advertising platforms in China even today. Therefore, we think we can actually cement ourselves even more strongly in that market over the next couple of years.
Shereen Bhan: Let me now pick up on some of the other issues that you talked about. You talked about giving up on the products. That didn’t work out for you. Now, you had this big launch in San Francisco – the MIIP platform that you launched, and that hasn’t really worked out as one of the key bets that you were hoping for in the way that it would. There has been a change in strategy there. Do you continue to want to take that forward? What is the story there?
Naveen Tewari: Yeah, look, I think contrary to the belief, the MIIP platform has actually worked. I’ll tell you the distinction. When we launched this, we made a mistake, which is where we positioned the consumer-facing side of MIIP a lot more than the underlying platform of MIIP. The underlying platform of MIIP today has already started contributing 10-15% of our revenues. The consumer-facing side of it was anyway significantly future-looking and we were merely trying to display that. And that came to light a lot more than the underlying platform. So, while that still remains, we had to get rid of the name, and therefore, we market that as a remarketing platform right now. That’s doing significantly well, globally.
But, that’s not the product that we did give up on. We gave up on products that never even saw the light of the day, that never even came out. Because, they were not going to essentially make sense for us. We had teams of about five to ten people that were actually working on it and they all felt excited about those kinds of products. We just didn’t feel that we would be able to do justice to those things coming out. Therefore, we had to say no to it.
Shereen Bhan: You know, the other thing that you talked about, Naveen, was that you don’t want to rely on external funding. Now, the last round of funding was in 2011 and that’s when you raised $200 million from SoftBank. You may not need the funding at this point in time, but are you looking at raising funds?
Naveen Tewari: Look, I would put this into two buckets right – one is, I actually think most of the technology startups should be able to become sustainable with the level of capital that we got. Now, going forward, looking for capital would basically be on our terms. Now, there are many things that one can do as an organisation where we don’t need the capital. We may want it or we may get it. Then, we will essentially do acquisitions. If we start talking about how we look at the future, we think that there are a lot of changes that are happening in the advertising landscape, it’s a great opportunity for us to essentially acquire a lot of companies. We haven’t yet done so over the past two or three years. But, we think that could be a great opportunity for us.
Shereen Bhan: So, will 2019 be a big year for you on the acquisition front? And where would you be looking at these acquisitions? Will these be geography-specific or capability-specific acquisitions that you would look at?
Naveen Tewari: Yeah, look, I think it’s hard to say. A lot of these are slightly more opportunistic in the way they are. But, what I could tell you is between 2017 and 2018, we would certainly look at doing a few acquisitions, which by the way, span across both geographies and capabilities. I would argue that they kind of started to go hand-in-hand a little bit. We’ll see what comes out but that certainly is on the cards.
Shereen Bhan: Naveen, what is the situation as far as the cash on books is concerned. At the end of March of 2015, it was at about $13 million. Also, in terms of the debt position, about $16 million. Any concerns and worries on the debt front?
Naveen Tewari: No, no we have enough cash to service our debt if we want, any day we want. There’s no need to do it. That’s why that is there. So, it helps you get the leverage that you want. So, cash on balance is not even a concern for us.
Shereen Bhan: Is this turnaround sustainable, Naveen? Have you been able to get rid of the non-core stuff that you wanted to get rid of, you know, restructure enough to be able to make this turnaround sustainable? Because, that’s the question everyone’s asking, given what we’re seeing in the Indian startup landscape at this point in time.
Naveen Tewari: Yeah, look, precisely for that reason, we never came out with this earlier. We didn’t want to talk about this earlier, we kept it under wraps for a long, long period of time. We wanted to be convinced ourselves. We saw great signs of it. We are convinced that it’s sustainable. We’re seeing signs of sustainability clearly. So, we are happy with the way it is. You should see this being sustainable for us for sure. By the way, I think on the point of the Indian ecosystem, it’s important that many, many companies look at becoming profitable, because as an entrepreneur to different entrepreneurs, I can tell you, it’s an amazing feeling to be profitable, and not be reliant on others in trying to grow yourself.
Shereen Bhan: I’m sure it’s been a lot of sleepless nights over the last two years, Naveen, for you. And I would imagine that that’s the case across a lot of startup boardrooms, at this point in time in India. What is that one thing that you would like to share with entrepreneurs who are going through exactly what you’ve been going through?
Naveen Tewari: People around you will tell you how hard growth would be if you try and force yourself towards profitability. You give it a lot more value than it is important for. The growth does not suffer as much if you do it rightly and smartly. You need to be extremely prudent about the way you do it. Therefore, that argument one should not take. I think it’s an overused argument that growth will get hampered if you look for profitability. It’s a completely overused argument.
Shereen Bhan: So, the road to profitability has been achieved. What about the IPO plans, Naveen? We’ve spoken about this in the past as well. Is the IPO on the horizon?
Naveen Tewari: Look, I don’t know what horizon means. But, if you ask me, we will look at something.
Shereen Bhan: The next two to three years.
Naveen Tewari: Yeah, absolutely. Then it should be on the cards, probably. The advertising space is not well understood in the country today. In general, it’s a very complex space – the advertising technology space. Now, in that space, by the way, if you look globally, there are Google and Facebook, the guys who are above a billion dollars. Then, there are players who are between $100 million to $1 billion. Those are a handful of players, maybe five, less than five, of which, global players are less than three, maybe two. Now, that’s the space that we’re in. The reason why adtech in general is not considered to be a great space to be in is because less than $100 million, there are 200 companies, and most of them may be less than $50 million. Adtech is hard. It’s very easy to start, very hard to scale beyond $100 million. We find ourselves not just at an India scale, obviously, but certainly at a global level, in that interesting band where we think we are at scale and differentiating from the others with very strong technology in place, and therefore, be able to cross the mark where the scale becomes paramount. Therefore, you see a lot of consolidation happening in the smaller companies and that’s the one that we want to take advantage of and grow. Therefore, as you grow, we think we will be one of the top five advertising platforms in the world in the next two to three years.
Shereen Bhan: Was selling out really an option for you over the last two years? Did you seriously consider that, Naveen?
Naveen Tewari: Well, it did start to cross my mind a couple of times because of the things being tough and you are trying to figure out how to get out of those scenarios. So, it does, it does cross your mind. I was reflecting. I was talking to an international player. He was, obviously, a renowned player and plays very well, and he was saying, “Look, as players, we also get to go through these phases where you’re doing really, really well, and then suddenly you have a slight slump. You question yourself. I think every one of us goes through that phase, and you come out of it, and you are much stronger and you’re fitter. You kind of do it better because you know what didn’t work, right?” I think that’s where we are right now.
Shereen Bhan: Well, Naveen Tewari, here’s wishing you and the team at InMobi the very best of luck. We hope that the lessons that you’ve learned over the past two years will ensure that the growth that you now see is going to be sustainable. Thanks very much for joining us on CNBC-TV18 and sharing your story with us when you started InMobi in 2007, and today, as you’ve turned profitable. It’s always a pleasure, thanks very much indeed.
Transcriptions by Arunima Rao
Arunima Rao interned with Young Turks from April to June 2021
Twitter @_arunimarao
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