[Guest article by Alok Kejriwal, Founder of Contest2Win. Alok shares the story behind his decision to sell Mobile2Win].
“’In retrospect, thank god and my luck that i exited a business that started off as a great value creation partnership (content meets mobile operators’ into one today that is of a ‘dalal’ or broker – Sir please can you buy this from me and pay me when you like… I dont ever want to be a dalal…”
By 2005, a company I had co-founded called Mobile2win (originally started in China in 2001 and then brought into India in 2003) was sailing…
We were first movers in the India Mobile VAS (value added services) space and things were looking up – thanks to all our learnings in China. The first Indian Idol voting platform had been successfully handled by us (and ever since) and Sony India had made us a long-term partner. We were partnering with lots of media companies, selling our mobile games on Vodafone and creating creative marketing platforms. Rajiv Hiranandani – head of the business was doing a great job.
The success was also creating a sweet problem
The business needed a series B investment to scale and my existing investors – Siemens Mobile Acceleration from Munich and Softbank Ventures from China were not at the best of terms with the management of mobile2win.
Just a month earlier I had come back from Shanghai and attended the most bizzare board meeting ever in my memory. The meeting started at 9 am and by 9:30 am, there was war in the boardroom. 2 Germans (Siemens), 1 Indian (Gopala Krishnan (GK) – the CEO) and 2 Chinese (Softbank) were all screaming at each other simultaneously in German, Chinese and in Hindi (me telling GK to control himself). The issue was typical start-up stuff – scaling up, finances, hiring, firing etc, etc, and while I let them go at each other (Softbank shouted at GK for pointing fingers with this hand – a very ‘disrespectful’ act in China), clearly this was a board that was not going to co-operate with me for raising money in India.
Back home, when I started showing mobile2win around, there was massive interest. Sandeep Singhal of Sequoia India was kind enough to stay up late night in his room at the Taj, Mumbai and hammer out a term sheet for me the next morning.
All these and more got no responses from Softbank and Siemens. So I asked them what they really wanted?
Softbank was not going to put money in and Siemens wanted out. They were non-Indian VC’s and only Indian VC’s would understand Indian Mobile VAS space and hence invest.
This was going to be a tough deal to close out.
One afternoon, I met Pramod Haque and Vab Goel of Norwest Venture Partners. ( I later learnt that Anupam Mittal of shaadi.com fame had turned down a term sheet of Norwest for funding Mauj.com).
Norwest stepped on the gas and took an active interest in talking to Siemens and Softbank and understanding their motivations. They engaged with mobile2win management and also spoke to other investors.
A few days later, late afternoon I received a phone call that precipitated into the ‘toughest decision of my life’ :
Vab indicated that he had settled all issues of valuation, exit and new investment between Siemens and Softbank and the management of Mobile2win (GK and Rajiv), and that Norwest and another VC was ready to go ahead in massively funding mobile2win at great valuation terms.
Except, there was one condition:
Alok (me) had to exit the company!!!
At first I thought he meant Alok had to be distanced from management and I told him that I was barely involved. “Exactly” he told me – “You have no role to play, do not have the capacity to invest more money and your chunk of equity will free up lots more space for new investments”. Essentially Norwest wanted to buy out the promoter, make the company totally VC owned and then drive the management themselves.
Over weeks, I understood that this was a non-negotiable stance by Norwest. Also, the other 2 investors – Siemens and Softbank were sold on this solution and began to pressurize me to exit (For the innocent – if most VCs want an exit to happen, they can force the promoter to do the same using the ‘drag out’ clause).
So, here I was – someone who had founded a good company, sitting on the brink of VAS value explosion in India, and now being offered millions of dollars to walk out. It became a very puzzling and difficult situation to handle..
Since the Company was structured in China, I took a legal view from a historic law firm in Hong Kong called Haldanes and I remember the very polite British accented lawyer talking to me for 1 hour non stop till I interrupted and asked him – “Do I have a case to stay in”? He replied “No Alok”.
I then consulted my most supportive VC and guardian of all these years – ICICI Ventures. Bala Deshpande and Nandini Satam were so objective in their advice and mentoring – I still regard ICICI Ventures as the best thing that ever happened to me as an entrepreneur.
Late night at 2 am, I got up and sat in my living room and brooded about the exit from mobile2win. I would be rich, the company (contests2win) would receive substantial cash to do other things etc, etc … At the same time I would also have to sign a 3 year non compete from doing anything mobile in the world (!!) and have to live without what may become a billion dollar company without me.
Legally, I could battle it out… A ‘drag out’ would take months to execute and kill the deal and also the funding – so it would finish the company. I would have at the most won a Pyrrhic victory…
The next morning I called Vab and said ‘ I’m selling’.
The deal closed within 4 months. It made me a dollar millionaire and more importantly put cash into the mother company (since share were held by contests2win) that allowed us to pay a 1250% dividend to shareholders. We invested 1 million US$ into games2win that jump started the business and received funding from Clearstone and Silicon Valley Bank.
The months that passed were dark. VAS continued to haunt me and I would wonder if I had lost the biggest opportunity of my life… Mobile2win India hired big wigs from TV and elsewhere and moved into a 10,000 sq feet office (from the 1500 sq feet office I had). They hired over 200 folks and seemed to the hottest company around…!
So, what was the outcome you may ask?
In 12 months post the deal, the cracks in the VAS business began to appear in the Indian Mobile space. Operators were unrelenting to share more than 20-25% revenues, payments were delayed by months and the business became strangulated with lots and lots of wannabes giving away content and revenue share for free.
24 months later, mobile2win was flipped over by the VCs to a Chandigarh company called Altruist for a non-cash deal. The business had collapsed and this was clearly the VCs saying it was over.
For me, this was not sweet revenge but just the toughest decision (to sell or fight) that had turned out so positively!!
And what happened to Mobile2win China? GK left and a smart Chinese called Nick Zhang was hired by Softbank and Siemens as the CEO. Nick turned the company around and then astoundingly sold it to Walt Disney (USA) in a multi million cash $$ transaction. Softbank China, Siemens and my group got lucky again!
[Republished from Alok’s blog]