The funding story-Jai Ho!

Lokesh with a brilliant academic track record from an Ivy league institute and Gopal also a rank holder in IIT had both put in about 15 years each with a multinational in India. Both were in a well-paying jobs with reputed MNCs organisations with high salaries and employee stock options.

But there was heartburn… a hunger to create to do something…. There was so much happening in the ecommerce space, in the dotcom space  in India that both wanted to pursue the entrepreneurship bandwagon. So after several long sessions of discussions and long chai sessions, long old monk sessions they finally decided to call it a day from their cream jobs and stepped out of their jet setting jobs to create a start-up. The lure of creating a start up the start-up bug had bitten them. They floated a company “LOGO” (Lokesh and Gopal) with an aim to be the next big thing in the app space, to be the next WhatsApp like app in the tech enabled space. Wow what a dream inspiration…

They also were able to influence Ramgopal and Amar who were also 10-15 years experienced with large MNCs and also earning huge packages and to chuck their paying jobs and be founding members of LOGO.

They quickly got together. They had all the right ingredients to get them the first round of funding with “". The first thing they did was to create a mobile app using their tech skills and business skills. 

  • Four IIT/IIMs with a tenure of 12-15 years with MNCs and all who quit highly paying jobs.
  • An android, IoS app with a brilliant sounding, very convincing idea a wonderful story in mind
  • Perfect ingredients of what a VC had been waiting for.

The dream combination

Four IIT’ians, a mobile app and a  mobile app combined with a dotcom idea. Just the sort of thing that Lion Global VC or a Global VC would want to Invest in. So here comes Lion Global with two other investors and put in a Rs 10 Cr  investment based on their business plan for 1 year.  The sum consideration for 10% stake or equity is Rs 10 Crore. 

This is where the story starts. Lokesh and Gopal company is now valued at Rs 100 Crore and how-If 10% fetches 10 Crore than the balance 90 is worth 90 Crore!!! Yes perfect, overnight they move from a shared business center to a swank office and within weeks hire a huge team of sales executives. The intent-how to spend the 10 Crores in a span of 6-8 months and await for the next round of funding.

And true to it, to promote the app they hire event managers, television ads, full page ads in leading publications, radio ads all media coverage et all . In addition freebies for downloading the app across all eateries, free voucher per download across bars pubs etc, they hire large sales teams to sell the concept to merchants retail establishments all over and finally within a span of 6-8 months they have ensured that the funding is compulsorily spent. 10 Crore rupees spent in a span of 6-8 months. 

Investment of founders

Development of application software and creation of base idea and platform. Total investment in hard currency is maximum Rs 5-10Lacs made by the founders. Now the valuation of the company has become 100 crores. The calculation is very simple –if 10% equals 10 Cr then balance 90% equals 90 crore. Wow what a money spinner!!! But the funds have dried up…in 6-7 months and they still need to pay salaries, vendors etc and they are nowhere close to a break even with a committed monthly outflow for about 50 employees on board whose salaries need to be paid.

In the following weeks they go to Lion Global VC and say that in case they do not get more funding they will have to close the shop and send all the 50 employees home and go back to their jobs. It is their 5-10 Lacs of investment versus the investors 10 Cr. Obviously the VCs are now in a distress mode to protect their investment.

Over the next few days Lion Global VC the other investors come towards an understanding-together decide that the investors will fund to the extent of expenses for the next 3 months operating expenses and within that if they are able to find another investor or buyer for the business then they will sell off the business and proposition to interested parties do so such that their investments are protected. Else, they will close down the business in the event they are unable to find the buyer. Now all the concerned parties Lokesh, Gopal, Lion Global and the other investors have come together with one common goal and that is is to find another bigger buyer for the entity.

Together with the help of the investment advisor at Lion Global Finance and other co-investors they approach bigger fish – Retailking who are also in the same boat but at a 100x scale amounting to investments of about Rs 2000 crore…. Remember now the team has grown stronger not only does Lokesh and Gopal have 2 additional partners but also backed by a reputed global investment firm Lion Global and two other reputed names venture in the market for a sell out.

The potential buyer - The bigger fish Retailking in order to increase their valuation decide to buy out “Limbo” for 100 Crores valuation with a down payment of Rs 1Cr and the rest 99 Cr in stocks of Retailking. Mind  you - stock of Retailking that is not publicly listed or publicly traded stock. Media is alerted, all over there is press coverage “Retailking buys Limbo for an undisclosed amount” say the headlines (same article says intelligence reports peg the figure somewhere at Rs 100 Cr) and the mention of a share swap is mentioned somewhere down below in the article. By now Lokesh and Gopal and Gopal have become sort of mini national icons and successful entrepreneurs.

The deal is very simple that they (Retailking) will pay a down payment of Rs 1cr to the founders of Limbo and balance 99 crore will be paid by swapping equity of Limbo with the equity of Retailking with a 2-4 year lock-in period as well as a milestone based employment agreement whose tenure is anywhere between2 to 4 years.. Retail king valuation is Rs 2000 Cr arrived based on the same principles of funding of which they will pay 99 Cr worth of equity to Limbo founders. Since it is a private equity both valuations are based upon speculation and perceived potential than hard numbers of monthly/quarterly sales or profitability. This 2000 Cr has happened in the same way that the valuation of Limbo has happened for 100 Crore. Like to like…birds of a feather flock together. They merge with this understanding of 99% sale through equity swap.

Now they are all one big fat Indian family-Retailking plus Limbo waiting to find another super Retailking. The sage continues. Both are hugely negative on balance sheet and immensely bleeding but the funds never dry up. Because to save 10 Crore they merged with another 2000 Cr company and the saga continues. There are enough bankers and backers…The bubble has become bigger to save 2000 Cr there will be enough to put another 2000 Cr. Meanwhile Lokesh and Gopal are now employees of Retailking and continue to have ESOPS apart from their monthly salaries. They are ready for the next venture ……Jai HO!

Trending Technology - Cloud is here to stay

The past two decades have seen a significant disruption in the way we do business. If we look at the IT Industry itself it has transformed itself from companies that were doing hardware or software alone to companies that have understood that convergence of hardware and software is the key to success. On one hand the internet from being just a medium data connectivity which people used to use either for web mail or browsing has not metamorphosed into a massive unified converged communication channel whether it is voice data or even video. Companies that pioneered this were valued at billions of dollars whether it is a Skype or whether it is a WhatsApp ultimately got bought over at several times their initial valuation and have today become a way of life or a part of any users’ day to day interaction with the world at large. Even a day to day consumer of internet services has seen the power of the internet grow and percolate into our daily lives through the advent cloud based computing and social media popularity rise through Facebook, WhatsApp, Twitter, LinkedIn and most recently the several hundred apps that have emerged on hand held devices that enable everything from on line shopping to gaming, maps to mobile wallets. So cloud has enabled even the common man to connect with friends, make online payments, chat, video chat and also make voice calls and also find directions without the need to ask a passerby. All this is possible with ubiquity of data connectivity and convergence of voice, data and video as long as he has a hand held mobility device that is connected to the cloud.

While this has been happening on one hand, in the B2C space, if we look at the B2B space also, corporates have moved from the conventional data centre based model to cloud based computing. If we go back, before the advent of large MPLS networks and redundant data centers there was the advent of UNIX based systems that had dumb terminals with all the computing power concentrated on a server that had the OS, Database as well as application and we had dumb terminals called as RS 232 terminals that slowly died down because of the advent of more powerful LAN-Ethernet, thick Ethernet etc. That concept slowly moved to Data centre’s when reliability, availability, redundancy and Continuity of business became important considerations to run enterprise applications.  Not only have the servers moved in a virtual environment to an AWS or an Azure platform but so have the enterprise applications, their ERPs and organizational tools to manage right from their sales reporting to production and finally functions like HR logistics have moved to a SAAS based model completely on the cloud. 

John Gage, a research scientist at Sun Microsystems once said these words that continue to remain true for generations to come- "The network is the computer." These words also became the company’s tag line for many years and continue even after Sun became Oracle. And in today’s world continue to stand tall with the advent of cloud computing.

With LAN becoming stronger and stronger over time, with each passing day there was a time when we moved from low speed LANS to high speed LANS and from Kbps speeds to Mbps speeds and finally GBPS speeds. The very same evolution has occurred with wireless networks while wireless networks become stronger, there will be immense convergence of wired and wireless technologies through extended wireless networks which started initially with offering connectivity in Kbps, moving on to Mbps and very soon the day is not very far away when connectivity of every possible wireless network will show speed tests crossing Gbps speeds coupled with the ability to reach the remotest of locations all over the globe seamlessly and without data loss rather with robust Gbps connectivity. If we circle back to the words of John Gage they are with each passing day more and more relevant and pronounced.

With the advent of cloud however the skills required to manage speed, performance security redundancy, availability and continuity of business, applications will also be of a very specialized nature The world will require Data centre and networking experts of a different nature, the skill set will move from being a pure applications guy or a pure networking guy to someone with a core skill set and also who can converge business and Technology together through newer ideas and ways of implementing solutions over the cloud.

The skill required to make a cloud security specialists will vary and acquiring those skills is going to be increasingly important with each passing day.


The dynamics are changing from a technology as well as business stand point, tomorrows networks and cloud computing will be able to do much more than todays’ and cloud is here to stay. All businesses and technology enabled organizations will need to adapt to cloud computing thereby early adapters will have a business and technology edge over the slow movers.

Bursting the fear bubble – IT Layoffs in India

We have been most recently witnessing a lot of news about the layoffs in the IT Industry. Is it real or just a bubble? While the whole media is talking of layoffs in the year 2017, there is little talk of the number of IT jobs that have been last year on year lost in the past decade. Various industry reports state the number to be anywhere between 50,000 to 80,000 job cuts in the year 2017. When yahoo cut about 2000 jobs in Bangalore there was a lot of media attention that this attracted. But when some Bangalore based IT biggies downsized, there was very little media coverage and they quietly let go about ten times that number-20,000 to 25000 people in just one year. Many of these job cuts never grabbed significant media attention.

What is however important is to view the whole scenario from  two different perspectives-the employer and the employee- perspectives

Is the phenomenon of job cuts new to the IT Industry?

The answer is a clear no. Maybe the quantum might vary in numbers but at this point of time there is no firm count or an organized platform or agency that announces the number of employees that an IT company had year on year let go in the past 10 years or publishes this data. And no company posts their employee downsizing on any formal platform nor do they invite press conferences like they do to announce good quarterly results or annual results and rightly so. And even if this were to be published it will be very difficult to segregate the desired versus undesired job cuts or attrition. Nor is this data published by the companies themselves in terms of the year on year dip in employee count because of job cuts alone and not necessarily because of undesired attrition. So first thing- Job cuts is a very natural phenomenon as far as the IT industry is concerned. 

The employer view point-Is there a remedy for Companies?

One of the key reasons the IT industry has been constantly able to steer off crisis situations is because of its constant adaptability-its ability to evolve, innovate and adapt to a constantly changing environment. In times of distress, starting with the big American companies Microsoft, Oracle, IBM or HP and their Indian counterparts such as HCL, Wipro, TCS, Infosys CTS or Tech M (that bailed out Satyams and its employees) all emerged as winners over time. So whether it is a Trump Administration or an Obama administration, whether it is an Indian or American IT company if you see the track record of the past several years these companies mostly have not only had a very strong governance model but constantly have evolved the art and science of survival and profitability as a basic instinct and shown amazing turnarounds at various inflection points emerging winners. Whether it is on the technology front or whether through innovative value propositions, they have been consistently adapting to the business environment and keeping abreast with technology and market changes to meet ever demanding client needs. Someone said that if you take all the wealth in the whole world and distribute it equally amongst each person on this planet, within a finite amount of time, this wealth will go back to where it came from. This of course is a very diverse view though and all may not subscribe to it but if we take a clue from it, the individual players have learnt well to survive and overcome obstacles from time to time as is evident from the top 10 global and Indian IT service providers who have constantly innovated themselves through effective survival mechanisms. Companies who failed to adapt to that change, companies who failed to innovate also were not able to survive in the long run. One can name quite a few disasters or slow movers but let us by and large learn from the success of these great organisations.

The employee overview-Is there a remedy for employees?

One of the learning’s from the IT Industry is that one has to constantly add skills and a skill that you had 20 years ago or 5 years ago may not be good enough to take you to the next natural progression. A good example is of COBOL programmers who have become almost extinct over time, and 30 years ago they were highly in demand. Same is the case with the Y2K bubble that burst and there were various posts in the year 2000 -2001 the most popular one that showed scores of developers atop an elephant with tag line “B2B-Back to Bangalore”. What happened to these individuals? They ultimately did not re-equip themselves with newer skills nor adapt to newer technologies. A turtle is slow but is seamlessly able to adapt to land and water with equal ability demonstrates versatility. A firm belief that layoffs although may be painful in the short run on one hand, on the other hand pose not only a challenge but are a great opportunity to explore yourself from a knowledge, skill stand point, financial stand point economic stand point as well as from a technology stand point and as a professional as well as personal. I have seen a few colleagues quit IT and move towards something entirely different like starting a race track for potential motorbike riders, and being very successful at it. What brought you here today is not enough to keep you going where you want to be tomorrow.

Remember that it is anxiety of the unknown that is a bigger bubble, rather than speculate act to re -invent, act to reskill, act to be adaptable and that is the key. 


In a constantly changing environment, embrace the change and challenge yourself to overcome the challenge, there is no other remedy than reinventing yourself and those who do will ultimately emerge winners…

About Us

Avgi Solutions is an IT Solutions and services Company focused in creating and providing customized solutions and value to mid-sized and large organisations towards their IT needs through innovative & customized solutions addressing their business needs.

Read More

Related Services

We offer a suite of reliable, responsive, flexible and proven infrastructure services and solutions that deliver value to business. Our service offerings span across planning, building, running and monitoring the IT infrastructure operation.

Read More

AVGI is an acclaimed product engineering services and technology solutions company with an affluent heritage of collaborative, offshore and outsourced product development. We underpin the entire gamut of product Lifecyle.

Read More

AVGI offers managing human resources to help bring in reliable results in process. We reduce your efforts in hiring right talent for your organization. We provide a complete support to client companies for fulfilling staffing requirements.

Read More

AVGI offers the complete suite of testing services to streamline the processes, improved quality levels for the software products and systems while intending to work on the cost-effectiveness, profitability and high quality results.

Read More

AVGI - a promising team with cost effective and innovative ideas, provides a spectrum of engineering design services irrespective of manufacturer's industry. We understand the client's objective and design the product.

Read More