Cover Story
Dotcom Survivors
The past nine months have seen hundreds of high profiled dotcoms across
the world bite the dust. But in the midst of carnage, some start-ups have
managed to survive- and even flourish. So, which are the dotcoms that
actually did things right while their peers were busy burning cash? The
first BW-Netsense survey throws up 21 survivors who were marching ahead
even as the dotcom carnage was taking its toll of their peers. How we
identified these dotcoms- and the lessons one can learn from them.
Clear Survivors INDIAMART - It began as a
query-forwarding service for Indian exporters in 1996. Now, it is trying
to make a go at global outsourcing for its clients.
IndiaMART - Matchmaker, Matchmaker
Till last year the man on our cover barely knew the meaning of the term
VC. The family business was petroleum trading. Thirty-one-year-old Dinesh
Agarwal is an unlikely dotcom entrepreneur yet, at one point, in mid-2000,
VCs were crowding into his office in a congested part of east Delhi. The
slightly built managing director of Indiamart- a B2B portal for exporters-
looks amused as he recounts his experience.
Agarwal had a hard time telling the VCs that online auction was not about
to take off in a hurry in India. For one, there was no payment mechanism
in place. Then, suppliers and buyers conducting global transactions worth
millions without meeting once needed sturdy guarantee systems in place.
The high-risk, high-reward existance oriented VCs who were scouting
around for an instant scalability business model were not impressed. But
Agarwal, with his family business to bank on, did not lose much sleep over
it. Today, Indiamart is an ideal example of the net-based entrepreneurial
spirit. And a profitable one, at that. On revenues of Rs 135.4 lakh, it
declared a net profit of Rs 6.2 lakh in FY 2000 that is expected to touch
Rs 14 lakh this year (revenues: Rs 287 lakh).
| Indiamart founder Dinesh Agarwal perhaps sums up the temperament
of these hardy survivors: "We did not base our plan on any
external funding posssibilities. Investments are made only after the
cheques come in." The bottomline: since easy money wasn't taken
to be a given, capital wasn't squandered. |
A chance query from a cousin about the Chicago Mercantile
Exchange, which Agarwal found on the web, triggered off the idea of an
online directory service. ASSOCHAM provided the content and Indiamart was
up and running, working as a sort of online matchmaker for Indian
suppliers and global buyers. It charges Rs 5,000 for a single page of web
presence with the guarantee of 5 enquiries a month. About 75% of its
revenues come from this. Currently, Agarwal says, Indiamart has 70,000
listed businesses (like handicrafts and apparel), 1,000 B2B catalogs and
generates about a lakh queries a month. He claims to have generated over
Rs 400 crore worth of business for his clients last year- most of it for
the travel industry. Not surprisingly, he is now planning to spin off
online reservations as a separate business.
Another logical extension is an online auction portal. Agarwal has
already tied up with a Geneva based supplier verification company, SGS, to
verify products and orders before shipment from India and approached
rating agencies like Icra and Crisil to enable payments through escrow
accounts.
Agarwal has steered clear of advertising. Instead, high visibility has
been achieved by pushing his site with search engines. Although other B2B
sites like Indiamarkets have the same model, Agarwal thinks he can do
better for two reasons: his existing contact database of 60,000 suppliers
and the sound relationships he has built in the last five years, which
newcomers are going to find difficult to replicate. Agarwal now plans to
join an MBA course. Would that make him a more stereotype dotcommer?
| Revenues |
Rs 287 lakh in
2000-01 (12 months provisional) |
| EBDIT |
Rs 35 lakh
(provisional) |
| PAT |
Rs 14 lakh
(provisional) |
| PROS |
Big first-mover
advantage
Strong business relationships that may be difficult for newcomers to
replicate
Prudent financial management |
| CONS |
Plenty of
competition
Scalability without external funding could be an issue |
| Dotcom |
First
movers |
Financial
prudence |
Multiple
revenues |
Brick
& Click |
Scalability |
| IndiaMART |
high |
high |
medium |
Low |
high |
