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Mumbai-based online travel portal Cleartrip has raised $40 million from Nasdaq-listed Concur Technologies, which has acquired a minority stake for the investment. This is the single largest private investment in an Indian online travel startup till date.

With the latest round of funding, Cleartrip has so far raised a total of $60.2 million since its inception in 2004, probably making it the highest funded online travel startup in the country. Its previous investors, venture capital firms Kleiner Perkins Caulfield & Byers, Sherpalo Ventures, DAG Ventures and Draper Fisher Jurvetson (DFJ), remain invested. The deal also comes attached with a strategic marketing partnership with Concur. The Redmond-headquartered company manages the travel and expense reporting needs of over 15 million business travelers globally and will tap into the Indian market through the Cleartrip association.

Cleartrip was founded in 2004 by Hrush Bhatt, Stuart Crighton and Mathew Spacie and the portal went live in 2006. It raised a $3.7 million Series A round from Kleiner and Sherpalo in early 2006 and followed up with a $8 million Series B from DAG Ventures, Kleiner and Sherpalo. In 2008 it raised a $18.5 million Series C round led by DFJ, which invested $10 million. The remainder came from Mumbai-based Mahindra Group and Cleartrip’s existing investors. The company’s financials are not publicly stated but Medianama reports its gross revenues at $12.39 million for the year ended March 31, 2010, quoting a Director’s Report filed by Cleartrip with the Registrar of Companies.

The other leading online travel startups in the market currently include Makemytrip, Yatra and Via. All three have been heavily funded by venture capital investors over multiple rounds. Gurgaon-based Makemytrip, which went public last year, had raised a reported $38 million from investors such as SAIF Partners, Helion Venture Partners, Tiger Fund and Sierra Ventures. Mumbai-based Yatra has raised an undisclosed amount of funding from Norwest Venture Partners, Reliance Venture, TV18 and Intel Capital.  Via, based in Bangalore, is backed by Indo-US Venture Partners and Sequoia Capital, who have invested $15 million in the company. It is now reportedly in the market to raise $100 million. Sequoia along with Battery Ventures had earlier also invested $25 million in Mumbai-based Travelguru which was acquired by Travelocity in late 2009.

The Travelguru acquisition set the pace for consolidation in the online travel segment. The entry of global players such as Expedia and the imminent entry of others has made it a fiercely competitive segment. Given the prevailing environment, Cleartrip could not have landed the $40 million windfall from Concur at a better time.

What others are saying about the deal

• US company invests $40 million in Cleartrip (Mint)
• Concur buys $40 million stake in Indian travel portal (Reuters)
• Concur partners wih, invests $40 million in India’s Cleartrip (Techcrunch)

Image Courtesy: Cleartrip

Continuing with our round table series, read what our five panelists — Saurabh Khullar, Ideacts; Jiby Thomas, Quikr; Hrush Bhatt, Cleartrip; Saurabh Gupta, Phonethics; Naveen Tewari, mKhoj — had to say about their experiences in drawing up their business plans.

Drawing Board – The Business Plan

Nikhil Pahwa: Hrush (Bhatt), how did you go about crafting the business plan?

Bhatt: Creating a business plan was fairly easy. You had to do a lot of research and digging around for data, etc. It is after the plan, when you start getting ready to launch that things get much harder. The plan pretty much, most people in this room will tell you, is subject to change. Nothing really plays out the way you planned.

Pahwa: Was there anything you decided to take out while at the planning stage?

Bhatt: To begin with, we had a pretty blue sky plan. It was after we got funded that we decided to take some things out. We took out, for instance, the entire concept of offline sales. We didn’t launch with a very big call center. We still don’t run a big one. We don’t encourage people to call us for their transaction. We want it all to happen online. When you start implementing the plan, you start to take the hard decisions. You’re in the middle of the reality of it.

Pahwa: How did you go about identifying the costs you would incur, the revenue streams, etc?

Bhatt: When we started out online travel was an emerging opportunity. It has grown tremendously in the last 2-3 years. So it was quite easy to define what we would go after. Domestic flights were the start of the opportunity. It was quite easy to identify, didn’t take much homework or guesswork. We knew we had to have a low-cost base. The idea of growing into a 1,700 people call center, making sales calls and all for 15% margins just didn’t make sense. It still doesn’t.

Pahwa: Saurabh (Gupta) what did you learn through the planning process?

Gupta: We went in with the thought that if someone thinks mobile phone in India, they should think of us. That was the plan and we thought we had it all covered in terms of ground activation. We actually went out and spoke to 3,000 mobile users in New Delhi and looked at retail activation. But it was when we were trying to implement it that we realized that going through telecom operators is not such as bad deal. They would set up their own distribution channels with 30-40% margins and it would save us the pain of managing it ourselves.

Pahwa: What did you identify as costs at the plan stage?

Gupta: The primary cost was distribution and discovery of the content. On the distribution front the technology was a huge challenge. Today there are kids out there who can build WAP sites. To build a WAP site and integrate it with the operator’s complex billing setup was a big challenge. When you try to integrate it, you realize that your WAP site, which is your destination, becomes obscure. Then you need to spend money to drive traffic to your site.

Pahwa: What did you identify as revenue streams and risks?

Gupta: In terms of revenue streams, the largest we thought would be through telecom operator revenue share. Because the cost of content was so low for us, it worked out on a cost-to-revenue model. The risk that we found was that typically the market was cartelized. Each operator had its own favourite people that it went through and even if they were simply aggregating stuff, we were told, “Why don’t you come through aggregator XYZ, etc.” That’s when we decided not to go through the operator or the aggregator and see if we could do this ourselves.

Pahwa: Jiby (Thomas) why did you decide to go with the same company and rebrand instead of starting from scratch?

Thomas: Well it was as good as starting from scratch. The product had to be built again from scratch, we were a two-member team, so that had to be built ground-up and the brand had to be built all over again.

Pahwa: What did you take from the previous company (Kijiji)?

Thomas: What we had was a community of users, which was valuable. That’s what we took with us when we built Quikr.

Pahwa: Naveen (Tewari) what made you choose the mobile space?

Tewari: I think that’s primarily because there was an interest and the macro factors supported that interest. 600 million handsets and that’s just India. We could build a model that is slightly global.

Pahwa: So what risks did you identify at the planning stage?

Tewari: We basically looked at one thing; “Can I scale this business to a stage that gives me enough entry barriers that other competition cannot necessarily come in?” That’s the risk we hedge all the time. In the SMS thing we figured that there is no technology base barrier that we’re building. We’re building scale. To a certain extent it can easily go away to a large player because they have far more number of relationships with advertisers. I don’t have anything that people would come back for. So all the time we make sure that the business we do is scalable and sustainable.

Read Part 1 here.

Photo Courtesy: Phonethics

The world has changed quite a bit since last November when Nikhil Pahwa, Medianama, and I pulled together an eclectic bunch of entrepreneurs for a round table discussion, the venue for which was Sequoia Capital India’s sea-facing boardroom (free of charge) at Worli. Our theme was ‘Before & After (Starting Up)’ and the attempt was to discover how five randomly chosen startups had tweaked or completely overhauled their business plans in the course of their journey from drawing board to real world.

The theme we had chosen is perhaps even more relevant today as we find ourselves in the midst of a growth slowdown. Well thought through ideas followed by razor sharp business plans have never been more important. The stories shared by our five panelists Saurabh Khullar, Ideacts; Jiby Thomas, Quikr; Hrush Bhatt, Cleartrip; Saurabh Gupta, Phonethics; Naveen Tewari, mKhoj (left to right except Khullar) — which were candid and insightful may help some of you through these difficult times. Happy reading.

Getting Started

Khullar: We actually started up in 1999 in Pune. We went to 30 cyber cafes and installed our application (a desktop interface application targeted at cyber cafe users), which had taken six months to build in-house. And we were in business for about three months before we went bust. At the time we (Rudrajeet Desai, Maninder Gill and Khullar) were 20 years old and nobody would give us money, especially since dotcoms had just gone bust. So we shut shop, went out own ways and picked up where we had left off a couple of years ago. We’ve been friends since school and always wanted to work together. In May 2007 we commercially launched operations.

Thomas: In our earlier avatar we were a company called Kijiji in the online classifieds space. After having been around for two and a half years we reached an inflection point where we realized that there is huge potential in the local classifieds space. However, we were part of a larger organization (eBay) and they needed to take a call on what they would do in India. As part of that call, it was decided that it would be best if we were spun off. That move gave us the freedom to do a lot more instead of being restricted by a global platform. In February 2008 we rebranded ourselves as Quikr and started again from scratch. It was a new team (we were a two-member team while at Kijiji) and the good thing was that we saw scope for reasonable success over other players in the space, who had been around much longer. There were small things that we were doing that were making an impact because we probably understood and addressed people’s everyday needs and problems better.

Bhatt: I’ve been self employed or an entrepreneur since 1999, largely because I have a healthy disrespect for power point presentations. The first company I started was called Paper Plane. We were in the business of making websites for other people. The first client we landed was Thomas Cook and came through luck rather than hard work. We spent about six and a half years running their entire online operation and in the process learned a lot about online travel. We also realized that the Thomas Cook guys were not going to take the opportunity seriously. So a couple of us decided to start Cleartrip, which was formed in 2004, got funded in 2005 and was launched in 2006.

Gupta: I became an entrepreneur when I was in college. Set up a company called Brandmakers & Promotions People in 1998, which was essentially a tele-marketing company. I sold it in two years while still in college and therefore had a whole pile of money that I didn’t know what to do with. So I taught myself film-making and worked on various (advertising) campaigns. For about six years I ran a production house called Ethics. We made television commercials and corporate films for brands such as Hyundai Motors, Honda Motors, etc. Around that time one saw a trend of not only attention spans and and costs of content creation falling, but also this new distribution coming in through the Internet, mobile, etc. So we produced a 30-minute film called ‘Control+Alt+Delete’ in 2006 with Rahul Bose. Now logically it was a stepping stone to making a feature film. But the interesting thing that happened is that a lot of people came and said, “Why don’t you look at monetizing this? Release it on Internet and mobile and see if it will actually make any money.” Frankly I got into this venture (Phonethics) as a skeptic. I didn’t know whether it would make money. Anyway, Ethics became Phonethics and we were funded by a bunch of angel investors. The primary hypothesis of Phonethics has two heads. One, short form content. Two, we felt that characters, visual icons, which have historically been the strength of Indian communications and is the way Indian art and storytelling is done, was somehow lost in translation in the last 30 years. So our hypothesis was short form content, but not disparate pieces, folded into characters.

Tewari: We started in early 2007. Before that I was in business school (Harvard Business School) and after school while trying to figure out what I would do next, the whole idea of mobile search, which didn’t exist in India at the time, began to look very interesting. So I packed my bags, came to Mumbai on vacation and decided to build a search platform. The assumption was that I would build a great interface and give people information. The mistake I made was that I did not realize that the information for search did not exist. So we figured, we’re in the search space, we just got funded for it (by Mumbai Angels), we should figure out what’s the best way to go about collecting information. One of the things we always kept in mind was that the business model has to be scalable and sustainable over a period of time. Now, collecting information is not scalable. That’s when we realized that this was not necessarily going down the right path. In all of this we had decided that we would monetize anything we did through ads. So we said that anyway we want to get down to a SMS-based advertising model or build an ad network around SMS, so we might as well change it (mKhoj changed from mobile search to mobile advertising six months after starting up).

Coming up in Part II… Drawing Board

Photo Courtesy: Quikr, Cleartrip, Phonethics, mKhoj

A belated thank you to the people who made this blog’s first Entrepreneur Round Table, co-hosted by Medianama, happen on November 14 in Mumbai.

We ran into a few technical glitches but otherwise it turned out to be a candid, informative and interesting discussion. Thanks Hrush Bhatt, Cleartrip, Saurabh Gupta, Phonethics, Naveen Tewari, MKhoj, Saurabh Khullar, Ideacts and Jiby Thomas, Quikr for making the time. The round table stretched to one and a half hours on what must have been a busy working day.

And, of course, a big thanks to Raja Ganapathy and Sequoia Capital India for hosting the venue (and coffee and sandwiches).

The video, unfortunately, hasn’t come out too well. But, Nikhil (Medianama) and I will roll out the transcript of the discussion in batches shortly on our respective blogs. Going by the enthusiasm that this small experiment generated here’s looking forward to a series of similar round tables at least in Mumbai, if not across multiple cities.