Thread by @ShubhamGupta54

A thread dedicated to Mr. Shripal Morakhia, the great organization built by him and importance of timing in success of an Organisation.
Working closely with Mr. Morakhia in the rescue efforts of Smaash I am deeply saddened seeing the death of this great indian Startup. #Smaash

Shripal started his career as EA to president at New York stock exchange. Post which he came back to India and started SSKI in late 90s. He was the entrepreneur who set up the first home grown investment bank franchise and sold it to IDFC in 2007 to IDFC at around INR 6500 Mn.

Parallely he also was working on one other revolutionary business idea of that time, setting up the first digital broking house of India, Sharekhan leveraging the new security demat process in India. He sold Sharekhan to CitiVenture at INR 5000 Mn in 2007.

He was very kind and made various millionares in both of his ventures i.e. SSKI and Sharekhan via ESOP to all employees. Nikhil vora of Sixth Sense being one of those employees at SSKI.
He also in early 2000s formed various other startups like YOBOHO and amar chitrakatha.

During early 2010 he laid the foundation to the first and the most novel startup with the aim to provide indians with thrill of sports combined with technology and provide world class experience via Smaash. It started with the first centre of Smaash in 2012 at Kamala Mills.

By 2015 the Mumbai center was breaking records in revenue and with the novel games and IPs created by the company, they started reaching 20 crore revenue and 15% EBITDA margin via a single centre at Mumbai.

By 2016 it was a fairy tale for Mr. Morakhia that he was able to bring in private equity partners like Fidelis on board putting more than 20 mn dollars, and company expanding from 1 centre to 10 centres across Mumbai, Delhi, Gurgaon and Hyderabad.

Company clocked a Revenue of 103 Crores and an EBITDA of 21 crores by FY 16.

During the end of FY 16 and start of financial year 17 came the turning point in the lifecycle of the company. To keep pace with the rapid expansion they went on an started the new centre at Minnesota USA, acquired BluO from PVR and 8 centres of SVM in a bid to expand to tier 2.

Being a growth focussed entrepreneur shripal was more and more focussed towards building the brand, increasing the revenue and doing innovation at the back of his startup. Due to this the entire organic/inorganic growth was funded via structured Debt rather than raising equity.

The total debt post both the acquisitions and US expansions went upto INR 350 Crores. The company planned that post rampup in the revenue, turning around acquired assets and growing the US business they will go for the next equity raise.

In FY18 successfully the company did around 233 crores revenue and due to low profitability in the near first year of acquisition of new assets company did around 56 crores EBITDA. At the same time Shripal being a good deal maker almost closed an equity transaction in late 2018.

Since, the company was grappling with high debt and an equity infusion was very necessary, in late 2018 they found out PE players in US to fund them and company also got listed on NASDAQ under ticker "WINR" but on the brisk of closing this transaction the ILFS scam happened.

Due to ILFS the US investors pulled out and he had to again restart the talks of getting the funding. In the meanwhile operation performance was improving and in FY 19 company did 267 crores revenue and 72 crores EBITDA.

But the debt burden was too much and company defaulted on certain liabilities in late 2019. Under huge lender pressure he was not able to implement his ideas on the firm. Entire days went on to the misery of improving financial performance and customer centricity went on backseat

With all this shripal was also trying to find an equity solution for the company where he was willing to pare his stake down completely but save the company. In Feb 2020 he again struck a deal with a major sovereign investor from Abu Dhabi.

But again it happened at the outbreak of corona and the deal failed. As usual timing, luck and how you fund your startup are some major important factors in determining the success of the organization.

In the past 6 months, 0 revenues from any physical center, high employee salaries, renegotiations with center owners and debt piling up had made him decide to close his dream startup.

Lessons to be learnt from the great man and his great startup:

1) Never ever grow without the right capital structure.
2) Profitability is as important as Revenue.
3) Inorganic acquisitions and Capex should be planned in a way where you don't lose your existing business.

Working with him I was always in awe of Mr. Morakhia and his determination to succeed even at the age of 65+ in admirable. May he come back more stronger with this. #startupindia #startupstories #startups