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Article | ID:passagegroup, author | Zhou Xin

For the average person, the founders of rocket-like start-ups seem to be semi-god. Everyone thinks they can do everything. They can raise hundreds of millions of dollars to raise the company to the peak and win friendship and fame.

But this omnipotence is just an imagination. In fact, any well-known founder will tell you that even if its startups continue to grow and develop, the challenges and problems will not disappear, but the nature has changed.

Sahil Barua is the CEO and co-founder of Delhivery. Delhivery is one of the largest third-party logistics service providers in India and was founded in Gurgaon in 2011 by five co-founders. Most large e-commerce companies, including Flipkart and Amazon, rely on Delhivery for warehousing, distribution and logistics.

The company has raised hundreds of millions of dollars from well-known investors such as Tiger Global Management, Carlyle, Fosun and Nexus Venture Partners, and currently operates in more than 1,200 cities across India.

Driven by strong growth and greater ambition, listing seems only a matter of time for Delhivery. In mid-2018, it was rumored that Delhivery's informal prospectus, a precursor to IPO, would be on the market at any time. The company will become one of the few Indian start-ups listed on the Indian stock exchange.

But it never did. Because Barua received a call from a multinational group of Softbank. He found himself having to deal with a problem that was both happy and frightening—whether it would be acquired by Softbank. This is also the problem that many founders of well-known start-ups are trying to solve in the past two years.

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According to Barua, Softbank Corp. 's problem is not a single dual problem. This is a big problem. It contains a series of small questions, each of which needs to be carefully considered.

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In the controversial Delhivery in 2019, the situation in recent years is this:

In 2016, the company stated for the first time that it will conduct an IPO. In 2017, the company established an internal and external audit committee to set up a quarterly report/accounting. At the end of 2017 and early 2018, Delhivery strengthened its board of directors by adding four new members. Admiral Bansal, consultant and former managing director of private equity firm TPG Capital, William Tang of investment company Fosun Capital, Maersk, logistics company, and PricewaterhouseCoopers, a professional services firm Former executives Hanne Birgitte Sorensen and Deepak Kapoor served as new directors respectively. In 2018, Delhivery approached Goldman Sachs, Morgan Stanley, Citigroup and Kotak Mahendra Bank, and plans to let them take charge of the IPO process.

But the IPO never happened.

Some time ago, Delhivery said it had raised $413 million through Softbank's vision fund. Softbank partner Munish Verma said in a press release: "Our investment in Delhivery reflects our focus on working with leaders in the innovation market. Over the years, Delhivery has shown industry-leading growth as e-commerce logistics. A one-stop solution. We are excited to be part of Delhivery, which will set a new benchmark for the logistics industry."

Verma may want to express that Softbank Corp. invested a lot of money in Delhivery, so forget about IPO.

Delhivery financing round

Delhivery financing round

This raises the question: Why did the five co-founders of Delhivery choose this path?

In the traditional field of venture capital, IPO is regarded as the ultimate peak of honor. In some ways, this is the only way for a start-up to grow into a big company.

But Softbank did eat the IPO. Why is this so?

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But these benefits are conditional.

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One of the most obvious reasons is that if a large number of shares are accompanied by put options (sales intention), the stock price can easily fall, especially if there are not enough buyers in the market. For the founders who want to sell shares in an initial public offering (IPO), the situation is even more serious – the market may see a founder trying to sell shares as a sign of pessimism about the company's future prospects.

So, except as a signal of victory, IPO may not always be a happy ending.

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Both of these make the company jittery-what if they change when they're about to IPO? The company has been waiting for six years and is fully prepared for this, so it does not want to make a mistake in the pace of regulatory reform. The simplest thing is, Delhivery doesn't want to have a IPO. during the election.

"if we go public as planned, it will be the election season," Barua said. We are bullish on macroeconomics, but there is huge volatility in the industry. We can't wait six months for a few more people to prepare for the IPO. As we hovered, Softbank Corp. contacted us and asked if we could talk to them. "

Impact from Chinese and Indian counterparts

The second reason is that the surprise is from China.

The IPO experience of China Logistics Co., Ltd. and Baishi Express has brought heavy pressure to Delhivery. Both companies' businesses are heavily dependent on Alibaba Holdings (which is also Softbank's portfolio company), which were listed on the New York Stock Exchange in 2016 and 2017 respectively.

In October 2016, Zhongtong Express was listed at a price of US$19.50. In October 2018, its share price fell to US$15. Best Air has lowered its initial $1 billion financing plan and raised only $450 million.

All this adds to the pressure on Delhivery. Therefore, Softbank Corp. 's phone call for the company is a good opportunity.

But what if you are calling a softbank? If it is someone else?

“This is a difficult question to answer,” said a Delhi-based venture capital investor who asked for anonymity. “If Softbank is not in India, it’s hard to say whether we will do this. I think we will say, let’s agree on the pre-IPO issues and see what happens after six months or a year. But because of Softbank In India, the question people need to consider is, what if Softbank funds other players? This is a price war in the market. Why do you take this risk? It is best to let Softbank become a partner, not a competition. opponent."

On a global scale, this is perhaps the problem that many founders of start-ups are trying to solve. Can you say no to Softbank and then watch it support competitors? Softbank's huge amount of money can provide competitors with strong scale, ambition and endurance. Can you afford it?

Maybe capital is not everything, but it is still important. Look at the economic chain hotels Treebo and Fab Hotels, which struggle to maintain operations against OYO-like hotel chains that have been supported by Softbank.

In addition to capital, Softbank's strong position also allows them to gain access to channels and insights, whether it is to achieve strategic cooperation with other Softbank portfolio companies, or to gain insightful insights into the details and challenges at specific operational levels. The above investors added: “This is different from the previous team at Softbank. We found that the team consisting of Munish Varma (softbank partner) and Marcello Claure (softbank vice president) really focused on the operational details.”

Marcello Claure,Sprint CEO

Marcello Claure,Sprint CEO

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Softbank is a must, and as long as it invests billions of dollars in companies, these companies may make singularities progressive.

Most of these funds may be used for technology infrastructure and services, but Softbank is quite clear, and a large part of it will need to be invested in “traditional” industries such as agriculture and medicine, and in the logistics industry where Delhivery is located.

In today's world, robots and autonomous vehicles may replace manpower – this will not only change the performance and service metrics, but will also completely disrupt the corporate unit economy.

In this case, can Delhivery afford not to have these technologies (these technologies are provided by Softbank Corp. 's portfolio companies, which have invested billions of dollars in related technology development)?

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