Bag, Baggage & Room at the top: Aditya Sanghi & Hotelogix
A sedate growth, a well-planned merger, an ill-fated demerger, an unforeseen pandemic, and an improbable win…Aditya Sanghi has endured umpteen highs and countless lows in fifteen years of his entrepreneurial journey. What makes the founder special is his indomitable spirit and never-say-die attitude
Indira Nagar, Bengaluru
It all got triggered by the bits and pieces of a casual conversation. On one of the balmy evenings in March 2019, AxisRooms’ Ravi Taneja sauntered into the office of Hotelogix to have a cup of coffee with his industry counterpart Aditya Sanghi. The rivals — while Hotelogix was a cloud-based property management company, AxisRooms was a travel distribution firm — got into random chatting, and over the next few hours, the friends whimsically slipped into an introspection mode. “Have you noticed? It has gone flat,” lamented Taneja. “Yeah. It’s quite sluggish. And it has been so for a while,” added Sanghi, who joined hands with Prabhash Bhatnagar as a cofounder back in 2008. A year later, AxisRooms began its innings in 2009. Over a decade later, the travel industry veterans were trying to figure out the whys and wherefores of their stagnated growth. “None of us was hitting the ball out of the park,” recalls Sanghi.
Taneja, however, proposed to hit the ball out of the stadium. “Why don’t we merge,” he suggested, which sounded more like an outrageous idea. Interestingly, there was one more firm — RepUp, a guest experience management firm — which was keen to join hands. The combined strength, overlapping synergies and complementary products, he reasoned, would not only make the merged entity immensely muscular, it would also swell the global market opportunity for the new-born who would be better placed to offer a full-stack solution to the customers. “I think this is the missing piece in our puzzle,” he reckoned.
Sanghi, meanwhile, looked puzzled. Over a decade of tough journey — which had its fair share of highs and lows — the thought of merger never popped up in the minds of the entrepreneur who managed to get the backing of a battery of investors, including Accel Partners, Blume Ventures, Mumbai Angels, Saama Capital and Vertex Ventures, and laboriously scaled the company globally.
Though sceptical to begin with, the seasoned businessman put on his pragmatic cap. The merger, Sanghi said to himself, provided all the three partners an opportunity to gain from each other’s strengths, fill up the weaknesses, have a more optimized approach, and grow much faster. “I questioned my scepticism with an open mind, and tried to look into the merit of the idea,” says Sanghi. For one of the early pioneers of enterprise property management SaaS firms in India, the merger talk looked like a silver lining in the heavy dark cloud.
‘Cut the crap, remove the clutter’
Sanghi, though, knew the enormous complexity of the task. A lot had to be done to put the rough edges of the puzzle together. To begin with, he discussed the idea with Accel’s Shekhar Kirani, and other board members. All were on the same page, and found the idea progressive. Suresh Shanmugham of Saama Capital offered a priceless perspective. “If you think there is merit in the merger, then cut the crap, remove the clutter, and close it with speed,” the board member suggested. Ben Mathias of Vertex Ventures too dished out an invaluable tip. “Most mergers fail on structure,” he said. “So ensure that you work extensively on it,” he advised.
The golden nuggets worked. Sanghi, who was grappling with one of the toughest parts of the merger — aligning the founders, giving them leadership roles, and syncing employees with the new organisational structure — found himself liberated. All the three founders decided to work towards the common goal on a war footing. The idea was to spend seven months together to have a better understanding among the prospective partners, close the merger by December, and raise a fresh round of funding — $4–5 million — to execute the new plan.
Everything indeed got executed according to the script. There was, though, an unintended twist in the tale. The merger deadline got delayed by three months, and towards the end of March 2020, India was in the midst of a raging pandemic. Suddenly, all prospects of raising money vanished in thin air. “A sure-shot $5 million turned into zero,” recalls Sanghi, who was a mute spectator to the ruthless pounding of the travel and hospitality sector. The founder, though, still believed in the bigger story. ‘The battle can be won if we fight together’ was the reasoning weapon Sanghi used to convince all the stakeholders. The merger finally happened, all the pieces — hooks and knobs — came together, and the jigsaw puzzle got solved.
Six months later, a central knob vanished, and the puzzle crumbled. Mathias’ apprehensions turned out to be prophetic. Due to technical issues, one of the three partners had to step out of the merged entity. It was devastating for Sanghi. The setback was huge due to multiple reasons. First, the three-way merger now became a two-way merger. What this meant was a new entity and organisation which had to be restructured again. What this also meant was a new round of legal approvals, employee alignment and go-ahead from the board.
Second, the truncated new entity also meant a smaller target market, new set of consumers, and most importantly, letting go of the ones who were already identified. Third, it also precipitated a fresh round of uncertainty. Fourth, a battered travel and hospitality sector was still grappling with the pandemic. What this meant for Sanghi was to keep costs under control. For a company, whose revenue dipped by more than 50%, and was alarmingly running low on reserves, cost control meant downsizing. The founder, like any other entrepreneur during those distressing times, had to bite the bullet. He decided to bring down the cost by 20–25 percent. Well, this looked like a sure-shot way to crack the pandemic puzzle. Right? Wrong.
‘One deep cut over multiple small stabs’
Sanghi’s friend showed him the right piece. “Adi, there are many ways to kill a company. But one sure-short way is to run out of money,” Aneesh Reddy delivered the stern message over the phone. The cofounder of Capillary Technologies got to know that the founding team at Hotelogix was a bit reluctant in taking the harsh step. A concerned friend stepped in to kill Sanghi’s dilemma. “Make one deep cut, bring down cost by 60%, and then over the next few months revive the cost,” he advised Sanghi, and made another call to Prabhash (founder) and convinced him of the pressing need to take drastic steps.
Almost during the same time, the struggling firm got a massive global business opportunity to power all accommodations in the recently-concluded world cup. The contract was huge, and there were much bigger rivals in the fray. Sanghi, though, was confident of pulling it off. What also propelled him to test his luck was his gut feel that if his team emerged victorious, it could change the destiny of his company. Clearly, the stakes were high, but Sanghi again preferred to look at the bigger picture. “I had nothing to lose but everything to gain if we bagged the deal,” he says.
The dice did land in his favour. After a few gruelling weeks of intense preparation, Hotelogix pipped all the Goliaths and bagged the contract. It looked like Sanghi had finally mastered the art of completing a puzzle. Well, well, there was another crucial piece that Sanghi inadvertently overlooked. Hotelogix had to furnish a performance bank guarantee in order to complete the deal.
The tragedy, though, was that Sanghi didn’t have the money! There was no money in the bank, VC funds shied away from betting on a company in travel and hospitality, and debt emerged as the only option. But there was a small problem. Like their venture capital counterparts, venture debt players too didn’t want to look adventurous by offering loans in hospitality tech during pandemic. It looked like the end of the road for an entrepreneur who had hustled all his life, and was now just one shot away from his much-deserved glory. “The picture is not complete till it gets completed,” says Sanghi, who was hoping for a miracle.
And a miracle did happen. Sanghi’s friends chipped in, and completed the picture. “Within a week, I had Rs 3 crore commit” he says. Hotelogix went ahead and successfully completed the project. Fast forward to 2023. The company is on a firm growth trajectory, and Sanghi tells us his biggest takeaway from fifteen years of grit and persistence. “I have not made money, but what I have is probably something that not many would have,” he says. “I have the trust, faith and love of my friends,” he says. What the plucky entrepreneur also has — and loads of it — is character. In one of the months last year — much closer to the ebbing of the pandemic — Sanghi got a letter from one of the angel investors whimpering about lack of exit since 2010. The hospitality industry, Sanghi wrote back, has gone through a lot of turmoil over the last two years. “But Aditya Sanghi has not yet thrown his towel,” he underlined.
‘Free advice, costly lesson’
Even minus pandemic, Sanghi’s entrepreneurial journey has been nothing less than trial by fire. His biggest low, ironically, coincided with the high of the first institutional round of funding he raised. He explains the paradox. Post-funding, Shekhar Kirani offered the rookie founder two priceless lessons. First was the around hiring. “If you want to hire two, hire four,” advised the sagacious VC. Second one revolved around operations. “Make your platform free, concentrate on data and see what value can be built,” he underlined to the rookie founder. Sanghi conveniently ignored both the lessons. “I thought I knew the best,” he says.
Though advice was free, the cost of turning a deaf ear was heavy. Sanghi now decodes both the lessons. On hiring four instead of two, the idea was to fast-track growth. “If you can compress your four years into two years, then go ahead and take VC money,” says the founder. VC money, he adds, can help you scale fast and win against the time if one uses it properly. “I think we lost close to two years of our growth by shunning his advice,” he says. Heeding the second advice, he reckons, would have helped Hotelogix focus more on product experience rather than hard-core sales marketing.
If being ahead of the time in riding the SaaS curve in 2008 was daunting, then having a rough ride with the cofounder was equally scarring. There were strong differences of opinion in terms of charting the growth of the company. What helped, though, was again looking at the bigger picture, and having immense trust in the cofounder. “Both of us never had the wrong intent,” he says. “We diverged on approach, but converged on trust and intent,” he adds. If one is clear about the ‘why’ of entering into a journey — whatever be it — then matching other common traits becomes simpler. There is no doubt, co-founder friction is mentally very draining and needs strong resolve to walk over it. In fact, choosing his cofounder was one of the two moves that Sanghi made in less than 30 minutes. “Deciding my life partner was the first one,” he smiles, adding that one has to constantly work on a relationship. “You can’t take things for granted,” he adds.
With success finally under his belt, is there a message that he would like to pass on to all hustling entrepreneurs? Sanghi shoots the best one. “There is always a room for you at the top,” he says. All one needs to do, Sanghi reckons, is to pack one’s entrepreneurial bag with loads of courage and determination, get rid of all baggage, and enjoy the trek. “Don’t forget, there is a room at the top.”
