InMobi's Trials and Tribulations
InMobi, India's first billion-dollar-valuation start-up, is finding it difficult to raise funds and survive independently.
- Aug 13, 2016,
- Updated Aug 16, 2016 2:39 PM IST
On September 15, 2011, when Japanese firm SoftBank Group announced a $200-million investment in InMobi, celebrations broke out in the company's then main headquarters at Embassy Golf Links, a technology park in Bengaluru.
There was a palpable sense of excitement among InMobis rank and file. An Indian company was taking on the might of the likes of Google and Facebook in the digital advertising technology space (ad tech) - a David taking on the Goliaths. The investment was a milestone. Softbank had come into the company, valuing it at a little over a billion dollars, officially making it India's first Unicorn. A Unicorn is any private company, which has a valuation of more than a billion dollars.
Cut to June 22, 2016. The US Federal Trade Commission said in a statement that InMobi had "deceptively tracked the locations of hundreds of millions of consumers - including children - without their knowledge or consent to serve them geo-targeted advertising." Under the terms of settlement, FTC slapped a $4-million civil penalty on InMobi, who admitted that it had made an inadvertent and unintentional error. Significantly, the FTC statement further said that the $4-million penalty was slashed to less than a fourth to $950,000 based on the "company's financial condition".
Why did India's first ever Unicorn company, which had raised a cumulative sum of $220.5 million apart from a $100 million in venture debt, have to plead to have its penalty reduced? Rumours have been swirling for months that the company, which says it is the world's largest independent third-party ad-tech player, was up for sale; that it was unable to raise further funding; that it was burning through cash; that it had laid off nearly a fifth of its employees; and that it was staring at an uncertain future.
Business Today spoke to the company as well as former and current employees, analysts and industry experts to get a sense of why India's first Unicorn may end up as a Unicorpse (a former Unicorn, now valued at less than $1 billion). But before we get there, it is important to understand the digital ad-tech space and why InMobi has had a dizzy roller-coaster ride.
While InMobi raised a cumulative $220.5 million and has been witnessing topline growth, it has struggled to make money. While Singhal protests that the business enjoys 30-40 per cent margins and is "unit economics profitable", the company is clearly making losses. It has accumulated losses of $224 million. On top of it, the company raised $100 million in venture debt from Tennanebaum Capital Partners, of which $40 million was used to repay an earlier loan raised from Hercules Technology Growth Capital.
"The potential for mobile advertising to grow even further is very huge and we (InMobi) have been making the right moves in the marketplace"
To turn profitable, the company has laid off approximately 15-20 per cent of its workforce. Arun Pattabhiraman, VP of Marketing, however says the company still has 975 employees and "we continue to hire". A series of senior leaders has left the company in the recent past. Manish Dugar, CFO; Samuel John, Director of Operations; Atul Satija, Chief Revenue Officer; and Nimish Joshi, Head of M&A, Investor Relations, among others. Counters Singhal. "Most of them with the exception of Manish (Dugar) were not that key. All start-ups face some attrition. People who had left us in the past have returned recently."
To ensure that it becomes profitable in a tough climate, InMobi also has cut back on funding for so-called moonshot projects (long-term projects with low probability of success). Singhal, however, says that they continue to invest in developing products required to help InMobi's customers.
Softbank, the main investor in InMobi, is itself facing turbulence after its COO Nikesh Arora recently left the organisation. Another analyst who did not want to be identified, says "Nikesh came from Google and understood the ad-tech business very well. The fact that even when he was at Softbank and when InMobi was desperately looking for additional funds, he chose not to invest, must say something. InMobi is clearly at crossroads."
Singhal asserts that InMobi will be profitable in a quarter and does not require additional funding for survival. His claims are however being taken "with a bucket of salt" says the analyst quoted above. "Since 2011, they have been publicly saying they are a quarter away from profitability. Unless they raise equity or debt, they are a good acquisition candidate who will be likely sold for pennies on the dollar."
Softbank, which is a major stakeholder in the company, might not also allow InMobi to raise funds in a down round making them a Unicorpse. 'That is for the board to decide and I cannot comment on it,' says Singhal.
Naveen Tewari in the past had declared that InMobi would reach a billion dollars in revenue by 2016. It looks like this year they may end up closer to $300 million. The US IPO that Tewari has spoken in the past is unlikely to happen, too. China's Youzu Interactive is often mentioned as a potential investor/acquirer of InMobi. However, with accumulated losses and debt equal to revenues, it is unlikely to pay the kind of price that existing investors may want.
For InMobi, the next couple of quarters might decide its future.
On September 15, 2011, when Japanese firm SoftBank Group announced a $200-million investment in InMobi, celebrations broke out in the company's then main headquarters at Embassy Golf Links, a technology park in Bengaluru.
There was a palpable sense of excitement among InMobis rank and file. An Indian company was taking on the might of the likes of Google and Facebook in the digital advertising technology space (ad tech) - a David taking on the Goliaths. The investment was a milestone. Softbank had come into the company, valuing it at a little over a billion dollars, officially making it India's first Unicorn. A Unicorn is any private company, which has a valuation of more than a billion dollars.
Cut to June 22, 2016. The US Federal Trade Commission said in a statement that InMobi had "deceptively tracked the locations of hundreds of millions of consumers - including children - without their knowledge or consent to serve them geo-targeted advertising." Under the terms of settlement, FTC slapped a $4-million civil penalty on InMobi, who admitted that it had made an inadvertent and unintentional error. Significantly, the FTC statement further said that the $4-million penalty was slashed to less than a fourth to $950,000 based on the "company's financial condition".
Why did India's first ever Unicorn company, which had raised a cumulative sum of $220.5 million apart from a $100 million in venture debt, have to plead to have its penalty reduced? Rumours have been swirling for months that the company, which says it is the world's largest independent third-party ad-tech player, was up for sale; that it was unable to raise further funding; that it was burning through cash; that it had laid off nearly a fifth of its employees; and that it was staring at an uncertain future.
Business Today spoke to the company as well as former and current employees, analysts and industry experts to get a sense of why India's first Unicorn may end up as a Unicorpse (a former Unicorn, now valued at less than $1 billion). But before we get there, it is important to understand the digital ad-tech space and why InMobi has had a dizzy roller-coaster ride.
While InMobi raised a cumulative $220.5 million and has been witnessing topline growth, it has struggled to make money. While Singhal protests that the business enjoys 30-40 per cent margins and is "unit economics profitable", the company is clearly making losses. It has accumulated losses of $224 million. On top of it, the company raised $100 million in venture debt from Tennanebaum Capital Partners, of which $40 million was used to repay an earlier loan raised from Hercules Technology Growth Capital.
"The potential for mobile advertising to grow even further is very huge and we (InMobi) have been making the right moves in the marketplace"
To turn profitable, the company has laid off approximately 15-20 per cent of its workforce. Arun Pattabhiraman, VP of Marketing, however says the company still has 975 employees and "we continue to hire". A series of senior leaders has left the company in the recent past. Manish Dugar, CFO; Samuel John, Director of Operations; Atul Satija, Chief Revenue Officer; and Nimish Joshi, Head of M&A, Investor Relations, among others. Counters Singhal. "Most of them with the exception of Manish (Dugar) were not that key. All start-ups face some attrition. People who had left us in the past have returned recently."
To ensure that it becomes profitable in a tough climate, InMobi also has cut back on funding for so-called moonshot projects (long-term projects with low probability of success). Singhal, however, says that they continue to invest in developing products required to help InMobi's customers.
Softbank, the main investor in InMobi, is itself facing turbulence after its COO Nikesh Arora recently left the organisation. Another analyst who did not want to be identified, says "Nikesh came from Google and understood the ad-tech business very well. The fact that even when he was at Softbank and when InMobi was desperately looking for additional funds, he chose not to invest, must say something. InMobi is clearly at crossroads."
Singhal asserts that InMobi will be profitable in a quarter and does not require additional funding for survival. His claims are however being taken "with a bucket of salt" says the analyst quoted above. "Since 2011, they have been publicly saying they are a quarter away from profitability. Unless they raise equity or debt, they are a good acquisition candidate who will be likely sold for pennies on the dollar."
Softbank, which is a major stakeholder in the company, might not also allow InMobi to raise funds in a down round making them a Unicorpse. 'That is for the board to decide and I cannot comment on it,' says Singhal.
Naveen Tewari in the past had declared that InMobi would reach a billion dollars in revenue by 2016. It looks like this year they may end up closer to $300 million. The US IPO that Tewari has spoken in the past is unlikely to happen, too. China's Youzu Interactive is often mentioned as a potential investor/acquirer of InMobi. However, with accumulated losses and debt equal to revenues, it is unlikely to pay the kind of price that existing investors may want.
For InMobi, the next couple of quarters might decide its future.