Last summer, a bunch of Chinese executives from Alibaba Group pounded the streets of Chennai, unmindful of the port city’s oppressive heat. They were meeting owners of local cinemas and checking out the movies playing. The team, led by Benny Chen of Alibaba Group, was hosted by Nammalvar Ramkumar, the founder of online movie ticketing startup Ticketnew.
The theatre-hopping ended with Ramkumar, the low-profile, soft-spoken and media-shy founder of Ticketnew, selling a majority stake in his company to Ali Pictures, one of the group companies of the $23 billion Alibaba Group, in January this year.
While Ramkumar declines to discuss the terms of the deal, industry insiders put Ali Pictures’s investment to be over $30 million or nearly Rs 195 crore.
Founded in August 2007, Ticketnew had been bootstrapped until the Ali Pictures investment happened. Until this investment happened, the Ticketnew versus Bookmyshow rivalry can be described best as the classic David-Goliath battle. Founded by Ashish Hemrajani in 1999, Bookmyshow has raised around $128 million so far from investors including Accel, SAIF Partners and Stripes Group.
“It’s a millionth of a chance for a company like us getting discovered by Alibaba and getting the investment,” says Ramkumar, who’s had to mortgage his house and other assets apart from using overdraft facilities from the banks to survive and remain profitable.
“First is the survival test, which I have passed. But the challenge is to scale. For me, scaling is not just money but strategic help and a bigger brand to associate with. This is where Alibaba investment will help. Of course, money is important too,” he adds.
“I took less than 20 days to sign up the big four multiplexes in India, all of them went live with our software in a week. I have been trying to get them for years. With the funding, I can now do this and compete better,” says Ramkumar.
The turning point for Ticketnew came, ironically, when Bookmyshow started a conversation with Alibaba for a potential round of investment about a year ago.
“That was the first time Alibaba and Ali Pictures heard Ticketnew’s name with details about the country’s online ticketing industry,” says a person familiar with the talks.
For Alibaba Pictures, acquiring a majority stake in Ticketnew is a stepping stone towards exploring a bigger play in India’s booming entertainment industry. Already, Amazon and Netflix have entered the market and have committed big monies to acquire local content and even fund new movie projects.
When asked about why Alibaba Pictures picked Ticketnew, an Alibaba spokesperson had this to say: “With Alibaba Pictures’ knowhow, technology and resources, we are confident of working closely with TicketNew to further expand its online ticketing business in India.”
Ticketnew’s bootstrapped journey
While bootstrapping ensures entrepreneurial freedom, it has its own challenges, especially if a startup is operating in a market with heavily funded, aggressive rivals throwing money to acquire market share.
“Just being small, profitable isn’t enough, we have to grow,” says Ramkumar. For him, bootstrapping was not a choice, but the only way out because the investors would always back “the winner takes it all” theory.
“I did try raising funding, but the investors’ mindset has been fixated. Most of them believe there will only be one Unicorn in the space. I tried raising funding from almost all the VCs and PEs in India; you name it and I have met them,” says Ramkumar. “Unfortunately, our timing hasn’t been that good, too. Every time I went out trying to raise funding, our biggest rival too would be out there.”
The company has been cash positive and profitable since 2011 but profitability can take a startup only so far.
“The relationships we have with local cinema owners is unique, but lack of funding didn’t help. Our rivals were making advance payments, which we couldn’t afford. The model has been to pay a year’s earnings in advance to the big cinema chains,” says Ramkumar.
Orbgen Technologies, the company that owns and runs Ticketnew, started with selling new year party tickets in December 2007.
“Later I started seeing a gap among the cinemas and how they were managing their inventories etc. I always wanted to be in the ticketing space. Travel was too crowded, so we started with event tickets,” says Ramkumar.
“I found that thousands of cinemas weren’t using any software, that was a big gap. To enable those cinemas, you needed a full stack. While PVR and Inox have had their own technology teams, the neighbourhood, small cinemas didn’t.”
Ticketnew’s first customer was Sangam cinema in Chennai, which went live with the software in August 2008.
“I sat on one of the counters selling tickets to see if there were any software issues first hand. There were initial bugs.”
“Is this going to work,” Ramkumar remembers asking his colleagues back then. His team and he spent the night fixing the software glitches, which included printing duplicate tickets, and so on.
Ticketnew’s software today is running in over 1,000 cinemas. Its business model is two-pronged — it charges a small convenience fee from users buying online tickets and it earns revenues from software development, installation, and maintenance from cinema owners.
According to Ramkumar and industry estimates, there are more than 12,000 neighbourhood cinemas in India, and nearly half of them are in the five southern Indian states. Most of them are single-screen cinemas. And most of the smaller cinemas don’t even have a software solution to integrate their processes.
“China talks about over 40,000 screens and is completely organised. More than 80% of ticket bookings in China happen online,” says Ramkumar.
“In India, we do only around 10% bookings online; the potential to grow is huge. We (Ticketnew) will be less than 15% of the online tickets sold in the market today.”
For its part, Alibaba Pictures is looking to tap this opportunity with its investment in Ticketnew.
Finding Alibaba Pictures
The way Alibaba Pictures executives moved quietly to pick up the majority stake in Ticketnew underscores their strategy to identify the opportunities ignored by mainstream VCs. In fact, the executives at Paytm, Alibaba’s biggest investment bet in India, were surprised when they first learned about the Ticketnew investment.
“Paytm too has a growing online ticketing business that competes with Bookmyshow. It was surprising to learn that Ali Pictures looked beyond Paytm,” said a second person familiar with Alibaba’s strategy, asking to stay anonymous.
But that’s the way Alibaba Group operates.
“It functions as a conglomerate of entrepreneurs representing different businesses and with complete freedom to make their bets,” the person said.
A council of around 20 partners, chaired by Alibaba founder Jack Ma himself, meets regularly to discuss the new bets. “They even vote on future strategy,” the person added.
Ticketnew’s software runs in over 1,000 cinemas. It charges customers a small convenience fee and gets software revenues from cinema owners
For Ticketnew, it started with a simple request from an Alibaba executive on LinkedIn to learn more about the startup in 2015. Later, the conversations led to a visit by a team led by Benny Chen, Managing Director India & Global Strategic Alliance at Ant Financial, the Alibaba company that operates services such as Alipay.
“The Alibaba team looked at us differently; their understanding of the potential is very different. The VCs here need to change their mindsets, they are too fixated on a template. There’s room for more than one player,” says Ra
The investment was closed by the end of January this year and the announcement made in June.
For Ramkumar personally, the Alibaba investment is a culmination of a long and painful entrepreneurial journey. “There was a time when I didn’t have money to buy milk powder for my newly born son,” he recalls. “It’s an everyday battle. At many points, I too asked (myself) what am I doing, but the next day you come back and fight it out again.”
Alibaba is looking beyond ecommerce in India
People familiar with Alibaba see a bigger role taking shape for the Chinese giant in India with linkages overseas. “Alibaba wants an India ecosystem play, which is not just limited to e-commerce,” said the second person quoted above without name.
According to three Alibaba Group executives who spoke on the condition of anonymity, India is a battlefield where Alibaba wants to win the war against Amazon beyond just e-commerce.
“The Ticketnew investment, for instance, isn’t just aimed at India’s online ticketing industry but testing waters in the much bigger and fast-growing entertainment sector,” one of them said.
The Alibaba spokesperson emphasised the long-term nature of its bet in India when asked about Alibaba’s ambitions beyond e-commerce and Paytm. “Our mission is to make it easy to do business anywhere. India is a key emerging market, with tremendous potential for growth. We are absolutely committed to working with our local partners and developing this market for the long term,” the spokesperson said on email.
An industry expert contextualised India as the first neutral marketplace that Alibaba and Amazon are facing each other eyeball-to-eyeball. K Vaitheeswaran, an early e-commerce entrepreneur in India, said Alibaba was primarily a beneficiary of protection by the government in China, where the biggest global tech firms – Amazon, Google, Facebook, Uber – have all lost to local Chinese firms. “I believe that Alibaba must beat Amazon in one large open market like India otherwise they will fall behind Amazon in the next few years. So far, we have not seen any evidence of this happening,” he said. Vaitheeswaran is also the author of ‘Failing to Succeed – The story of India’s first e-commerce company’.
“Meanwhile, Amazon will continue to open up more profitable new business opportunities – AWS, Kindle, Prime, Electronics, offline retail – to help them support the e-commerce B2C business which will continue to be low margin, high volume, and cash guzzling. To counter this, Alibaba will also start exploring other sectors to see if they can also create some fresh leverage and reduce their dependence on pure e-commerce,” Vaitheeswaran added.
The investment into Ticketnew, instead of Paytm, could also be a mixture of opportunistic valuation and negotiation tactics. “It could be a message that while we are committed to our investees, our investment decision will always be based on practical valuations, and we are open to go outside if needed,” he added. “Properties could always be merged later if it makes commercial sense.”
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The story was updated at 2:47pm on October 24, 2017 to add a photo credit.
Disclosure: FactorDaily is owned by SourceCode Media, which counts Accel Partners, Blume Ventures and Vijay Shekhar Sharma among its investors. Accel Partners is an early investor in Flipkart. Vijay Shekhar Sharma is the founder of Paytm. None of FactorDaily’s investors have any influence on its reporting about India’s technology and startup ecosystem.