The 2006 Delhi winter was finally setting in after the chaos caused by the monsoon. The VC business is a bit like the monsoon – unpredictable and with uneven distribution. In this business, if you stay around long enough, you realise that while building a history of triumphs is rare, a history of misses is definitely guaranteed. In the winter of 2006, I missed two companies that went on to make a big mark in the Indian start-up scene.

These companies had appointed bankers to help them raise capital, and both sides had followed totally opposite approaches. The first was a Mumbai-based company called BookMyShow. BookMyShow was the only online ticketing company for movie tickets in India. It had a nice ring to it. Every seat in a theatre was part of a perishable inventory, like a flight ticket. If you could make it easy for moviegoers to pick and book their seats in advance, it would help sell more seats and improve the moviegoing experience.

The banker emailed us a lengthy document about the business and its prospects. This document, called the private placement memorandum or PPM for short, was sixty pages long. It had reams of information. A banker would usually sit with the company management for weeks to understand the business and prepare a document with that level of detail. It required converting the future of the business into a series of financial projections.

I was intrigued by the detailed PPM and wanted to give it a thorough read.

I printed the sixty pages, closed the door of my office and settled down to go over the rows upon rows of business descriptions and dozens of tables of numbers. The cover had the official name “Bigtree Entertainment” in bold on it. My mind wandered a few times, thanks to my compulsive habit of staring at my BlackBerry, but somehow, before the end of the day, I had trudged through to the end of the PPM.

There is an archaic law in India about movie ticket sales being restricted to the theatre’s box office. This was the only constraint in an otherwise digitally neat business. To access the seat inventory, BookMyShow had sold to theatres a software that they had sourced from a New Zealand–based company.

This software helped theatres with seat allocation but also gave unique inventory access to BookMyShow. BookMyShow used this access as a competitive edge to build a consumer-facing business. It was a straight enough business model, and being a movie buff myself I could understand the power of a single source of all movie tickets. The niggling doubt was: how badly did I want a confirmed ticket in hand before I went to the theatre? Did the average customer care enough?

The company had shown remarkable promise in aggregating the supply of seats in various movie theatres. It could potentially sit on this inventory as a single source. At that time, there were fewer multiplexes and more single-screen theatres. Chains like PVR were not as common as they are today. The supply seemed fragmented. The aggregator could have become very powerful.

The founder, Ashish Hemrajani, was young, suave and passionate about his vision.

Ashish and I met in my office along with their banker. Ashish, like Deep [Kalra], was born into a privileged household and had taken to entrepreneurship early. He was a man on a mission and had a youthful exuberance about him. And boy, could he talk!

I thought his Mumbai upbringing had something to do with this deep-seated belief that movies were an integral part of entertainment for every Indian. Ashish was almost gleeful when he walked me through his journey and his plans. He had travelled a meaningful distance without a serious backer. By rolling revenue back into the business, and with private capital from his family and friends, he had centred his life on the creation of BookMyShow.

He and his co-founders had started the company in 1999. And like MakeMyTrip, they had kept the lights on through the seven long years of the funding winter. Finally, VCs had reappeared in India and there was a justifiable expectation of fresh funding.

The best part of BookMyShow’s model was its simplicity. It was a low-margin business but the number of people who would eventually buy movie tickets on the Internet was projected to grow by many thousands in the future. The tough times that followed the founding years of BookMyShow were not just due to lack of money, but also competition.

Eventually, BookMyShow won both battles. Many competitors perished. BookMyShow was more or less the last company standing, and like MakeMyTrip, it dominated the online movie ticketing market.

Ashish had the pulse of both sides of the business: the consumer-facing side and the part that aggregated tickets across movie theatres all over the country.

The founding team was a classic Silicon Valley–style ensemble of a tight-knit group of people focused on technology and business. A role that was a fixture in any Silicon Valley start-up was that of the product head. The product head was the bridge between the customer and the engineering team. The role required the product manager to translate between these two functions. This ensured that engineering built great features that made production adoption easy.

This role had still not appeared in consumer Internet companies in India, and as expected, it was missing in both MakeMyTrip and BookMyShow. When the need for it came up in conversation with Ashish, his response revealed the general absence of people who could fill this role in India.

In 2007, my view of the Internet market in India was shaped by constraining factors like the lack of broadband infrastructure. There just wasn’t enough Internet access. There was a sense of despondency about the lack of devices, of deep- pocketed service providers and even of reasons to go online for the mass user. Our internal thesis was that Internet users would grow steadily but slowly. Companies that were relying on online users for growth needed to budget for many more years to get to their goals.

This outlook was the premise we operated from when we looked at consumer Internet businesses in 2006. In the case of BookMyShow, their revenue model was based on a commission of Rs 10 per ticket to be paid by theatre owners for every ticket sold. My main worry was the size of the revenue that BookMyShow could get to. I was thinking that in a small user market, a small commission would build a small company.

So with Ashish, our discussions kept revolving around the size of the market.

This was one question for which there were no easy answers. No one had seen the future. Even if the future unfolded slowly, I could not see either fast market adoption or market factors of movie ticket commissions increasing.

MakeMyTrip operated in the same market, but there we could see the work-around that consumers were doing to obtain an essential service. An airline ticket represented travel, which denoted a high priority. This was a necessary spend. People in India love movies, but would they ever worry about buying movie tickets in advance because prices would otherwise go up or seats would run out? Or would neighbourhood stores set up computers and provide movie-ticket-buying as a service to their shoppers? The answer in my head was ‘not so sure’.

So, after perching myself on the safe seat of logical reasoning, I concluded that this was not an investment we wanted to make. We conveyed our decision to Ashish. I was wrong about the market size, of course. BookMyShow went from strength to strength and raised Rs 150 crore from SAIF Partners. The market did not grow. The market exploded! BookMyShow sold 100 million tickets in 2016. In January 2018, reports indicated that Ashish was raising another round of funding and investors had valued the company at over Rs 3000 crore. Ouch!

Excerpted with permission from The Moonshot Game: Adventures of an Indian Venture Capitalist, Rahul Chandra, Penguin Random House India.