‘Review, Reset, Renew': Thyrocare Technologies Founder A Velumani On Unicorns In Crisis And How To Revive Them

The story of Navi Mumbai-based Thyrocare Technologies, a chain of diagnostic and preventive care laboratories, began much before the advent of the “start-up” culture  in India. In 1995, when founder Dr A Velumani started the diagnostics business,  he had no money, no investors (forget marquee), no pitch notes, no Word Doc or PowerPoint presentations with complicated Excel sheets that promised the moon. All he had was a business idea, Rs 2 lakh of his provident fund money and the hunger to succeed. Nobody called him an “entrepreneur”, the term “start-up” was yet to become sexy and unicorns were just legendary beasts with a single pointed horn. Marquee back then was just a large tent set up for outdoor activities. 

Between 1995 and 2015, Velumani worked tirelessly to build a fundamentally strong and profitable business. In 2016 he took it public and in 2021 he sold 66% of the stake he held for Rs 4,546 crore to the founders of e-pharmacy company PharmEasy. 

In a short span of six years, the entrepreneurs at the helm PharmEasy — founded in 2015 — had raised several rounds of funding from many marquee investors, produced lots of PowerPoints that elegantly listed all their strengths and gained unicorn status. However, when PharmEasy’s valuation fell sharply and suddenly, Velumani who managed to get Rs 4,600 crore in his bank account from the sale paid dearly for a gamble he took — a costly mistake in hindsight — and invested Rs 1,500 crore back into PharmEasy.

In an interview with The Core’s Anjuli Bhargava, Velumani spoke about why he thought Byju’s finds itself in a crisis today. He said, “Once you have allowed big investors in, very little remains in your own hands. Very few founders have the courage to say: you have given me money, give me adequate time and I will deliver decent returns… Investors keep loading pressure for quick and big returns and if the entrepreneur is also tempted, a problem amplifies.” 

But how could businesses like Byju’s, that now find themselves in troubled waters, rescue themselves? Velumani said that if a business was fundamentally strong and was fulfilling a need for society, “there’s no reason why it cannot work in the long run”.

In the interview, Velumani also spoke about his own journey with Thyrocare, the investing and start-up ecosystem in the context of today’s businesses and what entrepreneurs must do today to keep their businesses afloat and growing. 

Here are the edited excerpts from the interview: 

What are some of the major changes you see in entrepreneurship and the ecosystem that has evolved from the time you started your business?

To begin with, starting with and without money are two very different things. Moreover, back when we started, the comfort, reach and access that technology provides today was missing altogether. 

I would argue that the word entrepreneur itself was non existent when I started. In fact, this word itself was barely heard till 2005. Even if you pick up The Economic Times of that era, you won’t see the word entrepreneur mentioned more than once or twice in a year. Those days there were no job portals so there was no easy route for employers and employees to find each other as no internet existed. Like in matrimonial alliances, investors and entrepreneurs had no easy way for connecting or finding out more information about each other. Anybody starting a business was mostly doing it to have a better income and make their lives more comfortable. Listed companies in the 1980s and the 1990s were quite rare. 

It was only in the 1990s that people started to focus on the idea of listing and reaching a size. Also, till 1990, there was no talk of tech companies and hardly anything known as the services industry. That was an era where few people knew what company law is or how to take care of a shareholder or what loopholes existed. In fact, every loophole found helped make the system stronger. Even SEBI came into statutory existence only in 1992. It’s like first the road is built, then vehicles come onto it, then accidents happen and only then signals come into force. Signals don’t come into force unless accidents happen.

Till the 1991 liberalisation, things were of course very different but from when do you feel there was a perceptible change in the way the startup ecosystem began to change?

In the last 1990s, the dot.com boom came and for a while it looked like everything was going to be determined by it, until people realised that everyone had only a website in hand and no business in hand.

Coming to entrepreneurs, the employment cell in engineering and management colleges underwent a change. Earlier, people — a majority of graduating students — looked for good placements in campus interviews but around 2005, a change occurred where an equally forceful “e” cell - the entrepreneurs cell - started to form. A 100% employee chasing population metamorphosed into a majority wanting to set up start-ups. Why ?

Many parents are no longer dependent on their children’s income now. So these children are free to pursue their dreams and take risks very early so to speak. Now those dreams are increasingly determined by the unrealistic, internet stories of those who became billionaires or millionaires at the age of 25. Nobody realises these are aberrations but the attraction is only towards aberrations. If he can do it, why can’t I. 

So like a marriage needs a whole range of services to come together to pull it off — a caterer, decorator, priest photographer or pundit — similarly a whole ecosystem including incubators with IT, HR, logistics, legal, finance has sprung up to cater to this new animal, who is typically clad in t-shirts, short pants and seen at stylish coffee shops with big coffee mugs in hand that get their brains working (chuckles), is a graduate of an IIT or IIM and at the threshold of achieving his big dream. 

Investors also have metamorphosed. India didn’t really have an equity culture earlier. People were investing in secured returns like real estate, gold,  fixed deposits and savings schemes. But at some point people wanted double digit returns instead of the single digits they were accustomed to. Fund managers come in, promising to convert US $1 million into US $50 million and in a few cases, they do. Again, those are the aberrations that get highlighted. Funds managers have access to global funds and are actively searching for entrepreneurs who might deliver such returns. It’s a bit like the groom and the bride have both matured enough to search for the best match.

Then all this jargon comes in: pitch decks, marquee investors, projections, addressable market, the SWOT — all this comes in as investors want some surety on whether they are investing safely. Events are held in all major cities where entrepreneurs and investors come together and those who have only projections on paper  are looking to raise big money. They don’t have a sizable turnover or any profits to speak of but they are keen to be valued at astronomical sums. Those making losses are asking for  billions of dollars of valuation. All this is happening due to greed from both sides. It is like the boy only wants to marry Aishwarya Rai and the girl wants none less than a Shah Rukh Khan (chuckles). 

So, all the Bollywood “makeup” is happening here too. False projections are made by both sides, leading to disappointments post marriage. Now, once someone has invested in a start-up at an absurd valuation, he needs someone to come in at an even higher valuation so he is saved. A Theranos type of situation builds up. To hide one lie, dozens are told till one day, it is out in media

Isn’t Byju’s case similar as well?

I think Byju didn’t make wrong promises and was not out to cheat, though their promise to their clients had a lot of exaggerations. In Theranos' case, it was blatant fraud, false promises were made and lies built upon lies. I think Byjus is more of a victim, not the villain. The investors hyped him up to be more of a hero than he really was and he became a victim of this hype. The process in both cases might have been similar but I think the intentions were different from the Theranos founder.

If you were in Byju’s shoes today, what would you do?

His mistake was in allowing the investors to play him and in willingly playing the valuation game. Once you have allowed big investors in, very little remains in your own hands. Very few founders have the courage to say: you have given me money, give me adequate time and I will deliver decent returns. That’s where he too faltered. Investors keep loading pressure for quick and big returns and if the entrepreneur is also tempted, a problem amplifies.

In Byju’s case, he probably thought all his investors had more experience, knowledge and wisdom than him of how businesses are built, projected and run. He yielded himself unknowingly to become a victim. Covid made matters worse. It looked almost like Covid came to help Byju’s to grow and investors and everyone felt that this dizzying growth seen during Covid might sustain for decades, which didn’t happen. It was just an aberration. 

There were two spells in such collapses: the first five months and the next five months. The first lot got shares at lower values when the value was going up illogically and next five months paid higher for shares at exorbitant rates. Those who bought in the second rally are the biggest victims.

How were they victims? Weren’t they greedy? 

The first lot were greedy and villains and the second lot were greedy and victims (fomo) as I see it. It’s a process. The biggest problem in the equity market is that if someone big buys, everybody buys and if someone big sells, everybody sells. The herd mentality. 

In my college days, none of the girls coming to college were going to a beauty parlour. Today, in colleges, at least 75 percent of the girls would be going to beauty parlours, if not more. Makeup has become a necessity. So has it become for entrepreneurs. They also are not normally presenting. Similarly, investors too are not normally presenting. Investors also come with a presentation of the companies they have picked and invested in : many big names. They might have made a success in one out of 10 investments but they make the entrepreneur feel they can make him into a Google or Facebook. Investors pitch artificially and entrepreneurs are also putting their best face forward, not the real one. This is what leads to quick divorces. If both the bride and the groom have lied or resorted to excessive makeup, the marriage won’t last long.

Having said that, what we are reading today is the most successful entrepreneurs' success stories and the most miserable failures. These don’t constitute more than 2% at either end. Remaining 95% I have come across many gems. These founders don’t keep raising money, they might raise money once and a limited amount. They are focussed on building great businesses and working really hard towards this. They use internal accruals to grow their businesses. When I have asked these founders how many investors they have, they say they are yet to bring in any outsider. In some cases, I have offered money to some of these gems and they tell me they’ll let me know if and when they require funds : they say money is not the problem. They are not sitting in half pants at stylish coffee shops or attending networking events as they don’t have the time. They are focussed on building a strong and sustainable business. 

So to come back to the analogies of the marriage market: the bride the boy is keen on is not interested in him and the bride who is keen on the boy,  he doesn’t want. Similarly, funding too. The ones who are desperately looking for funds, I don’t want to invest in and the ones who I want to invest in are not looking for funds. It's a Catch 22.

There are a few lessons in all this. One, financial prudence is critical for entrepreneurs. Two, it is not a 100 meter dash, it’s a marathon race. Three, nobody will overtake you : the world is too big for you to worry about being overtaken. 

I have a punch line here: Don’t try to become a billionaire before you meet your father-in-law but do try to become one before you meet your son-in-law. It takes time to get anywhere. If you are in a rush, your chances of collapse are high. Your artificial valuation may please your father-in-law but the marriage will not last. 

Success is never a problem but sustaining it is. Growth is never a problem, sustaining growth is. Never artificially grow anything as it is not sustainable. Too many entrepreneurs are not aware of these things or in their desire to be the next hero, they ignore these. Until Thyrocare listed, nobody knew who Velumani was, although I was working very hard for many years by then. In today’s glamorised, over hyped and makeup-led world, it is hard to remember many of these basic tenets of doing business.

But how do you see the Byju or even a PharmEasy play out going forward? How can the businesses be rescued?

The girl may have lied, the boy may have lied. The whole neighborhood knows there’s trouble in this marriage but the fundamentals are not broken. The business is creating a solution for the common man — be it Byju’s or PharmEasy.

Valuation falls may be a problem for investors but it’s not related to the operations of the company. Look at the Byju’s case. They got money from investors and students. We have to see where all the money has gone: it has gone to Shahrukh Khan, sponsoring cricket matches,  into acquiring customers aggressively, overpaying some employees and in paying high valuations for acquiring businesses that appeared to have a fit. Now, if you have overspent on all these items, you will pay the price. You might have taught your investors some lessons if you were following their wishes and you might learn some lessons too. 

But now comes the hard and the real part: reworking pricing and your main offering. Restructuring.  With all the damage done in the last three years, it might take 10 years to come back to the original spot you started the race from. There are no shortcuts. Mistakes have been made. The price has to be paid: review, reset, renew.

This requires a lot of resilience…

Yes undoubtedly. Byjus, PharmEasy and there must be a few dozen others like these. But if the business is fundamentally strong and is fulfilling a need for society, there’s no reason why it cannot work in the long run. 

Of the two, PharmEasy is selling medicines which will remain essential. Byju’s is shakier as it is selling dreams. They wanted to create a fantasy and sell it: that I think is no longer possible. But having said that, coaching is a very powerful domain and digital is the way ahead there too. 

There have been reports and I think someone like Ranjan Pai (​​chairman of the Manipal Education and Medical Group) coming in — who understands both education and hospitals/healthcare — would be a viable solution to the problems of both. He could come in and buy them at a fraction of the present valuation and exploit many synergies with his existing businesses. His present businesses are mostly physical, he wants to go digital too and if he gets it for a song, he might bite. It makes sense for him as he will dominate in these areas and very few will be able to match; he can use these to propagate his core business. 

Look at PharmEasy, it is down from US $7 billion to US $700 million. It will take a while to get to even US $ 2 billion again. Same for Byju’s. Both business models are not wrong. Investors and promoters lose but the company will have its own DNA and workings. But it will not be easy: the business will have to restructure and the hard work that was not put in earlier will have to be put in. I think it will take a minimum of ten years but both businesses should deliver.

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