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Rajeev Mudumba

The Case of the Failed; nay, Fallen Entrepreneur!

VG Siddhartha, Founder, Chairman and MD of Coffee Day Enterprises also known as “Coffee King” went missing on a bridge over River Netravathi near Mangalore, Karnataka, India on July 29th, only to be found 36 hours later, as a dead body making its way into the sea. 

His professional journey, coming from a family of 135-year-old Coffee Growers who mainly focused on supplying the world with rich South Indian coffee, to an entrepreneur who established an enviable chain of a few thousand wholly-owned retail coffee stores, not just across India but in about another 5 countries is nothing short of phenomenal. He rewrote the coffee consumption story of India and became the person responsible for creating a new ambience and experience of how coffee should be consumed, not just for millennials but other generations too, who lacked access to a retail coffee experience in hip stores and locations. He created, in the east; the concept that we experience with Starbucks in the west.

Siddhartha founded Coffee Day in 1993 and opened the first Café Coffee Day in the growing silicon valley of India, Bangalore three years later. But, within 2 years of 1993, he became the largest Indian exporter of coffee. Since then, the company has grown into India’s biggest coffee chain. The company went through an IPO in 2015 to lukewarm response.

Based on their 2018 Annual Report, they have 2700 retail units and 47500+ vending machines within corporate offices. Later, they are known to have closed several stores due to business issues and its estimated that currently, there are 1700 locations across 245 Indian cities and other stores in some international destinations. By the way, Starbucks is estimated to have about 150 stores in India. Siddhartha catapulted to the billionaire club in 2015 with an estimated net worth of $1.2 billion. 

The 2018 Annual Report on the company website says that the coffee industry in India is set to grow at a CAGR of over 11% in the next 3 years. They also reported coffee retail gross revenue growth of 12% in FY17-18 and states that there has been constant same-store sales growth over the last 25 quarters.

The key performance indicators per their 2018 Annual Report are shown below:

Source: http://www.coffeeday.com/PDF/Coffee_Day_Annual_report_2018.pdf

Apparently, the company is said to have done well during its first 10-15 years after which it took some heavy loans and the Chairman was having issues paying back. He is said to have liquidated his shares recently in an IT firm to pay back some of the loans. He seems to also have had tax issues with the government that curbed his liquidity. Moreover, there was pressure from Private Equity firms who had invested in the organization, for him to buy back shares to help the share price. With mounting pressure on all ends and a lack of liquidity, he wrote a letter to the shareholders and staff saying as much, a couple of days before he disappeared. 

Let me share some more data with you.

According to the Indian Ministry of Corporate Affairs, of the 1.9 million companies registered with the government, about 680,000 or 36% closed in 2018. The previous year was at 20%. The share of dormant companies, those under liquidation, and under the process of strike-off is less than 3%.

The point I am trying to make is that every day, we are inundated with the success stories of companies that have raised money, many of them; companies that have made an exit or IPO, a handful of them and then, there are stories such as VG Siddhartha’s where pressures of running a business, oftentimes battles fought alone by the entrepreneur take toll. Sad but drastic actions taken by such entrepreneurs come to light and the nation, in fact, the international community talks about them since they are well known. But, in the dark streets and corners of entrepreneurship are several such entrepreneurs that take risks to keep their dreams and their employees’ jobs afloat, fight their battles alone and have sad endings. Entrepreneurship is not all guts, glamor, and glory. There are failures too and a strong ecosystem to support is needed to ensure the fall is not so bad, that we have such drastic incidents. PE and VC firms, the banking system, tax bodies, and the government, employees and entrepreneurs – this is the ecosystem, which needs to find ways to make entrepreneurship flourish. There will be failures, no denying that! But, the way they come down can be improved so that the passion and zeal to do something different and work hard to get it right, does not die with it.

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