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Alok's Posts / Startup

If Kingfisher was a startup, it would still be flying – 5 reasons why!

If Kingfisher was a startup, it would still be flying. 5 reasons why:

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I applied a cold analyst lens to the saga of Kingfisher Airlines and tried to simulate what would have happened if the airline had launched as a ‘Startup’ vs. a funded ‘Corporation’.

This is how it could have played out:

1. VCs (instead of Loan Sharks) wouldn’t have let the Airline go bust.

Check out the Shareholding pattern on KFA: (Source: Moneycontrol)

If Vijay Mallya + Promoters own only 8.5% of the airline, it’s clear that their equity has settled to the same level of highly diluted high single digit ownership seen in some of the well known, top funded startups (ecom, etc). So, owning a large chunky % of the business never seemed to be the agenda at all.

If KFA promoters would have ‘diluted’ their equity for dollops of funding vs. taking on large debts & institutional money, the airline would have got a chance because VC money per se cannot be ‘recalled’. Either the venture would have succeeded or failed on its own merit but definitely not due to the pressure of paying back loans and interest.

Check out the Balance Sheet that makes my point clear: (Source)

2. KFA couldn’t have raised more money if they didn’t deliver on the ‘MVF’.

Check out the cash flow of KFA before it blew up: Source

Focus on the “Net Cash Used from Financing Activities”

Clearly, KFA was borrowing loads of money from willing (gullible) banks and financiers who had NO CLUE what was happening to their money because they all they were interested in getting all of it back with fat interests.

This is the crux of my argument:

A VC would have advanced the first round to KFA to basically sort out what I would like to call ‘MVF’ – Minimal Viable Flights. Until those flights were not optimized to yield-in cash or growth (in the hope of cash later like ecom), the next round of cash would not have come!

Closing the funding tap would have ensured that KFA would have got its act right -of flying, not borrowing. This would have prevented the unbridled expansions, purchase of Air Deccan and massive focus on growing than operating!

3. Without checks and balances, there is no control.

Ask any seasoned entrepreneur who has raised VC money about the checks and balances that VCs put into the running of their startups. They will confirm that the monthly P&Ls and ‘burn’ discussions can really become uncomfortable conversations if something is not going right.

Check out the P&L of KFA (source)

Look at the glaring items that stare at you! What on earth could have been “other expenses” (cost of employees, fuel and depreciation NOT INCLUDED) that was almost 50% or more of revenues?

Also pay attention to the interest paid out by the airline (or at least accounted for) year on year.

Note the Blue Line I’ve drawn under Profits/Losses without exceptional items. Check how eerily close it is to the interests paid in some of the years and also almost controllable if ‘other expenses’ could have been controlled.

Investors are critical to help startups find their equilibrium. Businesses nowadays are risky as hell and its only prudent to have the investor examining every aspect of your business (like VC Board members) on a day on day basis vs. sitting aloof waiting for their interest cheques to come in.

4. Who fired the CEO?

Did any of these loan sharks who loaned billions of dollars to KFA ask for a CEO change? Whose responsibility was it to make sure that the airline was being run by the best CEO in the world vs. the one that the founder appointed?

I checked that during the most horrid years, the CEO – Sanjay Aggarwal remained CEO for 4 long years? (Source – Linkedin)

Which VC in the world would have tolerated keeping a CEO of a startup that had no clue of profitability, viability and business direction for 4 long years when these kinds of moneys were involved?

Google around to read about the tumultuous relationships founder CEOs and professional CEOs have with demanding VCs. It’s not pretty but it definitely leads to a lot of spitting and polishing to get the business right.

5. Alignment of Interest – VCs vs. Shylock

I have met a lot of startup founders who detest their investors for the trouble they cause them. The constant nagging, questioning, probing and occasional firing always gets founders very upset.

The point I always make to them is that the VC IS ON THEIR SIDE!

The VC is NOT INTERESTED in seeing entrepreneurs and their startups fail! It’s bad for them both business wise and professionally. Their demeanor is purely based on doing their job – making the startup and its key team members push the farthest, hardest and swiftest to win. (Citius, Altius Fortius is the Olympic motto).

On the other hand, Shylock (my favorite in all the Shakespeare I have read) was quite the opposite! He lends money to Antonio without having any interest in the welfare of his business. Shockingly, just before he lends money to Antonio, he muses (Act 1, Scene 3 – Merchant of Venice)

“If I can catch him once upon the hip,
I will feed fat the ancient grudge I bear him.”

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Shylock wanted Antonio to fail to extract revenge. Did the same apply to the lenders of KFA?


Written on Sunday – 10th April 2016 – Mumbai



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  1. I think political pressure and cuts the bank officers took to pass the loan and convert those NPAs to equity is the main culprit. This is a classic case of crony capitalism .

  2. Murky waters whereth their ship lies. The question is who murked the waters?

  3. This is certainly a literary piece for Entrepreneurs like us who are yet to see the VCs.

    We have an angel Investor although initially he was smart in putting all his investment as Loans but now when we have paid the dues he is more than willing to enter into equity relationship with us. Loans may be a case to prove the worth of your entity.

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