Most startups go through at least one near death experience. And it’s up to the founder to tell the world with a straight face that everything is fine.

This is probably what Naveen Tiwari, the CEO & Co-founder of InMobi, is doing when he tells the press that it has no plans to sell.

Sometimes you come away with the impression that he wants to take the company public. And at other, that he doesn’t. You think they have revenues upwards of half a billion dollars, but they don’t. You think they are India’s answer to Facebook & Google. But that’s a stretch.

So what’s the real story?

Recent developments at InMobi and a look at its balance sheet will tell you that things aren’t as rosy as they look from outside.

On one hand, the company needs fresh funding urgently to stay afloat. And on the other, it must figure out whether to sell out or continue being independent, plough in revenue from new businesses and stem attrition.

A person familiar with the thinking of InMobi’s top investors and its board members told pankaj mishra

Any IPO in current market situation, be it India or the U.S., is at least two years away. The debt position of InMobi is a tough one to manage in the short term, and it kind of weighs heavy on any future prospects.

IPO is a far cry, You know why

More than 4 years after raising $200 mn from Japan’s Softbank and becoming the first Indian company to be called a ‘Unicorn,’ the ad-tech company is now staring at an uncertain future. The funding environment is tough, many top employees have left the company and a ‘make or break’ situation prevails at InMobi.

Even if it comes out of this stronger, a successful IPO is a far cry — considering how ad:tech companies are being treated in markets abroad. Take the case of Millennial Media. The Baltimore based ad:tech company was sold earlier this year to AOL for a fraction of its original value. It was termed a ‘mercy killing’ by Forbes.

Millennial Media’s stock performance since IPO

According to sources, it is in talks to raise fresh capital from Chinese game publisher Youzu Interactive. “It’s a joint venture with Youzu and a deal to raise money from them,” the sources said. Through the joint venture, InMobi will help Youzu enter the Indian market. This deal has taken unusually long to materialise.

Not a Unicorn anymore

Sources said that YouZu’s offer to invest in InMobi is at a valuation upwards of $800 mn. That’s considerably less than what the founders originally had in mind. The devil is that Softbank, which owns nearly a third of InMobi has the power to veto any investment that comes at a valuation less than $1.5 Bn. Softbank did not respond to an e-mailed query.

Another person, also familiar with the conversations at the top, said there’s been interest from potential investors including Foxconn, “but negotiating enterprise valuation north of $1.5 billion has been a bottleneck,” the second person said.

InMobi’s new plans

InMobi’s big plan was to segue into a bigger segment it called discovery commerce. For this, it conceived and launched a product called Miip last July. The idea was to get retailers like Walmart and Target to spend money on InMobi’s network and get paid in commissions every time someone bought an item. That bet is yet to pay off in a big way.

I hear that 100% of merchants brought on board by the BD team have churned and the revenue and results is nowhere close to making a dent on anyone’s top or bottom line. Team seems disillusioned- hallway conversations are like “what is going on with mipp” “nothing much same old”. (Quora)

As per my sources, InMobi had signed up over a dozen early customers at launch including Walmart, Target & Amazon India. Many of these were pilots and conversations. The company, however, was unable to convert these into long term paying customers. “At an all hands meeting, Navin said that InMobi couldn’t get the economics right for Walmart and that meant the product wasn’t working,” another source said. Snapdeal, another Softbank company in India, did not sign up for the program.

At the sidelines of an event organized by InMobi in San Francisco*, Ram Shriram, an early investor in the company told me

The success of this will clearly come from how many apps they can sign up and how quickly they can get users on the platform. Once that happens, there is no stopping them.

Will they be able to sign up more apps? We’ll have to wait and watch. But before that, there are more pressing matters to be dealt with.

The ‘ticking time bomb’: Debt on the Sheet

In August 2015, InMobi took on $60 mn in debt from a consortium of lenders led by Tennenbaum Capital Partners. Over $40 mn was used to pay off an older loan from Hercules Technology Growth Capital, sources said. That leaves the company which lost $45 mn in 2014 & $40 mn in 2015, with little runway.

Multiple sources confirmed that InMobi’s revenues for the year ended March 2016 are about $320-$325 mn. At the end of March 2015, it had cash and cash equivalents of about $30 mn. That’s barely enough cash to last the year without fresh funds, cutting costs drastically or miraculously turning profitable within the year.

Debt is not new to business. However, it gives a lot of leverage to potential investors or buyers over a company.

Revenue growth & no profits in sight

Here’s a look at the company’s financials over the years.

Source: ACRA, Singapore

InMobi is widely believed to be making revenues upwards of half a billion dollars. However, its financial statements say that company made revenues of $262 mn for the year ended 31 March 2015 and $202.5 mn for the previous year.

The company’s past performance indicates that its revenues won’t cross half a billion dollars this year either.

Back in 2011, when InMobi raised $200 mn from Japan’s Softbank, the idea was to hit a billion dollars in revenue within 3 years. Its revenue is only a third of the original expectation.

In December 2014, InMobi’s Chief Financial Officer Manish Dugar told The Economic Times that it was looking to “hit profitability in 2 months.” From the interview, it isn’t really clear what he meant. But for the year ended March 2015, the company clocked losses of $40 mn. It lost $44.6 mn the previous year. That’s a little bit off from “profitability.” In total (from the beginning that is), it lost $223.9 mn by the end of March 2015.

Reaching a billion dollars in revenues without fresh fund infusion and a winning proposition will be very hard for InMobi. The so called unicorn, has hardly lived up to the hype.

Supercell Cuts Spending

While new revenues are yet to kick in, its traditional business has taken a punch in the gut. The biggest blow came in August 2015, when Supercell, the makers of games like Clash of Clans, began to cut spending. It was InMobi’s biggest customer, contributing nearly 25% to the revenues. That went to zero within a month.

Bleeding talent

In November, Tewari sent an email to 800 odd InMobi employees, conveying a sense of urgency. A copy of the mail which is with me says:

It is not the interim fluctuation that is keeping me up at nights...What’s keeping me up at nights is the fact that we are standing at a juncture of InMobi history where it is a ‘make’ or ‘break’ time for our dream of ‘reimaging advertising.

There is this whole narrative around InMobi’s amazing work culture and so on. But tension has been mounting at InMobi headquarters in Bengaluru. Over the last year, InMobi has lost more than a dozen mid to senior employees.

A former InMobi employee pointed me to an anonymous Quora post when I asked about the company’s performance. It read:

Team has seen massive at senior level attrition due to people being disillusioned.

Many employees have indeed been critical of the company’s recent performance. Many have left as well. At a recent townhall meeting, Tiwari had to answer questions like — what does InMobi plan to do about slowing revenue growth?

Atul Satija, who was Chief Revenue Officer quit in April 2015. Khushboo Maheshwari, who was head of Commerce at InMobi left the company in August 2015. In September, Nimish Joshi, who was Director - Global Alliances, M&A and Investor Relations, quit the company to join Ola, a taxi hailing company which rivals Uber in India.

Priyanka Prakash, who was Global Sales Strategy & Operations Lead - Brand Business, left in August. Sreejita Deb, who was heading the commerce vertical for InMobi quit in December to join another a Mumbai based startup. Senior product manager Rangasayee Chandrasekaran, left in September, a month after Maheshwari to join another startup. At InMobi, he was the product management lead for commerce. Ravikiran Vadapally, VP Finance at InMobi is also on his way out, sources said. CFO Dugar himself has been approached by multiple startups like Practo that have raised massive amounts of venture capital.

Some more questions

In the last four years, a large amount of venture capital has been put to work in India. It begs the question: Why didn’t InMobi raise more capital while plenty of money was chasing Indian companies in their growth stage?

Nikesh Arora, the new President & Chief Operating Officer of SoftBank Corp knows a thing or two about advertising technology (he spent a large part of his career as Chief Business Officer of Google.) If InMobi is indeed the next big ad:tech success, and given Softbank’s recent focus on Indian companies, wouldn’t he have written another large cheque by now? What gives?

*Disclosure: I was part of a group of journalists sent from 4 Indian publications to cover the launch of Miip in San Francisco. InMobi paid for travel & stay.

**A detailed questionnaire sent to Tiwari went unanswered. They however promised a meeting which never materialised.

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