How they beat the 2000-01 Dotcom Bust

by Satrajit Sen

German philosopher Friedrich Hegel once said: “The only thing we learn from history is that we learn nothing from history.”

So, what do we do when the history of economic crisis repeats itself -- a) we curse our stars for making us a part of the repeating history; b) we scratch our heads to find out innovative ideas for survival; and c) we refer to the existing survivors on what they did when they had to face the historic event?

Today, when the entire country seems to be scratching out ideas for survival in the current global economic slowdown, AlooTechie spoke to the survivors of 2000-2001 Dotcom Bust to know about the strategies that they had adopted to survive at that time.

Mahendra Swarup, who is now chairman and chief mentor at Smile Interactive Technologies Group, was then MD and CEO of Times Internet Ltd (Indiatimes.com). Founded in 1999, Times Internet is one of the primary survivors of the Dotcom Bust. Pointing out his learnings from that phase, Swarup provides an industry-wise view of how to survive a downturn.

The dotcom crisis was actually initiated by the financial world which exaggerated the internet business. They actually felt that internet would generate faster returns to capitals and that is where they made mistakes. Entrepreneurs started focussing on revenues and advertisements became their only revenue stream. But there were not many internet users and hence advertisements did not work. Internet became a media rather than a service and that is where the crisis took a bigger shape. Even now, I believe that ads should not be the only revenue stream for an online business.

On the other hand, companies which believed that their businesses were actually fulfilling some needs, sustained well at that time. Companies like Naukri, Shaadi and IndiaMart were focussed on fulfilling general needs and their revenues were not based on ads. That is where they succeeded.

At Indiatimes, we had a clear focus on our profit and loss statement and hence we divided the organisation into different divisions. At that time, we launched our media properties (EconomicTimes.com, TimesofIndia.com), e-commerce division (Indiatimes Shopping), business solutions division (TimesJobs.com, TimesMatri.com) and mobile VAS division (8888). Other than the media properties, all the three divisions were focussed on providing meaningful services.

We did cut down our expenses to make the businesses profitable for the next 18 to 24 months. Our employee strength was cut down to 300 from 750 and we stopped all kinds of promotional activities. Thus we first restructured our business model and then went ahead for cost cutting. I firmly believe that cutting down on costs without restructuring the original business model hurts the business as the original business needs that much of costs. Rather, restructuring the business model before cutting costs is a viable idea.

Businesses looking to raise money should either have the first-mover advantage in the related field or should have a focus on innovation, R&D (research and development) and long-term purpose. The product that they design should be focussed on solving consumer needs for a long time. Raising money for spending them on advertisements and promotions, in the present situation, will be foolish.

Entrepreneurs should not look at employees as costs. Laying off a high salaried employee and getting more new employees at a lower expense will not serve the cause of the business. At Indiatimes, we laid off people as our restructured business model did not need them anymore, but we retained those people whom we really needed. Thus businesses should look forward to retain good employees and try to manage their growth at a lower cost.


Info Edge India (Naukri.com), which was founded by Sanjeev Bikhchandani in 1995, had to encounter the Dotcom Bust phase just after receiving funds from ICICI Venture in April 2000. Hitesh Oberoi, co-founder and chief operating officer, Info Edge India, shares his experiences of the time.

For us, actually there was no bust as we had raised our funds just before the situations started worsening. But we understood that it will be tough for us to raise another round of funds soon and thus became focussed on conserving cash.

At that time we focussed on scaling our sales and did not spend much on promotional activities. We had cut down on our advertising expenses as we had no hope of raising funds soon. Consequently, we also launched a number of high-value products and introduced innovative services which actually helped us to perform well in that period.

We have seen through those times and survived well. During the Dotcom Bust phase we had Rs 10 crore in the bank and now we have around Rs 330 crore. So, now we are not worried about our stability but yes, we are taking the careful route as far as expenses are concerned.

For new entrepreneurs and startups, spending the raised funds sensibly becomes imperative especially in these situations. They should conserve cash and spend it sensibly. Spending on sales should be the primary focus rather than promotion. Those who are yet to raise money should keep on innovating and exploring possibilities to introduce new products and services.


MakeMyTrip.com was launched in 2000 and the company initially focused on the US-India travel market. Later, in September 2005, MakeMyTrip launched its India operations. Deep Kalra, founder and CEO, MakeMyTrip, shares his story of how the company survived the phase.

During 2001-2002, travel and tourism was ravaged by a series of storms -- the aftermath of 9/11; the Dotcom Bust; the attack on Indian Parliament in December 2001 and the SARS epidemic. While the demand for ‘discretionary’ travel and tourism plummeted, the NRI (Non-resident Indians) market proved to be highly inelastic and reliable, mainly because the drivers for these trips were quite different. Despite hindrances, NRIs used to come to India to visit families and friends.

We basically survived that phase as we had our focus on the NRI market. At that time, the smartest decision that we took was that we stopped marketing in India. We carried on initial promotions but soon we realised that India, at that time, had plenty of lookers and no bookers. So, we conserved money by focussing on the NRI market.

Now, to deal with the current slowdown, an entrepreneur has to identify the audience and spend accordingly on promotions. Entrepreneurs should also keep a buffer of cash or line of credit they could dip into when times are tough. Getting the team right is imperative. It’s the single most important determinant for success and everything else can and will change!


Founded in 1997, BharatMatrimony.com, which later changed its name to Consim Info in December 2007, is yet another survivor of the Dotcom Bust. Murugavel Janakiraman, founder and CEO, BharatMatrimony shares the lessons he learnt from that phase.

Outlook to situations should change -- don’t look at it as recession. See this as an important opportunity to take a step back and look internally improvising at the business, product, process, productivity and efficiency.

One must look at creating good opportunities and be open to partnerships. One should also try to innovate different products and new processes for acquiring new customers. Money saved is money earned. That philosophy needs to percolate across the organisation.

Most importantly, an entrepreneur must believe in his product, service, team and himself. If he backs himself to get through the recession, his business will emerge as a rock solid unit when the times are better.


Founded in 1996, IndiaMart.com is among the major survivors of the Dotcom Bust. Dinesh Agarwal, founder and CEO, IndiaMart, shares his thoughts on how the company survived the 2000-2001 Bust.

We made ourselves financially stable by cost cutting and optimizing resources. We also seized hiring and halted reviews. But we did not fire anyone. We enhanced our focus on core competencies and divested all non-core products. Then we re-developed and launched well-targeted products and built robust support processes. We also explored new markets.

While talking about his plans to deal with the current economic slowdown, Dinesh Agarwal said: “We have plans to extend the lead by launching new innovating products and restructuring current offerings. We also want to gain more market share by focusing more on optimizing sales and support cycle. We will focus on new business opportunities as it is a very good time to freeze some valuable business proposals.”