Sabeer Bhatia. Hotmail.com.
These names might not mean much to startup folks in India in 2021. But in 1997, when US tech giant Microsoft acquired a fledgling company that offered a free “electronic mail” service for a whopping sum of US$500 million, it made for major headlines.
For all practical intents and purposes, Hotmail was an American company with just one tenuous link to India—its founder’s roots. But this was enough for Bhatia to be lionised and deified as a startup hero in India, particularly in Bengaluru, where he had spent his childhood years. Bhatia’s success was inspirational to young entrepreneurs in India and kicked off a thousand startup dreams.
Last week, Microsoft acquired acquired Techcrunch Microsoft acquires Ally.io, OKR startup that raised $76 million Read more another startup—an OKR (Objective and Key Results) solution provider called Ally.io.
The parallels between Hotmail and Ally.io are eerie. Both were US companies with founders of Indian origin acquired by Microsoft. While Microsoft did not disclose the price it paid to acquire Ally.io, industry sources peg it at around US$500 million—the exact same sum Microsoft paid for Hotmail.
But beyond these deal mechanics, the similarities end.
The differences between the two companies’ respective journeys is a great prism to see how the world of Internet startups and the Indian startup ecosystem as a whole have evolved in the intervening years. While Bhatia was lauded as a hero, Ally.io’s acquisition barely got a passing mention in mainstream media. Its founder Vetri Vellore is still largely unknown.
A world of difference, a different world
When Microsoft acquired Hotmail in 1997, most Indians wouldn’t have even heard the word “startup”. It was an era that was vastly different from the current startup-centric milieu. The Internet had barely reached Indian shores, and IT services bellwether Infosys had gone public only four years earlier. There were hardly any tech startups of note in the country, and there was little to no VC funding available.
As “software ate the world” in the past two decades, bolstered by the rise of the Internet and the ubiquity of mobile devices, the world of technology and technology investing has both changed radically.
For one thing, the size of technology startups is quantum times higher. Take Microsoft itself. In 1997, the company was worth just around US$200 billion despite its market dominance. Today, it’s worth over US$2 trillion, and several other tech companies such as Amazon, Google, and Facebook have nose-bleed valuations. When Microsoft acquired Hotmail for US$500 million, it was the company’s largest acquisition at the time, and the announcement was met with fanfare. When Microsoft acquired Ally.io for US$500 million, it was just a blip on the radar for mainstream media, which is now accustomed to unicorn-sized deals.