Unconventional business: Birth of HummingBird Suites

A casual conversation at a party in 2004 was the moment of conception for founders of HummimgBird, Vivek Madappa and Vinod Thimayya's nest-egg.

"A senior vice-president of a large company was lamenting about exorbitant hotel tariffs impacting his bottom line. “I realised a market opportunity that night," says founder-CEO of Madappa, on how HummingBird Suites, the country’s largest corporate stay solutions company, was born.

HummingBird provides corporates comfortable, intimate and affordable homes. Its offering is superior to a hotel or a service apartment, he says. Among other things, it offers stays for less than a month as well as solutions for recruitment training, meetings and conferences for large groups.

The brothers started the company in 2005, and have grown to having over 750 customers, including IBM, Accenture, JP Morgan and Wipro. Today, HummingBird runs 285 suites in 25 properties across the metros. The company projects revenues of Rs 35 crore this year. Thimayya says the firm broke even in the first year itself.

Madappa and Thimayya had to take a leap into the unknown, as neither had any experience in hospitality. Both quit their jobs—Madappa as a marketing executive with Tata Tetley, and Thimayya as a business development executive at Countrywide—to start HummingBird at the age of 38.

The world, of course, thought they had lost it. Banks didn’t give them money because they had no idea who they were and what market they were entering. "When you become an entrepreneur, you are a nobody, a faceless entity,” says Madappa. To condition himself for what seemed like an ‘impossible’ challenge, Madappa went on a 100-kilometre Himalayan trek. "Like a trek in harsh conditions, you somehow complete the journey along the way," he says.

The brothers pumped in their savings, which amounted to a princely sum of Rs 3 lakh. They had no choice but to follow an "asset light" strategy. Instead of acquiring properties, Madappa decided to lease second and third homes from tenant-weary owners. The duo initially rented some apartments in central Bangalore.

They then approached Philips with an offer it couldn’t refuse: Rs 4,500-5,000 per night for a fully furnished apartment, compared to the Rs 10,000 that service apartments charged. "We were cash strapped, so we offered Philips a discount in exchange for a cash advance. This gave us our initial push," says Madappa.

At the end of the first year, the company had earned Rs 1.5 crore in revenues and made a profit, says Madappa.
In 2008, HummingBird posted revenues of Rs 11 crore. Along the way, it expanded to Hyderabad, Pune, Mumbai, Chennai and Gurgaon, while setting up more locations in Bangalore. However, the brothers kept coming up against funding walls.

Most venture capital funds said they were bit players, that there was no reference model for the business. "But we were eventually noticed, because we were the only player in a virgin market," says Madappa.

In 2008, Bangalore-based venture capital firm, Helion Venture Partners, invested $4 million in Hummingbird, acquiring a 30% stake. The firm saw a good opportunity in the business: Mid-to-low-end corporate employees had no accommodation available for their price, says Kanwaljit Singh of Helion.

Earlier this year, the brothers launched operations in Ahmedabad and Madurai. Madappa believes the value-for-money model took them places. At no point were they in competition with hotels. “It’s a long-term partnership between us and our corporate clients,” says Madappa.