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Crafting homes out of houses | Srikanth Iyer @ HomeLane
357 Plays2 years ago
HomeLane changed India's home interior design scenario by using technology to offer personalized and professional interior services. Starting from his humble beginnings in 1993, Srikanth takes us all the way to the present with his current venture HomeLane.
Read the text version of the episode here.
Read more about HomeLane:-
1.From 90 Days at Wipro to Founding a Rs 268 Crore Empire: A Young Techie's Incredible Journey
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Transcript
Introduction to Shrikant Ayer and Early Journey
00:00:00
Speaker
Hey guys, this is Srikant Dyer. I am the co-founder and CEO of Homelain.com.
00:00:18
Speaker
Do you remember what you were doing in 1993? I'm guessing that many of you would not even have been born then. This was the year that Shrikant Ayer started his first business. This was an era in which the word startup had not been invented. In fact, at this time, India did not even have cable TV. In this very special episode of the Foundathesis podcast, your host Akshay Dutt sits down with Shrikant Ayer to talk about his amazing journey as an entrepreneur.
HomeLane's Success and Subscription Call
00:00:44
Speaker
Starting from his humble beginnings in 1993, Shrikant takes us all the way to the present with his current venture, Home Lane. Home Lane is one of the largest companies in the home interior space. Having raised more than $100 million from some of the biggest investors, stay tuned and subscribe to the Founder Thesis Podcast or any audio streaming app to listen to the amazing journey of veteran founders who are changing the world.
Academic Background and Career Shift
00:01:16
Speaker
I got a sports co-task seat because I played table tennis for the state for so many years. I got a computer science seat in RVC, which is one of the top colleges in Bangalore at least. So, to join that, my claim to fame also is I'm Anil Kumple's batchmate. He and me win the same batch.
00:01:33
Speaker
I did a very interesting course. Harvard conducted their only off-campus course in India during the 90s and I managed to catch that. Amazing. Yeah, so I have a postgraduate degree in software engineering from Harvard, which I did.
00:01:48
Speaker
Very nice course actually, very interesting. In fact, I keep joking that in that one year I probably learned more than what I learned in the four years of engineering, practically. So it was a very good course. Got an immediate placement even before I finished it, I got it to Wipro. But I just felt that was not for me and quit in three months and started my first venture.
Entrepreneurial Ventures in Computer Assembly
00:02:11
Speaker
So that's my beginning of my entrepreneurial journey actually.
00:02:14
Speaker
So, what did you start? Like, I mean, you were like a, I mean, you literally were selling like 21, 22 at that age. Yeah. 22, all of 22 years, 23 actually. The branded computers were very expensive compared to the unbranded ones. So you used to get these assembled computers and the price difference.
00:02:34
Speaker
he would not afford IBM or a Compaq which were the top two brands then and they pretty much were okay going for an assembled computer which was like 10,000, 20,000 cheaper than the branded one. So duties were very high and so on and so forth. So at that point in time I saw an opportunity there and how this happened was I have this good friend of mine who runs a university here. At that time it was a college, it was not a university.
00:03:01
Speaker
largest college. So he always had requirements for these computer labs. I mean, and the labs, the minimum, these computer, Charlie's computer I say used to buy. And he came and said, Hey, you know what, I'm looking for a lab for this. Do you know somebody who can do this for me? And in my Harvard course, I had my classmate. He was from Mumbai and he was a typical, very hands-on kind of guy. He knows you have those guys who are very
00:03:25
Speaker
and detail oriented and they know everything about they do where they're very good with their hands he's one of those guys and he already in his college days itself and Bombay being as entrepreneurial as it is in his college days itself has started assembling computers and learned about how to do it and all that
00:03:41
Speaker
So he said, hey, you know what, I can help you do this. Why not? If you're interested. I said, yeah, man, sure. Then I found some suppliers who could give us some genuine components. And I told my friend saying, Hey, you know what, I will get you this lab. And this is the price if you're okay with it. And he was absolutely fine
Lessons from Marwadi Trading
00:03:58
Speaker
with it. And I was making 5,000 rupees a computer per computer. And my monthly salary from Wipro was four and a half thousand rupees then.
00:04:06
Speaker
So I said yes. So I did the math. I mean it was not very difficult to do. So the first branch of this friend of mine helped me. And it went off reasonably smoothly. We had our own problems but went off smoothly. Then I hired like a couple of guys. Then I had a small home office kind of a thing. So I used to have an office as part of one part of my house. So it started small.
00:04:33
Speaker
and then grow that and you were selling to businesses like you would obviously want bulk orders right like selling to individuals wouldn't not necessarily I was doing a mix of both because the margins were so good right I mean in fact if you going to consumer your margins would even be better because they would not really bargain so much
00:04:53
Speaker
because it's just one computer. But yeah, that taught me a lot. I mean, just to give you one more anecdote of one learning, which kind of blew me away. And I worked a lot with Marwadis during that time because they are typically the trading community. And they've been doing this for centuries, I guess. So very, very good, very sharp, etc.
00:05:16
Speaker
Once I remember about 2-3 years into the business, I also started thinking okay, I should also start importing some memory chips etc. which seem to have
Founding Edurite and Market Challenges
00:05:27
Speaker
some reasonable demand. So, I met one of these suppliers during some event which was in Singapore or somewhere like that.
00:05:35
Speaker
and I said hey I want to get specifically this RAM what we used to call RAM I mean now also you have that but you know that time you used to have those typical chips which you need to insert so I said okay I will try and take a lot of some few thousand pieces and and as always first time I was importing so made a few mistakes this thing got delayed so I thought it would come in like April or something like that it ended up coming only by July
00:06:00
Speaker
And as technology, anything in technology, once it goes out of work, it goes out of work very fast. Right? So, high speed of obsolescence. So, and by the time I was getting this, I was almost becoming obsolete and I started sweating. It looks like this is going out of first one, what should I do? First one, what should I do?
00:06:29
Speaker
He said, I want to buy this chip and tell them broad quantity, tell them each different quantity, don't say the same quantity, say different quantity.
00:06:53
Speaker
So basically what he taught me was he said, if it is a B2B, you create some artificial demand, but there's no demand. Yeah. And then he said, leave it to me. After that, I will push it out to them and I will give each of them a little. And so that one thing really taught me so much. There's so much of native intelligence, the what's called, I mean, we can call it common sense, but there's a lot more than that, right? This is doing the right thing. It's not, you're not really.
00:07:21
Speaker
cheating, but you are taking advantage of the supply and demand scenario and creating some artificial demand kind of thing, etc. So it taught me so much like that. I mean, I've learned like lots during that. So seven years I ran that business. It was called Total Solutions. I ran that. And how were you getting customers for it? Like, did you have a store friend? Was it just like telephone calls and meeting people at their homes? Yeah.
00:07:48
Speaker
So mostly word of mouth, first two years I did not have a storefront but after that next five years I had a storefront. I managed to make enough money to hire a place. So I don't know of Bangalore but there's this place called Malaysia around here which is reasonably residential area. So I got a nice office there. That time the business had become big.
00:08:08
Speaker
But it became big on the basis of B2B orders, which was larger customers. Like you said, this PES University was a big customer. Gokula's exports, there was a company, it still exists actually, they are large government exporters. They were big customers. I used to do a lot of work, even with BEL, some quasi government organizations.
00:08:29
Speaker
So did quite a bit of that. And you would be selling hardware plus services also, like CE. Right. OK. Plus services, maintenance, AMC or ASC. So that time, pretty much, I was the door-to-door sales guy. There was nobody else. I was doing all the selling. So I think door-to-door selling teaches you a lot, teaches you quite a bit, right? Thinking on your feet, moving fast, understanding what they want before you actually
00:08:57
Speaker
put out your offering to them so many things it teaches you right so that that was very i would say educational for me those for seven years.
00:09:07
Speaker
And in the year 2000 was when my second startup happened. The same gentleman, my friend, was running BES University by now. He came up with an idea of building an e-learning company. He said, I want to build an e-learning company. I run a college. The top 2% of students come to my college. The next 98% want to come to my college, but cannot come to my college. So can we use technology to bridge that gap?
00:09:34
Speaker
can I give them the best teaching to the next 98% and take advantage of it as a business model meaning charge them for it sounded like a very simple and nice idea I mean I guess we are still trying to figure out in terms of e-learning across the world seemed like a nice idea so he said you must be part of this founding team this was 2000 year 2000 this was the year 2000 in fact
00:09:58
Speaker
Jan 26th on Republic Day, I remember we made and made a pitch to the first angel VC that I have ever laid eyes on in my life. One Mr. B.B. Jagdish. He is still very active. He is very popular in the valley. I don't know if you've heard of him. But he started this company called Exodus. Exodus was AWS in its previous form. And yeah, so he made it big. He had come down and we pitched to him for 4 crore of seed investment.
00:10:23
Speaker
And in 15 minutes, he agreed. So we didn't know what to do. We had not expected him to agree. So that company was called ADURITE. So started that in 2000, along with this friend of mine from the year. So on LinkedIn, it says Tutor Vista. Was that like the public facing brand of it?
00:10:42
Speaker
No, so basically what happened was started with Edurite and this company got acquired by Tritavista in 2007. So in 2007 we got acquired, so I ran part of the Tritavista business also after that. And what was the Edurite model like B2C and cohort based?
00:11:01
Speaker
Asynchronous. Yeah, when we started, it was a simple B2C model. Asynchronous. We said that what we will do is we will get the best teacher for each subject. So for example, physics, there was Professor Shankar from Basanguri, who was very famous at that point in time. People used to write entrance exams to get into institution. I mean, he was so popular. So we said, let's get people like that.
00:11:25
Speaker
Capture them teaching the subject and take the recommended book which they would recommend and combine the two. So, give a student a CD-ROM. At that time, you could not stream such big videos and all that because bandwidth. We'll give it to them in CD-ROMs which they can play from their CD player on their laptop or on their desktop.
00:11:44
Speaker
That was the model. So we started with 9th and 11th because we said 10th and 12th. Parents will not take us, will take the risk of using e-learning in 10th and 12th. People may say, you know what I mean? I won't make my kid a guinea pig kind of a thing. So we said we'll do 9th and 11th and then next year we did 10th and 12th. So we had 9th to 12th in a couple of syllabi like CBSE and all that ready.
00:12:07
Speaker
And then we were ready to launch. We launched, we did a big bang launch. We were on TV. We got an ad campaign. We thought there was no queue. Then we realized that PC penetration is a big issue in our country, right? 2% was the more PC penetration at that point in time.
00:12:25
Speaker
So this was like a CD with an executable software. CD with an executable software. And each year it would have its own CD. Maths would be one CD. And this software would have a journey.
00:12:42
Speaker
You can also buy a pack, you can buy a physics, chemistry, maths, biology and you can buy, it'll be slightly cheaper or you can buy subject to subject option. Okay. And it would have a journey for the student and assessments and like, like a complete learning experience. Correct. So you have it in chapters, it'll have videos embedded in that. So you can within the CS1 itself click and watch the professor teaching that. Then you can ask doubts.
00:13:07
Speaker
The doubts should go and be answered by other teachers. You could browse the web. We had curated content. See the problem with Google even then and even now is when you search you get too much of content. I mean how do you know what is relevant. So I remember now also water cycle. Water cycle is taught in 4th grade. It's taught in 8th grade. It's taught in 11th grade. And each grade it's taught with different levels of depth.
00:13:29
Speaker
So, but Google doesn't know who's searching for it when they are searching for water cycle. They will show up the same content for all three. So we said, okay, we'll curate it and we'll put it. So we did some very interesting stuff actually, but you won't believe it. Now that you're asking me about that actually, I'll give you one other learning there, right? This was on product.
00:13:46
Speaker
Right? How you always feel that some feature that's your favorite will always be very useful. For me, I always felt that this, we used to have this section called connected links, meaning basically you're studying water cycle. It was a lot of work because it's not easy, right? You have to go into the link, check what is the relevance and then put it there, etc. So it took a lot of time for our teachers to do it.
00:14:10
Speaker
So about three years later, we read a survey from our users saying, this related links, believe it or not, was ranked last and I was heartbroken. And so just the users were clearly giving us this one saying, and if it is costing so much money for putting it in, then it's even more reason for you to remove it. Their logic was very simple. Their logic was your CBSE textbook.
00:14:42
Speaker
We used to sell online, it was a simple B2C
00:14:55
Speaker
product. So we used to have two channels of sales. One was direct to consumer and through stores offline. And the other was through direct telecalling. So we used to have a website. People used to come and say, hey, I'm interested. And then we will get a team to call them up and do the selling, etc, etc.
00:15:12
Speaker
Decent business, profitable, protected about 5 crores of revenue with about 1 crore of profit in about 6-7 years. But it was a tough journey. So I told you all the good things. Now I can tell you some of the bad things that we went through, especially in the Adirai journey.
00:15:29
Speaker
We raised about 7 crores of angels other than B.V. Jagdish few other angels also we managed to raise some money and there are three of us who are co-founders we decided that we would really go all out like I told you and we got it totally wrong we got the whole product completely wrong few reasons when somebody is looking at e-learning or take your own podcast as an example right when you're going to cast this you're going to
00:15:53
Speaker
make it bite sized. You're going to make it topic based. You're going to make it three, four minutes each because people can consume it easily.
00:16:01
Speaker
Nobody wanted even a professor Shankar to be speaking for 90 minutes continuously. One was that the same professor was not applicable everywhere. He was a Amitabh Bachchan, no doubt. But he is what I call a local Amitabh Bachchan. So,
00:16:24
Speaker
I could not sell the product on his face, so to speak. The third and the biggest thing was accent. Now, when Professor Shankar was speaking, he had a South Indian Kanadaga accent. I mean, very heavy. So, those were some of the issues that we came up with.
Restructuring Edurite for Success
00:16:40
Speaker
Anyway, by 2002, we had run out of money. We had 100 employees. We had almost no revenue and we had about minus 40 lakhs, which means we had to give vendors 40 lakhs, but we didn't have any money to give them.
00:16:51
Speaker
These writers would be like this, people who were pressing the CDs, doing the video recording for us. So that was the state. Anyway, so the other two co-founders of mine decided to take a step back and the first job I did, I still remember, will never forget the date, September 23rd, 2009.
00:17:12
Speaker
was the first day I took over as the CEO for Eduray. Till then I was the CEO and the first thing I did was I had to let go of 75 out of 100 people on one day. So, it was the most traumatizing, the most depressing phase for me.
00:17:30
Speaker
I had never done something like that. I had never fired a single employee before and I had to let go of 75 people on one day. I had to do it myself as in I had to sit. I spent 10 minutes each with each of the people who were being let go and the worst part was we didn't even have money enough to pay them one month's notice. We only had money to pay them 15 days notice.
00:17:50
Speaker
So I had to even request them saying, you know what, I don't think I'll be able to give you one month's notice. I am giving you 15 days notice starting from today. And here's the check. I will grant my best to find you a job. So everything. So what I decided to do after that, what I completely decided to restructure the product.
00:18:13
Speaker
I said, yay, yay, dankika lecture mein chalega. I said different accent. It's just not exciting enough. So, and I could not reuse. See the problem again was for CBSE and ICSCE for 12th grade, I had to redo the product pretty much again because even though the topic some may be common, the professor will not teach both. Typically the professor only teach one and he will only go the CBSE or he'll only go the ICSCE.
00:18:38
Speaker
So, then I realized that this reusability needs to come in here. So, I took every single subject, broke it down into the smallest component. Let's say a three-minute learning component. Newton's laws, Newton's first law, second law, third law, every action has an equivalent opposite reaction, right? So, that's the subtopic and that is what I will teach and that I will teach in three to four minutes. Now, that is reusable. If I can get something which is non-video, basically which is animated,
00:19:07
Speaker
which has a neutral accent, right, which can be consumed by its size like 3-4 minutes, and the concept should be taught visually. So, if I'm talking water cycle, I should show water evaporating, forming clouds and go moving around for incoming again. So, you're completing the full cycle kind of a thing.
00:19:24
Speaker
I said I am going to spend my last rupee on creating these reusable learning objects, RLOs we call them reusable learning objects and we created tens of thousands of these. But did you have money to invest in it because animation takes money, right? So when I came down to 25 people, okay, we were getting revenue. So that revenue was enough and more to sustain us and plus a little bit more.
00:19:52
Speaker
was continuing to sell. So, I had not pulled it out of the markets yet. So, I said, let me take the juice out. So, those had some B2B tie-ups, went to some schools and said, hey, we'll give it to you at bulk. If you buy 10 sets, we'll give you at 50% discount. It's a lot, it was a lot of money. So, did a little bit of that. So, managed to keep the fire burning and the lights on basically. Created these objects. Of course, I didn't create kindergarten to 12th in one year. It took me like three years to create it. But,
00:20:21
Speaker
Yeah, there's no easy way back. It was a long, arduous journey back and then did some very interesting things. So I created these learning objects. Now suddenly I had CBSC ICST state boards, all of them I could cater to because I could just rearrange these. Like if you look at it, like compound wall with bricks, I just rearrange the bricks and it becomes a different syllabus kind of thing. So you can just change the journey a bit. The content is there. You just have to program the journey. Correct.
00:20:49
Speaker
The way they ask questions is a bit different, etc. But still I realized that there is a problem with PC penetration problems with consumers. So I said, how am I going to solve this? I said, okay, let me not look at what's the problem with this market. Let me look at India's strength. India has strength, India has strength volume. India is purchasing power.
00:21:13
Speaker
Correct? We all know this, right? People, we have millions who can buy, but they can't pay more than 1-2 dollars, I mean, for 100-200 rupees. High user base, low ARPUs. High user base, low ARPU, right? So that's, I mean, now we know with all the ad sales and the geos, right? I mean, we all know where the, how that is, right? So I realized that, I'm talking this like 2004-2005 and said that, so. 10,000 was for like one year, all subjects or something like that.
00:21:39
Speaker
for one year for all four subjects. So BCM being a year, it ties into 4th year. That is our Rupiah. That is our Rupiah. I mean, how many people could afford it? First of all, BC penetration. Because people don't compare it to books, you know. So like, it's expensive. Yeah, correct.
00:21:54
Speaker
So then I said, okay, now let me not look at this product as a mainstream product. It's not a standalone product. Let me look at this as an ancillary product and ancillary to something which already has volume. So first thing I thought of was computers. At that time, coincidentally, McKinsey came out with a study saying that PC penetration in India, there was one big report and in that they said the number one reason for home PC buying, home PCs is education. Number one reason.
00:22:24
Speaker
Okay, by the way, the fact was that education became number six after the PC was bought. Nobody was using it for education. People were using it for gaming and whatever else, right? So before they buy, everybody had very noble intentions. So I went to Intel. I went to Intel. I met Intel. Intel also was headquartered in Bangalore only at that time. I managed to get to the marketing head of somebody like that.
00:22:52
Speaker
You shut down your other business by then, which was selling computers? Oh yeah, I shut it down. I shut it down in 2000 itself. I'm a one horse pony. I'm all in. I'm not a parallel kind of guy. So anyway, so I went to Intel. I went to the marketing head. I told them, Hey, I'll give you a great idea, right? You're selling PCs today. Here's the McKinsey report saying that number one reason for PC penetration education.
00:23:16
Speaker
You are interested in heightening his expectation from the PC. If he thinks he is going to use it for education, let him think that way. You only offer him something. So, today you are giving him an empty coffee cup.
00:23:38
Speaker
Simple. So I said I will do one thing. I will map the top 10 syllabi in India and put it on your computer. At that time more than laptops, desktops used to sell. I will put it on the hard disk of your desktop. The user will be able to choose 2 syllabi, up to 2 syllabi because
00:23:57
Speaker
Normally, every family will have two kids, two syllabi and everything else will get erased from the hard disk. Only those two subjects, those two syllabi will remain and the kid can use that grade and that syllabi, all the subjects. But I want 200 rupees per box irrespective of whether it's
Transition from Edurite to HomeLane
00:24:13
Speaker
used or not. Why? Because the fact that you are advertising saying you are giving education is helping you sell. So I need to have part of that also.
00:24:20
Speaker
So I asked them for 200 rupees per ball. So I will try for 2 lakh copies. We sold 1 lakh copies in 8 weeks. And this would only be in branded computers, right? This was only in branded computers. We tied up with three of their OEMs. They pointed us to hitsi. They pointed us to Sahara computers.
00:24:38
Speaker
Yeah, I bought this out of desktop. And one more, LG, LG computer. So LG also used to have desktops there. So we tied up with these three and they did 200,000 volumes for us. I mean, it was mind blowing for me. Did this lead to renewals? Like yours basically bundling in one year syllabus, right? Did it lead to renewals? Like people finished one year and then they want to buy for the next year also.
00:25:03
Speaker
Yeah, no. And for that, money comes directly to you, like something like that. Correct. So we did get, but the renewals were not like 50%. Unfortunately, the renewals at that time was only about 20%, which was okay. But it was still free money for me. It was still free money for me. Yeah. Yeah. And for the renewal, you'd ship them a CD or like you could just give them an activation code. No, we would ship them a CD. We would ship them a CD.
00:25:27
Speaker
Yeah, because that time streaming was just not possible. They were not bandwidth. So I did that. So that was very interesting. And I got a lot of personal confidence saying, hey, I can do this. I found a way. I know volume is the way in India kind of thing. So next one I did was I said, OK. Or I started thinking. And then I said, you talked about textbooks, right? I said, let's look at how many textbooks are sold in India. I mean, just to give you a broad idea,
00:25:56
Speaker
There are about 250 million children going to school in India, approximately. Each one has an average of four textbooks in a year. That's one billion textbooks, right? And 50% of them are hand-me-down. I mean, 500 million new textbooks are printed every year. My Bola boss, this is the volume that I want.
00:26:14
Speaker
So I went to S-Chant, Frank Brothers, Macmillan Publishers, all the top 10. I met all the top 10 and I had a simple pitch. I went to them with two textbooks. One was S-Chant textbook without the CD and one was S-Chant textbook with the CD-ROM which had the same content animations
00:26:34
Speaker
plotted and mapped to whatever content was in the same textbook, right? So it was matching 100% with this. So, I mean, I don't know if you've heard of this publisher called Frank Brothers, they're quite big. You would have, if you studied in a series, you would have studied one of their textbooks. They loved the concept. Again, long story short, they loved the concept. I pieced it to them at 25 rupees, a CD-ROM.
00:26:55
Speaker
But I said, I want a minimum in terms of number of copies and I want a minimum of 5 lakh copies per year. And I told him, simple thing. Look at how the consumer will think of it. Your textbook is selling at 100 rupees today. Textbook with CD at 130 rupees. Perceived value of a CD wrong then, I don't know if you remember, was about 300 to 400 rupees. That was the typical. For stamping the CD, it used to cost 6 rupees, 50% and more so, right?
00:27:22
Speaker
So, contact was mine. I told him, I will give it to you at 25 rupees. And you sell it at 30 rupees. You make money also there. But I want, this is a minimum volume. Frank Brothers loved it. Lot of others liked the idea but these guys got going first. They agreed on a price of 22 rupees. I still remember this. And I redone the number of lakhs of copies I have sold to them over the years. It was just amazing.
00:27:48
Speaker
So what happened was it became an integral part of the book. And once you become part of the book, then they can't take it out, even if they want to, because next year the teacher will ask, I think they eventually went with building it in-house, right? I do believe they have like an in-house tech division or they used to have.
00:28:06
Speaker
Yeah, they did. They still have. Which is why they probably didn't bike this one. They thought that they would build it on their own. But Frank Brothers did. In fact, we got acquired, again long story short, about three years later, we got acquired by one of their competitors Pearson. Pearson is another book publisher. But dependency was so high on us, but for two, three years after acquisition also they used to buy CDs from us.
00:28:27
Speaker
So Tutor Vista acquired you first or Pearson acquired you first? Tutor Vista acquired us in 2007 and Pearson acquired all the whole business in 2011. They were using our content as the backbone to the online tutoring which was happening in the US. So Tutor Vista business model was simple. Take an Indian teacher and get her to buy tutoring students in the US. So you will get US price and you will get Indian cost.
00:28:53
Speaker
So the original white hat model. So that was the model. They used our content as the base content. So they used to use our animations and our HTML content.
00:29:08
Speaker
And so this business, you continue to run under Turevista and they continue to run their tutoring business as a separate thing. I guess Turevista was like the by juice of its time in the sense that they raised 100 million dollars and must have been like amongst the highest in terms of building a funded company and then even getting an exit when Pearson acquired. Correct. We had raised a total of around 50 to 60 million and we got acquired for 200 million by Pearson in 2011. Okay.
00:29:35
Speaker
So then what, like you had like a lock-in period at Pearson? I did for two years. So I finished the lock-in period in 2013 and then voluntarily they offered me the role of CEO for India. Okay. For the entire Pearson business. For the entire Pearson business, which included the textbooks and this. Sounded like a very nice role and I'd worked with the company for two years. So I'd seen them, they'd seen me. So I said, yeah, cello, maybe I don't know, maybe it's time to
00:30:02
Speaker
for a second coming. So I accepted the role and as a pure employee, I had finished my non-competes. So very voluntarily joined them as the CEO for India, for K-12 India actually, and did that job for a year, exactly a year actually. When I realized that I just didn't like it. So at the end of year one, which was basically end 2013, I went and told them, Hey, you know what, this is just not working.
00:30:28
Speaker
I'm not motivated to come and work because of the salary you're paying me because it's not like I'm a lifelong professional, right? I mean, I've actually come over from the other side, but this is just not exciting me enough. And I don't think you are getting value for whatever you are hired before. So I think I said I'm going to go. So about five, six months I left.
00:30:47
Speaker
But I also started looking out for what else to do. And that's when I got the idea for Homelain. I mean, that's when Homelain happened. What led to that discovery? When you discover a problem, tell me that. Yeah. I mean, it was actually in two or three phases actually, Akshay. About two years earlier, meaning, the Pearson company,
00:31:08
Speaker
What about the rest of your apartment? Being at Ambaram again, you first you buy one or two apartments because you know everything, you go into real estate, safe bet kind of things also. So I had done that and while doing those apartments up, I found that it was an extremely frustrating experience. At that time, I never imagined in my wildest dreams that I would end up trying to solve that problem. But yeah, that's what I was thinking. Why is there no brand?
00:31:34
Speaker
So there's like painting and woodwork and all, like you bought a bare shell apartment which did have cupboards. I have bare shell, I just needed to do cupboards. One I was going to move in myself, one I was going to rent out. So both the times I had like a very bad experience.
00:31:49
Speaker
So I decided to do the home lane one. So basically said that when a middle class urban customer buys a home, they mostly ended up going to a contractor or somebody from the unorganized industry and their journey is predictably bad. So can we make it predictably good? So that's really the point that I started from.
00:32:10
Speaker
This is such a contrast from being an edtech founder. What made you confident that you can build predictability and consistency here? Or did you want to do an aggregation model where you aggregate these contractors and manage service quality? I would not understand that journey. So the aim was very clear. I wanted to bring predictability in the customer's journey in this space. So that is no compromise. That's the headline.
00:32:40
Speaker
For that, what all do I need to do? I need to do two, three things. I started from saying, what all will I sell? I can't sell anything and everything. So I said, first of all, I will only do few things. I will not do everything. If I have to bring productivity, I can't do it only by assuming that my last mile force will be the best in the business. That's just an impossible assumption to sustain.
00:33:02
Speaker
My processors have to edit, my product definition has to edit, then my people have to edit. It cannot be only people. So first I said, okay, I will only do modular furniture. I will not do anything else. I started with that. Everybody else was doing everything. The product quality, then at least you can control because it can be centrally made instead of
00:33:21
Speaker
painting which you can't centrally control. Exactly. So I don't have. The second thing I said was no manual labor will be used in the last month. No manual labor.
00:33:36
Speaker
Yeah, okay. So like an IKEA model. Yeah, it was a very difficult talk. You can imagine right now we are 1000 homes a month, we are doing 600, 700 crore revenue. Now everybody thinks it's a great idea. That time everybody was saying, hey, this is the revenue, what is the revenue? And then I decided, what are all the things that I want to do myself? And what do I want to just control? I can't do everything myself. That was clear. So the first thing I said was, for example, manufacturing. What is cookie cutter?
00:34:04
Speaker
You are going to manufacture for me, but your whole line will be only for use for Honglian. It won't be used for anybody else. So then like third party contract manufacturing.
00:34:20
Speaker
third party contract manufacturers why should they work with me because I'm giving them consistent volume right that's why they should work with me right then I thought of last mile installation last mile installation is where things fail mostly right so but I still said if I have to control and expand
HomeLane's Business Model and Expansion
00:34:37
Speaker
this and have control over the customer experience it needs to be a Sonia yet so far model which means that I should not employ them directly but I should be able to control them without employing them which was a bit tricky so then I came up with this concept of a franchisee model we call it a FOCO model franchisee owned company operated so a franchisee in our business does two things for us he puts up a store Abhi Hamarepa's 54 stores in India
00:35:04
Speaker
Okay, investment for eStore is approximately one and a half crores. They put up one and a half crores of CapEx. Homeland does not put up a single rupee of CapEx. They also hire 30 or 40 carpenters per store, the franchisee. The sales in the store is run by Homeland, not by the franchisee. Okay, like you deploy your manpower there who's handling customers. Okay.
00:35:24
Speaker
My manpower. Sales guy is my guy. Designer is my designer. franchisee has no control over it. He is like I said, it's a FOCO model franchisee owned company operated model. They also do the last mile install. Reason for that actually was see in our business, you're not only going to be installing modular furniture. The local entrepreneur who's based in Thane is the best guy who can get all this together in a past timeline and in an acceptable quality.
00:35:54
Speaker
and you also know how to navigate like getting the permission to for commercial vehicle delivery location and all that yeah exactly exactly so decided to keep manufacturing out decided to keep the last-mile installation out and basically decided to the catalog to a much smaller what we call a finite catalog which is no major skill is required to install just assembling work is required in the
00:36:20
Speaker
customer side. So the skill requirement in the last mile became very less. And that was our secret sauce. Okay. Interesting. So see, this sounds extremely efficient, but was this the case from day one or did you discover it? No, no, no, I discovered it. Never. This was never the case from day one. So you must have done only one day, one locality that your loans must have been limited to an area.
00:36:44
Speaker
Only Bangalore. Yeah, just Bangalore. Bangalore, we had one showroom. First six months, I can't tell you. Five crores a month, six crores a month. We didn't know what to do. And these were like turnkey projects like someone bought an apartment and gave you the work to get it up to living standards. Yeah, exactly. Exactly.
00:37:03
Speaker
And after six months, I realized that order Lena Asan hai to execute Karna is the tough work. And then I was in a, I mean, one thing was I started this business to improve the customer journey experience. We were doing exactly the opposite. We were doing exactly that. We were worse than the carpenter because we just could not. I mean, can you imagine doing you six crore every month for objects execution? It was just impossible.
00:37:26
Speaker
I still remember some requests which came up. One customer came up and said, hey, my son loves music. I caught the piano. I couldn't sleep for two nights. I said, how am I going to get a bag to do this? But I took the order and I had to do it. So then I realized that I was very lucky. I chanced upon this book. There's a book called Uncommon Service. It's by this author called Francis Frey, who was a professor at Harvard Business School.
00:37:55
Speaker
So she's a very senior senior lady who's taught there for a long time. I think now she's on the board of WeWork or something like that. So she had a very interesting theory. She says, any business in service delivery can never be great at everything it does. If you try to be great at everything, which means to maximum variety doge best, price be doge best, service be doge best, warranty be doge best, then you will be mediocre at everything. So then it dawned upon me saying that in our business where there's so much of operational complexity,
00:38:23
Speaker
variety was the enemy of scale. The more the variety, the less the scale that was possible. Right. It's hard to do quality control if you have too many SKUs. Correct. So then to me, Don saying, okay, I think I should decide what I don't want to do very clearly, then define it. At that time our ticket sizes were 15 lakhs per house.
00:38:47
Speaker
So, I completely said, okay, we will only start with modular furniture, we won't do anything else. At that time, you were doing painting and bathroom fittings and all of that. Everything we were doing, flooring, those windows, those previously windows that you're sitting next to, those windows, show me. So, first we said, we can't be graded everything, let's be clear, right?
00:39:07
Speaker
who is our customer and what does he value. So that was one example which is very that was one book which really struck home for me. The other thing example that struck home for me which was not in the book but which I myself kind of connected with was Indigo Airlines. Indigo started amongst the airlines the last in India right. They were amongst the last to start but they were very clear from day one. Jet was already there with
00:39:33
Speaker
Yeah, Jack was there. So many Sahara was there. There were so many large airlines. Air India of course was there. They came in very clearly saying, boss, I am serving just the guy who is only interested in getting from point A to point B on time every time. I am not going to give him full white glove service. It's not for me. If you want white glove service, go to Jack. They started with no means, if you remember first.
00:40:00
Speaker
It was talked about a lot that there are no wheels on this flight. Yeah, so it was exactly similar for us. So not only we decided that we won't do so many services, we stopped doing civil, flooring, plumbing, you name it, we stopped all of that. We said we'll start with modular furniture.
00:40:17
Speaker
And even in the modular furniture, we said we'll have a finite catalog, which means that if my competition has 2000 color options of laminate, I will have 100 color options of laminate. I'll have 5%. That's all of the catalog. What does that do to me? My supply chain complexity is much lesser. My pricing is bigger. My stock holds of fewer. I don't have problem of my vendor saying, yeah, stock nahi hai. Right.
00:40:39
Speaker
And so I can fulfill my 45 days or rent promise. So basically this 45 days or rent promise became our notch stuff. Up to a point like we started off by saying this sounds like a very nice line which customers will immediately get to saying if we can't do the service in 45 days we are not offering the service. It became reverse. Got it. Amazing.
00:41:01
Speaker
And I'm guessing anyway that Paratol law would apply, not 20% of the SKUs would be responsible for 80% of volume sold. Yeah, exactly. Exactly. So it's not like we were being, we were excluding too much of the TG also. So that was a big turning point. It was a game changer for us. How did the first franchisee get signed up then? So this so far you're still in Bangalore running one storefront and running some sort of, you signed up contract manufacturing also.
00:41:31
Speaker
Yes, contract manufacturing, I didn't have the quantity to do one full factory. So I started off project by project. And are these like carpenter shops or are these like factories? No, no, no. These don't be modular furniture shops. These won't be carpenters. There won't be some, maybe two, three crores of equipment will be there. One beam saw and one edge banding machine, etc. One drilling machine. That's a typical kind of a small unit. Now, of course, it's a much larger, but we started by per project. Now, of course, we do.
00:42:00
Speaker
the whole lease line. We had the first franchisee, a first store was on old Madras Road, just off in Ranagar, in Bangalore. And this store had like furniture on display and all, like what did this store look like? Yes, it's an experience sector, about 4000 square feet. It will have samples of our kitchens, wardrobes, entertainment units, all of that. You can't buy anything there, you can only experience.
00:42:25
Speaker
we I set up the first store myself using our own CapEx ran it for six months then figured out what is the return that I've been getting for that CapEx and then came out with a model for a franchisee saying you put so much CapEx
00:42:41
Speaker
you will get this much percentage of revenue share every month. Of orders coming in, of orders you are installing, you have a different revenue share for that. So, a project lifetime for us is about 150 days, about 5 months. So, the project will be able to get the CapEx return. And when he installs the project, then he will get installation revenue. Both are variable, there is no fixed cost.
00:43:04
Speaker
I'm not sharing rent with him. I'm not doing any of those things. So basically it's his risk and his reward. So why is the life cycle 150 days? You have that 45 day promise, right? But the customer takes 100 days to finalize the design. Customized. Customized, take the measurements. It's not like going to like going to lens card, trying 10 frames, choosing one. It's not like that. Exactly. It's not as simple as that.
00:43:32
Speaker
Okay, okay. This would include only the woodwork or also like the sofa, the table, all of the buildings. Everything, everything. But we don't need the products. So the mobile furniture like cots, sofas, dining table, we only trade in that. We only trade. So my focus again on what not to do. Can't do everything. We only will do modular furniture. Everything else we will not let go of the business but we trade in it.
00:44:00
Speaker
Okay, got it. So you have suppliers that you have a catalog of those products also, but those are not built as per your specifications there, whereas Modular is built. Nor are they built by us. Nor are they built by us. And so this two-part revenue share, first part is probably when the customer gives an advance, right? Like he would give something and from that the franchisee owner gets paid and the second part would be on delivery, they would pay the remaining about it.
00:44:28
Speaker
After installation, not only on delivery. After installation, the franchisee will get paid.
00:44:34
Speaker
So this sounds like a business which needs a lot of working capital. No, it's negative working capital. Customer gives you 100% advance. 100% advance. Wow. They give you 10% and then 40% and then 50%. Before you ship the product, you get the money. Okay. Which sounds surprising given how low-trust this market is. Like people don't trust that. But the low-trust is both ways, which is why if you go to a carpenter, you can see that there's a lot of mobilization, but there's a lot of material that needs to be sold.
00:45:04
Speaker
Once you give that money, then you're pretty much stuck. You can't get out after that. So that's how the industry has worked. You've always been advanced. But you found it challenging or it was not a challenge to get that remaining 50% before delivery is what I'm wondering if that was a challenge or that got my list.
00:45:22
Speaker
About 5% of our customers even now creep about it. But we are very clear with our policies and we have never made an exception till today. We have sold about 30,000 customers so far in the last eight and a half years. Which is again your philosophy that better to say no to things that you can't do. So you'd rather say no to that customer who is not ready. And rather say no.
00:45:42
Speaker
Amazing. I love how focused you are. Amazing. And I think that comes from the multiples doing multiple startups. Like as the first time founder, you find it hard to say no, you want to do everything. Yes. Revenue is hard to refuse. Yeah. Yeah. Yeah. Yeah. Amazing. So tell me that journey, like in terms of building that franchisee network of 50 stores, how did you sign up the first one and then how did you scale that up? So the first one actually was quite tough.
00:46:08
Speaker
First of all, it was a totally new concept. That's the risk and I never wanted to compromise. It's not like... My rule was simple. I will have the same rule for everybody from day one till the end and that's it. You want to take the risk, you take the risk, you don't want to, don't take the risk. But finally found somebody who bought so that one center that I had opened, I converted that itself into a franchisee center.
00:46:35
Speaker
Sir, this revenue was already assured. Yeah, I found one, two partners actually who invested in that. We had a bad time. For six, nine months, I guess we were also figuring out, he used to say, the material is not reaching on time. The material always has some part missing. Scratches were on the shelf.
00:47:01
Speaker
For him, every day more of the carpenter is more money. So, he would be cribbing if anything was reaching the site in a wrong manner because that was our responsibility, manufacturing and shipping. So, it was not so good but we learnt a lot in that 9 months.
00:47:19
Speaker
Unfortunately, I think that franchisee, that specific franchisee, he lost his patience and he said, Nair, I want out. And then that was bought by then we had started expanding to other stores. We had like two stores in two more stores in Bangalore, one store in Chennai, one in Hyderabad, one in Mumbai.
00:47:39
Speaker
And these are like your setup or you found franchisees. No, all were franchised. So they looked at this model and they all signed up. Obviously, I mean, they didn't know too much of the details that this was not going so well, but they all liked the model and they signed up. But it was like five or six stores. So I pretty much did the selling myself to all those franchisees.
00:47:59
Speaker
Now, I can tell you, Akshay, we are on the other end. I mean, now we have 54 stores. We have only about 35 franchisees. About 50% of our franchisees has a minimum of a second store. We have a reverse problem now. We have too much demand. We have people coming in and saying, but yeah, so it took some time, lot of learning. We also had to tweak the revenue share because we started off with too much initially and then we made it too less.
00:48:28
Speaker
And then we realized that, yeah, so we kind of increased it a little bit. So like we adjust the volume, like that we adjusted it so that it was, it needs to be sustainable for them and for us at the same time. I think this is one of the few models which has scaled to this extent. I mean, we do about 80, 90 crores a month right now and completely comes, everything comes through our franchise stores.
00:48:49
Speaker
Wow. Amazing. Okay. And do you have a science behind where to open? Because there could be cannibalization happening. Two stores are too close to each other or stuff like that. Like how does that happen? Yeah. So we followed two or three rules. One is we don't have, we have a five kilometer rule, five kilometer radius. Before we open any new city or a new store where there's no other store. So there's no question of cannibalization.
00:49:14
Speaker
We look for people searching online for modular design, interior design, modular kitchen. These are the keywords that we see where the searches are coming from. So if the searches are more in HSR than in Gormagla, then we will open in HSR and not in Gormagla kind of a thing.
00:49:29
Speaker
And obviously, the third one would be the propensity to spend. So that comes, for example, at Delhi and Hyderabad, the propensity to spend is much higher than, let's say Chennai is very conservative, whereas the reverse is true in Hyderabad and in Delhi, maybe. There's a show-off value for here. I mean, especially in Delhi, you want to show-off. Exactly. So, I mean,
00:49:57
Speaker
So we look at all of those and then take a combination and then become the geographies. How did you fund this? Did you need funding or because it says negative working capital? No, it needs funding. We need to build technology and initially for customer acquisition you need. I've raised about 100 million dollars, so for 105 million so far to be exact.
00:50:16
Speaker
over five funding rounds. We have the top names, market names. Sequoia Capital is an investor. Axel Partners is an investor. PD Light is an investor. Evolvents is an investor. JSW is an investor. I have enough investors. I'm quite a few investors. OJF is an investor. IIFL is an investor. So we have got like a bunch of investors who are very supportive and who back us.
00:50:40
Speaker
So, why 100 million? I mean, is it the customer acquisition that is costing more or is it the technology? We can divide the spend that we have done of this money in broadly three buckets. One would be on branding and customer acquisition. We have signed on. I don't know if you saw on IPL, we launched a campaign in DVC.
00:51:04
Speaker
which we did, not thus IPL, the previous one. So we have spent some decent amount of money. The only we have signed on for three years. So that's a commitment for a longer period of time, etc. The second one that we have is on technology. For example, we have got a platform called spacecraft, which is a virtual 3D design collaboration platform, which is used by the designer and the customer to collaborate and design without meeting physically.
00:51:32
Speaker
So they both will be looking at the same scene which will be the apartment view and the designer will be able to design the modular furniture using spacecraft itself. And this really helped us during Covid because most of our competitors shrunk during Covid because it's a consultative selling business and you need to meet physically to do this business. We managed to sell without meeting physically and because of spacecraft and we didn't have any year in which we shrunk. We grew every year even during Covid.
00:52:00
Speaker
So spacecraft is like a metaverse kind of an experience where customers can... Yeah, metaverse is the next level. This is simple 3D design, which you can see screen, like you and I can see the same screen. The good part, the great part about spacecraft is it is connected to exact price. So the designer and the customer can see the dream home, but with the price, like taximeter, the price will keep going up as you keep adding stuff.
00:52:26
Speaker
Okay, amazing. So all the SKUs will be available to the designer. You can just select an SKU, drag it and change the color. Exactly. You just drag and drag it and it'll add it.
00:52:42
Speaker
so that then the designer can give problems as to how you can reduce the price and so on and so forth. That was the second area. The third one was just growth itself. See, even if you don't have, you have a franchisee model, you don't have a capex requirement, you still need to invest on that market to grow that market, right? So that also requires a little bit of investment. So if I'm opening in Jaipur, I won't make money from day one.
Future Goals and Podcast Conclusion
00:53:05
Speaker
I'll lose money for the first six months.
00:53:07
Speaker
Before I start, you have to do the payroll for sales and designers because you have a designer and a salesperson in each store.
00:53:14
Speaker
Correct. Those are the three areas that we spend money on. How do you do lead generation at scale? Is it Facebook ads or what are the ways in which you are doing that? About 85% of our leads are digital, out of which about 70% of them are paid and 30% of them are organic. And the balance 15% comes from referral and offline, tie-ups with builders etc. and referrals. Our existing happy customers refer other customers.
00:53:44
Speaker
I guess, is the storefront also generating leads? Is it a prominent location? It does, but it's very small, hardly 1-2%. So, because this is a plant purchase, right? You don't go, suddenly you don't buy a kitchen on a whim and a fancy.
00:54:01
Speaker
Right. I want to understand celebrity endorsement a bit. What kind of celebrity endorsement works? Like you chose Dhoni. Was there a science behind choosing Dhoni? Yeah. We believe that Home Lane is a hero archetype because when a customer is doing up their home, they are a bit confused. You need someone with an assured thing saying, you know, I know my stuff.
00:54:23
Speaker
and I will take you to the right place. Dhoni gives you that calm personality. You want to project competence and Dhoni projects competence. That was one reason why we did that. What were some of the challenges in that 1 to 50 or 55 franchisee journey? That whole scale up of the last 7-8 years?
00:54:46
Speaker
I mean, yeah, I think what the challenges differ as you scale. Initially, convincing other people on your vision, saying, is itself the biggest kind of challenge, right? But after that part is proven already, consistency of that messaging, consistency of you having the same rules for everybody, being fully transparent, making sure you have the best team to handle this at a skilled manner.
00:55:12
Speaker
Nobody should think that Ariyar because he is in Bangalore, he is getting a better deal, I am in Jaipur, I may not get such a good deal. Every franchisee has exactly the same rules, everybody, everything is software driven, everything is transparency based. So how do you communicate all of this? So as a brand, we said we will have these values, trust and transparency, empathy, collaboration, customer obsession are some of our values.
00:55:37
Speaker
What we decided to do, what is the most difficult as per me is that from that 50 employees to now 2,300 employees, how do you get the consistency of messaging to all of them so that everybody at least some at some points in time
00:55:52
Speaker
Walk the talk as far as the home-line values are concerned. That is the most difficult, according to me. Do you have an answer to that? How to let your culture permeate? I do. First of all, this is culture in a company's top-down. You have to walk the talk.
00:56:11
Speaker
If you are not transparent, then you cannot ask, you have no right to ask your employee to be transparent, frankly, as for me as a founder. One, second is today with technology, you must use it to over communicate, keep stressing. It can be like a broken record, you may be saying, but it is very important for you to keep stressing on the classes.
00:56:31
Speaker
that this will bring in. Whether you like it or not, employee churn is a reality. You will have 2, 3, 4% churn every month. So for me, what that means is that I have out of the 2,300 people, I have 50 to 75 people going out every month and about around the same number coming in every month.
00:56:51
Speaker
So, every three months, there are 200 new guys, 250 new people, which I have to communicate with and tell them because they don't care, right? I mean, unless you tell them that it's important. Help me understand the lay of the land. On the one hand, you have, say, like a stacky board direct type of competitor, like, say, live space. Then you have Pepper Fry, Wakeford, these kinds of furniture brands.
00:57:15
Speaker
And then you would also have the old school like say Godrej also is a furniture brand. So how do you bucket these competitors? Whom do you see as competitors? Whom do you not see as competitors? So frankly Akshay, if you take the whole, all of the people that you said just now and all the other branded players like Design Gefey, Bonito, Yevu, all of those guys.
00:57:35
Speaker
they all will together constitute about 5% of the market share today. Okay, the big architects, all of those would be about 8%. 87% of the market share is still with the unorganized segment. So as far as we are concerned, very clearly, we are not interested in taking half percent more revenue share from, or sorry, market share from Lipspace. We are interested in taking 5% market share from the unorganized segment.
00:58:04
Speaker
Unorganised means like say it could be a local carpenter or it could be a contractor. How would you take market share from them? Is it just that as disposable incomes increase so people are willing to spend more for assurance for predictability?
00:58:20
Speaker
Absolutely. As conditional value keeps going up, right? I mean, you want a personalized design. You want something that's made for you. That cannot be done by a contractor or a carpenter. You don't want to do project management. You want the outsourced project management. That cannot be done by a carpenter or a contractor. So that's where we come in. So far, VC, essentially, Homeland is a bet on the India consumption story. As Indian disposable incomes increase, consumption patterns will change and Homeland fits into the new India. Absolutely.
00:58:50
Speaker
So you raised about 50 million dollars in your last round. Will your next round be like a unicorn round? I don't know about that. I think we are more interested in getting to profitability ideally rather than raising more money at this point in time. So we're very focused on getting to a bit of being a bit of profitable, which will happen in about six months from now. We did hit cash profitability during Covid, but then we raised around and we went for growth. So at that time we were doing about
00:59:15
Speaker
to 300 crores of revenue. Now we are closer to about $100 million of revenue. I haven't spent so much time reminiscing about my early days of entrepreneurship as much as I have with you today. So it brought back a lot of memories for me also. And that brings us to the end of this conversation.
00:59:31
Speaker
I want to ask you for a favor now. Did you like listening to this show? I'd love to hear your feedback about it. Do you have your own startup ideas? I'd love to hear them. Do you have questions for any of the guests that you heard about in the show? I'd love to get your questions and pass them on to the guests. Write to me at ad at the podium dot in. That's ad at t h e p o d i u m dot in.