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Ritesh Kumar on the challenges of selling software to Indian SMEs | TranZact
235 Plays11 months ago
Ritesh Kumar had worked for a couple of years in investment banking after graduating from IIT Kharagpur when he decided to build his enterprise, and just like any truly great founder story, there were many twists and turns before they truly achieved their product market fit and started the journey of scale.
Ritesh is the founder of TranZact, which is helping Indian SMEs to be more effective and efficient through software that is built for them. In a way, Transzact is powering the dream of ‘Make in India’ and helping us compete with Chinese manufacturing.
In this episode, Ritesh talks to Akshay Datt about
- Identifying the right problem to solve as a founder
- The journey of getting your pricing right as a SaaS founder
- ‘Less is more’ approach of product building - focus on what really matters to your customers
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Read more about TranZact here:-
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Transcript
Introduction to Ritesh Kumar and Transact
00:00:00
Speaker
Hi, everyone. This is Ritesh Kumar, and I'm the founder and CEO of Transact, which is a digitization platform for Indian SME manufacturing companies.
The Need for SMEs to Compete Globally
00:00:25
Speaker
If the make in India dream is to come true, Indian manufacturers need to get a lot more competitive in order to compete with large scale Chinese factories. However, Indian manufacturing is still dominated by SMEs and this means that the path to competitiveness needs more innovative solutions. And Transact is one such company that is helping Indian SMEs to be more effective and efficient.
Ritesh's Transition from Banking to Entrepreneurship
00:00:49
Speaker
Ritesh Kumar had worked for a couple of years in investment banking when he decided to build his own enterprise. And just like any true great founder story, there are many twists and turns before they truly achieved their product market fit and started the journey of scale. In this episode of the founder thesis podcast, Ritesh Kumar shares what it takes to build a software solution for Indian SMEs who are notoriously averse to paying for software and how they scaled a truly built for India's SaaS business.
Educational Background and Early Career
00:01:28
Speaker
Give me like a quick summary of how you got into entrepreneurship, you know, from college to becoming a founder. I think I'll start with my college days, right? So I have graduated from IID Kharagpur back in 2011.
00:01:45
Speaker
And I graduated with a dual degree and got an apostrophe to work in the finance side. And it was a very, very conscious call because I was always very, very fascinated towards understanding business in detail. And there are two kinds of companies which typically comes to IITs for campus placement. And more than 90% of those kind of companies come for control.
00:02:15
Speaker
you know, primarily on market side, you know, building some statistical models and all those things, there are only 10% companies which come for a, say, you know, mergers and acquisition kind of a role or some sort of a frontend banking kind of role, investment banking kind of a role, right.
Financial Career and Insights
00:02:30
Speaker
So, it was a very, very conscious choice, because during my IT days, I did my CFA as well, CFA level two, you know.
00:02:40
Speaker
I got an opportunity to work with Ambit corporate finance for three years, close to three years, where I get to learn a lot about the businesses around, you know, how these businesses are being formed, how these smaller businesses are kind of, you know, working compared to bigger companies and etc.
00:02:57
Speaker
And then definitely the obvious career progression from there, from being a sell side analyst, was getting it to a buy side. So that's where I started kind of giving interviews to a couple of PE shops and got an opportunity to work with Eversone Capital, which is a $6 billion private equity fund.
00:03:21
Speaker
What kind of companies do they invest in? So real CC is there. Burger King is there. Then they have done a couple of cinema deals as well. They got into some hospital deals as
Entrepreneurial Inspiration and First Business Idea
00:03:33
Speaker
well. So I think they are fairly safe. Sector agnostic, the only difference is that most of their deals are core deals. That means they do the majority buy.
00:03:46
Speaker
They run the business, basically. They primarily run the business. And that's how I got bigger opportunity to understand operations as well. So that's how I got to know the difference between an enterprise work here in India and the way SME work. Because I got to see a couple of subsidiaries of these bigger companies as well. And I used to visit those companies and visit those clients to understand the day-to-day operations, et cetera.
00:04:17
Speaker
after completion of one year, right? I try to understand that my work is getting repeated because ultimately, you get to know one company, you get the buy side mandate, and then you kind of keep on understanding, diving deeper around the operations, around the management, around their day to day work, and et cetera.
The Fitness Venture Journey
00:04:40
Speaker
But at the end of it, this was getting repeated. And then I thought, what is the next progression from here?
00:04:46
Speaker
My elder brother is also got graduated from IIT Madras back in 20, you know, early 2000. And he had done couple of a series of, you know, partially failed and many failed startups, right? And the kind of discussion I used to have had with him was really amazing. The kind of, you know, knowledge or the rather the spectrum of knowledge what he used to bring on the table was like really amazing.
00:05:13
Speaker
That actually inspired me a lot apart from whatever happening in Indian market that if you ever want to do your business, this is the best time to get into the entrepreneurship. When I actually got into investment banking, I was working for 14, 15 hours in a day. When I got into Eversone Capital, I was working again for 14, 15 hours in a day or there was no weekends.
00:05:38
Speaker
And then even I looked at associate and VP's as well. So why don't you work for yourself, right? So I'm like quick, you know, after one year, that's how I got into the entrepreneurship.
00:05:55
Speaker
And you know, we've chatted before, so I know that I used your original idea was completely different from what you're doing now, but just take me through that journey. Like when you decided to quit Everstone, what was the original idea and then how did it evolve to become what it is today?
00:06:12
Speaker
So Transact is definitely not our first idea, I would say. And before talking about the first idea, to be very frank, the way I had taken a call, it came out as an observation. So what I observed during my MBIC days as well as Everstone days, most of my colleagues used to grip a lot about the fitness.
00:06:32
Speaker
And many of them, this sounded to be very, very serious about fitness. And they used to say that we don't have proper gym, proper facility nearby, either in my office or even when I'm traveling or at my home as well. And that's why I'm unable to continue my fitness activities. Because both of these jobs require a lot of traveling as well.
00:06:56
Speaker
Uh, so this was my observation and I thought, you know, we can, you know, this is an exciting time where we can actually do something in the fitness. And I myself also is fairly active in my daily life, irrespective of how busy I am in my day to day life. Right. So that was the only thing. And with that thought.
00:07:14
Speaker
I took the plunge, and that's where I got connected with my co-founder now, Sharasain Sharma, who used to be my batchmate of ID Kharagpur, and also happened to be my hostel mate, as well as wing mate. So apart from being a co-founder, we share a very, very good friendship also, a very strong friendship since last over 15 years, I would say.
00:07:40
Speaker
And why I actually specifically reached out to him, because what I got to know that, you know, after his MBA from IMM Tabat,
00:07:50
Speaker
despite of getting PPO on day zero from Mackenzie, he deferred that PPO offer. And he was working with one of the health, you know, one of the healthy for the startup in Bangalore. Right. So I thought, you know, if he had deferred, definitely he must be having a very strong interest in startup. And second thing is, since he's working in healthy space or fit, you know, he can very well relate to the fitness space as well. And that was the reason I reached out to him.
00:08:21
Speaker
Now I would like to kind of give some background about him as well. So after graduation, he worked with Barclays Capital Singapore for two and a half years in their product slash technology division. And after that, he did his MBA from IMM Dabat. Now, when I actually reached out to him, he immediately got interested.
Startup Challenges and Technology's Role
00:08:43
Speaker
And then I said, okay, let's start. So why don't you kind of come down to Bombay?
00:08:48
Speaker
And the very next day, he took a flight, right? Amazing. Which was a very, very, you know, I would say that was my first win as an entrepreneur because having a very, very, you know, aligned co-founders is going to be required because entrepreneurship is always going to be a very, very difficult journey, I would say.
00:09:10
Speaker
While, you know, on the face of it, it looks very glamorous, but it is, you know, on every day, if there are, you know, five things which are going good, then there could be 95 things which can go wrong. And hence you need people who can know how we can have, you know, have these kind of discussions. And those can only be your co-founders, right?
00:09:31
Speaker
So I would term it as a second marriage, right? To be very frank, right? So basically, this essay comes here. Now, the other observation is, if you look at the last decade of India or for the world, there were so many things which were happening.
00:10:00
Speaker
technology, and most of these new age companies were running on the back of technology, transformation technology, right? Transformational technology, right? So while Sharad is a very, very amazing coder, but his interests always lie in solving problems and product side. Right? So and I was always very, very fascinated towards working very close to the customers. That means business side, growth side, right?
00:10:31
Speaker
So while you can take care of growth, and I can take care of the product, there has to be someone who can happily sit behind the screen and code for 20 hours in a day. So both of us agreed that the technology was in place. So we had to deal with the network, but the problem was that
00:11:04
Speaker
If you talk about technology folks, they were involved in something. Now there was one guy, Rohan Saint Sharma, who is actually first cousin of Shara Saint Sharma.
00:11:27
Speaker
Otherwise, my family will blast me, right?
00:11:36
Speaker
So he suggested me. And then, you know, so both of us, we flew down to Bangalore because Rohan, he's a 2013 graduate of Bics Pilani. And he was working with Oracle for in the technology for around one and a half years. And after that, he was heading that technology division of one of the largest logistic tech startup called Qubito. So Rohan, Qubito for technology and then Bangalore and
00:12:10
Speaker
And then I spent around a week with him. Again, I spent around a week with him. Again, I spent around a week with him.
00:12:24
Speaker
Matab, you would be a great addition to our, as a co-founder, in FCB technology back then, because Transact was not there. In fact, there was no name to the startup. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It was just an idea. It
00:12:53
Speaker
If we want to start the way we kind of deep dive into the entire fitness space, we need to have a majority of people like you and me. We need to have fitness. In fact, we need to have a lot of fitness. In fact, we need to have a lot of weight loss. We need to have a lot of weight loss. We need to have a lot of fitness. We need to have a lot of demand for the problem. Because most of our circle is anyway kind of looking for fitness. Mostly we need to consolidate the supply side.
00:13:23
Speaker
right. So you have a lot of people who like your supply side cut and we thought here, just say, Oh, you're not here to do the three
00:13:32
Speaker
Hotels go a umbrella brand mila kick consolidated supply consolidated key and then offered it to the To the travelers we thought here. Why don't we consolidate these tier 2 tier 3 tier 4 gyms? Go down car You know offering enhance carrying a and then under one umbrella brand. We would be able to kind of match it to the Demand which exists in the market was my assumption. He took a demand board, but I
00:14:15
Speaker
We will further extend to extend it to the customers also just me up existing customers can voice banana and go push notification banana based on what's up on us looking at for my customers can demand
00:14:28
Speaker
Now, all three of us are engineer and very, very fascinated.
00:14:46
Speaker
So you would be like an asset like cult fit types. Correct, absolutely. You can say we wanted to kind of consolidate this year to year 3.
00:15:08
Speaker
And this is what I'm talking about, say, 2015, the first quarter, right? And Bananasurukya, without knowing the fact that KRA used to work in yoga, right?
00:15:36
Speaker
which was, again, I would say the first biggest mistake, and which somehow we corrected with our current startup, which is known as Transac, right? So how many bananas? It's a good technique to know, because one would say that you can't fit just a chain of gems collate or have an asset like chain of gems collate. I mean, if you had raised funding, we would be talking about a different startup
Pivot to SME Manufacturing Solutions
00:16:04
Speaker
today.
00:16:04
Speaker
Absolutely. I agree with that. You're absolutely right. The only thing, see, up here, up hindsight, he mistakes so much.
00:16:14
Speaker
If you look at failure success and success success, if you look at failure success and failure success, then you would be able to understand what is going on. If you look at failure success, then you would be able to understand what is going on. If you look at failure success, then you would be able to understand what is going on. If you look at failure success, then you would be able to understand what is going on.
00:16:39
Speaker
rather have a market validation, but I don't care actually demand taken here or actually to have a banana as come MVP mindset against a banana.
00:16:48
Speaker
Or rather, actually, the use of a VOC as well, rather than having to use a VOC as well. Yeah, got it, got it. Take a UL, more feature focused, how many features do we need? Then launching something small and seeing a skip-traction. Correct, correct, correct, correct, correct. And then launching something small, which is important. And I will tell you, I will tell you next time, I will be learning something in corporate career.
00:17:17
Speaker
But to realize that nobody was ready to use it. Because if you talk about these tier 2, tier 3 gyms, you have to actually operate. You have to make a head coach to operate. Also, head coach has to be sophisticated. He's just maybe a 12th-class guy or a commerce graduate who has gone into fitness and he just wants to build his career in fitness an hour and say 20, 30, 48,000 rupees in a month. That's it.
00:17:49
Speaker
We have a lot of problems. We have gyms on-board. We have a lot of on-board problems. We have a lot of on-board problems. We have a lot of on-board problems. We have a lot of revenue.
00:18:05
Speaker
In case the agreement was signed, the agreement was signed. Every new customer had to pay for their charge. It was completely different. The demand side of the company was completely flat. I and Sharad used to stay just outside of the office and did a lot of street marketing.
00:18:25
Speaker
We used to speak to a lot of these, you know, folks who, you know, ID folks who are working in companies and they are coming out in a chai break or sukta break. And this was like a
00:18:47
Speaker
Like an integrated offering, like, say, class pass, just say, US, there's that. Yes, yes, yes. Any gym you want to go, you go to, as many times in a month you want to go, like, buffet. Absolutely. That was the idea because, you know, Joe, if you remember, Joe, many colleagues say, even Joe, many observations, most of the colleagues used to say, since our travel job and since we don't get time,
00:19:12
Speaker
That means the possibility of going into society is very less. Because there are many times that there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no time, many times there is no
00:19:41
Speaker
And somehow, we were not able to kind of bring the demand, to be very frank, right? But honestly,
00:20:13
Speaker
The more and more we started meeting people, we started meeting people, you know, meeting the regular Janta.
00:20:22
Speaker
Right. So do my early adopters a bargain market name on the market. One day Bob Belkour deep dive career and understand care cello pants percent job care lead up to this could be on market care. So we're happy so much me I care. It's a motivation. Well, I put a shoot or do some majority of logo. We attack here. Actually, it may have me up now. I'll continue to come. Yeah. I'm office. I don't know. My office and my door floor series. I don't know. I'll be Mac and then do my fitness. Okay. I'm going to live out there. Right.
00:20:54
Speaker
In terms of travel, in terms of everything, people started giving different excuses. Travel was not the issue. 14-15 hours or 12 hours in a day was not the issue.
00:21:22
Speaker
But they said, again, this is a clean map, a walker, which is more than a kilometer, which is more than a kilometer of fitness. And the one finding was, the majority of people here in India, when they talk about fitness, it's primarily about weight loss. The reason for this is that the fitness is zero motivation.
00:21:52
Speaker
And the more and more we started diving deeper into this piece, we realized that we had a demand side problem, rather than supply side problem. The demand was superficial.
Building and Marketing Transact
00:22:09
Speaker
And if we want to really make a big business in India, because which is going to eventually happen?
00:22:15
Speaker
We need to kind of do a very, very Capex-heavy approach, where we need to kind of own the entire thing, not just the fitness center, but even the entire awareness, maybe around food as well, maybe around the activities as well, maybe around fitness as well. And this was before, you know, cult fit, I would say. And we concluded, it was, if it passed out, would become a primary thing.
00:22:40
Speaker
which we never wanted to do. We were not very confident also. We thought that the best time was the best time, 2013 was the best time. So we thought that we would double digit, million dollar and all that.
00:23:03
Speaker
So that's how we concluded that we were approaching the apex of model Janapadega which I think you know few months down the line called fit launch. And they took the entire you know holistic approach where they started catering this problem right from the awareness. Right. So for food very come chaos may I think doctors believe it is my boss a reactivity will care then they won't the entire fitness chains. Right. So yeah, I mean, that's how this was our first idea. And
00:23:34
Speaker
So, did you continue to do this while also trying something? Like, how did you discover, transact the idea? Yeah. So, honestly, I will say that there is no reason for this.
00:23:54
Speaker
If you talk about, or if you get to know the background of our families, all three co-founders are family. So, for example, my father used to work in the production department of a railway, local railway in NCR region. Sharath's dad takes care of the inventory part of NTDC.
00:24:22
Speaker
in one of their plant or one of their unit. And Rohan's dad has always been, you can say, a factory manager of couple of SME manufacturing companies since starting off his career.
00:24:42
Speaker
We kept hearing. We kept hearing. We kept hearing. We kept hearing. We kept hearing. We kept hearing. We kept hearing. We kept hearing. We kept hearing. We kept hearing.
00:25:07
Speaker
It must be fairly simple. But when you are actually doing it in 1000 pieces or lakh pieces, there are, you know, couple of things, more than, you know, 10, 20 things which are moving badly. And hence, it becomes very, very difficult and complicated job to do the manufacture, even
00:25:32
Speaker
manufacturing of a simple product, right? So, I think Kahinagai family background is related to this. If you talk about how did we narrow down to this idea, this happened out of Serendipity, to be very frank. Because what happened, there was one fitness center owner who used to own one of his manufacturing facility based out of Vasai, which is located just outskirts of Bombay.
00:26:02
Speaker
He used to kind of call us to his wasai plant and say, I am happy to invest my entire morning time, at least three to four hours, to give you all sort of a data and all sort of insights related to my fitness center and tell you all sort of my problems, the way I look at my fitness center. Right? So yeah, there has to be one or two people who are ready to invest their time.
00:26:34
Speaker
And then we come back and work from, say, Andheri, somewhere from, say, Starbucks or CCD or some other gyms, right?
00:26:53
Speaker
who reach Vasai, you need to take a metro from Andheri metro station to Andheri local station. From Andheri local station to Vasai local station, you need to take a proper local train, which is almost always crowded, always runs on 120% capacity, right? And then Vahasi abko shared auto leke jagajana parthata. Vahasi 8 kilometer walk karna parthata.
00:27:20
Speaker
And this is how most of us, like, you know, all three of us used to kind of travel on almost daily basis. Yet to figure out...
00:27:39
Speaker
So, majority of time, what used to happen, you know, he used to start, let's start discussing about the problem. And then after every 30-45 minutes down the line, he used to get calls from his, you know, his operations people.
00:28:15
Speaker
And these kind of 1000s of operational problem. Right. And now, while
00:28:26
Speaker
thousands of operational problem, who say he solved anything, but ideally SME owner or that owner never wanted to kind of get himself involved in the operations. Rather, he wanted to, you know, work on the growth here, growth is occurring, visit development is occurring, team culture is occurring, team culture is occurring, team culture is occurring, right?
00:28:49
Speaker
But he always used to say, you know, IAD, IMSA, graduate, who always used to feel very bad about it. But he did not have any solution because again, manufacturing unit, right? So, he said,
00:29:17
Speaker
Yet I have a solution. Why don't you guys kind of sit here in my office? And every now and then, you sit for the whole day. I will sit with you and discuss all sorts of insights.
00:29:45
Speaker
So you know, starting with going one or two, three days in a week, it became routine for us.
00:30:00
Speaker
And that's how it started happening, right? Now, since anyway, you know, parallelly, this fitness, we were building the thesis and we were getting like a lot of argument and all that.
00:30:29
Speaker
What used to happen, while all three of us cannot call ourselves as a hardcore engineer or a core engineer anymore, the machine fascinates all the engineers to be very frank, irrespective of what they are doing in life.
00:30:58
Speaker
So, out of, you know, our, you know, interest, we used to roam around this in factory and all that. You know, it's not difficult to come, right? It's not difficult, less resources, motivation, right?
00:31:24
Speaker
And then workers said, hey, then they get a poor process. And then, you know, we kind of, you know, literally amazed to see here such a complicated operations is still running pen and paper and, you know, say 50 other different excel sheet. And the very interesting part, you know, this guy had one customized ERP system at in place, and also had tally in place.
00:31:51
Speaker
Telly is an accounting software, which is predominantly used by these SME manufacturing companies. And then the other pieces, most of these office workers or some of those workers also used to have smartphone.
Customer Engagement and Product Iteration
00:32:29
Speaker
So this actually intrigued us a lot. And we thought
00:32:37
Speaker
we started getting deeper into deeper in that factory itself. So how many cakya kyaar haam invariably fitness ka discussions kam kar theor haam factory wa hain jara bhaat kand lak hai. Or actually owner also in one of those fine days said kyaar agar aa meri factory kehri kehri ku solution raasat thura. So that will be like really interesting and I'm ready to pay also. Right. Because fitness see, you know, I think one ka side business tawar wapnek bahi wakir kehri kehri shalaar hai.
00:33:08
Speaker
And that is where we started asking more and more questions. And that is where we started asking more and more questions. And that is where we started asking more and more questions. And that is where we started asking more and more questions. And that is where we started asking more and more questions. And that is where we started asking more and more questions. And that is where we started asking more and more questions.
00:33:33
Speaker
You need to understand that most of my workers, or office people, these are just a college graduate, or just a college graduate, or just a simple 12th pass. And tally is predominantly an accounting solution. That works on debit and credit.
00:34:02
Speaker
And honestly, I can guarantee this that a random room full of people, if you ask 10 people, if you ask them for a debit and credit, it would be easy. No, but we would be able to...
00:34:18
Speaker
make you understand. And the reason is because I've interviewed a lot of people, right? And you can imagine here the kind of people I interact with, you know, are all coming from big colleges, societies and you know, whatnot, right? So, I don't know. I don't know. I don't know. I don't know. I don't know. I don't know. I don't know. I don't know. I don't know. I don't know. I don't know. I don't know. I don't know. I don't know.
00:34:42
Speaker
Procurement is now where many of them are consumed here in memory, many of them are finished but produced. So easily manage any of my operation, people start using tally and they mess up my account. And second, and second, why? Because accounting is a very, very sensitive topic, sensitive thing, because I do not want to kind of
00:35:03
Speaker
You know, haggle around with all those, you know, regulatory authority, you know, tax, and this and that, right? And hence, very, very clear demarcation is only being used by the accounting department. And rest, if you talk about all the operational department right from sales procurement store production,
00:35:25
Speaker
These guys are using Excel nowadays. However, these guys were supposed to use this ERB where I invested more than 5 lakh rupees in one go. There is one only marketing person.
00:35:44
Speaker
who is creating a sales quotation or inquiry from that software. Out of these four or five people, only those two guys know how to kind of create sales inquiries and sales quotation.
00:36:02
Speaker
Basically, around three to four years back, there was one software guy or software company from Pune came to me. And they said, because of sales, production, and accounting, they said, because of the problem,
00:36:28
Speaker
I would say I don't get time to do any sort of product R&D, any sort of investment in business development and all those things.
00:37:06
Speaker
And lastly, the profit will grow where they won't be able to tell you. Because nobody can be able to tell you that. So, we have a company called Bola, which is a software company, and Bola is a software company, and Bola is also a software company, and Bola is also a software company, and Bola is also a software company, and Bola is also a software company, and Bola is also a software company, and Bola is also a software company, and Bola is also a software company, and Bola is also a software company, and Bola is also a software company, and Bola is also a software company, and Bola is also a software company, and Bola is also a software company, and Bola is also a software company, and Bola is also a software company, and Bola is also a software company, and Bola is also a software company, and Bola is also a software company, and Bola is also a software company, and Bola is also a software company, and
00:37:11
Speaker
Basically, their way of working is either visual or it is in their mind.
00:37:39
Speaker
So these are the things which are happening in SME sector, right?
00:38:08
Speaker
And then after one year, every now and then they used to ask, or even implementation took more than eight to nine months. And that was a very, very partial implementation.
00:38:24
Speaker
So, in this case, you can see that there is a lot of experimentation going on. You can see that there is a lot of work going on. You can see that there is a lot of work going on. You can see that there is a lot of work going on. You can see that there is a lot of work going on. You can see that there is a lot of work going on.
00:38:45
Speaker
But ultimately, I was unable to kind of use it properly. Because there are workers who are going to use it, right? And that was the mistake which we did. And somehow, because we spent close to 5,000 rupees, we thought, why don't we use it for 5,000 rupees? We thought, why don't we use it for 5,000 rupees? We thought, why don't we use it for 5,000 rupees?
00:39:13
Speaker
Right now there are only two people. And if I ask those guys to kind of do the implementation, they will ask money. So that is the reason the majority of new people, they have shifted to excel sheet because excel sheet they can simply use.
00:39:34
Speaker
Now the only problem is because there are 50 other excels which must be running in my organization.
00:39:53
Speaker
And why I'm specifically talking about inquiry because the moment you say ERP,
00:40:10
Speaker
You know, for a general people like you and me, and that is where another, you know, very, very interesting finding. When they talk about the ERP, more than 80% of their headache is their direct business, which is inquiry to dispatch.
00:40:32
Speaker
for accounting, accounting is also their first problem that what they want to solve, because they do not want to, again, you know, spend any single time with the, you know, tax department or regulation, regulatory department, and whatnot, right.
00:40:48
Speaker
So that would be really amazing to give. With a similar concept, if you can solve it for my factory, that will be a really amazing proposition. And I'm happy to give you money also. But this time, I'm afraid of it.
00:41:16
Speaker
We have to have observations. And we have to make sure that we don't have enough time to do this. And of course, we have to make sure that we don't have enough time to do this. We have to make sure that we don't have enough time to do this. We have to make sure that we don't have enough time to do this. And we have to make sure that we don't have enough time to do this.
00:41:41
Speaker
And that's where we started doing a deeper dive into the market, and this is what I'm talking about, the third quarter of 2016. Okay. Or Surum may definitely be a market validation, but you need people who can spend time, right? So, with their network,
00:42:07
Speaker
We must have met with more than 100 companies in the span of close to four months of third and fourth quarter of 2016. And more than 70-80% of these companies are using Excel to run their day-to-day operations.
00:42:35
Speaker
Joe excels me poor a operation sales credit a purchase credit a store credit or production credit a generate a more accountants go there and accountant us call double as a red tree cut the head create a panel balance sheet on a monthly or quarterly basis, right?
00:42:53
Speaker
And because of this reason, more than 70% of their daily time goes into operational firefighting rather than participating in expos, doing some business development activities, doing some product R and D's and building team as well. And to a very basic thing, we're spending more and more time with their family as well.
Growth Challenges and Strategy Reevaluation
00:43:11
Speaker
Right.
00:43:13
Speaker
So the problem is that we actually must have met right from 50 lakhs of manufacturers, annual turnover of manufacturers, till 200 crore of annual turnover of manufacturers as well. More or less, we had a common problem. We had a couple of companies, a couple of these companies were going towards customized ERP players, end to end.
00:43:46
Speaker
And usability. Usability was not there, right? Usability from the folks which are there in the SMEs were not there, right?
00:44:01
Speaker
definitely we cannot charge on a front basis. This was the first finding. Second finding the on voting, the implementation where majority of these ERP takes anywhere from, say, three to six months. And I'm talking about the best implementation time. Otherwise, I have seen an ERP getting implemented for over two years also in a five crore company, right?
00:44:27
Speaker
and to start quick onboarding and implementation time. And third is like really amazing support. Yet each should be a differentiator. And the most fundamental innovation should be our system. We guys are like really a great fan of WhatsApp.
00:44:52
Speaker
You can see, I think, you know, India must be, as far as the users are concerned, must be a biggest market for WhatsApp. And you can see here, that discussion is more on, that discussion is more on the complexity of the ad in the existing product, rather than a feature banana.
00:45:21
Speaker
So, we are a very, very strong believer that India met technology innovation comes from a simplicity, not on a deep tech or a sophisticated feature. Simplicity in technology is the innovation for India. Yeah, I always feel the best product manager is the product manager who knows when to say no.
00:46:14
Speaker
Yes, yes, yes, yes, absolutely.
00:46:16
Speaker
We were very very clear we are not going to get into
00:46:21
Speaker
say HRMS, travel, even for that matter, accounting also. Because we felt here, Tally bought amazing software here for these SME manufacturing companies to take care of their accounts. Or Dusra, accountants are very, very habituated and very, very comfortable with using Tally as an accounting software. Again, because Tally works on debit and credit fundamentals.
00:46:50
Speaker
And your accountants, I have a completely see if they go get commerce, they go get India Kapoor accounting system works on dividend credits, right? While if you talk about businesses, or if you talk about, you know, say CFA, which I, you know, kind of study during my, you know, graduation, most of these, you know, courses are based on cash flow basis. Right.
00:47:15
Speaker
Uh, we have a business model procurement, get now who has sales, get now why is she's been out of focus, right? Or I see that he gets a cat. He's a very jotty, right? So yes, he's family sure. Yeah. Or is smart. How many decide out of the 100 companies whom we are meeting. Let's try to do one thing in message subset, best of the best companies, you know, Joe.
00:47:39
Speaker
We had a lot of people who were like really very excited that we had a product cloud. We had a product sale, and then only we'll start doing the coding. So, we had a product sale, and that's where we did the MVP mindset, and this is what I was talking about. We had a back-end code for the hard code. Again. And there were workflows, there were communications, there were documentation.
00:48:08
Speaker
We have a front-end. And we have to mandate the customers to do the same. That's where we start doing the coding, first line of code. And this is, again, I'm talking about 2017, the first quarter. Honestly, I still remember that Shara and Rohan were first customers to do the same.
00:48:37
Speaker
So, pricing is a little bit different. But again, I started doing the conversation. The moment I started doing the conversation with that owner and I felt here, this guy is such an immense pain. I felt like he was trying to trust me. I felt like he was trying to help me. So, I immediately decided that he was going to decide what to do.
00:49:06
Speaker
Let's see, that's our month. Right? Because we were not validating the pricing to be very frank, right? So argument will proceed.
00:49:24
Speaker
But I am based 10,000 rupees per month. And the first pitch ever in my life, you know, this guy said, I don't know, okay, considering that, you know, I'm happy to give you discount.
00:49:50
Speaker
But you have to go to the domain to give you the product. You have to go to the domain to give you the live product. And you have to go to the team to do the implementation.
00:50:15
Speaker
And then I immediately came out from that bitch and I called Sharon and Rohan and then I told them instead of Dasar for him.
00:50:26
Speaker
Here, it's Dasar for a month, right? Close to Dasar for a month. That's where we started doing the first code. And I thought, if you look at the first code, then Das Logos, if you look at the chart, they agreed somewhere between 5,000 to 10,000 rupees per month pricing. And we thought, we had four customers.
00:50:48
Speaker
to go live and do the beta testing. Well, you had like a 40% conversion rate. That's what the child looked like. But 40% of the time, out of 100, I chose that. Yeah, most likely to convert. So, early adopters will set you up, right? And then I started meeting the remaining 90 people also. And not for sales, because if you have sales, you have to pressure the product to deliver the product. So, early adopters are ready to wait as well.
00:51:17
Speaker
They are more evangelist and they will help you. They said, we are happy to take a look at your product after a quarter of a roll out.
00:51:33
Speaker
But honestly, in all, fundamentally, credit is the sole perspective. Yes, supplier and buyer discovery is the sole perspective. Yes, in all, commerce is the sole perspective. So, we have to have a lot of feedback. Again, we actually got to know these companies through our dad's reference.
00:51:58
Speaker
So out of, you know, their relationship with our dad also, they generally suggested, let's again start doing the, you know, white voting and all that.
00:52:21
Speaker
And we thought, what we realized, the commonality between is ultimately credit, because most of these companies don't have their digital transactions. They don't have their history of data. They just have their filings.
00:52:39
Speaker
Joki egg, you know, accountant cut there with a lot of adjustment, right? Or say real business car reflection, right? So most of these banks and NBC's are dependent on those ROC filings, which happens on a yearly basis, and that too on balance sheet, Casper those minutes, man up here and there, right? And second,
00:53:00
Speaker
How do you think commerce will be a problem? Yeah, while India Mart is an amazing solution, it's a very, very innovative solution if you talk about, you know, which got founded, say, 35 years back, and, you know, have got, like, very, very good connects with the founders as well. But many of these companies, we get, like, very good discovery from India Mart.
00:53:25
Speaker
But when, you know, say for one particular item, we get 100 potential leaves, both for our customer side as well, both on our supply side as well.
00:53:35
Speaker
But if you want to really assess them, we need to understand their performance data. So for example, if I'm looking for a supplier, I want to understand their QCG data. And Q is for quality, C is for cost, and D is for the variance in the delivery rate or dispatch time. I want to understand that as well, because it's a B2B thing, especially for B2B thing. It is very, very critical, because it's a time thing. Many times, I need to build an additional capacity
00:54:05
Speaker
to serve that customer. And if I'm working with one new supplier, because I keep on working with my customers, my brand name is on stake. If the quality goes for a toss, if a delivery time goes for a toss of that supplier. And hence, it's very, very critical to understand the performance of those suppliers as well. From a customer side, I want to understand the customer's timely pay. I don't know how to do it. I don't know how to do it.
00:54:58
Speaker
And that is where the moment we started connecting the dots, we realized that ultimately everything is
00:55:05
Speaker
is transactions, right? If you talk about existing customers' transactions, what is the order frequency?
Transact's Platform Features and Evolution
00:55:14
Speaker
What is the average order size? Similarly, on the supplier side, if you talk about supplier's rejection rate, pricing variation, delivery time, and transactions,
00:55:31
Speaker
And if you think, if you talk about transact, we were trying to digitize their transaction. And hence, the name became transact.
00:55:41
Speaker
If we are able to digitize, say, transactions of these companies and able to, you know, bring, say, hundreds of thousands of companies, which starts using transact on day-to-day basis, you know, we will be able to generate tons of transactional data and that data becomes the foundation to build multiple
00:56:05
Speaker
you know, monetization layer like commerce discovery and lending and whatnot. Right. So you can say that became the long term vision care. You know, Transact becomes the digitization platform for these SME manufacturing companies.
00:56:23
Speaker
with the immediate focus of digitizing their transactions right from sales to dispatch. And with this, the data becomes the foundation to build a multiple layer of monetization like commerce, lending, and discovery.
00:56:42
Speaker
Okay. What was your MVP product, which you gave to these customers you sold to these four? Yeah. Yeah. It was just, uh, procure to pay where, you know, I've got purchase order, but she's not talking about inward.
00:56:59
Speaker
The second workflow was order to cache. And then inventory management. Because we knew for the fact that production inherently is a complicated department.
00:57:23
Speaker
Right. But to be very frank, you know, just after three months or six months down the line, because you won't be able to kind of, you know, complete the entire production. And then third, that is style integration.
00:57:51
Speaker
Okay. This is a procure to pay and the second you said is order to cash, order to cash. Okay. Fairly simple workflows, right? With some PDFs getting generated and then like a
00:58:07
Speaker
tracking like a Kanban board or something that you can track. This is also one of the insights which we got from our customers. This is also one of the insights which we got from our customers. This is also one of the insights which we got from our customers. This is also one of the insights which we got from our customers. This is also one of the insights which we got from our customers. This is also one of the insights which we got from our customers. This is also one of the insights which we got from our customers. This is also one of the insights which we got from our customers.
00:58:35
Speaker
Order confirmation is linked in the Sare document. Ultimately, that becomes the docket for delivering the entire goods or finish goods to that particular customer. Now, one of the problems is that they stated that all the transactional documents are segregated.
00:59:04
Speaker
Uh, in different, different email chains. That incorporates a transaction timeline
00:59:20
Speaker
which starts with two or three initiator documents. The majority of cases made the sales website starts with order confirmation or a sales quotation or an inquiry. And why we said transaction timeline because not just the documentation,
00:59:45
Speaker
We took a lot of insights and inspiration from these consumer apps which are very widely successful in India. Because the idea is that while we are talking about B2B,
01:00:09
Speaker
But SME can't be used as a consumer. So mobile-based applications can't be used. So one of these days, transaction timelines can be used to form and collaborate with both internally as well as externally. And the second inspiration is that the ERP software is boring. You know, color
01:00:37
Speaker
color, blue, black, grey, or dark. The reason is that it should come across as a very, very serious software. And trust me, I think psychologically, the acceptance of this software is very important.
01:00:59
Speaker
So again, coming back to the transaction to transaction timeline here, this may have got poor us order to cash case are a documentation of the house got a communication with us similarly purchase a purchase order. What's the work order?
01:01:14
Speaker
Work order is basically the order confirmation. The sales order will be finished on this particular payment terms and this particular delivery rate will be delivered. The order confirmation is the production line. The production line is the internal document. So, you can say it's an initiated document for the production department.
01:01:44
Speaker
Basically, somebody would have planned out whatever, like say 10 headlights, supply, lights, bulbs, air parts, okay. Okay, correct. It's a bill of material, all the engineering company and food companies and a couple of other companies called recipe.
01:02:06
Speaker
which is a very, very secretive formula. We have a cube light, glass rod, inductors, resistance, light bulb, wires, etc. We also have a production desk. We have to automatically work on the desk. The desk has an inventory check-over item available.
01:02:40
Speaker
And that's where the procurement things start. And you send the purchase order to your supplier.
01:02:54
Speaker
What is GRN? What is GRN? GRN is good received note. Good received note. Basically a quality testing document.
01:03:10
Speaker
If you want to have an inventory with those items, or if you want to have a production department, you can have 20 light bulbs. If you want to have light bulbs, you can have light bulbs. If you want to have light bulbs, you can have light bulbs. If you want to have light bulbs, you can have light bulbs. If you want to have light bulbs,
01:03:26
Speaker
And you have inventory module also? Yes. Okay. This whole whole workflow is managed on transact. Yes, yes, yes. So, we have sales module, we have purchase module, we have inventory module, we have production module, and then we have recently added
01:03:56
Speaker
And what is the production module?
Strategic Shifts and Monetization
01:04:21
Speaker
This is a production module. We have a bill of materials. We have manufacturing. We have time to reject it. We have to accept it. We have to store it. We have to do the collaboration. We have to pass the line reject. We have to pass the line reject. We have to do the manufacturing. We have to do the QC testing. We have to do the production. We have to do the invoice.
01:04:25
Speaker
like production to work order.
01:04:49
Speaker
Got it. And why do you need Tali integration? So, Tali integration has been a really, really good selling point because most of these customers said they are sales, purchase, inventory, or production. Some of those custom ERP had given us accounting software also, but because of the way we run the business, right?
01:05:17
Speaker
And the kind of people we have in our accounting department, they're not comfortable moving out of value.
01:05:26
Speaker
Right. So ultimately it's a happy bit. It doesn't need to run much on a data in a pattern or double laser entry or duplication of that. Got it. Okay. And like, tell me the journey. You must have started with some products, some pricing, and then as you made more features and the pricing would have also evolved and your customers that you were targeting, how did you acquire more customers beyond those fours? Yeah. Yeah.
01:05:52
Speaker
So yeah, initially if you talk about the majority of 2017, where we must have acquired say close to 50 odd companies, it was pure cold calling and meeting them for a demo and many times multiple demos also.
01:06:08
Speaker
And the reason is we were very clear cares initially because we need a greater validation. It's going to be a very serious product. I'm discounting. I'm sorry for the validation. I'm not going to do that. I'm not going to do that. I'm not going to do that. I'm not going to do that. I'm not going to do that. I'm not going to do that. I'm not going to do that. I'm going to do that.
01:06:32
Speaker
At that time, I am one of my very early team members, or rather founding member, called Mudith. We used to kind of go and do the selling. And sometime I, myself also, used to kind of take care of the implementation part as well, once the selling is done. In 2017, it was predominated. In 2018, it was a cold calling.
01:07:01
Speaker
Uh, cold calling out of reference, you know, data, data, data, data, data, data, data, data, data, data, data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data data
01:07:30
Speaker
And then 2019, maybe, predominantly, you see GDMP come here. But product may have a job that come here. Okay. Hummer at 2018 K and that we feature request on our company with it. So what is your feature request? And we thought he had a feature even up to initially a male customer service able to, you know,
01:07:53
Speaker
Uh, customer service able to, when they asked about, yeah, they should be a feature to a feature to it. We used to think, yeah. But beyond the point, I'm not sure if it's a customer, a feature to a feature three and all that. And there's a boost for our fundamental break. Yeah.
01:08:10
Speaker
There is a majority of owners to self-report. So the feature requires that users are in it. And users, they are not most of the sophisticated people in the world. Rather, they must be taking care of it. At the moment, you ask someone to do the data entry properly. Definitely, they are unable to understand the long-term benefit of it.
01:08:41
Speaker
And then we realized that we separated in 2019, primarily we separated buyer persona and user persona separate. And we said, and that's where we started focusing on the output driven things like reports, business intelligence, approvals, all those things which are very, very critical for business owners.
01:09:11
Speaker
Right. And we internally used to call those input feature care is color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color change color
01:09:34
Speaker
aggressive call on the product, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought, we thought,
01:10:02
Speaker
And I think after 1, 2 quarters. How many paying customers by end of 2019? I think, say, a bit over 200. OK. And the average is 5,000 rupees. 5,000 mansektu. 5,000 mansektu. OK. Every 5,000 mansektu. I think this would work out too. About 10 lakhs of monthly revenue. Yeah. Yeah. Yeah. Correct. Absolutely. So 10 to 15 lakhs can operate there.
01:10:32
Speaker
Now, is Doran, of course, 2017 is the seed round race, or definitely PASA is the source of the market. So, what we did is let's try to do the water testing in the in the entire, you know, in the few of the VCs just close connected. And the moment we reached out to them, you know, we got like hell lot of like really bad rejection, I would say, right?
01:11:02
Speaker
Most of the company said, because of the 200 numbers. Yes. Why don't we roll out the market place fees or the lending fees? I'm happy to fund.
01:11:19
Speaker
Again, first time co-founder, you don't understand the language of VCs. Honestly, many investment backgrounds, but I come from PEP.
01:11:38
Speaker
I'm not sure how to do it. But VCs are working on incomplete data. They have to allow for exceptions. Maybe they say no to a company, but then their mind changes, so they don't want to close the door.
01:12:08
Speaker
Yeah, absolutely. I think it's important to know that, apart from the product, that the GTM will be able to scale the scale of the product. And I think it's important to know that the market plays a big part.
Resilience and Business Fundamentals
01:12:23
Speaker
I think it's important to know that, right? And I think it's important to know that the next fund is there. And the product will expand and expand, right?
01:12:38
Speaker
This is the third quarter of 2019. And the way we did it is, whatever transactions data we were capturing, we internally created a model and internally started consuming it.
01:13:28
Speaker
I think anywhere from say 4 to 5 crore of GMV.
01:13:37
Speaker
you know, important data points and all that. And I think, you know, you cannot build bigger businesses on the back of what VCs are saying. VCs can give you right input, but you need to kind of internally reflect what are right things and what are wrong things for your startup, right?
01:14:07
Speaker
So I'm going to start up Joe up the more marketplace piece of open here. Definitely we have got like immense learning for the marketplace, which definitely going to kind of be given to utilize whenever we are going to launch it. For respect, I'm going to show fair 2019 can take you off. You're amazing. I can't tell you see, but I'm gonna show good day and 2020 gave April. We are gonna take it.
01:14:32
Speaker
and corona k time pay you know clueless kr kare kam because many of our customers out of those two hundred twenty fifty odd customers they said kr you need to support on the pricing front and this and that right
01:14:50
Speaker
And if beach may have made, you know, you know, we had to kind of raise another bridge round from our existing investors, and they supported us well, because they also believe in the long term vision, what we have, and always have been very supportive on the, you know, on transact whatever we are doing, right. So we thought,
01:15:11
Speaker
Let us go back and kind of see the situation. And what we realized here out of four core module operational module, which is sale, purchase, inventory and production, most of these companies are using sales, purchase and a very basic part of inventory production.
01:15:32
Speaker
And as I said, right, he both complicated department, right. And you know, like that's low, that's become kind of, yeah, I'm sorry. Call me up and all that. And it's currently you try uses come down on all the advanced module, I would say, right.
01:15:50
Speaker
So, we have to have customers who want to know that we have to support them. But we have to have modules to make sure that the entire support will move towards the chat. And we will decide that we have to make video calls. Similarly, on the sales side also, we said that we are not going to meet because video calls are accepted normally. So, we are going to
01:16:21
Speaker
you know, any sort of any numbers of demos, we are going to give it on the video call. I think out of 250, more than 60% of those companies got shared. Because this was very initial.
01:16:47
Speaker
And then a few customers stayed back. And then we came back to a free model. And again, we came to the conclusion that we are not going to be able to run any of these things. We are not going to be able to extend or run any of these things. Because you never know if you are going to be able to run any of these things. So we are not going to be able to extend or run any of these things. We are not going to be able to run any of these things. There were two rules. So either grow revenue.
01:17:16
Speaker
or grow a number of uses. And till that time, we were very, very sure that the product was very short. Especially the grind, which we did in 2019, we got a lot of learnings from the product side. And when the product changes, the product changes. To be very frank, as far as the feature is concerned, as far as any bigger thing is concerned. So, now, this is either uses or growth.
01:17:41
Speaker
Yeah, I'm getting a revenue growth. I need those user pass out because this is how they're going to lay out the thesis in front of investors. I put in some messages from the bull. I'll revenue in this kind of a market is not going to happen, man. And I corona, I believe each other. I guess I got it right. Don't know what I had to freemium. I don't know why coffee look freemium. But again, despite of saying here, I'm of support, Chad Baker, then you have obsessive freedom. Why don't we try the freemium approach?
01:18:10
Speaker
And in 2020, I think November or December, we launched here. Or when we launched it, we realized that we did not support it through just the cold call.
01:18:25
Speaker
Now, unlike before, there was a software based on digital marketing, because people wanted to speak to us. In fact, people wanted to see us physically, right? But now, premium can be very well supported with the digital marketing, and that's where we started GTM on the digital marketing. So from, say, 200 odd paying customers in 2020 early,
01:18:55
Speaker
And 2020, I think 2,000 plus customers using customers. These are not MAU or DAU because ours one is a web application. And a certain number of documents created on a daily basis. So the company says,
01:19:24
Speaker
These are the documents that we have used in the last few months. And these are active companies. Unlike KRA's mobile applications, we have been using them for a long time.
01:19:37
Speaker
We have a good validation and I think that's where we started doing the fundraise and this time definitely learning from my past mistake and of fundraising as well. This time we planned really well and I can do a separate session of KR series and fundraise. That cannot be a very scientific method but there could be some playbook.
01:20:03
Speaker
So we raised our $7 million round of CZ in, I think we got the term sheet in somewhere around July 2021. And got the money in the bank in I think November, December 2021. And the good part is like we have been able to rope in one of the finest investor in the world called Tribe Capital.
01:20:27
Speaker
And, you know, apart from all the devices related to business, you know, they are like really good data scientists. So to be very frank, the way they had evaluated me that in okay.
01:20:42
Speaker
they actually kind of asked me to give all sort of a raw data to them. And then they had created more than a 30 pager of a report telling me that these are the things which are good in your company. These are the things which are not good and you need to kind of work on those things. So yeah, very, very interesting addition, I would say. And I always believe when you get investors on your board, I think money is the smallest addition.
01:21:11
Speaker
for the, I will say, lowest value addition in your fundraising to be pre signed, right? So yeah, I mean, in 2021. One question here. So your revenue was down to zero because you switched to the premium. Close to you can say, you know, maybe 45 lakh rupees somewhere here and there. What was the difference between the free plan and the paid plan?
01:21:38
Speaker
Again, paid plan, we were giving some sort of these advanced module called advanced inventory as well as production, and integration, and used to give some sort of a video call for the implementation piece as well. Okay. That time, right. And honestly, paid was not the focus. It's just that, you know, some of those companies which are bigger in nature, they wanted to kind of, you know,
01:22:04
Speaker
kind of go ahead with a full product, and that's why we were charging. However, one of the very interesting thing, we never said that our entire product is going to be free. And we had a lot of debates with our board and with a lot of advisors and mentors. And the reason is they were saying that, why don't we acquire these companies that are free of cost?
01:22:29
Speaker
and quickly acquired a few hundreds of thousands of companies and then build an additional layer of monetization. So like the lending or commerce or whatever. Basically the kata book models.
01:22:44
Speaker
Yeah, Katabu is primarily for different segments. Different segments, but the borders are the same, like acquire for digitization and earn through lending. Correct, correct, correct. So, lending or commerce. So, honestly, they were forcing that, you know, because our thesis to them that software is going to be like, say, 40-50 million dollar of ARR or say, max 100 million dollar of ARR.
01:23:07
Speaker
But if you want to kind of build a bigger, monetizable business, that will come from these kind of value-added services like commerce, discovery, lending, etc., which will make it as a billion-dollar business. So that's why we had two things. Always, we used to build. These are manufacturers. And the S&E has a pain.
01:23:36
Speaker
is just that, unless they don't get the ROI, they don't have the conviction, that's what they are like, you know, skeptical, right? And second piece is, you know, most of these customers used to say it was, at free of cost,
01:24:01
Speaker
Because these guys, they don't understand VC funding and all those jazz, right? While the focus was not on paid, but we used to kind of defend ourselves,
01:24:28
Speaker
just to avoid getting into some sort of a trust deficit. And trust me, in six or more than six years of building Transact for SME manufacturing companies and SME trading companies, the biggest thing what you can do or what we are trying to do is digitizing the trust.
Building Trust and Sustainable Business
01:24:52
Speaker
If you philosophically want to understand what Trandax is doing, we are actually trying to digitizing the trust, maybe for a lender, maybe for a customer who is looking for a supplier, maybe for a supplier who is looking for a customer. Right? So we were very clear, right?
01:25:32
Speaker
You know, you have a tendency to splurge.
01:25:38
Speaker
have a tendency to throw money on problems. I think the problem should be the last thing you should be spending when you're actually trying to discover the problem and trying to solve it on a fundamental matter. Money can help you to scale. Money can help you to get more time.
01:25:59
Speaker
But problem fundamentally solve make it work. That is not that you are not fundamentally solve the problem, right? So the team was like, you know, you're boring in nature, right? And then, you know, this 2,000 became 5,000, 5,000 became 10,000 and 10,000 free customers, right?
01:26:27
Speaker
And the moment, you know, I think last year, you know, even all the entire company, the one value, what we have, uh, uh, being able to have customers. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah.
01:26:57
Speaker
Just to understand, we never used to, even till now also physically, for selling or for implementation, but customers understand them. Right?
01:27:14
Speaker
The majority of these three customers are very, very small manufacturers, say 50 lab, 1 crore, 2 crore, max 2 crore of annual turnover, which are hardly heavy one or two users. To be paid in advance inventory and advance production is going to be very difficult.
01:27:35
Speaker
And these are the observations that we have seen in the world. And we have seen that in the world. And we have seen that in the world. And we have seen that in the world. And we have seen that in the world. And we have seen that in the world. And we have seen that in the world. And we have seen that in the world. And we have seen that in the world. And we have seen that in the world. And we have seen that in the world. And we have seen that in the world.
01:28:00
Speaker
Right? That means both in terms of engagement, as well as in terms of money also, because the real testimony, the most closest testimony for any successful software.
01:28:17
Speaker
Even use has also become very proxy in nature, to be very frank. You can pass a user's use. The closest proxy is, but you can pass a user's use. You can pass a user's user's use. You can pass a user's user's use. You can start using that, right? So, if you want to make sure that the user is present, that the monetization is focused, then you have to make sure that the GTM is built, because the customer is required.
01:28:45
Speaker
Initially, definitely, we were getting a lot of inbound for the Series B as well. Why not get 10,000, 1 lakh? Even if just 2% are paying customers, 1 lakh, 2% is a big amount.
Vision for Transact's Industry Impact
01:29:25
Speaker
If you have everything good in place, your communication, positioning, your product,
01:29:34
Speaker
You know, early adopters are required to do this, but the early majority of the people who are down for that. And the early adopters are the late majority of the people who are out there, right? Same question. We have to go multiple times and add the kind of part. Multiple times and add the kind of part. And we have to go to the sales cycle. We have to go immediately. We have to go to the awareness level. We have to go to the reference level. We have to go to the audio level.
01:30:02
Speaker
If you want to buy a brand, you can go to transit.com. If you want to buy a brand, you can go to 14th or 16th newspaper. You can go there.
01:30:10
Speaker
So, I think, you know, there's one very interesting book, which I, you know, there are four steps of Epiphany. No, I'm not sure if that's right, but that's like really amazing. What are the four steps? There are a lot of customers who are interested in the innovators, early adopters, early adopters, early adopters, early adopters, early adopters, early adopters, early adopters, early adopters, early adopters, early adopters.
01:30:36
Speaker
Okay.
01:30:52
Speaker
I strongly recommend all the founders who are trying to build their business on a first time. They should definitely read it.
01:31:07
Speaker
And then, there are three customers, and at the end of the day, the end of the day, the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the end of the
01:31:36
Speaker
And the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part is that the good part
01:32:14
Speaker
We will be proposing it to them.
01:32:27
Speaker
be having more leeway to build a business in a fundamental manner, right? You have some revenue which is coming out and taking some bit of your fixed cost and hence you always have a more, you know, bigger runway and bigger that money can be utilized in more and more experiment to figure out
01:32:57
Speaker
fundamental spine. Because your business is starting generating revenue, right? And then, you know, somehow, last quarter alignment, and quarter end May 2020, last quarter may formally November may monetize and focus honestly.
01:33:15
Speaker
Distilled marketing became one part. We started meeting more and more customers.
01:33:46
Speaker
I don't know if you've heard of this before, but I think it's a bit of an unstructured discussion, I would say. Most of us are insights. Most of us are early adopters, and I don't know if you've heard of this before, but I think it's a bit of a product mindset. I don't know if you've heard more and more about the market, but if you have a customer who wants to deliver a product, which means you might have to have one or two people in a few of these industrial clusters.
01:34:15
Speaker
And we have to look at what is at the bottom of the brand.
01:34:19
Speaker
So that is where we kind of, apart from say, digital marketing, we started focusing on word of mouth and customer reference as well. Second piece, we started working on the channel partners as well. And third piece, we've identified two or three clusters by deploying through two or three people. We are doing some demand generation activities, whatever demand is getting generated.
01:34:48
Speaker
First initial call, we take it to either on video or on a phone call. And then we try to go and sit with them and show the demo. And now I have like few faces to take money from those customers.
01:35:19
Speaker
SME is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he is a business owner, he
01:35:34
Speaker
Oh, okay. Okay.
01:35:48
Speaker
And as of now, I think in November, the revenue is close to 5 lakh. And the idea is to take it to anywhere from 1 to 2 in next 6 to 12 months.
01:36:05
Speaker
And Jobe and Pesha, the idea is to kind of, if that can take care of our fixed costs and some bit of variable as well. So then the next big fundraise we want to do, we want to kind of invest the entire money on the growth and the big bank experiments. And as far as the runway is concerned, we have more than 60 to 70% of our money lying in the bank.
01:36:31
Speaker
Always have been very, very frugal in nature. I have a fortunate of meeting, you know, Indian art founders as well, Thai founders as well. It's not going to be a glamorous business. However, it is going to be a very big real business, but it will take close to, you know, two desert number of years.
01:37:00
Speaker
And more and more, we are, you know, the way in that Indian ecosystem is getting matured. I think, you know, art style, art style. Since we are talking about, you know, generating free cash to generating being profitable on a big day level. And I think it's more and more conversation because, you know, the good part is like, you know, the exit is not just the bigger VC.
01:37:25
Speaker
The exit is IPOs also. So if we are able to, you just do not need to kind of necessarily build a billion dollar business to kind of get exit for your initial investors. Rather, you can build a very, very high quality 100 million or 200 million dollar business and go for an IPO, man.
01:37:42
Speaker
Right. And then you have a public money and you can kind of, you know, build a generational business out of that public money, what you are building. Right. Because you have a very, very strong foundation, which you have built. Right. So that's, that's my belief. So Abhi, you are earning 50 lakhs.
01:37:59
Speaker
purely by selling software to SMEs, which is amazing because SMEs don't pay for software. I mean, the traditional wisdom in India is that people don't pay for software and you have managed to disprove it to an extent. Purely for software, people are... Yeah, I will rather want to modify this thing. People have a very, very, I would say, casually say this, right?
01:38:25
Speaker
The wisdom somehow is correct that SMEs are, they don't pay for software. But you need to understand that why they are not willing to pay the software. When they are actually spending more than 20,000 rupees on a weekend and they keep on going to Thailand and Mauritius and Maldives and all that, right?
01:38:53
Speaker
You know, India has a software job, it's called ROI. They have a resistance to it, right? And honestly, I think that is the only thing that you need to optimise. If you say ROI, it's called Nickel.
01:39:18
Speaker
So for an example, my average Arbu would be somewhere around 50,000 rupees. This can be surely 50,000 per month or annual? No, annual for a customer. Because I have been able to generate value for them.
01:39:44
Speaker
How are you? Can you tell me how you generated value? And what was the value? Was it like cost saving or was it like increasing their turnover? So, for example, five crore annual manufacturers, right?
01:40:25
Speaker
So that is the one way to look at it. Second is, stock debt. Stock debt is less than you are buying 100s items.
01:40:36
Speaker
You have a tendency to order that item.
01:40:43
Speaker
Okay. So that is the one piece. Second is what we have looked at here. See, ultimately cost saving is not the primary agenda. Yeah. Honestly, personal time.
01:41:10
Speaker
Yeah, I mean, I have been living with my children. Okay. I don't know if she's gonna get here. Actually, it may be very poor. I don't know. Coor operations. I got my school digitized. I thought owner are able to out of both 80% times 78 hours, they're able to, you know, save more than three to four hours on a daily basis.
01:41:28
Speaker
I think that growth is important. They keep on traveling, they keep having international expos, they keep having videos, etc. In fact, one of my customers said that one of my customers said that he would spend a lot of time in London, but he would spend a lot of time in London. Because I know that he would visit me, and he would say that he would spend a lot of time there.
01:41:49
Speaker
And when I was cut two years down the line, he said, now, look at my profile. I have been really active on LinkedIn. Time is directly proportional to growth or your personal growth. And time cubits, because people are not calling them.
Technological Advances and Financial Management
01:42:13
Speaker
That's correct. Just a few clicks of buttons. And the last part is travel. If you want to travel, you can go to the shop. And you can go to the shop.
01:42:23
Speaker
The employees would already know that the work order automatically releases. Correct, correct, correct. The department automatically tells you that the orchestration, which a human mind used to do, that orchestration is being done by software now. Yes, yes, yes. Absolutely, absolutely. Amazing, amazing. And what is your current monthly burn? Yeah, monthly burn.
01:42:52
Speaker
close to a crore rupees. And this is how much is salaries, how much is marketing? Yes, salary, he told us rather here, honestly, because, you know, majority of people we hired, so before funders, and majority of people we hired during the bubbled market, I would say, right? But the idea is to kind of reverse this, right?
01:43:34
Speaker
Again, third-second is only not for acquiring, rather, trusting, generating the trust in customers' mind. And the good part is, we have only one thing, we don't want to acquire it. I mean, in the near future. But if you go to Vadodha, if you go to Nasik, what happens in the bottom of marketing because Vadodha and Nasik are having more than 4,000 to 5,000 potential customers, which can potentially become my customers.
01:43:51
Speaker
Variable means like customer acquisition cost, like digital marketing and all. Even offline as well.
01:44:00
Speaker
because 70 to 80% of these companies are using Excel entirely. I'm saying instead of Excel entirely, why don't you use transit plus time, right? You're putting up voting there, how you... What is the channel partner for you?
01:44:23
Speaker
So channel partners, both of them are channel partners. Different softwares distribute customers. Everyone is selling Tally. Tally or any other ERP or doing some sort of consulting. Or, you know, it could be a channel partner, you know, real estate.
01:44:43
Speaker
anything and everything to be very frank, right?
Future Expansion and Data Utilization
01:44:46
Speaker
Basically, the agenda here is to build channel partner, joking customer cut trust is already here. And if you're roadmap, what's next? Because you have one is commerce, where you start telling them, can you buy from other people on transact platform or second is lending because you are seeing the data. And so yeah, honestly,
01:45:11
Speaker
While that roadmap is still far away, to be very frank, because we are very, very clear that, you know, unlike before where we kind of prematurely kind of started working on the marketplace, this time we are very clear, unless we have like few thousands of companies which are paying me.
01:45:27
Speaker
And they are using transit. So right now we have 10,000 companies, but most of them are free. So we have close to 1,000 companies which are paying us. Unless we have like few thousand, say 50,000 or lakh companies which are paying us, this number could be a little different in all practical purpose. Before that, I'm not going to kind of work on the second part of my vision.
01:45:48
Speaker
But definitely, the next part is, I believe all three things, discovery, commerce, as well as lending, goes hands in hands. You know, B2B is a commerce company with a supply chain financing. Similarly, commerce is a discovery part. Discovery is a part that enables people to come here. So, I think it's very open to discover and very open to be very frank. The idea is that if you re-transact,
01:46:14
Speaker
with a very simple-to-use software, we are able to digitize more and more transaction. And as in when we are able to capture transactional data on a repeated basis, we are going to work on the next part of the vision. Does adding one customer give you access to his counterparties? Yes. Because you said, no, a purchase order. Yes, yes, yes. So the interesting part is,
01:46:40
Speaker
Uh, you know, uh, yeah, big customers, uh, on board with that. Okay. Yeah. Yeah. Yeah. Yeah. And then it goes out to their counterparties and counter parties coming automatically, free profile.
01:47:13
Speaker
However, the entire data is very encrypted because we are very, very clear about the data security and data security is a very, very critical fact for SMEs. Again, because of the trust part.
01:47:26
Speaker
So, you know, when you are going to build and utilize the data, it is going to be some proprietary engine which is going to be, you know, consume the data and then give us some, you know, overall result. Not a company specific result, right? But you're not selling to a counterparty, but that would be an easy sell. You would have an email ID. You have to have a soft marketing. Sell, outbound, outreach. Again, that is also a data security breach, right?
01:47:54
Speaker
Because I don't know the data, I don't know the phone number, but with the system, I don't know about pop-ups, I don't know about mail. You also want to digitize as more than 10,000 companies have been able to digitize their whatever. Okay, because purchase order is going through Transact. Yes, yes, yes. The mail is triggered through Transact so that mail can contain a call. Not just the mail, not just the mail, even we have done the WhatsApp integration as well.
01:48:21
Speaker
And so that is your Transact chatbot, which is sending Transact chatbot and we have an API to kind of, you know, do the integration for their WhatsApp APIs as well. Company's API as well. But what about the companies which would actually have? Correct, correct.
01:48:38
Speaker
But the interesting thing is, the reason is that while WhatsApp has bought WhatsApp, they are actually marketing it. But they end up using it for anything and everything. Payment reminder is critical. Reminders are critical. Very interesting.
Focus on Genuine Solutions and Internal Culture
01:48:57
Speaker
Let me end with this question. What's your advice to aspiring founders? Yes, so very, very
01:49:07
Speaker
critical advice is, you know, never ever get fascinated with what you are building, right? Always get very fascinated what kind of problems you are solving. And for that, very, very critical
01:49:25
Speaker
to stay very, very close to customers, to be very frank. I've seen enough number of founders, even we also did the same mistakes that we speak to, say, a handful of customers, and we say, yeah, this is a problem. Because we already have some solution in our mind, and we try to kind of find that problem for the solution which we have in mind.
01:49:48
Speaker
And we force fit, and we try to hear those things only, and these are the problems we should be solving, and this is on a larger scale. So that is the one very, very important advice I would say. Second advice, as per Martin, my learning, never money should be the last thing to throw to solve any problem, especially till the point you have not achieved PMF.
01:50:17
Speaker
Right. And third, which is not the least, honestly, very, very critical. And, you know, if you talk about, you know, all the founders, they get
01:50:27
Speaker
bogged down and pulled up by their businesses and their business operations and their GTMs and whatnot. And they keep aside their cultures. I have seen enough number of bigger companies also into my surprise where they think culture can be done later. I think there are two products which you're badly building. One is a product which is something what you're building for external customer.
01:50:52
Speaker
And internal product, which is nothing but a culture for your internal team as well, because that will take you longer. When your chips are going to be down, these are the people, the important set of people are going to stick with you. For example, in our case, we had created a cultural document of, I think, more than 60 pages in the first year of our existence.
01:51:14
Speaker
And I think hardly one or two people must have resigned for our company for any reason. And we had to take, unfortunately, some time call, OK, boss, this rule is not relevant for us right now. But hardly seen any additional, because the culture, the way we are building our team and culture.
01:51:39
Speaker
And that brings us to the end of this conversation. I want to ask you for a favor now. Did you like listening to the 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 adatthepodium.in. That's adatthepodium.in.