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How I Built Two Unicorns After Being Arrested By The FBI | Sandeep Aggarwal (Droom & ShopClues)
412 Plays3 years ago
"Most entrepreneurs think that insufficient capital goes against them. You die due to indigestion, not due to hunger."
Sandeep Aggarwal's powerful insight challenges the "blitzscaling" mentality prevalent in the startup world. In this episode, he explains why having too much capital can be more dangerous than having too little, leading to a lack of discipline and inefficient spending. It's a hard-won lesson on the importance of capital efficiency, forged from the experience of building two unicorns.
About Sandeep Aggarwal
Sandeep Aggarwal is the only tech entrepreneur in India to have founded two unicorns back-to-back: ShopClues, India's first managed marketplace, and Droom, India's largest automobile e-commerce platform. After a successful 14-year career as a top-ranked Wall Street internet analyst covering giants like Google and Amazon, he moved to India to launch his entrepreneurial journey. Despite losing his first company amidst a personal and legal crisis, he founded Droom in 2014, scaling it to a $1.2 billion valuation. His first company, ShopClues, became India's 5th consumer internet unicorn and achieved that status having spent only $70 million.
Key Insights from the Conversation
- The "Real India" Thesis: ShopClues’ initial success was driven by a visionary strategy to target the millions of small sellers and buyers in India's Tier 2 and 3 cities, a market completely ignored by competitors at the time.
- The Viral Growth Hack: Sandeep reveals how a simple but brilliant marketing campaign—selling an Adidas deodorant for just ₹9—led to an explosion in user growth for ShopClues, taking them from 18 to 200 orders per day almost overnight.
- Engineering Trust with Tech: Droom’s entire business model is built on creating trust in the highly fragmented used-car market through a proprietary tech stack, including an algorithmic pricing engine Orange Book Value and a digital inspection service ECO .
- Resilience as a Superpower: The conversation highlights how Sandeep turned a career-ending crisis, including his arrest and the loss of his company, into the clarity and motivation needed to build his second, even more resilient, unicorn.
Chapters
02:23 - Surviving the Dot-Com Burst & Landing a Top Wall Street Job
07:07 - The "Real India" Thesis: Why We Ignored Cities to Win the Heartland
09:46 - How We Onboarded Our First Sellers And Created Digital Catalogs from Scratch
15:00 - The ₹9 Deodorant Hack That Got Us 30,000 Users Overnight
22:58 - Understanding the Insider Trading Allegations
29:48 - The Comeback: Analyzing 52 Ideas to Found Droom
32:00 - The Droom Thesis: Fixing Trust in the Broken Used Car Market
38:52 - How Droom's Transaction Model Actually Works
41:09 - Engineering Trust: Building OBV, ECO & Droom History
45:41 - Droom Credit: Fixing the Used Car Loan Problem
53:30 - Path to Profitability & The Economics of Droom
Hashtags
#FounderThesis #SandeepAggarwal #Droom #ShopClues #StartupIndia #Entrepreneurship #Unicorn #Ecommerce #FounderStory #StartupJourney #Resilience #Comeback #GrowthHacking #Marketplace #IndianStartup #VentureCapital #BusinessPodcast #MakeInIndia
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Transcript
Introduction of Sandeep Agarwal and Podcast Hosts
00:00:00
Speaker
Hi guys, this is Sandeep Agarwal. I am founder and CEO at DOOM. Hi, I am Akshay. Hi, this is Saurabh. And you are listening to the Founder Thesis Podcast. We meet some of the most celebrated sort of founders in the country. And we want to learn how to build a unicorn.
Sandeep as a Pioneer in Indian Unicorns
00:00:31
Speaker
Tata Birla Modi. These are the names associated with the first generation of business people from India. They were the early pioneers in setting up large organizations in India. Similarly, when one would talk about the pioneers of building unicorns in India, there would be only one man who has done this not once, but twice. And that man is Nanadhar than Sandeep Agarwal, the founder of Shop Clothes and Room.
Early Life and Education Journey
00:00:58
Speaker
Sandeep's had a fascinating journey, first as a ringside observer to the internet boom and then as a participant. Sandeep built up his reputation as one of the most savvy Wall Street analysts and his insights at work combined with his personal history of growing up in India built up the conviction in him that the time was right to start an internet business in India and the rest as they say is history.
00:01:25
Speaker
Born and raised in Chandigarh, happy family, big family. We had a big house and in hindsight, it was so beautiful and amazing. So there was a very acute family pressure that I should also pursue Chartered Contancy and I was already doing Bachelor in Commerce.
Wall Street Career and Shift to Indian E-commerce
00:01:41
Speaker
So it was a crucial progression. But when I enrolled for Chartered Contancy,
00:01:47
Speaker
or CPA somehow I did not realize but I was less happy and anyhow I tried a few things nothing worked out because I was really not trained for that career track but when it worked out I ended up doing my master's and though their their onwards somehow I know academically also started doing much better and so I graduated from there I did my internship with Kotak Mindra Goldman Sachs joint venture in Mumbai
00:02:13
Speaker
And although in hindsight, if I look at, I would say this was more like partly research, partly wealth management. So anyhow, but I had more academic curiosity. I wrote a GLAD exam, went to US for my higher studies and during the first dot-com boom, graduated from the business school. When I was doing graduation, that time the first dot-com boom was happening. When I connected doors, I realized that it was very bad time to be in a business school. I should have been in a Silicon Valley.
00:02:43
Speaker
and I graduated 9-11 happened and dot-com, dot-com bust happened and when I connected the boards, I realized I've been in a business school now rather than in a job market, but of course it was true for me.
00:02:57
Speaker
I ended up getting a job in Schwab.com, the largest online stock brokering firm. I was part of the very respected leadership program run by Mr. Chuck Schwab who personally ran this program and I was one of the 7 out of 48 who were chosen for this job. I actually first created a credit risk system for the money market mutual fund of Charles Schwab.
00:03:19
Speaker
which invested in 5000 banks around $190 billion.
Founding ShopClues: Challenges and Naming
00:03:24
Speaker
So in 2010, I thought that while the internet industry was 16 years old, it was stopping to get ready for e-commerce and many other opportunities, very similar to what happened in China from 2000 to 2010 and very similar to what happened in Silicon Valley from 1964 until 2010.
00:03:48
Speaker
So, I thought if those two countries are precursor to what can happen in India, I should be there in India, not writing research reports. I may close to a million over a year, but I should read an underlined asset. And with that thought in mind,
00:04:08
Speaker
It was very clear. It is a marketplace. It's an e-commerce. It's for India. So by the time it is Father's Day and I resign, I'm already into that idea for eight months or 10 months.
00:04:22
Speaker
Like how do you build a prototype? From January 2011 until May 2011, I already had a full line up and running technology. I had three different vendors, one in Mumbai, one is in London, one is in Ukraine working on my idea.
00:04:42
Speaker
Like you were saying software vendors, like they were coding and building the software shop, shop news first ever release. And why the name shop clues? I was like, I covered internet sector for living. I knew all these, how we have home remedies, how we have a wisdom about Silicon Valley. So I like to say that I was very fortunate together, lot of wisdom of Silicon Valley.
00:05:07
Speaker
So, because of B2C, Consumer Internet Play, I tried honestly 2000 names. I can even tell you the story. Shop Clues was not our most favorite name. But we were getting close to launching our business.
ShopClues Model: Supply Creation and Market Differentiation
00:05:20
Speaker
And Shop Clues was a placeholder since January of 2011.
00:05:25
Speaker
In September 2011, after moving to India, I sent an email to my entire team, maybe 8 people, that guys a month from now, we must settle on one name and after that we cannot change. Shoplose has been the name so far.
00:05:42
Speaker
This is not written on stone. If you have a better name and you can convince everyone, we will go with that name. If nobody of you come up with a better name, we will go with shop clues. This is not necessarily the best name, but let's say five years from now, if we fail and we analyze why we failed, I can tell you name shop clues will not be the reason.
00:06:06
Speaker
Why would we say we failed? But it was a very weird name, right? It was no snappy word, lip card. And by the way, I had a much more, this little bit more story, is I had 200 more things around clues. So I had a travel clues, investment clues, education clues, and you did it.
00:06:26
Speaker
I had 220 memes. They were already a vertical play. I would like to say I had a... I did not have a vertical in the vertical. I had a vertical in the horizontal. Then I teamed up with three more people in Silicon Valley. Second one because he was VP of engineering with one of the technology companies which was ran by one of my friends. So they all were in here.
00:06:50
Speaker
And they were like me living in Silicon Valley for 12, 15, 18 years. And I made one thing very clear that this is a consumer internet business for India, cannot be built from Silicon Valley, so you have to be on the ground. So, all of us sold our household, moved to India.
00:07:07
Speaker
an e-commerce business, I believe like supply is more important than demand, right? Like creating good supply, good catalog. That has to be solved first before you solve for demand. So Akshay for shop news, there are a couple of things which were very different.
00:07:24
Speaker
Then any other who was operating in an e-commerce category, that was a whole thesis. Why I left my $1 million Wall Street job, why I left Silicon Valley, why I put all my eggs in one basket called Shop Cruise, is because Shop Cruise became first ever marketplace in India, independent of category.
00:07:45
Speaker
And this is was that India's largest retailer is going to be an online company and that online company will be a marketplace model asset light, just in my supply type of model rather than a inventory like model. We on record were the world's first ever e-cocks company who became a managed marketplace. And what does that mean? Is it a fulfillment by the marketplace?
00:08:09
Speaker
written policy, common written policy by marketplace and all the payment policy by marketplace. So we did not give control for fulfillment, return and payment to the sellers.
00:08:42
Speaker
So, did you have the most tech startups have in garage phase, like the founders sitting in a garage in Silicon Valley or in India's second apartment phase? Absolutely. See, 10th October 2010, I started shop clues from my house in Silicon Valley. So next 10 points, literally, it was absolutely my garage in my house in Silicon Valley or my backyard.
00:09:09
Speaker
or one of the rooms and everything was full of whiteboards and all that environment. When I came here, I lived in a corporate housing for four months and that was a garage. You can see everyone operated from there. And then we did our first office, which is not apart from the Google India's office here in Bhuganam. And in fact, we started from there literally have seen even our first fulfillment center.
00:09:34
Speaker
was also the basement of the same office. And until we reached 200 orders per day, probably 30 cents, the packages were packed by me and my team, not just the packaging wise and the fulfillment.
Building Supply and Community at ShopClues
00:09:46
Speaker
How did you build supply? It is important to do that first.
00:09:51
Speaker
Look, we were starting to get out of our corporate housing to our office in Gurgaon. So we met someone who was going to supply a few laptops and printers, which we needed to run our office. I asked that guy, why don't you start selling online? And he says that, sir, I don't know English. And I don't know very big business. I said, I'm not charging anything from you. You only pay when you sell.
00:10:15
Speaker
And you have this big facility, but it's only open from 1 am until 8 pm. You are only selling to someone who knows you or stop by at your shop. Right? Imagine your store is open 24 by 7, Pan India. Imagine you getting order from Coim to Orgohati.
00:10:29
Speaker
I'm that very drinking. He said, sir, I don't know English, but my wife is an engineer. So this Sunday, are you working? I said, no, but I'll come to office. He said, OK, my wife will come to your office. You meet me on Sunday. I take one of my team members and the office. And he and his wife stay for one hour. And she, I remember giving a thumbs up to her husband after she heard us for the next 10 weeks.
00:10:56
Speaker
I or my team member will go to Mr. Jans dealership and we will literally take our laptop and make digital catalog because see that time for everything there's a digital catalog in India now that time there was nothing so we call it 3P, product, price and picture.
00:11:12
Speaker
We said, you give us 3 PE, we will handle everything else. And so we will go and create their catalog because they did not even have a product and price and picture, right? So we created that catalog. Then one of my friends, he and another friend who ran this company called Happy Unmarried. It was a famous school brand. This company has now come up with multiple D2C brand doing very well. They were building this early stage of building Happy Unmarried. Very similar to some of these G2C brands.
00:11:40
Speaker
So we told them, why don't you start selling? They started selling this keychain to 100 rupees coffee mug. Then I met a friend of mine in Ahmedabad and his neighbor actually offered this business where you could give your digital picture and they'll print it on our coffee mug. So I said, why don't you come online? Then I met another person who ran other home furnishing. So that's how the first four or five people happened. Like little who matters socially or who supplied us something.
00:12:10
Speaker
And then we did a business development team. We had a lot of crazy ideas in terms of how the supply can be built, what should be our pitch, what should ever go to market material, etc. And for its time it worked.
00:12:22
Speaker
We started having thousands, our pitch was solid. We did loads of community work. We did seller summits. I imagine in a farmhouse in New Delhi, you have 400 sellers who sell on shop news coming and we are welcoming them and giving them free things, giving them product demo. They are staying for dinner. The da's going on. Then there's our art ceremony. Most of these sellers have never academically accelerated. Now receiving a trophy, becoming a larger seller or the best rating, etc. And so all those systems started shaping up.
00:12:52
Speaker
All of a sudden, we had India's largest supply while our competitors had a must-hire GMV because they only sold laptops, electronics, and while we sold clothing, shoes, and accessories, health and beauty, jewelry, watches, gift, and flower, and that for money, every selling price was less, number of orders were much more, and we had our unit economics so much more in our favor.
Revenue Model and Customer Acquisition Strategies
00:13:14
Speaker
What was your revenue model in this? Like, you would keep a percentage of sale price?
00:13:21
Speaker
Well, that time it was not uncommon if you wanted to have a listing fee, insertion fee or something. But even that time, large businesses did not know the word called e-commerce. I'm not kidding. And our supply was going to come from traders and retailers. So we kept it very simple.
00:13:38
Speaker
but four men's based managed marketplace, they only when you sell. So it was X percentage by category. In motor electronics, we made let's say five to 9%. In clothing shoes and accessories, we made 10 to 80%. In X free high, let's say a category which has a 60%, 80% gross margin, we made 18%. So I would say 3% to 18% average was roughly 12%. Actually, there are a couple of things because I had a Wall Street training,
00:14:08
Speaker
I had a firm believe eventually the largest retailer of India will be an online company and that online company will be just in time supply like a marketplace rather not a marketplace. Secondly, because India is a low-trust market with e-commerce services not fully evolved so marketplace has to be managed. We actually did not offer cash-on delivery and when I started shock news 80% of India's e-commerce was cash-on delivery
00:14:39
Speaker
For shop clues it was only 8%. We focused more on unstructured categories such as clothing, shoes and accessories, health and beauty, jewelry and watches, gifted flowers and another thing was we focused, we catered to 2nd and 3rd year India rather than tier 1 settings.
00:15:00
Speaker
How did you acquire customers like you wanted to focus on tier 2, tier 3 cities? These customers would be tough to acquire through like regular online ads. Akshay, I as a wall street analyst, I covered
00:15:14
Speaker
Amazon and eBay, but I also cover Google, Facebook, LinkedIn, Yahoo, et cetera. So I was as familiar with internet marketing as with e-commerce. A typical Indian e-commerce company paid 1,800 rupees or roughly $30 that time to acquire a customer. They paid that much to acquire a customer.
00:15:41
Speaker
I knew that this is a faster way to achieve bankruptcy. I said the most analytical department at that shop news has to be a marketing team rather than a finance or analytics team. We used lot of things which were very smartly crafted. We started collaborating with a third party seller. They would sell a deodorant for 160 rupees in retail.
00:16:09
Speaker
We told them that we can push a few hundred to a few thousand. I said, okay, how about two days and 600 deodorants? He said, sure. Now I say deodorant, Adidas deodorant for night would be at shop news only until day at 11 a.m. and no cash for delivery. Last four months before this deal, I was only setting 18 orders per day.
00:16:36
Speaker
After and I had 8800 registered users in 4 months I remember. After first deal of deodorant. We sold 4000 deodorant in 2-3 hours. I registered users backed up from 8800 to 30000.
00:16:56
Speaker
Next day onwards, my daily or any order without discount and promotion were not 8 to 20 per day. We were actually 200. This is such an amazing growth hack. And did you raise more funds after this kind of growth would have definitely needed more funds, right?
00:17:14
Speaker
Yeah, so we raised 1.95 million from 15 of my friends after when we came to India within three months when we were still doing 18 orders and we did not have a courage but we were funded with our series A by ICBC and after this kind of growth within five months we started getting lot of inbound interest.
Funding Journey to Unicorn Status
00:17:33
Speaker
For that time we did India's biggest, probably series A.
00:17:35
Speaker
We did India's biggest since week because it looks very paltry and small now. It was 4 million that time for Series A and it was around 10 million for Series B. And when did you achieve unicorn valuation? We achieved unicorn valuation in 2000, end of 2014. Okay, within 3 years of starting, amazing. 4th year of operation we reached the unicorn status. That time it was 5th unicorn in India.
00:18:03
Speaker
and fastest to be unique on level that time. And we had only 70 million to reach a unique level. And give me like a summary of that growth curve. Like obviously you would have run out of office space and you would have needed to scale up that scale up. Absolutely. So Akshay, we launched Shop Cruise commercially under closed beta. Only if you lied us through Facebook, you'll get a user password to access shopuse.com.
00:18:34
Speaker
We did that on 21st November 2000. Until I mentioned to you this 9 rupee deodorant, this was on March 2012. So let's say November to March 4 months, we were only doing on an average 20 orders per day. But literally after the two deals, we reached 200 orders per day.
00:18:57
Speaker
By April of 2012, we reached 400 orders per day. By August, we were already at 2000 orders per day. So, it looked like 2000, it looked like so small, from 20 to 2000, around 8-9 months was right. And by December 2012, we were
00:19:16
Speaker
actually north of 10,000 by December 2000 north of 10,000 by December 2013 I would say 100,000 and by December 2014 by the time we knew two months before the word knew that we are unique on would be around 400,000. This is like June 2013. I've been now running shop clues for several years and it first time rather than feeling like headless chicken
00:19:46
Speaker
First time I'm feeling that looks like we have arrived. And the month I called we have arrived will be eventually profitable, eventually unicorn, eventually public company is the month I travel to USA. Where I travel every six months since I moved to India because I mandate my active green card and one of the condition was that I must be back in USA every six months. So in July 2013, I go to US for two weeks.
00:20:18
Speaker
This is 29 July 2013.
Insider Trading Allegations and Impact
00:20:21
Speaker
I am coming back with my ex-wife, my two, and all of a sudden like a Hollywood movie, I have not even got down from the car. Police cars come and surround us in a T-shape so that we cannot back our car and run. And it says FBI. And they say, who is Sandeep Agarwal?
00:20:46
Speaker
And I get down and I say, I'm Sandeep Agarwad. And they sent over a document to me and say, sir, you are arrested. I said, for what? They said, when you were analyst in 2009, you provided some information to a client of yours and insider trading information. So we order from a judge to arrest you. And right in front of my kids and XY, they arrested me.
00:21:15
Speaker
They even removed laces from my shoes, either fearing that I will strangulate them. It was exactly the Hollywood movie you would have seen. Everyone is crying. Everyone is in shock. They take me to a facility. I have no idea where they are taking me, but they gave that name of that facility to my ex-wife. Only thing I know is I'm handcuffed, sitting with two cops on a back seat on a walkie-talkie. They are saying,
00:21:44
Speaker
He is in our possession, informing someone I could tell in New York. Then I recognize this is Beria, this is Silicon Valley. I live there for a decade and a half. I know they're taking me towards outskirts of San Francisco and near to the Chevron oil refinery. And they keep me, they take me inside which was an overnight cell where someone who got a traffic ticket
00:22:09
Speaker
Someone who was too drunk to drive, someone who had a domestic violation, someone who was whatever was kept overnight. It was not a gym, but it was a holding cell. It was a holding cell for an overnight.
Understanding the Insider Trading Case
00:22:24
Speaker
They took me inside next 5 AM. Like this is now, I'm in that cell for 10 hours.
00:22:34
Speaker
He took me to FBI office in San Francisco, where he created this mug shot for me, which you have seen in a movie, me holding my height. And I'm presented in front of a judge in a federal court. I was given bail, and I was asked that your case is being transferred to a judge at New York. So I have one fundamental question here.
00:23:02
Speaker
Generally, insider trading is brought against employees of a company who, by virtue of being employed at a company, they have access to this information. Absolutely. Let me clarify that insider trading definition is you are in possession of something which is confidential and inside information, not publicly available.
00:23:29
Speaker
So one is right inside information, not publicly and for me available. And you acted on that information and made money on four things have to happen in position of information is non-public. It is my team. I had a coffee with Bill Gates is not a material information.
00:23:57
Speaker
If you are in a possession of information, it is material, non-public, you acted upon it, means you did not ignore it, you acted upon it in your benefit and you made much out of it. All five conditions have to happen. Four, it be called as breaking the law.
00:24:14
Speaker
This was originally designed to your original question for two type of people. One is working in a company and giving and compromising with his fiduciary responsibility to give that information to an outsider. Or it was designed for the by side people who will use that information on trade and make better. But I was a sensor analyst.
00:24:43
Speaker
Right? It was in government record that I did not trade and I did not make money. How did this affect Mural at Shop Cruise? Of course, anybody who got my role or other roles, they were not trained, they were not ready.
Leadership During Crisis and Business Continuity
00:24:58
Speaker
Everyone, I was to Shop Cruise what Bill Gates was for Microsoft or Mike Zakhar Bhagi's Facebook. No different. So it was a low morale. I asked my team members three things. One, senior members I said,
00:25:11
Speaker
You will never fight with each other. You will never have insecurity from each other. And in months, even if this company pays you nothing, you are not leaving. And I told everyone else that guys work 50% harder and we will write a history. So I will have certain sessions. I'll write some long emails to keep that up. I was a very fatherly figure.
00:25:34
Speaker
So, morale was a problem. I knew that company was dependent on me. So, I didn't care about any of my recognition or getting paid for my effort, but I made sure that company successfully raised Series D and E. Oh, okay. It really happened in this period when you were in the US. I knew. I resigned in October.
00:25:58
Speaker
2013 and I knew the company would be dependent on me at least until December 2015. The company was fundamentally very strong and it was the most differentiated company with the best unit economics. Because of that and in half though all this happened, Akshay I was in USA
00:26:19
Speaker
By the way, all this time, series C, D and E, all three happened. Series C was already happening. In fact, that was one of the reasons why I was in USA when my legal case was happening. So after C, I saw while I was still in USA, I saw a lot of evidences that until my legal case is going on,
00:26:43
Speaker
It would be almost impossible for me to come back to Shock Loose. And every six months I could tell where I'm reducing my Shock Loose dependency on me, and creating copy-pandemic assets independent of me, thus helping that company to last forever. My primary job was to make sure I, my family, kids, wife, parents, they stay afloat.
00:27:09
Speaker
Shop lose does not go belly up and on the way I don't lose me in terms of don't die. These were literally my four survival techniques and I would say human survival on its best. I recommended one of my team member as a potential CEO but I told my board members that these people run
00:27:39
Speaker
the company and I'm not dying. I may not be able to serve the company as executive, but because if I am there and for me to communicate to them and ensuring that things are getting done is much better than you bringing Harvard MBA working with Xmecon Z.
00:27:58
Speaker
You did great with ZoomA and in fact only your GE responsibility matrix scoring very high. But if I don't have a good chemistry in my view, the company will still fail because this is not a 30-year-old Fortune 100 companies which are professionals you now can run. And the founder for a unique peculiar circumstances cannot serve as a CEO. But it's not dead and he's not brain-dead either.
00:28:26
Speaker
So with much of the reluctance, it still accepted my recommendation. And that gave me a lot of confidence that I will be able to save this company, even if I'm not running day-to-day operations. And then the day came, 8 November 2013, that while it took seven years, finally,
Legal Resolution and New Ventures Planning
00:28:55
Speaker
They dismissed and dropped all charges against me. But during that time, because of all the preparation and even while I was there, I was able to guide my team, build products, innovation, drive business. We were able to close the next series of capital in March 2014. After that, I knew that at least for the next 15 months,
00:29:26
Speaker
to two years, capital will be not the reason why this company will go belly up. I was already one notch higher in terms of my ability to make sure shop users not go belly up. On the other hand, I was getting a message from my tourney that your cooperation is so coming to an end. So I said, what's next for me? And while I was quite down and under,
00:29:55
Speaker
I was very clear that I wanted to be the king of my hill again. And I started working on multiple ideas. I created, I wrote down 52 different ideas, which I thought would help me create a billion dollar company. Each one could be a billion dollar company. That time it was still, Shop Cruise was a fourth unicorn.
00:30:22
Speaker
So even it was even during my legal case, it was not that common to think about. So that's 52 ideas. All I knew could create a billion dollar company.
00:30:36
Speaker
Because I was already one time a successful entrepreneur and a top-ranked Wall Street analyst, I utilized all my training and exposure to now come up with a little bit more methodical and scientific framework. How do I want to go about shortlisting the idea I will finally pursue? So I use screens such as large addressable opportunity, technology as a center point, high gross margin, asset light order,
00:31:07
Speaker
can perhaps handle it for some time from USA. Something I am passionate about. It may not require a huge amount of capital. Why I like Dhruv was India was the fifth largest automobile market in the world.
Founding DOOM: Disrupting Automobile Sales
00:31:25
Speaker
Unlike electronics, computer, mobile, fashion, travel, online was among the least online penetrated category.
00:31:36
Speaker
And I saw for 140 years, automobile engine selling has no disruption. I thought with the use of technology and mobile and AI and IoT and many other things and ecosystem and platform approach, I can create a 21st century automobile buying and selling platform.
00:31:56
Speaker
And so that's how I ended up choosing Doom. And you had used cards as your focus area right from the beginning. Yes. So whatever we do even till day that was completely documented return part of the original vision from the day one. While there's nothing wrong in pivot, I'm not a big fan of pivoting. I like vision. You may take your own time to develop it and vision can evolve.
00:32:22
Speaker
But I am not a big fan of pivoting to a very dramatically different opportunities. But then, who was able to secure the funding? I started thinking about the idea rather than not being able to work in a long-term purpose.
00:32:40
Speaker
Then I was able to get a VP of engineering who was VP of engineering in one of my friend's startup to join me. He also got another very senior, highly experienced engineer. And then I started paying $800 a month to another distant friend of mine who ran one company and who said, I'll give you one room, free internet, free printer, free water.
00:33:06
Speaker
$800 to pay me and take one room at the office. There was no co-working space like we were etc at that time. So, I paid $800 to him. I, my EPF engineering that another senior engineer, we started working out of that. All of a sudden felt like day one of shop news. I contacted the landlord.
00:33:32
Speaker
who was the landlord when I was building Shockloose, a smaller building from where Shockloose originally started. I, in him and I said, hey, do you buy cars that building from where we started Shockloose and we operated until last year? He said, yes, nobody occupied that building. So I said, can I take two floors?
00:33:53
Speaker
He said sure, so from August 2014 until 21st November 2014, I plus 20 more people probably got three hours per day sleep, worked extremely hard and launched the full-fledged India's first ever B2C pure play e-commerce for automobile app on 21st November 2014. By then we had already taken to 35 employees.
00:34:21
Speaker
How did you get inventory to this? So what you launched was a consumer-facing app or something where the sellers or the dealers can... It was a full-fledged platform where consumer will come, look, search, buy and buy, and dealers and individuals will be able to list an automobile which they want to sell using our path.
Go-to-Market Strategies for DOOM
00:34:45
Speaker
So it was a full platform.
00:34:47
Speaker
But did you have supply in place when you launched? Yes, we were able to get 50-20 automobile dealers in Mumbai and New Delhi.
00:34:56
Speaker
and around 50 to 100 automobiles. And every day we kept on increasing the supply. Okay. Okay. Okay. You told me about some of those go-to-market strategies you use for shop clothes, like the flash sale with deodorant. Can you tell me some of those go-to-market strategies or those growth strategies that you use for drool? Because you have to now build both sides, the supply side.
00:35:19
Speaker
Absolutely Akshay that's a very does not matter how disruptive innovative you are in the internet businesses in addition to disruption you almost have to do pamper users to change their legacy habits.
00:35:34
Speaker
From 21st November 2014 until 7th January 2015, we sold zero automobile because none of these strategies were at place and it was not easy for any Indian
00:35:50
Speaker
Forget about our 200 rupees less selling bull or our brand new silly number of smartphone. This was a used car in a lotus market. So, we sold no automobile from 21st November 2014 until 7th January 2015. How we were able to get our first order on 7th January 2015 was we said we sold
00:36:18
Speaker
Apajaj Pulsar motorcycle 2012 model usually costing $800 or 1000 or let's say 60,000 rupees. We sold it for $9,999.
00:36:39
Speaker
So, this was like a special offer, let's say, a flash sale. Yes. So, while we sold only one more cycle and that to around $1000 loss, or maybe $800 loss, probably half million people that day came to know about Broom.
00:36:58
Speaker
because a three-year-old motorcycle only available for $120, $30 versus $1,000 was very viral, and it caused an unmatchable hormone among users. Right? After that, we created more of different platforms, different programs, a car for $99,999.
00:37:23
Speaker
Harleh Kavitsa for $49,999. He had India's biggest bike, Mela, India's biggest car, club, Sunday automobile market. And we create these different type of properties. They all were viral, formal, and it created, and people will come to do the auto type. We also added a program called Go Set Helmet.
00:37:50
Speaker
where you could buy a 600 rupees high quality helmet only for 9 rupees. The helmet had a boot branding and every time we will run that sale in one hour, 12000 helmets will get sold. People thought that we buy this helmet for 7 rupees and sell for 9 rupees and make 2 rupees profit. It was very fun during that time if you are travelling to National Capital region of New Delhi
00:38:19
Speaker
at you're standing on a traffic light in your car, sir bike, two wheeler, rider may have a helmet written room on it. We experimented a lot of things, only one door. So we did a lot of these things and these were enough for people start coming to know about room.
00:38:38
Speaker
But I have a question here, like in shop clues, when you sell a product, it's easy that you just have to have a logistics partner who goes and delivers it to the owner, the buyer, but that's not the case here. So how did the sale happen? Because, yeah, no. So by the way, how do works is you come on room, create your requirements. Let's say you say, I'm looking for a toy talk, Fortuner thousand 80 white color in New Delhi under 20 lakh rupees.
00:39:09
Speaker
Then, based on the existing supply, our algorithms will match with our vehicles and you'll get a message that, Hi Akshay, we found 7 automobiles which match your requirements. After that, you pay 3% of automobile value to us on a credit card, debit card, net banking or mobile wallet. That money is kept in escrow.
00:39:31
Speaker
And then the vehicle is certified for you. And if the certification has been cleared, we will bring that automobile to you. And you just drive it. And if you like it, you pay remaining 97%. And if you don't like it, you get 3% refund, which was kept in escrow as a booking fee. So that's how room operates.
Comprehensive Offerings of DOOM
00:39:51
Speaker
That would be how you operate today, right? When you started, was it like this? Rather than bringing the vehicle to you,
00:39:58
Speaker
When we operated that and the buyer will go to that, we will connect buyer and seller activity and close the transaction. The drawback was that often time they will bypass us.
00:40:12
Speaker
We will have their own site but we have many others but that taught us lot of things in terms of how we can enhance our own value proposition that even when buyer and seller know each other still our platform is not bypassed or 250 lakh rupees buyer shorty or return.
00:40:28
Speaker
or various things which we offer which the dealer would not offer you and we found over the years that a buyer will be less likely to bypass us for a 3% saving because that's the only same saving he'll be able to drive his bypassing room because that is a fee we'll charge from a dealer and often and in long run we also realize that a dealer who was doing very well on our platform would not like to bypass us because he would like to
00:40:56
Speaker
He would not like to bypass us where the platform is contributing annual 200% growth rate for him.
00:41:05
Speaker
What is the certification thing that you said that you certify the car? What do you mean by that? We actually unlike shock clues where we created nearest first ever marketplace but with one different is that we were the first marketplace globally to take care of the last mile delivery because we did not think the small businesses were in India already at that time to even understand the e-commerce forget about the last mile delivery and fulfillment.
00:41:29
Speaker
But when I was doing room, it was not a brand new selling item, which can be sent to a courier. It required, it was a used power, right? So we built certification service. So we built a product called Orange Book Value, which is India's defective standard for used vehicle pricing. It gives you clear market value of any used vehicle. Then we built a split app for automobile inspection called Eco, which you can download from Android.
00:41:56
Speaker
and 13,500 auto mechanics in 1000 cities use our proprietary technology including AI Toolkit and IoT device to certify a used vehicle. And third we create a product called room history which has up to 100 million automobiles historical record such as the previous honors.
00:42:17
Speaker
disputed type of theft history, outstanding auto law. So, using open book value for pricing, eco for inspection, history for historical record, we were able to certify any used vehicle, anytime, anywhere in India. Cheaper, better and faster than a manual way of certifying our used automobile. And then, room of ski is our last mile delivery which will bring the vehicle to you or take it
00:42:45
Speaker
And Droom credit is our service from Droom which makes loan and insurance possible. So, you think about Droom.in or Droom apps as an e-commerce platform, or CD, e-coin history for certification, Droom credit for loan and insurance, and Droom velocity for the last mile delivery or return.
00:43:07
Speaker
That's how we build a platform plus multiple ecosystem services, very similar to solar system. Now tell me about Drove history. How do you build that? Every year, roughly 5.5 million used and new cars are sold in India. Every year, 18 million new two-wheelers like Motorcycle and Scooter and 40 to 45 million used motorcycle and scooters are sold in India. But the install base of the last 30-40 years in terms of vehicles still in use,
00:43:38
Speaker
not 30, 40, 50 million, it is 250 million. So, group history has built India's largest national repository for used vehicle historical record. So, whenever you are buying a used automobile as a buyer, you want to know number of prior owners, disputed title, theft history, outstanding auto loan, any natural gravity damage such as flood damage to the rust under the car,
00:44:06
Speaker
or accident claims from the insurance company. Or outstanding auto on whom history is India's largest national repository with 200 million plus automobiles, historical record as a database and on demand by entering the automobile registration number, you can get industry of that automobile.
Data and Financial Services Development
00:44:27
Speaker
So this product is work in progress. Some of these products are available in some other countries, but there the mandate was undertaken at a government level. We are a startup company. We folded our sleeves and started. We said, still, something is better than nothing. And over the years, we were able to cross more than 200 automobiles. For some vehicle, I may have zero historical record. Some vehicle, I may have four to five historical records. And the best product
00:44:55
Speaker
I may have up to 45 different historical record for a single vehicle. And this is again free to use. Does it act as a marketing tool? Like the way you mentioned about Orange Book Value is the beginning of the funnel. So this one is also work like that. We have also a vehicle finder service, which also work like that. But yes, when it comes to automobile certification, these products are used in that time.
00:45:20
Speaker
and for users they are free but we are experimenting with our premium offering. So for example for a free 150 rupees you get a very detailed valuation report from Orange Book Value and for about 100 rupees you can get a premium historical certificate for any used vehicle independent of whether you are buying or selling. Tell me about Drew Credit. So do you like die up with NVFCs and backs?
00:45:45
Speaker
We have tied up with dozens of NBFs. If we did not sell loan and insurance in our first six years of operation, sometime we feel very stupid about it because in automobile you can make more money from loan and insurance than by selling automobile. But he did not have a luxury of having a pricing engine, inspection engine, history, and many other services which did not exist in India, period, independent of who's providing them.
00:46:12
Speaker
So we as a company our strategy was to build all the basic plumbing work for India so that the digitization of this category can happen. So during that time unfortunately we did not get bandwidth to sell law and insurance and because we were asset light and we were technology heavy with low burn rate
00:46:32
Speaker
We did not want it only making money through transaction take rate and letting go very lucrative loan and insurance offered for multiple years. But a year ago, we started tying up a lot of banks and NVFC and now every time if we are able to attach loan or insurance when you buy a car from room, we are able to make money from that.
00:46:57
Speaker
So, would we earn for providing leads or do you also provide some underwriting support? Neither of the two. We have done, by the way, both. They don't work.
00:47:08
Speaker
Lead, we want, we are an e-commerce, performance-based e-commerce company and we like it that way. And underwriting, in my view, banks and a lot of other companies are already not very comfortable funding a used car and then they can't give really the underwriting decision to someone else. We build very advanced technologies for underwriting, credit risk, and many other things. In hindsight, I feel they were way ahead of their time.
00:47:36
Speaker
So, right now we really do a good job of attaching loan and insurance. Underwriting, loan approval, interest rate terms are decided by the lending partner. We get anywhere between 150 basis points on a low side up to 300 basis points on a high side as a one-time finding fee on a successful reversal of the loan and 19.5% insurance premium.
00:48:00
Speaker
as our take rate from the insurance writer. Like you rightly pointed out, the problem with used car lending is nobody wants to do it. Is there a way for you to solve that? Because more robots than the writing industry do like FLDG. Akshay, nobody wanted to do the used car, but everyone had a strong desire to do it. But for them, the risk and reward was not encouraging enough.
00:48:30
Speaker
and the reason was it used car for lender or for insurance company therefore problem number one who is a seller can i trust him second how do i know the exact price of the automobile third is the how do i know the exact condition of the automobile third other documents genuine
00:48:50
Speaker
If these four things are answered for a lender or insurance company, they would not mind funding a used car or writing insurance policy for a used car.
00:49:01
Speaker
For Droom, these things were manual. Now, for Ising, you have orange book value. For condition, you have equal. For documents, you have history. And seller is actually for all practical and optical purposes, Droom. Droom will not sell an automobile until while legally an accounting wise, the car does not belong to us because we are a just-in-time supply model with a cloud dealership concept.
00:49:26
Speaker
But for all practical and optical purpose, I'm giving the return, I'm giving the certification. That is exactly how room operates. That is how we have been able to create a more meaningful sense in this uncharted territory and we are finding lenders more comfort around the availability of information which did not exist in a scientific and comprehensive manner before room. But would there be an opportunity to have
00:49:55
Speaker
better running if you went deeper into it, in terms of not taking just the lead generation phase, but actually taking a spread. That's right. Akshay, so first of all, just to clarify, even today it is not lead, it is a performance-based take rate.
00:50:10
Speaker
Like we get 2.5% on a successful sale of our loan product. So just one thing. Second, to answer your question, yes, my feeling is we would like to have so much more data before we go there in a big
Path to Profitability and Expansion
00:50:23
Speaker
way. We did acquire one NBFC three years back, which we run it. We have done, we have taken limited capital exposure, but have done tens of thousand transactions, but very limited capital exposure.
00:50:37
Speaker
And we think we would like to keep it no capital risk model for a few years. And after that, we feel we know enough to be dangerous. This is like a few years away, basically. You're not confident yet. But yeah, but right now, even if I am able to successfully attach loan and insurance at a country's attach rate, which is an average of India, I'm still able to double.
00:51:05
Speaker
versus how I make as my income today. Our job is to create a selection. I can have a prime, somewhat subprime, and completely subprime lender. I can have India's lowest interest rate, and I can have its highest interest rate. And my job is to make sure buyers find their best vehicle and the lender
00:51:30
Speaker
whose terms are matching with what they can afford and what they deserve and they should get.
00:51:38
Speaker
And tell me about the velocity. So this is again through gig workers. Velocity is a little bit more either room on an operating or a network of vendor's partnerships. So we have two, three versions of the last mile delivery in one place. One is where we will coordinate in a much more controlled environment, a meeting between buyer and seller and for the exchange of vehicle and conditional documentation. Second one is I will have room driver
00:52:07
Speaker
bring the car from a dealer after it is booked online by the buyer to the buyer location. If he likes it, he will close the transaction there, then and there only, or he will bring, if he does not like the vehicle, it will go back to the seller. And third option is, we pick up the automobile and bring it to our fulfillment center where it goes through a much more detailed evaluation, sometimes cleaning, polishing, buffing, et cetera, and then we keep placing it on a flatbed truck
00:52:35
Speaker
and deliver it to the buyer. And how do you give the return guarantee which the seller is not giving? The seller's job is only sourcing and refurbishment, certification, selling, loan, insurance, return, warranty, and deliveries. So any vehicle you buy at the room, you can get up to 50 lakh rupees or $100,000 for the first six months. That is based on final certification done by us. That creates a baseline.
00:53:03
Speaker
and this warranty is anything new which is found out in the next six months on top of the baseline. And what is the spread between two-wheeler versus four-wheeler? Currently it is around 15 to 16,000 automobiles a month.
00:53:17
Speaker
And two-thirds of those will be cars, one-third will be two-wheelers. 90% to 92% will be cars, and 8% to 10% will be two-wheelers because of the price difference. What is your path to profitability? Can you help me understand the economics of what is the current?
00:53:36
Speaker
If we have been a contribution margin positive since September of 2020 and what does that mean is our current revenue is sufficient to recover 100% of marketing, 100% of host of goods sold and 100% of any other variable expenses. So this is CM3 hostage. What we don't recover with our current revenue, with our current scale is fixed expenses for technology and GNA.
00:54:06
Speaker
Sorry, what is the other thing? Technology and general administrative overheads. Basically, anything fixed to run, doing. That's the only thing we are not recovering. And as we start selling loan and insurance over scale, bring efficiency, marketing, or improve our conversion, any of these four can make company profitable. Reality is we are doing more.
00:54:30
Speaker
And we will achieve success, a varied degree of success in all of the sport. I will begin another founder who interviewed what I learned from that founder. There is this company called Kredar which does used bikes and they have again the same approach that focus on supply.
00:54:46
Speaker
And so instead of their own warehouses, they are creating credit franchisee owners who are completely controlled by the company. And these franchisee owners are provided the supply of bike. They work with the garages. So they don't own a garage, but they work with garages to get the refurbishment done. The franchisee owner puts in the investment for the inventory. So which takes care of that inventory problem. And so this credit showroom then becomes a way to do this at scale while still being
00:55:16
Speaker
So, on a supply side, theoretically, we are doing little bit like that, but I would say more evolved and more scalable model. In the sense, these dealerships already exist. These dealerships already exist. Since Droom started, we had 3,12,000 dealerships signed up on our platform and they applied to become a cow dealer.
00:55:41
Speaker
We have got approved 7% of them. So 21,600 of them have been granted right to be that cloud dealer. Then they commit their supply to us. So every physical store, employees, actual inventory, all those is their responsibility, their headache, and their expenses. And then we, as I mentioned, we have Orange Book Value, Eco at history for certification.
00:56:09
Speaker
and our website and app for selling, room credit for loan and insurance and this is in my view is a more evolved, more heavy on technology, less the most asset light and very skilful model where two different parties come together and create the best of both worlds, sourcing and repartishment,
00:56:33
Speaker
In my view, nobody can do cheaper, faster and better than small moment of dealer who is deeply entrenched into the local city king of a neighbourhood and because he is not also suffering from an agent principle dilemma because he is also the owner of those 6-8 cars which is sourced by him. So, he will babysit them and give them highest respect, love and attention.
00:56:57
Speaker
And nobody can do certification selling loan and insurance delivery cheaper faster than us. So it's a very unique combination. And in our view, this model is scalable. It's asset life. It uniquely overcomes India's character 6.
00:57:14
Speaker
of some constraints which you may have heard from different categories from different founders. Tell me about the IPO plan. Like you, I believe, are intending to do an IPO. What is the thought process behind it? Why do you wish to do an IPO? And if you could talk a bit about that.
IPO Aspirations and Impact of COVID
00:57:30
Speaker
Akshay, when I moved to India to start Shop Cruise, I always took, always as entrepreneur, I always take a long-term approach. I always believe it takes six, eight years minimum to create a world-class company. And if you are creating a world-class company which is built to last, then one logical natural progression for that company is actually going public.
00:57:51
Speaker
So, I had a same plan for Shop Clues and I had a same plan for Droom. So, from the time I founded Droom, we wanted for this company to go public. So, in the first half of November, 2021,
00:58:06
Speaker
We fight $400 million IPO for our Indian subsidiary here for an IPO in India for a plan of switching on a Bombay Stock Exchange and National Stock Exchange. And we got the approval from both stock exchanges several months back and we are progressing with the main regulator called Security Exchange Board of India for the approval. And we are for the process well-defined in this country.
00:58:33
Speaker
My last question to you, how did COVID change business world rule? Did it change any of your internal processes? Did it change your strategies, your marketing strategies? Or did it change the metrics, the kind of revenue? What was the impact of COVID? Actually, that's a fantastic question. We had seen, I would say, a new high, new low, both in COVID. When the COVID happened from 2014 until 2018, we were all very proactive.
00:59:03
Speaker
It pulls our raising capital and having access to capital more than what we needed, although we are very frugal, very asset light. Unlike other players in this category, we need maybe one tenth of what they need to build our technology. But when COVID happened, unfortunately, we found ourselves in a place
00:59:21
Speaker
where we had decent amount of capital, but still not as much as if the COVID were to last for several years. And then while we were the only pure play e-commerce company, we were not bleeding anywhere close to others. But India had a complete lockdown if you remember in the first phase of COVID. So for four months, before COVID, our largest month was 93 million dollars in GMB per month.
00:59:49
Speaker
And we sold on a peak, maybe 12,000 automobiles in a peak month before COVID. But in April, May, June, July, that 93 million was less than 2 million a month. Well, nobody would be buying here. Instead of 12,000 automobiles, it was probably low double digit.
01:00:09
Speaker
Right? So very bad time for a few months. It taught us a lot of other things. We were already frugal, but we took the definition of frugality and measurement and data to a next level.
01:00:21
Speaker
Then, what happened by July, we started seeing some signs of business recovery. But this time, in fact, we did start seeing something which we did not see since we started until COVID is much more rapid adoption of e-commerce in the automobile category. So, from July until November of 2020,
01:00:43
Speaker
We were now November was our became our first month after the seven eight months of covid where we were bigger than even the prior to covid which in my view very few company independent of any category can claim and then I would say in next one year we were able to more than double our business in less than one year.
01:01:03
Speaker
with our better unit economics better measurement and even much more clearer strategy and vision. The customer acquisition costs come down because of Covid because you probably a lot more people would be searching and organically reaching out. Actually four years back
01:01:22
Speaker
8-10% of our total traffic was organic. Right now, this would be early to mid 30%. Right? Then, for 4 years, 3 years back, less than 20% of the total traffic was free, which is basically organic, direct.
01:01:39
Speaker
or app-based. That is close to 60% now. Absolutely, from number of people coming to the room, unsolicited, without a paid ad, or more deals becoming cloud dealers, supply of new automobiles making to our platform. At RIC by metric, we saw all our major KPIs, which really matter, improved very dramatically. Amazing. You did 12,000 in 2019-20. What is your peak number currently?
01:02:07
Speaker
from the 12,000 vehicle. So that was Mr. Sandeep Agarwal, telling us about his fascinating and remarkable journey of conceptualizing and building Drume. We hope you enjoyed listening to this episode.
01:02:25
Speaker
If you like the Foundaties and Sparkcars, then do check out our other shows on subjects like Marketing, Technology, Career advice, Books, and Drama. Visit the podium.in, that is, d-h-e-n-p-o-d-i-u-n, .in, for a complete list of all our shows.