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Subin Mitra (Groyyo) on Funding, Factories & Fast Fashion
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How did a 23-year-old founder turn a near-death crisis into a profitable manufacturing startup? This is the untold story of Groyyo's dramatic pivot from losses to EBITDA-positive growth in India's apparel export industry.
In this episode, Subin Mitra, Co-Founder and CEO of Groyyo, shares the raw, unfiltered journey of building one of India's most promising B2B manufacturing platforms. From cracking Bain & Company at just 19 to witnessing the spectacular collapse of unicorn Zilingo, Subin's path to entrepreneurship is anything but conventional. He opens up about Groyyo's dramatic pivot after raising $40 million from Tiger Global, the painful decision to shut down a failing B2B trading business, and how the company transformed from spending ₹1.24 to earn ₹1 into a lean, profitable operation with 20%+ take rates.
This conversation with host Akshay Datt explores the realities of digitizing 20 million MSME manufacturers across South Asia, riding the China+1 wave, and why small factories are winning against scale economies in the fast fashion era. Subin reveals contrarian insights about marketplace business models, capital efficiency in the funding winter, and why Groyyo deliberately waits to work with Zara despite having direct access.
Whether you're a founder navigating growth challenges, an investor evaluating B2B opportunities, or simply curious about how global supply chains actually work, this episode delivers actionable wisdom from the manufacturing frontlines.
Key Highlights:
👉How Subin built Groyyo from ₹25 crore to ₹600 crore ARR while achieving EBITDA profitability in India's toughest funding environment
👉The untold story of Groyyo's near-death experience, investor intervention with Deloitte, and the strategic pivot from domestic trading to high-margin export services
👉Why Groyyo's "anti-scale" thesis, betting on thousands of small MSME factories over large manufacturers, creates a defensible moat in fast fashion supply chains
👉Inside the services flywheel strategy that commands 20-30% take rates through integrated consulting, design studios, and factory digitization versus pure marketplace models
👉Geopolitical tailwinds driving India's manufacturing moment, the reality of China+1 strategy, and how tariffs are reshaping global apparel sourcing from Bangladesh to Vietnam
👉Lessons from Zilingo's $300 million collapse, the dangers of growth-at-all-costs culture, and what separates sustainable B2B businesses from ticking time bombs
#IndianManufacturingStartups #B2BMarketplace #ApparelExportIndia #MSMEDigitization #StartupPivotStrategy #FashionSupplyChain #ChinaPlusOneStrategy #ManufacturingAsAService #FastFashionDisruption #StartupProfitability #FundingWinterSurvival #B2BStartupIndia #ExportManufacturing #GarmentIndustryIndia #SupplyChainTechnology #BangladeshManufacturing #ZilingoLessons #GrowthToProfit #CapitalEfficiency #IndianUnicorns
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Transcript
Introduction to Groyo and its Position in the Fashion Supply Chain
00:00:00
Speaker
Hi, I'm Subhin. I'm the founder of Groyo. We are a B2B manufacturing startup. What do you think textile and fashion?
00:00:16
Speaker
think textile and ah fashion Like technically. Textile typically connotes more of your raw material fabric yarn. Fashion connotes more of more of the garments and apparel, which is what we do. And you're more on the fashion side, right? We are more on the fashion side. we don't You're totally on the fashion side, I think. You're totally on the fashion side.
00:00:33
Speaker
We don't do the textile stuff. Okay, got it. Okay. Okay, cool. um Okay. So, Subin, welcome to the Founder Thesis podcast. I like to start my podcast with a reverse pitch podcast.
00:00:48
Speaker
We are going to learn about ah the fashion space from a supply chain perspective. ah Why are you the right person to talk about this?
00:00:59
Speaker
Because we have built, I think, in an industry that is going through a lot of change, a lot of disruption. um One of the few tech-enabled, profitable SME-led supply chains.
00:01:10
Speaker
um And I think there is still a lot more for us to do, but the foundations of that have been in the right place. Okay. Help me understand the the overall industry first. Like like there would be ah right customer facing right in the front of the supply chain would be like a Zara and right at the...
00:01:33
Speaker
Other end would be someone like the Reliance, which would be manufacturing the yarn. ah Just take me through the whole supply chain. onces Help me understand the structure. roughly right On the absolute front end, you have the consumer, which shops from ah fast fashion house, be it a Zara, Uniqlo or a Mango.
00:01:49
Speaker
um You will, in some cases, have a stockist or wholesaler in between who will play the role of managing the inventory and stocking the goods in that country. you will have the apparel manufacturer or the garmenter, which is in countries like India, Bangladesh, Vietnam.
00:02:05
Speaker
They will then source from fabricator or a fabric fabric mill who will supply to them the fabric cloth that is used for that, making that particular garment. And then behind that, you would have a yarn mill, which would sell it to the fabric mill, which will again again spin that yarn.
00:02:21
Speaker
And if you go a step behind that, you have the fiber mill, which will actually sell the raw fiber to the yarn the yan mill, which will churn that into yarn. That's pretty much the entire value chain. yeah Give me some prominent names for each of these in the supply chain.
00:02:35
Speaker
So on the brand side, of course, the fast fashion ones are very
Challenges and Strategies in the Fashion Industry
00:02:37
Speaker
big. Yeah, Zara, Uniqlo. On the garmenter side, you have Shahi exports, Gokuldas exports, PDS, which are all large listed players in India.
00:02:46
Speaker
On the fabric side, you have likes of Arden. These, like Gokuldas and all, they don't sell, but they and they produce as per specification. Like the client would say that I want a white shirt. yeah They are a hardcore manufacturer.
00:02:59
Speaker
Of course, they including us have design capabilities, so we do come up with designs, but we don't take that decision of what to sell. We will get a order from a brand and basis that order we will manufacture.
00:03:11
Speaker
okay that's exactly what a Shahi or a Gokul does do. On the fabric side, you have likes of say, Arvind, Raymond, Vardaman, who are all large large fabric mills.
00:03:24
Speaker
um on the yarn side gets slightly more type mode fragmented. It's not at are a lot of very large listed players.
00:03:35
Speaker
Okay. And where is Reliance in this?
00:03:40
Speaker
but Reliance is more on the fiber and yarn side, specifically more on polyesters where they've had a historical dominance. um There is Reliance Retail in India, which is also on the front end. Even before Petroleum, their first line of business was this Their first line of business was the Polyester business.
00:03:59
Speaker
um And they are to a certain extent on the front end because they have Reliance Retail, which runs a yeah fast fashion business in India as well. So to that extent, now they're on the front end as well.
00:04:10
Speaker
They are not on the apparel manufacturing side as aggressively um as of yet. And Arvind is also again on front end, like Arvind owns Van Hussain and a couple of these. I think historically what's happened if you look at a lot of these large manufacturing businesses in India and Vietnam, as they have grown and become very profitable over the years, they have then redeployed their profit to think that, okay, we are selling a garment to a brand for $5 and the brand is selling it for $20, $25.
00:04:41
Speaker
twenty five dollars right So why should we leave that part of the value not captured? Much rather use our expertise, capital and just go into that that part of the best value chain as well.
00:04:52
Speaker
And that transition has played out with most of these guys. Some have succeeded, some have not. But inherently, that's how they transitioned. So even garmenters are doing this? Like Arvind is of course doing yarn, like denim fabric, is doing fabric rather.
00:05:07
Speaker
And it has also got retail, Van Hussain, et cetera. Does it also do garment manufacturing? Yeah, i think... A lot of the smaller garmenters we know also who are like 200, 250, 300 crore exporter, at some point they also think they make their private label and they will launch a private label. and and There's a saying in our industry that the private label is always the bigger or sun for the exporter who burns who burns a lot of money and is more of just, is more is more of for show, right?
00:05:37
Speaker
And the manufacturing is the good sun, the one who actually gets him money and cash flow. But I think it's an aspiration for a lot of exporters after a point that let us let us build our own brand also. So from what I understand, you're saying that stay away from the retail side of it, even though it seems lucrative. Like you said, ah they buy for $5, sell for $20.
00:06:01
Speaker
yeah ah So why stay away? What are the hidden um i am not cost structures? I would say focus on anyone.
00:06:12
Speaker
um A retailer is a brand, a brand is a brand. right So their mentality, that thought process, the way they operate is very different. right um They will not think how to make this in $5. They will think that what will Akshay Subin like wearing.
00:06:25
Speaker
eight They will not think that where is this fabric going to come from. They will think yacha what what look and feel will the customer like. it And they will have a lot more marketing expertise than any manufacturer ever can.
00:06:37
Speaker
So I think what we have seen and a lot of these cases, if you're building a brand, build a brand. focus on building all of those capabilities, marketing, design, product innovation. a And if you're building a manufacturing business, build a manufacturing business.
00:06:51
Speaker
Because our expertise is not to figure out what will what will a consumer like in the store. Our expertise is to figure out that how can we get this $5 product manufactured in the fastest possible way, most cost efficient way and the best possible quality.
00:07:03
Speaker
right? Now, how to sell it is not what we what we have expertise in. um So, I think that's that's where a lot of people end up faltering. So, it's better to just focus on one and build on that.
00:07:15
Speaker
So, you know, this thing of 3x, 4x markup is their even in the restaurant industry, and yet restaurants see the highest failure rate. ah Similarly, from the outside, it looks like the apparel retail business is very profitable. Buy for 100 rupees, sell for 500 rupees.
00:07:33
Speaker
What are the hidden cost structures? I think so. and One sec, before you answer, a quick ah readjustment. Can you be in the center of the frame right now?
00:07:44
Speaker
ah yeah And you can tilt your laptop a bit, just be in the center of it. Yeah, okay. Yeah. yeah um Yeah, hidden cost structures. As you said, the gross margin is very lucrative from the outside that you think I will buy at 100 and sell at 500.
00:08:02
Speaker
But there are one is that can you at all sell or not. So that is a hidden cost structure, which is dead inventory. For most formo brands, dead inventory becomes becomes a challenge. And you can't return.
00:08:15
Speaker
You can't return. If you bought from your factory, then you have your stock. If any of my buyers comes and tells me after three months, I will not come back. I will not i'll not take that stock back. So one is, can you at all sell or not?
00:08:27
Speaker
That is the most important part. Second thing is almost 30 to 40% of the stock goes on discount. Right. So there your entire mockup actually gets squeezed because you're selling it for 50% discount, 60% discount.
00:08:39
Speaker
Right. I'd say for not selling SKUs, you might have to sell it 70% discount also. Yeah. Yeah. Yeah. End of season sales and all. End of season sales. Third is the whole. whether you look at offline retail or online retail, right?
00:08:53
Speaker
Offline, massive amount of kharcha will go into stores, setting up stores, rental, all of that, which will take away another 10, 20%. If you're doing online retail and Amazon or Flipkart easily takes away 20, 25%, right?
00:09:05
Speaker
a So that is where you get squeezed. And fourth core structure is actually RTO, which is returns. right Returns in India are as high 8% to 10% for for most most of the fashion brands.
00:09:17
Speaker
So if you break that down, you might think you're operating on 200%, 300% markup. But if you can even make 10%, it's okay ah a pretty commendable feat.
00:09:30
Speaker
Interesting. Interesting. How is ah ah Shane disrupting this market? And what is Shein for people who don't know Shein? Shein, of course, ivan is the world's fastest growing fast fashion house today, predominantly out of China.
00:09:48
Speaker
I think Shein is forcing a lot of the older global players to adapt. um And to that extent, it has created a market for us also, because that's sort of our USP as well.
00:10:00
Speaker
right And a lot of the older guys now realize that One, they cannot be doing new collections every three months. They need to do a new collection every two weeks because Sheen is having new SKUs on their website every two weeks.
00:10:15
Speaker
Second, they can't operate on a 180-day sourcing pattern. eight If Sheen is doing 30 days from runway to store, then the older guys need need to at least do 60 days or 75 days to compete with them.
00:10:26
Speaker
right I think Shane does in weeks, right? Like in a week or two. exactly Two to four weeks is their average sort of SLA. eight And third, tied to that is having a lot more width in the stores. right So you what we see now from a sourcing point of view also is customers may still be buying 100,000 pieces, but they don't want five SKUs for 100,000 pieces.
00:10:49
Speaker
They want 25 SKUs for 100,000 pieces because the stores need to have a lot more width, lot more variety. ah for a customer to sort of appeal to that and be drawn to that versus a Sheen or ah any of these newer players.
00:11:01
Speaker
Okay. I'll spend a little more time on the
Subhin's Journey and Lessons from Zilingo
00:11:04
Speaker
industry. ah The other disruptor in India specifically I hear a lot about is Zudio, right? have you like like why Why do people talk about Zudio so admiringly? What have they cracked?
00:11:16
Speaker
Zudio is a Tata a subsidiary in fashion retail. Correct. Correct. So I think what Zoodio's crack in India is taking branded retail to unbranded segments. A large part of Zoodio's market was actually earlier unbranded.
00:11:29
Speaker
um And they would be buying from local shops, local stores. right But because of the rising sort of incomes in India, there was an aspiration that we wanted to buy branded. And that aspiration was not getting met because all of the other stores like Vanuza, Peter England, Raymond were all in the 1499, 1299, 1599 kind of price points.
00:11:51
Speaker
eight Whereas Udio comes in and says, hey, we'll give it at a 599, 699, 799 price point. which is more or less as much as what they were paying in the unbranded segment. And then for that consumer, it become very interesting to say for the same price, if I get branded, mill up and of course the Tata brand also helps, right?
00:12:08
Speaker
um Then why not? And that is what they've, that is what they've cracked very well with very good distribution. And now you have Reliance also following suit in that, trying to go after that same segment.
00:12:19
Speaker
How did Zudio crack this market? Like if if they're selling similar product as... ah ah Van Hussain and all of that at much lower prices, how are they making money?
00:12:32
Speaker
I think this the main part where Zodios cracked it is one, we don't do a lot of domestic sourcing, but their supply chain is very, very tight from what we know. So they source at as low as possible costs.
00:12:45
Speaker
So they keep costs very, very tight. um Second, they operate on lesser markups at a unit level, compensating for that at scale at a volume level. right So they will say, okay, we will sell it in 500.
00:12:58
Speaker
We will not try to sell it for 1,000. But sell it 10 lakhs versus a van who is selling 1 lakhs. okay And that is their thought or strategy, which I think is playing out quite well for them.
00:13:10
Speaker
Okay, very interesting. Okay, now we've understood the space. We'll understand Groyo, but I want to understand Groyo through your journey of building Groyo. Okay.
00:13:22
Speaker
Take me a little bit through like what did you do for your education and then, you know, the journey with the career journey which led up to Groyo. Sure. So born and brought up in Bombay, spent most of my childhood early days in Bombay.
00:13:37
Speaker
um I went to Xavier's in Bombay. I studied economics there. Very fondly think of my college days. From campus, I joined Bain. So I was at the private equity team at Bain for a couple of years.
00:13:48
Speaker
As in you were looking at deals, acquisitions and all. Correct. Acquisitions are supporting clients are post acquisition as well. um So towards the end of my stinted vein, I got a very interesting opportunity to work with OYO.
00:14:00
Speaker
This is when OYO had acquired a large company in Europe and they were expanding into Europe. That I think for me was a bit of a turning point because I saw people who were exactly my age with exactly my kind of experience, right?
00:14:12
Speaker
Either managing full PNLs or managing a full city or sort of managing a full vertical. And I had this me yakara moment that I'm sitting here and doing PPTs the whole day.
00:14:22
Speaker
wow And there's this guy who's my my age who's suddenly head of Denmark for you. oh And I was like, consulting to and I can't see myself making PowerPoints and slides the rest of my career.
00:14:35
Speaker
So Oyo was your client at Bain? Oyo was our client. Yeah. Okay. um So I left consulting quite early. I left within within a couple of years. um I then joined a startup called Zillingo, which was not known for the best reasons, but also in the fashion fashion ecosystem.
00:14:52
Speaker
That was my first exposure to fashion apparel as an industry. What was their model? What what were they building? Were they on retail or on the garmenter or like where were they the supply chain? There was some confusion about what they were trying to build.
00:15:06
Speaker
um They were running an Uran kind of business in Southeast Asia, trying to do the Kirana store leg. They were running a mom and pop fashion shops.
00:15:17
Speaker
They were providing them inventory. Correct. Exactly. um They were trying to do the manufacturing export part from South Asia, which is why the team I had joined got set up. Okay.
00:15:29
Speaker
But I think at the end of the day, boiled down to not a lot of focus on building a real business and no real unit economics to speak of. which How much had they raised? I believe they were a unicorn before they went bankrupt. Correct. Yeah. They raised about three.
00:15:44
Speaker
They raised about $300 million dollars in total. Okay. Okay. Wow. So, like, you know, what was your learning there at Zilingo? Were you able to see the problems as they were happening? Yeah, absolutely. i think I was there for a little less than two years.
00:16:02
Speaker
Right? um Within the first year itself, I could see that this is not a real business. and Because they were gross margin negative. So they were actually buying at 100 and selling at 90 rupees.
00:16:14
Speaker
and okay and And how are you how are you ever going to make money out of that? I think at the time they were burning close to crores a month.
00:16:27
Speaker
a So that too seemed like unsustainable. like how How does this ever turn into a real business? um Yeah, i think I think we could, those insights could see it coming for a while. Why were the gross margin negative? Was it ah like a desire to show numbers to investors that we are like, you know, GMV, vanity numbers, this we are doing this GMV and all.
00:16:52
Speaker
I was mentioning this to an investor come to our office last week. Right. So when an investor comes in our nobody knows about it. It's like some guy is sitting in the boardroom with me and just talking.
00:17:03
Speaker
Right. But in our office, when a buyer comes, that's like a huge, huge problem. Like we will do a rangoli for them. We'll put up board saying, welcome Inditex team.
00:17:14
Speaker
right The whole office will come out and take a photo with them. eight At Zillingwood was exactly the opposite. That the buyer is not getting be different from someone. right like If an investor is coming, then everyone is there in the office, everyone is doing a photo shoot with them. So I think the focus was not to build a dhanda.
00:17:32
Speaker
The focus was more to get top line for the heck of top line, even at the cost of horrible unit economics. eight And yeah I think that just anything that is not sustainable will eventually get undone.
00:17:45
Speaker
So that's what ended up happening. And that's why they were doing everything, like from ah the supplying to retailers to exporting, like whatever. yeah i remember I remember the end they had also started a fintech vertical and I was like, yeah take me passage again was this is not correlated to the business at all.
00:18:03
Speaker
Okay. Okay. okay Okay. Interesting. Very interesting. Why are investors not able to see through this? Like, why didn't they put the brakes on earlier?
00:18:16
Speaker
after three hundred before I don't know then. I think at the time I was not very senior there to be privy to those conversations. But I think now it has changed a lot. right Maybe through to through them having their own learnings and them going deeper into the industry.
00:18:34
Speaker
Now, most of the most of the bigger investors I speak to at least are pretty well versed on what is the business, what is the what are steady state unit economics for some of the legacy players.
00:18:44
Speaker
So even if you're compromising on unit economics, how much is the compromise? What is the value added?
Groyo's Innovative Supply Chain Approach
00:18:51
Speaker
So I think for good or bad, that full boom cycle has now created and ecosystem that is more aware, more sort of real, where EBITDA matters a lot more than GMB. So that transition has happened.
00:19:04
Speaker
Okay, fascinating. Okay, so you were at Zilingo. You were doing the export business for Zilingo. I was hired to set up the South Asia business, which is India, Bangladesh, Sri Lanka say.
00:19:16
Speaker
Sort of exports and all of that. right Zilingo is also where I overlapped with Prateep, who's my co-founder. We joined at pretty much the same time and we really hit it off and got a great bond.
00:19:27
Speaker
I think towards the end of my stint there, I felt that there is no real focus handing to build a to build a real business that will that will sustain. But, someone will it. I think that that ah sort of learn ah so that sort of insight was very clear that fast fashion is going through one of the largest disruptions from a supply chain point of view.
00:19:47
Speaker
they There is a tangible amount of China minus one happening in the apparel sourcing supply chain. And buyers actively want a consolidated one-stop-shop solution where if you can tell them I will manage design, managed karuga quality, managed perru um And I will be a multi-category solution. It so creates a lot of value.
00:20:06
Speaker
So I think I was very clear that whoever builds this over the next 10 years is going to build a very valuable business. And it's a very large opportunity. Plus, I think the co-founder aspect was a very large part of the decision as well because I had seen in companies like Zillingo or Fashionsa that both the founders were generalists.
00:20:22
Speaker
Right? from Bain and both are from McKinsey. say And i I strongly felt that that is a very bad combination. That this is such a old school, technical, complicated industry. One of the founders needs to be like a hardcore industry veteran who is super technical, knows the full industry in and out.
00:20:38
Speaker
um And having Prateek with me also gave me a lot of confidence. So yeah. What is Prateek's background? Prateek is a hardcore industry veteran. He went to NIFT Calcutta. He started there.
00:20:48
Speaker
He was then working with factories in Delhi. He ran his own factory for a couple of years. He was with Inditex for eight years. Inditex Zara, Lefties.
00:21:02
Speaker
and de So he was heading there, India sourcing for about eight years. He was with JC Penney for three, four years. um He was also with Asmara, which is a similar B2B business in Vietnam for a couple of years as well. Pretty varied across textile.
00:21:18
Speaker
Okay. Okay. Okay. ah So the opportunity you saw was what? That ah more brands will shift their sourcing to India from China.
00:21:29
Speaker
And so there is a middleman opportunity here, somebody who will facilitate this? i think to take that a little further, one that brands in the new fast fashion ecosystem, the supply chain for brands needs to look very different.
00:21:47
Speaker
So they cannot source on a 180 day TAT, they need to source on a 70, 60 day TAT. They cannot source, they will now source 50 SKUs per order versus five SKUs per order. And that means a metric called MOQ, which is minimum order quantity that reduces from 10,000 pieces to 200 pieces, 300 pieces, 500 pieces.
00:22:05
Speaker
and um And at the same time, they would want one partner who can manage multiple of these SKUs in multiple categories. safe That is more from a sourcing pattern point of view. And of course, the macro tailwinds, China minus one, that production is going to move to not just India, but Bangladesh, Vietnam, all of the neighboring countries.
00:22:23
Speaker
And anyone who can build a aggregated efficient supply chain here, who can tell a brand that you want to play in fast fashion, you want to become more like a sheen, we will manage the back end for you.
00:22:35
Speaker
You focus on the front end. right That seems like one of the biggest opportunities. So your pitch to a brand is ah ah we are agile.
00:22:46
Speaker
ah If you give us a design, we will turn around and give it back to you in 30 to 60 days instead of 180 days. And our minimum order quantity is lower. You don't have to place, like if they go to a Gokuldas, probably Gokuldas would ask for a 10,000 minimum order. Whereas you would do it for 1,000.
00:23:02
Speaker
ah Yeah. Okay. Got it. that's all again And you will manage the long time. Design is also fully in-house for us. So we have an in-house design design team, a design tech tool.
00:23:13
Speaker
So it goes a little further to say that we will do the end-to-end design to delivery for you. But design is table stakes, right? Like I'm sure Gokuldas also has design and all. Everyone has design. All of the good players will have a design capability.
00:23:26
Speaker
Got it. Okay. ah And the other differentiator, how you're making this possible is by focusing on long tail. like Because minimum order quantity, if you started aggregating the bigger players, the minimum order quantity thing wouldn't work.
00:23:44
Speaker
Absolutely. um so I think that was a but one of the very foundational sort of thoughts we had that... There are lakhs of SMEs across India, Bangladesh, Vietnam. Most of these SMEs don't have enough business.
00:23:56
Speaker
The factory is at 50% or 60% utilization. These SMEs are perfectly tailored for this kind of export export demand pattern. They can do small MOQs, they can do fast stats.
00:24:07
Speaker
They're also more cost efficient than some of the very large guys. but they will lack capabilities in terms of compliance, in terms of design, in terms of quality. So can GrowYo become that building block in between that enables these SMEs to work with some of the largest brands globally?
00:24:23
Speaker
That was the very foundational sort of thesis we started with. Okay. Now, this space has competition, both legacy and new age.
00:24:36
Speaker
You mentioned fashions, ah that's like a new age competitor. Yeah. I think there's some Zoid, ah which is also, I think, a new age competitor. And then there are these legacy buying houses.
00:24:48
Speaker
Correct. Not able to remember the name, like Lee Fung or something. and Fung, correct. PDS and Lee and Fung. Yeah, yeah, yeah. So, how do they stack up? ah The first question is, aren't the legacy players able to handle this or what is lacking in them?
00:25:06
Speaker
And then second is, like, with the new-age players, what is the differentiation between the various new-age players? yeah I think on the legacy players, um we haven't seen anyone very actively focusing or catering to this.
00:25:18
Speaker
um This means what, like, the whole fast fashion... The whole fast fashion supply chain, and all of that. Okay. Essentially fast fashion supply chain means low MOQ and quick delivery.
00:25:30
Speaker
Quick delivery. Low MOQ, quick delivery um and a lot of agility on the on the whole process. right um So I think that for on the legacy players, we've seen that usually how these businesses have been built is they have worked with four five customers.
00:25:42
Speaker
So even the largest exporter will work with the Gap, Nordstrom, JC Penney. For those four five customers, they know that we will get order of 2, 3, 5, 5, 6, 7, 8, 8, 8, 9, 10, 10, 10, 11, 12, 12, 13, 13, 14, 14, 15, 15, 15, 16, 16, 17, 18, 18, 19, 19, 20, 20, 21, 21, 22, 22, 22, 23, 23, 24, 24, 25, 25, 26, 26, 27, 28, 29, 29, 29, 30, 30, 31, 32, 32, 33, 33, 34, 34, 35, 35, 35,
00:25:51
Speaker
and that thenll keep shipping so there is also i think a lack of incentive for them to say okay we our business and build this full thing becausehandda and they are they are content with that but that low mokq would probably break their processes like like they wouldn't be able i mean would one not making for them if you if you get build f for scale basically and but for scale if you tell us shahi a gokdaki thousand pieces per style and make 40 days, that's not possible.
00:26:18
Speaker
In a lot of cases, they actually take that order and they subcontract it to a small vendor. But now the brands are really clamping down on this because the brand runs a high high risk in that kind of for environment.
00:26:29
Speaker
So that's also working. I think the legacy players, I wouldn't say it's that they're failing to adapt. It's just that there is There is enough on that plate for them to not very actively
Technology and Compliance at Groyo
00:26:40
Speaker
focus on this. But I think one interesting trend we are seeing is that Fast fashion is now not only for your fashion SKUs, right?
00:26:50
Speaker
Because very few people want to just buy a plain white t-shirt anymore, right? So most, even your basic core SKUs are now coming with some element of design, some element of fashion, right? There'll be some print, there'll be some embroidery, something on it.
00:27:05
Speaker
And we think this is this is going to become more and more compounded. And that's that one reason we think this kind of a supply chain will become more valuable. Okay. ah Okay, so that's about legacy players. What about like fashion zahs or these startups?
00:27:23
Speaker
ah Fashion zahs, I don't know how existent they are. to There have been a few smaller startups, right? But I think one, a lot of the focus has been on the domestic business for these companies where they have okay focused on working with domestic brands and becoming a sourcing partner for them.
00:27:40
Speaker
We have fully stayed away from that and been 100% export. a ah We don't think domestic businessmen, there is a lot of value you can add as a an aggregator. a okay Second, as of now, we have not seen anyone solving for the long tail of supply.
00:27:54
Speaker
a lot of them A lot of them come with this crux that, okay, if you can aggregate four five large manufacturers and four five large brands, there is scope to earn 8-10% in between. eight But if you say that you will take a factory that has earlier worked for Vishal Megamart, you will make it compliant, you will get the process, you will implement design, you will implement tech, it's a pretty long-drawn operationally heavy process. eight So that as of now in India, nobody in India and Bangladesh, nobody has sort of been focusing on where we have built our strength and that sort of our bread and butter.
00:28:29
Speaker
Okay. ah So now long tail essentially means that these are Not professionally run, right? yeah like yeah These are like founder-led, you would say like Lala company in a way.
00:28:46
Speaker
and so how do you hedge your risks? These sound like risky suppliers to work with.
00:28:53
Speaker
It is for sure. I think it comes, as as I said, right? So All of the capabilities apart from actually owning the manufacturing are fully in-house for us. right Starting from compliance.
00:29:05
Speaker
So compliance is an in-house team where we have a team that will check if the factory export compliant, um if he's paying like he's paying wages on time, he's paying ESIC on time, fire safety compliances are there.
00:29:17
Speaker
Because we know our customers are super super diligent on these kind of things. right So we will first audit that factory if it is and we will check if Inditex audit, where will fail and where will pass. right okay And then work with that factory to improve that before we actually take that factory to or give an order to that factory.
00:29:33
Speaker
ah Production and merchandising is fully in-house for us. So we will not give an order to a factory and then leave it. yeah right We will have a production team in every hub. So in Tirupur, in Delhi, in Dhaka, whose only SLA is to ensure that good ship on time.
00:29:48
Speaker
So they will ensure that if we have to cut in the week, then 100 pieces are cut. a Third is quality. Quality is a fully in-house team for us. ah Where we will do a QC check at every stage of production.
00:29:59
Speaker
Because we know for our customers, quality is sacrosanct. So all of these capabilities we have built in-house from this lens only that these are not suppliers where they can handle the entire entire onus of production.
00:30:11
Speaker
These are suppliers where you get efficiency, agility. But the heavy lifting of that of that full process needs to be done by us. And that is our role also, right? That we tell our customers that we will give you the same level of design, service and quality which you would get from a Shahi or Gokuldas.
00:30:27
Speaker
So you have to compromise. they can know But we will give you the agility of and flexibility of a SME led supply chain. oh What was harder for you when you first started off building supply or getting orders?
00:30:42
Speaker
I think building supply and not just building supply because there's a lot of supply in the market. Building this full execution framework that was harder. Right? Because with there is enough demand in the market today.
00:30:53
Speaker
um we Even the initial team at our end was always a team of operating experts from the industry. So the lack of buyers or lack of orders was never much of a problem. But ensuring that... Like Pratik had Connects to get orders. Correct. Absolutely.
00:31:07
Speaker
Absolutely. Like to give you an example, even today, we we don't do Zara, right? And Pratik knows the Zara team very well. And we are very clear that we are not fully ready for Zara yet. We would first want to have our have our team, our system, our factories fully ready and only then go to the customer.
00:31:23
Speaker
So that that part is harder.
00:31:26
Speaker
Why are you not ready for Zara? Is it the scale or is it the compliance? Is the quality? What worries you? It is the quality and process.
00:31:37
Speaker
So Zara even more rigorous on timelines, um even more rigorous on sort of great quality, but with great timelines. okay And there is but the risk with any of these customers is getting in is still possible.
00:31:52
Speaker
But if you get in and fail to deliver, then you risk losing them forever. Yeah, you're out for life. You're out for life. and this This journey we saw with Zlingo Fashions as well, that they did spend a lot, they burnt a lot and got great customer, but they were not able to retain them and continue doing business with them.
00:32:11
Speaker
So we would much rather add four, five customers a year only, but know that with these four, five customers, we can keep going deeper. We can keep delivering well. And that they will they will start relying on us more versus add 30 customers and they'll not be able to cater to them.
00:32:27
Speaker
So Prateek has experience of working with Zara kind of buyers. Like he understands exactly what their requirements are. And therefore, ah like from day one,
00:32:37
Speaker
and when you're building your supply, you're not learning on the job. Like you're not ah screwing up to learn. Okay. Absolutely. Interesting.
00:32:48
Speaker
ah So like, tell me the journey of building supply. Like where did you start with till what was the stage where you felt that yes, okay, we have reached ah like a minimum viable supply chain.
00:33:02
Speaker
You know, I can't say MVP, but let me say MVSC. We started with NCR. I think NCR was our first hub. NCR today is our biggest hub as well. eight okay um NCR is where most of this happens, right? Noida, Gurgaon, Gurgaon, and you have the whole Khansa belt, which is um the Manisar belt, which is also big.
00:33:23
Speaker
And Yogyakar also has quite a few garmenters. okay um We started with and NCR, we started predominantly with women's, so women's was our was our first category. And we started with about seven to eight factories in NCR and one customer.
00:33:39
Speaker
ah which was ah What was the ask from the factory? Like, did they have to invest in better equipment, all of that? Or what what was it like? So even even today and how we have structured that model is we don't ask the factory to do a lot of capex.
00:33:53
Speaker
right So if we come across a factory where significant capex is required, that factory will perhaps not be the right fit for Groyo. right So we will look for factories which have decent capex, but there is some element of sort of you have to implement fire safety processes, lighting improve factory floor.
00:34:10
Speaker
Those things need to be done versus that you need to fully restructure your full floor and machinery and all of that. So that model has stayed true over the years also. So the initial, I think, pushback from factories was that what am I going to get out of it?
00:34:23
Speaker
How much business can you attend tangibly give me? You guys have just started. um How do I know I'm going to get regular business? Now that has eased out because it's been like four and a half years, people know that we work with these 40, 50 great clients. We can regularly give business to them.
00:34:38
Speaker
But when we started, that was tougher.
00:34:43
Speaker
Why would... ah I mean, you're giving them business, right? So so why so many questions? I think because it's... You're asking them to first fix those things.
00:34:54
Speaker
ah before Fix those things. It's an element of time and bandwidth they're putting as well. Plus, when you have just started, they don't know if you can continuously give them business. and like They might think, okay, you're giving one order, but what is the surety that after this, I'll get repeat order.
00:35:08
Speaker
And I'll get a good volume from you. right Which is true for any any new business that starts. Okay. So how much of your, essentially from what I understand, then a lot of what you do is removing risk from the supply chain side, like you already have these suppliers who could give you the product, but The problem is the risk, the whether the risk of not meeting timeline, risk of not meeting quality, risk of not meeting design.
00:35:37
Speaker
Because with the with the customer, we are the principal, right? we are on a We are not a platform platform. For the customer, Groyo is the vendor. We are the ones who they are giving that order to, who's going to supply to them.
00:35:48
Speaker
So the biggest risk we run is if there is a goof up on the on the process, then it is our credibility and our reputation on the line with that customer and that customer is not going to come back to us. It's very critical that we focus on the execution part of it.
00:36:02
Speaker
Ensure that all of, as you said, all of those risks are removed so that we can sort of keep getting repeat business from that customer. How much of the risk removal is through people and how much is through technology?
00:36:16
Speaker
I think about... 60 to 70% is through people and this is ah this is a people-led business. eight 30% is through tech which we have built over the last 3-4 years.
00:36:30
Speaker
There also are thought from DayZero has always been that it is supply-side tech that is actually going to help. right Demand-side tech is good to have. that You can show the customer to show you. I dashboard.
00:36:42
Speaker
But at the end of the day, the customer wants good product, good price, good quality. eight Supply side tech is where it can actually create leverage that getting the real-time QC insights, what quality is in production, getting real-time production insights. If you had to cut right Then that is going to create an issue on the whole timeline of the production process, which without tech you will get to know at the end of a week or maybe end of 10 days when you do a production run through, then you will see, okay, no, these two SKUs are running delayed.
00:37:15
Speaker
eight Versus it that tech if tech can give you that real-time insight, you can solve for that data itself that these two SKUs are running delayed, we need to ramp up production here. So that's where we've put a lot of bandwidth and investment on the tech side.
00:37:29
Speaker
ah how do you get data? I guess all of this depends on data in, right? If there is good data coming in, only then will tech work. yeah So how how is the data coming in?
00:37:41
Speaker
Like how do you know that 100 pieces were cut today? I think there, our approach has been that Two aspects. One is digitize the existing factory production flow. Don't introduce more work for that for that factory. right So typically before we came in, a factory had a system where the floor manager would make a time and action plan.
00:38:00
Speaker
right keyoter here These are the 10 SKUs. This is the time and action plan for the whole week. right We enable him to do the same thing on the Grow Your App. right After that, he would give sort of a note to every worker saying, you have to cut your target for your day, which the worker would update at the end of the day and give back to him.
00:38:19
Speaker
it Again, same part is digitized on the Grow Your And we've kept the tech fully, vernacular, very easy to use. eight All of that is help. It's not...
00:38:31
Speaker
seamless to say that it's not it's not that we onboard a factory today and tomorrow it becomes tech enabled. There is hand holding required, there is training required. But this just makes it makes it a sort of easier.
00:38:43
Speaker
And I think that is what has enabled us to implement this. We have now also put in aspects of bar coding, et cetera. So after after a certain part of the production, all the units start getting bar coded. So that we then use to leverage and capture data from there.
00:38:57
Speaker
Okay, interesting. ah But the barcode reading is through like some sort of a camera automatically reading it or there's like a human who's scanning? No, there's a human who's scanning. Okay. okay yeah okay ah This tech is available to the factory irrespective of whose order they are processing or it only when they are working on Groyo?
00:39:19
Speaker
orders. The factory will use it for if they are using it, they will use it for the entire production floor. a And it could be used for factory because if 30% capacity is coming from growers, 70% is coming from other buyers, other other customers they work with.
00:39:33
Speaker
So we usually don't come come across a scenario where a factory owner only uses it for our production. If it use it, will will not use it, it will not use it. So, this is like a free SaaS offering to people whom you're onboard, to factory owners that you're onboarding, that we will digitize your factory free of cost.
00:39:52
Speaker
Correct. Do you think this is monetizable? Like, and not in India, it's unlikely. We do monetize a part of it. And how we have structured that is, so this offering is is bundled with that with our compliance consulting offering, right where we say that we will we will help your factory become export compliant, ah improve your processes.
00:40:11
Speaker
We do things like skilling on the factory floor where we actually skill the workers. right That offering is monetized to large factories. and So we work with we work with large exporters as well, where we charge them about 30, 40, 50 lakh rupees a year for this entire entire process.
00:40:28
Speaker
right And that was our thought behind behind that, that we didn't, this is almost 40, 50 member team for us. right So we didn't want this to become a cost center. We were clear that at least it should be so much, that the cost should be taken from the team.
00:40:41
Speaker
So that is not sort of dragging down our margins. That's how we are. Very interesting. That's trusted. So your compliance team is doing this free for onboarded factories and is charging ah factories which are not onboarded.
00:40:57
Speaker
okay Larger factories. Okay. yeah Okay. Okay. okay in Interesting. ah What is the contribution of this consulting revenue to your ah overall revenue?
00:41:08
Speaker
About 3-4%. Okay. So it's just a way to... ah Like... Be more capital efficient.
00:41:19
Speaker
Yes, correct.
Groyo's Market Strategy and Expansion
00:41:20
Speaker
Absolutely. Not make it a cost center. Okay. Very interesting. Which also would, I'm guessing, help in retention. ah I think when people feel like they're owning a P&L, the retention would be much stronger. Yeah.
00:41:36
Speaker
Very interesting. Okay. Okay. Got it. So, okay. So, you built out this compliance function, which is one way in which you de-risk factories. And then you have the quality team, which is going and doing quality controls.
00:41:50
Speaker
So they would also... We have the production production merchandising team, which also which is also completely on the supply side. So what does this team do, production merchandising? So production merchandising basically after an order comes in, they become an owner of that order.
00:42:04
Speaker
and So one merchandiser, let's say there is a PO o from from lefties. right So one merchandiser is now the owner of that PO. They need to ensure that the entire time and action plan that has been committed to the buyer is followed.
00:42:15
Speaker
Right? In a nutshell. And they need to unbottleneck whatever is stopping that from happening. Right? It's not coming. It's not coming. It's coming. It's not coming. It's not coming. It's coming. It's coming.
00:42:26
Speaker
Production is not happening on time. Just solve all of that. That is their core SLA. Okay. ah What's the role of a merchandiser typically?
00:42:37
Speaker
role of a merchandiser exactly this. Right? So if you're a merchandiser, you'll get tagged to any one PO. Of course, at a time, multiple POs. But the role is to... Firstly, find the right factory for that PO. right ah The merchandiser does a lot of the costing part of it.
00:42:52
Speaker
right where With the buyer, we are typically a price taker and because you can't negotiate with the likes of a Mango or a Zara. They will say, we have $3 target price. If you want it, take it at $3.
00:43:03
Speaker
right With the factory, we are a price giver. right So there there is a lot of negotiation that goes on. right So that part, the merchandiser will frontline. um Breaking down the cost with the factory owner.
00:43:15
Speaker
What are the different cost aspects? How can we minimize what? right after the order has been closed, they will ensure that the entire process of the order is on track. Right right from the time, the button time, period all of that.
00:43:28
Speaker
Regular. So they will coordinate with the QC team to say, regular QC audit. Make sure there's a QC check happening every week. Make sure whatever QC issues are coming in that are being resolved on the factory floor.
00:43:39
Speaker
End to end managing the lifecycle of that order and ensuring it is shipped on time as per the quality that the customer has asked for. That is what a merchandise does. Okay. Do they also like break down the design into individual tasks?
00:43:58
Speaker
Not tasks, but they will break down the design to enable the factory owner to understand that better. Right? Okay. That if it's a look and feel, it will look like this. If it is a particular kind of pattern, it will have to do printing.
00:44:10
Speaker
So, your printing, like, let's say you don't have that printing facility in-house, so we have to send it outside for printing. All of those aspects, the merchandise will do. Oh, OK, OK, OK. Got it, got it, OK.
00:44:21
Speaker
yeah And ah you also have a design team. So design team would like help the client with design options and ideas and so on. Correct. OK. Design team is basically where Our customers give us a mood board or a trend board at the start of the season.
00:44:36
Speaker
right But then it is up to us to interpret that mood board and trend board and come up with actual designs and collections. um And when we go to a customer meeting, we travel with like physical suitcases. We go with two, three suitcases.
00:44:47
Speaker
ah There'll be a long table like this. We'll lay out all of the products on the table. and then And that design needs to talk to the customer. They need to understand and feel that, okay, this this partner really understands my language, um understands what I'm looking for.
00:45:02
Speaker
If that design is not strong, then the customer will not give the order. The conversation will drop off at that point. ah So design is where it all starts. If that design is strong and they really feel that, okay, Groyo understands my language, understands what my consumers are are looking for.
00:45:17
Speaker
That's when there it will move into more of a commercial stage of the order. And how did you build this design team? This doesn't sound like an easy team to build. A team which would understand the design language of each brand and be able to create winning designs?
00:45:34
Speaker
So I think a lot of them we have poached from large legacy export houses. right And again, I think our, apart from me and our finance team, our org has zero generalists. Everyone in every team are people who come with a lot of experience doing that.
00:45:50
Speaker
So we poached people from sort of large legacy export houses who have been working with these kinds of customers who understand their language. And that's how we've built it. Interesting.
00:46:00
Speaker
So, you know, this is a very different kind of a startup model. I talked to a lot of founders who ah who look for hustle and, you know, the the soft skills more than the experience.
00:46:12
Speaker
ah Whereas in your case, the the hard skills, the relevant experience is what you are primarily looking for. Is that the nature of the industry or like... I think it is because again, we saw some of our peers in the tech in the new age ecosystem who tried to do it the other way.
00:46:31
Speaker
I remember I'd gone for this buyer meeting in Dubai with Prithee and they had met, I won't name the startup, they had met one of our peers recently. And they were like two two guys from McKinsey had come who gave us like a PPT presentation on how they're going to use tech to digitize the whole supply chain.
00:46:48
Speaker
They both showed us a product, or they showed us design, or they talked about production.
00:46:55
Speaker
So I think that the nuance of this is this industry is a little different. um but I have now been in this industry for effectively seven years. But even I am not technical enough to be able to say I can fully read a design or do an open costing.
00:47:10
Speaker
Whereas if you talk to people like Pratik, you just look at what you're wearing and tell you what's in it. What is the price of every component? is open cost? How much can it be? Okay, fascinating. so i think that's what makes it very difficult to say that you'll hire a generalist from a consulting firm and make them do this.
00:47:27
Speaker
Fascinating, very interesting. ah You know, you kind of have like a anti-scale ah philosophy, you know, you're working with. ah smaller sized units and you prefer them to be smaller sized because that is your sweet spot to work with smaller sized units whereas like say ah China has very clearly a scale philosophy I doubt the kind of small scale enterprise that India has would survive in China today most of them would have gone extinct by now um
00:47:59
Speaker
Do you think that is inevitable that that only a few scaled up players will survive? Or do you think this long tail will survive of thousands of small manufacturers?
00:48:11
Speaker
I think the long tail is where, if you look at if you look at overall public data over the last last four, five years, the contribution of MSMEs to exports has been steadily rising, which 10 years back was at 25 watt percent as now and now has gone to 35, 40 percent.
00:48:25
Speaker
right So it's there evident signs that the long tail is now actually capturing more of that that market share because of the inherent advantages they bring in. And at least for the next 10 years, I think that is where more of the growth is going to happen.
00:48:38
Speaker
um It's not that the very large exporters will sort of fade away overnight. But it's also not that those businesses will grow phenomenally from here.
00:48:55
Speaker
Why? I mean, China is proof that scale works.
00:49:00
Speaker
So China is actually very different from a, even the scale in China is very different. right um They have used tech and process in a way where even larger factories are able to do very, very small batch sizes, very fast turnaround times, very cost effective production.
00:49:16
Speaker
right um I don't think India, Bangladesh has that level of infrastructure to sort of mirror that, which is why China has been where it is in yeah the global fashion supply chain.
00:49:30
Speaker
But your bet is that the the long tail will thrive. that That it will not be like few scaled up players and dominating. Our bet is the long tail has inherent advantages to thrive in today's today's fashion sourcing ecosystem.
00:49:47
Speaker
They lack the capabilities to make them thrive, which players like us need to bring to them. But yeah, fundamentally, if you look at what Global Fashion is seeking today, in terms of agility, in terms of speed, in terms of flexibility, that is best suited for the long term.
00:50:03
Speaker
Plus, I'm assuming their cost would be lower or not really? Costs are. Definitely. With scale also your costs come down, right? Like... It's only when you're somewhere in the middle that your costs are wonky. but So that's an interesting point actually. There's something lot of folks end up asking me that, you know, which scale costs will come down. Now if you think of the manufacturing process, which scale costs comes down when you have a line assembly process, when you have one SKU and you say, okay, if I'm making one phone versus if I'm making one million phones, my one million phone cost will come down.
00:50:39
Speaker
Now, if you break that down in fashion, no SKU is the same. Repeat orders, maybe SKU is not the same. eight Every order will have 15-20 SKUs. So which scale actually costs don't come down because it is not that you're making the same thing again and again. okay yeah You are making different SKUs with different processes with different button, kapra, everything.
00:50:58
Speaker
So it is actually the lower guy who has a cost advantage. The bigger guy will actually do the same thing, but with a higher cost structure because skip process his bot other and he will have 10 floor managers, 10 QC managers, all of that. So it's a nuanced to fashion.
00:51:16
Speaker
As long as it is labor intensive, the kind of anti-scale thesis will work. But if you started replacing labor with robots, then probably scale up.
00:51:29
Speaker
The efficiency of scale argument you can see very well on the fabric side, where it's very different, right? Because fabric may number of SKUs are lesser, it is more capital heavy, right? Less labor intensive.
00:51:40
Speaker
So there you see a large mill actually commanding better unit economics and doing better than a much smaller mill, right? But when it comes to apparel, that full dynamics change.
00:51:51
Speaker
Okay. ah Tell me about your revenue and
Funding, Growth, and Business Model of Groyo
00:51:54
Speaker
funding journey. Like year one, when you started, what kind of revenue were you at? When did you raise your first round? How has that been? So year one, I think we were at 25 crores in revenue.
00:52:04
Speaker
So relatively, relatively relatively small. We raised our first round very early. I think we we launched in July. We had raised our first round in September. This is about 21. 21. Yeah. anyone
00:52:18
Speaker
That was led by Alphawave. They were our earliest backer. I think when they came in, we were doing 25 lakh rupees of revenue. So it was a very, very, very early bet. Wow. And they invested a decent amount, right? That round was, i think, 4.5 million.
00:52:32
Speaker
That round was about 4.5 million. Correct. They they led the round. They did most of the round. How did you raise such a large round ah um at the seed stage?
00:52:44
Speaker
Like Seed Stage, such a lie round. ah you It's not like you are like serial entrepreneurs or something. It's very rare for first time entrepreneurs to have such a large round at Seed Stage. I think so two, three aspects worked in our favor then.
00:52:58
Speaker
One, the whole clarity we had on how to build, what to build, exactly what to do, right? Which is I think what not a lot of the folks we were speaking to at the time respected.
00:53:09
Speaker
um The fact that as founders, we brought in very complimentary skills, where Triteek is very strong on the technical industry side, I'm very strong on finance, commercial side.
00:53:19
Speaker
I think that also, that also, that's where, but I think We were very clear on month on month, quarter on quarter exactly what we will execute. cur It's not that there was any figuring out for us to do.
00:53:30
Speaker
We were clear that we will go to UK and we have five customers. here We need to have to have even to the extent we had even mapped out that we have to hire this person. We know the person. We know what his comp is going to be.
00:53:42
Speaker
okay All we need is the capital to give him offer letter. um So I think that that clarity that clarity helped a lot. Plus large time. Large time, very large time, of course.
00:53:54
Speaker
I think India, if you look at only India, Bangladesh, textile apparel export is almost $80 billion dollars come market. If you add Vietnam, it's $120, $130 billion market. So one of the largest markets in the world.
00:54:07
Speaker
And you said aggregators like you would get like 8-10% margin. So we actually command a lot more than 8-10%. We today earn about close to 28-30% at a unit level, at a take rate level.
00:54:21
Speaker
And that's because you're working with long tail, so you have more pricing power. Absolutely. Working with long tail. And... That also, it's not that there's no benefit to the factory there, right? Because how a lot of our factories think of it is if they were doing that same dress for Vishal Megamart, they would get 150 rupees or 140 rupees.
00:54:39
Speaker
Whereas if Groi was giving them that order and really squeezing and giving two and a half dollars. So two and a half dollars is still better than what Vishal Megamart is going to give. So there is benefit for both parties. Okay. Okay. Okay.
00:54:51
Speaker
Interesting. Okay. So yeah, first year was 25 crores. Then... First year of 25 crores, we raised from Alpha Wave in about September of of that year.
00:55:02
Speaker
um We also brought in a few few strategic angels in that round. um Our next round happened next year, which was September, september October of 2022. That was led by Tiger.
00:55:15
Speaker
And this was big round, right? 28 million. This was a big round. Yeah. This was a 28 million equity round. um Yeah, that was the end of- This was on the back of what? Your had scaled Your revenue scaled up?
00:55:31
Speaker
I think GMV plus I think one part of whatever we had projected and set out to do at a seed stage, we had been able to execute very well. okay We had also gone global very fast. right So by end of 21, we were in Bangladesh. We set up our entity in Bangladesh.
00:55:46
Speaker
copy By end of 21 itself, we were exporting to UK, we were exporting to Europe. In 22, we had started exporting to US. we had clients in the US. um okay We set up our GCC office in sort of mid of 22 as well.
00:56:00
Speaker
eight So in a year and a half, we were present in like seven, eight countries, had a pretty global operations. And I think the bigger picture they saw then is key foundation has been laid out with the right kind of capital. This can now become a very large global business.
00:56:17
Speaker
So I think that helped. And of course, there those times, it was a very different market. yeah Okay. okay ah What was your revenue that year, 22? twenty two At the time, I think we were doing about 100 crore run rate.
00:56:33
Speaker
Okay. 100 odd crore run rate. So did you really need $28 million dollars or you took it because it was available? We took it because it was available. I think... When we had started raising, we had started that process raising $10 million. Okay.
00:56:47
Speaker
okay And that, that was the thought that $10 million, dollars but but i said that's enough for us to build out over two years. But it was, it was, it was available. Tiger was one of, when we had, like when I started the company, they were one of the one of our sort of most aspired backers, right? key yeah yeah yeah Great, great partners to have.
00:57:08
Speaker
So that's, that's how that happened. Did you ah lose frugality because of raising so much money? ah Lose fiscal discipline?
00:57:20
Speaker
ah Start chasing revenue instead of EBITDA? but What you just said, you know, like chasing GMV instead of EBITDA? I think for...
00:57:32
Speaker
A very brief period of six to seven months we did. right Because that there was some hype in the market then. but i think What does that mean? like like What does it translate into?
00:57:44
Speaker
Like losing fiscal discipline? Like you will take orders at a lower price than you're comfortable with. You take orders at lower margin. At the time we were operating at I think an 8 to 10% unit level margin, which has today become 30%.
00:57:57
Speaker
thirty percent a Broadly that, I think, thankfully for us though, that was for a very brief period. I think two parts really worked in our favor. I think one, the experience Prateek had helped a lot because he could he could very easily tell he is not sustainable, that in in a year, all of this hype is going to fade away and what will what will remain is ah it long is if it is a long lasting profitable business.
00:58:23
Speaker
eight And yeah, I think we I inherently look to him for that expertise. So we put the, put the brakes very early. Okay.
00:58:34
Speaker
Yeah. I think that, that, that helped. Good stuff. ah You still have that money in the bank? Yeah, I think where we are today, the business is fat positive.
00:58:45
Speaker
We are cashflow positive. And we have, more than 50% of what we have raised left with us. Amazing. in that From that lens, raising a very large round then made sense but made sense now because fundraising is not something that is something you need to keep doing.
00:59:05
Speaker
Yeah, that distraction of ah having to constantly raise Having to raise consistently. Okay, correct okay okay okay very interesting. So ah how did you you know boost the margin from 10% to 30%?
00:59:21
Speaker
One part I think was just discipline that we set internal guardrails that anything below 20% we won't get. And if it's an order below 20%, then there needs to be a very strong rationale of why are taking it?
00:59:32
Speaker
um Very strategic customer or whatever. um That i think I think it's more of an org discipline also. The moment you put that, then the whole org starts solving for that. That okay, find vendors who can give better pricing, negotiate better with vendors.
00:59:47
Speaker
right so Discipline and culture was a large part of it. We went from a culture saying, okay, if you have 10 crores order, do you have 5 tickets? To saying, if you have 10 crores order, won't do it. It's okay.
01:00:00
Speaker
Let's leave that as aside. right So that was a large part. Design played a large part. I think setting up the whole design capability actually meant that we were river reverse engineering the cost from day zero because we are curating the whole design.
01:00:13
Speaker
We know what the fabric costs. you know what is the fabric cost, what is the button cost, what is the trim cost, right? So we will now go to a factory and say, hamme patai kapura karcha we will give you 50 rupees per garment for just manufacturing it, right?
01:00:27
Speaker
So that made our made sort of cost structures more efficient. Third, I think we transitioned to becoming a 100% export oriented business, right? So, which is why I was saying earlier that a lot of the startups I see going after the domestic business seeing that there is scale here.
01:00:44
Speaker
which is true, domestic may scale here, but making good unit economics as an aggregated and domestic is next to impossible. a And when when we took that call to say, okay, now we will do only exports and only work with top-notch customers, that meant that the arbitrage was a lot more for us because we were sourcing at 200 rupees and exporting at say, $4, $5, $6. So that translated to our overall unit economics.
01:01:12
Speaker
Okay. Your ah buyers, like the brands that you're selling to, they are aware that you are an asset light, like you're an aggregator. Yeah. Okay. that's okay You've done some M&A also, right?
01:01:27
Speaker
aye Not a lot. We've done one. ah That's been about it. what What did you acquire? So we, I think from the initial days of 2024, we really wanted to strengthen our business in the US.
01:01:45
Speaker
So UK and Europe, we had always been very, very strong, right? Because initial founding team were all X Inditex, X Next kind of team members. So we're able to get great trends in UK and Europe. US, we were always slightly weak, right? And that's where we got a great partner in the US who had been working with us ah for two, three years as well. And they sourced for Ross, Burlington, Macy's, some of the largest brands in the US.
01:02:09
Speaker
ah So it made sense to to partner with them. So this was a buying house in the US. This was a sourcing house, yes, correct. Sourcing house, okay. okay So the advantage of acquiring them is a shortcut to customers because they already have a roster of clients. So you instantly get into those clients and- Roster of clients, team on the ground. Okay.
01:02:32
Speaker
All of those aspects. Okay. So how did you, like, were you able to retain the founders after you acquired or like? Yeah, still very much actively actively sort of managing that full vertical.
01:02:45
Speaker
ah how but like How did you manage to ah get them to stick around? So I think we never, it was not, we've never structured it like a full on acquisition per se. right And we've always we've always been believers in this, that it is, there's a very people driven industry.
01:03:03
Speaker
eight um And there is a lot of value to the sort of credibility and reputation that the individual brings in. So even internally, how we are structured now is we are structured in multiple verticals.
01:03:14
Speaker
right so we will get in let's say but a senior person like prateek who has 20 years of experience in the french market right and we will let him run that as a full independent vertical that you manage your customers you manage your suppliers you have your own team we will provide support whenever required our design team will support you our tech team will support you but app up up the vertical pnl right right And that has allowed us to scale faster because when it's multiple independent verticals running, it's a lot easier to scale that business.
01:03:46
Speaker
And that strategy has worked well for us over the last two, three years. Very interesting. Another example of the anti-scale ah theory. yeah Because i I would imagine the the temptation would be to have ah supply chain centralized.
01:04:03
Speaker
Like ah typically that's what happens, right? Like sales, you have like local presence, you need relationships. So each each country will have like some sales head who's managing the customer relationship. He gets the orders and then delivery of orders goes to a central team and that team, because the logic is that the central team knows more suppliers and has more information about who's the best person to do it rather than having these smaller units but why why did you opt for this and why do you feel this work better having this standalone this we saw as a comparison to some of the new age companies versus some of how the some of the legacy companies have operated right see fundamentally we are an aggregator we are not we are not a manufacturer ourselves
01:04:49
Speaker
So that model works better if you have your own manufacturing unit. You know how much capacity you have. And you have a marketing head in Italy or a marketing head in Spain who's getting the customers. eight The moment you set up a sales and supply structure in our kind of a business, the sales guy will always say that supply is bad.
01:05:06
Speaker
That it's not good, it's not good, it's not good, it's not good, it's not good. And the supply guy will always say that it's bad. buyer is not good, price is not good, etc. So you're actually an aggregator who set up two intermediaries within your own company.
01:05:20
Speaker
And then it's very difficult to to sort of run that business efficiently. Versus creating a model where you have one in one sort of head or one one team.
01:05:30
Speaker
And the end-to-end order has to be managed managed by them. order up kolanahe atiapuhunahe production of politicalna You need to ensure quality as per the customer. And run that whole process.
01:05:42
Speaker
aidan That creates a lot more accountability. It creates a lot more efficiency. And it helps us ensure that the business is running efficiently. And is there compensation linked to their P&L or partial linked? There is, of course.
01:05:57
Speaker
Yeah. Okay. there is full skin in the way. Every vertical will have, when we start the year, we'll do a financial planning with every vertical, key which we just recently did, right? If I 26, you're not seeing it.
01:06:08
Speaker
Quarter one, quarter two, quarter three, quarter four. Then me and Prithik will spend more time with them. Every quarter, are you meeting your goals? um How can we sort of expand this business now, right? That if you're, let's say, with a particular customer only doing kids wear, how can we get into men's wear? How can we get into men's wear?
01:06:24
Speaker
um There, do we need better design? Do we need better factories? What do we need?
01:06:30
Speaker
How do you pass on, you know, there is that... ah organizational knowledge that someone who's like if you had a dedicated supply team they would have that knowledge okay these suppliers do this product best uh you know that that kind of knowledge how do you pass it on to so many individual units then like like you have all of these country specific teams uh they would not be how do you ensure they learn from each other ah you know So I think one one is there are some aspects which are centralized.
01:07:04
Speaker
Like design is largely centralized. We have a centralized design head who works with all of the verticals. right ah Quality is centralized. We have a centralized QC head who works with all of the verticals.
01:07:16
Speaker
and There would be individuals who would have a dual reporting, who would sort of also work closely with the vertical head and also report to the QC head, but we team centralized. yeah That to a certain extent helps us sort of translate this.
01:07:32
Speaker
Second, we will be also spend a lot of bandwidth in and this is more at ah at ah at a senior level, into identifying how can we cross sell more efficiently. right So every two, three weeks, every month, all of us will sit down together, q okay this This individual is working with these five customers.
01:07:49
Speaker
What are we doing with this? How can we get into more categories? Maybe there are some designs which and another another team is doing that can be that can be leveraged here. okay We very actively think of our business where we are today. as one Today we are working with about 50 customers and these are 50 of the largest in the world.
01:08:08
Speaker
right I don't think we would have even one to two percent share of wallet with most of these customers. right So getting to only seven eight percent share of wallet with just these 50 customers takes us to 6500 crores of revenue in the next world five years.
01:08:25
Speaker
Even if we don't add a single more customer anymore. So we very actively think that this is the this should This is the main focus of the org, that if we can just keep becoming larger for these customers, we will create a very large business.
01:08:39
Speaker
So why put so much bandwidth in getting 50 more customers? Might as well nurture these and scale up. So that's part of focus is there. um So it seems like a lot of the business is driven through selling of ideas.
01:08:56
Speaker
like Like, it's not like your client is coming to you and dictating, okay, this is the design manufactured. But a lot of the sales happens by you showing, okay, what do you think of this? like Like pitching garment ideas or showing them samples that you want to buy this.
01:09:10
Speaker
ah that is like That is like a bigger part of how orders happen. but So we... curate a collection, which is collection is like a design collection, which is customized for every customer and customized for every team in that customer, or every category, right?
01:09:24
Speaker
Every 14 days, which our design team will curate nonstop, right? okay And we will do it for categories we're not even doing. So let's say a customer, we are we are only doing kids wear.
01:09:34
Speaker
We will constantly keep keep sending them men's wear collection, women's wear collection. um And that is how we'll sort of look to get into more and more categories in SKUs. Okay.
01:09:46
Speaker
ah you When you say curate collections sent to them, you're talking of ah digital designs like a PDF with designs or you're talking of like samples and all? Both.
01:09:57
Speaker
we will We will send them digital designs as well. um The moment there is some kind of... appreciation or some kind of interest, we will immediately send them, send them physical design. um And we have our individuals in all of these markets, right? So we will have, if it's a British customer, we'll have someone money in London go to their office with, with that collection. Okay.
01:10:15
Speaker
This is something you had liked. These are the products. Are your kids wear team has been very happy with us. Why don't you give us a chance in women's wear also? Okay.
01:10:26
Speaker
So you really need your, ah team leaders, ah your regional leaders to be very strong at farming, relationship building, not necessarily hunting.
01:10:37
Speaker
ah You don't need to hunt further because you're already in the big names, but farming is what will decide how much revenue the business does. That's typically the kind of folks we have gotten also, right? We will get folks who have worked with those kind of customers for at least two decades.
01:10:55
Speaker
And I think our entire our entire management team today, apart from me, everyone else is 45 plus, right? Including our CFO who has like three decades of experience.
01:11:06
Speaker
um So that's the kind of talent we bring in also. People who have been there, done that, worked with those kinds of customers. ah That plays an important role.
01:11:17
Speaker
So is this typically how the industry works? Like the manufacturers, the garmenters are constantly pitching and the the customer, when he sees something, then they place an order.
01:11:28
Speaker
Absolutely. Yeah. So it'll work in two ways. The larger exporters will have their own marketing sales guys um in these markets. ah In most cases, the promoter owner will travel himself right ah for for meeting buyers and for going for this important meeting.
01:11:44
Speaker
If they don't have the capital for doing that, they will they will work with agents. So they'll have an agent in UK, an agent in France, who they will say, you get me the order, I will give you 10% commission, 5% commission on the value of the order.
01:11:57
Speaker
Those are usually the two ways in which legacy export will work. But the sales only happens through the designs of the garmenter. It is the garmenter who has to frontline that process.
01:12:09
Speaker
The customer will always come back with more... asks in terms of yeah tora change the color change ka smells a pattern then but the front lining needs to happen by the by supplier very interesting yeah i always used to think that uh fashion is determined by say uh like the the the retailer like like say zudio is determining what fashion is and what but they're curating they're not really designing their Their role is more of curating, looking at what their suppliers are pitching to them and then picking what they feel will sell.
01:12:42
Speaker
So I think dave what the brand owns fully is the brand language, right? That what should the overall look and feel and language of that of that brand be. Basis that they come up with the trend board.
01:12:53
Speaker
The trend board will dictate that. What does the trend board look like? What's a trend board? A trend board will basically have aspects like, you know, this is our language in terms of, let's say, women's wear. Women's wear is SS 26 trend board.
01:13:07
Speaker
Right? So we want to do more of florals. We think that's a big theme, right? um Within florals, we want to do more of, say, sundresses and those kind of aspects, right?
01:13:17
Speaker
That is sent to the vendors. Now the vendors will take that trend board and say, okay, the customer wants more florals. What kind of designs can I come up with? And ah make those actual SKUs and send that to the customer.
01:13:30
Speaker
Okay. Okay. Okay. Got it. Fascinating.
Financial Performance and Strategic Focus
01:13:33
Speaker
Okay. okay So are you planning to raise more funds now? What's your ARR currently? Currently, we are going at about 600 crores. Okay.
01:13:42
Speaker
so good ah With a 28, twenty eight 30% is your take rate in this. We have a 20% take rate, we have a 6% EBITDA and a 5% PAT. Wow.
01:13:54
Speaker
So you had like a decline year also, right? Where you had negative growth. So what happened there? Just the part we discussed, right? Where Okay. You sacrificed margin for orders. Correct. One, we transitioned to 100% exports.
01:14:13
Speaker
right Second, we put very strong guardrails on unit economics. So yeah, in our view, and I think our board also there was very helpful where we very clear, it makes more sense to have a business that is profitable, sustainable, and can survive long term versus trying to build a business that can get to 1000 crore ARR and then not have any cash flows or profits to translate into, right? Because that business in our view is more of a ticking time bomb, right? You don't know if it will survive.
01:14:43
Speaker
Whereas our business today will, yeah, it's positioned differently. do ah Does press coverage affect you as a founder? I'm sure when you had the negative growth, there would have been articles about it. I'm pretty sure it would have happened, right? Like, Tiger Global Funded Company. And so, like like, does it affect you? Or like, as long as your investors understand, you don't care?
01:15:09
Speaker
I don't think it affects us a lot. We are not a consumer-facing business, right, to that extent. If you think of our business, we have very few stakeholders, right? We have 50 customers, 200 suppliers, right? These are the most important stakeholders for us. yaa donor stakeholder with nabufakni but eighty They don't really go by what what media is saying or what the press is saying.
01:15:32
Speaker
They go by what actual execution business waits for. yeah And apart from that, as you said, it's more of a matter of your shareholders and partners understanding and being buying into the the approach.
01:15:44
Speaker
So not a lot. Okay. Are you planning another round, fundraise? Not immediately. I think
01:15:54
Speaker
Our thought right now is that we are PAD positive, we are generating cash flow. right um And for us to grow sustainably, we don't require more capital. um We do see there is a bigger opportunity because there are hubs like Vietnam, Indonesia, Turkey, which we are not present in at all.
01:16:09
Speaker
And our ability to build into those hubs makes it an even more compelling and sort of one-stop-shop solution for the customers, which might require some additional capital, but not pressing.
01:16:21
Speaker
So that's it. I think we have been... very fortunate to have two very good backers who have been very patient, very understanding, have never pushed us in the wrong direction.
01:16:34
Speaker
um So if you're lucky enough to find one or two more such partners, then maybe.
Global Sourcing Trends and Future Outlook
01:16:41
Speaker
Do ah tariffs affect your business? I think we're now at 50%, right? I'm sure garments would be at 50% for sure. Correct.
01:16:49
Speaker
So does it hit your business? Thankfully, the impact is minimized. right So our US business is about 10% of our overall top line. it okay And as I said, the business was from day zero skewed more towards UK and Europe.
01:17:03
Speaker
ah Thankfully, the impact on us is, is while the impact on the industry is a lot more severe, the impact on us is more minimized. And that's why we also saw lot of our US customers have reached out to us saying that if you all can give us a supply chain solution from Sri Lanka and Vietnam, we would love to move that business to you starting yesterday.
01:17:23
Speaker
okay And we have just recently hired a country head in Sri Lanka. We are setting up our base and office there because we think that makes it an interesting opportunity also that if a customer can say that I will manage the whole thing for you in Sri Lanka or Vietnam, then a large part of the business can go to that part now.
01:17:42
Speaker
Okay. Okay. ah Do you actually see the supply chain moving away from China? Because now India is like worse off than China, right? For an American buyer.
01:17:54
Speaker
Yeah. So do you see that happening, the the move away from China? We do. We do. I think that, see, that move has been happening for the last 10 years. um And it's been a very gradual move. I think last...
01:18:05
Speaker
Last year a couple of years, the media has been hyping it up a lot more. So it's not as aggressive as that. It's not that someone was buying 1,000,000 piece in in the last year, it will be getting 10,000 pieces.
01:18:17
Speaker
and It is more gradual that that 1,000,000 piece will perhaps become 90,000 pieces. Will next year become 85,000 pieces. right Some SKUs will move to India, some will move to Vietnam, some will move to Bangladesh.
01:18:28
Speaker
So it is happening, but it is not happening in a knee jerk fashion to say that, you know, all buyers are immediately stopping their China production and sourcing. China will, in our view, even over the next 10 years, I think China today is at about 55 odd percent, 55, 56 percent in global fashion sourcing.
01:18:45
Speaker
In our view, even over 10 years, that will get down to 45, 46. So they will still be the largest. But yeah, there is a gradual shift happening. So what can Indian manufacturing learn from Chinese manufacturing?
01:19:02
Speaker
I think couple of aspects. there One, I think from an efficiency point of view, China is far superior, late which India lacks. ah certainly Is that because of work ethics?
01:19:16
Speaker
Because of work ethics, because of infrastructure, all of those aspects. eight
01:19:22
Speaker
And I think tight tied to efficiency from an overall sort of process point of view, and this is true even for even for Bangladesh, even for Vietnam, um they are they are slightly more efficient than what and what we are, which also is something we need to work on.
01:19:40
Speaker
I think overall from a government sort of incentive or government policy point of view, um A lot of countries like Bangladesh have a lot more favorable policies for apparel specifically than what India has today.
01:19:57
Speaker
So the FTA which you see in UK happening right now for but India, Bangladesh has had such FTAs for the last 10-20 years for most of the importing countries.
01:20:07
Speaker
So that's where we have some catching up to do. Okay, okay, okay. Interesting. okay ah Okay,
Advice for Aspiring Founders and Role of AI
01:20:16
Speaker
cool. So ah let me end with this.
01:20:19
Speaker
What's your advice to aspiring founders who are building businesses?
01:20:26
Speaker
I think one, two, three. One would definitely be start, right? I think in my peer circle also, have a lot of folks who have been toying with an idea for one year, that this can happen, that can happen, that can happen, right?
01:20:39
Speaker
The first plan is never going to be be met. when we When we started the company, what our first plan was versus what we what the plan is today is very different. So should start? Would be the most important.
01:20:52
Speaker
Second, I think unit economics from day zero have to make sense. That fundamentally, I think, be it a startup or be it a legacy business, every company exists to give ah sort of create value for for all stakeholders.
01:21:06
Speaker
right ah So that dhanda mindset needs to be there that how are you going to fundamentally on revenue and on margins? right
01:21:15
Speaker
And I think third third would be that finding the right co-founder, finding the right finding founding team is crucial, right? Because these are people who will become, because over over the years, nobody on the out outside can really understand what you're going through, neither friends nor family, right? So the people who are actually going to, who you're actually going to rely on are going to be your co-founder and founding team, right?
01:21:39
Speaker
So that I think is something every person who starts should spend a lot of time on get the right partner. Okay, awesome. I'm going to slip in one last question. yeah Is AI affecting your business?
01:21:56
Speaker
Not a lot. um Not lot of the way. Because we are more of ah manufacturing export business, right? So, there is some element of AI being used on the design side, which we have also built into our tool.
01:22:07
Speaker
But okay otherwise, on the production factory side, though, very limited. But you could, for example, use machine vision for... like say, hu what was the production today? you could have a camera which is able to count how many units were stitched, stuff like that. like Or it's not worth it, the amount of spend you'll do trying to set that up.
01:22:29
Speaker
See, I think these these kind of units are at a stage today where basic things like electricity, energy, having a basic simple ERP, which is just doing data entry.
01:22:43
Speaker
but savin right so First, that foundation needs to be built over the next 10 years to then say that, okay, now you have all of these all of these things in place. And now you can use some element of AI and automation to make the process more efficient.
01:22:57
Speaker
All right. Let me end this. Thank you so much for your time, Subhin.