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Lord Of The Logistics | Abhishek Bansal @ Shadowfax
400 Plays3 years ago
An IIT Delhi alumnus who, inspired by the Chinese startup scene, built India’s largest hyperlocal tech-backed gig marketplace- Abhishek’s story is truly like that of Frodo Baggins.
In an insight-packed conversation, Abhishek tells Akshay about the journey of building Shadowfax.
Know about:-
- Aggregating supply and demand
- Pivoting towards enterprises
- Creating static hotspots
- Data-feedback loop of the enterprise product
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Transcript
Introduction and Shoutout to Zencastr
00:00:00
Speaker
Before we start today's episode, I want to give a quick shout out to Zencaster, which is a podcaster's best friend. Trust me when I tell you this, Zencaster is like a Shopify for podcasters. It's all you need to get up and running as a podcaster. And the best thing about Zencaster is that you get so much stuff for free. If you are planning to check out the platform, then please show your support for the founder thesis podcast by using this link, zen.ai slash founder thesis.
00:00:27
Speaker
That's zen.ai slash founder thesis. Hi, everyone.
Meet Abhishek Bansal and CataFacts
00:00:33
Speaker
My name is Abhishek Bansal. I'm the founder and CEO of CataFacts.
00:00:46
Speaker
You would surely know this. A unicorn is originally a mythical horse from fairy tales.
Inspiration Behind Shadowfax
00:00:52
Speaker
It is a funny coincidence that our guest of this episode, Abhishek Bansal, named his start-up after another mythical horse. Those of you who are Lord of the Rings fans would have already guessed that we are talking about Gandal's horse, Shadowfax. Abhishek's journey of building Shadowfax is no less fascinating than the journey of Frodo Baggins in the Lord of the Rings.
Lessons from China's Startup Scene
00:01:13
Speaker
Abhishek is an IIT Delhi alumnus who was working as a consultant when he got to see China's startup scene and disruptive platforms like Pinduodu who were building hyper-local logistics infrastructure. Inspired by that, he decided to build the same infrastructure in India. And the rest, as they say, is history. Today, Shadowfax is India's largest hyper-local logistics platform and it has raised $120 million still-date from top global VCs. Here's Abhishek telling Akshay Dutt about how it all started.
00:01:44
Speaker
end of 2012 to early 2014. This is the time when the Taobao of China was growing at an exceptional pace. You have all these metuans coming up, you have the food delivery network exploding, you see all these O2A platforms like JD and the others really, really becoming big in China.
00:02:04
Speaker
And we were working with one of the retail firms. We were advising them on their retail strategy. We were talking about how to create an organization which can actually foster this growth, use this basically as a potential to grow on back of their retail network. And we could see it's a crazy scale. Every few days, it made me think, what's going to happen in India?
Challenges of Starting Shadowfax
00:02:26
Speaker
Are these two worlds so different that this will never happen in India? Or is there the probability that India might actually behave the same way?
00:02:32
Speaker
I think we got an exceptional experience working into the retail sector we understood how the china market was going and i clearly remember i think end of 2014 is when i when i moved back to india and interestingly moment i was back to india i was assigned an indian client we were trying to see the indian industry and i remember going
00:02:50
Speaker
like for a week on the new assignment, as I call it. And I'm like, nothing is happening in India. India is not going to happen. India has to change. After what I see in there, this is the place which has to change now.
00:03:07
Speaker
I moved to Bombay in mid-2014. I think that's when probably the journey began to start Shadow Facts. That was the time I had no co-founder, I had no team, I had no idea, I had no clue what to even do. A couple of things people advised me at that time, I was like, until you really have your ass on fire, you won't innovate, you won't think.
00:03:33
Speaker
I think that was a kind of a move and it was a complete white wood, like all open options, anything like I can just potentially go in any particular direction. I think it was a very interesting phase, tried out a bunch of stuff. For a couple of months, I was working with a friend setting up a night delivery kitchen. So if you are in, which city are you from? I'm from Delhi, but I've spent a little bit of time in Bombay, not too much.
00:04:02
Speaker
So in Bombay, we used to run this night-level kitchen 24-7 thing. Anything that you need, we'll deliver it. And there was a friend who was starting this up. I'll let you come and I'll help you set up something. It's interesting. It's something I've got attracted to back in China. Let me come and see what you are trying to do. So I worked over there for a couple of months. Then I worked with the NGO Pratham. They are basically into vocational training. And I was particularly working on their vocational training program.
00:04:29
Speaker
worked there, spent a bit of time, understood how people in this entire industry come from, how people behave, how are the like the grassroots level employment problems in this country. And I think I saw a bunch of stuff. And this is the time when food delivery had just started. So the first like I remember, I think giant 2015 was the first time that you would actually order a food and there's someone who will basically come and deliver it.
00:04:54
Speaker
So it was really... And Bombay had a lot of action and food to do. Yeah, and Bombay had tiny, huge discounts and there was this entire thing exploding out there. I could see that there is a lot of action happening in this entire O2O space. Consumers go offline to online. People go offline to eat and they're now basically going online and they're ordering and eating at home. This entire offline transaction need to essentially go online. That was the whole belief at that point.
00:05:23
Speaker
And having personally now used some of these services, I was like, oh, this is an interesting time. This is happening
Shadowfax's Market Research and Initial Model
00:05:28
Speaker
finally. This had to happen, but I think this is bringing an unbelievable customer experience. Why would I, as a customer, not do it? If I had the opportunity to order groceries, food, anything which can be delivered within a couple of hours, why will I go out? It does just not make any sort of sense.
00:05:46
Speaker
And I think that's when we really started working towards shadow facts. And again, the idea of shadow facts evolved over a couple of months. It was not like a moment of, oh, let's do this. We actually took a lot of time doing a lot of primary research in terms of just going there out and talking to people.
00:06:05
Speaker
And the whole idea was like how will a viable business get created which can enable all of these offline stores to actually deliver to their customers. What do these people really need so that they can actually start delivering. And we did a bunch of research, we understood like
00:06:21
Speaker
The kind of challenges that logistics had, and having set up a small kitchen myself, I understood how difficult it is to even manage people. Having a speed of 10 delivery boys is a painful, painful problem. Imagine if there are 2000 stores, will each one of them have their own set of people just to deliver product? It is extremely inefficient, it is very, very costly, and it is painful to execute.
00:06:47
Speaker
like hiring people, managing retention and all of that, and then people competing between each other for pricing. It's a very, very difficult problem to really think about when it comes to that. And what we realized was that this is a problem that every business is going to face. You talk about like a small merchant, you talk about a large chain. Whoever we went and spoke to, we were doing primary service and suddenly we started doing sales. People were buying our services while we were doing sales.
00:07:14
Speaker
We are asking a question that we have come up with this sort of a business model. Do you think it's interesting? Why would you use if you want to use that? And then we go, we want this service. Can you start from tomorrow? I'm like, no, we don't. We just researched it. So we hired like 10, 15 interns in Bombay. And we did all that research. We understood what really is happening out there.
00:07:38
Speaker
And immediately we realized that by the end of the survey, we didn't even need data to collaborate that we should do this or not. We were like, when now can we actually say yes, because a lot of people have started calling us. We have shown something that we didn't even know like anybody wanted earlier. So I think that's how the journey actually started. It took us a couple of months and I think these are very interesting months because we were also trying to define the fundamental of our team.
00:08:04
Speaker
so one thing that i was very very clear back in those days was that it is it is like very difficult to succeed if you're soloing if you are like flying alone out there you you need to have a great
Founding Shadowfax with Webber
00:08:17
Speaker
founder founding team and i think there's one thing which probably i was i was good at i was good at business but i think when it comes to technology there was
00:08:26
Speaker
little that I could have done back in those days. So I think that's, that's really interesting. When I went to Bombay, I think that's where I met Webber. Webber is my co-founder. I'm not really met. I reconnected with him. So Webber and I... Okay. Okay. Is he like IIT friend? Yeah. So Webber and I overlapped in campus. He was two years junior to me, stayed in my, he was in my hostel. We had like,
00:08:48
Speaker
Good bonding, good friendship. We worked a lot back in those days as well. And Vavos graduated in 2014. I had graduated in 2012. So he just started his first job in Bombay. And I was going to Bombay and I was just looking to meet his friends. And that's when I think me and Vavos started striking a chord. Vavos was extremely clear that he wanted to start something.
00:09:10
Speaker
He is not even willing to wait for two years. He wants to do it right now, right here. He knows that time is right now. If you are a great guy in technology, you can start something, you can raise capital, you can build on top of it. And it's extremely clear that he wants to start something. And that's when I think we connected, or rather we reconnected, spend a lot of time brainstorming ideas, spending like weekend, just thinking brainstorming in the air that what can potentially happen. And at that time we were even, I would say debating,
00:09:40
Speaker
as wide as starting a company in logistics to probably starting even something like a tinder. So that was how wide the domain of the conversation was at that time. I think over a period of time, we spent a lot of time together. We got that conviction early 2015. We got this idea. We started doing primary research. We built this business out and
00:09:59
Speaker
And I think it was mid of 2015 is when we eventually launched. And the fourth cases at that time was that essentially everybody wants home delivery. The customers need home delivery, the merchants need home delivery.
Shadowfax's Business Model and Operations
00:10:12
Speaker
There are going to be maybe 20, 30 different platforms that are going to be created over the period of next 10 years. Large platforms worth going to, basically where consumers are going to place an order. And they'll be either using the offline store, they'll probably be having their own warehouses, but
00:10:26
Speaker
product will need to get delivered at an extremely quick pace. You will not be waiting for five days, 10 days to get your things delivered. And we were very, very clear. Which is what you saw in China also. China probably had next day delivery. No, I think China had moved to like back in 2014 itself, China had moved to like a few delivery models. And some of these models that we created actually had seen them. I knew that this exists over there.
00:10:51
Speaker
because it's a highly, highly fragmented market. If it is an extremely fragmented market, you have to really consolidate it. Somebody has to consolidate it, otherwise you will never be able to scale. If you think about 10 years down the line, where we are even today, I think today we have these large aggregators. You don't order from an independent restaurant. No restaurants today have their own delivery world.
00:11:12
Speaker
nobody in this industry hires delivery. Well, I think that's how we have come in the last six, seven years already. But I think that was the thesis even back then that this cannot operate the way it is. The market needs to be consolidated. There's going to be all these hundreds of companies who are trying to going to deliver. It's a difficult problem. It's like managing. Is there even 30 companies? You cannot have 30 different networks existing when it comes to managing these people.
00:11:39
Speaker
you think about it you think like think about how electricity distributed in our country there's a single power grid structure the power grid is basically the one which is transmitting all the all the energy required across the country and you can just tap in and get it on the on demand you don't you are completely eradicating all the inefficiencies that lie in if you basically run a network in silo so i think that's
00:12:02
Speaker
a whole fundamental behind how we build this business. So on one side, we have these individual or people of the crowd-forced partners who work on our platform. And on the other side, we have these SMEs, these large enterprises who are basically today working on our network. It's a two-sided marketplace. So we basically essentially do the matchmaking. Our algorithm over here is a
00:12:23
Speaker
is a highly functional algorithm. It's completely built on machine learning, data-driven algorithm. And it solves multiple kinds of problems within a small ecosystem. So think about solving for allocation, who should do what kind of an order. How do you manage customer experience? How do you manage earnings?
00:12:44
Speaker
per person. For us, to regain people and to basically manage an equitable index, we cannot have one person running a lot versus one person not making any money. There has to be an equitable distribution in doing all of that, as well as basically managing a cost and pricing structure for the businesses that we work with. Businesses work with such kind of aggregate network when they eventually start seeing a cost benefit as well. The cost of aggregating into a network should be
00:13:12
Speaker
should be significantly lower than what you would have done probably in asylum. That's the core advantage people start seeking as well. So I think it's a very, very core data-driven algorithm that we have ended up building in this business. People call our system extremely complex. Just imagine running a back-end of a food delivery company, an e-commerce delivery company, and a grocery delivery company. Three different categories, and maybe even medicine, where you need a prescription and all of that proves to be carried around.
00:13:40
Speaker
four different categories that we have built and created. Everybody who's basically working at the platform in this particular space is currently integrated on Shadowfax. And building so much complexity into our network and managing it through the same set of people. Basically, the people, the category, the different kind of enterprises, the different kind of requirements, somebody wants a delivery in 30 minutes, somebody wants a delivery 60 minutes, somebody wants to deduct their items.
00:14:04
Speaker
How do you manage that? I think that makes a business problem extremely complex, extremely data-driven to solve because some of these decisions need to happen in a very split-through order. So you saw the need for aggregating delivery.
00:14:19
Speaker
There were two ways to go about it. You could have done the Denzo approach or even the Grofer's approach, which is that you build a direct-to-customer platform and tell the customer, you want food, you want grocery, whatever you want, you want medicine, I will give you everything, which is what Denzo thought they will do, which of course now time has shown that that was probably not the right call, but you could have taken that call. What made you take the call that is to B2B?
Navigating the Logistics Market
00:14:44
Speaker
So again, I think when we started very much in the origin, we were fairly open to what we want to do. We were open to experiment. We were open to thinking about small businesses, large enterprises, even let's say end customers placing an order. We created all of those experiments. And I think fundamentally the way we think as founders, and that's one of my advice as well to people, to listeners in this podcast.
00:15:09
Speaker
Think about building a category. Think about doing something which nobody else is doing out there. How do you create a certain category which you can eventually win and rule? Is the idea, is the concept so different that you don't have people 10 times bigger than you're already doing or you don't have 20 other competitors larger than you are already doing that?
00:15:27
Speaker
And I think there is an acute focus on finding what category we define, becoming the market leader in that particular category and obviously doing it in a profitable manner. You want to build a business out of it. I think most of our decisions of how Shadowfax has evolved and how we have created a certain unique category for ourselves is being basically driving what business strategy we want to take.
00:15:50
Speaker
Should we go after SMEs? Should we go after last-mile clients? Should we go after enterprises? I think it's all being driven by the fact that we want to build a unique category. And we basically become a market leader in that. And that category should have the right to exist. There should be a reason by that category. I think that's how we started building it. Very early in the problem statement, we realized that by the time we started Shadowfire, there were 20 other companies
00:16:18
Speaker
which are doing end customer, which are taking an order from a customer. Okay. Okay. They were like, go first. Yeah, go first. Pepperdap, tiny, swiggy, zomato, food panda, you name it. Okay, here's the thing that I recall right now. They were like, they were every city had local players when you when you talk about food delivery.
00:16:36
Speaker
These are 2015 times that you could actually order for virtually free. Like that's how crazy those markets were. Okay. And what we realized was that it just does not make any sense for so many players to be needed right now. They're all undercutting each other. It's a bloodbath out there. Just does not make any sense.
00:16:52
Speaker
But what was clear was that this space is going to always get arranged. That you need to really be looking out for the space because the consumer demand is there. People want to order. There's a fundamental need that you're essentially solving for the end consumer. And what we realized was that to let all of these people fight it out, they provide the backend.
00:17:11
Speaker
They back-end its company. You'll sell the shovels in the gold list. So we didn't do that. And I think that's how we started. Initially, we were 100% SME-driven, so we were not working with large enterprises because none of them existed back in those days. We started working with mom and pop stores, very small, small, small enterprises that we eventually started working on. We used to take order on call, we used to press a button, we used to go there, pick it up and deliver. We got some amazing partnerships.
00:17:36
Speaker
Tell me about the actual launch. Like how did you even aggregate these gig workers? And it's like operationally, it just sounds like something which me having never, you know, like me having complete white collar background. I can't even imagine how I would go out and build a team of delivery boys. So tell me how you launched it.
00:17:56
Speaker
I think, as I told you, sales was not a problem. We used to go out there, we know people are sitting to basically give us services. So that was not a problem. I think it's a fantastic question because very little... Do people actually care about how do you talk about this supply? How do you really build it? Exactly. That's the challenge. So I think it was... See, again, I think that's where probably the couple of months that I spent with Pratham
00:18:25
Speaker
actually helped me define how we basically source people. Some of the fundamentals that we learned, that we applied, they are actually still existing. That's the way we even today operate. But I'll actually talk about what Prakham does in this. And then you'll understand how basically we got them in.
00:18:43
Speaker
Pratam was actually a partner for the first one year of our journey. They were our knowledge partner. They were the execution partners for in a lot of areas with us. So we did a very deep partnership with the nonprofit to actually kickstart some of those things. But I think later on, after having understood how some of these things operate, I think we started building some of this on our own. And I think we've scaled up like in a crazy manner for that.
00:19:03
Speaker
The way Artham used to work was that, and it still does today, they provide vocational training. So they'll actually find people in this country who want to pay money to basically train themselves and then actually go and find certain jobs.
00:19:20
Speaker
And these were like, they were not white collar jobs, right from raining to a beautician, to a plumber, they'll train you for that. And trust me, building a business model where you are charging for training, especially in some of these sectors, it gave them very unique capabilities, how to find such kind of people, how to create that sort of a network. And you need people at the grassroots level, you need people at a very local,
00:19:44
Speaker
gully level to actually find people we call this sourcing. This is typically called sourcing on mobilization of people. I remember the first day of our launch and we took our precious target that we launched with 100 people and we have to launch in seven days. It's not like going to take a turn to do that. We have to do this.
00:20:03
Speaker
And I had people like me, we hustling as a team, we have people from Patana, everybody's like figuring out what to do, how to hide so many people, this wasn't good at all. So you're aware of the law. And you needed 100 people with bikes. With mobile phones, okay.
00:20:19
Speaker
And I think it was even not easy like finding people with mobile phones is not as easy as it is today. So we did that and I remember how how actually the team executed it and we had a very small team I think it was a like very very small team which was actually working on it and the way they did was
00:20:35
Speaker
We essentially created stalls in every village of Gurgaon. So within Gurgaon, there are those small small villages. So between those massive high rises, you'll find a small village out there. We went over there, we put up a stall. We did the old Hindi movie style where you have that big auto guy with a loudspeaker.
00:20:53
Speaker
Remember the one you saw in Vasekpur? We did that. We took registration. We said if you join us at this date, we will do this. This is the amount of money that you can make.
00:21:08
Speaker
And it was a very competitive marketing. And I remember we got like, so we decided that we do the sprint of mobilization for about five days and we'll get the
Gig Work Model at Shadowfax
00:21:18
Speaker
people in. I remember people on the ground, they're like, after three days, they're like, we are closing the registrations. It's done now. We have 500 people in who want to do this. And if we take more, we don't know what to do with those people. So the requirement is not so high. Like we have to go live with 100.
00:21:33
Speaker
And you were not giving fixed pay, you were like paper delivery kinds of work model. Obviously, when you're starting, when you're trying something new, you give certain incentive, you give some something performance driven incentive that you work for 30 days, you'll get this much amount of money or you don't do any fraud, you'll basically maintain a certain customer experience and you get that.
00:21:53
Speaker
and i think that's how we did it i remember like taking her training myself the first training before going larry it was like i remember there was there was an uncle who had given us his basement to run as an office and one fine day he wakes up he's like why are 200 people in my basement why have you choked the entire lady by it we didn't think about anything of that okay we didn't realize there was a parking problem that was going to happen
00:22:17
Speaker
So we did that. There were 20 people sitting in the basement. I remember taking the lecture, like two hours. We did role play. We did all of that. And there was no content or anything. It was like, OK, let's go. I think each one played our part. We did that. I think it was Go Live Day. We actually launched with close to about 110 people on the ground. There were people operating on the app. There were the Go Live Day. We got close to about 500 orders on first day. How many customers did you sign up for?
00:22:46
Speaker
Yeah, so that was about, I think, close to about 100 odd merchants, 100 to 120 odd merchants, yeah, that we were doing that for. And then why Gurgaon? Like, you were in Bombay all this while, like, why suddenly launching? No, so I think, see, Gurgaon was a comfort zone for us. Gurgaon and South Delhi, that's where we started having spent a lot of time in campus, having spent a lot of, like, I had great connections over there, just in terms of, you have to start with restaurants, you knew the restaurant owners.
00:23:12
Speaker
There were a bunch of, I remember a bunch of IAD alumni who were running restaurants, big, big chains out there. And we just called them up. We were like, oh, we are launching. You want to try it out? Like how you start something. People are really very helpful. And I think people in your network, you always go back and realize that you can reach out to them always. And they'll be like willing to help, willing to, willing to try it out. We are doing something interesting.
00:23:40
Speaker
I think the place had wide to it, so we stopped it over there. I think we were in Bombay, we built our tech over here, then we moved to Delhi and we realized that we'll start from Delhi because that's the place we understand the best. We have a very, very core understanding of how the market, how the geography is, how people think, how and the kind of network access we'll have over there just from because of the campus presence, very close to South Delhi out there.
00:24:03
Speaker
What we did, we went out there, we had to build a first set of team in Delhi, we went to camp, we called like 20 people for drinks, we hired seven, eight of them.
00:24:13
Speaker
And you had like an app loss on day one. You directly went with an app approach, like place the order on the app for the retailer. It doesn't really work. If you don't have an app behind it, how could you even communicate with the delivery person?
Technical Challenges and Enterprise Focus
00:24:29
Speaker
So I think we started, obviously, it was not a smooth launch. Just to set the expectations, it was not a smooth launch.
00:24:37
Speaker
I remember there was an investor presentation, we were talking to investors on parallel and I remember there was an investor call and Webber was calling me up and he's like, the code which is running right now, that's the only code piece we have, the original one, it just got deleted somehow.
00:25:00
Speaker
I don't know how to solve that problem. I think it took him 12 hours to retrieve the code. Otherwise, after 10 o'clock, our website would have been like, the entire app would have gone down. It was very, very crazy. I think that's what happened. I think you always remember those times where you
00:25:17
Speaker
And that's when we first saw that, oh, we are creating some value. And it was very clear right from day to day. We have actually picked up a problem now. Nobody had seen it at that time. We were the first ones to come up with this idea. I remember within a period when we started this, within about three to four months, there were like 10 of
00:25:34
Speaker
And it's not like people saw us and then they started. I think there were some other teams which were actually doing something very, very similar. Both of us came up with this idea at that very moment. So I think the idea was born. I think it was a time which was ripe for such an idea to exist, such a business to exist. And I think people very, very realistically see
00:25:58
Speaker
And what did you price it like for those 100 customers you signed up? So I think initially we priced it on a per transaction order only it was a flat per order base that you get it delivered no matter how far and how close. We'll charge you a fixie for this.
00:26:13
Speaker
And we specifically help you in your PCARs. In your PCARs, you will not have to reject orders that we don't have people available. I think that was how we started solving it. It goes without saying we were not making any profit or anything. I think the initial times were just about, are you even solving a need? Are people willing to buy and pay for it? I think that was a very small proof of concept. I think that's how it all started. And I think the cost in this kind of a model actually to make money is a very,
00:26:43
Speaker
very business thing, a very, very rare thing in this sort of a business. So just to let you know, so this kind of a marketplace that today that we have built, where on one side you have all these enterprises, then you have all these delivery partners, it's essentially you're creating a service marketplace where you're providing a certain customer experience, you're providing on top of people who are completely dynamic in nature, where there is the element of trust that you have to build in your algorithm itself.
00:27:07
Speaker
What we've seen globally is that service marketplaces are extremely rare businesses to find and build. We have very few scalable, profitable service marketplaces. It's an extremely difficult problem because the moment your demand goes up, your service level should not go down. Your demand
00:27:24
Speaker
supply and your service excellence should scale up all at the very same time and while you're scaling this and building this up you cannot have overhead you have to basically do it through technology otherwise the overheads will make the model unsustainable in itself and when you're aggregating so much supply and demand and
00:27:41
Speaker
Essentially, it is about people. You're aggregating the thoughts of people. The time is essentially the commodity that you're trying to build and sell on your plans. And you don't want randomness creeping in. And when you're talking about people, behavior and randomness do obviously creep in. So how do you solve for that? I think that makes the modern extremely complex, extremely difficult. Very, very few companies have actually made money in this sort of a business.
00:28:07
Speaker
In the early days, we realized enterprises are scaling up. Enterprises need us more than the small guys. Lala running his own restaurant might still be able to hire a person, but a McDonald's is certainly in a lot of problems. Doing it in an organized sector is a very, very difficult problem than just doing it in an organized sector.
00:28:23
Speaker
I think it was within six months of our journey, we realized that, oh, we have to solve the enterprise problem. This is not a semi-problem. Eventually, if I am going to place an order for my favorite pizza, I want to sing a lab. I don't want to remember the pizza name on Google, search it, find it, website, and then place an order. How do you manage customer experience in that? The way what we realized was that they are eventually going to be extremely large platforms which are going to emerge.
00:28:46
Speaker
The enterprises are something which is a great business opportunity for us. They were actually willing to pay us much higher. Their credit worthiness was extremely high and the growth ambitions were very, very clear. Within six months, we actually started working primarily for enterprise and that's when the journey began of basically creating a very, very strong enterprise tool today, which exists today. Today, 95% of our business comes from enterprises.
00:29:10
Speaker
You talk about any brand in this country, you talk about anybody who delivers to the last file customer, they will be using Shadowfacts. You talk about Swiggy, you talk about Tomato, you talk about someone like a Magic Pin, you talk about medicine company like a 1MG or a Polo, you talk about someone like a Zepto, Big Basket, someone like a Flipkite, Nesho, everybody today uses Shadowfacts. We are the only company or the only logistics platform
00:29:35
Speaker
who can actually say that they have created various categories. All these different categories use a common set of network. They have their own differences. Each category is different. Think about ordering a grocery where you want your vegetables. You want to see a vegetable versus food delivery where you will take an order versus a mobile phone where you'll get a packed order. You want to return it, you can return it later. Each category is very different. How do you
00:30:02
Speaker
abstract the commonality between categories, create it on a common platform, make it extremely simple for people to understand, and extremely intuitive to apply as well on the ground. We got all of these enterprises on the same platform, within every, and there's an interesting term that you're not now going to hear from me, it's called a micro market. A micro market is, let's say, like a Galeria, is a micro market for us. Let's say, Kormangla is a micro market for us. Bandra West is a micro market for us.
00:30:30
Speaker
Today, we are at a level where we have demand coming from all possible categories. We eat food delivery, we eat grocery delivery, we eat medicine delivery, we eat e-commerce. We have all these platforms which are integrated. We have a very, very complex tech platform to manage the nuances of each category, the nuances of people, behavior, and optimization for customer experience and cost. In each of these categories that we build in,
00:30:51
Speaker
We have the same set of people who are basically working across categories following our algorithm and essentially delivering that. Now what happens is in this sort of a journey, you end up creating a sort of a network effect where you have so much demand coming in and there's so many people coming in. People come because they know all the companies are there on the platform. All the companies come because they know all the people are here on this particular platform. The cost of scale up is extremely low. They can immediately start guaranteeing customer experience without like depending on any external events or building it out by themselves.
00:31:20
Speaker
I think that's the kind of network effect we have ended up creating in this entire journey. And again, this is a network effect, which is prominently what we have seen in urban areas. We have also now started seeing in some of the tier 2, tier 3 cities where we have created some of these effects where we are taking some of the brands that we work basically into the lower reaches of the country.
00:31:40
Speaker
And I think this entire aspect of this network effect, where as a delivery partner, I come on Shadowfacts, it's basically for them, this is a plate like one app, all companies, I come over here, I find all kinds of companies to work with, and basically maximize my learning. Now, the way this entire platform is created, the way we brand position it, the way people understand about our business, we have created a model where
00:32:08
Speaker
We like to show them now if you're working for one particular company or one particular individual, it's like you're investing in a stock. It's an independent company stock. Versus, let's say, if you have a Shadowfax app, this essentially behaves like a mutual fund. When you're on the app, you can potentially work for all these companies that you can maybe even indirectly work with, but you're getting the best deals out. What we have done really well, and this is something that we've done over the last couple of years only, we've actually moved to a
00:32:38
Speaker
what internally we call it a sizzling payout deal. What that essentially is that if I'm a delivery partner, in my micro market or wherever I am working, I'll essentially be shown deals. Deals are basically where I can go or I can log in and make money. This is where I can stand and I can start making a different form of money. So for example, if you're, let's say, think about it, like if you're standing in front of a Zepto store and you're attached to Zepto for the next three hours,
00:33:04
Speaker
where there's a peak car going on versus let's say you are just probably in an area where there are only restaurants. On a very real-time basis, we actually tell them where is it that you need to stand, where is it you will get the best prize in at this very moment. And an individual can actually see what deals will be visible.
00:33:21
Speaker
for the next 7 days. So they can actually plan as well. It's not real time. You can plan, oh, Sunday I see there is a massive spike coming in e-commerce delivery, the season sales have happened. If I basically book this slot, if I do this basic training, I can actually make a lot more money than I make on a usual Sunday. Or let's say if there's a Christmas day coming in, Christmas people order 40% more food than usual.
00:33:45
Speaker
right? And we have to meet that demand. So we essentially give them those best kind of deals now. And this is basically become a very, very strong pull factor. It's a it's a brand recognition factor for us today where people understand I stay on side effects with the place one app all companies I come over here I make these money and this crazy days and my risk is reduced as a platform what also you would have heard a lot these days around the gig economy basically
00:34:11
Speaker
the earnings fluctuating significantly and that causes a lot of friction. See, that is the problem when you start running your own networks. If there is a common network where all of you are plugged into, the purchasing power for, I would say, intermittent serviceability is extremely low. I think that's the whole value prop. Today, enterprises are basically building models on top of on APIs. So today, two kinds of APIs work in. One is when, let's say, you have your internal fleet, you have your own capacity, you want a high flex capacity, you can use that.
00:34:41
Speaker
The other model we work in is that business is completely getting built on top of platform. Some of the most amazing new edge D2C brands, some of the large platforms which have recently emerged have actually been built on top of Shadowfax. When I say build on top of Shadowfax, it means like they'll probably be doing 95% of that run action just on
Future of Delivery Services
00:34:58
Speaker
our platform.
00:34:58
Speaker
rather than building anything of their own. And I think that's the kind of net, that's the power of the network effect that we have built in. It's the power of the platform that is basically getting built. And I think this is something we believe is going to be the future. It is probably in 10 years down the line. It's going to become a commodity. How do you purchase last mile capacity has to be thought like a like a commodity. Think about it like even today, like a payment gate. Like exactly like a payment gate. Today, I'll give you a
00:35:28
Speaker
Realistic scenario. We have a Swiggy, we have a Zumato. Both are amazing food delivery platforms. Both have scaled up operations everywhere. First of all, which is the platform that you order from? Zumato. By any chance, do you order from Zumato because their delivery is faster versus a Swiggy?
00:35:46
Speaker
I think I just like the UI of the app. Exactly, and you're extremely right in that. Both these delivery platforms, people don't order from these platforms because one's delivery is faster than the other. They're actually equally good. It is no more a differentiator. True, true, true.
00:36:01
Speaker
versus the experience that you can provide to your customer, the customization that you provide to a customer. For a matter of fact, I stay in Bangalore, and I think in Bangalore, majority of the people use video. My reasons for probably staying on the same platform is because they have so much data on me. Whenever I open the app, I know what, or rather they know what I want to eat. They remember what I last did. And I think the amount of personalization that is coming on some of these platforms,
00:36:28
Speaker
That's what is becoming a differentiator. The merchant experience is probably becoming a differentiator. The pricing is becoming a differentiator to the customer as well as the merchant. But the last my experience is no more a differentiator. And that is how the world is eventually going to be at. It's going to be a single network. There is going to be a people-based network which is built on top of trust. Trust, experience, data, you need to have a common data point. If you don't have
00:36:53
Speaker
common data point between platforms. I am a fraud person, I'll first go and defraud one platform, then I'll go to the other platform, then I'll go to the third platform. These individuals that you're dealing with, you need to, this needs to be built on behavioral analysis. I think the kind of data today that we have, it's a very differentiated data. It's a, it's a behavioral
00:37:13
Speaker
data across categories across clientele across markets across and even the consumer behavior data that we today track and the kind of data we have is essentially like if you are a customer you order from a swiggy order from a tomato you order from let's say five other ten other platforms
00:37:29
Speaker
There's a good probability that shadow facts will end up delivering all of those. There's no other platform which has this kind of a data algorithm built on so much insight on delivery partners as well as consumers in a particular micro market. I think that's what we believe that data is something which is going to become the differentiator in the power of this platform. The data, the algorithm, how do you manage customer experience? And eventually they are going to be a few very, very large networks where anybody can plug into.
00:37:57
Speaker
I think that's where I draw a big comparable or a parallel to how the telecom connectivity works. If you think telecom in every geography that you grow, you have a minimum of three to four players. You don't, as a customer want to just depend on one player to go, let's say, tell it bad in my, how do I work, or reliance is bad in my area, how do I work. It's always going to be like three, four large networks to run in.
00:38:19
Speaker
who have all the data, who have basically distribution capacity. And I think that's how even last file delivery is going to eventually behave. I think the kind of platform that we are building, it's something which is creating a category of its own. It is a category where anybody can plug in to draw capacity for servicing their customers, create a delightful customer experience without actually building for all of that in every micro market that you. It's a platform where we believe in the next 10 years, businesses are going to be picked.
00:38:47
Speaker
businesses in the future, or even today, a lot of them which are coming up, they don't actually need to set up any ground operations, they can just plug into a network. There's a network effect which comes into play, you get access to trusted people, you get all of that data, you have all like those amazing APIs to get
Shadowfax's Growth Strategy
00:39:06
Speaker
like minute split second level update on what is happening with major interaction. I think that's what we have built. That's what we are continuously building in our shadow facts today. We are there in about 600 cities. Now we plan to go to 2000 cities of this country. Today we have 150,000
00:39:24
Speaker
verified daily active users on the platform. We have, I lack verified monthly active users on the platform. People who come, people who have basically been verified by us, who have done a few orders and essentially they want to do more. That's the kind of bid that we have been able to create. And I'll tell you one very, very interesting fact about the way we have built this business. And that's when I said that the early fundamentals are actually responsible for creating what we are today.
00:39:49
Speaker
It's been six and a half years since we started. For the first five years of our journey, we had a zero marketing budget. We never speak. Because the inbound demand. Not just demand. Our marketing essentially goes into bringing people, doing all the immobilization. We actually created a very, very strong peer-to-peer referral network. Today, even today, 60 to 70% of our actually new people who come in, app downloads or whatever you call it,
00:40:13
Speaker
It's actually just organic. We have our offline center. We have of like how employment exchanges where we have those small smalls in Chinese, everywhere, where you can just walk in and say, I want to start working. You're working in shadow file, so you get a lucrative offer by bringing in five of your friends. We never spend any marketing money. We use our own platform. We basically went there. We launched a particular area. We used to do these grassroots mobilization drives. People used to come in and then the growth would automatically happen.
00:40:41
Speaker
And basically, when referral starts growing for you, that's when you know that you are creating value on the supply side. So until the first five years, we never did that. I think by the time we were creating a model, we were proving profitability, we were creating this micro market dynamics by bringing all categories.
00:40:57
Speaker
building a lot of technology to manage such kind of a complicated scenario in every market. We never spent on marketing and I think we've been growing at a crazy pace. I think it's been like, I think one, one and a half years since we have actually started looking at marketing now because we are looking to grow at an extraordinary pace. Even like just to give you some insight, I think in the last two years between pre-COVID versus now, we are almost four times larger than what we were, pre-COVID.
00:41:21
Speaker
And the idea is that we want to probably grow 3x in the next 12 to 15 months. I think at that kind of a scale, growing like a model which can grow so fast is a very, very strong testament that I think we have successfully been able to create a very unique category and a very differentiated one as well.
Promotions and Comparisons
00:41:42
Speaker
If you like to hear stories of founders, then we have tons of great stories from entrepreneurs who have built billion dollar businesses. Just search for the founder thesis podcast on any audio streaming app like Spotify, Ghana, Apple Podcasts and subscribe to the show.
00:42:03
Speaker
So I have a whole bunch of questions, which I've been noting. So I guess like a quick summary of shadow facts is Uber for delivery, right? Like you are, like, would that be right? Uber for delivery for enterprises, APIs, we are right for enterprises.
00:42:19
Speaker
You go to my website, you can't place an order right now. You have to integrate with our APIs. Yeah, yeah, yeah, yeah. Like a B2B, like Uber for B2B, got it. And so you are saying that eventual companies like Zomato and Swiggy will start cutting down their own delivery teams and just put it into shadow facts. And that's the way you see how things will trend.
00:42:39
Speaker
Yeah, I think a large part of that has already started happening. I think some of the large food delivery platform, not just stratified that even like even newer players coming in this particular space and the whole idea that eventually there needs to be multiple platforms, then there'll probably be a few very, very large platform that will get created in this particular space. And even like maybe Zomato's own inside fleet might itself become a separate platform later, that can very well happen. But there will be very limited platforms and people will need to
00:43:09
Speaker
They need to diversify their risk. They cannot have all their eggs in a single basket, be it their own basket.
00:43:16
Speaker
You can't even put both your legs in within your own embed as well. You want to diversify your platform risk while on the other hand, understanding how the global macro is eventually going to operate. Some of the ideas, for example, you see a Swiggy investing a lot into Instamart, which is a grocery delivery, is essentially extending that same last mile to basically create a very differentiated platform where you have all these categories. But again, you as a platform cannot just depend even on your own.
00:43:42
Speaker
The great scenario is maybe you do 40-45% of your overall transactions through your own network to diversify this. You control a certain element of that risk. Maybe for the remaining 50%, you have 2-1 maximum 3 players who are actually helping you out and helping you manage your cost or probably your customer experience. Is there a cost differential for a company to build in-house versus work with Shadowfax?
00:44:08
Speaker
There's a question of scale also. Assuming 100 would be different and assuming 10,000 would be different. I think it's not just a pure cost problem. Cost definitely is very, very high. If you are a brand, we're just starting right now.
00:44:23
Speaker
the cost and the barrier to entry so high that it will become a point of failure for you. That's how the current ecosystem goes today. If you are a brand coming in, it just does not make because nobody's going to fund you. It takes hundreds of millions of dollars to actually build this in every geography. So I think that in today's time, it's not just cost problem. It's an existence crisis. And today in the space where we are, we are the largest guys. There are actually brands who work only with us.
00:44:50
Speaker
And these are some of the large brands. They don't have an option because nobody has the kind of serviceability, the cost and the quality that we deliver today. So I know obviously brands which are upcoming right now, every brand works with us. That's how the business has been. When it comes to some of the large marketplaces, I think we do provide a cost differential, but I think more than the cost differential, I think the value that we bring apart from cost is something that matters for these people. I think the way some of the large platforms have started realizing is that the demand fluctuation at a local level is so high
00:45:20
Speaker
that either you inflate your in-house mechanisms or you reject customers. There's no middle ground right there. There's an opportunity cost either way. Either you overhire or you underhire in either case. And see the hyper-local problem or the last file problem in a very real-time sort of a problem. Today, you cannot have suddenly so many new customers coming in and you can't plan it because the entire delivery cycle is 30 minutes.
00:45:50
Speaker
today. Even 30 minutes is becoming like longer now. Okay, people are talking 10 minutes. Yeah, not 10 minutes is the new thing though issue the entire
00:46:01
Speaker
inception of an idea to place an order to the expectation that the order is going to come in within 10 minutes. How do you imagine managing such a fickle last night? I think that's where we essentially kind of... I think one of the capabilities that we've built in is basically on a real-time basis, the moment you start seeing a spike.
00:46:20
Speaker
you start getting basically that kind of a service. So I take an example, and this is what Web App actually compares a lot to in terms of when we explain some of our enterprise solutions.
Shadowfax's Product Evolution
00:46:33
Speaker
Think about AWS. The moment you start to draw more power from a server, AWS helps you scale up in a real-time manner. Just scale up without planning too much in advance. I think that's the kind of API that solution now that we've started building.
00:46:47
Speaker
Where the moment you see it in this particular corner, there is a demand expected in the next 15 minutes. The overall trend for today looks like this place is getting more demand. How do you ensure that you solve for that? So customers, the way they look at us is that they look at their, like how many customers do they have to reject? And the moment they plug us in,
00:47:11
Speaker
That factor basically improves significantly for them. And that's the value creation that we are doing. And trust me, if you can avoid a customer from leaving your platform to go to a competitor platform, if you can save that, that is priceless, absolutely priceless.
00:47:35
Speaker
I think that cloud analogy is a great way to understand. No company would really build their own server farm. And the ones who have their own server farm would probably get into the business of productizing it like Google, Amazon have done. So let's talk about the product. Now, what was version one of that product? What did it look like? And how has it evolved over the years to what it is today?
00:47:59
Speaker
Yeah, that's a very interesting and I can speak about that for hours and hours and hours. We think about a product and how we think it'll be in the next five years, what it is right now, what it was. Okay.
00:48:14
Speaker
I think through start off, it was basically a very simple API where let's say we used to go and we used to integrate in the DOS compatible format of a POS system. So for example, you're at a restaurant, it was a very simple integration. We used to like web reviews to run a code.
00:48:32
Speaker
Within five minutes there'll be a pop-up like you'll have a pop-up now whenever you press that you can enter a couple of details and you'll get a your delivery request is accepted after that. So we had this pop-up feature where you can basically place an order and it was like very simple like it was like it'll take you probably five seconds to place an order that's how easy and curated it was.
00:48:54
Speaker
So we used to do that. The order used to come to our servers. We used to allocate it to the nearest individual who would deliver it. And then the order would pop up on their app. They'd basically accept it, deliver it and come back and again. And you can then basically track that entire journey. As a restaurant owner, I can see where my order is delivered.
00:49:10
Speaker
And to the last mile customer, we used to send a small SMS. SMS made the customer... There was a link to it. A very simple, three-sided solution we had. And again, we used to... The product would have all the order history. There was a small... We used to call it a merchant portal. And you can actually track all your history. You can see some of the data analytics around all of that.
00:49:32
Speaker
I think that was how simple the product was back in those days. How would the collections happen? Like, would you send them a monthly invoice or daily? Very, very initial days, we had a weekly collection. Then in a couple of months, we started with a wallet system where you had to prepay. Then I think in a year after that, we started with a COD system as well, where we used to collect COD, we used to deduct our payouts and pay the remaining amount to the purchase progress.
00:49:58
Speaker
And how did that evolve over the years? So once you went with a pivot to enterprise, and in the early days, how did you tell your people where to start?
00:50:17
Speaker
I don't think we had all those systems back for that. I think the idea was to build a basic prototype just to see whether this works or not. So I think we used to use SMS, WhatsApp. We used to create very static hotspots as well. So these were a few points we used to create. We knew these people would be tired. So we had to have a parking spot. I remember in one of the localities where there were a lot of people, we even had a water tank kind of a concept that
00:50:43
Speaker
You basically come over here and you have free water. We used to like upsell to those people. We used to ask them to basically bring more referrals. The water tank idea has always been floating in and about at times, whenever you struggle in the Delhi heat, you get the water tanks out.
00:51:02
Speaker
I get very grassroots level solutions that we've built over there. Fundamentals, understanding people, understanding how they behave, understanding what people really need. See, the problem that we are solving, this is not something which you can't sit in an office and solve. You have to understand the pain of some of these individuals. Some of these guys, the way they work with us, you never imagine the problems until you actually meet them and you realize that
00:51:30
Speaker
That's the reason why people leave or join some other form. They might just very well leave you. You might actually be thinking, oh, am I paying less? Am I doing something wrong? But maybe something goes wrong, something, some fundamental goes off, and it creates a problem. So I think that understanding and then building on top of that product. So today, our product is very different. Not very different, I would say, but it's extremely complicated, extremely, extremely deep in terms of what it can potentially do.
00:51:57
Speaker
So today, how it works is that our core engine is essentially an API. Using that API, you can actually get any kind of a delivery transaction done as a company.
00:52:10
Speaker
You can say that I want to pick it up in Surat and deliver it to Bangalore. You can do that. You want to say that I can... So I thought you were hyper local. So you do like intercity also. Yes, it's over a period of time you build all of these capabilities because see as a customer as an enterprise, you need a complete solution.
00:52:30
Speaker
You cannot integrate with a very complicated API and say, oh, I'll only do the interesting bit. I will not do everything. And see that when you're integrating with some of these APIs, you have to cross and you have to go deep into these enterprises.
00:52:45
Speaker
When you're creating an enterprise solution, that's how it is different as well. You always continuously focus on mining a certain business. The more you offer the deeply entrenched you are, the better your pricing structure, the better your negotiations become over a period of time. Today, we have the capability where again, intercity is also a last-mile problem.
00:53:06
Speaker
How you pick it up from somewhere and then how you deliver it is probably something which takes 60% of the overall cost base. I think where APIs work is you can basically provide what you want to deliver, how big is the item, where do you want it to be delivered and then you can basically stay assured. Then our API will tell you how to like depending upon the delivery expectations, you can actually
00:53:29
Speaker
get anything delivered. So I think some of the real-time platforms actually have a real-time serviceability bit. So before you even accept an order from the customer, you have to check with us whether we are open for delivery right now or not, because the delivery might very well be in the next 10 minutes. If I'm not available, if I can, you should not even accept that order. Or you accept an order on your own behalf. I want to provide you with the capability. This is a very basic thing what we call serviceability APIs, whether we are serviceable or not.
00:53:56
Speaker
Then we have the order-taking APIs. Within the order-taking APIs, you actually have all the code. Basically, the moment you accept an order, you have to return back who's going to deliver it. You have to allocate the right individual, you have to set the expectation, you have to set certain ETAs, and you basically push that. And that's something that gets communicated to the end consumers.
00:54:14
Speaker
The third media thing in our system is what we call as tracking. And you have to track every aspect of the delivery. When they're at the pickup point, when they're at the delivery point, how are they delivering? Is the customer interaction okay? Is anybody stuck in this entire problem? What happens if a bike turns wrong? So all of those things basically come into tracking and troubleshooting experience. The post and the source API is basically around feedback and
00:54:38
Speaker
like strengthening of data. So once an order happens, you need to understand how, like there's an experience that you provide to a platform as well. We have all those, what I call it as a two-sided feedback point where we have to strengthen each other's databases as well just to understand historically how we did it. If you want to basically build engines on top of that. So that's the fourth API.
00:54:57
Speaker
So all of these APIs are available. They're available on basically two kinds of models today. One we call it as SF on-demand. SF on-demand is when you have to deliver within the next 30 minutes. And the other one is what we call as SF ship, which is essentially when you want to deliver across different cities.
00:55:14
Speaker
or you have a larger time frame which is not immediately or basically in the next 30 to 40 minutes. I think we have these two kinds of API configurations. People, brands come in, they integrate with us and then it's a completely automated process. So that's basically the
00:55:31
Speaker
Yeah, the intercity you outsourced further or you again have built it in. So we started this service by outsourcing certain bits of the supply chain. But I think over a period of time, we have actually built all of this in-house now. So today our presence in 600 cities is directly connected to us. We have basically, we have
00:55:50
Speaker
major network connections and we have established a lot of sortation centers where we basically sort shipments and then move into respective directions. We have expanded and basically gone very, very deep into this category. But I think the differentiation for us, for the brand that work with still remain the last mile only. The people side of thing, that's the reason where we are different. Otherwise,
00:56:11
Speaker
And again, this is a very honest assessment of our business. I don't think our network is a differentiating thing about us. It brings customers to us. Customers come to us because our last mile is very, very differentiated.
Gig Worker Experience
00:56:22
Speaker
So that's one part of the product. So basically how the demand aggregates with us. Now the second most important thing is basically on the supply. So we have an Android app. It's an app where basically anybody in this country can download that app. They register themselves. They get themselves verified. And within two hours,
00:56:39
Speaker
they are eligible to make money. Our entire vision for the space is that anybody in this country who's looking to make money, they have a bicycle, they have a bike, they have nothing. They should be eligible and be allowed to make money within two to three hours of even needing that money. How do you cover to that sort of an aspect? And I think that's where our app essentially comes in. Today, it's a system where you can download the Android app, you get yourself registered, you'll be unvoted in a couple of hours after like a few checks that we do.
00:57:08
Speaker
What kind of checks like address and other like KYC? Basically, all the documents you have to upload. Then what we essentially do is that on a real-time basis, we'll match your face with all the documents. It's an AI-driven engine today, which essentially does all of that matchmaking. Then what happens is, essentially, once you're done with all the matchmaking, you essentially get a demo order. The demo order essentially takes you to a physical touchpoint that we will have in your locality. So today, we have close to 1,000 touchpoints in the 600 city where we are in.
00:57:37
Speaker
And you'll be redirected over there. You go over there, you have to show your ID cards. You have to show that basically you're the same person in. And this is what we call what when we say KYC verified. So we have our own KYC setups at this scale today. And to be the individual basically download our app and essentially then they start working. So that entire period on an average training takes about two hours. And when they go to that branch, the vehicle is probably also inspected and they receive some basic training.
00:58:04
Speaker
Yeah, so training is there. So training is a part of. So training, but see what happens is that training is a lot happening on the app today. So you'll have live lessons, you'll have video-based training, you'll have modules, and you just need to know the very basics of delivery.
00:58:20
Speaker
See, on D0, when you join in, we'll not give you a complicated stuff to do. We'll give you the most simple orders. I think that's where our allegation engine comes into play. So for example, if I have a new partner, I will get a prepaid delivery where I'll just probably have to travel for a couple of kilometers, not a long distance delivery at all. I'll go, I'll pick it up and deliver it. So we classify certain transactions which are the most simplistic transactions. New partner will only get that.
00:58:46
Speaker
Like you've gamified it basically, like giving them a sense of achievement with a simple technique. So the entire app knows gamified. So the moment you log on site onto the app, you'll know these are the five places I can make money. This is how I get trained. This is how I build my own profile on the system. As I do more orders, I'll get more orders. They can actually, they have a very good health section. It's a completely automated health section that we have created now.
00:59:13
Speaker
Then there's this element coming on, basically sizzling payout deals. On the app, you have all these deals coming and running it. Which is like start pricing of Uber, like a good way to compare. But our deals are more predictable. See, it's not like I'm sitting at home, suddenly I will do a deal and, oh, the guy will run his bike and start delivering orders. They have to plan. They have to decide, now I'm using the app, what do I do tomorrow?
00:59:42
Speaker
That's the attitude that we bring in. I think that deal is very appealing to the Indian mind. Deal is always appeal to Indians. Deal is always appeal to people. I think we have seen immense success in that. The moment we have to improve and we started selling it as a value prop now. Our customers today sponsor these deals.
01:00:09
Speaker
For example, you're a platform, there's a certain locality, you want a certain spike tomorrow, please pay up.
01:00:15
Speaker
run a deal on a platform, run a deal on your own orders. We'll say, Licious tomorrow is running a deal. For all Licious orders, you'll get 20% more. Licious is sponsoring it. It is a supply to enable all of that. Today, I think that's where we actually create a lot of value. So let's say, think about, let's say you are a large e-commerce company after delivery e-commerce, the massive sale day event coming in, you want 30% more capacity tomorrow.
01:00:41
Speaker
pay it up. You can get it. You can just get it in one day. You don't have to plan for that 30 days in advance. I think that's the kind of model that we have essentially emerged onto now. It's an extremely complicated product. You can manage categories. You can manage every day. You essentially make money. One manner where we define our app today is we call it real-world code money. No bullshit.
01:01:08
Speaker
You come here, you do real work, you make real money, you go back. How does a gig worker qualify for more complex stuff? Like say handling cash, you need more trust. So what happens is we have created a milestone. It's a timeline chart that you have. The moment you cross a certain level, then new levels open up.
01:01:30
Speaker
think about playing a playing baton game online. You reach a certain level, five levels will open up, you get trained on that. Then for some of the very, very complex categories, we'll even call to you, you do a center.
01:01:43
Speaker
you come to a center like pharmacy would be most complex reverse logistics are the most complex reverse logistics is basically when you when you want to return a certain product let's say you order from from from an e-commerce apparel website you don't like that order you want to return it up somebody has to come in
01:02:01
Speaker
They have to check whether you are returning the right order or not. There's a quality check associated with it. They pick it up, and then they deliver it. I'll tell you a very interesting fact about this. We are the market leader in reverse logistics in this country. Having such a fragmented supply base, we have emerged as a market leader in the most difficult category for last five. That's how difficult it are, or how complex our back ends are. Today, through our APIs, let's say you are a brand.
01:02:31
Speaker
me to pick up a shoe from the Last Mile customer. You can configure. These are the five checks that I want. We have a pre-decided list of 50 checks. You can pick up any of those. If it is a trusted customer, you don't want to create problems for them. You can say, I don't even want to check.
01:02:48
Speaker
whatever it is, you pick it up. This customer has bought from me in the last 50 times. I know they are a trusted customer. They're not a fake customer trying to send wrong items in. You pick it up. You can actually pass all of that managed through an API. That's how powerful the APIs are. So at pickup point, you want, I want a photo of the build. I want to essentially have a proof of something. I want you to make a photograph.
01:03:14
Speaker
You can configure all of those on an API. So they have a flow. They have to do what the app is telling. That's their training. Read what is there and you do it and it'll happen. If it says, take the photo of the build and we add our app today in about five languages. It'll be written out there. You change your language, you understand what's written in. But we can make it extremely intuitive. We don't want to complicate stuff.
01:03:38
Speaker
So I think we have built on that sort of a model. I think just ensuring that people follow what they are being told, creating a technology which can track all of that, identify frauds is extremely important. I know if the boy is working
01:03:52
Speaker
They've done the last 30 orders where they've delivered every order in time. There is no complaints that have come in. I know now that person is real. They are like out there doing the real thing. They're not trying to cut corners. And I can trust them with more complicated stuff. Brands which work with us today in reverse logistics today have been able to reduce 80% of their losses which were happening because incorrect pickup were happening. 80% of them.
01:04:20
Speaker
That's how strong the value props are that we have built it. And again, this is built on top of this entire amazing last mile, which is flexible, which can do complicated stuff for you. And you have available over an API. So you said that building a service marketplace and a profitable service marketplace is extremely challenging because of...
01:04:39
Speaker
managing service quality. So like, I guess one of the ways in which you manage service quality is this, like giving them gradually more complex work. And so then you are able to get like a credit score for people who are working with you, which makes
01:04:57
Speaker
and then gamifying it and giving them extra points if they meet expectations. What about customer feedback and stuff like that? Do you directly collect customer feedback or delivery experience or the brand will collect that and pass it back? Obviously, we have our own feedback mechanisms. Customers get an SMS, they can put feedback over there, they can directly raise it to us.
01:05:19
Speaker
And a lot of feedback obviously comes from the partner platform as well. So they have an API where they actually send us real-time feedback so that we can act if something goes wrong. There is a chat support system where basically all delivery partners have access to live chat. They can actually chat with individuals on the backend that we have in the central control room in case they're stuck in a certain problem. I think there's a very, very strong feedback loop that you'd need to create. Your data points are all built on top of a feedback. You know somebody did a wrong word there.
01:05:47
Speaker
You cannot give them another order. You have to stop it at that moment itself. You cannot take that decision tomorrow. This guy was doing this yesterday. It has to be on the go. And I think some of those things remain manual. Some of those things gradually get automated on product. And as we discover new ways in which basically we face at scale, we obviously keep on building a lot of minor, minor capabilities and like creating those
01:06:13
Speaker
capabilities on top of some historical data trends so that like it can be completely scalable as a solution basically every time a delivery experience breaks you kind of analyze and then build it into the product so that that delivery experience does not break again do you also have like a fintech thing for gig workers like you know lending and credit i mean that itself can become a big business like
01:06:36
Speaker
That will become a big business. I think we have fiddled with it in the past. We don't have a very active means of, I think, providing them loans or anything. I think that is something that we are building. Maybe that's something that should emerge in the next three to four quarters, if not more. And I think there is a lot of problems that these people face on the financial side.
01:06:57
Speaker
Right now, we are solving slightly more fundamental issues in this space. L livelihood issues. L livelihood issues are there even from a financial inclusion perspective. See the problem that this space today faces is that nobody gives them a loan. Because they're working in delivery, delivery is not considered to be a space where you will get a salary slip. Until a salary slip with historical evidence comes in, no bank finances you.
01:07:23
Speaker
If these delivery individuals want finance, they want to even buy a vehicle, they want to upgrade. Now, the government has come up with a norm that you have to have electric vehicles. A lot of state governments are now coming up with it. That if you are a delivery actor, you have to buy it. Otherwise, you will not be allowed with the Philippine live view. Now, nobody is actually talking that these delivery individuals, nobody is financing them those vehicles. There's no finance available to these people. Some of those vehicles can also not be financed.
01:07:49
Speaker
I think solving for those kinds of problems is something that we are doing in the middle. I think our largest scope to this problem statement is how to give financial inclusion recognition to this community first. How do you get banks to actually have partnerships and they start trusting your data? You can do credit under it just because of the data you have.
01:08:08
Speaker
We don't even need to do credit underwriting. We can just provide data on which credit underwriting can happen. If we have so much data that you can underwrite your credit. We are not a financial institution to underwrite a risk. That's like the banking license provides you. So I think some of the most progressive banks today, we are actually talking to them. There is a whole conversation around how to solve for this problem first. And if you can solve it through the data that you have, it creates a very significant mode for the business.
01:08:36
Speaker
And I think that's our starting point to solve it from an approach perspective. I think that's like loans and some of these things will emerge. This is something that is very, very easy to build. But I think how do you solve it in a more structural manner such that like it becomes a differentiator is something that we are looking to do right now.
01:08:54
Speaker
We've also come up with like ideas and things where essentially loans are available. People can actually get like, for example, we've solved for situations where people can get paid on a daily basis. I made money. I want money today. We can give you real-time transfers. You don't have to wait till end of the month. They would probably like get 99% instead of 100% or something like that. Yeah.
01:09:14
Speaker
So we already have that on our platform. So we learned it a few years back and it's one of the differentiators. People know Delia. We go and work. I'll get money with tomorrow. I'll have a weekend party.
01:09:30
Speaker
This is in collaboration with the FinTech or you did it in-house? This is all in-house that we have done it. These are all in-house capabilities. I think with the FinTech, with the FinTech, I would say a progressive bank that we are working in, some of the new age banking changes that have been happening, we are trying to bring in more structural changes to this particular sector. Do you want to actually get into that lending play as a division or you just want to enable them to get access by providing data to a FinTech partner?
01:09:57
Speaker
So we will not directly start doing lending. That's not our business to do. I think we are good at something else. Maybe we'll have a partner or a FinTech organization to enable some of that. We'll have a place where maybe multiple banks can actually help these individuals out. And again, I think one thing that we've realized over a period of time is that you should do what you do, what you know best. What your core is, if you start doing too many things around it, it becomes a problem.
01:10:24
Speaker
Today we are at a space where the business that we are in, we believe that we can scale 3x in the next 12-15 months, we can scale 10x in the next 3 years. We don't need to invest our mind space into solving a different problem which might be better served by somebody who is an expert in that space.
01:10:42
Speaker
So now let me pick up the next thread. So you said that you talked about the four parts of your enterprise product, where the fourth part was about the data feedback loop. Help me understand that. Like, for example, would you tell them that this is a bad customer, like a fraudulent customer, or what is the kind of data which flows? And do you, for example, tell them even at the time of taking an order that this is a bad customer? Because you would know, based on your experiences with other players, which customer is a good customer, which is not
01:11:11
Speaker
I think it's a very, very detailed, like there are a lot of use cases that we have built onto that. So for example, when we say the order is not getting delivered, at that very moment, we can actually share a phone call between the delivery bar and the partner. If somebody wants to run an AI engine on top of that to comprehend whether they're the same or not, they can actually do it. So brands can actually verify that, yeah, this is what the customer said if they didn't accept the order.
01:11:36
Speaker
That's one way of looking at it. Then I think if basically there's a customer complaint coming in, the customer says that my order is problematic, it's not delivered. We get that information on a very real-time basis. Our API is based on what the customer is also saying. Let's say there's a certain delivery partner who has got three complaints in the last one hour, two hours.
01:11:56
Speaker
kind of a
Order Management and Funding Journey
01:11:57
Speaker
timeframe. Immediately we block the APIs which start rejecting orders. So I think those are some of the examples of how this is built in, but it's a very complex sort of an algorithm based on what the customer is saying or based on what the delivery partner is saying, we communicate that information for effective decision making.
01:12:16
Speaker
So tell me about the revenue and funding journey that you've had. You told me that you were doing about 500 orders a day in a couple of months after launch. So how did that grow over the years? When did you do your first round of funding? You told me you were in talks with investors at the time of launch also.
01:12:35
Speaker
I think there were a couple of investors who invested in us before we officially learned. There was a group of friends and family founders that we were able to accumulate. I think within a quarter of our launch, we did our first institutional race through eight road ventures. I think over a period of six years, we have done four rounds. We've raised about $100 million of capital over the period. We did our last race in December 2019, just before COVID happened.
01:13:01
Speaker
like a very good thing to happen considering the consequences and I think that's how our model works like the moment a market becomes turbulent our need increased like we were I think I think Covid was a very very interesting time for us and given how the need for home delivery rapidly went up and it's still like I think the tailwinds are are going to be there for the next few decades probably
01:13:25
Speaker
That's how long-term the impact is going to be there of all
Strategic Partnerships and Governance
01:13:29
Speaker
of this. I think the last stage was with Flipkart. We have a strategic partnership with Flipkart where their instant delivery model is completely built on top of Shadowify. So they are one of those brands which are basically built on top of our networks. And I think having a trusted name like a Flipkart really is a very strong testament to the network itself.
01:13:50
Speaker
that someone like that has integrated skilled up successfully. And I think the business scale up will continue happening because of the market. Did you not have this concern that you may lose, for example, Amazon business because Flipkart has invested in you, like that kind of concern of losing some customers because one customer has invested in you?
01:14:11
Speaker
So see, again, I think from a governance standpoint, we were pretty vigilant on that. I think there are no blocks. We ensure that there is, like what I call it, all privacy is maintained at the data level. I think right from the board level to the governance, I think the way we have set up, we ensure that this never becomes a problem.
01:14:30
Speaker
Having said that, see, anyways, Amazon does not work with 3PS. Amazon builds its own. So it's not even like a business you can even take. So Amazon hardly outsources. 95% of their deliveries happen in-house versus a Flipkart, which is significantly open to outsourcing.
01:14:49
Speaker
So none of the large, even in the e-commerce 3PL space, Amazon is not even the top three customers for any particular logistics company in this country. For them, logistics is a core in-house thing, so they don't really outsource. I think they're investing at a global level, which makes it very different. And what about revenue? Can you share some numbers of how revenue grew or number of orders?
Current Business Standing and Future Plans
01:15:12
Speaker
So today on a monthly basis, like on a daily basis, we do close a peak of like a million orders a day. And on an average, we would be doing about seven to eight, eight lakh orders a day across categories, across all the cities that were presented. We've grown almost like forex pre COVID versus now. Today we are at a
01:15:31
Speaker
at a revenue of close to about $200 million. So that's our annual revenue that we are running at today. So I think the platform has grown quite steeply. We still continue to grow 100% year on year for the last few years, despite COVID, despite all the
01:15:48
Speaker
all the lockdowns that keep hampering business. But I think as we are coming out of COVID, the way the market is opening, the way some of the action is happening, especially in the quick commerce, e-commerce space, I think the next tier looks pretty interesting for us. And I think some of the bits that we have taken, some of the partnerships that we have done, we believe that we'll probably build
01:16:09
Speaker
like close to our 3x scales in the next 12 to 15 months maximum. So a really high growth trajectory as we are sitting in. And what is the contribution to this revenue? Like how much comes from, say, food tech, how much comes from e-commerce and like, you know, what?
01:16:25
Speaker
So it's quite an equitable distribution between three large categories that we have food, grocery and e-commerce. Pharma fits somewhere between grocery itself, the way the complication of it. I think it's pretty much an equal looking distribution between these three categories today. But yeah, I think the quick commerce and the e-commerce spaces are growing really fast.
01:16:45
Speaker
Are you looking to raise now? I think we'll be raising some capital in the subsequent quarter now. I think there's some conversations which have made it headway in the recent couple of months. So yeah, something very well might happen this year. I'm pretty sure that would be like a unicorn round, right?
01:17:02
Speaker
I refrain from the kind of growth you've seen over the past two years. Unicorns are a myth. Do you know what shadow fight really means? That was one of my questions. How did you choose this name?
01:17:19
Speaker
So by the way, before us choosing this name, Shadowfax is a mythical horse in a lot of the rings. Have you seen the movie or read the book? I have, but I don't remember. I've not read the book. So you've seen the movie, right? So this protagonist Gandalf. Gandalf has a bright white horse. The horse's name is
01:17:40
Speaker
Shadow facts, it only comes once in the movie. I think the second movie, I think there's a small piece on shadow facts. Shadow facts is considered to be one of the, it's a mythical horse obviously, so it's considered to be one of the fastest horns. It can comprehend human language of mythical times.
01:17:58
Speaker
I think that's the concept behind Shadowfax. I remember the night we were talking to investors. We had not even launched the first set of investors that we were talking to. I was meeting someone the next day and there were a couple of very close friends who were like, we were having a drink and we were like, we need to have a name tonight if we have to talk tomorrow.
01:18:19
Speaker
And I think you have the buddy nights, right, where you come up with the brightest of ideas. So I think that's, that's how shadow facts came into existence. And yeah, I think we've just grown to love the Nate over over a period of time. So yeah, so you're not a mythical
Shadowfax's Differentiation in Logistics
01:18:38
Speaker
horse. So another mythical horse title doesn't really
01:18:46
Speaker
So last set of questions. How are you different from some of the other players in the field? Are you comfortable talking about it? And again, health listeners who are not from the space to understand the space. For example, how are you different from an e-commerce press or a delivery or a ship rocket?
01:19:05
Speaker
So see, there are two kinds of businesses. One is like logistics companies. One is like pure play aggregator platforms. Something like a picker or a ship rocket is actually an aggregator platform.
01:19:17
Speaker
You really don't do deliveries. You find people like Shadowfights or a delivery to aggregate and you help them help a small merchant manage between different kind of logistics companies. So that's a platform. So they're aggregating businesses on both sides. They're not directly working with it. They're not doing this. They're actually not doing the fulfillment part of this thing. Then you have the e-commerce logistics companies. I think the
01:19:40
Speaker
big differentiator is they don't do on-demand delivery. They cannot fulfill your order in the next 30 minutes. The technology over there is not provided for solving for that. And I think that's probably the biggest differentiation between us. When it comes to on-demand commerce, we are the largest leaders in that. We are probably... So like e-commerce express delivery, these are e-commerce. They do like next day delivery, kind of. Yes, they can only do that.
01:20:07
Speaker
And I think they're purely into that. So for us, e-commerce business is still about 30, 40% of our revenues. There is a competition, but I think the remaining business is fairly different. I think this is more from a customer value perspective, but I think from a backend perspective, it's a very different backend. We are built on top of these gig network individuals. Nobody else has a gig network, the kind of network that we have built. And it's the network which helps us differentiate ourselves.
01:20:36
Speaker
So I think the operating system is very, very different, but I think none of them are actually from just an outsider or a layman view perspective. I think if you want on-demand in this country, which potentially everybody wants today, you have to integrate with us.
01:20:53
Speaker
There's nobody else who's doing this like ultra fast delivery. You have individuals building niches in specific cities. You have a V fast doing it in Bombay. You have Danzo doing it in a lot of cities, but I think from a core logistics or a category perspective, we are the only ones. And again, we love building categories. We love calling ourselves category leaders in this.
01:21:18
Speaker
But we fasted Denzo are again more direct to consumer kind of Yeah, so they're not a head-on competition, but they're more SMA driven whether but we are again enterprise driven So in some ways they are in related space not obviously having a direct you're essentially in a category of your own large extent
01:21:35
Speaker
And so someone like a Zepto would have to build on you only. Like there's no way a company like Zepto could have been built without integrating with Shadowify. I mean, see, to start with, it's better you try it out, you build it on yourself. But again, we are working very close to models like that.
01:21:51
Speaker
And helping them create that zero to one solution that they might have created in certain geographies to create more like a larger pan India outlook and a scalable cost effective.
Company Culture and Conclusion
01:22:04
Speaker
What is like the organization DNA of shadow facts like if someone wants to an outsider who's considering a career in shadow facts like how would you describe the organizational DNA?
01:22:15
Speaker
See the organization DNA, it's a very flat organization. We pride ourselves in basically thinking long term. So we hire people who have spent long durations on the same problem, spend time in the same organization for a long time. It's one of the key hiring and shortlisting criteria.
01:22:31
Speaker
And once you come in, then you essentially are given very long-term sort of problems to solve for. Again, being a startup, it's a very disruptive sort of an environment. You don't, it's not bureaucratic. It's like everybody's super reachable. It's a flat office structure. Anybody can talk to anyone. You take problems in. If you want to fail, you fail fast. Don't keep dragging onto it. Like move quickly. Show outcomes into things. Show real challenges.
01:22:55
Speaker
I think some of the problems that we solve for, again, I like calling it, it's an original problem statement. A lot of problem statements that we see in our presence, there's no comparable to that. So what you'll find there, there's a lot of first principle problem solvers in our office. We appreciate people thinking from scratch, building out problem statement by themselves, defining the objective of what they really want to solve for.
01:23:19
Speaker
I think the great thing is that people in our leadership, they don't come from this industry. They have that coming from all kinds of diverse industries than logistics. We are like, logistics is a space where the gray area here is the better it is. And I think we're the outsiders in this space. We talk fresh. Clients love us because we talk very different things. We don't talk the standards, logistics jargon that everybody is talking out there in the market. So I think that's the kind of culture it has become eventually.
01:23:49
Speaker
We also pride ourselves in having a very good work-life balance. There are obviously times when you work extremely hard, but I think generally having a very disciplined, balanced approach, starting like sharp at like nine o'clock in the morning, ending before dinner time, maintaining discipline, having a lot of sports events. So we are known for having a lot of sports events in our offices. I personally like playing a lot. Even today, I play like four times a week, some of the other things. And I think that's a very core thing of the DNA for us.
01:24:17
Speaker
For our office teams, it's not like Friday, we get to look at it. People are like Friday, okay, let's have a football game now. I think that's the kind of culture, very young people. The average age of the organization is close to about 30. So we'll, we'll hardly have anybody outside there. 80% of the organization would be in the range of 25 and 25 today.
01:24:37
Speaker
So very young organization, people are generally looking to change and disrupt things and again having a peaceful approach to it, more sustainable. If you like the Found a Thesis podcast, then do check out our other shows on subjects like marketing, technology, career advice, books, and drama. Visit the podium.in that is T-H-E-P-O-D-I-U-N dot I-N for a complete list of all our shows.
01:25:08
Speaker
Before we end the episode, I want to share a bit about my journey as a podcaster. I started podcasting in 2020 and in the last two years, I've had the opportunity to interview more than 250 founders who are shaping India's future across sectors.
01:25:24
Speaker
If you also want to speak to the best minds in your field and build an enviable network, then you must consider becoming a podcaster. And the first step to becoming a podcaster starts with Zencaster, which takes care of all the nuts and bolts of podcasting, from remote recording to editing to distribution and finally monetization.
01:25:45
Speaker
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