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The IITian who started a trucking company | Karan Shaha @ Vahak
439 Plays2 years ago
Vahak aggregates the 3 key stakeholders in the transportation transaction - the intermediaries, the truck owners and the companies buying the service. Karan talks about discovering the opportunity and finding the product-market fit to make Vahak a category leader.
Read the text version of the episode.
Additional links:-
1.VAHAK: Tapping tech to bring order in logistics space
2.Vahak aims to transform the Indian road logistics sector
3.Bengaluru-based Vahak aims to transform road logistics sector using digitisation
4.How Vahak Plans To Drive A Brighter Future For India’s Lorry Owners
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Transcript
Introduction to Karan and India's Logistics Sector
00:00:00
Speaker
Hi, I'm Karan. I am the Coupondren CEO of Wark.
00:00:15
Speaker
About one-sixth of India's GDP is spent on logistics. With India's GDP predicted to hit $1 trillion soon, logistics will be a more than $160 billion industry. After all, the logistics sector is literally the lifeblood of the economy, enabling goods to be produced at the lowest possible costs and delivered to the consumers. But despite the importance of this sector, large parts of it remain unorganized.
Challenges and Opportunities in Logistics
00:00:39
Speaker
The average transporter in India owns less than 10 lorries and there can be 2-3 intermediaries between a transporter and the company buying the transport service. This is the reason why logistic sectors offers great promise to build large category defining startups and one such startup is Vahag. Vahag is in the business of aggregating the three key stakeholders in the transportation transaction. The intermediaries, the truck owners and the companies buying the service.
Karan's Journey and Early Influences
00:01:06
Speaker
In this episode of the Founder Thesis Podcast, Karan Shah, the founder of Vahak talks to your host Akshay Dutt about his journey of discovering the opportunity and finding the product market fit to make Vahak into a leader in its space. Stay tuned and subscribe to the Founder Thesis Podcast and any audio streaming platform to learn about the large opportunities that some of the most innovative startups in India are chasing.
00:01:37
Speaker
I basically belong from a service class family. My father works with LIC. He's basically a senior branch manager at this point of time. And my mother is a homemaker, but during our whole journey, she basically started multiple businesses from the house. I was born in a town called Belai, which is in Chhattisgarh. My mother had a big dream of basically getting both of her sons to IIT. I gave the IIT exam in 2011 and got qualified for IIT Kanpur.
00:02:03
Speaker
And then basically I started studying mechanical engineering from IIT. So I started my college journey in 2011. The culture in IIT was amazing. So one of the big influences I can say in my life were my colleagues and my friends and the kind of atmosphere that I got in the college. So one of the things that I did was I participated in a lot of extracurricular activities.
00:02:25
Speaker
So, having said that, I am someone who always wanted to do something of my own. But being a college student, I did not understand how business works, how a startup works, what are the core essence on the basis of which a business is created, right? So, in the final year of my college, I started studying about how a business is made, what are some of the key ingredients
00:02:48
Speaker
And at that point of time, I mean in 2014, 2015, the startup boom was already on its way. And that is where I actually met my co-founder. So my co-founder in Vahak is Vikas and he was basically my batchmate in college. Both of us studied mechanical engineering together for the four years that we stayed together and we used to have adjacent rooms.
00:03:07
Speaker
So I was in very close vicinity with him and we developed a very good friendship during that period of time. Right after graduation in 2015, I got an opportunity to basically work with a very, very early stage company, which was called Wishup.
Entering the Startup World with Wishup
00:03:20
Speaker
So Wishup was basically founded by ITIM graduates and Wishup basically used to provide on-demand concierge service to anyone who wanted to get any sort of product from the market.
00:03:31
Speaker
You can say it was pre-run, but the model was very similar in some way. They were not doing delivery, but they were definitely taking orders and basically outsourcing the delivery to somebody else. But the model was similar in a sense that through Wishup, you can basically order anything. So I basically joined the company as the first employee. I was the third person in the company after the founders. And one of the big opportunities that I got was to live with the founders.
00:03:56
Speaker
When I started my journey, founders basically invited me to live with them and basically handle the operations part of the business. It was a very good opportunity for me. You were working and living from the same space, is it? Yes, absolutely. It was just a two people company. They had not even started when I joined and I was there from day one.
00:04:15
Speaker
I'm amazed that you took that kind of a bet. It's very hard for me to think that an IITN who has unlimited opportunities in front of him, and I mean, you can earn very good salaries depending on what field you're opting for. What made you leave all that? And I'm sure the salary here would have been pretty low also, right? Because it was early stage.
00:04:36
Speaker
Absolutely, absolutely. So the salary was pretty low. One of the things that basically helped me was that money was always a part of my life, but I'm someone who values my freedom or my opportunity, the life I'm living over money.
00:04:51
Speaker
So when I joined Bishop, I was actually not looking for a job, but I was actually preparing for CAT. Since I was fascinated by business, I wanted to do MBA. And that is why I basically went from my hometown to Delhi to prepare for CAT. And during my preparations, I got an opportunity to work there. And the founders basically invited me to work from their home itself. That was a very good opportunity for me because I was basically spending 24 hours with these very smart guys, right? They were very qualified individuals. They had a very big plan
Identifying and Addressing Transport Inefficiencies
00:05:19
Speaker
in their mind.
00:05:19
Speaker
And that gave me the confidence that wow, these guys are just thinking about startup and the day they start working, the startup has started. That was a very new experience for me. I worked there for a short period of time, about three to four months, but that period gave me some very strong push in my life. It gave me the confidence, as I said, right after that, since I'm from Chhattisgarh.
00:05:42
Speaker
Just to give you a bit of context on Chhattisgarh, Chhattisgarh is basically a very mineral rich state. It's centrally located. So the business of transportation is very strong there, right? It's a big part of the economy. Some of my family members had rice mills back then in Raipur, right? And during my preparations for CAD, they basically told me that current booking a truck from the market is a big hassle. The truck rates continuously fluctuate. There is no way to find a proper lorry owner, a proper transporter from the market.
00:06:09
Speaker
There is no way to establish trust. And that is where I thought that there is a big opportunity. So I basically contacted Vikas. He was working as a consultant back then. Both of us started doing a bit of our research about the market and the problem that are there in the market. And this was back in 2016, right? We graduated in 2015 and this was back in 2016.
00:06:30
Speaker
So we did a bit of our research and we did not understood what are the deep rooted issues, but we understood that the problem is huge. The entire nation is facing it. We as a country lag in terms of performance of the entire transport industry. And in 2016, we basically came back to my hometown and we started our own transport company.
00:06:49
Speaker
like both of you quit your jobs and... Yes. Both of us basically quit our jobs. We took about 20 lakh rupees of loan from a friend's father who trusted us to do things. We took his money and we came back to my hometown and started our own transport company. What is a transport company? Doesn't a transport company have to own trucks? Is that what you thought that you will buy trucks and help me understand? Sure. So we never wanted to buy trucks, but just to give you a bit of context on what a transport company is,
00:07:17
Speaker
A transport company may or may not have trucks of their own, but they manage the entire transaction. So as soon as a transport company gets an order from a shipper, which is basically a factory on an industry, right? What they have to do is they have to basically source lorries from the market. There are more than 10 million lorries, which are owned by a lot of very small lorry owners. So what company's job is to basically match, make the load from the existing lorries from the market.
00:07:42
Speaker
manage the entire operation because there is a huge trust gap in the market. A transporter acts as a guarantor for both the parties involved. Transporter also provides working capital and manages the entire operation but they don't necessarily have to have a truck of their own. So we were working on a very similar model. What do you mean they provide working capital? The shippers can pay after 60 days or something so that way. And the lorry owner gets paid immediately. So that 60 days working capital is being funded by the transporter.
00:08:11
Speaker
Yes. So typically a shipper says that, you know, I'm giving you 20 lakh worth of my material. I don't want to pay for freight up front, but a lorry owner is a very small individual. Yeah. Yes, exactly. Right. They don't really have a lot of spare cash for them. So what a transporter has to do is they have to pay 70, 80% of the freight in advance to the lorry owner.
00:08:32
Speaker
on the basis of which they deliver the material, brings back a proof of delivery to the transport company. At that point of time, they get the remaining balance and based on the proof of delivery that the transporter has received, they get money from the shipper after a period of 30 or 60 days in some cases. So that is where working capital is required. So we started our own transport company, but we did not know that the issues are very, very big.
Founding of Vahak and Initial Growth
00:08:54
Speaker
So we basically started going to factory
00:08:56
Speaker
and industries. These industries and factories that we approached were also surprised by the fact that we are very young individuals coming into an industry which is age old. Typically, they don't see this kind of a thing. But we got a very good response from them. These shippers were happy to give us their orders because they trusted us. We basically set up a very small office in a transport nagar in Raipur and we started our operation.
00:09:17
Speaker
And at this time, Rivigo, Blackbuck, these companies have started up when you started? Yes. So I think Rivigo and Blackbuck had already started their operations and Rivigo and Blackbuck are typical transport companies. These are large transport companies, right? So when we started our operations, we were a very small version of them, right? So what we basically did was we ran this transport company for a period of almost two and a half years. Okay. We generated some good amount of revenue through that as well. What kind of
00:09:46
Speaker
monthly revenue, what are you doing? Like monthly billing. So for the period of two years that we worked, we generated about two, 2.5 crores of revenue through that business. And I mean, it's not very large in context of a transport company because the freights are usually high, right? The margin is usually low. We generated about five, six percent in margin, but since the freight amount itself is high, the revenue looks big, right? So we basically ran that transport company for almost two and a half years. But more importantly, we actually met more than a thousand
00:10:16
Speaker
glory owners and transport estimates during our whole experience of being a transport company. And after a certain period of time, we realized that we are facing a lot of issues in scaling this transport company. Why couldn't you just keep scaling? One of the major problems with scaling a transport company is the capital requirements.
00:10:34
Speaker
So as I said, we had 20 lakh rupees of money and those were the transactions that we could do. Even if we have a load and a lorry in front of us, we cannot match make them unless and until we have money to give to the lorry owner or friend, right? So it's a huge credit burden that there is on a transport company.
00:10:50
Speaker
as well as the fact that you have to manage the entire operation, the fact that you have to act as a guarantor between both the parties. That is a lot of capital intensive business because you need a lot of people on the ground to basically manage these things, right? Because there are a lot of problems and mishaps that can happen during the lorries on transit. So I would actually love to give you one example here.
00:11:11
Speaker
So the first transaction that we did as a transport company, we basically placed the lorry. The lorry went to the shipper's factory since the steel business is very good in Ripert and the material that was getting transported were steel rails. The trailer loaded the material and at that point of time, we basically went to our home to have lunch and all, right? As soon as we started having lunch, we got a call from the consigner, the shipper, that the rails have fallen from the trailer in transit.
00:11:38
Speaker
At that point of time, we as a transporter have to act as a guarantor. We ran to the place where the lorry was. We had to book a vehicle to pick the lorry back to the trailer. And that is where there is a lot of operations burden as well. This is a very small example. In many cases, theft happens. In many cases, the lorry breaks down, accidents happen. So when you act as a guarantor for such a big transaction, it takes a toll on your company.
00:12:04
Speaker
By guarantor, it means that if that had happened, then you would have to make up for it, unless you took insurance or something. Yes, absolutely. So if the loan owner is not getting paid on time, we have to pay him. If the loan owner is not satisfied with the service, we have to bear the branch.
00:12:23
Speaker
And if the material, if that gets damaged, then you have to pay the cost of damage. Exactly. Exactly. Exactly. So that is why that business has a lot of skin in the game. So that is one of the examples of some of the problems that can happen. So during our experience, we understood that it's difficult to scale this business, but we realized the fact that every single transport company in the market is facing a similar issue. We had to set up a call center, which was not scalable. And there were multiple issues that every single SME, a large or a small was facing.
00:12:50
Speaker
At that point of time, we basically pivoted from our transport company to a pure technology. What we visualized at that point of time is a product that can help such transport companies in the market to scale their operations. Because we were engineers, we knew technology, we knew that such problems can be solved through technology. But at that point of time, maybe the environment was not very well receiving to the new technologies that were coming up.
00:13:15
Speaker
So, we basically shut down our transport business and we started working on Vahak. This was back in 2019. With Vahak, we basically wanted to create a marketplace but at its core, our vision was to create a community because one of the major issues that we saw in the market was that there is a huge trust gap. As I said, there are more than 10 million heavy commercial vehicles in the nation and more than 75% of those vehicles are owned by lorry owners which have less than two vehicles.
00:13:42
Speaker
So, this is what we used to call, you know, chalakhi malakha. So, he's the one who is owning the vehicle and who is the one who is driving, right? Driver come owner, exactly. And these people are mobile, right? They keep moving from one place to another. They don't have a lot of money in hand. So, they don't want to deal with anyone whom they do not know personally.
00:14:01
Speaker
because they're never sure when will they get the money. And same on the demand side, right? A transport company or a shipper does not want to deal with anyone whom they do not know personally because they are never sure what will happen to the large amount of material that they are giving, right? That is where there is a huge trust gap. What this trust gap does is that this basically reduces the efficiency of the entire nation.
00:14:22
Speaker
Lorry owners, at this point of time, on an average, are able to run their lorries for just 50% of time in a month. The rest 50% of the time, they are just waiting for their next load because they are just dependent on two or three transporters to find their load, right? That is the problem that we identified. So with Vahag, the vision was never just to create a marketplace, but the vision was to create a trustable community, which can enable these users to increase their own business network, which can enable these users to create a brand value for themselves.
00:14:52
Speaker
because more than 80% of these players do not have any online presence. They have no way to prove their credibility or pass history to anyone in the market. That was a huge gap. So this platform would directly connect vehicle owners with shippers and remove the transport agency from the equation. No, absolutely not because we're a transport company ourselves. We understood the fact that a transport company plays a very important role in the market. As I said, they act as a guarantor. They provide working capital. They manage the entire operation.
00:15:22
Speaker
The vision also is never to replace the transport SMEs, but to enable them to do better business, right? But to enable them to provide better services to the shippers. So we are a platform that connects lorry owners to transport SMEs and then basically connects transport SMEs to shippers. So we are a three-way platform in that sense. So we basically started working on the technology in the later stages of 2018. And the platform was launched in the month of February in 2019.
00:15:51
Speaker
Okay. And this was with your savings only, like bootstrapped when you lost. Yes. As a transport company, I mean, we had a very small of money that our friend's father had given us. That money was used to create the initial product. And you shut down your services business. Yes. We totally shut down the transport business because I mean, we were just two individuals. It's not possible for us to do both the things that we wanted to focus on one thing. And for the two years that we ran the transport
00:16:18
Speaker
company, we understood the fact that it's difficult to scale. It's difficult to scale for anyone, let alone for two, just college graduates coming into a market and trying to disrupt things. It's difficult to do that as a transport company. So the platform was launched in 2019 in the month of Feb. And the first 500 customers were onboarded by us personally. So we had a good network in, uh, Raipur's local transport nagar. And that is when we started with the thing, these owners, these SMEs, drivers, shippers, and basically started onboarding them to
00:16:48
Speaker
As soon as the first 500 users were onboarded, we started seeing organic
Vahak's Evolution and Feature Expansion
00:16:53
Speaker
growth. So in the first six months of our operations, the platform had already onboarded more than 10,000 SMEs and owners onto the platform. And this was all without a single rupee spent on marketing. At that point of time, we understood the fact that this is a platform that is really valuable.
00:17:08
Speaker
We also understood the fact that if we want to create a bigger company here, if we want to create a big technology and really create some impact that I put might not be the best place to do that. At that point of time in the latest series of 2019, we moved to Bangalore because we obviously knew that there is a very good startup ecosystem also in terms of the talent, in terms of the investors, in terms of the services, multiple services that we can take in Bangalore to grow.
00:17:34
Speaker
In the later stages of 2019, we moved to Bangalore. When we moved to Bangalore, we had just six months of money left in the bank. We had cut down all of our costs because we wanted to take it as far as possible. And the product was live? The product was live. As I said, we already had more than 10,000 users on the platform. So the product was live.
00:17:52
Speaker
And these 10,000 users were, what, like port agencies, truck owners? What's the breakup? Shippers, actually. So all the three types of parties were on the platform. We had a very good response from lorry owners. So out of the 10,000 users that we had onboarded, more than 5,000 were just pure lorry owners. And the value that they saw in the platform was an opportunity to create a brand for themselves, which they were getting nowhere else. Any single user on the platform was able to create a profile based on the different business details they give us.
00:18:21
Speaker
they were able to make connections, they were able to get ratings and reviews, they were able to verify their documents. And this basically gave them an option to create a brand value for themselves. Right. How did the signups happen? How did you onboard such a large user base? So we basically created a mobile application. And as I said, after the first 500 SMEs were onboarded, SMEs and owners were onboarded, everything was organic. So transport companies
00:18:46
Speaker
is a very close-knit community, right? There was no COVID back then. And what these transport businesses and lolly owners do is that they're very active on the ground. They go to their offices, they hang out a lot during lunch hours, they hang out a lot after their office hours, they communicate a lot.
00:19:02
Speaker
They're always looking for business. As you said, 50% is the current capacity utilization. Yes. They are constantly looking for business. They have a lot of unions that they are a part of. It was already a big offline community that we were able to see, and that is how that word of mouth spread in the early days.
00:19:21
Speaker
And were they getting business also? Were orders getting placed? Yes, yes. I mean, at that point of time, we did not have a full fledged marketplace. But what we were able to see is that users coming in and making a lot of connection. So it was like a gestile kind of a model that time, basically, like you could get the phone number of somebody and then you could directly call them like a gestile or India, like a discovery platform. Yes, absolutely. Absolutely. And that was good enough to tell us that there is traction in the market. These users are coming back because we were calling a lot of these users.
00:19:51
Speaker
We were able to understand the fact that they're coming back because they want and they're getting more business. So when we moved to Bangalore, we started raising funds. And in the first two months, we basically closed the funding with Leo Capital. Leo Capital invested around 800k USD. At that point of time, we also unloaded some very marquee angels like Abhishek himself. So that was basically an 800k round, which was good enough for us to start our company, to basically develop the technology
00:20:20
Speaker
to hire some very good engineers into the team. And that is what we did. We started developing the entire technology, started developing the marketplace, and then the growth became even faster. So in the first year, we had onboarded more than a lakh users. And at that point of time, we basically started growing the team, raised our next round, which was a PCV round, which was led by RTP Global. That was a $5.3 million round that we raised.
00:20:45
Speaker
And at this point of time, we were clearly able to understand the fact that this is a product that has huge potential. Tell me how the product evolved. Like you were a discovery platform in 2019. How did that evolve? The main focus when we started the platform in 2019 was to fill the trust gap. So the first pieces of the entire product was the profiles that the users could create to create their own brand value. And they can, as you said, make connections and call other users. And could they also receive testimonials like testimonials or ratings?
00:21:15
Speaker
They were able to receive ratings, reviews, they were able to make connections, but they were not able to verify their documents at that point of time. Verified documents means verifying proof of ownership of the truck, uploading an RC.
00:21:30
Speaker
Yes, the lorry owner now at this point of time can basically verify their RC insurance, fitness on the platform. And on the demand side, a transport SME or a shipper can basically verify their GST and any sort of company verification document, right? So the next step for us was to develop the marketplace where users can not just call any other users, but they can actually post their loads.
00:21:52
Speaker
or their lorries. So at that point of time, what started happening was a load owner can come to the platform and tell us that I want my material to get transported from point A to point B. This is the exact weight of the load. This is the lorry type that I want. This is the amount of advance that I'm willing to pay. And this is the expected rate from my side.
00:22:10
Speaker
So we basically evolved from a community to a marketplace. The platform facilitated broadcasting of the marketplace. As soon as a load owner posts a load, we used to broadcast it throughout the Lorry owner network and they could start getting it. Would you like do some curation? Because I mean, broadcasting to all 5,000 may not be productive, right? Maybe location matching and lorry matching and all those things.
00:22:33
Speaker
Yes, absolutely. In the very initial phases, all of those things were not there because the platform was in its nascent stage. But at this point of time, we do all of that. Every single lorry owner tells us the preferred loads that they want to take, the preferred routes they want to go. Based on the transactions that they have done in the past, we are able to analyze what is the market rate that should be ideal. And all of those things are happening at this point of time. But back then, it was not there.
00:22:59
Speaker
And this posting you enabled for shippers or for transporters, like the transport agencies? Both. So when a shipper posts a load requirement, then it is broadcasted to transport agencies. And when a transport agency posts a load requirement, then it is broadcasted to lorry owners. Absolutely. Absolutely. And it was buy savers because a lorry owner can also post their lorry and that can also get broadcasted throughout the network. Right.
00:23:24
Speaker
Okay. So if I'm free tomorrow, I can post that available, this location, this is the loading type. Yes. That is where the matchmaking can be super quick, right? Because we know intent from both the sides. So the product basically developed from being an online community, a discovery platform to a marketplace. At this point of time, what we're looking to do is that we are looking to create an entire ecosystem around the marketplace and the community that has been created.
00:23:49
Speaker
Is this payment enabled? Does payment happen through the platform or is it only matchmaking? It is payment enabled. You know, one of the major problems that we saw in the market was related to payments. So low donors and shippers do not have a proper way to make transport related payments. And it's basically a multi-step process. You have to give a very small amount as cash, and you might have to go to a bank to do any of the RTGS. If you're using internet banking, you have to add that particular beneficiary. And it was a multi-step process.
00:24:17
Speaker
But why do you have to give cash? A lot of times when the lorry is in transit, anything can happen, right? There can be some accident. There are also cases of bribes being taken. And for all of those emergency expenses, a lorry owner always takes like five to 10% of their entire freight in cash.
00:24:34
Speaker
Just to be safe. On the lorry owner side, one of the major issues is that a lorry owner is never sure when they will get their payments, right? Even when the material is delivered, the lorry owner gets a payment after a long time in many cases. So we enable payments onto the platform to make sure that we are providing a safe and secure way for both the parties to trust each other. So at this point of time, we have our payment gateways. We have basically integrated it with an escrow account that safeguards the interest of both the parties. So the transport agency needs to
00:25:04
Speaker
pay the entire amount upfront and it sits in the escrow and once both parties agree that the delivery is completed then from the escrow it gets released. So, I mean that is definitely one way to do it and a lot of our transporters are happy to do it but not everybody is happy to pay 100% of the money upfront, right?
00:25:22
Speaker
Because you don't want to lock your capital. Yes. They earn interest on the money that is not being locked. There are multiple ways in which the escrow accounts works on our platform. There can be UPI mandates. You can basically commit to some kind of a payment at the point of EPOD. So all of those things are happening. Just tell me what are these things. I've never heard of them. What is a UPI mandate? Right. So what a UPI mandate does is that it basically locks the money in your bank account.
00:25:48
Speaker
So let's say I send you a mandate of 10,000 rupees. You may not have to pay me the money right now, but a UPI mandate, it basically mandates your payment based on certain conditions. So let's say Subahak platform tells you that you just locked 10,000 rupees right now, which gives a sense of security to the lorry owner. As soon as the lorry owner gives the proof of delivery, that money automatically gets directed based on your approval.
00:26:13
Speaker
So it provides a sense of safety to both the users. So what is happening in the offline market at this point of time is that a lorry owner goes and delivers the material, basically takes the signature or the stamp of the warehouse where the material has been delivered.
00:26:29
Speaker
Now, lorry owner has to physically come back to his starting location, give a proof of delivery and that is when he's getting the balance payment of the fleet. But this POD does not have to be offline. So it was already a push that was going in the market. Lorry owners can upload an EPOD, which is basically just a photo of the proof of delivery. Based on the photo, a load owner can also be assured that the material has been delivered. There is no shortage. There is no theft. And that is when a mandate can happen.
00:26:57
Speaker
And do you also do like geotagging? Yeah. At this point of time, we are doing it through the mobile application. But as I said, now we are looking to create an entire ecosystem. So things like GPS, things like SIM tracking facilities, tracking on the basis of their fast tags, tools, all of those things are happening now.
00:27:14
Speaker
So with geotying, the major problem that gets solved is visibility of the lorry. So without GPS being in the lorry or without any kind of tracking enabled, as soon as lorry dispatches from a loading point, there is no visibility as to where the lorry is. Which route is it taking? Where is it stopping? How much, what speed is it running at? And what is happening? So without the visibility, there is not much visibility for both the parties.
00:27:40
Speaker
A load owner is never sure when the material will be delivered. Because when you know when a material is going to be delivered, you can prepare things in such a way. You can arrange labor, you can arrange the machine if you know that this is where the lorry is. Without tracking, that is not possible.
00:27:55
Speaker
One more benefit that we as a platform get out of GPS is that once we know the location of a lorry, we are able to pre-book it in many ways, right? So if I know that a lorry usually goes from Bangalore to Delhi, and it's in Delhi right now, it is expected to come to Bangalore in the next three days, I can basically pre-book that lorry to provide better experience to the shippers as well. We take a commitment from the lorry owner that when you come to Bangalore, you have to go to this shipper.
00:28:21
Speaker
And they're very happy to do it because usually they have to wait two or three or even four days to wait for the next load. Getting a pre-booking is a great value proposition. You were talking about toll payments. Yes. With the advent of fast tags, the entire operations have streamlined, right? Now, nowadays they don't have to wait a lot of time on the tolls, which usually used to take a lot of time.
00:28:42
Speaker
With fast tags, one thing that we are able to do is that we are able to facilitate the recharge of fast tags and we are also able to gain visibility of the location based on the tools. So even if a lorry does not have a GPS or a SIM tracking enabled based on the fast tag data, we can identify where the lorry is.
00:28:59
Speaker
I want to understand how you get the data if there is a GPS in the vehicle. Is there like a standard way in which you can do an API integration and get the data? Yes. Yes. I mean, we have tied up with multiple players, multiple GPS service providers. Since we are not a GPS provider company, right? We are a marketplace company. We tie up with multiple GPS service providers and basically gain API access of the location.
00:29:22
Speaker
And how do you get the data of the tolls? Like where was the toll paid? So it also depends on the fast tag service provider, right? So we have tied up with multiple providers and they share the data with us. This is how the product has evolved till now. We have gone from becoming discovery, a classified platform, becoming a marketplace. We are providing our glory owners with the opportunity to do
00:29:43
Speaker
lorry insurance on our platform as well. We are getting into fuel, we are getting into trucks, entire body parts, we are getting into on-site maintenance, body works, and we are now looking to create an entire ecosystem around the market that has to be.
00:29:58
Speaker
Cargo insurance would be like the way when you're booking flight tickets, it says add insurance. So just like that, you'll have an add insurance at like a relatively low cost, which gives the transporter a piece of mind that if there is any damage. Yes. The transporter, most importantly, the shipper, because they know that not 20, 30, 40 lakh worth of material is now insured. We have actually tied up with players and we don't really play an active part in the operations part of it. We have actually tied up with Secure now and CoverFox.
00:30:27
Speaker
at this point of time for the cargo insurance and the transit insurance fees. These are not insurance companies, but these are insurance aggregators. So a load owner can choose to choose any of the insurance based on different plans and same for the load owner.
00:30:40
Speaker
And because these are like tech enabled companies, so they will have processes for pain-free claim process. Yeah, claim settlement and all those kinds of things. And you said you're getting into fuels. Yes. I mean, majority of freight actually goes into fuel, right? More than 50, 60% of the entire freight goes into fuel. A lot of lottery owners and transport SMEs
00:31:02
Speaker
are looking to get solutions where they are able to get predictability as to what are the fuel costs. Through our platform they can get discounts. We are also giving them a visibility as to where is it most profitable for them to get their fuel up. The fuel companies that we are tying up with are also in many cases providing many other kinds of support in the petrol pumps to these glory owners.
00:31:23
Speaker
So a lorry owner might choose to sleep sometime. They can use any other facility like grocery store there, right? There can be a stoppage point there. There can be a parking there, all those kinds of things. So you would have a time, let's say with BP or IOC, where you would do through QR code payment through the app or through a card or what, like how do you enable that transaction?
00:31:45
Speaker
There are multiple ways. We are still in the process of doing that, but there are multiple ways in which we can do. There can be virtual cards. There can be physical cards. There can be QR codes. The payment can directly happen from our app to any of the fuel providers. So all the options are there.
00:32:00
Speaker
So which would mean that the transporter would need to load a wallet or something or connect with the bank account like so that they can do the. Yes. Got it. Got it. Okay. And for parts like you said tires and parts spare parts. So this, how are you doing this or how are you planning to do?
00:32:16
Speaker
similar to other value added services, we are also not a tire service provider. So we are tying up with multiple online and offline vendors for this based on their availability and their reach in the different locations. And that is where we are able to get better prices because we are able to provide them a predictable demand, right? So a lorry owner may have to
00:32:35
Speaker
pay an X amount of rupees for a truck tire in the offline market. But through us, they can definitely get some good discounts and they are able to, you know, do transactions online, which is using 12 tires or which is using 16 tires. Getting new tires is a big cost for them and giving them better ease of business and discounts is a big feature that we are providing.
00:32:55
Speaker
So you said that there is a need to give cash to the lorry owners. The transport agency needs to give cash to the lorry owner. How are you enabling that? So we are not enabling that at this point of time. What we do on our platform is that we know the entire fleet amount, but cash is something that we are trying to reduce as much as possible while we know that it is something that is absolutely required for the kind of transaction that is happening, but we have no control over it,
Vahak's Revenue and Financial Services
00:33:18
Speaker
right? So the transport SME pays, whatever cash they have to, and the rest payment goes to our gate.
00:33:23
Speaker
I want to understand what is the business model here for you? How much do you earn on each of these things which you are enabling? Sure. So I'll start with the value added services first. On value added services, we work on a profit sharing or revenue sharing model, depending on the different service that is being provided. And that is where we earn a commission on the marketplace piece.
00:33:44
Speaker
So like if somebody is buying insurance, then there'll be some five, 10% of that amount, which you will earn. Okay. Yes. And still is cheaper for the law, you know, right? So it's a win-win situation because of the tech coming into the picture. Now, plus you're aggregating demand. So obviously you'll get a better price.
00:34:00
Speaker
Yes. The basic price discovery and posting loads and lorries on the marketplace is free. We don't charge our users on that. But what we're looking to charge our users on now is the use of things like our Steve Hestero accounts. And that is one of the big ways for us. One more thing that is going to be a big source of revenue for us going forward is the opportunity to provide working capital to these.
00:34:23
Speaker
users. So as I said, a transport company, a transport SME, is that they have a big bottleneck of the working capital that they have. The amount of capital they have, that is the only amount of transactions that they can do, right? And since in the offline market at this point of time, 100% of the business bookings, communications to telephone calls. So these transactions are not getting recorded.
00:34:44
Speaker
So, what these SMEs end up doing is that they go to local sites, they go to local lenders, and they take loans at a very high interest rate, which usually goes up to 3.7 a month. Right? We on our platform, we are looking to bridge this gap. We are looking to basically destroy this bottleneck. We are recording these transactions. We are recording the brand value and credibility of every single user on the platform.
00:35:06
Speaker
We know the parties that they are dealing with. We know the kind of working cycle and the payment cycles that they have. And based on the data that we are recording, we are looking to provide financial solutions to these story owners. Okay. So you can do basically a BNPL kind of a thing, like they can place the orders and get the whole thing done without having to pay off rent. They can pay in X number of days. So instead of paying 100, they will pay 105, something like that. That is definitely one way to get into financial services.
00:35:35
Speaker
What are the other ways that you're thinking of? I mean, there are things like there are things like direct working capital loans, there are things like invoice discounting, right? There are things for especially for the law, you know, there is a piece around truck financing. India as a country is limited by the credit that they got.
00:35:50
Speaker
As soon as we are integrating our platform into this vertical space, having access to this data and not providing this financial services is not beneficial for anyone because our users are also looking to get this credit. They just don't have the data to prove it. And you are collecting the data to enable that. At the initial stage, it will be like a loan origination that you will be doing well. You will get paid something once there is a successful dispersal. Yeah. Okay.
00:36:16
Speaker
And I would say that the opportunity is very big because the market itself is growing. It's not just about optimizing the existing market, but the transportation market is itself growing, right? There is a huge pressure on this industry from the e-commerce sector. Now with the growth in the manufacturing sector, there is a huge pressure on this industry to perform better. But there are bottlenecks, there are operational inefficiencies because of which this industry has been lagging.
00:36:41
Speaker
I have not really come across an example of a marketplace which is balancing three different stakeholders in the supply chain. Most marketplaces say that we will disrupt the middleman. Here you are saying that we are a marketplace where the middleman is also there, transport agency, the supplier which is the lorry owner is also there and the shipper is also there. I mean,
00:37:04
Speaker
How would it work in the log? I think it's very beneficial for us to have all of these three stakeholders because all of these three stakeholders are connected with each other. As you said, with us getting into lending, it helps for us to have the shipper as well as the transport SME, as well as the lorry on the platform.
00:37:19
Speaker
So while it may look like there are three players, which they are, but the problem between transport SME and the lorry owner and the problem between the shipper and the transport SME is very similar. The shipper and transport SME, both of them are looking to book good lorries from the market. So that is where the core algorithm of matchmaking between the load and the lorry remains the same. It's just that the nature of the businesses are different, but the use case is very similar.
00:37:43
Speaker
And that is why we are able to do that. The transporters have this fear that eventually the shipper can directly tie up with a lorry owner and remove him from the picture. As their platform grows, as there is more data about lorry owners, that could happen.
00:37:58
Speaker
We truly believe because we were one transport SME ourselves. We truly believe in the value that transport SME provides. The player that we get weeded out from the platform when technology and data kicks in are the brokers, which are not really adding any value. So we talked about these C players, right? In the middle of these C players, there are brokers. These brokers are not transport SMEs, they are not shippers, they are not lorry owners, but they are just, you know, in many cases, they are just facilitating the information transfer without really adding any value.
00:38:28
Speaker
A transport SME still add value once you have matured more as a product. I mean, you know, they provide working capital. Now you are taking care of that. So the way we feel it is that every single lorry owner will become a transporter themselves.
00:38:43
Speaker
The lorry owner himself or the transport SME himself will be able to do more business. A lorry owner might be able to pay for his own working capital because these are typically due to two different businesses, right? A transport SME has to set up a shop. They have to get business registration done. These are not requirements for lorry owners. Transport SME will remain the same. More and more lorry owners might be able to act as a transporter for themselves in the long term.
00:39:08
Speaker
So transport SMEs need to be GST registered and all of that, which our lorry owner doesn't need. They have to get registered with the government. They have to get all of those certificates before doing anything.
00:39:18
Speaker
So what you could do is enable a lorry owner to actually go ahead, get GST registered, get all of these other certifications and become a transporter. Does the platform give a different access to a shipper and a transport SME? Like, for example, can a shipper also see lorries directly and post the requirement to them or only a transport agency can see the lorries and vice versa?
Future Plans and Market Expansion
00:39:41
Speaker
So at this point of time, it's a fairly open, it's a single application for all the kinds of users. But now we are developing products. I mean, we are developing web applications, we are developing other types of applications as well, which will cater to specific needs of these users. Okay. And is it like a bidding system or is it like one fixed price, whatever the shipper says?
00:40:00
Speaker
No, I mean, it totally depends. I mean, the bidding happens in all the cases because a shipper wants to know what is the price that he's getting from the market, right? More the number of bids that they get, there is a chance of getting better loads. But the market is divided into two types of transactions. First is a contractual transaction. So big shippers in the industry like ITC, HQL, all of these companies do not book lorries on demand.
00:40:25
Speaker
They know what is the amount of material that is going to be produced and they give long-term contracts. They want to get in contract with some big transporters who can provide them fixed freight for the next one year. Yeah, because their output is predictable. But majority of the Indian market, more than 75% of Indian market is what we call spot market.
00:40:45
Speaker
In spot market, a shipper or a transporter usually tries to book a lorry just four or five hours before the actual lorry is required. That is where the prices vary. That is where the shipper and the transporter wants to get as much multiple bids as they can. And that is where auction happens. Okay. So that is the on-demand part of the market, basically. Which is the majority of the Indian market.
00:41:09
Speaker
So you're getting to both of these or you're getting to the on-demand part? I mean, we are mostly focused on the spot at this point of time, but we are now looking to get into contracts. So in the contract, does the price increase if there is a petrol price high? Is it linked to that? In some cases, that depends on the type of contract. So a shipper might agree to increasing the freight in case there is a drastic increase in the fuel prices because that changes everything. But in some cases, it's not.
00:41:37
Speaker
In some cases, Shipper asked the transport SME to manage that because even if the fuel prices go low, the rates remain the same. Okay. So you tell me about your funding journey. You told me you shifted to Bangalore 2019 and then you raised funds. Leo Capital, you said, right?
00:41:52
Speaker
So we moved to Bangalore in 2019, October. We closed our first funding round in the next four months, which was the 800k round, 800k USD, led by Liu Capital and we also onboarded some very good angels. The next round happened in the early part of 2021, basically the first quarter of 2021. We raised around 5.3 million, which was led by RTP Global. It is also again venture capital firm basically based in Russia and UK.
00:42:17
Speaker
And yeah, I mean, that was basically the pre-series A round for us. Recently, I mean, five, six months back, we raised our series A round, which was $14 million round, which was led by Nexus Venture partner. So what does the VCC knew? And I'm asking because there are already other players like Rivigo, Blackburg.
00:42:35
Speaker
which are in the same space. What do they see in you? How are you different from where you go in Blackboard? Sure. So I'll actually answer the second question first and then I'll go to what the VC has seen. So the co-differentiator here is exactly what I mentioned to you Akshay. I mean, all of these companies that we see in the market, right? Blackboard, Loadshare, right? All of these companies are large transport companies.
00:42:57
Speaker
Okay, so they directly acquire shippers and directly acquire lorries. They don't work with the transport SME. Yeah, they are a transport SME and they provide the working capital. They face exactly the same challenges that we as a small transport company use to face.
00:43:14
Speaker
That is where we are totally different from them, right? We are clearly differentiated in that sense. What VCC in us, I mean, we are a pure technology platform, right? Which has, which has the power to grow rapidly. We are, we have already raised more than 18 lakh SMEs and owners in the market. Being a pure technology platform basically enables us to disproportionately add value, right? So without reaching every single town, users in these places are able to use our platform to create their own brand, to create a brand value for themselves and to grow their business.
00:43:44
Speaker
So in case of Blackburg and Rivigo, they are operationally intensive businesses because that's what a transport SME does. He needs to take care of that nothing goes wrong and it's operationally intensive, but you are not operationally intensive. You don't need like thousands of feet on the street who will make sure everything is running.
00:44:03
Speaker
Yeah. Okay. Tell me about your acquisition. Do you focus on more on acquiring shippers or do you focus more on acquiring transport SMEs? Yes, the lorry owners is something which is growing organically, right? You may not really need to effort them. You're absolutely right. On that sense, Akshay, we are getting a very good response from the lorry owners in the market. They are organically growing rapidly. We are focused more on the transport SME.
00:44:26
Speaker
Okay. So there is this thing called either bill, which you need to transport between States. Is that something which you help in for people who don't know what's an evil bill? Can you start with that? What is an evil? Right. It's even bill is something that basically came into the picture with JST coming into the picture. So with JST, basically the government created a uniform tax structure for all these States. And the same thing happened in transportation.
00:44:50
Speaker
So earlier, what used to happen was that every single state that a transporter or a lawyer has to cross, they have to give some chalan to the police person or the traffic person that is there. And there is no visibility as to what is the tax in this state, what is the tax in that state. But now with the uniform structure, every single transaction that is basically traveling for more than 25 kilometers.
00:45:13
Speaker
It's compulsory for them to create an E-Web Bill. E-Web Bill is a document that is generated online on government portals and this document basically details out all the details of the transactions. So this is a compulsory document for any transporter or a lorry owner to move from one place to another.
00:45:29
Speaker
and it basically increases the efficiency as well because now they don't have to stop at nakas at every state border and they can seamlessly move from one place to another just by showing the ebay bill. For the government, the ebay bill is a way to audit GST. Absolutely. So it's actually beneficial. I think it's a win-win situation for all the parties involved. So we are at this point of time manually, in some cases, helping our users to create ebay bills, but we are looking to properly integrate technology as well.
00:45:56
Speaker
you would have all the data. You would know the GST numbers of all the parties because when you're doing the matchmaking, probably people are doing that verification. So it becomes like a single click generation. Absolutely. Absolutely. And I mean, once a user has invited one available, it's very easy for them to do the next, right? Which is not really possible in the current scenario.
00:46:17
Speaker
Okay. Okay. The first time they would be probably some OTP sign on or something like that. Yeah. First time is the barrier. And after that, there is no barriers. This could be a monetizable feature, right? I mean, it's adding a lot of value. Absolutely. Okay. Okay. Interesting. Very interesting. So what?
00:46:32
Speaker
I mean, currently is revenue a focus right now? Like, or is it something which you want to look at after you have built out all of the value added services?
Conclusion and Call for Feedback
00:46:41
Speaker
Right. So while we have the revenue and it's slightly growing, but we are not focused on that, the focus of our company at this point of time is to actually create that value first. We are very fortunate to have very good backers. The entire startup ecosystem is very good. So we would want to grow as fast as possible because as a platform, we're a platform that thrives on network effect.
00:47:02
Speaker
more the number of users on the platform, more value every single new user gets out of it, right? We have already onboarded around 18 lakh SMEs and owners on our platform. The total addressable market size for us is almost 4 CR. So we have a long way to go. And we are looking to capture 10-20% of this market first. That is the first goal for us. Got it. And what kind of, I mean,
00:47:26
Speaker
Can you predict what kind of revenue numbers you'd be doing a couple of years down the line, just to help listeners get an idea of how big a business this could be? Right. I mean, in terms of the revenue, I can say that in the next couple of years, we'll be reaching anyway close to 40, 50 million dollars a monthly revenue. Monthly revenue, 40, 50 million dollars. Wow. Okay. What is revenue here? It includes the entire transaction or? I mean, the transactions are already, I mean, on a monthly basis, we are already doing almost 45 million dollars through a platform.
00:47:55
Speaker
I mean, this is an inflated number, right? It's like the GMV number. No, no, it's not the GMV number. It's what we get out of the GMV because the market is huge. I mean, it's a $200 billion market, right? So if we capture 20% of it, you can imagine the kind of scale that will be at. And that brings us to the end of this conversation.
00:48:12
Speaker
I want to ask you for a favor now. Did you like listening to the show? I'd love to hear your feedback about it. Do you have your own startup ideas? I'd love to hear them. Do you have questions for any of the guests that you heard about in the show? I'd love to get your questions and pass them on to the guests. Write to me at ad at the podium dot in. That's ad at t-h-e-t-o-d-i-u-m dot in.