bijnis - taking factories to the world!
51 mins watch

28th Sep, 2021

 

Today on FounderMoments, we dive deep into Bijnis's journey of empowering the manufacturer community & their vision of taking factories to the world! Tune - in

 

Salonie:

Hi and welcome to Matrix Moments, this is Salonie and on today’s episode we have Siddharth Vij and Chaitanya Rathi, the co-founders of Bijnis. A B2B platform focused on digitizing factories and manufacturing in India. They are in conversation with Vikram Vaidyanathan, Managing Director at Matrix Partners India, as well as Sudipto Sannigrahi, Vice President at Matrix India.

They dive deep into Bijnis’s journey, so far and their vision of making factories globally accessible and empowering the manufacturer community. Tune – in to find out more.

Sudipto:         

Welcome, Sid and Chaitanya to Matrix Moments. Really a pleasure and privilege to have you guys today. For our viewers Sid and Chaitanya are the founders of Bijnis. Bijnis is a B2B marketplace in fashion, footwear and now I guess in all lifestyle categories as well as is on the mission to take Indian factories and Indian manufacturers to the world. And you know that we’re big believers on both the two things, right, a, building B2B vertical marketplaces that solve for quality, trust, discovery and variety for retailers. As well as the entire factory 2.2 that you’re championing and pioneering and taking our factories to the world.

 

And we’ll spend a lot of time on both but before that it would be great for our viewers to actually get to know both of you. I remember meeting you 18 months back and I was amazed by your background story that, ke bachpan mein factories mein bade hua hain, and you’ve seen this journey so closely over the last 20 odd years. So maybe you would love to start with your background, your journey and what made you start Bijnis and we can take it from there.

 

Vikram:          

Before we throw it to these guys firstly this is Sudipto, I’m Vikram. Sudipto leads everything that we do in the B2B commerce space and has led all our investments there. Sid, Chaitanya, welcome and congratulations on the new round. By the time this podcast goes live that will be public news. Congratulations, it’s been a privilege to be on this journey and looking forward to the rest of it.

 

Chaitanya:     

Thank you, Vikram, Sudipto.

 

Siddharth:     

First of all thank you for having us here. I think it’s been a privilege to be with Matrix. I think it’s been a year and it has been a good journey so far. So thank you for taking us on.

 

Chaitanya:     

I think it’s the second time we’re meeting together.

Siddharth:     

Yeah, exactly. But it’s been wonderful.

Vikram:          

Actually just for the viewers, listeners, we were just discussing that at least I haven’t met these guys, this is the second time that we’re physically meeting. But because we’ve been speaking so often it doesn’t feel like that at all.

Siddharth:     

Exactly.

Vikram:           

But I’ve met before our investment and then Covid happened and then it’s now.

Siddharth:     

I think it’s been a year. So, we just met when we were discussing the investment purpose and then actually the Covid happened.

Sudipto:         

Wo 18 mahine phele tha, we’ve all lost sense of time but that I think was Jan-Feb when we had first met. But, yes, great 18 months.

Siddharth:     

Yeah, got it. But just to introduce myself, so my name is Siddharth Vij. I’m one of the co-founders at Bijnis.

Chaitanya:     

I’m Chaitanya, one of the co-founders at Bijnis.

Siddharth:     

So since you just mentioned that how actually we started and what was the intriguing thought behind this. So first of all we were, Chaitanya and I we were studying together in Economic Honors in Delhi University. So, I, Chaitanya and Siddharth, so there’s a third co-founder as well, Siddharth. He actually is not there right now but we three were studying together in Delhi University.

And in our college times we were of course one of those grads, those people who were of course thinking about jobs after college or maybe -- we were doing Economics Honors so we could get some placement, ho he jaiga,  so we’ll do job. But I think in my second year at least I personally was very much inclined ki, ab job tou nahe karna hai, job nahe karna hai, and because I started one venture. And Chaitanya was also into some entrepreneurial activities in those times and at that point of time I think Indian ecosystem was just at the start.

It was kind of a booming, some ideas were coming in and given that we were also coming from family businesses, I mean our family background was like businesses all about that I think in that second year we were firm that -- at least I was firm that now I don’t want to join my family business, I’m very clear with that. And I don’t have to do a job.

Sudipto:         

But what’s your family business, why didn’t you want to do your family business?

Siddharth:     

So family business is into manufacturing, right, the family business was into manufacturing and at that point of time it was something which like I started a venture, I was a part of a internet magazine kind of a venture. And it intrigued in the stuff that because as a student of this business arena I’ve always seen my father doing a manufacturing kind of stuff. So I wanted to do something which could like technology was at that point of time coming up. We wanted to use that to make sure that something good can happen around it.

So we didn’t know that we will be doing the same business but after a certain point of time I thought that I don’t want to go into and do the same stuff. I want to start something new and I want to do something with technology.

Chaitanya:     

Realizing that we were second and third generation businessmen from the family perspective we thought ke agar wapas jayenge, tou wahe same cheez salo salo se chali ari hai. Wo wapas repeat karrai hai, I think that was not giving us the kick. And despite living in Delhi and obviously doing our own ventures, experimenting with lot of things, knowing about technology.

Siddharth:     

In fact when we started thinking about this B2B at that point of time was not much prominent. I think there were so many companies around consumer which were coming around, consumer internet but B2B is something like ke B2B kyun karra, matlab B2B kyun soch rai ho. Asa ous samay log bolte tha 2014-15 when we actually thought of it. But why we got stuck on it is this one single thing that when we stuck on an idea the single thought which influenced us to do this is because we’ve seen the pains of a manufacturer while growing up.

Vikram:          

So talk a little bit about that and also why footwear first?

Siddharth:     

So first question like why -- talking about the pains of the manufacturer as I said that I’ve seen -- so my father has been a proper manufacturer, he’s running a factory since last so many years. I always thought that they had lack of alternatives. Initially it was clear that they have lack of alternatives and also there was one thought which if I go in hindsight and think about it lot of technology innovation or experimentation was happening on the consumer side. The thought was it can happen on the business side as well.

And these manufacturers and factories, and it’s not that I didn’t focus on retailer, I had a thought about retailers or wholesalers or SME largely. Why it was manufacturing because I’ve seen my father doing manufacturing. It was like it was not a rocket science so logically I came on to a point that we have to talk about manufacturing, it was not logical. It was just a subconscious thought and because at that point of time Chaitanya and me were friends. We were very good friends but I was not sure that should I discuss this idea with Chaitanya at that point of time or not. But I discussed this with Chaitanya only -- and we were not that good friends in college. I mean we were good but it was not something that we could hang around daily.

In the last semester I shared this with Chaitanya and Chaitanya was coming from a manufacturing background as well.

Chaitanya:     

Exactly.

Siddharth:     

He’s like ke ye banda hai, and he was also similar kind of a risk taker that, ke nahe mujhe do saal job nahe karni hai, main kuch aur karlunga, but I think that thought of working with that manufacturer and working for that manufacturer aligned immediately. So we moved on.

Chaitanya:     

In fact one of the things I remember was I was coming from a hosiery manufacturing background and apparel manufacturing background. So he talked about let’s see what we can do in the B2B space and then why don’t you visit Agra which has been one of the biggest footwear manufacturing hub. And I know I randomly during the time of Christmas I randomly went there and I was not even imagining ke footware banta kase hai, and how huge the space is.

Siddharth:     

I discussed this idea with Chaitanya in a train and while I was going back to my hometown he was going back to his hometown.

Chaitanya:     

That was semester holiday.

Siddharth:     

That was last semester holiday. And he was so intrigued that the passion to start something was so much that when he went to his hometown he didn’t even stay there, the next day he was there in Agra to actually see ki, bata kya raha tha, let’s start it. So I think that was something which intrigued us and of course then time passes by. To the question that you asked that --

Vikram:          

Sorry, Sid, I’m just going to interrupt and -- for me it’s also instructive to listeners on founders stories. And what is common to a lot of great founders is a couple of things. One, you found your co-founder in the shared history that you had. And there is this some shared experience that you had both coming from manufacturer families but also shared experiences of college which led to that initial trust.

Chaitanya:     

Yeah. Absolutely.

Vikram:          

Second, what you said about, Chaitanya, which is the once there is that deep pain point that strikes you it almost becomes an obsession that this is just on your mind all the time and whenever people ask me should I start a business I always say if you’re deeply obsessed with a pain point and an idea then you’re there, you should just start.

Siddharth:     

Actually it was like I also speak to some early entrepreneurs and I said like how did you come up with this idea. We really didn’t come up with this idea because we really wanted to start something. It was just a click of the post, ke okay something can happen here. And then it was like he was going for a job, he was like he had a placement and then I had to convince him you have to just leave it.

Sudipto:         

Sid ki placement nahe horai thi, baki logon ko kich ra tha tu.

Siddharth:     

Exactly. That was the real case you can say that I opted out and I said that, pata nahe mera hoga ki nahe hoga, so I should opt out. And he went in so I think that was the time when I actually forced him to like you just do two months and then come back.

Sudipto:

And just for our viewers, right, if you remember Chaitanya, do minute phele bola ki, wo Binis kya karte, businessmen kya karte, iska twitter handle bhi Bijnesmen hain, just to give you the little bit of context on that.

Siddharth:     

Yeah. So at that point of time when we discussed it like for the first -- it was last semester and we were going. The only gap that we both had was we knew that we wanted to do something from the technology perspective.

Chaitanya:     

Yes.

Siddharth:     

We had an insight, we had a knowledge about the customer, like knowledge about the user if I could say. At the same time, ki yaar kya kar sakte hain, kya nahe karsakte hain, kya platfoem ban sakte hain, but we didn’t have any experience like, kaun banaega ye, who will be that technology because we were not coming from those engineering big colleges where we will have a co-founder who is from IIT and he will have that capability and he will build product. We didn’t have that I tried but we didn’t. So in our college itself we had a guy in our same batch, ase hota haina ki, ek batch mein ek banda hota hai.

Chaitanya:     

Kind of hacky mindset.

Siddharth:     

Who is very interested in softwares, computers. Like no matter he was not from the software background, computers background, but he was very, very and that was my like and he was like I’m going for MBA. I said no, you’re not going for an MBA, you’re coming here. Because we want someone who can build product and technology for us and why the idea struck with him as well because coincidentally he also came from manufacturing background. His father, like Siddharth’s father is an apparel manufacturer from Lucknow. And then the three of us and that story started. So this was the early start of the idea.

Vikram:          

Sorry I interrupted you when you were just going to tell us about footwear.

Siddharth:     

Yeah. So I was telling -- you asked why footwear. And as I said if there is no logic behind why we selected this, there was no logic behind why we selected footwear. The only reason we selected footwear was that my father is a footwear manufacturer so we discussed that they both have an experience in apparel manufacturing We thought that footwear is a smaller category as compared to apparel and it is more concentrated and also that, and also ki Delhi mein kaam nahe karsakte, kyunki itna paise nahe hai, ki Delhi mein sustain kar payenge, so let’s go to our hometowns for six months or one year and let’s see that if we can get this idea.

And we didn’t know about that venture funding at that point of time we didn’t know much about those investments. We had seen our father’s businesses going like building a profitable business coming out of that. So we wanted to build a decent size business wherein we could do something with technology and improve the life of the manufacturer. And why we started footwear because we thought that we had the leverage of our family networks and the market research will be quite easier because we had some strength in that because I was living in Agra and Agra is the hub of manufacturing or footwear.

So that was the only reason that we started with footwear. So there was no scientific logic behind why we landed upon this product. So that’s the simple reason.

Chaitanya:     

In fact I remember one of the stories of Siddharth was that his dad offered him two things, either you do an MBA with this some amount of money or you bootstrap your startup, choose wisely. And he was like given an option even if you’re choosing the first thing you are doing something wrong. But he was smart enough to choose, I would like to probably build that’s what the thing.

Sudipto:         

So from there fast forward to today, right, today you’re influencing the life of more than ten thousand manufacturers who are on your platform. So tell us a little bit about what has changed, how you changed the life of manufacturers and why do manufacturers use Bijnis so much?

Siddharth:     

I think it’s because we’re focused on one guy. I mean, as simple as that, because whenever -- of course our thought clarity has evolved a lot, I won’t say that the thought clarity was sync, it has evolved a lot. But one thing coincidentally or planned we were clear about that we want to change this guy’s life because we were always focused upon this.

Vikram:          

And you said this guy, it’s a manufacturer?

Chaitanya:     

Yeah, yeah, manufacturer.

Siddharth:     

So we wanted to focus on that manufacturer.

Vikram:          

So talk a little bit about that choice because it’s a big choice and I know we’ve debated it a lot. Which is manufacturer first versus retailer first. How did you zero in on manufacturer first?

Siddharth:     

So when we started our research like the company was called ShoeKonnect back then. It was Bijnis actually just 2-3 years back, back then it was called ShoeKonnect. When we started research about that platform it was like we will build a platform where a manufacturer will come in and put his factory on the platform. Like it will be a factory or manufacturer network what we can say. And there we’ll invite retailers, wholesalers and all those so that they can get demand.

When we were researching about those manufacturers initially we were very intrigued with this particular fact that there is lot to do for these factories. Because from managing the factory, from managing raw materials, from managing every odd thing they were not using internet. Why they were not using internet there might be many reasons for that, maybe they were no solutions available or it was ahead of time or whatever it is. But at that point of time what I should say is that, Vikram, we were not comparing things, we were not in a position to.

We didn’t have that enlightenment that we were not at a problem of choice that whether we should do retailer first or manufacturer first, that came later. Early on coincidentally landed on the manufacturer and it was so intriguing to work with him day in and day out because we were in their factories, jab humne phela platform banaya, pheli website banayi ounce liye, aur ounko sign up karaya ouspe, tou hum jate tha, 10 factory pe jarai, choti factories mein jarai, badi factories pe jarai, scooter pe jarai, ke aou hamare platforms pe sign up karo.

Vikram:          

So today how has that become clear, today that manufacturer is the core stakeholder that you want to solve for?

Siddharth:     

I think within next one and a half year we were very clear that okay, this is the line. And why we talked about that because it was very hard. In fact for the first two years we were clear that we will not be able to do it because manufacturer is very hard to get digitized because his priority to get digitized is not there. Sometimes things are ahead of time, it was like that it would be very, very hard and manufacturer is not going to use it but at some point of time they will.

Chaitanya:     

But there’s a positive side to the whole story also at the same time that we were going out to manufacturers we also realized that nobody was coming to them. So they were also very inclined that, ki ab hamare liye koi tou bana raha ha, ab koi tou sochra hai finally, and that’s where we became great friends with manufacturers in understanding their businesses fully inside out.

Siddharth:     

So I think when we worked with those manufacturers over the last in the first 2.3 years we worked with them, we manually sold their goods, worked like a wholesaler agent because we understood that okay, what manufacturer faces from their shoes itself. I think in those two, three years that clarity evolved that it’s not a small opportunity, it’s a big opportunity and this backward integration means building more stuff for that factory when you go inside their factory. So it’s a larger game and we should spend our life building it.

Vikram:          

I’ll tell you when you got me over the line, because initially we used to have this debate and I used to keep saying retailer because as a VC you look at the numbers there are more retailers so you should go after retailers. And I remember you politely kept saying no and then I asked you why and where you got me was you said retailer will switch to the next person who gives me a little bit of discount something easy whereas the factory will not. And that stuck with me that the factory is not going to switch and second that it’s really hard.

And I remember our team actually spending ten days with factories trying to figure out is this really hard and then we realized it’s really hard and your insight is actually quite unique. And then the last I went back to the numbers and it turned out there are lot of factories. So that got me finally over the line but what differentiates both of you guys is the courage of conviction. Once you settle down this is what we want to do you stick to it in a very polite firm manner. So I want to go back to the Shoe Connect days, because you got venture funding quite late. How did you keep that courage of conviction through some of the hard times. Talk a little bit about that and I’ll come back to Sudipto’s role which I keep interrupting.

Siddharth:     

So we built a very raw team initially. I mean early on as I said we were not coming from that ecosystem like some entrepreneurs come from that startup ecosystem. We were not coming from there, we were not from that ecosystem to be very, very frank. We knew how to do business, we knew because we’ve seen maybe it runs in the blood but early on it was very clear that venture funding we don’t know about it. We know how to build it and we know how to make it big, I mean we will make it big. That’s the idea.

So when we started building teams people said that will need money. We just focused on why teams getting -- I mean I know my father used to say you’re just taking 35,000, 40,000 from me or maybe because I spoke to Chaitanya’s father, Siddharth’s father, we pooled in 1 lakh rupees, almost 80.000-100,00 rupees. Isse kya karoge tumlog? Nahe humko isse upar ki zarurat nahe hai, humko sirf kuch platform ke liye kharcha karna hai, for the team we will build a very raw team and we will like -- so initially we got people from Agra itself who had some connect with manufacturing. And those people were not very significantly qualified or maybe MBA. No, I think they were college dropouts, in fact school dropouts one or two people.

Chaitanya:     

Exactly.

Siddharth:     

We made them learn things earlier. I think that 7-8 people early team that we built has really helped us navigate the situation without throwing money on the problem and just throwing mind on the problem. So in net net if you ask me without thinking of venture funding how did you navigate tough times I think we were just throwing our minds on the problem.

Chaitanya:     

The focus was not to build the product but the solution first. So product is more of a medium just to the solution. The focus was, ke solution kya banana hai, so we did Whatsapp trading, we did a lot of things in that story, ke matlab ake jo bhi hack karna hai, karna hai, lekin value creation hona chaheye, because we were belonging from business families and we’re seeing top businesses being built on money and value. Value means somebody is ready to give you money. So we were in a very clear line and obviously the best part was Siddharth’s father was critically a member of the person who we used to go out often to our rescue.

Okay, what is happening, it was like business is something fundamentally well anybody is ready to pay you. Check where you’re able to create that value or not. And I think that was though we were never focused on, ke phele he tech banana hai day 1 pe, day one pe he sari cheze karni hai, day one pe he amazing team chaheye, we were like let’s find out a value creation which we’re able to do.

Siddharth:     

I think one thought which has remained with me over the last 4-5 years and what it has helped us a lot I had the customer in my home. Every time I used to go night at home that particular customer my father he used to give me feedback and raw, ki koi nahe use karega bhai, isko sahe karo.

Vikram:          

Sorry. I have found the tag line for the podcast which is throw mind at the problem not money at the problem. And that I think line is going to stick with us.

Sudipto:         

True. I wanted to go a little deeper there. Now there are ten thousand manufacturers using, I think there are 30,000-40,000 plus retailers who’ve used your product. Ousko kya value milra hai, jiske waja se wo aapko pay bhi karrai hai, jiske wajae se wo aap ko pay bhi karrai hai, apka take rate achcha hai, contribution margin, positive ho, working capital nahe hai, credit mein dhanda nahe karte ho, cash mein dhanda karrai ho, log tabbhi dhanda karrai hai aapke saath.  what is the value that you’re bringing on the table for the manufacturer and the retailer?

Siddharth:     

Talking about the second part credit was never the problem in B2B.

Sudipto:         

But that’s not, credit ki baat kare hain, bohot obvious hai, sabko lagta hai, B2B bina credit ke banhe nahe sakta. Wo ayenge but phele value cover karte hain, fir credit karenge.

Chaitanya:     

I think value mein hamin sabse phele ek chiz samaj mein aagai thi ke, manufacturer’s se India mein SME wala software tou nahe kharid ta, so that was out of the table. Meaning that is a very good story that my father bought an accounting software, never bought even accounting software he was gifted one by a CA. And he’s saying main 10 20 saal s wo chala ra hu, and it’s running good, why would I even pay for it. And in fact while going to manufacturers we also understand that the real value creation for them right now at the pain point is revenue that, ke mujhe revenue lake do, fir sir main sari baatein sununga aapki, And that’s where I think our take of observation started that let’s build a solution on the revenue side. Once we’re able to build it then baki sari story badmein dekhengey.

Siddharth:     

So as you said that while we were working with that factory in those two years we understood one thing that we can build software, we can build raw material capabilities also, we can build lot of stuff because he is facing lot of problems genuinely. But also one thing is very clear, Indian businesses demand is the biggest moat and when you’re trying to convince a business, when you’re trying to convince a business to be your customer it’s a B2B company, we’re trying to make a business of the customer. I have to show, I mean, I think we were most comfortable to show topline as a value creation and improving toplines and improving bottom line as a value creation rather than going haywire, ke bhai ye bhi banate hai, ye banate hai.

So to ask a question when it comes to value creation and why those manufacturers are paying us to use the service is because retailers are coming in because factories are there. They’re getting products, I mean they’re using an app it’s like retailer it’s a convenience plus discovery as a value proposition. Because for a retailer he has options, he has options to purchase from a local trader, he has options to purchase from a maybe different other platforms and maybe Bijnis. Now the only reason he will come on Bijnis is because he might be getting better discovery and he might be getting better products which he’s not getting in his local geographies at a better price.

Chaitanya:     

At the same time if you understand our industries they’re highly unorganized and unorganized has one characteristic which is its discovery led, it’s not research led where you exactly know what you want to buy. Aj main apko puchunga ki apko bedsheets kaunsi kharidne hai, so you cannot tell me ki kaunsi kharidne hai, you’ll be like ke dekhou tou , ky ahai. And that is the same behavior which a retailer follows to anybody in the whole supply chain for this.

Sudipto:         

And if I understand you were saying that retailer will use retailer will multiple people, jo zyada dekhai, saste mein dekhaiga, achichi quality mein dekhaiga, that he again goes back to manufacturer, right, and give him that.  Par wo koi bhi karsakta hai, aap kyun nahe karrai ho, because I’ve heard that other people are trying to take your manufacturers and they’re not able to do it. So what are you doing for that?

Siddharth:     

I’ll tell you it’s not straightforward to work with the factory. Today there are lot of sellers and the profile is different. Wholesaler is a different profile, he can also be a seller. Agent is also another profile, he can also be a seller. A manufacturer has a profile, now when he sends or when you’re trying to build his demand by nature he is not the seller. As a company we identified that.

Chaitanya:     

His first principle is to build not to sell.

Siddharth:     

Yeah. Manufacturer’s first principle is to create, it’s not to sell. Like that’s the reason he is dependent upon agents and wholesalers and middlemen, right, here he has no alternatives. What we picked up for the manufacturer and why we became value creator for him and the proposition becomes interesting for him is that first he was getting an alternative which he’d never had in his life. And that alternative was better in terms of topline, incremental topline, incremental bottomline and most important cash flows. We improved cash flows by more than 100 percent, the time duration of cash flows.

Sudipto:         

Tell me a little bit about this, how did that change?

Siddharth:     

Of course we noticed, observed some insights in that value chain that how wholesaler is working, because we behaved like a wholesaler for the first year. So we understood what is the wholesaler’s gain. I mean many of these wholesalers if they listen they will beat me for sure but what I’m trying to say is that, ki jo insight waha se jo mile, the insight was that manufacturer’s payment is coming in three months. But that payment is not necessarily going to retailers in the first go. That money is getting being used in the middle, now that means that if there is a platform or if someone comes who is not using that money in the mid the money can go back to the manufacturer in the right time. I think that we picked up, when we picked up that we got the way to enter into the factory, kehte na license milgaya factory mein enter karna ka, because wo ouske liye blood tha.

And we realized this in the first three years that, ke boss ye ase banega,  And that’s the only reason I mean I will relate this thread to the credit question that you asked later on, but this was the biggest insight that we had that an alternative demand generation partner for the manufacturer will be the best game to get these factories on the platform, I think this is the better way.

Sudipto:         

So picking up from there, right, so let’s go to the credit part. You said that credit is not so obvious but like if you look at most B2B marketplaces they’re running on credit today. And actually when we spoke with you we were either calling 150 retailers and asking, pakka credit nahe lete naa Bijnis se? Tou dhanda kyun karte hain. So tell us a little bit more, like if everyone out in the market is giving them 7 days, 21 days, 45 days credit why would they do business on cash with you?

Siddharth:     

That comes down to the point I said, throwing brain at a problem not money at a problem. To enter the market and to get the retailers any B2B company at that point of time. I mean in 2016-17 B2B also started picking up. I think by then it was 2017 and B2B started picking up, there were good funded companies came in and at that point of time we also got to know that investments also happen like this. So at that time of course we didn’t have money to pay credit, we didn’t have money to do credit.

But we realized that why it is required. Why a platform and why a retailer will not pay cash. Because we realized on one insight. Again, every insight comes from our offline working behavior that offline mein tou retailer will never get credit on the first day, he will never. Why these platforms and why there is a need of the credit on day one, there is not, because offline that doesn’t happen, why do we need to change that behavior, there is no need to change that behavior. At the end of the day we wanted to make sure that the manufacturer’s money because my customer was the manufacturer he is paying me.

I wanted that his money to be with him in the right amount of time, he is getting better profits, he is getting better topline. He’ll be serious retailer will come automatically, that was the clear one liner view that we had and within those first 2-3 years of research. Credit we knew it was important, every intrinsic business has a nature of having some working capital. So credit is important no doubt but is credit a game entry situation for me, like is credit a acquisition strategy for me? Absolutely not.

Is credit a dependability strategy for me, yes. But after a certain point of time I knew that retailers were just trying us at that point of time. To try if I give them credit I think when we were having a pitch you guys also asked us so I clearly said and I think that credit is a false way of proving a PNF in the B2B market. When you’re not -- I’m not talking about the lending businesses I’m talking about the business of creating volumes or creating demand. Credit is not the right method to enter the market, why, because the businesses by nature in offline are not dependable on credit on the first days.

Chaitanya:     

At the same time because we were into a discovery led category though I personally went down to some retailers to understand the credit mechanism they were very clear, sir phele achcha maal phocha do, quality maal phocha do. credit is a reliability factor that at the same time rate of the product will boost that, ki jab market mein bohot zyada demand hai and I have less of cash and then I come to you and say, ki sir 20000 ki jake 50000 k amaal dedo, 30000 ka credit dedo, it was like ke sir wo tou baad ke situation hai, first the primary is dependability and the discovery led things dependability comes from the quality of the product he is receiving, the price margins he’s going to earn on those things. Is he even going to receive the products or not and all those fundamentals.

So that was clear that credit first principle to hai he nahe, first 5 6 month mein tou biklul nahe aata.

Vikram:          

And I guess the learning for listeners is see for B2B marketplaces there are some credit led B2B marketplaces and then there are some credit enabled B2B marketplaces. In your case it’s credit enabled potentially but you said you made a choice that we will not do something, we will not do credit and therefore it will be credit enabled some time down the road. And that I think is a very important choice because for the credit led B2B marketplace underwriting becomes the most important thing.

Chaitanya:     

100 percent.

Vikram:          

Because then that credit led choice leads to underwriting, leads to collections. Because you didn’t do that you could actually focus on the manufacturer and grow very fast around the manufacturer so it’s actually equally important to say we’re not going to do something. And you said we’ll not do credit and I think it was a big choice that defined you in the early days.

Siddharth:     

I think that has also helped us find the right problems. I mean when you opt for a solution which is giving you a certain growth but you know that is a false way of looking at it. It is required, no doubt, that’s the reason it is accepted in the market but the point of view is we thought that if I go in the hindsight had we used credit today also we don’t use credit by the way. we know that it will be important for us in future but right time has to come for that. Today we have to create value organically and I think in the strife to create value organically we found lot of problems which we couldn’t have found if we actually used credit because we might have delivered growth based on credit. I think those just helps you drive more insights. In early days customer insights makes the best shot and I think that has been with us.

Sudipto:         

And I think it’s fair that and we’ve been adding to it from this point, right. It’s also the category that we’re operating in. You’re operating in a category where as you mentioned, ki kisi ko bhi nahe pata ke ousko chaheye kya, tou ousko aur dekho, and ek baar dekh iye tou ousko pata nahe ki quality kya hai, so this is the trust. Then you essentially have to deliver that promise on the right time because fashion and footwear manufacturing does not happen on time. So there’s lot of problems to be solved especially in a sort of unbranded category like fashion. And given, credit dete hai tou log, asa credit ki waja se kharid lete hai, else you could havenever been able to solve all of these small things.

Siddharth:     

Of course. Actually what I’m trying to say is of course in the domain that we’re trying to operate in, right, I’m not specifically talking about other domains in that sense but I think the decision that we make early on that we have to work for manufacturer itself verticalized us in a position that we might not have to do non FMCG or pharma or those kind of categories because those are manufacturing led also but a different kind of manufacturing. Very organized, very -- not very fragmented.

Sudipto:         

Plus branded and they’re not discriminate categories, Mujhe agai ITC ka aata cheheye tou ITC ka atta chaheye, marketplace does not solve anything. But the moment your supply side becomes consolidated and branded you’re a redistributor, you’re not a marketplace. The moment it becomes unbranded and fragmented it is the marketplace that has the value because you’re doing the matching and mapping, you’re checking for quality, you’re showing doing discovery and personalization. So all of those things.

Siddharth:     

Yeah, exactly. I mean when we narrowed down our decision to build for manufacturers I think that created a way for us on which category to be in, which category to not to be in or which method to choose or which method to not choose, I think that was the idea.

Sudipto:         

So let’s fast forward five years, right, which all categories do you want to be in, what’s your vision for manufacturing and Make in India. And how do you see the retailers life evolving over the next five years.

Siddharth:     

See, we have a broader line statement for that we’re taking factories to the world. When we say factories we want to cover all the factories. All the factories what I mean is that the factories which are unorganized, which are in the fragmented markets but in the order of a certain priority. I have to enter a battle zone of working with manufacturer. Every manufacturer has a certain problem, big, medium, small. I can solve one thing at a time but in a better way.

So we have prioritized ourselves that okay, first we’re trying to capture the fashion categories, the lifestyle categories. Why, because the category structure is common and there is a large unorganized fragmented portion of manufacturers like small, medium, big not just output producing factories but input producing factories as well. So when we focus on that I think it gives us either to enter almost the wallet or maybe the gates of 1.2-1.5 lakh odd factories in India when we talk about this thing. Because in all I think fashion, lifestyle, accessories and all these categories they comprise of almost more than 1.2 lakh manufacturers in India including input and output factories, small, medium, large.

Sudipto:         

And that’s a 70-80 billion dollar market, it’s large.

Siddharth:     

Again the number looks -- I mean when I say 1.2 lakhs it looks small but it’s a B2B company. I’m talking about 1.2 lakh manufacturers where these manufacturers are driving an output of more than 50 billion and at the same time these singular manufacturers are driving in input or processing an input of more than 30 billion. So that itself becomes a game, right, and if I have a vision to improve the efficiencies of these manufacturing and efficiency of these factories I think it’s -- everyone knows India, sub continent Asia, sub continent region of continent countries and lot of other countries. They rely on manufacturing as a major supply chain and these countries are supplier to the world.

We also have a firm belief if I talk about that the developed model of European countries and US maybe India you cannot compare apple to apple, I think the developed form at India or maybe these countries will be quite different as compared to the developed zones of those countries. So when I say that next ten years are going to be important for manufacturing that means that these factories be it small, medium, large will need a certain efficiency measure be it in terms of working for demand, be it in terms of working for supply.

And if we’re saying taking factories to the world we’re trying to say that we’re trying to improve India’s capacity. Capacity utilization and efficiency to produce that capacity. So we’re trying to go behind them.

Vikram:          

I love this line of taking factories to the world. What is that in state business model though on B2B and we often have this debate on that we believe commerce is a evolving business model. What do you guys think is the business model for you or what are the elements of that business model?

Siddharth:     

So again there is a choice that we make here, right, for every company focus is very important, I’m a firm believer of that since day 1 and going to be with us in the coming years as well. That profit pools lies but there are many profit pools and revenue pools inside that factory. We’re trying to say one theory of building business that our customer is the business manufacturer. If we’re going to make money for him we’re in some value creation and we deserve some money out of it then. So for example whatever I try to do if I make incremental money or save incremental cost for my customer I deserve to get money out of it. If not nothing makes up for it.

So as we enter and as you say that what this interprets in the form of business model these factories if we’re trying to create demand we know that there is a business model out of it. But is that the only way that the business can be built, I think no. Demand and creating demand just gives us the license to enter that factory. And I think solving for other things is value creative for that manufacturer and it can give us a lot back as well.

Vikram:          

So whenever I talk to you guys it’s just so first principle and it’s a wonderfully first principle way of thinking about it which is manufacturer what is the core problem, demand is the core problem. If I solve that problem I’ll be able to extract value. And often as VCs we’re trying to force fit business model but that first principle thinking I think is what makes you unique. And if I interpret it from a VC lens if you -- there are so many ways to extract that monetization, right, whether it is an ad led business model, whether it is potentially contract manufacturing, whether it is private label, whether it is credit, there are so many ways in which you could extract that value if you’re responsible for x percent of demand for each factory.

Siddharth:     

I think that’s the point of view.

Chaitanya:     

Adding to that five year old thing we’re very clear with one thing, we have a factory app in place which we got as an app because we got to know one thing that the user we’re targeting because our goal was very clear. For the first so we have one of those companies which took C to series A probably four years. It took a lot of time because that was our discovery like where we --

Vikram:          

That was growing up days.

Chaitanya:     

Growing up days and I think that’s where the compounding starts, the clarity is bringing the compounding in place. Now in that journey we also discovered one thing, we want to build it for every kind of manufacturer not just .1 percent of the manufacturers in India. And when we go for that you have to be mobile first, you have to be -- so we have a thing called factory app which we aim to be a super factory app. 4 saal down the line, simple puchoge, visualization angle, manufacturer factory aap pe apna pur factory chalara hai, chae wo production chala ra ho, demand chala ra ho, supply chala ra ho, raw material chala ra ho, whatever, operation chala ho, infact, everything and anything on that factory app, that’s it.

A simplified version of where we’re able to see -- and one of the reasons for that is why digitizing is a method. As on date efficiencies of factory what we talk about and everything has not be digital they were even are able to relate it to topline and bottom line, kehte na, India mein problem ye hai, ki software operation efficiency lata hai, top line bottom line demand lata hai, But there is a correlation between that, there are very huge companies that use software but the small manufacturers, software ka kaya karna hai, koi fayda nahe hai sir, that’s where we think we’re going to be a beautiful amalgamation of both. Like operation efficiency with topline and bottomline.

Siddharth:     

I think in terms of market perception also there is a myth that I believe it to be a myth that these manufacturers are not able to use technology. They know priority better than us, I mean he’s the same manufacturer who is doing YouTube and Facebook. So that means he can use technology, he is not using technology for his factory, that’s the point. Now why he is not using is because maybe that is not the right priority problem that he might have right now. Most killing problem installing of software in the factory, no.

He might be having right now an urge to find alternative options to create more volume. Standard factory capacity utilization in India is 40-45 percent. Don’t you think that is a very relevant matter to work on? It is, 100 percent it is. So that’s what I think is driving us for now.

Sudipto:         

Switching gears I know when you started you were this core team of nine people raw, jo aake apka dhanda banaya, a company is formed, vision and mission is clear, various multiple rounds of capital. How do you think about hiring and building the team now?

Siddharth:     

So I think people being the most important part of building any company and we have I think when we started this company I mean at least Chaitanya had a two months experience of working in a company and I had maybe no experience. So although that was a negative but that was also a very fresh perspective because we didn’t know, ye jo hiring, team building, what is to building a corporate, we didn’t know anything. We could bring in everything in the fresh perspective. So for team building of course we’ve used our methods and we always believed in that kuch bhi cheez, humko hamari priginality se deviate nahe karni chaheye, jaha par hum hamari originality se deviate karrai hai, waha par, I think they’re following a trend and that trend might not work for us, it’s a risk.

So that might, but originality will always be with us. So it doesn’t mean that we don’t have to evolve, of course we have to evolve over the period of time and we’re trying to change ourselves as the time goes but when it comes to building the team be it back then or be it today one thing we’re very clear that the team and the people should come in for the right reason. At least people who are key contributors because we sometimes believe that initially we had a vision that each team member should be the owner of the company, should be that. And I think most of our early folks are still there with us and those people have like evolved with us, like evolved with the company. And those people really think, I mean we have this one pointers from the start and maybe that is because of that no one should work for Chaitanya Rathi, Siddharth Vij or Siddharth Rastogi or something like that, no one should work for a co-founder or a promoter or that designation or a super designation, everyone should work for that idea, for that purpose.

Vikram:          

What are the other right reasons, one is of course work for that customer and that idea, what else do you look for?

Siddharth:     

I think there are many reasons which come out of this because I’ll be very frank, today when I talk to some big industry folks they come and when I have a conversation with them those people are again very good positions in big companies and maybe big startups. If they ask me about my investors first, my venture funding timelines first I switch the call within five minutes, I don’t talk. Why, because I know that it’s not -- I’m very proud of my investors, the point is not that.

Sudipto:         

Thankfully.

Siddharth:     

The point is not that, the point is what am I doing, who are my customers.

Chaitanya:     

Where am I going.

Siddharth:     

Where am I going, what is the team, what is the product, where these questions are? I think these questions tell you that the person is coming in for the right reasons. And it’s very important to a certain sense because I’ll tell you it’s a goal. We really want to take this company public, we’re not building for short term, we know that we’re committed for the next 10-15 years that we want to make an institution which outlives us. For that, agar main aj, wo tacticles, ousko tacticles keh sakte ho aap, but agar wo tacticles measures aaj hum nahe le rai hai, I don’t think that our 10 year version will look like that ever.

Vikram:          

And you know, for me the fact that they’re both Bijnis men but have this wonderful missionary streak is what that combination actually is very unique. And you know, Sid is talking about the right reasons and he had multiple term sheets even in the last round and so on. And he chose the investor for the right reasons and that’s why I asked him to double click on those right reasons because he also wanted investors who are coming in with that long term thinking and long term journey.

Siddharth:     

Yeah, yeah, 100 percent. I think it’s very important. I think we have had so many conversations in the past one year, there are conversations which are heated conversations like, ke apka kuch point of view hai, mera kuch point of view hai, But I think when the goal is the same then those conversations are healthy, but agar wo goal nahe hota, then those conversations take you nowhere. I think that’s the -- I mean we personally don’t as much as this ecosystem celebrates investments a lot personally the day the money comes into the account, I mean we have 2-3 investments. The day money comes into account I think personally me I’ll be very honest I have a certain pressure in my mind.

Of course there is a responsibility towards shareholders, as a company you will always have it which is a good practice. But I think that insecurity of making that bringing it to be a massively profitable company and not really is today that remains and I think that should remain. Because that just tells you that okay, this is a raw material which has come into account.

Sudipto:         

I think that’s very interesting that capital is a raw material to build.

Siddharth:     

This is a raw material and it should be celebrated in a manner. I mean in our company today we really tell people, I mean sometimes I think lot of -- as I said I’m very candid with this discussion because I really understand from this perspective that people should not believe that investment or funding and in fact founders also is a milestone that needs to be celebrated in the form of a monetary hike or maybe any particular event. Because it’s like finding a good office, it’s as good as that. You get partners that’s a very good thing because you get knowledge sharing as well. But that money is the money that is coming in to build the company and I think it’s very, very important fundamentally to us.

Chaitanya:     

At the fundamental level also somebody asked me how do you feel that you have so much funding first of all I think our first principle is revenue is to cost, not funding is to cost. So it does not make a difference how much money we have in the bank what matters is if the revenue is growing I will be super happy, yeah, aj ye 10X of that now, that’s more of a happy factor for us. Internally also that’s the culture inside also.

Siddharth:     

I think that’s come from our customers because our customers are the B2B customers. Now we always think this is investment hai, jabtak ap profitable nahe house, main trust kase karunga apko, they’re depending on my platform for their business, they keep us sane.

Chaitanya:     

They keep us fundamentally driven.

Siddharth:     

Our customers keep us fundamentally driven. I know it is a fact of B2C companies as well but for B2B companies --

Vikram:          

Now he took away capital is just a raw material I took away our money is in good hands.

Sudipto:         

One last question, so your biggest customer, your dad, how does he feel about everything now. I think he gave you the choice five years back and where you’re now today how does your dad and then how do your families feel about all of this?

Siddharth:     

I think very good. I mean being that he is a customer of course he is very proud of it. Right, because he is in that market so he understands, generally B2B products, Har koi relate nahe kar pata, ke what they’re trying to build. I mean as a person no one is understanding how it’s done, because he’s a customer of course he is a proud customer. And because he’s a father as well so of course that makes him feel proud.

Chaitanya:     

And more proud of what we’ve evolved into.

Siddharth:     

I mean I, Chaitanya and Siddharth have lived at my place for around an year so our father used to come at our place and he treats all three of us like, because ous samay jo bhi hamare 4 5 jano ki team thi, I think they were early folks as well. He used to have one weekly session with us. Because whatever you’re doing is not working or this is working. And today also whenever I do something and tonight if maybe -- you know, I live in Delhi, of course whenever I’m in my family’s house he calls me up and he says that okay, there is a feedback, I think that is most important to me. Because as I said it’s an asset for us to have customer around and that has been our most important enabler as well.

Sudipto:         

Fantastic.Thanks, guys, for taking the time out. It was amazing to hear all the stories and the journey that you’ve gone through so it was fantastic to have you guys here. And I’m sure this is the first of many Matrix Moments that we do with you.

Siddharth:     

Privilege to be here.

Vikram:          

Thank you for the super candid conversation. I sort of almost rediscovered the business again and my excitement for it is even higher. And I’d forgotten the one line zingers that both of you are capable of. And I’m hoping the listeners enjoyed as much as I did which is throwing mind at the problem not money at the problem, demand is the biggest moat. You said the early learning is bringing the compounding today. But the one that will stick and I think for the title of the podcast is taking factories to the world. So here’s to that and here’s to the journey going forward.

Siddharth:     

Thanks a lot, Vikram, thanks a lot, Sudipto.

Chaitanya:     

Thanks, guys, thanks for everything.

Siddharth:     

It was a very insightful conversation for us, it was our first time, candidly, and but it was very good. Cool.

Sudipto:         

Thank you.

Salonie:

Thanks for tuning in. For more Matrix Moments episodes, you can head to www.matrixpartners.in/blog. You can also follow us on Twitter, LinkedIn, and YouTube for more updates.