Meet Chaitanya; manufacturing runs in his veins. He hails from a renowned textile family from Gwalior, and is the grandson of the prodigal Late. Vishambhar Dayal Rathi. Unfortunately, they lost the family business long back.
He along with his college friends, amazing team and great investors, is on a mission to Take Factories to the World.
Let us read through his inspirational story …
YC – Welcome to Yellow Chapter! The objective of the interview is to know “you”. Learn about your journey from the very beginning. How was your home setup? What were your parent’s expectations, and what did you want to become?
Chaitanya – I grew up in Gwalior, a small town in Madhya Pradesh. I was born and brought up in an upper-middle-class textile family. My grandfather (Late. Vishambhar Dayal Rathi), a hosiery manufacturer, hails from the creative generation.
Early 70’s, our hosiery brand was competing with Rupa Innerwear and Amul Innerwear, which are now 2000 Cr. brands. Our grandfather created a lot of businesses, textile, schooling and property.
We had a joint family with 36 members and a big house with 100 rooms. I have 12 cousins, all of them ace performers in academics. They knew doing good in academics was the only way to move out of Gwalior for further education. They were very eager to step out, explore the corporate world and even settle abroad.
I was the youngest in my generation. I really wanted to join the family business. I was obsessed with our businesses – “Dhanda”. But by the time I could join, our family business went down. Everything was wound up. There were huge losses.
Reason for the business going down –
Everybody was scouting for each other’s blood, a typical business family issue if not addressed properly from the beginning. There are three types of generations:
1. Creative generation – Like my grandfather. People who come from hard times. People who create and value every penny spent.
2. Destructive generation – Like my father and my uncles. People who don’t value. People who do not have vision and zeal.
3. Preservatives.
I strongly believe in the famous quote, “Hard times create strong men, strong men create good times, good times create weak men, and weak men create hard times” by G. Michael Hopf.
Why Delhi University?
As far as I remember, I have always wanted to be a business guy. In grade 7th, I started reading Business Today. I was very fond of reading autobiographies as well. I opted for commerce in grade 10th. I thought that the best way to learn business would be to stay close to numbers. I then went on to score well in the 12th grade as well.
2011 – Got into Shaheed Bhagat Singh College – Bachelor of Arts (BA), Economics – Delhi University.
I still remember the advice given by my parents when I was stepping out for the first time, “you’re gonna experience good things and bad things; just don’t get addicted to anything”. So simple, yet so true.
DU was a great experience. DU gives infinite exposure. I got the opportunity to experiment with many things and did internships in factories around Manesar. I wanted to work in Dominos in Gwalior, but because of family pressure I couldn’t do it. I was always curious about how learning things are made and sold.
Three startups I did in DU:
1. Economy Decoded – Simplifying economics and macroeconomics for a layperson. I did it with a college friend Dhariya.
Reasons for failure :
- We were young, still in college. There was no vision.
- Not able to think big like scalability and content distribution.
- Content absorption was low, unlike today.
- Not aligned internally.
2. Result App – We (my cousin Anish Somani) and I brainstormed and figured out that whenever results are declared, there is massive traffic on the college website. The website runs very slow and eventually crashes.
Solution – We created an app that directly links the result page. The idea was a hit.
Anshi was the tech guy, and I was taking care of the marketing. Those days, Facebook marketing was “the” thing. I did Guerrilla marketing on DU’s Facebook page. We got half a million downloads. We were earning around 20K through ad revenue. But eventually, we had to shut down, and we both moved on.
3. Beghar. in – The idea was simple, solving stay for PG students. But unfortunately, we (Siddharth Rastogi | Rajat Agarwal |) shut it down within four months. We learned Housing.com got colossal funding and was massively growing; however, this model didn’t really appeal to us, and we understood that when we ventured into the same.
YC – How did bijins happen?
Chaitanya – 2015! We all completed graduation. Siddharth and I were travelling to our respective hometowns. While travelling, we discussed a lot happening in the B2C space because of Amazon, Flipkart and Snapdeal. But none in the B2B space.
Siddharth’s father is a renowned shoe manufacturer in Agra. He offered me to stay with him for a couple of days. The plan was to explore the manufacturing market in and around Agra and business possibilities. I quickly grabbed the offer.
Learnings from our market visit:
1. People think there is money only in big cities or corporate jobs, but even we were shocked to see people minting money in manufacturing, wholesale and retail businesses. People had several crores of annual turnover.
2. There was hardly any infusion of technology in the manufacturing sector.
3. Trust is one of the most critical factors in this business.
We could see some gaps. I had two options:
1. Do an MBA
2. Take money from my father and start a business. My dad was clear he could give me the seed capital of 5 Lakhs only, and the rest I had to manage on my own by taking a loan. I opted for option 2.
Luckily, around the same time, we met Siddharth Rastogi, our friend from college. Siddharth’s dad is an apparel wholesaler in Lucknow. He was working with PWC but looking for a change.The three of us got together and decided to start. We started with trading. In the meantime, Siddharth Rastogi was busy figuring out the tech that could be introduced in this space.
We did trading for around four months. We bought the samples first (when you don’t have money you think good solutions), we showed the samples to the retailers and then took the order. We created multiple group on Whatsapp and were managing business through it. We got contact numbers for wholesalers and retailers very quickly on JustDial.
We got a good response. I still remember we got seven orders. But to get our share of the money, we had to first send them the stock. Being naive, we shipped. Out of the seven orders we shipped, only four vendors made the payment. The other three vendors never paid. To date, our Rs.1.5L remains unrecovered.😀😀
There could be three possible scenarios:
1. If all seven vendors would have paid – It means there is infinite trust in the industry, and a typical lead model will work.
2. If all seven vendors did not pay, the whole industry would be flawed.
3. Four vendors paid – Which means that some people are looking for the material. They are willing to try and do good business but are slightly hesitant.
Also, some vendors did business using WhatsApp, but only with trusted vendors. So we realized the most significant gap in the industry was “Trust”.
We wanted to solve for “Trust”. We (Siddharth Rastogi + Anish (my cousin)) started working on developing an app wherein the manufacturers and retailers can do business directly. We wanted to give an option to do business digitally as we did on WhatsApp.
Gradually, we realized that India is a very value-driven country. Two very interesting findings were:
1. Retails simply want just two things = margin + timely delivery.
2. Unorganized manufacturers, however, are suppressed by wholesalers. Wholesalers not just take the inventory but also take three months’ credit. It’s like you are giving your inventory + cash to sell your inventory.
Pivot –
At this, we pivoted and decided to solve for manufacturers first. We also realized Indian SMEs are not very keen on buying SaaS. Primarily because of two reasons:
1. Everyone was looking for revenue first.
2. Software was not simple to use; hence willingness and adoption were quite low.
Solution – Help manufacturers generate more recurring revenue.
The plan was to start with generating recurring revenue and go deeper into the manufacturing landscape. Help them solve capacity + operations + capital management + raw material, and others. But right now, we are more focused on solving for generating recurring revenue.
We realized that if we can empower the manufacturer with tech, the retailer will stick around because of the product and cost and not because of the services of any platform. Product and cost are primary, and services are secondary.
Initially, manufacturers were reluctant to get onboard with us. Wholesalers did not see any value for them with us, and even the retailers were quite skeptical. We had to deal with each of them separately:
Manufactures – We convinced them just to upload their samples + cash on delivery. COD for manufacturers was unread. They were typically used for 90-120 days of the payment cycle. 10 Day cash flow cycle was unread considering they had 90-120 days cycle.
Based on our past four months of trading experience, we were certain of pulling some orders. And we knew once the orders started coming in, the rest of everything could be solved quickly.
Once the trust was established, we started with a five days payment cycle, then ten days. Right now, we are at a twelve and half day payment cycle. But fortunately, we usually get our payments on the seventh day. Fortunately, we usually get our payments on the seventh day, although credit is something we still have to figure out.
We are the only company in B2B which is cash flow negative. We have a decent float ready at any given time because we get money in advance from our retailers.
Wholesalers – We told them many retailers are visiting our platform looking for better pricing.
Retailers – We convinced them of price comparison on our platform. Example – Initially, Flipkart was used just for price comparison and later, people started buying directly when the trust was established. + Moreover, initially, we were offering cash on delivery, which was rare for this industry.
We made many mistakes and have been through tough times but slowly, things started shaping up. Initially, we were working from Agra, but in 2017 we shifted to Delhi. By this time, we were keen on scaling.
The first funding cheque came from Sahil Kejriwal. He could relate to the problem we were solving well as he was a shoe exporter. Later we were supported by Info Edge – Sanjeev Bikhchandani , Kitty Agarwal and Rishabh Katiyar. We shared a common vision of building a sustainable and scalable business.
YC – What were your learnings so far from your entrepreneurial journey?
Chaitanya – Few learnings from my six years journey:
1. Put minds to problems first, rather than money or people.
2. We have seen three near bankruptcies in the last seven years. We have learnt things the hard way. Build a sustainable business. Do not depend on anyone.
3. Run revenue is to cost, and never funding is to cost.
4. Invest in your business but have a horizon of 3 to 6 MONTHS, have clear expectations of ROI within this visible timeline of months.
5. B2B is not about the acquisition. It is based on retention. 95% of our business is based on retention.
6. In B2B, if retention is the key metric of your business, then trust has to be iterated repeatedly. Marketing plays a key role in reiterating trust. Initially, we were only focusing on sales but going forward; we will be focusing on marketing as well equally.
7. In B2B, the cost is the key, unlike in B2C, where convenience is the key.
8. Great team is the key – Siddharth Vij is the captain of the ship with a great sense of direction and vision | Sachin Chauhan | Rishab Mathur there are many more names.
9. Behavioral shift takes time. You might get your first customer using tactics, but you can get his mind share only after repeated orders.
YC – Can we talk about some numbers, competition and plans ahead?
Chaitanya – TAM – Total Indian market output is $100 billion. Manufacturing output is $60 billion. There is another $30 Million in raw materials purchases. So our market is around $80 billion.
CAC is probably Rs.1000 to Rs.1200 per retailer and Rs.5000 to Rs.6000 per manufacturer. We recover our CAC from retailers in three to four months and the manufacturers in one and a half to two months. Right now, our margin is 10% to 15%. Frankly speaking, our LTV is still relatively high; we are trying to figure it out.
Right now, we have around 1600 manufacturers—our North Star metric = daily active user of the factory. In the next five years, we need 100% mind share of the manufacturer and 30% wallet share. Three months back, we were at a $100 million annual run rate.
We have realized that no manufacturer wants to outsource 100% of their factories. They don’t want clients to contribute more than 20% of the total order size. The simple logic begins, all eggs should not be in one basket.
We aim to be in South Asian countries – India, Bangladesh, Sri Lanka, Pakistan, Vietnam, Indonesia, etc. All these countries have very similar per capita, demographic and topographic dividends. Even the problems are pretty similar – highly unorganized manufacturer segments. Toys, home textile, lifestyle and kitchenware are all our industries currently.
Our vision is “To build the biggest manufacturing ecosystem in the South Asia countries”.
Ideal Customer – Manufacturers of unorganised Industries like Footwear, Apparel , Home Textile.
Competition – Manufacturer.com – A global business-to-business trade platform based in Los Angeles, California, that connects buyers and sellers throughout the World.
Initially, people used to think Udaan and Ajio were our competitors, but they were not. Competition is someone who acquires the same mindset as your customer. Also, they both are on private label. When you are a private label, you compete with the manufacturers and not build for the manufacturers. In a private label, you consolidate your manufacturing; you cannot get it done from infinite manufacturers.
There were some players in the market, giving credit to retailers. Speaking to a couple of retailers, we realized the retailer is only keen on selling and making money. He is not very keen on getting credit. The retailer needs six basic things first:
1. Reliability of price
2. Good product
3. Margin
4. Lead Time
5. Timely delivery
6. Variety, and lastly
7. Credit – but only when required and not on day one.
Groyyo – They are competition, but we both are in different segments. We are dealing with budgeted retailers. They are dealing with mid-sized retailers. Also, they are more on the brand front and not on the manufacturing front.
Fashinza – They are focusing on exports + on the brand and not on the manufacturing.
YC – What are the marketing initiatives bijnis is taking?
Chaitanya – Interviews + Press mentions = Frankly speaking, we realized the value of marketing probably four months back. Founders are usually very purpose driven. We realized that to hire + build a good team, we must present our story to the World. We have to let people know who we are.
Internally we are building for the manufacturers, but we also have to put the company in front of the people who will eventually work with us. From now on, you will see more senior leadership of bijnis in public domains.
We’re also focusing on two other things – product marketing and content marketing.
Product marketing – Our excellent product team is talking about the product – How To Market Your Factory On The bijnis Factory App | How To Reduce RTO and Grow Your Manufacturing Business On The bijnis Factory App and many more.
Content marketing – Our vision is to build the biggest learning platform for the manufacturers. Everybody is educating the future employees; nobody’s educating the employers. Indian manufactures contribute around 17% -18% GDP right now. They employ around 20% of India’s population.
We have realized that even the manufacturers want to learn and grow. They are not using Youtube just for entertainment but also for education. Even the manufacturers form communities to spread knowledge and gain knowledge from other counterparts.
We are working towards building the biggest manufacturing community – Factory Owners Club by bijnis
YC – What keeps you going?
Chaitanya – I have a simple philosophy, what not to regret at 80 years. I wanted an adventurous life, and I am living one. I’m always curious about building things. Building as a first principle goes to the atomic level of inventing something. If I can create or invent something, that will be my ultimate goal. I have this newfound love for Physics and Psychology. Honestly, I try to read them from time to time.
I want to solve for a lot of people at scale. I think that’s where you go from Success to Significance in life. Success is a very individualistic metric, whereas Significance is a macro metric with an impact on a lot of people.
Book recommendation – The Tata Group: From Torchbearers to Trailblazersby Shashank Shah
| Shoe Dog: A Memoir by the Creator of Nike.
Chaitanya, it was a great conversation. Thank you for your time. Yellow Chapter wishes you all the very best in your future journey.