Mafia for Scale: Brotherhood to Founders, 85+ Investor Rejections, Renting camping gear and beyond
GrabOnRent CEO and Co-Founder Manish Sugandhi talks about his startup journey. From conducting a Tech Fair to founding a UI/UX startup Perdix to eventually starting GrabOnRent with some of his founders from Perdix, Manish discusses it all. Minted from the Flipkart mafia, Manish also discusses how we was able to leverage that network to make GrabOnRent work. Listen to Manish of GrabOnRent: Mafia for Scale talk about brotherhood to Founders. He also talks about 85+ investor rejections, renting camping gear and beyond.
Manish’s experiences are like thought stream from a young entrepreneur who is out there in the trenches making it happen:
So when you start off something when the city gives you their artistic sense, people would then diversify into other fields that would give them the opportunity to possibly say earn better.
— Manish S Sugandhi at 04:08 in The Track
Very few young people are shrewd enough to realize the power of networking and building a circle of friends at a very young age. Manish realized it very early on:
So this is where Flipkart mafia just like the PayPal came in handy.
— Krishna Jonnakadla at 11:07 in The Track
Yes, and I’m happy to be a part of it. But yes, that’s how a lot of connections come into being right?
— Manish S Sugandhi at 11:07 in The Track
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Manish Sugandhi’s thoughts on how to build trust:
See, one of the things that I believe in, I still follow is you need to be genuine, you’re speaking to your suppliers, like you need to communicate things very clearly. I’m saying that also applies for your customer side. In case if you’re able to deliver today, tell them you’re able to deliver. If you’re not, it will take five days, tell them it’s going to take five days, do not tell them it’s going to take two days and then take another three days from there. Because that will hit your consumer trust and the customer will never trust you enough. So that if you say I’m coming today, I’ll say like ‘nai’ , come to my place, give me the item that’s when I will believe that you are coming.
Manish S Sugandhi at 22:04 in The Track
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Episode Transcript (Automated Transcript)
people, customer, work, rent, bangalore, rental, manish, organization, products, terms, company, months, flipkart, market, identified, short term rentals, days, furniture, realized, india
Krishna Jonnakadla, Nida Sahar, Manish S Sugandhi
Krishna Jonnakadla 00:01
This is Maharajas of Scale, the podcast where we go behind the scenes and talk to founders who are demolishing the myths around building and scaling a big business in India. These are the stories that have shattered the assumptions around Indian consumers and are changing the game completely. I am Krishna Jonnakadla, serial entrepreneur, co founder of FLIP, the Fashion Locater In Town and startup mentor, bringing you these stories. Today we are chatting with Manish from GrabOnRent, a startup that is actually giving some of the other established players in the space, a run for their money and doing a lot of interesting things moving beyond some ordinary and normal categories that people have associated companies similar to grab on rent. So we'll hear from Manish. Manish, it's good to have you on this podcast.
Manish S Sugandhi 00:56
So thank you so much, Krishna, for having me on this podcast.
Krishna Jonnakadla 00:59
So my Tell us about your entrepreneurial journey. How did this happen? From what I gather, it was a typical scratch your itch, kind of a venture where you had some difficulty and you decided that you wanted to do something about it? Was it something like that? So tell us a little more about your entrepreneurial journey.
Manish S Sugandhi 01:15
So I think it was partly from the fact that yes, we felt that the audience like ourselves, or people in our age group were one of the larger use cases for the problem that we faced at a certain point of time. But I think there was also a couple of other factors that influenced us to get there. So in fact, once I graduated from IIT Guwahati, the first thing that I did, or rather had a campus placement, so I joined Flipkart, but post the placement session, and before I had to join Flipkart, there was something that I wanted to I was getting a little bored in the campus. So we started a company called Perdix Business Solution, which was into design and design consulting. So as a matter of fact, that is a company that we started and right from the day we started, there was certain amount of clientele that we had from a network of people that we worked with. So this was basically UI/UX. So basically, tech related design, we worked into animations and graphics. So that is how we started, also a fact that it already has a really well established department of design. So there were a lot of juniors that we could use as a good workforce for us that we started off with. Eventually, in about seven, eight months that I was working with Flipkart, I also in parallel, ran this. But then I did not really scale it up, because I did not really know where the entire journey was going. And it was then after about eight, nine months in Flipkart and I realized that maybe this is not the kind of work that I want to do and then I decided to move out of Flipkart and then run this as a full time firm. So, we were a bootstrap company from day one, you're generating profits. So there was substantial amount of cash, some of our clients came forward and said, if you guys are looking for funding to accelerate your work, will be more than happy to come in. And we're like, we don't really need the money, then we did not really want to dilute our holdings. More than that we wanted to have the independence in terms of running the film the way we wanted to. We work in the span of two years. From there, we work with about ten Fortune 500 companies, we work with Skype India, we work with Facebook, we worked with WeChat, these were a lot of different companies that we got to collaborate with. We did specific group researches for companies such as Skype, and they were trying to indigenize their entire offering. So from a team of about five people, all five being co-founders, we expanded ourselves to close to 30 member team, clocking in about two crores of revenue annually. But that was again the services sector and the the entire working around it. So we established ourselves back in Calcutta, because that is a place that has got really good designers coming in. People think that Bangalore has great designers but Calcutta has good, I would say economical designers who come in at a great price point and their efficiency towards work is brilliant.
Krishna Jonnakadla 03:55
So I've always thought that Calcutta is home to the artistic, your textile and those sorts of designers. And you're telling me even in UI/UX, and modern age design, technology design in Calcutta is home to people like that.
Manish S Sugandhi 04:08
So when you start off something when the city gives you their artistic sense, people would then diversify into other fields that would give them the opportunity to possibly say earn better. When people realize that yes, how long would our handicrafts or fabric design or fashion design would go, these people also diversified into other categories such as UI/UX, animations. One of the other cities that produces great designers is Indore. I mean, these are two cities where people generally don't relate to very tech heavy companies but these are places that produce some really amazing talent.
Krishna Jonnakadla 04:38
I have been surprised by the kind of tech and design talent that seems to come out of Indore. I think it's a great city to watch out for, you are absolutely bang on as far as that is concerned.
Manish S Sugandhi 04:48
And then from there, I worked in Calcutta for a bit, moved to Gurgaon for a bit. And then eventually we decided to set up base in Bangalore, obviously reason that most of our clients are here. This was in Perdix itself. And that's where I had to keep moving cities keep shifting across cities. And that is where about 2015, towards the end of it, I realized that a much larger market would be for people like us where people are either shifting jobs, or people are moving for better opportunities. Some of our designers move from Indore or from Calcutta to Bangalore. And they faced a similar problem. Around that time, there were certain LinkedIn reports that said that the average span at which a person changes the job is about two and a half years. And on average, about 75% of people change three jobs in 10 years, which was a very different number in contrast to how the generations before us have worked, where they've stuck onto an organization for 8 years, 10 years, 15 years, and they got comfortable in that organization. And they did not want to shift.
Krishna Jonnakadla 05:49
So you're contrasting Job Change equivalent to a city change that sort of the initial user profile.
Manish S Sugandhi 05:56
A part of it, but also a part of it comes in that if I'm staying in the south of Bangalore, and if I'm shifting my job to a company that is offering a better opportunity in north of Bangalore, I would also change the house. So I need not necessarily change cities, I might just change jobs in a particular city. But I might want to stay closer to my workplace, let's say, I'm in Noida, and I've got a job in Delhi, I would never travel from Noida to Delhi, I would prefer staying as close to my workplace as possible. And this is something that almost everybody prefers, nobody wants to travel and waste about 25 30 hours a week, because they feel that time is way more valuable for them to use it for something more productive, especially if the person is very competitive, he will like to do it. So what I'm equating is job change to changing houses, whether in the same city or cities outside. Moreover, people have lost that inertia of moving out of their hometowns. Earlier, people used to be like, I want to stay around my parents, I want to stay around my family. But now they're like, until I'm 30-35, until I really settle down and settling down no longer means marriage for people right. Settling down now comes to the point where the kids go to school, because that's when they are for like staying in the same city for longer. Even after marraige a lot of people are experimental, the wife is staying in one city, the husband's staying in the other. They meet up for some time, then they decide to either move into one city, or there are a lot of permutations and combinations possible. But at the overall level, people have been moving across for jobs and shifting jobs more often than what they were doing, I would say 15 years back.
Krishna Jonnakadla 07:22
We all see headlines. We read business journals and articles. And very rarely, we pick up business models, or even designed business models out of these headlines or articles. What Manish said right now, is what a lot of entrepreneurs are made of. The ones that go behind the articles and the headlines and does earn business models out of them equating a job change to a house change. And also putting together a trend that people now have lost inertia around moving out of their cities and away from their families in their initial career life is a golden observation. What's more crucial is to read implications for their business from this observation. So your own personal experience, what you saw clients going through and LinkedIn research and some gut feel as well?
Manish S Sugandhi 08:17
I would say a lot of gut feel. And that's when we identified that if there's a problem that we are facing, possibly this problem would have been faced with a lot of other people before we got in. I mean, that's something that's philosophy that in case if there is a problem that I'm facing today, this possibly hundred other people who would have faced it, and somebody would have tried to figure out what the best solution for that problem is. That is where we identified other offline sellers in this market or other people in this market who would rent out products. We went out to the market and we realized a similar thing existed for last 40 years in cities like Bangalore, and in Delhi, but majorly for two categories of people. One was expats who are moving into these cities for a certain period of time for their consulting work or job or for people in the defense sector. Because every two years they had to move house and a lot of them are not willing to move around with their items. So we figured out there were about eight to 10 offline rentals with people with huge amount of inventory, who are in the sectors but they were catering to only these two sectors, they were not really catering to the other community, people in the IT sector or people in the consulting or the backing, because number one, they had trust issues because they felt that people would not really pay them on time. Secondly, their process was so manual and so paper intensive that somebody in the IT sector would not want to go for it, he's like I would better buy it because of so much hassle in doing it. That is when we realize that there's a huge opportunity in not renting products, but in becoming a technology platform where people could come in where we have a set of sellers at the back end, who are renting products, we curate those products, identify the product listing, take a certain amount of risks and the first default guarantees. And on the other side, we have got a plethora of customers, new customers are coming in, which the other guys or the offline sellers have no idea on how to capture. And that is where the entire concept of marketplace came into being. And that is where we realize that this concept is scalable, wherein if we are able to get the tap into the right kind of the product, right kind of pitching to the end customer, we will be able to scale it up drastically, in a very short span of time. I think that was one of the first assumptions we had. And that was one of the worst assumptions we had. Because we identified once we started working, the market does not have enough supply to cater to the kind of demand that we are holding.
Krishna Jonnakadla 10:32
I've always personally felt that India is a supplier positive market, demand side will take care of itself if only the supply side got its act together. So let's dive a little more deeper into that starting point. Tell us about the founding team. And how did you put that together at that point in time. And when you decided to zeroing on this market. I've heard similar stories. But I loved what you just said about both the defense sector, as well as the expats. The expats have been a long known catchment area or demand base for these sorts of services. But your segment that you identified was a completely different segment outside of it. And the other two aspects that you identified was the kind of paperwork that these legacy renters, legacy players that were having, and the trust issues that existed on both sides. There is another aspect about trust, which I'll come to later, let's dive a little more deeper talk to us about some of that thinking, the founding team and the founding tax.
Manish S Sugandhi 11:39
So it was more or less like when we were in Perdix, we came across an opportunity. So we were exploring the fact that whether we should have this part of the subsidiary of Perdix where and we have a rental platform, because we had a team we had a good amount of money coming into cash flow positive, I like to not really require external funding, if we do have enough now would have our own clients are willing to fund us for a project of ours. So we could make the use it that way. So we were five founders, we have five partners in short, all five IIT Guwahati grades, so we guys work together for the tech fest. So I knew each other for a good six, seven years before we got into that phase. Some of them knew each other back from the 11th and 12th days in Kota. So it was a group that knew each other, we had partied each other, played with each other. So we knew each other in the way in and out. So we knew who holds what strength or what are the things that people like and dislike. And we founded a great team to work with. Some of these, even though we are not in business anymore, but they still remain to be the best of friends trips today, going outside India. So all of it comes together with these guys, we already actually put it up on the table that this is what I think we should be doing, this is a great opportunity in this. Not everybody was on the same page on it. So that's when out of five of us, two of us decided that because we want to pursue this. And we did not do wanted to stay in the company for the sake for the sake of being there on the paper because we would not really be adding value, we decided that it's best for us to exit the organization. So on mutually decided terms, whatever work we were handling, we hand it over to them, the managers in the organization, and we eventually moved out. So we sold a majority of a stake as well to the other founders, we made a bit of money in doing so, which helped us with funding the early I was at the first seven, eight months of GrabOnRent effectively. Because even before the first round of funding came and we had invested a good amount, about a crore in the organization. So it was because of a certain level of exit that we had got from the previous firm that were able to reinvest that money and get us off the ground. Because with the lack of capital, most of the companies fail. And in about six, seven months time, we are already at 20 member team with GrabOnRent. And so it was that initial impetus from certain financials that we were able to arrange for that help us get there. Now when we started, it was me and Shubham, my other co founder, we decided that this is the organization, this is the work that we would want to do. But we realized that outsourcing something is important as tech should never be done because until unless you have full control over what is happening, it will not really make sense. Also from a previous experiences, a lot of our work in Perdix, some of our clients had outsourced the UI/UX tech part of it, ie the HTML CSS part. And we realized that, it's not a very seamless flow. No matter how much you try, they're going to be hiccups plus changes that you need take time. And if you are a consumer facing brand, we cannot let even a wrong color gone to the website and let it be there for two days, it's going to obviously impact the customers in a negative way. So, the design philosophy came into this, something very important. If you are doing a lousy work of your website, it kind of somehow, subconsciously affects the customer when they think that if these guys are not able to maintain website in a good way, how are they assuring me of a great service. And this is something like we have to admit that, if a web page on Myntra takes too long to load, like how the hell are these guys going to deliver the item to me on time, we don't make these connections. And some people would logically argue as well that A does not relate to B, but subconsciously people make those choices. And so this is a part of the design thinking that we had adopted in our early days that we realized that things that we do should be done in house, should be done in a great way. That is where a couple of people from Perdix also said that they would want to join this, it looks like a great idea to move. And again, because everybody was on the same page, they decided to move in shifting the payrolls. In fact the first five months, we worked out of Perdix office itself. So that's where the team grew. And then we decided that maybe we will require a new office. So then we move to Bellandur. And that's where we did this. So there was about initial three or four people but we knew that we needed a tech co founder. So I would say this, this comes much earlier, like in the first week of our ideation information, there was a friend of us he was trying to start up, he had an idea in terms of creating something like a hyper local delivery systems because those were the days when Roadrunner was still not there in the market. And which is not there anymore, that got acquired by somebody. They had a good exit overall, so these were again, the founder of Roadrunner was from my team in Flipkart. So I knew these guys like in and out, but the entire about eight people in my team and Flipkart had joined, all of them have their startups right now. All of them have raised a good amount of money doing great work, payment has come out of the same team. One of them had started a company similar to Roadrunner and shut it down, then started a second one that all that has also got funded. My boss there started a company called grow, which I think received a good $50 million last month. So that entire network of people has helped me in a great way. One of the people I work with is on Ankit Nagori who now runs Cure fit. So it was a good network of people. I will come to it, how that affected us later and how that helped us later.
Krishna Jonnakadla 17:05
So this is where Flipkart mafia just like the PayPal came.
Manish S Sugandhi 17:08
Yes, and I'm happy to be a part of it. But yes, that's how a lot of connections come into being right?
Krishna Jonnakadla 17:14
If you heard other episodes on Maharajas of Scale, you would have heard me mentioned the term mafia. In fact, I say it several times, whenever I happen to see a set of people, there are sort of brothers in arms and have a purpose that is common and binds them together. It is a good kind of mafia, a network where people believe in one thing, and in helping each other. If there's anything an entrepreneur can build, that will possibly last his entire lifetime, and maybe beyond it is this network. And it's perhaps more wiser to build a network before anyone builds a company or a venture, it cannot be stressed enough. And we can see the positive impact that a mafia sort of a situation actually has had on grab on rent or Manish's venture.
Manish S Sugandhi 18:06
So that is where we realized that we need it again. That's where Aditya Sharma came into the picture. Again, IIT Guwahati computer science guy was working at HP at that point of time and he had the 'kida' to do something, he had the itch to do something new. And that's where we like Adi, this is what we're thinking about, what do you say. And he in the first going loved the idea, and then we got onto the table. And we decided that if all three of us are equal stakeholders, then we have an equal equity holding into the company. And that was the first discussion that we had that let's keep point one clear. Now let's get to the work. And believe me, he is such a great coder, within seven days of us deciding on the idea and the features. Our first website was live, our first Android app was live in less than seven days.
Krishna Jonnakadla 18:46
I can imagine. I think I've seen. We've done some similar things as well. In our startup, there were times where we took two years to get to a certain point. And there was a point where we had four interns to run an experiment, just try a completely new avatar. And it happened in just 10 days. I think the right people always set the tone and they make such a huge difference.
Manish S Sugandhi 19:11
I completely agree with you that. And that's where the first one week we realized no matter what we do, where we get along, or how we move on to the next steps, first thing we need to do is get business because nobody is going to look at us as an idea and funders.
Krishna Jonnakadla 19:25
So at what point of the company was this three months, four months in?
Manish S Sugandhi 19:30
And this was 15 days into the company.
Krishna Jonnakadla 19:33
That's so interesting.
Manish S Sugandhi 19:35
So we decided we are going to do this. Next day, then a private limited firm used to take about a month to get registered. So the next day, we got registered ourselves as a proprietary firm and the next day, the bank account was open. Within seven days from there, five, six days from there, we decided on the first look of the website is going to be identified, which tools would make sense, how to plug and play some of the things so that we are live, met some of the suppliers and we started with over three categories. We started off with adventure gear, because we felt people would like to rent things that they would not like to own or they may feel it's only a one time use thing. We feel one time use is going to be a great use case for us. We started off with party items. When I say party items, I'm speaking about hookah, poker sets, drinking rulers and things like that and barbeques. And then the third one was furniture. So we had over three, four vendors that we identified initially of these categories, on boarded them. In parallel, the tech system was going on and within about 15 days, this was around August one second week that we had gone live.
Krishna Jonnakadla 19:42
So did these vendors already operate in a similar model? Or did it take you to familiarize them and come up with deals that they would understand.
Manish S Sugandhi 20:45
So a part of these guys were already used to the rental market, but they did not really know how to reach out to the end customers. So when we told them that we are going to open up a all new different domain for them, right. Some of them are very hesitant, but some of them openly said, Let's do it and try it. I mean, first 10 orders, let's see how it goes. And then we'll figure it out. So earlier, the model was they had to deliver the items by themselves. We're betting at a very heavily on short term rentals, we had very few items that would go on with the customers for the longer duration and we started off. Again, as you mentioned, possibly if I'd spoken to you four years back, I would have realized that India is a supply heavy market demand will generate itself and take care of itself. But we were then struggling with the problem of the chicken and the egg, whether we solve for the demand or the supply. And that is where we stopped doing that. First, let's get the people on board. Let's create the trust with them. The settlements with the vendors used to be almost instantly.
Krishna Jonnakadla 21:37
Somewhere I've heard you guys talk about in your initial formative days, earning vendor trust was very important. And then you when you began, you spoke about trust between the consumer, most people would hazard that trust with the end consumer, especially for a platform like you is more important. Although if they look at, there is an economic aspect as well, that is a model. How did you solve for user trust as well as vendor trust?
Manish S Sugandhi 22:04
See, one of the things that I believe in, I still follow it is you need to be genuine, you're speaking to your suppliers, like you need to communicate things very clearly. I'm saying that also applies for your customer side. In case if you're able to deliver today, tell them you're able to deliver. If you're not, it will take five days, tell them it's going to take five days, do not tell them it's going to take two days and then take another three days from there. Because that will hit your consumer trust and the customer will never trust you enough. So that if you say I'm coming today, I'll say like 'nai' , come to my place, give me the item that's when I will believe you that are coming.
Krishna Jonnakadla 22:36
Let's do a little deep dive, the way I've seen is, especially in situations like these. Let's say a particular furniture item is not necessarily new. If I'm renting, its not all the time new , it might be refurbished one. So I have a situation whereby I need to do an inspection at source. And then I need to let say on delivery as well. I do an inspection the customer says ok I've seen it. Now what happens on pickup if there is a dispute, because in India, we've seen situations where did you implement, let's say certain photography guidelines where you're photographing in and out of that. And if people change the delivery people change, how do you solve for those sorts of outlier situations.
Manish S Sugandhi 23:21
So there are two major problems in the rental industry. First of is what happens if the item gets damaged, and the second one of the items gets stolen, the item gets stolen to a great way was covered with the insurance that we were able to crack in with one of the larger firms. The second one in terms of the damage, any technical problem or any light wear and tear, we don't charge the customer. So it was part of the offering. Also what we got from our vendors at the back end. But in terms of damage, physical damage, let's say the bed is broken and the customer says 'nai' I got a broken bed, it's very difficult to justify this until and unless you have a visual proof around. So right from the day one of the organization, they were images about eight to 10 images of every product that were clicked at the time of pickup from the warehouse, the same number of images clicked at the time of delivery. Same number of images clicked when we were reverse picking the product and the same number of items when we got it back to the warehouse. So no matter in which sector of the transit or usage the damage happened, we knew exactly what happened. So if our customers said, so long back must be over four years back when you just started off, the customer said that I got a broken hookah and it didn't really work I need a full refund. We were like we'll refund you that is not a problem. But these are the images at the time of delivery. This was set up properly and you used it and this is at the time of pick up which definitely was damaged. So you are a better judge if you would want us to refund the money and still we will refund you the money but you take that call and the customers said, All right, I broke it you can deduct the security deposit.
Krishna Jonnakadla 24:42
Manish S Sugandhi 24:42
So this is where it comes out to be if you have visual proves and people don't really argue. So that is how we started back in 2015. And eventually once we realized that the market does not have enough supply, we had to get back into certain level of financial engineering, identify if we need to take the products on our own books identify what kind of rules are we restricted by because of the FDI. So after that we had raised a round of funding. Interestingly, one of the investors in our funding was Unicorn India ventures. I knew these guys back from our college, again, for some reason why are they tech fest because we also used to organize B plan competition. And then the person who runs Unicorn India today. Mr Anil Joshi, he was a part of Mumbai Angels, as a I think he was the vice president of Mumbai Angels and he had come, the first event I'd invited him, he had come down to the campus for judging. And for the next four years, he kept coming to the campus, so he kind of had a good bond with our campus. I had worked in the same place Shubham had worked with a similar people so he knew both of us. So the first meeting that we had with these guys, is like, I like you guys, we are like a team. We like the concept, we are willing. Now let's discuss the term sheets. It was one of the fastest conversions we had when this conversion happened like almost six seven month and this happened when we raised the first million dollar round.
Krishna Jonnakadla 26:00
And it was completely by unicorn India ?
Manish S Sugandhi 26:02
Unicorn and Ivy Cap, two funds had funded us. But it so happened that was more again because of a ongoing relationship with people that it happened and before that, by the way, we had got rejects from almost 80 85 firms in India pretty close, because the model what we anticipated is a technology based model will be able to scale it up quickly. Eventually over the next few months, we realized that this model is not like food delivery model where you just build a case and people will use the product for single time and return it. The more useful case in this business model is renting products for a longer duration, furniture, appliances, fitness, IT equipment. IT equipment itself, Dell HP already have a huge leasing business proposition at their end which most of the larger organization rent IT equipment because in after every three or four years its going to exist where they have to return the product and in case if they have such large quantities and their environmental laws that prohibit them from just destroying it or throwing them away. So this e waste management and complications around it did that. Because of which leasing became a brilliant model for them. So even we got into that, long term leasing is a shit. But how do we tap into the right kind of supply, the suppliers don't have the money to buy it, they're not going to buy the inventory we need, we want to standardize the inventory on a system. That's where we created a model where we had a set level of suppliers, financials NBFC's who would fund the products, we would manage it and then rent it out via our platform. And eventually, that's how we slowly transitioned into from 100%. Effectively the marketplace model but we we have a set structure via which we rent out the products and we managed the products today. So every product that somebody rents from Grab On Rent for the last two and a half years, appliances, fitness or furniture are all managed by us. We ensure the quality control of these products, we ensure that only the best of the products go in because of which the supply became better. Every step that we took, the supplier kept getting better, we were able to offer brand new items to customers were willing to rent for a longer duration, we were able to give them the option of rent to buy.
Krishna Jonnakadla 28:05
In the late 90s when online businesses were all the rage. And everybody in his, who just started a website was raising capital. There was a wise man called Gary Wendt, who was the CEO of GE Capital, who put together a fund called Gary Wendt Capital Management. And Gary would always say the businesses that he was most interested in investing were the click and mortar businesses. What he actually meant was those online businesses that had a profound impact in transforming the regular brick and mortar businesses. This is exactly the transformation online platforms can have. So when Manish talks about standardization, standardizing product, standardizing supply, standardizing management, standardizing pricing, standardizing policies, standardizing paperwork, and ensuring a certain level of quality and consistency. That is the outcome that Gary talked about. Online businesses being able to bring a multivariate number of offline businesses and physical businesses and standardizing them. And when that happens, it creates predictable outcomes, predictable quality and consistent experiences for consumers, suppliers, investors, and the platform, everybody in the ecosystem. And that is what ends up making one plus one into 11 or something have much more exponential value than usual interactions.
Manish S Sugandhi 29:31
This happened eventually with all the learnings in the in the last few months.
Krishna Jonnakadla 29:36
So who were your early adopters, and how has it changed? Talk to us about let's say you launched first in Bangalore, and then you launched in the rest of the country. And what sort of users did you see initially? And what sort of equipment did you see bought initially, from ticket prices and some behaviors, donations and what are you seeing now.
Manish S Sugandhi 30:03
So when we started off, we were doing one day rentals as a primary focus. We realized that so short term rentals was one day rental or one week rent, we used to rent out a lot of sound and lighting setups for stages. That was something where it was a good model to work but wasn't on scaling up. And people would use it then there was a lot of problems, to bypassing to the final vendor.We were able to give them better pricing because with us with the vendor, we had like a 20-25% discount on the market price. And they would get hardly five or 10%. So they were not always able to bypass but there were certain cases where you bypass it. And it was not a scalable model that would help us grow into a larger organization. So the average rental duration would be about three, four days. So parallelly we started off with longer term rentals, we realize long term rentals are very close to a SaaS platform. It's very difficult to get the customers but once you get the customers, they're not going to leave you for certain number of months. It is like tomorrow, if I stop my marketing spend, I already have a large number of customers who are committed to use my product for the next maybe 12 24 or 36 months and there is going to be revenue that will keep coming in. So this is not a typical e commerce play. This is a play where you have to acquire customer and the longevity of a single customer is more important than acquiring two more.
Krishna Jonnakadla 31:23
So the average life of a customer with you, at least for one rental is about 24 months
Manish S Sugandhi 31:28
So, right now we see an average of about 15.6 months. So that's from the last month. And this went up from seven days, two days in 2015, to about 15 and a half months in the last four years.
Krishna Jonnakadla 31:42
Wow. That's a massive jump. And in terms of the users themselves, did you see mobile, techie, executives from let's say, the Whitefield is this parts of Bangalore's to change to other demographics. Have you seen that shift happened yet ?
Manish S Sugandhi 32:00
So you have run a couple of startups yourself, so you have that experience. If you were to start something like this, whom would you expect would be your first target audience like if you are democratically or demographically define them in terms of their pay and the age group, what would be the age group that you would prima facie try to target.
Krishna Jonnakadla 32:17
I would say maybe 22 to 30. Especially the ones that are somewhat aspirational, who do not want to buy furniture and then want to still have good stuff, and also attach it to a cash flow from a salary that they're having. Or even maybe couples who have just got married and both are in jobs, and maybe have just moved to Bangalore from location, they still haven't figured out, they haven't bought a home, they still renting home. So some of those demographics
Manish S Sugandhi 32:49
I think you'll get them bang on but there were certain add ons to these like when you realize that 22 to 28 or 30 is the best age group to tap into. Initially that is the age group you are tapping into and effectively we're getting a lot of business from them. But we felt is the 30 to 40 age group also wanting to rent. Let's experiment. So at one point of time 22 to 30 used to contribute 95% of our business. And it used to contribute 95% of the business because we did not happen to the other age group. Once we started we like let's experiment weather 30 to 50, what are the chances of them renting, what kind of products will they rent? And once we started pitching into, we were like, this is again these guys are also renting. Why are they renting? So we spoke to the customer. So the company today is run by Operating Council which is heads of each of the department about nine people. Responsibilities even today include that we need to speak to about five customers every week to get the feedback until unless you get the feedback on what is good, what is not, we're not going to improve. So when we guys spoke to the customer, they were like I'm a consultant working out of Mumbai, I want to project with BCG or Mackenzie in Bangalore. I'm in some remote areas in and around Bangalore but I prefer staying in my levels. I don't understand that place. And if I have to stay here I don't know to buy my furniture so I rented out. There were certain people who said that we have moved into Bangalore, we are looking to buy a house but we are not sure whether we want to buy it yet. We like to rent it. A lot of people who moved in with the intention that there is somebody coming into my home I need a particular room only to be furnished for about three or four months, once my parents are coming in laws are coming in. So from about 95% of our user base coming from the younger age group. Now it is down to about 60% or rather, the older age group earlier only contributed to 5% has now gone up to almost 40%. And this is something that we never anticipated that would happen.
Krishna Jonnakadla 34:41
But these people are also out of towners in a way.
Manish S Sugandhi 34:43
Most of them, but some of them people staying in the same town as well. I'm a landlord, I need to give a flat on rent, I do not want to buy the items and give it on rental. The only reason is if tomorrow a new tenant is moving into that flat and he has his own furniture, what do I do with my furniture, storing it is going to be a cost, selling it is going to make me lose a lot of capital and a rented flat always ease better rentals than a non rented flat. So I as the owner would rent furniture and along give it like a fully furnished flat on the rental basis to people. So this was again something that came out from our discussions, then we realize people generally want to move into a new city don't take a house straight away until and unless there's a group of friends that you are going to move in with. Otherwise they would take a place, a company accommodation, for about 10-15 days, stay in earlier PG's, now co living space for about two three months, then decide on the house that they want to move in because they get a feel of the city. Because in Hyderabad if I have to travel six kilometers is not a big problem. But in Bangalore, if I have to travel six kilometers I'm going to cry about it every single day. So every city has its own nuances that you want to get used to before you buy the house.
Krishna Jonnakadla 35:58
So,how big is your user based today?
Manish S Sugandhi 36:00
We have catered to more than 15,000 customers so far in four cities. So this includes we started off in Bangalore, then Hyderabad, Mumbai and then Gurgaon.
Krishna Jonnakadla 36:10
And about revenues.
Manish S Sugandhi 36:11
I would have loved to give you the numbers but then, I'm not allowed or I'm not supposed to.
Krishna Jonnakadla 36:15
Okay, and how is this user base changing growing? What sort of growth are you seeing in that user base.
Manish S Sugandhi 36:20
So we almost had a 100% growth last year. And we think that, that kind of growth can be continued in the next few years. As I mentioned, we are not an e commerce company where we would increase our revenue by five x or six x in a year. But the revenues that we once increase are not going to go down the next day. Because every SaaS type model, you get a stable revenue, and more than stable revenue, you get a customer and he stays with you for a good amount of time. And it's building on that reducing churn increasing new inbound customers.
Krishna Jonnakadla 36:50
So let's switch gears a bit and then go back to your initial validation point. The fact that you launched a website within a matter of days, of you thinking about this idea speaks volumes. It goes aligns very well with what you know, a lot of people say in the tech ecosystem that, launch things first and get validation, right? What was your thought process? And how did you go about establishing initial validation. And then I want to talk about how you rate the market in terms of how you changed because changing user baskets or user segments is not an easy value proposition because it requires a whole host of thinking change. So let's talk about the initial validation part.
Manish S Sugandhi 37:32
So initially, we did not have a model to look up to. It was not a set model somewhere in the world where we could just copy food delivery. There were companies in the West and the East where people could copy from ecommerce, they were players fashion, they were players. But rentals never existed anywhere us did not have organizations which would rent on great scale. As Berkshire Hathaway company that rents furniture, but then the model is drastically different they looking at drawn long term rentals for furniture and majorly office furniture. And a good part also comes from home. But when we started our model was short term rentals and a part of long term rentals. We did not envision is that we would someday move into long term rentals because that is what people generally want. And to get a validation, I could either go out and take a survey where people say something and do something else altogether. So that would not be a good validation. A better way to prove our model would be just go out, make people use the product. If people are willing to pay then that validates my entire assumption that this is a market that will exist.
Krishna Jonnakadla 38:36
Steve Jobs infamously said, we do not do market research. We do not do focus groups, we do not do surveys. Steve was onto something. And we all know he was onto a lot more than that. And this delves right into what Manish just said right now, product market fit or validation, which is very crucial for any product, or service or idea, stems from people actually buying the product, you can only do so much in terms of getting people's thoughts and emotions when you actually quiz them. Because what's actually happening is that when you ask people a question or an answer to a survey, they're actually thinking with their mind. And we've all heard this phrase that people buy emotionally, and then rationalize, logically, that's exactly what they're doing. When you actually put a product or service out there for purchase, you're actually connecting with their emotion. And if they did buy that exactly means that they were emotionally connected to the product or service. And therein lies the validation. So unless and until you actually put something in front of people, validation can be a long shot. It can all look like it's fantastic on the drawing board, but you don't know what validation looks like until you put the actual product or service in the hands of the consumer
Manish S Sugandhi 40:00
To our first website was in fact, we did not do it from the scratch, we use the Shopify template, modified it, hard coded certain things in there. Because you Shopify is meant to buy items, to rent it we had to make modifications. We ran that system for the first, I would say five months. Because once it was live, we kept making modifications. And then we realized, because nothing like this exists, I cannot just use a Magenta or a similar platform to develop it, we had to do it right from the scratch. That's where in that five months time, we got our engineering team in place, the back end and the front end, the iOS app, the Android app, we made a mistakes in there as well, we could have been much more efficient. But we realized let's just start building native apps, because native apps was the thing then back in 2015. Eventually, after one year later, we realized any change we do we have to make three code changes, which is not a sustainable way of doing it. That's when we moved to a single platform based code. So that one change that we do in any code, it just reflects across platforms. And that is where our systems are now like more efficient and faster.
Krishna Jonnakadla 41:08
And these are all decisions that Aditya makes, I suppose ?
Manish S Sugandhi 41:12
So we again, as I mentioned, part of the entire work that we are operating council do, is we'll look at different parts of the entire organization. So it went a little into the company culture, because that is something where a lot of these implications coming from
Krishna Jonnakadla 41:27
Can we come to the company culture part. After we talk about the transition, the validation.
Manish S Sugandhi 41:32
Sure, I'll do that. So Aditya yes does make a lot of decision. But I think it's also a lot of inputs from other people in terms of how, what is happening in the market, what are the new trends, what a new technology we should really work at. So moving back, when we identify the customer want to rent this, that's when we set up a vendor management team, on boarded more vendors, on boarded more products, slowly moving from short term rentals to the longer term rentals.
Krishna Jonnakadla 41:57
So what sort of traction did you see in the first few months.Talk to us about that.
Manish S Sugandhi 42:01
We were doing about seven, eight orders a day on good days and bad days, we would be at zero orders as well.
Krishna Jonnakadla 42:08
How many days after launch, did you have your first order.
Manish S Sugandhi 42:11
So I think the day that we launched our website in about 13 or 14 hours we had our first order. So we went about marketing in a very specific way. The apartments that I stayed in had about 1400 flats, I did not have the money to go out and spend a lot on branding or marketing. So we got about 3000 small pamphlets printed, and we got them inserted in all the newspapers as a first round of marketing. Second, because I was staying in those apartments, I would go and drop a leaflet below every door in the apartment. Because I wish people got to know something like that existed. So very set small user base where I could experiment, even if something goes wrong or something breaks atleast I'm not losing a brand name before I started. And then we did not start with the name Grab On Rent then. We used a different alias to launch this website, proof it right and then move to the main domain. So that in case if things go bad, I can just leave that as a learning experiment and move on to the right one. This was back in August 2015. And we launched our website officially on fifth of September of 2015. So we took a good one month to learn from these mistakes, correct the wrongs that we had done, and then launch the final website.
Krishna Jonnakadla 43:22
So you sort of set up a dummy name. And then you knew that GrabOnRent would be the actual name.
Manish S Sugandhi 43:30
Actually, we had about five domain names that we had purchased. And then one day, we decided to sit down and shortlisted. So each one of us gave our priorities, four of them got eliminated. Everyone liked one. So that's GrabOnRent.
Krishna Jonnakadla 43:46
So first customer within 12-13 hours. That's amazing. And then from then on, you've spoken about the short term rentels. How long of a period was that you had the short term rentals that drove practically all of your business.
Manish S Sugandhi 44:03
So I think we did it for a good eight months from the all the way until June 2016 is when we ran our short term rentals, we continuously felt that it would be a category that would help us acquire the customer. Because people like to experiment with a short term rentals and before the move into a long term rentals. So we had our cohorts for short term and long term products, we saw people coming into the short term categories experimented and move into the long term categories.
Krishna Jonnakadla 44:31
So at that point in time, talk to us about what the unit economics look like.
Manish S Sugandhi 44:36
So we will unit economics negative then. Because the cost of logistics, acquiring a customer, servicing the customer was very high. We did not really have the ability. The only way we would have made money is if that customer comes back to us repeatedly because that's when there's no acquisition costs there is logistics cost which was factored in.
Krishna Jonnakadla 44:56
What sort of acquisition costs did you have back then. Were you aggressively advertising?
Manish S Sugandhi 45:01
So we were using the digital platforms using Google AdWords, pamphlet again was still a big thing for us, at least for the first one year because we were able to target specific community by community. After that it became too crowded to go for the pamphlet, because every year they would be like 600 pamphlets in the paper, and we just got lot in the noise. So we started using digital platforms, we scaled up our social media channels, identified customers would come back as repeat. So there was a time when we saw 80% conversion from short term to long term categories. People would come in, try something short term and then run something long term. Eventually, we realized that code is only 20%, where people are using short term for the benefits of short term, long term for the benefits of long term. Not a lot of people are making that switch over people who want to use long term are coming in with the confidence of using it because we had established a brand by then. Also for the short term categories, we were losing money, and we were literally running two supply chains, because short term categories had to fulfill within two hours because it was instant gratification, whereas for longer term, people are willing to wait for a couple of days for the products to arrive. So the cost just exploded. We were running two supply chains, and each of them was not benefiting the other in any way.
Krishna Jonnakadla 46:07
What did the revenue split look like at that point in time.
Manish S Sugandhi 46:10
So we had about 40% of our revenue coming from short term categories. 60% coming in from long term categories and, and the positive economics of the long term category were tremendeous. In a way, even if that was helping us the short term categories by itself was never going to be profitable as what we realized, there is not enough repeat for the product. So when I say adventure gear, people rent out adventure once in a year, maybe, there are very few people who go on hikes and trails every week and somebody who would do that would eventually buy the product. They would experimented once liked it, and then they used to go ahead and purchase it. So the repeat was not there. The repeat was not happening. We had shift over the long term that was not happening. That's when we decided and running a separate supply chain for it was important. And if you miss that two hours timelines, then people would bash on social media left, right and center, we were losing the brand value because of them. So even if we delivered. So I remember the New Year of 2015 and 16, we delivered close to 130 items in that 24 hours. It was like a record. We miss just one order that we could not deliver because it was way outside the city limits 129 users never gave us a positive feedback that one customer went all over the social media blitzkrieg about talking about how bad our service was. So these are some of the realization that we had that short term category, you need to have 100% fulfillment rate. More than that, if you miss it, then it was not making business sense for us in any of the ways.
Krishna Jonnakadla 47:39
Were you tracking, net promoter score at that point in time?
Manish S Sugandhi 47:42
We did track Net Promoter Score, and we used to do it for both the category short term and long term.
Krishna Jonnakadla 47:48
So in that, and at some point in time, you made a conscious decision to shut down short term. Do you ever shut down short term?
Manish S Sugandhi 47:57
I think we did. We scaled it down bits, bid by bid, bid by bid. Those products, which were ongoing products, the ones that we had in our own inventory, we use them for a bid, but eventually, one by one, we started cutting them down. And I think end of 2016 is when we altogether moved out of the short term categories. Customers would come back to us. So we do not want to leave them disappointed. So we had a network of vendors with whom we worked with some of them. So we used to pass on their contacts, because we knew the guys in which area who would furnish it. We had created hyper local network in Bangalore, dividing Bangalore into 10 classes. Each class has a primary, secondary tertiary supplier who can supply in a certain amount of time. So we used to identify the person. So even after we shut down almost for a year, because that's when at least people kept inquiring about it, we kept giving them the information for it.
Krishna Jonnakadla 48:51
So it's interesting, you should talk about eventually the cohort, sort of clearly separating itself, the short term people doing short term rentals and the long term as doing long term rentals. Normal experience in business will dictate that because you're not at a massive scale. And this is not a very widely established industry segment yet. So you would think people would come the ones that are unfamiliar with you, and do a short term, rental. And because the cost of trying there is low, and then once they have had a certain experience with you, then start taking a much bigger leap of faith, you know, in terms of doing something like that, did that transition from what I hear that transition almost never happened?
Manish S Sugandhi 49:39
That transition happened very strongly in the first few months, did not continue after that. So I also drew a leaf from my experience in Flipkart, where Flipkart used to sell books, and anticipated people would then go into transition into other categories of electronics or furniture or, anything else, because that's where the profit really lies. It happened for us for the initial few months. But then some people started perceiving GrabOnRent, as the suppliers of party items and adventure gear. Some people started perceiving them as a furniture rental company. We were literally playing with a dual face in the market, we are not able to establish our identity as one of these two and one of them is did not make either financial sense or was not scaling up. We experimented for a year, it's not like we gave up immediately in a month or so, should I do identify "repeat ata hai kya, kuch bhi repeat ata hai kya" is the some amount of traction we can gain. When none of that happened is when we had to take that call, we have to brand ourselves as a furniture leasing organization. Because if we do not, then we are going to lose out on that cluster of people because the competition then had raised a lot of money by then. And when we started, Furlenco and Rentomojo were very small. Like we eventually realized that organizations like these exists because they had raised about a couple of million and the RentoMojo was present only in Mumbai, then they shifted that base to Bangalore, Furlenco was in Bangalore, just had started picking up traction. So these were experiences that we gained after we started off, there was one company which eventually, I think they pivoted as a 'pay later', they were also one of the furniture rental companies, a couple of them shut down. So it was a turbulent time.
Krishna Jonnakadla 51:27
So if we were to characterize the first year or so was actually growth driven. And maybe validation was the primary motive, attraction and validation. It was neither profit, it was not necessarily profit, because it was all short term rental, the unit economics, didn't just makes sense. But it was about understanding the market. It was put you in some sense, it was the price, you paid to find out how the market work, established supply chain, you know, get the nuts and bolts and understanding of the nuts and bolts of the system. Then later on, have you ever been forced to sacrifice profit for growth or growth for profit?
Manish S Sugandhi 52:07
So I'll take the questions one by one. Sure. On the first thing, I would say in the first year of running grab on rent, we experimented so that our short term learnings can help us become much stronger in the long term play. On the second side in terms of growth and profit. I think these are very subjective ways of looking at it. Growth for certain organizations is also profitability because you have to hit a certain benchmark before you can hit profitability.
Krishna Jonnakadla 52:35
What, I mean by that is a very conscious decision where you would say, if you are serving four or five segments of customers, there is a certain profitability or a cost associated and you take a conscious call like what you did with the short term renters. Sayin that hey, this is not driving profitability. There is a certain amount of revenue that is coming out of it, that puts us in a certainl league. Now the second set is where, that is a very easy choice to make because your net economics are negative. But when you're serving four or five segments where there are certain degree of profitability and then do you say, hey, this is there is some dead weight here. If we actually ditch it, which is actually adding maybe 25%, lower the supply chain, these other segment can actually go much faster. There, you're actually sacrificing growth for profitability. Wouldn't you say?
Manish S Sugandhi 53:31
I would say the second case, you're actually sacrificing nothing for growth. And if you do not sacrifice or do not make those difficult choices, then in the long term, you wouldn't even turn profitable, because you would just be dragging along with the setbacks.
Krishna Jonnakadla 53:43
That's right. So I'm asking, Are you at that fork yet? Have you been in that situation where you had to maybe start doing something which had maybe some degree of profitability, but not a whole lot that it would drag down the other segments that you were serving?
Manish S Sugandhi 53:57
So we used to do one thing over when when specifically asked something that we used to do earlier, there were two things that we changed in the first one year of our growth, one and a half year of growth, the first thing was we shut down certain categories, because they wouldn't make a lot of sense, because these were categories, which are driving growth for us, but they were not driving profitability. I would say the shorter term rentals for us, for example the party items again. Also, it was making the company dual faced, as I mentioned, because I which, even though it was driving growth, for me, I was not able to position myself in the right.
Krishna Jonnakadla 54:29
So there was also an identity crisis.
Manish S Sugandhi 54:31
Identity crisis I would say, because if I had not shut it down, then I would have possibly been running it today, revenues would have been coming, but in the longer runalso it would have not given profitability. The second thing that we did as a conscious choice was we used to take a lot of orders over the phone call as well, because we were listed on just dial, people used to call us because you're competing with some of the local players as well, they would call us and they would give us the orders, it was a very cost intensive way of placing orders. And once our website and our entire tech platforms became solid, that's when we decided even though that may lead to about a 10 15% drop in the revenues in the short term on new orders in the short term. In the longer term, if you do not let customers adopt to how to use this platform, they would never learn it. So let's take that conscious call and phase out taking calls. And we decided that this is the last day on which will do it. And after we did not take orders on the phone call, we just stopped it
Krishna Jonnakadla 55:28
In India, the last mile is something that we all have very little control over. The sort of people that work in in that last mile, let's say people who tell about people who drive the trucks, people who have the touchpoint to the customer saying that yes, I saw this, the people that are clicking the pictures. And the Indian consumer today is no longer tolerant of poor experiences. At one point in time, there was a situation where we would say okay, I'm, I'm possibly paying less for this, I will possibly put up with a lesser level of service. But it's no longer the case. So this last mile, given that it is possibly all geek driven, contractual driven, how are you controlling perception about the brand and ensuring quality in the last month.
Manish S Sugandhi 56:20
I'll borrow a line from somebody who's been very influential for me. There's the CEO of a company in US called Zappos. Tony Shay, he had written a book called Delivering Happiness, which was the story of Zappos. In which he very nicely described that your brand and your company culture are one and the same, they are two sides of the same coin. If you are unable to create a good culture internally, you will never be able to create that brand value for the customer. This is one of those first books I had read. I mean, everybody reads zero to one when they start off. And then this was just a book that somebody hand over and read this, it will be interesting for your field. And we used to have contractual guys with us. But we realize these guys will never take ownership. Like tomorrow if something happened, I like sir, it happened, it happened, I cannot do anything. Because I wish we set up some ground rules for ourselves. A lot of people that have seen leave good companies is because they have been slogging their ass off in that organization for about two years, three years. And then when there's a need for a hire, or a person to drive change, they get somebody from outside to drive that change, where people feel really disheartened because of it that I have given everything to this organization, I'm willing to give more then why am I not the right person in that position? Because I wish we decided we are going to get people train them and then move them up the ladder as a part of the company organization. Now, how does that come to your first question the last mile, people who joined us as delivery boys back in 2015, today, are managers with the organization. today, are senior managers with the organization. They have a career path. So a person who joins us a delivery guy sees himself in that path that today I'm delivering but tomorrow I'll be an coordinator then I'll become a manager. And people have seen that transition eight, nine promotions in the last five years, four years within their own hierarchy, that they feel that this is why I should take ownership of things.
Krishna Jonnakadla 58:19
So are you then hiring fundamentally different people, then with a certain level of education, if they have to be able to move up?
Manish S Sugandhi 58:27
People, sometimes you would see people are engineers, people are very well educated doing the deliveries on Zomato or on Swiggy even today. It's not that these people want to do it. But because they do not have a defined career path, they're not able to get the kind of jobs that they wanted. It's only about identifying those people and retaining them, which iscritical in sort of about 10 people who joined us until January 2016 our organization still has nine of them. Because these people are the ones who still drive the change. These people the best part is they have seen what works, what doesn't, say, somebody comes up with a great idea that let's do this, 95% of the times we have tried that before and there was some learning. But if somebody wants to try it again, because the scenarios has changed, we give them that learning and tell from here now build on with your idea.
Krishna Jonnakadla 59:17
So I think that gives us a good segue into the culture part of it. I'm a big believer in the fact that the first founding team members set the tone for the culture that actually exists in the company, it is not a very widely understood concept in India. And it is slowly dawning on people that if you have to have keep workforces together, you actually have to retain them longer, which means you need to have happiness, that also means that you actually have to, have a culture. Sometimes if you do not have a culture, the worst possible things out of the team actually rears its head, which is actually not good. And I've seen both sides of the coin, you know, amazing working cultures. And you know, the other side of it as well. What sort of culture do you embrace and what is it like to be on Grab on.
Manish S Sugandhi 1:00:05
For me something that I've tried to put in practice as well as first I like to keep things very transparent. Some founder shy from the financials internally, they do not want to divulge the information. They do not want to give away information when times are good, or when possibly some people would give out information when times are great. But when times are not so good that they try to hold back on information being scared that it will affect people negatively. So transparency, I'll give you a little more detail on what I mean by transparency. And second thing is ownership. So when I speak about transparency from the first week of when we started with the first employee in, we used to have our all hands sessions every Friday, five o'clock to six o'clock was a set time. Eventually, once a team size grew to 15 18 20 people, we wanted to ensure everyone is aware of what's happening in the organization good or bad, because either somebody would have heard about it, they have that contacts. That's how , we were facing a lot of problems in our customer support, because none of us had the experience. We hired somebody but he was unable to do it. He was like I need somebody who can help me on these things. The other guy said, I know somebody had big basket who heads the customer support, we can go and have a chat with him tomorrow. We got connections of connections because of which somebody would say that our contact and ABC plays that if that will help us market things better. This happens even today, four years into the organization every Friday, five to six is set for all hands, people from all the city team should join in, operations would go for on a halt for some time. But we want to ensure that everyone is aware of what is good and what is bad. There was a time that we face that the money was drying, we were facing a difficult scenario. But we kept people updated that this is the scenario these are the effort that we're bringing in what it's going to take about three to four months time. So people who are okay, they're like in case if you want to hold back salaries, if you want to give only half the salaries for few months we are okay because after that once times get better, you can pass on the rest of the salary. So just keeping things transparent, help people reciprocated from their side as well that they felt that they were a part of the organization. Then the second thing which I talked about is ownership. One of the things I hate using in the organization is the word employees. You know, like even today, if I'm referring to anybody in the organization, I would refer to them as a team member, or a teammate, I would never refer to somebody in the organization as an employee, because I just hate that word. And that is something that has passed on from people to people. So even now, when our team leads speak to the delivery executives that do not treat them as employees, they treat them as members of the team who are essential for the growth. And then they take that ownership on themselves. If I have to finish three things, I'm going to finish it with impeccable, I'm going to finish impeccably without anybody questioning either my ethics on my ability to do it. If I'm unable to do it, I'm going to reach out to somebody who can help me do it better not just to feel at it again and again, without improving myself.
Krishna Jonnakadla 1:03:03
How big is the GrabOnRent organization today? In terms of number of team members.
Manish S Sugandhi 1:03:08
Right now we would be about 140 people across locations.
Krishna Jonnakadla 1:03:12
So are you feeling any growth pangs now, because it is up to a certain point. A lot of these concepts allow you some room to work with each other. As teams are closer things are more cohesive, it's easier. But when you start scaling, and when you go multi city and when you start serving vastly different consumer segments is when a different set of strategies come and come true. Are you facing any growth pangs yet?
Manish S Sugandhi 1:03:42
So we did face them about a year back? Speaking with some of the mentors that we were in touch with Phanindra Sama, from Red Bus had his mentor. So there we are lucky to be in touch with few good mentors in our lifetime. People whom we could reach out to over a phone ask them the things, people who are in the position that we were in at some point or the other to ask them that we are facing this issue. What do you what would you suggest we do at this point of time. There was a good network of peers that we had. Every month we have a fireside chat with some person in the industry, who's been there, done that kind of a person, like Ankit Nagori had came in, we had founders of Big Basket come and speak to the guys and we had our investors, somebody was a Chief Business Officer Mr Anand from pepper fry, who build a similar logistically difficult business in the organization. These are the guys who came in and started giving us information. But that was not just sufficient. We needed people because it was not a 20 25 member organization that one or two people could just lead it. That's where the operating council came into being. Heads of all the departments, who are the ones who knows everything in extreme granularity so that they are able to update and pass on the information in the correct way to their respective teams. With them, we invested in terms of identifying what are the extra training that they would need, what is the help they would need, connected with the people have done so that they can learn it. Then we hired people in certain positions where we realized experience was critical. Like especially with something like customer support. We had, Leonardo moved in with about 12 years of experience from Concentrix. So we also hired people in certain critical areas where knowledge of let's say furniture was very important. Somebody who's worked with furniture granularly for last 10 years, somebody who's worked at customer support, because these people brought in experience that other people could learn and from there was a lot of peer learning. Then there was a Stanford Seed Program that is run, where they choose in about 30 startups every year, that they help the leadership team groom, So we applied for it, got in, we train under the Stanford seed program. So that also gave a lot of learning.
Krishna Jonnakadla 1:06:03
So is that a residential program?
Manish S Sugandhi 1:06:04
It is more like they do it as a residential as well as they work with the organization. So it's a mix program that happens. So these were some of the initiatives plus the operating council meetings, then started with the intention, that people who are driving the organization need to know what the other dependencies are on them, and keep things up to date. It is a model that we again, borrowed from three, four different companies made our own model and identified what works for us.
Krishna Jonnakadla 1:06:38
Fantastic. I think you hit a lot of notes in terms of learning from peers, establishing a good mentor network, having them because I'm of the belief that you cannot be the source of all learning and knowledge to your employees. Even if you are, even if you did know the right thing, many times it makes sense just from hearing someone else's, the amount of credibility that it carries, is just turns out to be immense. So I think that's amazing. So we'll do one more question on the market. In terms of the market, how big is the market right now? And where are you at in terms of market share? Is some ballpark numbers?
Manish S Sugandhi 1:07:19
See, I do not like these numbers that run in billions because they are just made up now.
Krishna Jonnakadla 1:07:25
Whatever makes sense to you. Because nobody wants made up numbers. There's no point in throwing a 10 million number out there and then saying, okay, we'll have 30% 40%, what I'm trying to get out is what sort of a market force are you?and how are you seeing the market?
Manish S Sugandhi 1:07:41
Right now the market size with all the players combined in the market, on an annual basis would be close to about $15-$18 million right now. And that I think represents about 2% of the total market that would rent
Krishna Jonnakadla 1:08:00
Possible market that is addressable. Only $15-$18 million, is address is 2% of the addressable market, overall total addresses.
Manish S Sugandhi 1:08:08
I would say, if not today, at least over the next four or five years, the market is going to grow into $500-$600 million market. I'm talking in terms of the net revenues that will be brought in by all the players together. Good part about having competitors in this segment is you need to educate the customer. So as much as I would like to frown upon them. Without them, none of us would be or rather without that collaborative education to the customer, none of us would be successful.
Krishna Jonnakadla 1:08:36
So then let's talk about in terms of the low hanging fruit as a as I would call it, possibly grab on rent and the others have possibly hit that mark now, with all the usual channels tricks of the trade that are possible. Now, where does the next growth come from? When do we start seeing the residents who are living in a city will that adoption ever happened? And is that why you see that addressable market being so large, so if the addressable market is so large, what are those are unaddressed segments or use cases that you haven't addressed yet or none of you are addressing yet and that you will start addressing.
Manish S Sugandhi 1:09:15
So throwing in some stats in four metros, or four cities that we talk about Hyderabad, Bangalore, Mumbai and NCR region, close to 50% of the flats on an average in each city are rented out. So if I have to talk about the residents, I think that is going to come at a much later phase. It's these rental properties that people would want to rent the production. And if I'm talking about 50% of close to what about a crore households in these places, I'm talking about 50 lakhs households, right now, the overall market capture would be close to about one lakh.
Krishna Jonnakadla 1:09:52
What are the barriers to capturing that? Is it sheer awareness?
Manish S Sugandhi 1:09:57
If you got in the market and still talk to people and ask them, do you know platforms where you can rent it. Only two or three out of the time, people will be aware that they can rent products. Once they start getting used to the concept of rentals, that is when they would start using it as a concept. So I would say primary reason why the market is still slow is because people are unaware of rental as a concept yet. Now with some of the things working in our favor in terms of still a large number of people moving into the cities, the urbanization has been at an all time high. More than this, people are more than happy to shift jobs every two years. Earlier, a two year job shifter would be called a jumper, it's no longer the case. If you're able to build the organization for two years, scale it up people are very happy with you. And it's it's a cultural change in a lot of companies that has crept in, because of which people will again rent. So I don't need people to move across cities. As I told you earlier as well, I need people or we need people who are shifting jobs moving across, want to experiment, progressing in life will keep renting and look at it like a school. Somebody who gets into the first grade in the school will stay there till his 10th grade or even if he shifts schools, he is going to complete his education specially the way system in India is very few people go private education. Most of them would stay in the schooling system for 10 years at least. I would say now people have just started joining the first and the second grade. Even if they shift schools, which I'm saying shift platforms for rentals, they're still going to rent for a long duration. Now there was a platform that came up Zefo, for some time back where people felt it was great to just buy products and rent it and give it back to them after a certain period. But that did not work out as a concept, which they raised a substantial amount of funding and it is close to 50-55 million. And even after that they were unable to prove the market, they were unable to prove the concept and eventually got acquired by quicker about two three months back. So that again, further puts the onus on us to ensure that people would keep renting the products and together the industry I think has growing at 100% year on year for the last two three years and will continue to grow in the space for at least four or five years from here.
Krishna Jonnakadla 1:12:06
So if we were to look at analogous examples from let's say, other industries, we are seeing the likes of GM, Toyota introduce car subscription plan, something that would be unthinkable at one point in time, given how most of these automobile supply chains are geared towards actually selling the car versus actually selling a subscription to a car. It's a terrific hack, because in fact, it only puts the supply chain into higher gear because now you're turning more number of cars. Do you see something similar concept coming in that would actually help you make a rental look like a subscription and therefore change the minds of some of these consumers the other 99 lakh consumers in the one Crore.
Nida Sahar 1:12:55
I think definitely even the way we pitch ourselves right now it's just a furniture subscription at the end of the day. Subscribe it for as long as you want to we provide free relocation, free service, you do not have the hassles of maintaining the product, specially if you are living with friends, then nobody wants to take the liability. Its a great value add for all of you, none of you have to make the payments. Because you mentioned automobiles because I'm aware of this company called a Ather Energy, which are doing e bikes
Krishna Jonnakadla 1:13:23
I actually own one.
Manish S Sugandhi 1:13:25
So you might be aware that they also have a leasing plan. And about 16-17% of their entire sales that happened is on lease basis.
Krishna Jonnakadla 1:13:34
The slight contrast here, between the lease and the subscription, is in the subscription that GM, Toyato all of these are putting out, you actually get a new vehicle at the end of year one. The vehicle changes completely. So that in a lease option you actually stick with that vehicle or that product. So for a Ather, if you're leasing, instead of buying outright, you actually leasing and whatever the term of the lease at the end of that term that goes back. But this is sort of like office 365, whereby as long as you keep the subscription alive, whenever a new model comes out, you actually get the new model.
Manish S Sugandhi 1:14:14
So for few products, the subscription, then in your definition of subscription for certain product subscription makes an absolute sense.
Krishna Jonnakadla 1:14:21
No, what I mean to ask is, if you position this in that way, will some people change their mind? Who are possibly fence sitters, maybe not look at it as a rental, but as a way of owning something and also an ability presenting a new option completely altogether? Would that bring in new swathes of customers is what I'm asking.
Manish S Sugandhi 1:14:43
So the more older segments of our group already look at it that way. A couple which is married, would not possibly rent a bed, but there will be more than happy to rent a sofa set, because they want a new look in the living room every year or every one and a half year. And if somebody's willing to give them that, if I go online and try and buy a sofa on Pepperfry it is going to cost me around 70-80 K. On the other hand, if I'm able to rent a sofa for about 1000-1500 bucks a month and use it for a year, and then just swap it for a new design that works very well for me. And this is something that our customers do. And that is where some of the services that we added on in terms of free swapping free location came into being..
Krishna Jonnakadla 1:15:25
So let's talk about Manish little bit. what's your personal journey been? You mentioned that you went to Guwahati? Did you always want to be an entrepreneur? Or did it happen along the way, why entrepreneur?
Manish S Sugandhi 1:15:39
One of the things that I hate doing is I hate doing things which are already there. Monotony. I'm scared of monotony. I want to keep trying and doing something. So as long as I'm able to keep experimenting, keep doing something you will be more than happy. My that eight nine months stint at Flipkart taught me this that no matter how good a role I am in at an organization that I do not feel or do not have an ownership feeling about it. After a certain point of time, I'll just get bored about it. To say that even with grab on rent, and I would say they were days when I felt bored about doing something. But then in the larger picture, or in the larger sense of it, the last four years have been tremendous. In terms of amount of learning I had, the amount of people I could meet, more than that these experiences I do not think I would have been able to get anywhere else. So irrespective of where the next set of our investments in terms of what we do next how we do next. Every day in the morning, when you wake up, you've got that enthusiasm of getting up identifying what is it that people need to be doing? What is it that you are doing right? Or you are doing wrong? Things which you're doing wrong? How do you correct them? The ones which people are doing right? How do you encourage them to do it? What kind of culture would you want? What kind of people do you want to work with? What works? What doesn't work? How do you keep yourself on the edge of the biggest challange. Its like a T 20 match every single day, no matter if I hit a century yesterday, or if I took five wickets yesterday I need to come back and perform again. And if I do not perform for a day or two, I'm going to get dropped from the team. So it is like I have to be at the helm of it. And I think a great, great amount of support that came in other than the family was definitely from my co founders. Okay, there would be days that I would be down I will like, why is this happening? Why is that happening? And then they would like let's get together. Let's talk about it. Let's put things into action. Let's get the wheel rolling. I have been days and I've been sad and my teammates came and like, Manish you should do this. Yeah, you're doing this, just keep doing it. It's the way to go about it. And when that comes from your team, people that you are motivated want up one point of time they giving it back to you, the amount of hours or the goosebumps that it gives you is just the thing to live for, for an entrepreneur.
Krishna Jonnakadla 1:17:59
Amazing. Have you had a near death moment for the company in its journey since last four years?
Manish S Sugandhi 1:18:05
I think Yes, we did. And one of the things that I was telling you about there was a time when we had to ask people to go we had to cut the salaries. So it was like in first year of our existence.
Krishna Jonnakadla 1:18:16
How tough was it taking those decisions.
Manish S Sugandhi 1:18:19
So we were eight months into the company. Whatever savings we had, had exhausted it, maxed out our credit cards, taken loans from friends and families. We did everything and then we were like now we do not have the money to run ourselves for two months, which is what the VCs are saying they'll need it because there's a due diligence process. It was something for the first time for us we had never done it before. We thought people are saying take the money, we'll get it in one week. But no, it's like there's a due diligence process, you need to submit certain number of documents and their own set of questions is going on for three months. What do we do now.
Krishna Jonnakadla 1:18:53
So the money did come in after two months.
Manish S Sugandhi 1:18:55
So for those two months, at least, we told our guys see we are in a bad position right now we told them frankly, very difficult position, we know all of you have a little bit of your commitments, however have commitments, EMI's we will try and support you as much as possible. But otherwise, we'll be only able to give you x amount of money for the next two months. Once we get the funding or if we get the funding, we are going to pay the rest of the thing or we might just not survive this. They said that if you have come this far, and we have got the traction and the term sheets assignment, I think we should get the money. And then they said that, let's do it together. What happens is what will identify. Then eventually, once we got into financial contracts with people, identify that things had to be done in a certain way. And we did not do them in that way. Because again, these were mistakes, or these were learnings for us that happened over the next two three years, some of the people that we spoke to always kept telling that in a market like this, when there's a downtime in the VC market 60-70% of the company will just shut down and go for the easier way out. But if you have to survive and come out of it strong, you need to have that will power to make it run. And sometimes that will require unconventional ways. If you are unwilling to fight with those unconventional ways, and you're never going to make it. So our VCs have been very positive about the way they look at us. Also because unicorn by itself as an organization had invest in pre series, a series a kind of funding, they know the problems Mr Anil Joshi has been with the startups for the last 20 years. So he knows where companies work, companies fail, things work out or they don't. They generally do Series B or Series C, lead those rounds. But they came in with us at our pre series A level because they felt that we love the team, they like the organization, and they were always clear, we're going to keep supporting you. So they support, their insights, their mentor network helped us.
Krishna Jonnakadla 1:20:51
So what's in store for Manish and GrabOnRent in next few years, where will we see both?
Manish S Sugandhi 1:20:57
As I told you, the dots always connect backwards, at least in terms of plans, I would say we like to scale it up to a few more cities, maybe explore a couple of locations outside India, where rentals might work. Where the demand is there and supply isn't, go and create a supply for fulfilling that demand. In India, we would want to increase, we will increase our market share. But more than we would like people to adopt or will push for people to adopt rental, overcome the challenges that have in general plague this industry. And that's it. I think we will just keep doing the good work that we've been doing so far.
Krishna Jonnakadla 1:21:35
Fabulous. Manish, it's been a pleasure chatting with you. Thank you for taking the time to talk to us at Maharajas of Scale. I think there are tons of take aways, we have right from validation to understanding the customer market, to appear network, bringing in established entrepreneurs, to have fireside chats with your team and dealing with near death moments. Gosh, how old are you?
Manish S Sugandhi 1:21:59
Twenty Seven right now.
Krishna Jonnakadla 1:22:02
I find it hard to believe, feels like you had a decade or two experience in. There they always say a year startup experience is equal to seven or eight years somewhere else.
Manish S Sugandhi 1:22:12
I only wish I do not old that quickly.
Krishna Jonnakadla 1:22:16
So it's been a pleasure having you and we wish you the very best and I'm quite certain that will see grab on rent and change the paradigm in several countries across the world and in India.
Manish S Sugandhi 1:22:26
And thank you so much absolute pleasure being a part of Maharajas of Scale. And we wish you luck with your next set of interviews as well.
Krishna Jonnakadla 1:22:34
Thank you Manish.
Nida Sahar 1:22:36
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