As per a recent Entrackr report, Indian startups saw over 250 acquisitions in 2021.

Edtech startups like Byju’s, Unacademy, and upGrad have been in the headlines for their acquisition spree, and also startups in the e-commerce roll up space such as Mensa Brands, GlobalBees, 10club, Upscalio, and fitness tech platform Cultfit (Curefit) also took over smaller brands, recording the highest number of acquisitions last year.

With so much going on around acquisitions, our guest Rohit Anand, Founder, 1digitalstack.ai shares his experience of getting his first venture acquired.

During the episode, Rohit talks about bringing in a third-party consultant to assist with the acquisition, his second stint at entrepreneurship, and much more.

Notes –

02:12 – Starting his first entrepreneurial venture in 1999

06:34 – “Importance of going after a problem where you have a natural advantage.”

11:39 – What did Value Edge work upon?

12:57 – Value Edge’s ARR at the time of Exit

13:39 – Thought process behind the Exit

18:46 – Process of identifying the right M&A Advisor and the help an entrepreneur can expect

24:00 – Maintaining balance during the stress while acquisition

28:57 – Deciding to start 1digitalstack.ai

32:31 – Current scale in terms of ARR & top clients

35:17 – Taking investor money during his 2nd entrepreneurial stint

38:10 – Future plans for 1digitalstack.ai (in terms of ARR & Growth drivers)

42:15 – Vision and Ambition of building a large company

46:19 – Current practices: Same & Distinct from Value Edge

50:32 – His approach towards investing

 

Read the full transcript here:

Rohit 0:00

I recall we identified something like 40 possible acquirers and given that we were in the life sciences domain, analytics domain, I mean that 40 is the reasonable number. And then they ran the sort of teaser. And I remember vaguely that it was something like about 12,13 companies who were interested post teaser, where then they send the NDA on our behalf, sign the NDA and then share the information memorandum. So, information memorandum was seen by 12,13 out of a pool of 40. And then they shortlisted that to maybe five odd companies that wanted to get into a more serious Deep Dive. So the whole process, running this process, putting timelines to possible acquirers because everybody wants to take their own time. And you don’t have that time because you’re also wanting to run a process.

 

And then if you’re putting one against the other, you want to make sure that, and another person says, Oh, I’ll get back to you after two months, and one person is getting back to you with an offer next week. Now, what do you do? How will you compare, you will have to wait than two months for the next offer, you just can’t, you have to tell them, listen, we have 10 days of time you put in an offer, either you are in or you’re not in. So that can be best told by a third party. Because you’re always a bit nervous, you were selling your first company, you’re talking to somebody in the transaction team, or the M&A team of a large company.

 

So there’s no emotion. And I think that makes it so much easier. Particularly I think for first time entrepreneurs getting the right kind of professional support is something that I would absolutely advise

 

Siddhartha 2:15

Dear listeners, this is your host Siddharth Ahluwalia, founder of 100x entrepreneur podcast which I started along with my wife, Nansi. Before we begin, I would like to thank our sponsors Prime Venture Partners. Prime is the first institutional investor in the category creating tech startups like Mygate, Niyo, Dozee, Planet Spark. Prime is now investing out of its fourth Fund, which is more than 100 million dollars. Today, I have with me, Amit Somani, Managing Partner Prime Ventures. Amit, I would like to know how you evaluate founders, and what are the different evaluation criteria like?

 

Amit 2:52

Siddhartha, at Prime we look for what we call category creating or category defining startups, we’re really looking for what we see is a startup 10x better than the current state of the art. It could be a product, it could be technology, it could be go-to-market, it could be a business model, whatever. So, that is one core criteria. As for the founders themselves, we’re really looking for founders that have very high learning agility or a very high learning quotient. You know why that is important Siddhartha, is as you’re going through your seed to pre series A to series A and sort of journey to build your company to get product market fit to accelerate it, you have to make a lot of trade offs and a lot of decisions. So we’re really looking for founders that have very high learning agility.

 

Siddhartha 03:39

Thank you Amit. So listeners, let’s dive straight into this week’s podcast. Today I have with me Rohit Anand, founder of 1Digitastack, which is an e-commerce analytics company serving in many countries and has the top e-commerce enterprises and brands as its customers. Rohit is a serial entrepreneur and a very dear friend of mine. I have known Rohit since the last five years and the relationship has grown tremendously. He’s an entrepreneur who has supported tremendous other entrepreneurs. And today, I’m very glad to share his journey, right from the point of failures he faced in 1999 as an entrepreneur, the way he restarted back again after 10 years and today how the ecosystem is shaping up. Rohit, welcome to the 100x Entrepreneur podcast.

 

Rohit 04:29

Hey, thanks a lot Siddhartha. I’m delighted to be here and honored. You rightly mentioned that our relationship has grown and I’ve really enjoyed the relationship as well. As a founder and as an investor, there are so many touch points with you. And thanks a lot for your confidence in me and also your confidence in 1Digitastack. That always means a lot to me and a lot to the team.

 

Siddhartha 04:58

Rohit, I’m really grateful that the 100x Entrepreneur fund could be part of 1Digitastack’s journey. And I want to share today with entrepreneurs a very different kind of entrepreneurial path, it’s not straight to unicorn. But it’s a very meaningful path. And, as we discussed, not every path needs to become a rocket ship, there are paths in entrepreneurial journeys which can give immense satisfaction, immense credibility in the ecosystem. And the entrepreneur has the right to choose what kind of life he wants to build, he doesn’t need to be in a rush to prove to his team, his family, even himself or his investors that the unicorn is the final outcome.

 

So, we would love to start, going two decades back, what made you start your first entrepreneurial venture in 1999. And if you can also share your family background, your upbringing, and what made you, come to a point in 1999, that you finally took the plunge of entrepreneurship.

 

Rohit 06:03

In my case, we can talk about decades, because unlike many of the entrepreneurs who are in their 20s, I’m going to be 52 this year, so I’m in my 50s so we can actually go back 20 years right now. I was born in Delhi, grew up in Delhi, and did my schooling and college here. I helped my mom in the early days do her own business. So it was always something that was around the house sort of course, in those days, we never talked about scale or size. And it was a one person show, but it was always these kinds of experiences, I think early days of one’s life do stay with you. And you’re right, they help you to kind of get that business muscle or some kind of business thinking,

 

And that was always there. And even when I went to IMT, in 1991 to 1993, I had the idea that at some point of time, I will do something on my own. But that time wasn’t the right time for me to get out and do something right after the MBA, those were the days as well.

And I decided to go for a corporate job with Ranbaxy. It was a campus placement in 1993 but a few years later, it was 1999 and I decided to take the plunge, put in my savings of around 20-25 lakhs, that was a huge amount in those days, and start something which was a woman’s community portal, the whole revenue model was built on advertising and things like that very similar to mom school, or Sheroes or some of the portals that are there, but much ahead of its time, remember this was internet 1.0.

 

And I started this in 1999. and one and a half years into it, kind of realize that the revenues didn’t happen the way, it was planned in 2000 there was if you remember the dot com crash as well the first one, and suddenly the funding dried up and it was difficult to get to and in those days, of course, the funding environment was also very different. And there was no option but to close, right and recalibrate my life. So, that was my journey. There were a lot of learnings from that experience. I also decided to recast my life, decided that I was still young enough I was not that old I was 30, had some years of experience in working in a large corporate and I took this failure well, and I applied to INSEAD, went and did an MBA in France in Fontainebleau, post MBA got a job with pharma because I had worked previously with Ranbaxy in pharma with Amgen was in Switzerland, beautiful country idyllic Absolutely. Then went on to Sanofi in Paris, again, phenomenal location, great place, large corporate, etc, etc.

 

But then seven, eight years later, that bug always remained with me, that unfinished story that always remained with me. And I decided to take the plunge again and do a U turn, sort of and then come back to India. And I started my entrepreneurial journey part two with Value Edge in 2008.

 

Siddhartha 10:01

If you can share the first couple of years of ValueEdge, how did you identify the problem, what you wanted to solve? How did you get to reach out to those customers, because I remember those customers were not Indian customers, they were European pharmacies that you brought in. And how did you scale Value Edge till the point of exit?

 

Rohit 10:23

Yeah, when I came back I wanted to do something. And there were also some forks in the road. I could have done two or three very different things. There was an idea of building a business related to IP, because part of my extended family is an IP in the IP domain. Something could also be in the education space as I was an INSEAD alum and so on. But I really went after pharma, because I think it’s important to go after the space, it could be a niche space. But I think it’s important to go after the space where you have some natural advantage. And that, I think, is incredibly important in any business, any opportunity.

 

So that’s how I thought of pharma analytics as a space. And I decided to take the plunge. And sometimes you just have to take the plunge and tell yourself that, if it doesn’t work, you can go back to a job, maybe it would be difficult to go back to Europe. But you can always go back to your job. And at least give yourself a year, a year and a half to do this properly. For me, it was really very simple. I had worked in Europe, I had built some, I wouldn’t say reputation, but at least I had some goodwill and some good relationships in Europe, where I worked with my employers, and with former colleagues and so on. And I decided to take a flight to Switzerland and just go out there and talk.

 

And then there’s also I think, somewhere destiny, somewhere luck, as well. My previous employer, Amgen, was looking for some competitive intelligence in the biosimilar space and so on, and they gave the first assignment and earned in Swiss francs. So that’s how the company started. And sometimes you just have to go out there and do it, you don’t need a business plan, you don’t need formal org structure, and this and that, etc. I just had a handful of people, I sat in a friend’s office, they weren’t shared offices, any of that those days. And I just got going. And I think one of the things that’s always important is to have that bias for action. And do it rather than just talk about it.

 

And then it just happened. And the journey of Value Edge was like eight heads in a row. I mean you toss a coin, and you get eight heads in a row, it was something like that. And I went sometime to Europe, and then a former boss said, okay, it was ​​Roche, and he said, stop so and so. They were saying, Why should we outsource? We do everything in house. There is no need for us to outsource. And then they had some financial debacle. And then the CFO changed their vision and their thought process changed internally. They said, Oh, we met up with you. Why don’t you pitch for this RFP, they gave us one RFP, we grabbed it. I learned later that TCS and other companies were also offered the same RFP. I mean, they went to eight Indian vendors, but they know the kind of energy and intensity that we put into that RFP. And when they saw what we had sent as a reply, they said, who are you? Why don’t you come over to Switzerland and discuss with us. Long story short, in the short journey of Value Edge of seven, eight years, Roche became a $2 million business. And in a company, which eventually had a business size of around six and a half $7 million. And this was our game changer.

 

So, it was destiny, but it was also about getting really high quality people in the company. I always believe that these are all knowledge businesses, and a knowledge based business can only be built by having the best of people. And that’s something that I’ve always aspired to do, to get. So I got in two great co-founders, who were highly skilled, one of them was from IIT Kharagpur and the other one was from IIT Kanpur. Building that team meant that there was excellence, there was consistency in our delivery. And clients just depended on us and the whole reputation grew a lot internally. And we were able to mine our clients deep and then of course, one thing led to another and the business really grew.

 

Siddhartha 15:03

So ValueEdge was an analytics business, giving competitive intelligence to pharma companies?

 

Rohit 15:11

Competitive intelligence, forecasting, data analytics. It was a mixed bag between all of those. We also set up a small technology team, we built a small cloud based intelligence product as well. At the time of exit, we had a couple of million dollar plus clients, there was Rosh, there was Mark, there was buyer, blue chip clients. And it was about 150 people with offices in the US, in Europe, in Frankfurt and in Switzerland. So it was substantial, a lot of things had been accomplished, all bootstrapped. I had a dominant share in the company. But it was also a reasonably generous equity ESOP that was given out to attract some of the best talent. We had a fantastic campus recruiting that was happening at BITS Pilani, with pharma, and other good campuses. And it was a well run company from the inside.

 

Siddhartha 16:20

So in which year you exited, and what was the ARR when you sold the company?

 

Rohit 16:29

It was a services business. So, it was around six and a half million. I started the company in 2008. I had exited in 2016, via sale to WNS. But it was while I had sold in 2016, I was required to be with them till 2019. So, my full exit happened effectively in 2019.

 

Siddhartha 16:58

And what was the thought process behind the exit? Was there a parallel plan that you could have built from six and a half million, the first section half million is very tough, that you could have compounded even 2x annually and reached, let’s say, $30 to $40 million in a few years?

 

Rohit 17:17

You’re right. I mean, there could have been, and there’s always a fork in the road where you say that yes, you could have taken the company, maybe to $30 to $40 million. But I think in our mind, it was sort of clear that going more than $10 million would need a different approach, where we would need to build up a sales force in the US, a sales force in Europe, we would need to raise capital. So it would be a different type of a game, it would be a game where we will raise capital, dilute, then when we get investors, we are also driven by their priorities, by their growth rate by their expectations, managing all of them, then building a sales force in Europe and the US then growing that.

 

My co-founders also had been around for about seven, eight years in the journey. They were also like me and saying, okay, we haven’t seen any exit, we don’t really know, everybody was getting a bit restless, they also wanted to see some money, and we thought, okay, let’s explore, looking at what an exit could look like, by our sale, And then see if we get a good deal. Maybe we do this now. Because the other thing is that at the end of the day, it’s not only about the absolute value of a company, it’s about what is your share at the end of the day at the time of exit, and sometimes even when you grow bigger, but you have multiple dilutions, you might not be having that kind of share as as you had today. And so we said, look, let’s explore that.

 

But one thing we were very clear about was that if you’re going to explore exit, the only way to do it is to do it well, anything in life, the only thing to do is to do it well, because you will never know whether it was the idea or it was the execution. So we thought that if you have to do it, well, I was the founder who was totally focused on the exit. Let me tell you that an exit is at least three times more work and effort than a fundraise. If you think a fundraise is highly energetic and takes a lot, it is very demanding. And I mean, an exit is at least three times, because you’re out of that you’re encashed out and it’s like as it says in Latin, It’s the buyers problem after that. So we thought the only way to do it is to do it well. We went through the whole beauty contest, we saw many different possible partners who can help us out here, eventually we settled for Grant Thornton.

 

We wanted to go, we were very clear that we didn’t want to go with an individual

boutique or a one man show we were in touch with some of those. It might have cost us less

but then, if we were talking to enterprise clients, then we knew that there was no way that we could sort of, get that kind of parity until we were well represented. And we had to be represented by someone senior at a well known firm. So we took our time to finalize some partner and we eventually went with Grant Thornton, they have a nice M&A team.

 

And then they ran the whole process, which was sending a teaser and then getting interest, and then sharing the material, and then the whole idea was to generate as many competitive offers as possible. But one more thing, what is important, I think, when we speak of exit, is that, for us it was yes, the valuation was important. And obviously, that’s the main element, but also, it was about getting the right terms, structuring it well, also ensuring that there are no outs. So if you’re not paid the whole amount upfront, then obviously there is a risk that you might not get paid, or you might get partly paid, or there are some outs in some way.

 

So you had to make sure that, from a legal perspective, the outs are minimized, there is no clawback that sometimes could happen, and things like that. So that’s when we also got a large law firm, we got Khaitan to represent us out there in this way. So all in all, it was a lot of effort, the whole thing took six, seven months, eight months, I think. But yeah, by 2019, we had the exit, it was a $20 million exit with 17.5 million cash upfront, and then the balance in RSUs. And all the cash 70% was paid on day one, and the 30% was paid over three years. So you had to kind of be there for three years, and so on.

 

Siddhartha 22:08

And if you can share the process of identifying the Grant Thornton among the partners, EY of the world, how did you identify them? How did you build that kind of equity with them? What are the kind of fees these M&A advisors charge? And what is the actual kind of help that they do? Do they help you identify the right set of acquirers? Or do they reach out to acquirers on your behalf?

 

Rohit 22:34

Yeah, so the fee really varies. But it could be anything from the larger the deal size, the smaller is their percentage, but it’s really a success fee. All advisors take a little bit of upfront, the upfront could be always negotiated, but it could be anything from five lakhs to ten lakhs in today’s day and age. But it’s basically to show some kind of seriousness and commitment, but their real fee is always a success based fee. And in our case, it was in the range of I think, 2.25% or something like that, always something that has to be negotiated down.

And EMI would be something like 3%. So there was some difference between the different firms, as I recall and Boutique could do it at maybe one and a half percent or something like that as well.

 

They run the whole process for you end to end. So I think first is the whole thought process in terms of building the information memorandum, building the story, putting it all together, a lot of thought and effort goes into that, that is one part of it. Because there is no point embarking on that, until that story is not built very clearly the need to understand you, the team, the business, the competition, the landscape, put it all together. That’s one part, they do the entire reach out, obviously with our input as well. So we were looking at a strategic partner. So I recall, we identified something like 40 possible acquirers. And given that we were in the life sciences

domain, analytics domain, I mean, that 40 is the reasonable number.

 

And then they ran a sort of teaser and I remember vaguely that it was something like about 12,13 companies who were interested post teaser, where then they sent the NDA on our behalf, signed the NDA and then shared the information memorandum. So information memorandum was seen by 12,13 out of a pool of 40. And then they shortlisted that to maybe five odd companies that wanted to get into a more serious Deep Dive. So the whole process, running this process, putting time lines to possible acquirers because everybody wants to take their own time. And you don’t have that time because you’re also wanting to run a process.

 

And then if you’re putting one against the other. You want to make sure that another person says, Oh, I’ll get back to you after two months, and one person is getting back to you with an offer next week. Now, what do you do? How will you compare? You have to wait two months for the next offer? You just can’t, you have to tell them, listen, we have 10 days of time you put in an offer, either you’re in or you’re not in. So that can be best told by a third party. Because you’re always a bit nervous, you were selling your first company or you’re talking to somebody in the transaction team, or the M&A team of a large company. Do you say that with that kind of confidence, but when the other guy is running the process, he’s gonna just run it and say, Listen, guys, this is the way we are running the process. This is the structure, this is the thing. Either you’re there or you’re not there.

 

So there is no emotion in that. And I think that makes it so much easier. Particularly I think, for first time entrepreneurs, getting the right kind of professional support is something that I would absolutely, absolutely advise. And then there are all kinds of mistakes, because the shareholders agreement comes from them, from the acquirer. And then when we saw the shareholders, the first draft that came from Shardul Amarchand, WNS, we kind of had a heart attack. Because they had things like if somebody leaves, and they’ll have a clawback and so on, they had identified key people and said, look, there are seven, eight key people in this business, if anybody leaves, I’ll take this much back.

 

Now that is like, Guys, can I have control over that? I can’t, but looking at the agreement, like this means that already, you could see that that money would not even be your money, firstly, you have to receive that money, then pay tax on that money, then you get the net of that. And then imagine, from the net, if someone is taking that back, that’s your hard earned money. So you need to be extremely careful in that. And it does take a lot of time and effort. And I think having the right partners makes a lot of difference.

 

Siddhartha 27:20

Also at that point, would have made a lot of stressful situations between the founding team as well, how to find the right price, and on a daily basis to and fro with the acquirer with their legal team, whether this will go through or not? How did you maintain that kind of balance through the eight month process?

 

Rohit 27:44

Yeah, so it’s a highly stressful process, no doubt about it. And there is also a need to keep your internal co-founding team involved, informed, they also need to know what’s going on, you can’t play your cards in just close to your chest at the same time, you want to keep the morale of everybody up, because suddenly people are then wondering that, okay, what’s going on, suddenly, in the office, you have, a lot of meetings in conference rooms where, possible people keep coming in, it’s a small office, it’s not like they’re much so many floors, and you can’t be seen and all of that. So, at the same time, you have to keep the business going. Because if we lose sight of the business, just imagine a scenario that the deal falls through for any reason, ABC reason, but you have left your eyes on the ball on the business. And then suddenly, you find that the business starts, the impact starts coming on the business, because you’ve taken eight months, your eyes have the ball eight months out of the year is like two thirds of the year gone.So you can’t do that. So it’s a hard balancing act.

 

That’s why it’s advice, never ever do it unless you’re absolutely certain about it. And it can’t be just, we’ll just explore this for a laugh, you have to be really serious about it, because it’s too much effort, you have to keep paddling on both boats, you have to balance internal operations, as well as keep this going with different responsibilities. You have to keep your internal core group informed because in a business like this, it’s also about the team, they’re also buying into the team. And at the same time, you can’t let the whole thing out that people start losing interest in the company and so on. We are still growing, we’re still hiring, we are still growing clients, etc.

 

Siddhartha 29:31

And at that point in time, what was WNS ‘interest to acquire the company like it was a six and a half million dollar company. But I believe WNS at that point of time could have been worth $300 million.

 

Rohit 29:42

No, much more because they were around 700 million or something like that. And they were not acquiring us for the revenue. I think they were acquiring us for the capability in life sciences. They had a large Life Sciences practice with one client, where they had like 700-800 People with that one client where they had built an outsourcing capability, and it was just one client, but you can imagine massive size 700, 800 People with just one client. But they had somehow not been able to progress this beyond this one client, they had been trying for a few years. And that all we learned later, this was all learned post deal, because then I was reading that life sciences unit, they’re not able to do this, and they had tried various things.

 

But then they found that, rather than just do this, it’s a classical make versus buy question, I mean, do you do this yourself, they could have, or they could have just bought, and there was for them, it was okay, we can spend $20 million for this, we may as well buy it, because anyway, the company is generating cash and profit. So there’s a payback, they’ll earn it all back. And also sort of positions the company slightly, as they were also trying to move away from pure BPM toward more analytics and stuff like that, so they’re done. They’re not very acquisitive. They’re done like two or three acquisitions in a bunch around the same time as us. And then after that, I think again they’ve stopped, at least to the best of my knowledge, they haven’t done any more.

 

Siddhartha 31:21

And if they had to put a number to the kind of return they made from the acquisition. Would you have that kind of number?

 

Rohit 31:31

No, I don’t have the math around it. But I know that the acquisition has worked very well for them, because immediately it was reflected also in the stock price, which immediately went up when the announcement itself was made. So I think they earned the entire money back just on the share price alone, one of the learnings that I could have, and that was again, hindsight was and maybe part of the payment could be made in cash, or part of the payment could have been made in, more like a stock component, which comes upfront. And that allows us to also partake in that. But again, that is all hindsight now. You get wiser with time.

 

Siddhartha 32:09

Yes. And how is the journey moving forward? When did you decide to start again, 1digitalstack? How did you meet your co-founder in 1digitalstack?

 

Rohit 32:23

So, that’s very interesting, I had no illusions that I’m going to do pharma, I wanted to do something. And I wanted to have a second innings, it was just very obvious. Although I was a “late bloomer”, you can call because I never made it to under 30, or 40 or any of that. But there was, I had started Value Edge, and then I will say, 38. And by around 46,47, I was done with it, or getting out of it. So then, and I was very clear that I still had it in me to do one second innings besides, also, now in a small way, looking at Angel investing and things like that. And there were two learnings, one learning was that I wanted to go after a big problem to solve, that was absolutely clear in my mind, and I like science analytics for all, obviously had an advantage out there.

 

But at the end of the day, it was a relatively niche problem. So I wanted to go after a big problem. And secondly, I wanted to use technology, and I wanted to build a product company and not a services company, because the effort and the time is the same. But just imagine the multiple that you get on a tech product company versus the product multiple that you get on the services company, and many good reasons for that are well known reasons for that. But if you’re the owner of a services company, you get the short end of that. That’s the reality.

 

So why not try and build a product technology company? So these were the two thoughts. And then I was exploring many ideas and I was having a lot of coffee with lots of different possible people and just meeting people and so on and I met my co founder, Tarun, who came from FMS, Unilever, and so on. And he talked about e-commerce. And it immediately clicked with me, because we could see that trend line. This was very clear, long before the COVID pandemic that Amazon was taking off, marketplaces were taking off in market after market, country after country. And if there was anybody who could say that, listen, I’ll use a combination of technology and data science to draw actionable insights and provide these actionable insights to brands that will help them to accelerate their growth on Amazon, who doesn’t want to, which brand doesn’t want to accelerate their growth on Amazon or marketplaces, and it’s increasingly a very competitive space.

 

And as brands get on these platforms, and it becomes a bigger and bigger channel, they have to do this. But in reality doing this on their own isn’t that simple. You need to absorb massive amounts of data at scale, use data science, have e-commerce expertise, and bring it all together at the same time. And so we thought of doing this as a third party, doing this for brands, because that is not their core competence, and building a product company doing this and for me, that was a really exciting problem to solve. And we just went for it.

 

Siddhartha 35:46

And can you share the current scale and how much time it took you to build 1digitalstack in scale in terms of ARR in terms of top market lines that you have.

 

Rohit 35:56

So, we formally incorporated in November of 2019. We brought in our first employee in Feb of 2020. And today we are a 40 people company. We have about 24 clients, 25% of the businesses outside India. At the end April we are looking at $1.2 million ARR. We are working with some of the most marquee clients. We’ve been very fortunate in our journey. They include the likes of HP, Nestle, Philips, Glanbia nutritionals, Havas media etc. All on the enterprise side.

We are slowly onboarding some, and we’ve been working with these clients for the last one one and a half years and demonstrated considerable impact. We are just onboarding a few other marquee names including Marts, Petfoods, Marico and so on. And also on the B2C side, we’ve been working with the likes of Neeman shoes, Pilgrim, Blue Tokai coffee, ZyngaVita and so on. So a number of brands.

 

And so far, yeah, we started, it took us about six, eight months to build the first prototype. Once we had the first prototype, as in the case of Value Edge, we had a game changing moment in July, August of 2020, when HP invited us, and they looked at us to help them power what they call their E-commerce command center. And that was, I think, a real turning point for us. What we were doing in terms of extracting data from Amazon, cleaning the data, analyzing that data, and drawing actionable insights is exactly what that e-commerce command center was looking for.

 

And it was a great fit. And that was a turning point. And I always believe that getting in an anchor client relatively early in your journey is a game changer. And we have just been lucky to get HP, a client of that stature. We started working for them in India, the impact has been such that they’ve taken us to Singapore, and we’re doing a few countries in the Asia PAC region. We’re just starting some work for them in the North American continent and in Europe, and the relationship has just grown and grown.

 

Siddhartha 38:32

That has been quite an awesome journey. So the first time, you didn’t take any investor money. Second, how did you decide to take investor money? And how’s your thought process? Who to take it from? Because you had many options.

 

Rohit 38:46

Yeah, so I think when I look back, yes, we did not take any investor money in Value Edge, it was a niche space. And the company was always profitable. And we always had sufficient funds to grow our business from internal accruals. Obviously, that thought process is still with me, but I don’t believe that and I honestly do believe that every company does not need to take money from outside. Having said that, the two situations are not exactly analogous. We’re in a vast market, E-commerce advertising alone is, Amazon and everybody else put together as about 300 billion.

 

So it’s a massive, massive market, but they’re also very large, well funded players, be it commerce IQ, or data we give or take metrics or there are so many of them going after some slices of this. Not everybody is doing identical things to what we’re doing or we’re doing things which they are not doing but they are all going after some slices of this. And if you really want to build a global company. We would need to accelerate with some capital as well, we don’t need a lot of capital. So we were also looking to minimize our dilution also. And we thought that raising money in the range of about a million dollars would be sufficient.

 

But it doesn’t, it gets us to what our goals are, we’re looking to build out a Singapore office, we’re looking to build out a strong CXO team, building a lot of talent and so on. So it does need capital that will not be in sync with our inflows. But we don’t need a lot of capital. And that led to the thinking that we need, we are well served with angel funding. And that’s the route that we’ve taken. And of course, we’re delighted that you and 100X are on board. And we have a few marquee angels as well in the US, in the UK, in India, in Singapore, and we’re absolutely blessed to have these angels, we’re looking forward to doing the round and actually getting the money in very soon. And then just going out all out after that.

 

Siddhartha 41:19

I’m really grateful that 100X Entrepreneur fund could lead the round along with some of the top names in the Indian startup industry and angels, along with us. Now moving forward, how do you see this journey going? Do you want to take it to 10 million ARR? Like slowly and steadily? Or do you see that there’s an opportunity to fast track it, let’s say in the next 18 months to 24 months.

 

Rohit 41:53

In the next 18 months, we are looking to take this to 3 million. And then after that, we do want to fast track it. And there are multiple growth drivers. We see the growth drivers as essentially what we are doing is, if we really think about it, we are extracting data from Amazon and marketplaces, we are analyzing the data through data science. But it’s not only about actionable insights, we also have another product that we have launched recently in the media optimization automation space, which essentially rests on the same data. But it also combines with first party data that Amazon provides to the brand owners.

 

And we think that the second product that we launched, Reviniti which is a far bigger opportunity, then the media intelligence, then the intelligence and insights product and we are seeing some rapid adoption, not only among the D2Cs, but we are seeing rapid adoption, even among enterprise clients. So let me give you an example. We are working with Philips, and we are providing them with actionable insights through RevStack. But when we launched Reviniti, in January, they were very keen on it. And we’ve signed a contract with them to help them in optimization as well. So that’s so even as enterprise clients want optimization, because everybody needs to be efficient with their Amazon spent.

 

Also, mid market clients and D2C clients, frankly told us that we don’t have a need, we don’t even have the internal capability to absorb these insights and make sense of them. Because we don’t have the analytical horsepower. All we need is someone to actually run the campaign for us in an efficient manner. So we think the opportunity is far bigger with Reviniti which is our media optimization product that we launched in January. So I think the acceleration will be far, far more rapid from now on. What we need to get right and that is something that is very much a work in progress, and we have not solved and it’s not that I never say that we’ve solved everything, is to get a GTM absolutely right.

 

We think that this also will be, I mean, while India has been a big base, but we think that a massive opportunity exists in Singapore and the APAC region. Tarun, my co-founder, is planning to relocate to Singapore in the second half of the year. We think that the relocation will sort of give a massive impetus to this because then he’s physically out there and nothing like having the founder in the market. We’ve seen that in startup after startup. We’re also looking to bring on a serious head of growth to bring on marketing, etc. A lot of learnings from other SaaS companies that sales and marketing has to be front loaded as opposed to, coming in late. So I think that’s something consistent I saw in shashank’s podcast as well. I think a lot of people talk about that. So I think that’s something that I want to also do.

 

So if you get all these pieces right, I think they can be a massive acceleration, there is no need for us to be slow and steady. This is, horses for courses. So this is not Value Edge. This is a company that can grow much more quickly, a much larger team, a much larger opportunity out there. But it’s still for art’s to get to it, we still have to execute it. And there’s just a long way to go.

 

Siddhartha 45:28

And what’s your vision and ambition for 1digitalstack? Where do you want to take it? And why do you want to take it?

 

Rohit 45:37

Yeah, Tarun and I, when we sat down, and we talked about our vision, on the early days, we were both clear that we want to build a large company, I mean there is a little joy, it’s not just a financial outcome or anything like that, but there is a joy in building a large company that impacts a lot of clients, a lot of brands, a lot of people. and we really wanted to do that. So that was like the founders having their original coffees and meeting up on the Starbucks’s and then doing some whiteboarding together, and then figuring it out that okay, this is a problem that we really want to, because when you go after the problem, you are going to devote 10 years of your life to it.

 

So you need to keep that for 10 year. So you cannot go after something. And then just say after one year Oh, no, now I have changed. Am I normal to go? Yes, they can be tweaks within that. But then broadly, you are going after that for a substantial part of your life. So we were very clear about that. And we thought we’ll do whatever it takes. Now, in terms of, yes it’s important to have very clear financial outcomes And as we talk to investors, also, we need to be clear about where we really want to take this and how big do we want to make this. Yes, we have that coveted 100 million dollar kind of milestone in our mind that we will eventually get to that milestone, we want to be a large, well known, well recognized player in the e-commerce enablement ecosystem, more broadly.

 

I mean as e-commerce grows into 1000s of billions of dollars, because that’s where e-commerce is today. And the enablement system, one part of it is the logistics enablement or the warehousing enablement or other types of enablement. But then they’ll also be the data enablers, the IP enablers, the data science guys, all of the enablers will also have substantial businesses, and we want to be a substantial business in that ecosystem.

 

Siddhartha 47:40

And for you, the Holy Grail is 100 ARR company?

 

Rohit 47:48

Yeah, I mean, that’s something that we have set ourselves to and at this point in time, I think we have got a good early momentum into growing that. What does that mean? Actually, if you think back about it, how many brands would that take, at our current AOV, it would take us about 3000 brands. But that’s a very, very rough number. Because we can also talk about other products we’ve got, one product that we’ve got is this whole brand watch, which could talk about IP, and brand reputation. And again, watching that on behalf of brands on e-commerce channels, we talk about trends, which could be another product and so on.

 

So if you have more products, etc, the number of brands could come down, but we could be talking about impacting anything from, let’s say 1000 brand upward, which is a very, very different business to what Value Edge was, the kind of impact that was, and I’m very confident that if we get the team right, because I’m again going back to the basics, it’s about team. 50% is about the team. I’m just completely over weighted on team, we’ve got the space, we’ve got the product, we built it, clients wouldn’t be paying us for it, we wouldn’t have won an RFP with Havas, or we won’t have HP, giving us more work, etc, if we weren’t already solving something for them. So they’re paying us and we’re solving something for them. But what we really need to do is just get out there. We’ve got the zero to one journey. If we get the team right and we are able to execute along our plans, there is no reason why we can’t do it.

 

Siddhartha 49:32

And this time around, what is the same thing that you’re copying from Value Edge and what are the things that you are doing completely different from Value Edge based on your learnings?

 

Rohit 49:45

Yeah, I think what has really been important in Value Edge is getting the right quality of talent. So we have for example, someone in our company, Shantanu, he’s from IIT Delhi, ISB, worked in Acer and some other companies etc. So, many strong pedigree is heading operations, we’re looking at getting someone else and head of product again, very strong ISB this and this and she’s about to join us at the moment. Same thing, we are talking to some other highly pedigreed people, ex IIT, etc, to come in as head of growth or head of data science and so on.

 

Building that CXO team at that level, being generous with ESOP. So that wealth creation can be shared, as opposed to wealth creation being concentrated, creating a culture of fairness, meritocracy, as far as possible, it can never be perfect. But it’s not that there is politics or there is time for politics, or there is favoritism or someone was getting a promotion or so and so is boss’s favorite, and none of all that stuff, we don’t have time for all that stuff.

 

So that’s something that we did very well at Value Edge, I would love to retain that and try to retain that we’re also very strong on things like employee benefits, health insurance, other plans, etc. Of course, things have changed. The providers today are different. I mean, you get aggregators, who’ve aggregated yoga, and meditation, and gym and everything all into one. And those are the kind of tweaks, of course, time has passed. And you get these kinds of things today, that you weren’t getting. You get new different kinds of office spaces, which one there, etc. But broadly, this thought process of people first, team first, and then everything else falling in place is the philosophy that I think made Value Edge successful.

 

And that’s what we want to continue. What is different? I think what is really different is, if you see the whole business model itself is different, we are genuinely a technology company. Yes, there may be some service element on top of it, because particularly as we work with enterprise clients, they may need some analytical support or some analyst time to be built on top of it, but genuinely to build a very strong technology rich company with solid analytical capability. I think that is very different. And I think that was something that was missing, that could enable us to scale up. The other thing that I think was very different was, which, again, I planted as in the roots of the company was that there is a genuine co-founding relationship. Tarun and I are equal co-founders. And I think that also is very fundamental. And that was, again, something very thoughtfully done. It wasn’t because I wanted to bring on someone who’s better than myself, smarter than myself. And then it’s sort of there that we’re always on the same side of the fence. There is no time and energy for interpersonal conflict or anything like that.

 

So we always see it from one perspective, because we are completely aligned as we are equal owners. And I think that is very fundamental. And I did not have that equity structure with my co- founders last time. Which then results in downstream when things are going well also and there’s some time, then you can think, Oh, well, I’m just a small owner, maybe I can go out and get something better for myself, or maybe I can set up my own thing or whatever. That doesn’t happen if you are an equal owner. And I think that was something that I had also learned and brought out here.

 

Siddhartha 53:45

And Rohit you have been fairly involved in the startup investing ecosystem in the last three years. Can you share about your set of angel investments? Or the funds that you have invested in? And what’s your structure of thinking? How do you invest?

 

Rohit 53:59

Yeah, so Well, thanks for that Siddhartha, I mean it’s a mixture of things. One is that, let me tell you, that I’m very conservative, first and foremost, because I think that’s extremely important. When I had a pie to invest in, I wanted to firstly get in a professional firm to help me in that. So I brought in IAFL. To help me in that, I want to be absolutely clear about that. And I think that’s extremely important, because I think it’s not necessary that if you’re a founder, you would also be very good at managing money. So that’s one thing and so 90% of the money is in various equity funds or debt funds, etc. It’s 10%, where I’m also an LP in some funds. And I’m also an angel investor. So that 10% is also then further split between LP and an angel investor.

 

Now, being an LP allows me to then participate in the investment thesis that the fund itself is running and different funds have different thesis. I am largely weighted towards tech. So, I’m an Angel investor in, for example, Your Next fund two, Your Next Fund three, Pi Ventures, mixed one like Stellaris fund two, which is between consumer and tech. The large consumer fund where I’m an LP is Sixth Sense, which has shown some incredible success on the consumer side. But I’m largely weighted on the tech side, so these are where I’m an LP. And so approximately 40-50% of my corpus on this side is already invested as an LP.

 

And the balance part of it has been invested, part of it is left which is purely my judgment, good or bad or ugly. We’ll see now because all these things take time. But yeah, very proud to be associated with some good investments made. Investments in Neeman shoes, where you advised me many years back, so I’ll never forget that. Virohan on the health tech side, Blue Tokai Coffee, Biryani Blues, Riziki and several others Navia healthcare, etc. I’m guided by two things out here. And I’ve tried to keep this very, very simple. One, I’m guided by the market that the entrepreneur of the team is pursuing, how large is this opportunity? Is it a niche opportunity? Do they have any competitive edge in this opportunity? What is their right to win out here?

 

So what is the opportunity and really trying to understand the opportunity? And the second thing is really the quality of the entrepreneur and the end of the founding team. I mean, I often judge that are they better than me or of me at that age. And I’m just surprised by and delighted by the quality of entrepreneurs that are coming out. Now, I think they’re a notch above what there used to be. Not a notch above, I think a couple of notches above, incredibly smart, very well read, very well informed. So I think if you combine both these unless things can go wrong, I mean, execution can go wrong, the whole market can change, many things can happen. The journey is never a straight line, it can be rough and Rocky. But if you have the right crew, and you’re backing the crew, and they have gone after broadly, the right space, then yes hopefully many of them will sail through.

 

Siddhartha 58:02

Thank you so much Rohit. It’s been incredible walking in your shoes through this podcast, I hope listeners enjoy it, cherish it as much as I did. And there are some final points that we never had any conversations during the last five years, which I got to learn through this conversation.

 

Rohit 58:21

Thanks a lot Siddhartha. Thanks a lot for having me. I know we’ve been wanting to do this for a while, but I’m really honored and delighted to be here. And again, wish you all the success with 100X. And I’m delighted to be part of that as well. So let the journey grow and let our relationship bloom and I look forward to more informal interactions as well.

 

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