Crafting homes out of houses | HomeLane
Crafting homes out of houses | HomeLane
1993- that was the year that Srikanth Iyer started his first business.
This was an era in which the word startup had not been invented. India did not even have cable TV at this time.
Starting from a humble beginning in 1993, Srikanth takes us all the way to the present with his current venture HomeLane.
Srikanth initially began his career as a computer engineer at Wipro but soon discovered a strong inclination towards working independently. This prompted him to resign from his job within just 90 days!
Building ventures since 1993, Srikanth founded HomeLane in 2014.
Back in 2014, the home interiors sector was unfragmented. People would frequently face delays and encounter unprofessional practices. HomeLane changed this by using technology to offer personalized and professional interior services.
Today, HomeLane is one of India’s premier end-to-end home interior platforms, having raised more than 100 mn dollars from some of the biggest investors.
In this conversation, Srikanth talks about his fascinating journey as an entrepreneur.
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Additional readings:-
1.From 90 Days at Wipro to Founding a Rs 268 Crore Empire: A Young Techie's Incredible Journey
2.How third-time entrepreneur Srikanth Iyer got it right
Read the text version of the episode below:-
Srikanth: Hey guys this is Srikanth Iyer. I'm the co-founder and CEO of homelane.com.
I got a sports quota seat because I played tennis for the state for so many years. I got in computer science seat in RVC, which is one of the top colleges in Bangalore, joined that. My claim to fame also is I'm Anil Kumble's batchmate. I did a very interesting course. Harvard conducted their only off-campus course in India during the 90's and I managed to catch that.
I have a postgraduate degree in software engineering from Harvard which I did. Very interesting, in fact I keep joking that, in that one year I probably learned more than what I learned in the four years of engineering at least practically.
It was a very good course. Got an immediate placement even before I finished it. I got into Wipro, but I just felt that was not for me. And quit in three months and started my first venture. So that's my beginning of my entrepreneurial journey.
Akshay: What did you start? You literally must have been 21, 22 at that age.
Srikanth: The branded computers were very expensive compared to the unbranded ones. So used to get these assembled computers and the price difference itna zyada tha ki aam adami could not afford IBM or a Compaq, which were the top two brands then. And they pretty much were okay going for a assembled computer, which was 10,000, 20,000 cheaper than the branded one. Duties were very high and so on and so forth. At that point in time I saw an opportunity there. And how this happened was, I have this good friend of mine who runs a university here, at that time it was a college, it was not a university.
He always had requirements for these computer labs. And minimum 30 computer, 40 computer he used to buy. And he came and said, "Hey, I'm looking for a lab for this. Do you know somebody who can do this for me". And in my Harvard course, my classmate he was from Mumbai and he was a typical, very hands-on kind of guy.
You have those guys who are very detail oriented and they know everything about they do. They're very good with their hands, he is one of those guys. Bombay being as entrepreneurial as it is, in his college days itself, has started assembling computers and learned about how to do it.
He said, "Hey, I can help you do this". Why not if you're interested, I said, "yeah sure". Then I found some suppliers who could give us some genuine components and I told my friend saying, I will get you this lab and this is the price if you're okay with it. And he was absolutely fine with it.
I was making 5,000 rupees per computer. And my monthly salary from Wipro was four and half thousand rupees. I did the math. It was not very difficult to do.
So the first tranche, this friend of mine helped me. And it went off reasonably smoothly. Then I hired a couple of guys. I had a small home office kind of a thing. I used to have an office as one part of my house. Started very small and then grew that.
Akshay: And you were selling to businesses, like you would obviously want bulk orders.
Srikanth: Not necessarily. I was doing a mix of both because the margins were so good. In fact, if you go into consumer, your margins would even be better because they would not really bargain so much because it's just one computer. But that taught me a lot.
Just to give you one more anecdote of one learning which kind of blew me away. I worked a lot with Marvadis during that time because they typically were the trading community. They've been doing this for centuries, very good, very sharp et cetera.
Once about 2,3 years into the business, I also started thinking I should also start importing some memory chips et cetera, which seemed to may have some reasonable demand. I met one of these suppliers during some event which was in Singapore or somewhere like that.
And I said, 'Hey, I want to get specifically this RAM'. What we used to call RAM. Now also you have that, but that time we used to have those typical chips which you need to insert. I said, I will try and take a lot of some few thousand pieces. And as always, first time I was importing so made a few mistakes.
This thing got delayed, I thought it could come in April or something like that. It ended up coming only by July. Anything in technology, once it goes out of work, it goes out of work very fast. And by the time I was getting this was almost becoming obsolete and I started sweating because itna sara maal la ky mery ko beechna b hai. Toh mai mery supplier ky pass gaya ki Sir isko kya karna hai.
What should I do? He said dekh bhai aisa nai karty hai. Phly toh ek kaam kar. Mai tujy 5 number dy ta hu sab wholesale dealer hai. Sab ko phn kar and say I want to buy this chip. Don't say I want to sell. Say I want to buy this chip. And tell them broad quantity, different quantity. Basically what he taught me was he said if it is a B2B, you create some artificial demand.
Then he said leave it to me. After that I will push it out to them and I'll give each of them a little and that one thing really taught me so much. There is so much of native intelligence we can call it common sense, but there's a lot more than that.
This is doing the right thing. You're not really cheating but you are taking advantage of the supply and demand scenario and creating some artificial demand kind of thing. It taught me so much. Seven years I ran that business, it was called Total Solutions.
Akshay: How were you getting customers for it? Did you have a storefront or was it just telephone calls and meeting people at their homes.
Srikanth: Mostly word of mouth. First two years I did not have a storefront, but after that next five years I had a storefront.
I managed to make enough money to hire a place. There's this place called Malleshwaram here, which is a reasonably residential area. I got a nice office there. That time the business had become big, but it became big on the basis of B2B orders, which was larger customers. This BES University was a big customer, Gokaldas Exports were big customers. I used to do a lot of work with some quasi-government organizations. So did quite a bit of that.
Akshay: And you would be selling hardware plus services also.
Srikanth: That time pretty much I was the door-to-door sales guy for the company. There was nobody else. I was doing all the selling. I think door-to-door selling teaches you a lot. Thinking on your feet, moving fast, understanding what they want before you actually put out your offering to them, so many things it teaches you.
That was very educational for me, those first seven years. And in the year 2000 was when my second startup happened. The same gentleman, my friend who was running BES University by now. He came up with an idea of building an e-learning company.
He said, I want to build an e-learning company. I run a college, the top 2% of students come to my college. The next 98% want to come to my college, but cannot come to my college. Can we use technology to bridge that gap? Can I give them the best teaching, to the next 98% and take advantage of it as a business model, meaning charge them for it.
Sounded like a very simple and nice idea. I guess we are still trying to figure out in terms of e-learning across the world. Seemed like a nice idea. He said, you must be part of this founding team.
Akshay: This was year 2000.
Srikanth: This was the year 2000. In fact, Jan 26th on Republic Day, we made a pitch to the first Angel VC that I ever laid eyes on in my life.
One: Mr. BV Jagadeesh, he's still very active, very popular in the valley. He started this company called Exodus. Exodus was AWS in its previous form. So he made it big. He had come down and we pitched to him for 4 crore of seed investment and in 15 minutes he agreed. We didn't know what to do. We had not expected him to agree. That company was called Edurite. Started that in 2000, along with this friend of mine from BES.
Akshay: On your LinkedIn it says TutorVista was that the public facing brand of it?
Srikanth: No. Basically what happened was, started with Edurite and this company got acquired by TutorVista in 2007. I ran part of the TutorVista business also after that.
Akshay: What was the Edurite model? Like B2C, cohort based or asynchronous?
Srikanth: When we started it was a simple B2C model asynchronous. We said that what we will do is we will get the best teacher for each subject.
So for example, physics ky liye there was professor Shankar from Basavanagudi, who was very famous at that point in time, people used to write entrance exams to get into his tuition. He was so popular. We said, let's get people like that, capture them teaching the subject and take the recommended book, which they would recommend and combine the two.
So give a student a CD-ROM. At that time you could not stream such big videos. We'll give it to them in CD-ROMs, which they can play from their CD player on their laptop or on their desktop. That was the model. We started with 9th and 11th because we said for 10th and 12th parents will not take the risk of using e-learning in 10th and 12th.
We said we'll do 9th and 11th and then next year we did 10th and 12th. We had 9th to 12th in a couple of syllabi like CBSC and all that, ready. And then we were ready to launch. We did a big bang launch. We were on tv. We got a ad campaign. We thought there was no queue. Then we realized that PC penetration is a big issue in our country. 2% was the home PC penetration at that point in time.
Akshay: This was like a CD with an executable software.
Srikanth: CD was an executable software.
Akshay: And each year would have its own CD like 9th maths would be one CD. And this software would have a journey.
Srikanth: You can also buy a pack. You can buy physics, chemistry, maths, biology and it'll be slightly cheaper or you can buy subject by subject also.
Akshay: And it would have a journey for the student and assessments like a complete learning experience.
Srikanth: It'll have it in chapters, it'll have videos embedded in that. Within the CD itself, click and watch the professor teaching that. Then you can ask doubts. The doubts would go and be answered by other teachers. You could browse the web. We had curated content.
See, the problem with Google even then and even now is when you search, you get too much of content. How do you know what is relevant to what? Water cycle is taught in 4th grade, it's taught in 8th grade, it is taught in 11th grade. And each grade it starts with different levels of depth.
But Google doesn't know who is searching for it. When they're searching for water cycle, they'll show up the same content for all three. So we said we'll curate it and we'll put it. We did some very interesting stuff actually. But you won't believe it.
Now that you're asking me about that, I'll give you one other learning there. This was on product. How you always feel that some feature that's your favorite will always be very useful. For me, I always felt this, we used to have this section called connected links, meaning basically you are studying water cycle. And it was a lot of work because it's not easy. You have to go into the link, check what is the relevance and then put it there.
It took a lot of time for our teachers to do it. About three years later we did a survey from our user saying Ap kon kon sa feature use karty ho. So this related links was ranked last. And I was heartbroken. The users were clearly for this one saying ki is ko hata do and if it is costing so much money for putting it in, then it's even more reason for you to remove it. Their logic was very simple. You're doing all that, it's absolutely no use to me. We used to sell online. It was a simple B2C product. We used to have two channels of sales. One was direct to consumer and through stores offline. And the other was through direct tele calling.
We used to have our website. People used to come and say I'm interested and then we will get a team to call them up and do the selling. Decent business, profitable product about 5 crores of revenue with about 1 crore of profit in about six, seven years.
But it was a tough journey. I told you all the good things. Now I can tell you some of the bad things that we went through especially in the Edurite journey. We raised about 7 crores of Angle. Other than BV Jagdeesh few other angels also, we managed to raise some money and three of us who were co-founders, we decided that we would really go all out.
And we got it totally wrong. We got the whole product completely wrong. When somebody is looking at e-learning or take your own podcast as an example. When you're going to cast this, you are going to make it bite-sized. You're going to make it topic based.
You're going to make it three, four minutes each because people can consume it easily. Nobody wanted even Professor Shankar to be speaking for 90 minutes continuously. One was that. Two was that the same professor was not applicable everywhere.
I could not sell the product on his face. The third and the biggest thing was accent. When Professor Shankar was speaking, he had a heavy South Indian Kannada accent.
Those were some of the issues that we came about with. By 2002, we had run out of money. We had a hundred employees, we had almost no revenue and we had about -40 lakhs, which means we had to give vendors 40 lakhs but we didn't had any money to give them.
Akshay: These vendors would be?
Srikanth: People who are pressing the CDs, doing the video recording for us. So that was the state. The other two co-founders of mine decided to take a step back and the first job I did, I will never forget the date: September 23rd, 2002 was the first day I took over as the CEO for Edurite, until then I was the COO. And the first thing I did was, I had to let go of 75 out of the 100 people on day one. It was the most traumatizing, most depressing phase for me. I had never fired a single employee before.
And I had to let go of 75 people on one day. I had to do it myself. I spent 10 minutes each with each of the people who were being let go. And the worst part was, we didn't even have money enough to pay them one month's notice. We only had money to pay them 15 days’ notice.
So I had to even request them saying, I don't think I'll be able to give you one month's notice. I am giving you 15 days’ notice starting from today and here is the check. I will try my best to find you a job. What I decided to do after that, I completely decided to restructure the product.
The problem again was for CBSE and ICSE for 12th grade, I had to redo the product pretty much again, because even though the topics some may be common, the professor will not teach both. Typically the professor only teaches one and he'll only go the CBSE way or he'll only go the ICSE way.
Then I realized that this reusability needs to come in here. I took every single subject, broke it down into the smallest component, let's say a three-minute learning component, Newton's first law, second law, third law.
That's the subtopic and that is what I will teach. And that I will teach in three to four minutes. That is reusable. If I can get something which is non-video, which is animated, which has a neutral accent. And which can be consumed bite-size like 3,4 minutes and the concept should be taught visually.
So if I'm talking water cycle, I should show water evaporating, forming clouds and go moving around, rain coming again completing the full cycle kind of a thing. I said, I am going to spend my last rupee on creating these reusable learning objects, RLO's we called them. And we created tens of thousands of these.
Akshay: But did you have money to invest in it? Because animation takes money.
Srikanth: When I came down to that 25 people, we were getting revenue. That revenue was enough and more, to sustain us and plus a little bit more. I was continuing to sell. I had not pulled it out of the markets yet.
So sold those. Had some B2B tie-ups. Went to some schools and said, we'll give it to you at bulk. If you buy 10-10 sets, we'll give you at 50% discount. It was a lot of money. Did a little bit of that. Managed to keep the fire burning and the lights on.
Of course, I didn't create kindergarten to 12th in one year. It took me three years to create it. It was a long, arduous journey back. And then did some very interesting things. I created these learning objects. Now suddenly CBSE, ICSE, state boards, all of them I could cater to because I could just rearrange these. If you look at it like compound wall with bricks, I just arranged the bricks and it becomes a different syllabus kind of thing.
Akshay: You can just change the journey a bit. The content is there, you just have to program the journey.
Srikanth: The way they ask questions is a bit different, et cetera. So did that. But still I realize that they had a problem with PC penetration and volumes with consumers.
So I said, how am I going to solve this? I said, let me not look at what's the problem with this market. Let me look at India's strength. India ka strength hai volume. India has purchasing power. We have millions who can buy, but they can't pay more than $1, $2 or a 100, 200 rupees.
Akshay: High user base, low ARPU.
Srikanth: With the Airtel and Jio, we all know how that is.
Akshay: 10,000 was for one year or subjects.
Srikanth: For one year for all four subjects. So PCMB ky liye 10,000 tha. How many people could afford it?
Akshay: Because people will compare it to books, it's expensive.
Srikanth: Then I said, now let me not look at this product as a mainstream product. It's not a standalone product. Let me look at this as an ancillary product and ancillary to something which already has volume. First thing I thought of was computers. At that time, McKinsey came out with the study saying that PC penetration in India, there was one big report.
And in that they said the number one reason for home PC buying is education. By the way, the fact was that the education became number six after the PC was bought. Nobody was using it for education. People were using it for gaming.
But before they buy, everybody had very noble intention. So I went to Intel. Intel also was headquartered in Bangalore only at that time. I managed to get to the marketing head.
Akshay: You shut down your other business by then, which was selling computers.
Srikanth: I shut it down in 2000 itself. Anyway, I went to Intel, I went to the marketing head. I told them, I'll give you a great idea. You're selling PCs today here is the McKinsey report saying that number one reason for PC penetration is education. You are interested in heightening his expectation from the PC.
If he thinks he's going to use it for education, let him think that way. You only offer him something. So today you are giving him an empty coffee cup. I said I will do one thing. I will map the top 10 syllabi in India. And put it on your computer. At that time more than laptops, desktops used to sell. I will put it on the hard disk of your desktop. The user will be able to choose two syllabi, because normally every family will have two kids. Two syllabi and everything else will get erased from the hard disk.
Only those two syllabi will remain and that kid can use that grade and that syllabi, all the subjects. But I want 200 rupees per box, irrespective of whether it's used or not. Why? Because the fact that you're advertising saying you're giving education is helping you sell. So I need to have part of that also.
I asked them for 200 rupees per box. I will try for 2 lakh copies. We sold 1 lakh copies in eight weeks.
Akshay: And this would only be in branded computers.
Srikanth: This was only in branded computers. We tied up with three of their OEMs. They pointed us to Sahara computers.
Akshay: I have bought a Sahara desktop.
Srikanth: And one more, LG computer. LG also used to have desktops there. So we tied up with these three and they did 200,000 volume for us. It was mind blowing for me.
Akshay: You were basically bundling in one year syllabus. Did it lead to renewals? Like people finish one year and then they want to buy for the next year also? And for that money comes directly to you.
Srikanth: So we did get, but the renewals were not like 50%. Unfortunately, the renewals at that time was only about 20%, which was okay. It was still free money for me.
Akshay: For the renewal, you'd ship them a CD or you could just give them an activation code?
Srikanth: No, we would ship them a CD. Because that time streaming was just not possible. There was no bandwidth.
I did that. That was very interesting and I got a lot of personal confidence saying, I can do this. I found a way. I know volume is the way in India. So next what I did was I started thinking and then I said, let's look at how many textbooks are sold in India. Just to give you a broad idea, there are about 250 million children going to school in India approximately. Each one has an average of four textbooks in a year. That's 1 billion textbooks, and 50% of them are hand me down.
500 million new textbooks are printed every year. So I went to S.Chand, Frank Brothers, Macmillan Publishers. I met all the top 10 and I had a simple pitch. I went to them with two textbooks. One was S.Chand textbook without the CD and one was S.Chand textbook with the CD-ROM, which had the same content animations plotted and mapped to whatever content was in the same textbook.
It was matching 100% with this. I don't know if you've heard of this publisher called Frank Brothers. They're quite big. If you studied in a CBSE you would've studied one of their textbooks. Long story short, they loved the concept.
I pitched it to them at 25 Rupees a CD-ROM. But I said, I want a minimum in terms of number of copies and I want a minimum of five lakh copies per year. And I told him simple thing. Look at how the consumer will think of it. Your textbook is selling at 100 rupees today. Textbook with CD at 130 rupees.
Perceived value of a CD-ROM then was about 300 to 400 rupees. That was the typical for stamping the CD. It used to cost 6 rupees and 50 paisa for MoserBaer. So content was mine. I told them, I will give it to you at 25 rupees and you sell it at 30 rupees. You make money also there.
But I want this minimum volume. Frank Brothers loved it. Lot of others liked the idea, but these guys got going first. They agreed on a price of 22 rupees. The number of lacks of copies that I've sold to them over the years was just amazing. What happened was it became an integral part of the book.
And once you become part of the book, then they can't take it out even if they want to.
Akshay: I think S.Chand eventually went with building it in-house. I do believe they have an in-house ed-tech division, or they used to have.
Srikanth: Yeah, they did. They still have, which is why they probably didn't buy this one. They thought that they would build it on their own, but Frank Brothers did. In fact we got acquired again. Long story short, about three years later we got acquired by one of the competitors, Pearson. Pearson is another book publisher. But the dependency was so high on us for 2,3 years after acquisition also, they used to buy CDs from us.
Akshay: TutorVista acquired you first or Pearson acquired you first.
Srikanth: TutorVista acquired us in 2007 and Pearson acquired the whole business in 2011. They were using our content as the backbone to then online tutoring, which was happening in the US.
TutorVista business model was simple. Take Indian teacher and by tutoring students in the US. So you'll get US price and you'll get Indian cost.
Akshay: The original white hat model.
Srikanth: So that was the model. They used our content as the base content. They used to use our animations and our HTML content.
Akshay: This business you continued to run under TutorVista and they continued to run their tutoring business as a separate thing. I guess TutorVista was like the Byju's of its time in the sense that they raised a 100 million dollars and must have been amongst the highest, in terms of building a funded company and then even getting an exit when Pearson acquired.
Srikanth: We had raised a total of around 50 to 60 million and we got acquired for 200 million by Pearson in 2011.
Akshay: Then what? You had a lock-in period at Pearson?
Srikanth: I did, for two years. I finished the lock-in period until 2013. And then voluntarily, they offered me the role of CEO for India.
Akshay: For the entire Pearson business.
Srikanth: For the entire Pearson business, which included textbooks and this. Sounded like a very nice role. And I had worked with the company for two years, so I had seen them, they had seen me. So I said maybe it's time for a second coming. I accepted the role and as a pure employee. Very voluntarily I joined them as the CEO for India.
Did that job for a year, when I realized that I just didn't like it. So at the end of year one, which was basically end 2013, I went and told them, this is just not working. I'm not motivated to come and work because of the salary you're paying me, because it's not like I'm a lifelong professional. I've actually come over from the other side. But this is just not exciting me enough. And I don't think you are getting value of whatever you hired me for. I said, I'm going to go. About 5,6 months I left. But I also started looking out for what else to do and that's when I got the idea for HomeLane. And that's when HomeLane happened.
Akshay: What led to that discovery?
Srikanth: It was actually 2 or 3 phases. About two years earlier, jab paisy agaye thy, first you buy one or two apartments because you know everything will go into real estate, safe bet kind of thing. I had done that and while doing those apartments, I found that it was an extremely frustrating experience. At that time I never imagined in my wildest reason that I would end up trying to solve that problem.
Akshay: This is like for painting and woodwork and all? Like you bought a bare shell apartment which didn't have cupboards and all.
Srikanth: Correct, I just needed to do cupboards. One I was going to move in myself. One I was going to rent out.
Both the times I had a very bad experience. So I decided to do the HomeLane. When a middle-class urban customer buys a home, they mostly ended up going to a contractor or somebody from the unorganized industry. And their journey is predictably bad. So can we make it predictably good? That's really the point that I started from.
Akshay: This is such a contrast from being an EdTech founder. And what made you confident that you can build predictability and consistency here? Or did you want to do like an aggregation model where you aggregate these contractors and manage service quality?
Srikanth: The aim was very clear. I wanted to bring predictability in the customer's journey in this space. No compromise: that's that the headline. Now for that, what all do I need to do? I need to do two, three things. I started from saying, what all will I sell? I can't sell anything and everything.
First of all, I will only do few things. If I have to bring predictability, I can't do it only by assuming that my last mile force will be the best in the business.
That's just an impossible assumption to sustain. My processes have to aid it, my product definition has to aid it and then my people have to aid it. It cannot be only people. So first I said, I will only do modular furniture. I will not do anything else. I started with that. Everybody else was doing everything.
Akshay: The product quality then at least you can control because it can be centrally made instead of painting, which you can't centrally control.
Srikanth: Exactly. The second thing I said was, no manual labour will be used in the last mile.
Akshay: Like Ikea model.
Srikanth: It was a very difficult call you can imagine, right now we are 1000 homes a month. We are doing 600,700 crore revenue. Now everybody thinks it's a great idea. And then I decided what are all the things that I want to do myself and what all do I want to just control? I can't do everything myself. That was clear. So the first thing I said was, for example manufacturing. Which is basically a lease line model.
Akshay: What's the lease line model?
Srikanth: You're going to manufacture for me but your whole line will be only for use for HomeLane. It won't be used for anybody else.
Akshay: So they're like third party contract manufacturing.
Srikanth: Why should they work with me? Because I'm giving them consistent volume. That's why they should work with me. Then I thought of last mile installation. Last mile installation is where things fail mostly.
But I still said, if I have to control and expand this and have control over the customer experience, it needs to be a so-near-yet-so-far model, which means that I should not employ them directly, but I should be able to control them without employing them, which was a bit tricky. Then I came up with this concept of a franchisee model.
We call it a FOCO model: franchisee owned, company operated. A franchisee in our business does two things for us. He puts up a store. Abi humary pass 54 stores hai India mai. Investment for each store is approximately 1 and a half crores. They put up one and a half crores of CapEx. HomeLane does not put up a single rupee of CapEx.
They also hire 30 or 40 carpenters per store, the franchisee. The sales in the store is run by HomeLane not by the franchisee.
Akshay: Like you deploy your manpower there who is handling customers.
Srikanth: Sales guy is my guy, designer is my designer. The franchisee has no control over it. They also do the last mile install. Reason for that was, in our business you are not only going to be installing modular furniture.
The local entrepreneur who is based in Thane, is the best guy who can get all this together in a fast timeline and in an acceptable quality.
Akshay: And he also knows how to navigate like getting the permission for commercial vehicle and delivery and location and all that.
Srikanth: So decided to keep manufacturing out, decided to keep the last mile installation out and basically decided to cut the catalogue to as much smaller, what we call a finite catalogue, which is no major skill is required to install. Just assembling work is required in the customer site. So the skill requirement in the last mile became very less and that was our secret sauce.
Akshay: This sounds extremely efficient, but was this the case from day one or did you discover it?
Srikanth: I discovered it. This was never the case from day one.
Akshay: Then your launch must have been limited to one area.
Srikanth: Just Bangalore. We had one showroom, first 6 months 5 crores a month, 6 crore a month. We didn't know what to do.
Akshay: And these were turnkey projects. Like someone bought an apartment and gave you the work to get it up to living standards.
Srikanth: Yeah, and after six months, I realized that order lena asana hai, usko execute karna is the tough work. One thing was, I started this business to improve the customer journey experience. We were doing exactly the opposite. We were worse than the carpenter.
Because we just could not, can you imagine doing a 6 crore every month projects execution! It was just impossible. I still remember some requests which came up. One customer came up and said, my son loves music. Ap cot bana rahy ho na, ap cot piano ki shape mai banao. I couldn't sleep for two nights. I said, how am I going to get a guy to do this?
But I had taken the order, I had taken advance, now I had to do it. And I was very lucky. I chanced upon this book called Uncommon Service. It's by this author called Frances Frei, who was a professor at Harvard Business School. She is a very senior lady who has taught there for a long time.
She had a very interesting theory. She says, any business in service delivery can never be great at everything it does. If you try to be great at everything, which means tum maximum variety do gy, best price, best service, best warranty b do gy. Then you'll be mediocre at everything. So then it dawned upon me saying that in our business where there's so much of operational complexity, variety was the enemy of scale. The more the variety, the less the scale that was possible.
Akshay: It's hard to do quality control if you have too many SKUs.
Srikanth: Then to me dawned saying, I think I should decide what I don't want to do very clearly, then define it. That time our ticket sizes were 15 lakhs per house. I completely said, we will only start with modular furniture. We won't do anything else.
Akshay: At that time you were doing painting and bathroom fittings and all of that.
Srikanth: Everything we were doing. First we said, we can't be great at everything. Let's be clear. Who is our customer and what does he value? That was one book which really struck home for me. The other example that struck home for me, which was not in the book, but which I myself connected with was Indigo Airlines.
Indigo started amongst the airlines the last in India. But they were very clear from day one. There were so many large airlines. Air India of course was there. They came in very clearly saying, mery ek b plane me business class seat nai rahy ga.
I am serving just the guy who is only interested in getting from point A to point B on time every time. I'm not going to give him full white glove service. It's not for me. They started with no meals first.
Akshay: It was talked about a lot that there are no meals on this flight.
Srikanth: It was exactly similar for us. Not only we decided that we won't do so many services, we stopped doing civil, flooring you name it, we stopped all of that. We said we'll start with modular furniture.
And even in the modular furniture, we said we'll have a finite catalogue, which means that if my competition has 2000 colour options of laminate, I will have a 100 colour options of laminate. I'll have 5%. What does that do to me? My supply chain complexity is much lesser, my pricing is better, my stockouts are fewer.
I don't have a problem of my vendor saying, stock nai hai. So I can fulfill my 45 days or rent promise. Basically this 45 days or rent promise became our North Star. We started off by saying, this sounds like a very nice line which customers will immediately get, to saying, if we can't do the service in 45 days, we are not offering the service. It became reverse.
Akshay: And I'm guessing anyway, that Pareto law would apply, 20% of the SKUs would be responsible for 80% of volume sold.
Srikanth: It's not like we were excluding too much of the TG also. So that was a big turning point. It was a game changer for us.
Akshay: How did the first franchisee get signed up then? So far, you're still in Bangalore running one storefront and you signed up contract manufacturing also?
Srikanth: Contract manufacturing, I didn't have the quantity to do one full factory, so I started off project by project.
Akshay: Are these like carpenter shops or are these like factories?
Srikanth: No, these would be modular furniture shops. These won't be carpenter shops. They will be some 2,3 crores of equipment there. One beam saw and one HB banding machine, et cetera. That's a typical kind of small unit.
Now of course, it's much larger but we started by per project. Now we do the whole lease line. We had the first franchisee, our first store was on Old Madras Rd, just off Indiranagar in Bangalore.
Akshay: And this store had furniture on display? What did the store look like?
Srikanth: Yes, it's an experience centre about 4,000 square feet. It'll have samples of our kitchens, wardrobes, entertainment units, all of that. You can't buy anything there, you can only experience. I set up the first store myself using our own CapEx, ran it for six months, then figured out what is the return that I'm getting for the CapEx and then came out with a model for a franchisee saying, you put so much CapEx, you will get this much percentage of revenue share every month of orders coming in. Of orders you are installing, you will have a different revenue share for that. A project lifetime for us is about 150 days, about five months.
And when he installs the project, then he will get installation revenue. Both are variable. There's no fixed cost. I'm not sharing rent with him. I'm not doing any of those things. Basically it's his risk and his reward.
Akshay: Why is the lifecycle 150 days? You have that 45-day promise.
Srikanth: But the customer takes 100 days to finalize the design. Customized, take the measurements etc.
Akshay: It's not like going to Lenskart, trying 10 frames, choosing one. It's not like that.
Srikanth: It's not as simple as that.
Akshay: This would include only the woodwork or also the sofa, the table, all of the that.
Srikanth: Everything, but we don't make the products. The moveable furniture like cots, sofas, dining tables, we only trade in them. My focus again on what not to do. Can't do everything. We only will do modular furniture. Everything else, we will not let go of the business, but we trade in it.
Akshay: You have suppliers and you have a catalogue of those products also. But those are not built as per your specifications. Whereas modular is built.
Srikanth: Now they are built by us.
Akshay: This two part revenue share, first part is probably when the customer gives an advance, like he would give something and from that the franchise owner gets paid. And the second part would be on delivery they would pay the remaining amount.
Srikanth: After installation, not only on delivery. After installation the franchisee will get paid.
Akshay: This sounds like a business which needs a lot of working capital.
Srikanth: No, it's negative working capital. Customer gives you a hundred percent advance. They give you 10% and then 40% and then 50%. Before you ship the product, you get the money.
Akshay: Which sounds surprising given how low trust this market is, people don't trust that.
Srikanth: But the low trust is both ways, which is why if you go to a carpenter once you give that money, then you are pretty much stuck. You can't get out after that. That's how the industry has worked. You always pay in advance.
Akshay: But you found it challenging? Or it was not a challenge to get that remaining 50% before delivery.
Srikanth: About 5% of our customers even now crib about it. But we are very clear with our policies and we have never made an exception till today. We have served about 30,000 customers so far in the last eight and a half years.
Akshay: Which is again, your philosophy that better to say no to things that you can't do. You'd rather say no to that customer who is not ready.
Srikanth: I'd rather say no.
Akshay: I love how focused you are. And I think that comes from doing multiple startups. As a first-time founder, you find it hard to say no. You want to do everything.
Srikanth: Revenue is hard to refuse.
Akshay: Tell me that journey in terms of building that franchisee network of 50 stores. How did you sign up the first one and then how did you scale that up?
Srikanth: The first one actually was quite tough. First of all, it was a totally new concept. That's the risk. And I never wanted to compromise.
My rule was simple. I will have the same rule for everybody from day one till the end and that's it. You want to take the risk; you take the risk. You don't want to, don't take the risk. That one centre that I had opened, I converted that itself into a franchisee centre.
Akshay: So the revenue was already assured.
Srikanth: I found 2 partners actually who invested in that. We had a bad time. First 6-9 months, we were also figuring out. He used to crib, he used to say the material is not reaching on time, the material always has some part missing.
For him every day more of the carpenter is more money. So he would be cribbing if anything was reaching the site in a wrong manner because that was our responsibility: manufacturing and shipping. It was not so good, but we learned a lot in that nine months. Unfortunately that specific franchisee, he lost his patience and he said, I want out.
By then we had started expanding to other stores. We had two more stores in Bangalore, one store in Chennai, one in Hyderabad, one in Mumbai.
Akshay: And these are like you only setup, or you found franchisees?
Srikanth: No, all were franchised. They looked at this model and they all signed up. Obviously, they didn't know too much of the details that this was not going so well. But they all liked the model and they signed up, but it was like five or six stores. I pretty much did the selling myself to all those franchisees. Now, we are on the other end. We have 54 stores. We have only about 35 franchisees. About 50% of our franchisees has a minimum of a second store. We have a reverse problem now. We have too much demand.
It took some time, lot of learning. We also had to tweak the revenue share because we started off with too much initially and then we made it too less and then we realized so we increased it a little bit. Like we adjusted the volume, like that we adjusted it so that it needs to be sustainable for them and for us.
I think this is one of the few models which are scaled to this extent. We do about 80,90 crores a month right now and everything comes through our franchisees stores.
Akshay: Do you have a science behind where to open? Because there could be cannibalization happening, two stores are too close to each other. How does that happen?
Srikanth: We follow two or three rules. One is, we have a five kilometre rule. Before we open in any new city or a new store where there is no other store. So there's no question of cannibalization. We look for people searching online for modular design, interior design, modular kitchen.
These are the keywords that we see, where the searches are coming from. If the searches are more in HSR than in Koramangala, then we'll open in HSR and not in Koramangala. And obviously the third one would be the propensity to spend. For example in Delhi and Hyderabad, their propensity to spend is much higher than, let's say Chennai is very conservative, whereas the reverse is true in Hyderabad or Delhi maybe.
Akshay: There is a show off value especially in Delhi.
Srikanth: We look at all of those and then take a combination and then we pick on the geographies.
Akshay: How did you fund this? Did you need funding because it says negative working capital?
Srikanth: No, it needs funding. We need to build technology and initially for customer acquisition you need. I've raised about a 105 million dollars so far to be exact for HomeLane, over five funding rounds. We have the top names; Sequoia Capital is an investor, Accel Partners is an investor, Pidilite Ventures is an investor. JSW is an investor. I have enough investors. We have got like a bunch of investors who are very supportive and who back us.
Akshay: Why a hundred million? I mean is it the customer acquisition that is costing more or is it the technology.
Srikanth: We can divide the spend that we have done of this money in broadly three buckets. One would be on branding and customer acquisition. We have signed on Mahendra Singh Dhoni as our brand ambassador.
I don't know if you saw on IPL, we launched a campaign TVC. We have spent some decent amount of money, Dhoni we have signed on for three years. So that's a commitment for a longer period of time, et cetera. The second one that we have is on technology.
For example we have got a platform called Spacecraft, which is a virtual 3D design collaboration platform, which is used by the designer and the customer to collaborate and design without meeting physically. They both will be looking at the same scene, which will be the apartment view and the designer will be able to design the modular furniture using spacecraft itself.
And this really helped us during Covid because most of our competitors shrunk during Covid. Because it's a consultative selling business and you need to meet physically to do this business. We managed to sell without meeting physically and because of spacecraft. And we didn't have any year in which we shrunk. We grew every year, even during covid.
Akshay: So spacecraft is like a metaverse kind of an experience.
Srikanth: Metaverse is the next level. This is simple 3D design, in which you can see screen, you and I can see the same screen. The great part about spacecraft is, it is connected to exact price.
And the customer can see the dream home but with the price, like taxi meter the price will keep going up as you keep adding stuff.
Akshay: So all the SKUs will be available to the designer. He can just select an SKU, drag it and change the colour.
Srikanth: You just drag it and it'll add it. Then the designer can give prompts as to how you can reduce the price and so on and so forth.
That was the second area. The third one was just growth itself. You have a franchisee model, you don't have a CapEx requirement, you still need to invest on that market to grow that market.
So that also requires a little bit of investment. If I'm opening in Jaipur, I won't make money from day one. I'll lose money for the first six months before I start making.
Akshay: You have to do the payroll for sales and designers because you have a designer and a salesperson in each store.
Srikanth: So those are the three areas that we spend money on.
Akshay: How do you do lead generation at scale? Is it Facebook ads or what are the ways in which you are doing that?
Srikanth: About 85% of our leads are digital, out of which about 70% of them are paid and 30% of them are organic.
And the balance 15% comes from the referral and from offline. Tie up with builders, et cetera and our existing happy customers refer other customers.
Akshay: Is the storefront also like generating leads? Is it a prominent location and all that?
Srikanth: It does but it's very small. Hardly 1, 2%. Because this is a planned purchase. You don't go and buy a kitchen.
Akshay: I want to understand celebrity endorsement a bit. What kind of celebrity endorsement works. Like you chose Dhoni, was there a science behind choosing Dhoni?
Srikanth: We believe that HomeLane is a hero archetype because when a customer is doing up their home, they're a bit confused. You need someone with an assured thing saying, I know my stuff and I will take you to the right place. So Dhoni gives you that calm, as a personality.
Akshay: You want to project competence and Dhoni projects competence.
Srikanth: That was one reason why we did that.
Akshay: What were some of the challenges in that 1 to 50 or 55 franchisee journey? That whole scale up of the last seven, eight years?
Srikanth: I think the challenges differ as you scale. Initially, convincing other people on your vision saying ye kaam kary ga is itself the biggest kind of challenge.
But after that part is proven already. Consistency of that messaging, consistency of you having the same rules for everybody, being fully transparent, making sure you have the best team to handle this at a scaled manner. Nobody should think that because he is in Bangalore, he is getting a better deal.
I'm in Jaipur I may not get such a good deal. No! Every franchisee has exactly the same rules. Everything is software driven. Everything is transparency based. How do you communicate all of this? As a brand, we said we will have these values, trust and transparency, empathy, right collaboration, customer obsession are some of our values. What is the most difficult as per me is that from that 50 employees to now 2,300 employees, how do you get the consistency of messaging to all of them so that everybody, at some points in time, walk the talk as far as the HomeLane values are concerned. That is the most difficult, according to me.
Akshay: And do you have an answer to that? How to let your culture permeate?
Srikanth: First of all, this is culture in a company's top down. You have to walk the talk. If you are not transparent, then you have no right to ask your employee to be transparent, frankly as for me as a founder, one.
Second is, today with technology you must use it to over-communicate, keep stressing. It can be like a broken record, you may be seeing but it is very important for you to keep stressing on the pluses that this will bring in. Whether you like it or not, employee churn is a reality. You will have 2,3, 4% churn every month.
So for me what that means is that out of the 2,300 people, I have 50 to 75 people going out every month and about around the same number coming in every month. Every three months there are 200 new guys, 250 new people which I have to communicate with and tell them because they don't care unless you tell them that it's important.
Akshay: Help me understand the lay of the land. On the one hand you have say like a stacky board, direct type of competitor, say Livspace. Then you have Pepperfry, Wakefit these kind of furniture brands. And then you would also have the old school, Godrej also is a furniture brand. So how do you bucket these competitors? Whom do you see as competitors? Whom do you not see as competitors?
Srikanth: Frankly, if you take all of the people that you said just now, and all the other branded players like DesignCafe, Bonito, all of those guys they all will together constitute about 5% of the market share today.
The big architects, all of those would be about 8%. 87% of the market share is still with the unorganized segment. So as far as we are concerned very clearly, we are not interested in taking half percent more market share from Livspace. We are interested in taking 5% market share from the unorganized segment.
Akshay: Unorganized means, say it could be a local carpenter or it could be a contractor.
Srikanth: Local carpenter, contractor.
Akshay: How would you take market share from them? Is it just that, as disposable incomes increase so people are willing to spend more for assurance for predictability?
Srikanth: Absolutely, aspirational value keeps going up. You want a personalized design. You want something that's made for you that cannot be done by a contractor or a carpenter. You don't want to do project management. You want to outsource project management. That cannot be done by a carpenter or a contractor. So that's where we come in.
Akshay: So for a VC, essentially HomeLane is a bet on the India consumption story. As Indian disposable incomes increase, consumption patterns will change and HomeLane fits into the new India.
Srikanth: Absolutely.
Akshay: So you raised about 50 million dollars in your last round. Will your next round be like a unicorn round?
Srikanth: I don't know about that. I think we are more interested in getting to profitability ideally rather than raising more money at this point in time.
We are very focused on getting to be EBITDA profitable, which will happen in about six months from now. We did hit cash profitability during Covid, but then we raised a round and we went for growth. At that time we were doing about 2-300 crores of revenue.
Now we are closer to about a 100 million dollars of revenue. I haven't spent so much time reminiscing about my early days of entrepreneurship as much as I have with you today. So it brought back a lot of memories for me also.
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Until the next founder's thesis📕,
Your host, AD
Amazing interview covered all the points if one is looking for building a brand need to read this .