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The IITian who started a trucking company | Vahak
Did you know that about 1/6th of India's GDP is spent on Logistics? With India's GDP predicted to hit 1 trillion dollars soon, the Logistics industry is set to become a massive 160 billion dollar market. Talk about incredible potential!
Logistics is the economy's lifeblood, making it possible for goods to be produced at the lowest costs and conveniently delivered to consumers. Yet, despite its immense importance, large parts of this sector remain unorganised. It's time for a change!
Bengaluru-based Vahak aims to revolutionize the Indian logistics industry.
In India, the average transporter owns fewer than 10 lorries, and there can be 2-3 intermediaries between the transporter and the company buying the transport service. Vahak seeks to bridge these gaps and improve the logistics ecosystem's efficiency.
Karan Shaha talks about discovering the opportunity and finding the product-market fit to make Vahak a leader in its category.
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Karan Shaha: Hi, I am Karan. I am the co-founder and CEO of Vahak.
I basically belong from a service class family. My father works with LIC, he's basically a senior branch manager at this point of time.
And my mother is a homemaker. But during our whole journey, she basically started multiple businesses from the house. I was born in a town called Bhilai, which is Chhattisgarh. My mother had a big dream of basically getting both of her sons to IIT. I gave the IIT exam in 2011 and got qualified for IIT Kanpur. And then basically I started studying mechanical engineering from IIT Kanpur. So I started my college journey in 2011.
The culture in IIT was amazing. So one of the big influences I can say in my life where my colleagues and my friends and the kinda atmosphere that I got in the college. So, one of the things that I did was I participated in a lot of extracurricular activities. So having said that, I am someone who always wanted to do something of my own.
But being a college student, I did not understand how business works. How a startup works. What are the core essence on the basis of which a business is created, right.
So, in the final year of my college, I started studying about how a business is made, what are some of the key ingredients. And at that point of time, I mean, in 2014, 2015, the startup boom was already on its way. And that is where I actually met my co-founder. So, my co-founder in Vahak is Vikas and he was basically my batchmate in college. Both of us studied mechanical engineering together for the four years that we stayed together.
And we used to have adjacent rooms. So I was in very close visibility with him, and we developed a very good friendship during that period. Right after graduation in 2015, I got an opportunity to basically work with a very, very early stage company, which was called Bishop. So, Bishop was basically founded by IIT, IIM graduates. And Bishop basically used to provide on demand, concierge service to anyone who wanted to get any sort of product from the market. You can say it was pre Dunzo but the model was very similar in some ways. They were not doing delivery, but they were definitely taking orders and basically outsourcing the delivery to somebody else. But the model was similar in a sense that through Bishop, you can basically order anything. So I basically joined the company as the first employee. I was the third person in the company after the founders. And one of the big opportunities that I got was to live with the founders. So when I started my journey, founders basically invited me to live with them and basically handle the operations part of the business.
It was a very good opportunity for me.
Akshay Datt: They were like working and living from the same space?
Karan Shaha: Yes, absolutely.. It was just two people company. They had not even started when I joined, and I was there from day one.
Akshay Datt: I'm Amazed that you took that kind of a bet.
It's very hard for me to think that an IIT-an who has like unlimited opportunities in front of him. And I mean, you can earn very good salaries depending on what field you are opting for. What made you leave all that? And I 'm sure the salary here would've been pretty low also, right?
Because it was early stage.
Karan Shaha: Absolutely. So the salary was pretty low. One of the things that basically helped me was that money was always a part of my life, but I'm someone who values my freedom, my opportunities, the life I'm living over money, So, when I joined Bishop, I was actually not looking for a job, but I was actually preparing for CAT, since I was fascinated by business, I wanted to do MBA. And that is why I basically went from my hometown to Delhi to prepare for CAT. And during my preparations, I got an opportunity to work there. And the founders basically invited me to work from their home itself.
That was a very good opportunity for me because I was basically spending 24 hours with these very smart guys, right? They were very qualified individuals. They had a very big plan in their mind. And that gave me the confidence, right? That gave me the confidence that, wow, these guys are just thinking about startup.
And the day they start working, the startup has started. That was a very new experience for me, right? I worked there for a short period of time, about three to four months, but that period gave me some very strong push in my life, right? It gave me the confidence, as I said. Right after that, since I'm from Chhattisgarh, just to give you a bit of context on Chhattisgarh, Chhattisgarh is basically a very mineral rich state. It's centrally located, so the business of transportation is very strong there, right? It's a big part of the economy. Some of my family members had rice mills back then in Raipur, right? And during my preparations for CAT, they basically told me that current booking a truck from the market is a big hassle.
The truck rates continuously fluctuate. There is no way to find a proper lorry owner, a proper transporter from the market. There is no way to establish trust. And that is where I thought that there is a big opportunity. So I basically contacted Vikas, he was working as a consultant back then.
Both of us started doing a bit of our research about the market and the problems that are there in the market. And this was back in 2016, right? We graduated 2015, and this was back in 2016. So we did a bit of our research and we did not understood what are the deep rooted issues, but we understood that the problem is huge, the entire nation is facing it.
We, as a country, lakh in terms of performance of the entire entire transport industry. And in 2016 we basically came back to my hometown and we started our own transport company.
Akshay Datt: Like both of you quite your jobs and-?
Karan Shaha: Yes. Both of us basically quit our jobs. We took about 20 lakh rupees of loan from a friend's father who trusted us to do things.
We took his money and we came back to my hometown and started our own transport company.
Akshay Datt: What is a transport company? Doesn't a transport company have to own trucks? Is that what you thought? That you will buy trucks and or like, help me understand.
Karan Shaha: Sure. So, we never wanted to buy trucks, but just to give you a bit of context on what a transport company is, a transport company may or may not have trucks of their own, but they manage the entire transaction. So as soon as a transport company gets an order from a shipper, which is basically a factory on an industry, right? What they have to do is they have to basically source lorries from the market. There are more than 10 million lorries, which are owned by a lot of very small lorry owners. So transport company's job is to basically match, make the load from the existing lorries from the market, manage the entire operations, because there is a huge trust gap in the market.
A transporter acts as a guarantor for both the parties involved. Transporter also provides working capital and manages the entire operations, but they don't necessarily have to have a truck of their own. So we were working on a very similar module.
Akshay Datt: What do you mean they provide working capital?
The shipper can pay after 60 days or something. So, that way.
And the lorry owner gets paid immediately so that 60 days working capital is being funded by the transporter.
Karan Shaha: Yes. So typically a shipper says that, you know, I'm giving you 20 lakh worth of my material.
I don't want to pay for freight upfront. But the lorry owner is a very small individual.
Akshay Datt: Hand to mouth. Yeah.
Karan Shaha: Yes, exactly right. They don't really have a lot of spare cash with them. So what a transporter has to do is they have to pay 70, 80% of the freight in advance to the lorry owner, on the basis of which they deliver the material, brings back a proof of delivery to the transport company at that point of time, they get the remaining balance, and based on the proof of delivery that the transporter has received they get money from the shipper after a period of 30 or 60 days in some cases.
So that is where working capital is required. So we started our own transport company but we did not know that the issues are very, very big So, we basically started going to factories and industries.
These industries and factories that we approached were also surprised by the fact that we are very young individuals coming into an industry which is age- old. Typically they don't see this kind of a thing, but we got a very good response from them. These shippers were happy to give us their orders because they trusted us.
We basically set up a very small office in a transport Arian wrapper and we started our operations.
Akshay Datt: And at this time Rivigo and Blackbuck, these companies have started up, when you started?
Karan Shaha: Yes. So I think Rivigo and Blackbuck had already started their operations and Rivigo and Blackbuck are typical transport companies.
These are large transport companies, right? So when we started our operations, we were a very small version of them, right? So what we basically did was we ran this transport company for a period of almost two and a half years. Okay. We generated some good amount of revenue through that as well.
Akshay Datt: What kind of monthly revenue were you doing? Like monthly billing?
Karan Shaha: So for the period of two years that we worked, we generated about, 2, 2.5 crores of revenue through that business. And I mean, it's not very large in context of a transport company because the freights are usually higher.
The margin is usually low. We about, 5, 6% in margin, but since the freight amount itself is high the revenue looks big. Right. So we basically ran that transport company for almost two and a half years.
But more importantly, we actually met more than a thousand lorry owners in transport SMEs during our whole experience of being a transport company. And, after a certain period of time, we realized that we are facing a lot of issues in scaling this transport company.
Akshay Datt: Why couldn't you just keep scaling?
Karan Shaha: So, one of the major problems with scaling a transport company is the capital requirement. So as I said, we had 20 lakh rupees of money and that those were the transactions that we could do. Even if we have a load and a lorry in front of us, we cannot match-make them unless and until we have money to give to the owner upfront.
Right? So it's a huge credit burden that there is on a transport company, as well as, the fact that you have to manage the entire operations, the fact that you have to act as guarantor between both the parties, that is a lot of capital intensive business. Because you need a lot of people on the ground to basically manage these things, right? Because there are a lot of problems and mishaps that can happen during the lorry's on transit. So I would actually love to give you one example here. So the first transaction that we did as a transport company, we basically placed the lorry.
The lorry went to the shipper's factory. Since the steel business is very good in Raipur, the material that was getting transported were steel rails and the trailer loaded the material. And at that point of time, we basically went to our home to have lunch and all right, as soon as we started having lunch, we got a call from the consigner, the shipper that the rails have fallen from the trailer in transit. At that point of time, I mean, we as a transporter have to act as a guarantor. We ran to the place where the lorry was. We had to, book a vehicle to pick the lorry back to the trailer. And that is where there is a lot of operations burden as well. This is a very, a small example, right? In many cases theft happens.
In many cases, the lorry breaks down. Accidents happen. So, when you act as a guarantor for such a big transaction it takes a toll on your company, right?
Akshay Datt: And by guarantor it means that if the theft happened, then you would have to make up for it unless you took insurance or something.
Karan Shaha: Yes, absolutely. So, if the lorry owner is not getting paid on time, we have to pay him. If the load owner is not satisfied with the service, we have to bear the brunt. So that's it.
Akshay Datt: And if the material, if that gets damaged, then you have to pay the cost of damage.
Karan Shaha: Exactly.. So that is why that business has a lot of skin in the game. So, that is one of the examples of some of the problems that can happen. So, during our experience, we understood that it's difficult to scale this business, but we realized the fact that every single transport company in the market is facing a similar issue.
We had to set up a call center, which was not scalable, and there were multiple issues that every single SME, large or small was facing. At that point of time. We basically pivoted from our transport company to a pure tech module. What we visualized at that point of time is a product that can help such transport companies in the market to scale their operations.
Because we were engineers, we knew technology, we knew that such problems can be solved through technology. But at that point of time, maybe the environment was not very well receiving to the new technologies that were coming up. So we we basically shut down our transport business and we started working on Vahak, this was back in 2019. With Vahak, we basically wanted to create a marketplace, but at its core, our vision was to create a community. Because one of the major issues that we saw in the market was that there is a huge trust gap, right? As I said, there are more than 10 million heavy commercial vehicles in the nation, and more than 75% of those vehicles are owned by lorry owners which have less than two vehicles.
So this is what we used to call, you know Chak So he's the one who is owning the vehicle and who is the one who is driving, right? Driver-cum-owner. Exactly. And these people are mobile, right? They keep moving from one place to another. They don't have a lot of money in hand, so they don't want to deal with anyone whom they do not know personally because they're never sure when will they get the money.
And same on the demand side, right? A transport company or a shipper does not want to deal with anyone whom they do not know personally because they're never sure what will happen to the large amount of material that they're giving, right? That is where there is a huge trust gap. What this trust gap does is that this basically reduces the efficiency of the entire nation.
Lorry owners at this point of time, on an average, are able to run their lorries for just 50% of time in a month. The rest, 50% of the time, they're just waiting for their next load because they're just dependent on two or three transporters to find their load, right? That is the problem that we identified. So with Vahak, the vision was never just to create a marketplace, but the vision was to create a trustable community, which can enable these users to increase their own business network, which can enable these users to create a brand value for themselves. Because more than 80% of these players do not have any online presence They have no way to prove their credibility or past history to anyone in the market. So that was a huge gap.
Akshay Datt: So this platform would directly connect vehicle owners with shippers and remove the transport agency from the equation?
Karan Shaha: No. Absolutely not. Because we were a transport company ourselves, we understood the fact that a transport company plays a very important role in the market. As I said, they act as a guarantor. They provide working capital, they manage the entire operations.
The vision is also is never to replace the transport SMEs, but to enable them to do better business, right? But to enable them to provide better services to the shippers. So we are a platform that connects lorry owners to transport SMEs and then basically connects transport SMEs to shippers. So we are a three-way platform in that sense So, we basically started working on the technology in the later stages of 2018.
And the platform was launched in the month of February in 2019.
Akshay Datt: Okay. And this was with your savings only, like bootstrapped when you launched?
Karan Shaha: Yes. As a transport company, I mean, we had a very small of money that our friend's father had given us, and that money was used to create the initial product
Akshay Datt: And you shut down your services business?
Karan Shaha: Yes, we totally shut down the transport business because, I mean, we were just two individuals. It's not possible for us to do both the things at once. We wanted to focus on one thing. And for the two years that we ran the transport company, we understood the fact that it's difficult to scale.
It's difficult to scale for anyone, let alone for two just college graduates coming into a market and trying to disrupt things. It's difficult to do that as a transport company .So the platform was launched in 2019 in the month of Feb. And the first 500 customers were onboarded by us personally.
So we had a good network in Raipur's local transport network. And that is when we started visiting these owners, these SMEs, drivers, shippers and basically started onboarding them to our platform. As soon as the first 500 users were onboarded we started seeing organic growth.
So, in the first six months of our operations, the platform had already onboarded more than 10,000 SMEs and owners onto the platform. And this was all, without a single rupee spent on marketing. At that point of time, we understood the fact that this is a platform that is really valuable, we also understood the fact that if we want to create a bigger company here, if we want to create a big technology and really create some impact, Raipur might not be the best place to do that.
At that point of time, in the later stages of 2019, we moved to Bangalore, because we obviously knew that there is a very good startup ecosystem, also in terms of the talent, in terms of the investors, in terms of the services, multiple services that we can take in Bangalore to, you know grow. So in the later stages of 2019, we moved to Bangalore.
When we moved to Bangalore, we had just six months of money left in the bank. We had cut down all of our costs because we wanted to take it as far as possible.
Akshay Datt: And the product was live?
Karan Shaha: The product was live. As I said, we already had more than 10,000 users on the platform.
So the product was live.
Akshay Datt: And these 10,000 users were what, like transport agencies, truck owners? What's the breakup?
Karan Shaha: Shippers actually. So all the three types of parties were on the platform. We had a very good response from lorry owners. So out of the 10,000 users that we had onboarded, more than 5,000 were just pure lorry owners. And the value that they saw in the platform was an opportunity to create a brand for themselves, which they were getting nowhere else. Any single user on the platform was able to create a profile based on the different business details they gave us. They were able to make connections. They were able to get ratings and reviews.
They were able to verify their documents and this basically give them an option to create a brand value for themselves. Right?
Akshay Datt: How did the signups happen? How did you onboard such a large user base?
Karan Shaha: So, we basically created a mobile application, and as I said, after the first 500 SMEs were onboarded, SMEs and owners were onboarded, everything was organic. So, transport company is a very close-knit community, right? There was no covid back then. And what these transport businesses and lobby owners do is that they're very active on the ground. They go to their offices, they hang out a lot during lunch hours.
They hang out a lot after their office hours. They communicate a lot.
Akshay Datt: They're always looking for business. As you said, they're 50% is the current capacity utilization.
Karan Shaha: Yes. So they are constantly looking for business. They have a lot of unions that they are a part of. It was already a big offline community that we were able to see, and that is how that word of mouth spread in the early days.
Akshay Datt: And were they getting business also, were were orders getting placed?
Karan Shaha: Yes. I mean, at that point of time we did not have a full fledged marketplace, but what we were able to see is that users coming in and making a lot of connections.
Akshay Datt: So it was like Just Dial kind of a model that time, basically, like you could get the phone number of somebody and then you could directly call them, like a Just Dial or India Mart, like a discovery platform.
Karan Shaha: Yes, absolutely. And that was good enough to tell us that the is traction in the market. These users are coming back because we were calling a lot of these users, we were able to understand the fact that they're coming back because they want and they're getting more business.
So when we moved to Bangalore, we started raising funds. And in the first two months we basically closed the funding with Leo Capital. Leo Capital invested around 800K USD. At that point of time, we also onboarded some very Mark Angels like Abhishek himself, right? So, that was basically an 800K round, which was good enough for us to start our company, to basically develop the technology to hire some very good engineers into the team.
And that is what we did. We started developing the entire technology, started developing the marketplace. And then, the growth became even faster. So in the first year we had onboarded more than a lakh users. And at that point of time we basically started growing the team, raised our next round, which was a round which was led by global That was a $5.3 million round that we raised. And at this point of time, we were clearly able to understand the fact that this is a product that has huge potential.
Akshay Datt: Tell me how the product evolved. Like you were a discovery platform in 2019. How did that evolve?
Karan Shaha: The main focus when we started the platform in 2019 was to fill the trust gap.
So the first pieces of the entire product was the profiles that the users could create to create their own brand value. And they can, as you said, make connections and call other users.
Akshay Datt: And could they also receive testimonials like, testimonials or ratings?
Karan Shaha: They were able to receive ratings, reviews, they were able to make connections but they were not able to verify their documents at that point of time.
Akshay Datt: Verify document means like verifying proof of ownership of the truck. Like, by uploading an RC?
Karan Shaha: Yes. The lorry owner now at this point of time can basically verify their RC, insurance, fitness on the platform, and on the demand side, the transport SME or a shipper can basically verify their GST, Adhaar and any sort of company verification document.
Right? So the next step for us was to develop the marketplace where users can not just call any other users, but they can actually post their loads, or their lorry. So at that point of time, what started happening was a load owner can come to the platform, can tell us that I want my material to get transported from point A to point B.
This is the exact weight of the load. This is the lorry type that I want. This is the amount of advance that I'm willing to pay, and this is the expected rate from my side. So we basically evolved from a community to a marketplace, right? And the platform facilitated broadcasting of the marketplace.
As soon as a load owner posts a load, we used to broadcast it throughout the lorry owner network and they could start.
Akshay Datt: Would you like do some curation? Because I mean, broadcasting to all 5,000 may not be productive, right?
Maybe location matching and lorry matching and some of those things.
Karan Shaha: Yes, absolutely. Absolutely. In the very initial phases, all of those things were not there because the platform was in its nascent stage but at this point of time, we do all of that. Every single lorry owner tells us the preferred loads that they want to take, the preferred routes that they wanna go, based on the transactions that they have done in the past we're able to analyze what is the market rate that should be ideal. And all of those things are happening at this point of time. Right. But back then it was not there.
Akshay Datt: And this posting you enabled for shippers or for transporters, like the transport agencies?
Karan Shaha: Both.
Akshay Datt: So when a shipper posts a load requirement, then it is broadcasted to transport agencies.
And when a transport agency post a load requirement, then it is broadcasted to lorry owners?
Karan Shaha: Absolutely. And it was vice versa because a lorry owner can also post their lorry and that can also get broadcasted throughout the network. Right.
Akshay Datt: Okay, so if I'm free tomorrow, I can post that available this location. This is the lorry type.
Karan Shaha: Yes. That is where the matchmaking can be super quick, right? Because we know intent from both the sides. So the product basically developed from being an online community or discovery platform to a marketplace At this point of time, what we are looking to do is that, we are looking to create an entire ecosystem around the marketplace and the community that has been created.
Akshay Datt: Is this payment enabled? Does payment happen through the platform or is it only matchmaking?
Karan Shaha: It is payment enabled. You know One of the major problems that we saw in the market was related to payments. So load owners and shippers do not have a proper way to make transport related payments. And it's basically a multi-step process. You have to give a very small amount as cash, and you might have to go to a bank to do any FD, RTGS. If you're using internet banking, you have to add that particular beneficiary. And it was a multi-step process.
Akshay Datt: But why do you have to give cash?
Karan Shaha: A lot of times when the lorry is in transit, anything can happen, right? There can be some accident. There are also cases of bribes being taken. And for all of those, emergency expenses, a lorry owner always takes like 5 to 10% of their entire freight in cash, just to be safe on the lorry owner side, one of the major issues is that a lorry owner is never sure when they will get their payments, right? Even when the material is delivered, the lorry owner gets a payment after a long time in many cases. So, we enable payments onto the platform to make sure that we are providing a safe and secure way for both the parties to trust each other.
So at this point of time, we have our payment gateways. We have basically integrated it with an escrow account that safeguards the interest of both the parties.
Akshay Datt: So the transport agency needs to pay the entire amount upfront and it sits in the escrow. And once both parties agree that the delivery is completed, then from the escrow it gets released?
Karan Shaha: So, I mean, that is definitely one way to do it, and a lot of our transporters are happy to do it, but not everybody's happy to pay a hundred percent of the money upfront. Right?
Akshay Datt: Because you don't wanna lock your capital.
Karan Shaha: Yes. They earn interest on the money that is not being locked. So, there are multiple ways in which the escrow accounts works on our platform. There can be UPI mandates, you can basically commit to some kind of a payment at the point of e-POD. So all of those things are happening.
Akshay Datt: Just tell me what are these things? I have never heard of them. What is a UPI mandate?
Karan Shaha: Right. So what a UPI mandate does is that it basically locks the money in your bank account. So let's say I send you a mandate of 10,000 rupees. You may not have to pay me the money right now, but a UPI mandate, it basically mandates your payment based on certain conditions.
So let's say Vahak platform tells you that you just locked 10,000 rupees right now, which gives a sense of security to the lorry owner. As soon as a lorry owner gives the proof of delivery, that money automatically gets directed based on your approval. So it provides a sense of safety to both the users.
Akshay Datt: and what is e-POD?
Karan Shaha: So what is happening in the offline market at this point of time is that a lorry owner goes and delivers the material, basically takes the signature or the stamp of the warehouse where the material has been delivered. Now lorry owner has to physically come back to his starting location, give a proof of delivery, and that is when he's getting the balance payment of the freight. But this POD does not have to be offline, so it was already a push that was going in the market. Lorry owners can upload an e-POD, which is basically just a photo of the proof of delivery based on the photo a load owner can also be sure that the material has been delivered.
There is no shortage, there is no theft, and that is when a mandate can happen.
Akshay Datt: And do you also do like geotagging?
Karan Shaha: Yeah, at this point of time we are doing it through the mobile application, but as I said, now we are looking to create an entire ecosystem. So things like GPS, things like sim tracking facilities, tracking on the basis of their FASTag tools, All of those things are happening now. So, with geotagging, the major problem that gets solved is visibility of the lorry.
So, without GPS being in the lorry or without any kind of tracking enable, as soon as lorry dispatches from loading point, there is no visibility as to where the lorry is. Which route is it taking, where is it stopping? What speed is it running at and what is happening?
See, without the visibility, there is not much visibility for both the parties. A load owner is never sure when the material will be delivered. Because when you know when the material is going to be delivered, you can prepare things in such a way, right?
You can arrange labor, you can arrange the machine, if you know that this is where the lorry is, without tracking that is not possible. One more benefit that we as a platform get out of GPS is that once we know the location of a lorry we are able to pre-book it in many ways. Right. So if I know that a lorry usually goes from Bangalore to Delhi and it's in Delhi right now, it's expected to come to Bangalore in the next three days, I can basically pre-book that lorry to provide better experience to the shippers as well.
We take a commitment from the lorry owner that, when you come to Bangalore you have to go to the shipper and they're very happy to do it because usually they have to wait two or three or even four days to wait for the next load.
Getting a pre-booking is a great value proposition.
Akshay Datt: And you were talking about toll payments.
Karan Shaha: Yes. with the advent of FASTags, the entire operations have streamlined right. Nowadays , they don't have to wait a lot of time on the tolls, which usually used to take a lot of time with FASTags. One thing that we are able to do is that we are able to facilitate the recharge of FASTags, and we're also able to gain visibility of the location based on the tools.
So even if a lorry does not have a GPS or a SIM tracking enabled, based on the FASTag data, we can identify where the lorry is.
Akshay Datt: I want to understand how you get the data if there is a GPS in the vehicle. Is there like a standard way in which you can do an API integration and get the data?
Karan Shaha: Yes. We have tied up with multiple players, multiple GPS service providers since we are not a GPS provider company. Right? We are a marketplace company. We tie up with multiple GPS service providers and basically gain API access of the locations.
Akshay Datt: And how do you get the data of the tolls? Like where was the toll paid?
Karan Shaha: So it also depends on the FASTag service provider, right?
So we have tied up with multiple providers and they share the data with us.
This is how the product has evolved till now. We have gone from becoming discovery, a classified platform to becoming a marketplace. We're providing our lorry owners with the opportunity to do lorry Insurance on our platform as well. We are getting into fuel. We are getting into trucks, entire body parts.
We are getting into on-site maintenance, body works, and we are now looking to get an entire ecosystem around the marketplace that has been created.
Akshay Datt: Cargo insurance would be like the way when you're booking flight tickets, it says add insurance?
So just like that, you'll have an add insurance at like a relatively low cost which gives the transporter peace of mind that if there is any damage?
Karan Shaha: Yes. The transporter, most importantly the shipper because they know that 20, 30, 40 lakh of material is now insured. We have actually tied up with with players and we don't really play an active part in the operations part of it. We have actually tied up with Secure Now and Cover Fox at this point of time for the cargo insurance and the transit insurance piece.
These are not insurance companies, but these are insurance aggregators. So, load owners can choose to choose any of the insurance based on different plans and same for the lorry owner.
Akshay Datt: And because these are like tech enabled companies, so they will have processes for pain free claim process.
Karan Shaha: Yeah. Claim, settlement and all those kinds of things.
Akshay Datt: And you said you're getting into fuels?
Karan Shaha: Yes. I mean, majority of the freight actually goes into fuel, right? More than 50, 60% of the entire freight goes into fuel. A lot of lorry owners and transport SMEs are looking to get solutions where they are able to get predictability as to what are the fuel costs.
Through our platform, they can get discounts. We are also giving them a visibility as to where is it most profitable for them to get their fuel fueled up, the fuel companies that we are tying up with are also, in many cases, providing many other kinds of support in the patrol pumps to these lorry owners.
So a lorry owner might choose to sleep sometime. They can use any other facility like grocery stores there, right? there can be a stoppage point there, there can be a parking there, all those kinds of things.
Akshay Datt: And so you would have a tie-up let's say with BP or IOC, where you would do through QR code payment through the app or through a card, or what? Like how do you enable the transaction?
Karan Shaha: There are multiple ways. We are still in the process of doing that, but there are multiple ways in which we can do. There can be virtual cards, there can be physical cards, there can be QR codes, the payment can directly happen from our app to any of the fuel providers.
So all the options are there.
Akshay Datt: So which would mean that the transporter would need to load a wallet or something or connect with the bank account, like, so that they can do the-?
Karan Shaha: Yes.
Akshay Datt: Got it. Okay. And for parts, like you said tyres and parts, spare parts so this how are you doing this or how are you planning to do this?
Karan Shaha: So, similar to other value added services, we are also not a tyre service provider. So we are tying up with multiple online and offline vendors for this ,based on their their availability and their reach in the different locations. And that is where we are able to get better prices because we are able to provide them a predictable demand, right?
So a lottery owner may have to pay an X amount of repeat for a truck tire in the offline market. But through us, they can definitely get some good discounts and they're able to, you know do transactions online. Which is using 12 tyres or which is using 16 tyres, getting new tyres is a big cost for them.
And giving them better ease of business and discounts is a big feature that we are providing.
Akshay Datt: So you said that there is a need to give cash to the lorry owner.
The transport agency needs to give cash to the lorry owner. How are you enabling that?
Karan Shaha: So we are not enabling that at this point of time. What we do on our platform is that we know the entire freight amount. But cash is something that we are trying to reduce as much as possible.
While we know that it is something that is absolutely required for the kind of transaction that is happening but we have no control over it, right? So the transport SME pays whatever cash they have to, and the rest payment goes to us.
Akshay Datt: I wanna understand what is the business model here for you? How much do you earn on each of these things, which you are enabling?
Karan Shaha: Sure. So I'll start with the value added services first. So, on value added services we work on a profit sharing or revenue sharing model depending on the different service that is being provided. And that is where we earn a commission on the marketplace piece.
Akshay Datt: So like, if somebody is buying insurance, then there'll be some 5, 10% of that amount, which you will earn?
Karan Shaha: Yes. And it still is cheaper for the lorry owner, right? So it's a win-win situation because of the tech coming into the picture now.
Akshay Datt: Plus you're aggregating demand, so obviously you'll get a better price.
Karan Shaha: Yes. The basic price discovery and posting loads and lorries on the marketplace is free. We don't charge our users on that. But what we are looking to charge our users on now is the use of things like our safe escrow accounts. And that is one of the big ways for us. One more thing that is going to be a big source of revenue for us going forward, is the opportunity to provide working capital to these users.
So as I said, a transport company, a transport SME they have a big bottleneck of the working capital that they have, the amount of capital they have, that is the only amount of transactions that they can do. Right? And since in the offline market at this point of time, hundred percent of the business bookings, communications are through telephone calls.
So these transactions are not getting recorded. So, what these SMEs end up doing is that they go to local states, they go to local lenders, and they take loans at a very high interest rates, which usually goes up to 3% a month. Right. We, on our platform, we are looking to bridge this gap. We are looking to basically destroy this bottleneck.
We are recording these transactions. We are recording the brand value and credibility of every single user on the platform. We know the parties that they're dealing with. We know the kind of working cycle and the payment cycles that they have. And based on the data that we are recording, we are looking to provide financial solutions to these lorry owners.
Akshay Datt: Okay. So you could do basically a BNPL kind of a thing. Like they can place the order and get the whole thing done without having to pay upfront?
They can pay in X number of days. So instead of paying a hundred, they will pay hundred and five, something like that.
Karan Shaha: Yes. That is definitely one way to get into financial services.
Akshay Datt: What are the other ways that you're thinking of?
Karan Shaha: I mean, there are things like direct working capital loans.
There are things like invoice discounting. Right? There are things for, especially for the lorry owners, there is a piece around truck financing.
India, as a country, is limited by the credit that they got. So as soon as we are integrating our platform into this vertical space, having access to this data and not providing these financial services is not beneficial for anyone because our users are also looking to get this credit.
They just don't have the data to prove it yet.
Akshay Datt: And you are collecting the data to enable that?
At the initial stage, it'll be like a loan origination that you will be doing, well, you will get paid something once there is a successful dispersal.
Karan Shaha: Yeah.
Akshay Datt: Okay.
Karan Shaha: And I would say that the opportunity is very big because the market itself is growing. It's not just about optimizing the existing market but the transportation market is itself growing, right?
There is a huge pressure on this industry from the e-commerce sector. Now, with the growth in the manufacturing sector, there is a huge pressure on this industry to perform better. But there are bottle necks. There are operational inefficiencies because of which this industry has been lagging
Akshay Datt: I have not really come across an example of a marketplace, which is balancing three different stakeholders in the supply chain. Most marketplaces say that we will disrupt the middleman, here you are saying that we are a marketplace where the middleman is also there, transport agency the supplier, which is the lorry owner is also there and the shipper is also there. I mean, how would it work in the long run?
Karan Shaha: I think it's very beneficial for us to have all of these three stakeholders because all of these three stakeholders are connected with each other, right?
As you said, with us getting into lending, it helps for us to have the shipper as well as the transport agency, as well as the lorry owners on the platform. So while it may look like there are three players, which there are, but the problem between the transport SME and the lorry owner, and the problem between the shipper and the transport SME is very similar.
The shipper and transport sme, both of them are looking to book good lorries from the market. So that is where the core algorithm of matchmaking between the load and the lorry remains the same. It's just that the nature of the businesses are different, but the use case is very similar and that is why we are able to do that.
Akshay Datt: Does the transporter, have this fear that eventually the shipper can directly tie up with the lorry owner and remove him from the picture, as the platform grows, as there is more data about cloud owners, that could happen?
Karan Shaha: We truly believe because we were one transport SME ourselves.
We truly believe in the value that transport SME provides. The player that will get weeded out from the platform, when technology and data kicks in, are the brokers which are not really adding any value. So we talked about these three players right in the middle of these three players, there are brokers.
These brokers are not transport SMEs. They're not shippers, they're not lorry owners, but they're just, in many cases, they're just facilitating the information transfer without really adding any value.
Akshay Datt: Will a transport SME still add value, once you have matured more as a product? Like, I mean, you know they provide working capital, now you are taking care of that.
Karan Shaha: So the way we feel it is that every single lorry owner will become a transporter themselves the lorry owner himself, or the transport SME himself will be able to do more business. A lorry owner might be able to pay for his own working capital because these are typically two different businesses, right?
A transport SME has to set up a shop, they have to get business registration done. These are not requirements for lorry owners. Transport SME will remain the same. More and more owners might be able to act as a transporter for themselves in the long term.
Akshay Datt: Okay, so transport SMEs need to be GST registered and all of that, which a lorry owner doesn't need?
Karan Shaha: They have to get registered with the government. They have to get all of those certificates before doing anything.
Akshay Datt: So what you could do is enable a lorry owner to actually go ahead, get GST registered, get all of these other certifications, and become a transporter. Does the platform give a different access to a shipper and a transport SME, like for example can a shipper also see lorries directly and post a requirement to them, or only a transport agency can see the lorries and vice versa.
Karan Shaha: So at this point of time, it's a fairly open platform. It's a single application for all the kind of users. But now we are developing products. I mean, we are developing web applications. We are developing other types of applications, which will cater to the specific needs of these users.
Akshay Datt: Okay. And is it like a bidding system or is it like one fixed price, whatever the shipper says?
Karan Shaha: No, I mean, it totally depends. I mean, the bidding happens in all the cases because a shipper wants to know what is the price that he's getting from the market, right?
More the number of bids that they get there is the chances of getting better loads, but the market is divided into two types of transactions. First is a contractual transaction. So, big shippers in the industry like ITC, HUL all of these companies do not book lorries on demand. They know what is the amount of material that is going to be produced and they give long-term contracts.
They want to get in contract with some big transporters who can provide them fixed freight for the next one year.
Akshay Datt: Yeah. Because their output is predictable.
Karan Shaha: But majority of the Indian market, more than 75% of Indian market is what we call spot market. In spot market, a shipper or a transporter usually tries to book a lorry just four or five hours before the actual lorry is required.
That is where the prices vary. That is where the shipper and the transporter wants to get as much multiple bids as they can, and that is where auction happens.
Akshay Datt: Okay. So that is the on demand part of the market basically.
Karan Shaha: Which is the majority of the Indian market.
Akshay Datt: So, you're cater to both of these or you're catering to the on demand part?
Karan Shaha: I mean, we are mostly focused on the spot at this point of time, but we are now looking to get into contracts as well.
Akshay Datt: So in the contract does the price increase if there is a petrol price hike? Is it linked to that?
Karan Shaha: In some cases that depends on the type of contract. So a shipper might agree to increasing the freight in case there is a drastic increase in the fuel prices because that changes everything.
But in some cases it's not. In some cases, shipper asks the transport SME to manage that because even if the fuel prices go low, the rates remain the same.
Akshay Datt: Okay. So, you tell me about your funding journey. You told me you shifted to Bangalore in 2019 and then you raised funds, Leo Capital you said, right?
Karan Shaha: So we moved to Bangalore in 2019 October. We closed our first funding round in the next four months, which was a 800K, round 800K USD, led by Leo Capital, and we also onboarded some very good angels.
The next town happened in the early part of 2021, basically the first quarter of 2021. We raised around 5.3 million, which was led by RTP Global. Which is also again venture capital firm, basically based in Russia and UK. And yeah, I mean, that was basically the pre-series A round for us.
Recently, I mean, five, six months back. We raised a series A round which was 14 million dollar round which was led by nexus Venture Partners.
Akshay Datt: Yeah. So what does a VC see in you? And I'm asking because, there are already other players like Rivigo, Black Book, which are in this same space. What do they see in you? How are you different from Rivigo and Blackbook?
Karan Shaha: Sure. So I'll actually answer the second question first, and then I'll go to, what the VCs see in us.
The core differentiator here is exactly what I mentioned to you Akshay, I mean, all of these companies that we see in the market, right? Blackbook, Porter, Load share, right? All of these companies are large transport companies.
Akshay Datt: Okay. So they directly acquire shippers and directly acquire lorries. They don't work with the transport SME?
Karan Shaha: Yeah. They are a transport SME and they provide the working capital. They face exactly the same challenges that we as a small transport company used to face. That is where we are totally different from them, right? We are clearly differentiated in that sense. What VCs see in us, I mean, we are a pure technology platform, right? Which has the power to grow rapidly. We have already raised more than 18 lakh SMEs and owners in the market. Being a pure technology platform basically enables us to disproportionately add value, right? So without reaching every single town, users in these places are able to use our platform to create their own brand.
To create a brand value for themselves and to grow their business
Akshay Datt: So in case of Blackbuck and Rivigo, they are operationally intensive businesses because that's what a transport SME does.
He needs to take care of that nothing goes wrong and it's operationally intensive, but you are not operationally intensive. You don't need like thousands of feet on street who will make sure everything is running smoothly.
Karan Shaha: Yeah, totally.
Akshay Datt: Okay. Tell me about your acquisition. Do you focus on more on acquiring shippers or do you focus more on acquiring transport SMEs? I guess the lorry owners is something which is growing organically, right?
You may not really need much effort there.
Karan Shaha: You're absolutely right. On that sense, Akshay, we are getting a very good response from the lorry owners in the market. They're organically growing rapidly. We are focused more on the transport SMEs.
Akshay Datt: Okay. So there is this thing called E-way Bill, which you need to transport between states. Is that something which you are helping in? Just for people who don't know, what's an E-way bill, can you start with that? What is an E-way bill?
Karan Shaha: Right E-way Bill is something that basically came into the picture with GST coming into the picture. So with GST, basically the government created a uniform tax structure for all these states. And the same thing happened in transportation.
So earlier, what used to happen was that every single state that a transporter or a lorry has to cross they have to, give some chalan to the police person or the traffic person that is there, and there is no visibility as to what is the tax in this state, what is the tax in that state.
But now with the uniform structure, every single transaction that is basically traveling for more than 25 kilometers, it's compulsory for them to create an E-way bill. E-way bill is a document that is generated online on government portals. And this is document basically details out all the details of the transactions.
So, this is a compulsory document for any transporter or a lorry owner to move from one place to another. And it basically increases the efficiency as well, because now they don't have to stop at Nas at every state border, and they can seamlessly move from one place to another just by showing the E-way bill.
Akshay Datt: For the government, the E-way bill is a way to audit GST.
Karan Shaha: Absolutely. So it's actually beneficial. I think it's a win-win situation for all the parties involved.
So we are at this point of time manually, in some cases helping our users to create E-way bills but we're looking to properly integrate technology as well.
Akshay Datt: And you would have all the data, you would know the GST numbers of all the parties, because when you're doing the matchmaking, probably people are doing that verification, so it becomes like a single click generation.
Karan Shaha: Absolutely. And I mean, once a user has rated one E-way bill it's very easy for them to do the next. Right? Which is not really possible in the current scenario.
Akshay Datt: Okay. The first time they would be probably some OTP signed on or something like that.
Karan Shaha: Yeah. First time is the barrier, and after that there is no barriers.
Akshay Datt: This could be a monetizable feature, right? I mean, it's adding a lot of value.
Karan Shaha: Absolutely.
Akshay Datt: Okay. Very interesting. Currently, is revenue a focus right now? Like, Or is it something which you wanna look at after you have built out all of the value added services?
Karan Shaha: Right. So while we have the revenue and it's slightly growing, but we are not focused on that. The focus of our company at this point of time is to actually create that value first. We are very fortunate to have very good backers. The entire startup ecosystem is very good.
So we would want to grow as fast as possible because as a platform, we are a platform that thrives on network effect more the number of users on the platform, more value, every single new user gets out of it, right? We have already onboarded around 18 lakh SMEs and owners on our platform.
The total addressable market size for us is almost 4 cr. So we have a long way to go and we are looking to, capture 10, 20% of this market first. That is the first goal for us.
Akshay Datt: Got it. C an you predict what kind of revenue numbers you'd be doing a couple of years down the line, just to help listeners get an idea of how big a business like this could be?
Karan Shaha: Right. I mean, in terms of the revenue, I can say that in the next couple of years we'll be reaching anywhere close to, you know, 40, 50 million dollars for monthly revenue.
Akshay Datt: Monthly revenue, 40, 50 million dollars. Wow. Okay. What is revenue here? It includes the entire transaction or-?
Karan Shaha: I mean, the transactions are already, on a monthly basis, we are already doing almost 45 million through our platform.
Akshay Datt: I mean, this is a inflated number, right? It's like the GMV number.
Karan Shaha: No, it's not the GMV number, it's what we get out of the GMV because the market is huge. I mean, it's a 200 billion dollar market, right?
So if we capture 20% of it, you can imagine the kinda scale that we'll be at.
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