Ranju Sarkar finds out more about Nowfloats, the start-up that is used by 240,000 businesses.
Sara Fashions, a garments trader in Delhi, always wanted to take its business online, but did not know where to start until it found Nowfloats.
The Hyderabad-based start-up allows small businesses to create a website by downloading an app, which also allows business owners to update their website -- so critical in showing up on web searches for a particular product.
The app also prompts businesses on what they need to change on their site.
With features such as these, Nowfloats grew 500 per cent in two years and is used by 240,000 businesses that reach 13 million consumers.
In January, it raised $10 million in Series-B funding from Iron Pillar and two venture funds of IIFL, as well as Blume Ventures and Omidyar Network, which had invested in the Series-A round.
It was initially backed by Blume Ventures, Mumbai Angles and Hyderabad Angels.
''SMEs, especially in emerging markets, lack a very intuitive tool that can help them reach out to their customer and gain business online. Nowfloats has a great product for that, which implies a huge market opportunity, especially when you look at it as a platform in long term," says Anand Krishna, managing partner, Iron Pillar.
''Most importantly, it is the team and its passion for solving a huge problem through a SaaS (software as a service) product made in India that attracted us. We love product companies and believe such companies for the world can be built out of India," says Krishna, adding, ''It has done a good job of building its first product and is now focusing on its business and sales operating metrics."
EXPERT TAKE
Micro, small and medium enterprises (MSMEs), estimated at 50 million, are the backbone of India's economy, and its fastest-growing segment.
Today, MSME owners have smartphones in the smallest of towns and are adopting technology for their own business growth and productivity. Nowfloats provides a basic set of online presence and marketing tools that get MSMEs connected to the internet, which work at the lowest of bandwidths.
MSMEs do need something like this to get started on their online journey, which is paramount, given the rate at which India is getting digitised. I think Nowfloats' approach of marketing automation and standardised pricing, interspersed with human intervention, is the only way of making things work in the Indian context, with the obvious caution that sales cycles could be long.
As a member of the MSME system, I wish more players like Nowfloats with focus on Indian MSMEs get funded, and join us in spurring digital inclusion for the Indian MSME.
-- Asish Mohapatra, co-founder & sales head, Of Business, a marketplace for SMEs
Opportunity
India has 51 million small businesses. If you exclude 40 million, chaiwalas or small shops, it leaves you with a large market, says co-founder Jasminder Singh Gulati.
"There is an opportunity to create $20-billion companies in this space," he says.
It also competes with local web developers and indirectly with Just Dial (on classifieds), India Mart (b2b search), Go Daddy (web hosting), and Facebook and Google, which is providing small businesses with a free website. Luckily, many of its customers use multiple platforms, and are happy to include Nowfloats.
It has many first-time customers, but most of them are driven by returns on investment: They want to know how many leads they can get for a fee. It works with payments firms like PayU and Intstamojo and is now looking to acquire one, to help it capture data at a customer's point of sales.
Business model
It follows a classic SaaS-based subscription model, with a monthly renewal rate paid upfront. It charges a business Rs 25,000 a year.
In return, business owners get an app, which can be used to create and update their website.
"The app not only gives you a website instantly, but also has certain elements of auto SEO or search engine optimisation. We take key words out of an update and populate it back on your website," says Gulati.
It also prompts the owner on what he needs to update on the site, based on what customers are searching online.
''No other solution combines the ability to create, update, get prompted on what to update, get leads, do auto SEO and search engine marketing, for which we have collaborated with Facebook and Google. We have combined four or five very diverse businesses," says Gulati.
Investors see the potential to build a global SME tech business using Nowfloats' base SaaS product to enter SMEs and add additional products, solving more and more problems for each SME vertical.
''It has the potential to eventually grow to many billions of dollars in revenue. The company has a great customer acquisition cost (CLV:CAC) ratio, which makes it an extremely profitable business, in short and long run," says Prasanna.
The Customer Lifetime Value to CLV:CAC measures the relationship between the lifetime value of a customer and the cost of acquiring that customer, a key metric for subscription-based companies. The value of a customer should be three times more than the cost of acquisition.
Road ahead
It wants to serve a million small businesses and reach 30 million customers. Currently, it has 240,000 businesses that together reach 13 million customers.
Gulati feels the content and updates by businesses throw up a lot of options. ''We now know what people are searching for. In future, we could be the largest repository of updated data on small businesses. We can leverage these data."
It has planned to expand its 650-strong sales team, especially in tier-3 and tier-4 towns, which brings 80 per cent of the business; the rest comes from resellers/web developers. It also wants to spend on digital marketing and brand building, and strengthen its technology platform.
Challenges
It needs to improve its renewal rate to 60 per cent, from 48 per cent today.
For this, it needs a very transparent sales and on-boarding process, focus on Return on investment and constant customer engagement. It will need a sales team to get initial customers in the first few years till renewals kick in.
Another key challenge is ''continuing to keep the product mindset and understanding of customer needs at scale as customer segments get fragmented and specialised,'' says Prasanna.
