Bootstrapping a Robust SaaS company from India: Rategain CEO Bhanu Chopra (Part 4)

Sramana: What is the market size you have available?

Bhanu Chopra: We started by providing competitive information and then we branched out to selling the information to all of the players in the travel industry. Every element in the travel industry is highly commoditized and consumers’ buying behavior is driven by price. We sell to all of the top hotel chains, car companies, and every major online travel agency.

As a result, our market size varies based on the customer segments. On the online travel agent side, there is only a handful that we can sell to but we sell to all of them. We sell to all the big as well as most of the regional players. We also have traditional travel agents as our customers. We pretty much cover the entire spectrum. We are in a very good position.

We compete the most on the hotel side. There are a bunch of players on the hotel side. We also have a distribution product for hotels, which allows hotels to pass along their rates and availability to all of their channel partners. We also have an online reputation management product. We will aggregate all of the reviews about their hotel and provide it to them. We can tell the hotel what the guest experience is from the time they book the hotel through the time that they check out. We show them a heat map and can give them indicators if they have issues with something like room service.

Sramana: From 2004 to 2007, you reached several million dollars in revenue based on OTAs. What happened in 2008? What changes happened that year?

Bhanu Chopra: The biggest change for us to move away from being solely reliant on the OTA market actually occurred in 2006. We had a major player in the hotel hospitality industry approach us because they liked our price optimization software. They had a similar product but they felt ours had better results and performance. They requested an OEM deal where they would white label our product. That turned out to be a great thing for us because it gave us a way to expand without a sales force. That gave us immediate scale.

Sramana: I love OEM deals. I think those deals are very cost efficient and they can give you huge returns without requiring a lot of capital.

Bhanu Chopra: That OEM relationship was a big boost for us. We started reaping the benefits of that deal in 2006. One of the drawbacks to the OEM deal was that we had to sign exclusivity with them for the hotel aspect of the business. We agreed that we would not directly employ a sales force to sell to hotels.

We were growing quite fast through 2010. A significant amount of our growth came from our OEM partnership. In 2010, almost 80% of our revenues were from that partnership. That is when we suffered a major setback. The company we had our OEM agreements with decided to purchase our competitors. From their perspective, it made sense. They had an OEM deal and had amassed a substantial customer base. They could simply consolidate competitors and leverage the customer relationships that they owned, and that is exactly what they did. They took all of their customers and moved them to our competitors.

This segment is part 4 in the series : Bootstrapping a Robust SaaS company from India: Rategain CEO Bhanu Chopra
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