Scaling a Cloud Telephony Company in India: Knowlarity CEO Ambarish Gupta (Part 7)

Sramana Mitra: Given that it is such a high-touch customer service model, the question that I’m trying to ask you is. Right now you’re heavily venture-funded and you can finance your cost. At scale, does this company have the unit economics to become profitable?

Ambarish Gupta: Well, that’s true. The unit economics of this product is very good. It’s incoming calls and they are free in India. Our growth margins are quite high, probably around 70%. Then we spend money on acquiring customers, which in the first year was around 75% of our revenue. After a year and two or three months, we were able to break even. With a renewal, everything you make after the first year is profit.

Sramana Mitra: But you’re also having to finance the customer service?

Ambarish Gupta: We do it over the phone and that way, we are able to reduce the cost. The cost of customer care representative is pretty low. While it’s high touch customer care, you can hire a large number of people for this job. Our cost of customer care in a year is around 10% to 15% of overall revenue. We are still able to make money after the first year.

Sramana Mitra: The customer has a rich lifetime customer value number. You’re basically able to reconcile the unit economics that way.

Ambarish Gupta: Yes. The cost of labor in India is low. It is very complex in terms of managing large number of people. We are a 500-people company. If you manage that complexity, the unit economics work out.

Sramana Mitra: I think you’ve navigated very well. I love the very beginning of your story where you got the 70 lakh rupees ($140,000) twice from the politician to finance your seed round. That’s awesome. Is there anything else you want to share?

Ambarish Gupta: My original idea was it was going to be a billion-dollar opportunity. Whatever we have done in five years, I thought we could finish in two. It definitely took longer than what I had planned for. But I’m very excited about the financial outcome of building up such a great company. Another great thing is the impact we have. We are now in India, Singapore, Philippines, Dubai, Turkey, and we’re starting in China as well. We are the first company from an emerging market that is selling business productivity solutions to small businesses. They didn’t use any technology before. Microsoft and Salesforce.com failed. We are able to do it because we simplified the technology to the level that they can understand. It is on their phone.

Sramana Mitra: What you’re offering is also not the level of technology that Microsoft and Salesforce.com sells. This is very simple, basic technology that they’re starting to learn to use. I think the interesting thing that you’re creating is the ability to reach these customers and a channel that will allow you to potentially sell them other products going down the line.

Ambarish Gupta: That’s the mechanics of the business. I was talking about the outcome. I’m a computer science graduate and learned business in my MBA school. I feel that this is a combination of both. From an impact point of view, I feel very good about combining my life learnings and giving back to a very large number of people who would otherwise be not using any technology. That is a very satisfying thing about this business.

Sramana Mitra: Congratulations! It’s great to see that you’re moving right along. I’ll look forward to following your story.

[Also check out my Entrepreneur Journeys book, Seed India – How To Navigate The Seed Capital Gap in India]

This segment is part 7 in the series : Scaling a Cloud Telephony Company in India: Knowlarity CEO Ambarish Gupta
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