KhataBook – Digital India ka Digital Khata

 KhataBook – Digital India ka Digital Khata

KhataBook – A Bookkeeping app is a startup with no revenue and a loss of ₹126cr in FY20. The startup has also raised $100mn in its Series-C round with a whopping valuation of $600Mn. This app enables businesses to digitally record the credit they have extended to customers. It has been downloaded over 10mn times.

In this edition, we will discuss the 2-year-old startup that has just begun its operations and has achieved a $600mn valuation with no revenue to show. In this, we will discuss KhataBook’s inspiring story in detail, and try to debunk some real facts behind the expectations, and their strategy behind delivering their promises to investors.

How it all started -Inception

It all started with a small dream. The main aim is the end-to-end digitization of business processes for MSMEs, i.e., digitize every workflow within the small businesses in India and creating a digital ecosystem for MSMEs.

Back in 2016, Khatabook co-founders Ravish Naresh, Ashish Sonone, Dhanesh Kumar, Vaibhav Kalpe, and Jaideep Poonia realized that the khata or ledgers that every MSME in India carries for bookkeeping need to be digitized, and someone had to do it with urgency.

The platform was first built by Vaibhav Kalpe in Delgoor village in Nanded district and he got this inspiration from his father, who ran an electric shop in Degloor, when he saw him struggling to keep a track of receivables pending. So, he decided to help him in running a shop and simultaneously started learning Android programming through the internet and coded an app that had no backend, very basic front end but this had helped his father in keeping the track of transactions effortlessly.

The app was released on the Play Store on Oct-16 and had managed to attract 60k users by Oct-18.

Ravish Naresh, an IIT Bombay alumni, current CEO of Khatabook, and had previously been a co-founder of Housing.com, also tried to solve this problem by running a start-up called Kyte.ai at that time. After knowing about Vaibhav’s app, he persuaded him to join him in this initiative and get him into the core team of the startup. After Vaibhav’s arrival, they got into restructuring KhataBook from scratch, added new features, and relaunched it on the Play Store in Jan-19.

The first base of 60k merchants actually helped KhataBook go viral and the network started expanding. Their commitment, hard work, and the digital landscape changes in India favored them tremendously and with Jio’s entry into the service provider space, millions of users from hinterlands of tier-2 and tier-3 cities in India joined the digital wave. The people for whom we were solving the problems were coming online faster.  All these factors combined with the digital offering explicitly catering to the needs of Bharat contributed towards the fast growth of the company.

What is KhataBook?

KhataBook was launched onto the market to replace this traditional approach by converting all offline transactions into digital ones. It is a digital ledger and finance management platform which enables companies to keep a digital log of their financial transactions and accept payments online safely and securely. It reminds its users when money is due to be paid or collected via WhatsApp or SMS alerts. The app is vernacular with 13 different languages for the diverse population of the country.

It is 100% free to use for all types of businesses with which shop owners can record credit and debit of customers.

Khatabook’s Universe

Besides the main flagship app, khatabook has 4 more solutions including the CashBook, MyStore, PagarKhata, and recently acquired Biz Analyst as a part of its offering’s portfolio.

  • CashBook – Want a digital solution for cash handling and tracking? Then here you go with their next offering that could help with cash sales and expense management. This also comes as the additional feature in the app; however, they also have an exclusive Cashbook android app for those who are only looking for cash and expense management requirements
  • MyStore – A much needed digital solution, an online storefront platform that enables merchants to take their business online in just 15 seconds as it allows merchants to continue doing business while maintaining social distancing norms.
  • PagarKhata – a staff management platform for businesses to help merchants digitise staff attendance, payroll, wages, send automatic updates of attendance, leaves, payments, bonuses, work-timings, etc. seamlessly.
  • Biz Analyst – Recently acquired SaaS business management solution integrated with the Tally ERP9 ecosystem to offer premium value-added services where users can avail on-demand access to sales and purchase reports, bank balance, livestock updates, and other MIS reports; thus, allowing a bird’s-eye view on their business operations.

A dream that has started to come alive

Within a year’s time, the app had surpassed 7mn downloads with around 3mn active users. The app has a huge base of MSMEs at Pune, Hyderabad, Jaipur, Ahmedabad, New Delhi, and Patna. It also observed a good footprint in neighboring countries too, namely- Pakistan, Nepal, and Bangladesh.

The tag Tagline- “Digital India ka Digital Khata” could not have been more apt.  At present, it serves one of the largest MSME networks in the country.

Their Mystore application was also installed by more than 2.5mn merchants within a month since its launch amidst the Pandemic in 2020. Over 2.5mn businesses across the country rely on Pagarkhata for their staff management needs

A uniquely poised marketing strategy behind the skyrocketing success

Khatabook has an unusual advertising strategy. They worked to build the power of word-of-mouth. The main focus was- digital channels that enforced short video viral online content, like TikTok, Chingari, ShareChat, etc. Leading to high engagement and registering themselves in the mind of each and every local household. Relevant communications to enter the households of people who are an active part of the shop culture on both – demand and supply sides had a vital role to play. Customized-personalized messages have helped Khatabook increase its click-to-conversion rates by 3% month-on-month. Inculcating gamification, videos-based content on the user’s specific business category, and quizzes to entertain and educate users led to increased users’ interest, more activity, and loyalty.

Geotagging helped Khatabook in customizing messages as users choose their preferred language. Customized communications from the inception, helped them move users quickly through onboarding. More than 55% of their users belong to tier-2 cities in India. This insight has helped Khatabook prioritize future features that can specifically focus on this segment and add real value. Language inclusion and simplicity: thus, are the factors that fuelled their growth.

Funds Raised so Far-

Khatabook was built with first principles and had a product-market fit, and their initial hockey stick growth curve built the trust in the VC realm which helped them in luring the funds within a couple of months after launching. At the same time, they were also one of the first associates shortlisted under the program commenced by Sequoia called Surge, which is the startup accelerator and incubation project.

Recently, at a whopping valuation of $600mn Khatabook has raised $100 million in a new financing round which brings up the total amount raised to $186.5mn in 4-rounds of funding led by several known investors including Tribe Capital, Moore Strategic Venture, GGV Capital, Partners of DST Global, Sequoia India, Tencent, and several well-known angels in the community.

Why $600mn valuation with zero revenue?

It has successfully built such a network by empowering this seismic shift among MSME businesses to move from paper to digital. Despite its large early success and fast adoption to date, the company is early in its path to power the segment.

A major reason for the company’s valuation seems to be its penetration in the Indian SMB market, which does not have much internet penetration. The company claims that it has seen a 150% YoY growth in FY 20-21 and to have over 10mn monthly active merchants registered on the platform. Overall, its merchants manage more than 264mn customers. About 95% of the Indian districts are represented on its app, as per the company.

Way Forward

The first phase of our journey was to enable digital transformation by building a tech ecosystem for Indian MSMEs and now that they have created a widely accepted digital platform, the next step will be digitally-enabled financial services for small businesses.

With the recent amount of funding, Khatabook will focus to strengthen its talent base by hiring across multiple roles like engineering, product, design, analytics, and data science functions, and focus on financial services disbursement through its software ecosystem

SHOPIFY- THE UNBREAKABLE

thevcstories

https://thevcstories.com

We manifest the entrepreneurial and startup ecosystem for enthusiastic entrepreneurs by helping them build their entrepreneurial skills and encouraging them in job creation rather than finding ones. These episodes aim to provide much-needed guidance & motivation among the youth and bridge the knowledge gap.

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