Capillary Aims To Become The Salesforce.com Of Retail CRM; Will It Succeed?

8 May, 2012

The Techcircle Fastrack 20 jury did not have to rack their brains to pick Cloud-based CRM startup Capillary Technologies Pvt Ltd this year (See who else is there in the list). The Bangalore-based company, which offers CRM solutions to retail companies, made it to the list because of the significant market traction it has achieved over the last few months.

Six months ago, Capillary was processing around four million transactions a month; it is now dealing with eight-and-a-half million transactions on a monthly basis. Also, at that time, the company was working with 100 brands and reaching out to 10 million consumers. But now it caters to as many as 140 brands and 22 million consumers.

Understandably, the number of customers has gone up. Earlier, the company was catering to 6,000 paying merchant outlets (5,500 India and 500 abroad), both large and medium retailers. It now services more than 9,000 (8,000 in India and 1,000 abroad), with a lot of existing customers also opening new stores.

Set up in August 2008 by IIT Kharagpur alumni Aneesh Reddy, who is the CEO, and Krishna Mehra, the company was incubated by IIT Kharagpur with a soft loan of Rs 15 lakh from the institute's Entrepreneurship Cell (Reddy and Mehra co-founded it; the company shifted base to Bangalore in May 2009). The money was paid back to IIT in February 2011, after the company became profitable in mid-2010.

Capillary received its first round of angel funding from Harminder Sahni, Naresh Malhotra and Qualcomm ($100,000 as the winners of QPrize). Later, in January 2011, the company got its second round from existing investors Sahni and Malhotra, and new investors Rajan Anandan and Venkat Tadanki, along with a few others.

Intelligent CRM

Capillary's flagship product is inTouch, a Cloud-based CRM solution (aimed at large enterprises) integrated with billing and point-of-sale outlets of retail chains. The company also offers a stripped-down version of inTouch called TruTouch, which targets smaller retailers (1-15 stores).

"Unlike most CRMs which simply help you collect a lot of data, our product's USP lies in the fact that it is also able to analyse the data and suggest relevant campaigns (like marketing campaigns)," says Reddy.

"Regular CRM products only provide solutions for the CRM side of things while analytics & business intelligence products only provide analytics. But we provide both and thus, we are uniquely positioned," he adds.

TruTouch is now used across 1,100 stores in India (this product is not offered abroad), compared to its earlier usage in 500 stores.

In terms of enterprise-installed solutions, Oracle, SAP CRM are among the company's competitors.

Changing Market Dynamics

Mehra had shared a bunch of statistics with us half-a-year ago, but the industry scenario has changed since, resulting into considerable growth. You can read our earlier article on the company here.

For one, he had earlier mentioned that Cloud adoption among bigger retail brands had not taken off the way it was expected. But that scenario is finally changing.

"Larger retail chains, which were sceptical of Cloud only six months ago, are actually adopting it now," confirms Reddy. "It's mainly because they have seen others benefit from Cloud and they are now 'following' the same trend. Plus, Cloud adds a lot of value to the business and it's also cost-effective. Those are the key factors attracting the retailers," he adds.

The company has offices in India (Delhi, Bangalore and Mumbai), Singapore, the UAE (Dubai), the UK (London) and South Africa (Johannesburg), and is currently setting up a product and sales office in San Francisco Bay Area. It will also open offices in China and Australia. Capillary will further leverage its existing client base to expand into other geographies (what Puma and Pizza Hut did, might well be followed by other customers).

The company spends around Rs 9-11 crore per year on research and development (R&D) and an additional Rs 5 crore on sales and marketing. And in case you are wondering how a startup can invest so much, here is what Reddy has to say, "Being a SaaS company, our profit margins are fairly high. Around 70-80 per cent of that money we put it from our side while the rest is drawn from the angel funding we have received."

Six months ago, the tech firm had 150 employees on board and the number has now increased to around 210. Although talent acquisition and scaling up marketing & sales efforts are some of the biggest challenges, Capillary targeted 8x growth last year and managed to achieve 6x growth for that period, claims Reddy. It is now targeting 4X growth for 2012-2013.

What's the vision of the company? "We would like to be the Salesforce of retail CRM five years from now," concludes Reddy.