How LeadSquared is chasing a $500M market opportunity
Four years ago, three engineers who previously worked with IBM and Oracle sniffed an opportunity few Indian entrepreneurs had noticed till then.
Nilesh Patel, Sudhakar Gorti and Prashant Singh realised that most consumer-facing startups in India at the time relied largely on advertisements to acquire customers. Few had a well-thought-out strategy and fewer still used marketing technology to track sales leads and convert those into actual revenues.
The trio started LeadSquared in 2012. The venture, owned by MarketXpander Services Pvt Ltd, operates on a software-as-a-service model and helps clients capture leads across the web and then enables them to track, manage, engage, and follow up the leads until a transaction is closed.
Patel, also the company's CEO, said LeadSquared can be used as a customer relationship management (CRM) software. "Our aim is to make a simple and easy-to-use software that drives customer acquisition for sales and marketing teams," he said.
Revenue, business model
The company is on track to triple its revenue to $1 million (Rs 6.7 crore) in 2015-16, said Patel. He expects to close 2016-17 with $3 million in sales.
The company targets B2C businesses such as education, real estate, financial services, health and wellness, travel, hospitality and consumer services.
It claims to have about 400 paid customers. These include Flipkart, Byju's Classes, Randstad, The Deltin Group, Times Pro, Studymate, NIIT Ltd, Ashoka University and NestAway.
The company functions through its website and a mobile app. It offers different packages for its software depending on business requirements. The cheapest package costs Rs 999 a month and is targeted at startups. The costliest one is priced at Rs 50,000 a month for larger clients that have high volume of leads and manage teams of 5,000 to 10,000 people.
LeadSquared says it provides its services to companies in 20 countries. In India, the company has offices in Bangalore, Mumbai, Delhi, Hyderabad and Chennai while the international customers are served from its US office.
Patel said marketing technology has become big business in India over the past few years. He estimates the size of the domestic market to be around $400 million to $500 million.
To arrive at this number, Patel and his colleagues used corporate databases to find out the number of companies in their target market, the amount these firms spend on sales and marketing IT and the growth trend for the number of sales and marketing people in India.
The local opportunity is far smaller than the global market size. Market research firm IDC estimates global spending on marketing technology to grow at a compound annual pace of 12.4 per cent to $32.3 billion in 2018. IDC doesn't have an India-specific number.
But the Indian market is expanding at a faster pace; Patel expects growth at 20 per cent annually for next five to 10 years.
Before launching the startup, Patel spent 15 months working with B2C and B2B businesses to build their marketing and lead generation engines.
Patel graduated from Netaji Subhas Institute of Technology, Delhi and has worked with IBM. Gorti is an IIT-Kanpur alumnus and was previously with IBM, Talisma and Oracle. Singh an IIT-Delhi alumnus and has worked with Telesoft, i2 and Oracle. In 2003, Patel co-founded Proteans Software along with Gorti and Singh. They grew the company to about $10 million in revenue before Symphony Teleca acquired it in 2010.
The trio bootstrapped LeadSquared with Rs 2.5 crore. Over the past two years they raised close to Rs 4.5 crore from individual investors. The company said it is in advanced talks to raise as much as $5 million that it plans to use to build a customer base in the US and the UK, to increase sales and marketing teams, and for product innovation. It expects to close the funding round by May.
The main CRM players globally are Salesforce.com, Zoho and Microsoft Dynamic CRM. HubSpot, Marketo and Act-On are some of the major companies that provide marketing automation services.
A number of marketing technology startups such as LeadSquared have emerged in India over the past couple of years, though they have a long way to go if they want to compete on the global stage.
Some startups have attracted investors' attention, too. Blueshift Labs, a US-based marketing automation startup that has Indian-origin founders, secured $8 million in Series A funding in January while enterprise marketing automation suite Wigzo raised $500,000 in a pre-Series A funding round in December.
LeadSquared, however, claims it is different from the others as it caters to both sales and marketing teams.
Patel said the market is choked with "old-school" CRMs for sales teams and automation software for marketing teams. "There is an urgent need for software that brings both of these functions on the same page in a clutter-free manner," he said. "That's what we're trying to achieve with LeadSquared."