Aneesh Reddy, co-founder and chief executive of Capillary Technologies Pvt. Ltd, says it’s good to be in a retail sector constantly disrupted by tech, prompting its constituent players -- online and offline both -- to seek out new digital solutions from the firm. Founded in August 2008 by IIT-Kharagpur graduates Reddy, Krishna Mehra and Ajay Modani, the software-as-a-service (SaaS) firm recently raised $20 million (Rs 128 crore) from two existing investors -- private equity giant Warburg Pincus and global venture capital firm Sequoia Capital. In an interview with TechCircle, Reddy spoke on the funds raised and expressed hopes of the firm reaching $100 million in annual revenue over three to four years. Edited excerpts:
Why didn’t you go for external investors? Would it not be a bigger validation?
We did have some inbound interest. Since we are not burning much cash, we were happy to have a smaller fundraising. We are a lot closer to profitability and it made more sense to go with internal investors for a smaller round. We didn't go out looking for money and our existing investors were happy to support us. Also, we gave an exit amounting to a million dollars to a few of our employees. LionRock Capital (Singapore-based proprietary seed-stage investment firm) bought out the early angels and employees for under $3 million (Rs 19.53 crore). The next round will have external investors and some of our investors will be exiting in a large secondary round.
What will you use the funds for?
Since the last funding, we have developed new products. We have also added a few markets like China, Indonesia, Saudi Arabia and Turkey. It is not that we are chasing profitability. We continue to invest in growth. This should last us a good 18 to 24 months. A large part of the funding will go to scaling up new products like consumer packaged goods (CPG) and artificial intelligence. We had good success in South East Asia and we will double down in the region by aggressively looking at Indonesia and in West Asia at Turkey.
Could you tell us about the revenue growth rate?
We are growing at around 15-17% quarter after quarter for the last three to four quarters now. We will continue to grow at the same rate for this year as well. Since our last funding, we have grown 3.5 times.
You have been around for a decade or so, but still not profitable. What all are holding you back?
We lost some time in focusing on the US market two years ago, which did not work out well. We got out of the market very soon when we found that we were burning too much cash. If we wanted to be profitable; we could be in six months. We are investing heavily in China. It is about whether we want ourselves to be a $30 million company with a 10% profit margin or a multi-million dollar company. We want to be a very large SaaS company from Asia. Our focus is to get to $100 million in revenue and faster, too, rather than looking at profitability at this juncture. We have enough money and people to support us in this journey. Hence, why would I want to show profitability for the sake of it?
How long will the journey be to $100 million? Retail as an industry is seeing a lot of disruption, led by e-commerce players.
It will take another three to four years. After retail, we have now entered CPG and will focus on these two verticals for the time being. It is good to be in an industry that is changing rapidly. People are willing to change and try new technologies. Retail is doing much better now than it was two years ago. There is no madness in retail or e-commerce, which we saw in 2015 or 2016. If you look at retail and e-commerce, there is quite an equilibrium in how things go forward across the world and we will see that in India, too.
Are you looking for a public market listing any time soon?
We are a Singapore-registered company and 70% of the revenue is being generated there. Around one-third of our revenue comes from India. We do have an Indian subsidiary as well that sells to our Indian consumers. We would like to list in Singapore but nothing in the next 24 months for sure. We work with most of the big e-commerce companies and we had acquired e-commerce solutions firm Sellerworx last year to strengthen our product in the domain. As omni-channel gains prominence, we expect a lot of business to come our way. We offer a well-integrated software platform for them.