Packaging materials marketplace company Bizongo, which early this month raised $22 million (Rs 146.7 crore) in its Series B round of funding, realised early on that end-to-end serviceability will be key to sustainability in the business-to-business industry. It voluntarily shut down a portion of its business that accounted for nearly 95% of its revenue. The move put the company on the right growth path, and it subsequently raised capital from marquee investors such as Accel Partners, IDG Ventures, the International Finance Corporation (IFC) and B Capital.
Since its first capital raise, the company has grown about 30 times, achieving an annualised run rate of about $15 million. It has raised a total of $26.6 million in funding.
Owned and operated by Smartpaddle Technology Pvt. Ltd, Bizongo was founded in March 2015 by Aniket Deb along with Ankit Tomar and Sachin Agrawal, alumni of IIT Delhi and IIT Bombay. The company operates as a B2B technology platform providing packaging solutions to small and medium enterprises (SMEs) and large companies across India.
In an interview with TechCircle, Bizongo’s chief executive Deb talks about how it plans to use the capital from its recent fundraise, how it scaled to current levels, and why it hived off its polymers and chemicals business. Edited excerpts:
What are the factors that helped you attract marquee investors like B Capital and IFC?
The scale of the company has grown really well over the span of the last 18 months. We raised Series A round of capital in October 2016, which was dedicated to building a very B2B centric platform in the packaging and material handling industry that’s highly fragmented and the existing value chain is completely broken. Our aim was to fix all of these loopholes through our products and services. Our value proposition was strong, yet it remained to be validated.
Before raising our Series A round, around March 2016, we completely abolished our chemicals and polymers business and took over packaging. It was around 4-5 months of work in the packaging industry before we went ahead and raised [the] Series A [round]. Over the last 18 months, we refined the value prop much better. We realised that we can design, develop and procure packaging overall and we can drive a customer’s entire value chain. The refinement of the idea has brought us massive results. We have been able to acquire many great customers, the volumes have grown organically and we have gained the trust of our investors with our growth because this is an industry where customers purchase not out of impulse, but after careful considerations.
Our repeat cycles are cohorts and the nature of our transactions with our existing set of customers gave our current investors a lot of reassurance of their investment and it was manifested that we are scaling up on the back of a solid model in a growing industry.
The new investors were excited about the differentiated proposal we offered. The B2B segment is very lucrative. It’s highly fragmented and there’s a [deep] lack of technology in this segment. Our understanding of the B2B segment is very solid. Our approach is not to spread too thin, rather do the same thing in more quantity. This really struck a chord with our new incoming investors.
What was the rationale behind abolishing chemicals and polymers business?
In mid-2015 when we started off our journey, all we knew was that we wanted to be a transactional B2B platform because we could see how companies like JustDial and IndiaMart functioned and we weren’t convinced of their business models. Honestly, we think the lead-generation businesses will not be around a few years down the line, say by 2025.
We sought to find something that will sustain, and for that, we realised it should have end-to-end serviceability attached to it. So we launched a B2B-focused transactional platform with chemicals, polymers and packaging products where the end-to-end logistics was handled by us. We transacted in these three categories for roughly about 5-6 months and then realised that the commodities and non-commodity segments (which is the unbranded packaging products) were behaving quite differently.
On the commodity side, the margins are very less. It was a complete trader/distributor model and the only leverage that an intermediary would have is the price. On the other hand, in the packaging domain, nothing is readymade. The products are made only after you understand the problem statement. Over and above that, you add a lot of value like design and development to make sure that the final good is ready. Since it’s unbranded, the concept of the fragmented seller base also comes into the picture. Your ability to churn out the best-suggested vendor or supplier for each use case becomes very important. Being in the commodity space, you are at best going to be impacting the price and that too, you will be playing with a margin percentage of about 0.5-0.8%.
Around March 2016, we realised that these early trends are hard to ignore, [and also] at that point in time, about 95% of our revenue was coming from chemicals and polymers. However, we decided that for us to scale well as a company, we should take the packaging path (non-commodity). It was a tough call for us to take, but we decided to intentionally forgo 95% of our revenue for scale and sustainability. We stuck to our basics principles, which are business, internet and sustainability, and that really helped us grow.
What are the synergies that you’re looking to achieve with your new investors?
[With] B Capital, they are engrained in a lot of industries such as consumer goods, healthcare, and manufacturing. B Capital with its association with Boston Consulting Group offers startups like us access to [a] great set of investors on the board. Going forward, we foresee some of the senior leadership from the group being able to connect us to the right clients as and when required, when they see that the value proposition we have matches the expectations that their clients might have. [From time to time], we are also looking to explore new avenues, sectors and industries that we can target with our model.
[With] IFC, its investment portfolio has many companies from the banking and NBFC sector. In the larger B2B space, the presence and smooth functioning of lending and crediting solutions are necessary for SMEs to survive and grow. We work with many SMEs and we have already started some work here, and we foresee IFC playing a key role because of their connections and understanding of how the crediting space works.
Where have you invested the fresh funds and what’s the runway you expect?
We foresee a runway of about two and half years. The major deployment of the capital is going to be for ramping up our technology and hiring the right set of talent. Since we work with a lot of local enterprises, our sales and operations need to be more localised. So we have ramped up our Delhi operations in the last six months and we are soon opening a new office in Bengaluru.
Can you throw more light on Bizongo’s offerings and processes?
From a serviceability angle, I would say that design, development and procurement are what we stand for. Our buyers are typically large enterprises in FMCG, retail, pharma/healthcare, food/food processing, supply chain, and e-commerce.
ProcurePlus and DesignLabs are the two key solutions on the platform. When we onboard a buyer, we pass that particular lead to our network of curated suppliers. The suppliers bid for the project and we go back to the buyer with the best possible bid. Once the buyer agrees to the price, we onboard the buyer on to ProcurePlus—[this is] an end-to-end procurement process platform where every buyer can see a customised catalogue that Bizongo has created for him. The catalogue will include the products, specifications, prices, analytics, manufacturing timelines and will be able to track the delivery of the shipment.
DesignLabs is a process that happens before ProcurePlus, where we offer design services during the articulation of the problem statement with the buyer, as required. We have been successful in reducing the fragmentation by building an encyclopaedia of sellers. We have mapped out which sellers in which region are able to manufacture what kind of products.
Can you share some key performance metrics that you have achieved so far?
We work with over 100 enterprises now such as Myntra, Amazon India, First Cry and Bunge and we partner with around 250 sellers. Our average order ticket value on the platform is roughly around Rs 10-15 lakh. Revenue growth rate has been impressive over the years. We have grown from $500,000 annual run rate during our Series A round to roughly about $15 million currently, which is about 30 times [growth] in 18 months. Most of our demand comes from Bengaluru, Delhi, and Bombay where our regional operations are based. We expect that this $15 million annualised run rate would possibly hit about $70-80 million a year from now.
Packaging is an industry where technology penetration is yet to take place, unlike other sectors. What’s your take on the market opportunities and competition?
Yes, we do not see so much technology penetration in this sector. However, the market opportunities are massive. The size of the market is roughly about $50 billion in India and it’s one of the fastest growing B2B segments with an annual growth rate of about 18%. Because of increasing consumerism and people wanting better packaging of their products, the size of the industry is growing at a massive rate. The larger players in this industry are typically manufacturing businesses like Uflex and Essel Group. I would quantify them more like partners. I want to be able to attain a scale where I can provide certain advantages to such businesses. We offer packaging as a solution. We are optimum in procuring any sort of SKU. The Essel Group is really good [at] laminated tubes [and] Uflex is an expert in certain types of films, whereas we cover the entire domain. Therefore, we would rather look at them as partners.
What are your international expansion plans?
Not in the very near future, but somewhere down the line we would want to expand to other Asian markets, from a supplier and SME point of view. We have seen South East Asia act as an excess supply market where there are many packaging suppliers and manufactures and they starve for the right quantum of business. But it could take at least a couple of years before we go international.