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| Edited By: Ashish K Tiwari |Source: DNA |Updated: Dec 17, 2018, 01:24 PM IST
Incorporated in December 2015, Connect2India is a platform that helps small and medium enterprises (SMEs) build international business/trade of their goods. It also serves as a medium for mid- and large-scale companies looking to import specific items not otherwise available through their own networks. Founder and chief executive officer Pawan Gupta in conversation with Ashish K Tiwari, talks about the company, services offered and SMEs' problems that are being solved through its network.
After quitting ESW Capital-owned Trilogy back in 2015, I decided to do something in the area of international (export and import) trade. There were extensive talks then about achieving $900 billion worth of exports from India in three to four years. I thought it was a great time to launch a venture that will impact millions. We initially started with a managed marketplace model acting as a SaaS (software as a service) platform providing access to buyers of the SMEs' products. We then started getting client feedback saying they didn't know how to pursue the discussions even if they found a potential buyer on the platform.
I thought of combining trade and technology to make it easier for SMEs to grow. Being family-driven businesses, there is a lot of gap in knowledge/ information (about international trade) with SMEs in India and lack of capabilities. Besides, they are not in a position to afford related costs in terms of hiring a full-time export manager, etc. And there are also very high risks associated with this activity as in you can choose a wrong product, market, process and procedures, buyer, etc. That’s where we come into play. So while SMEs can focus on producing quality products at highly competitive prices – that’s what they do best, we handle all their exports related activities. Ours is a very technology-driven solutions company that offers (international trade) data from multiple sources across the world. And we are marrying this with offering an end-to-end service in terms of what, where, how and whom to export.
It starts right from identifying the buyer, entering into discussions, negotiations and quotations with them, arranging and executing the export order. Like the Uber model, we also have a network of Custom House Agents (CHAs), logistics, inspection and shipping companies for the order execution part. So if the cost for shipping one container is Rs 15,000 I am able to do a bulk deal with the CHA at one-third the cost, or Rs 5,000. Even after keeping Rs 5,000 as profit, I am able to pass on significant savings to the SMEs. They also get an increased flow of business, their risk gets significantly mitigated and they are able to sell their products in 20 countries – something they wouldn’t have been able to do on their own. Being a platform, we have a network across every single country. Once you plug-in into our platform, you get access to buyers, suppliers, associations, chamber of commerce of every single country. We are also in a better position to negotiate the best available price for the SME’s product. Just to give you an example, very recently, there was news about a farmer selling his crop of onions at Rs 1 per kilogram. We have onion containers going every single week at Rs 20 per kg. If such farmers would have been in touch with one of our guys, they would have got a much better rate for their produce.
Currently, there are over 50 million SMEs in India and less than 1% are actually into export/import. This number in developed countries is 20%. If you see, a lot of commodities are exported to nearby countries. In fact, India’s top five exporting nations include China, US, Dubai, Hong Kong and Singapore. Four of the top markets we are exporting to are our neighbouring countries. If the SMEs are able to focus on products exported to these markets, a huge untapped business opportunity awaits them.
It was a bootstrapped venture when launched three years ago. So far I have invested Rs 50 lakh in the business. In October 2017, we raised a seed round of $50,000 from two overseas individual investors based out of the US and the UK. This was done largely to get a feedback from the investor community on a venture like this. A lot of top investors in India were willing to fund us then but we didn’t really require so much money and I wasn’t keen on excess stake dilution at the seed stage.
There are around 75,000 users of which 10,000 are active and 550 are paid customers across multiple sectors including agro-commodities, steel, chemicals and so on. The numbers may seem low because we are still in the awareness building stage and will take some time to graduate to the high package charges. We also have around two million trade partners listed on the platform that gets 1 million traffic every month. We are planning to increase the traffic number to 50 million and become the first choice for every single importer and exporter.
It’s a self-sustainable business with a current run rate of $0.5 million. Earlier, we were focusing on SaaS but we are now driving transactions, which was introduced three months ago. We have two revenue channels. There is a one-time onboarding fee ranging from Rs 50,000 to Rs 5 lakh, depending on the services/solution subscribed for by the SME. Then there is a commission/transaction fee ranging between 3% and 5% of the value of export or import done via the platform.
Funding will be required as we want to significantly scale up the business. At this stage, we are thinking whether should go for debt or equity. There is a possibility to raise convertible debt considering we have good cash flow and the government is also supporting such ventures. I am in touch with investors from Silicon Valley, some of which have already done the due diligence, and also some top-tier investment firms in India. The plan is to first reach a certain scale before going for equity fundraising. There are certain milestones I can reach without external funding. But if I have to achieve a traffic of 50 million and increase presence across 200 countries, then I definitely need funding. Also, we have an exciting roadmap on the technology front as we plan to integrate blockchain capabilities to facilitate traceability, smart contracts, etc. If we don’t raise funding, we will be able to use our network and probably take more time to achieve scalability. Funding will help us prepone it by a few years and we will have own offices in each of the 200 countries. We’ll probably get into a Series A funding of between $10 and $20 million sometime in the first quarter of fiscal 2020.
