Can the Indian Market Alone Take You to $100M ARR? | Aneesh Reddy, Capillary Tech

Are recessions actually the best time to start your company? 

Aneesh Reddy, the founder of Capillary Technologies, believes that economic downturns are the ultimate filter for identifying products that have a "right to exist”,which is only earned when a product solves a deep, non-negotiable pain point for the customer. This idea has shaped Capillary’s journey that led to a 4500 Crore IPO, 250 million consumers and 100,000+ stores worldwide.

We explore the internal culture at Capillary that has not only retained 20% of its core team for over a decade but has also served as a launchpad for 50+ startups. Aneesh offers a contrarian view on leadership that founders should micromanage their teams for the first six months to instill the right DNA before scaling. 

We also discuss expansion into the US market, detailing the "Risk vs Reference" framework that defines how sales strategies must pivot when moving between continents. He shares what went wrong in Capillary’s early attempt to enter the US, the lessons from that experience, and what eventually helped them succeed in the market the second time around, leading to the US now contributing over 50% of their revenue.

If you are a founder building in SaaS or looking to scale from India to the world, this episode with Aneesh Reddy is for you.

00:00 – Trailer
01:50 – What to build that has not been commoditized
05:20 – Customer-facing or fast-changing products will survive
09:08 – How Capillary hit early PMF
13:54 – Risk vs Reference in the US & Asia
18:10 – How Capillary won the US market (after failing first)
24:56 – Outbound & partnerships that work better in the US
30:30 – Right to exist differs in startups vs large companies
35:34 – Micromanage in startups for the first 6 months
40:47 – How Vipassana changed the founder
49:57 – How 1/5th of the team stayed for 10+ years
55:29 – The culture that created 50+ startups
58:24 – The right metrics to go IPO in India
01:01:53 – The choice to build a product company
01:05:24 – Pioneering acquisitions of US startups
01:09:18 – Why not build a roll-up to get $200 million ARR?
01:10:43- 5 major decisions behind Capillary’s journey
01:14:46 – Why are top SaaS stocks down?

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This video is for informational purposes only. The views expressed are those of the individuals quoted and do not constitute professional advice.

Transcript

SPEAKER_01 0:00

So capillary has a unique structure. How did you think about building this structure which had all the right metrics to go public in India?

SPEAKER_00 0:08

India has always had that mindset of you know value, value, value, right? US on the other hand is can you discover what the pain point of that individual is? Istia is a very high ROI market. In Istia, what got us scale has always been saying you're putting$5 on us, you will make$25 a margin.

SPEAKER_01 0:28

Another playbook that Capillary has pioneered is you integrate Western world companies. Because software as a concept is pretty old in the Western world.

SPEAKER_00 0:36

In the AI world now, for the average company, you will not make money. US public market. Every category has four or five companies available. The first and the second sometimes make money. Suddenly now, all of these 3, 4, 5, 6, 7, or 20 don't really have a right to exist in many. And he said, Local one leave now. And it was very deep on it. When people like that leave, it's very personal. This was not an employee for you. Your best people will burn out. They will not leave for.

SPEAKER_01 1:10

Hi, this is Sidhahat Alwaliya, your host at Neon Show and managing partner at Neon Fund, a fund that has invested in some of the best enterprise AI companies between US and India Corridor, like Atomic Work, CloudSec, and Spot Draft. Today I have with me Anish Riddi, founder of Capillary. Anish, welcome to the Neon Show.

SPEAKER_00 1:30

Thanks for having me here today.

SPEAKER_01 1:32

Anish, I'm so glad to do this because I believe this is one of the first public recordings that you are doing after like after going public.

SPEAKER_00 1:39

Yeah, definitely from a founder standpoint for sure.

SPEAKER_01 1:42

Yeah. So so excited to dive deep into your journey at Capillary. You're also among the pioneers that uh said that, hey, so Capillary has a unique structure, right? There's a Singapore HQ, the India sub, and all the revenue gets accrued inside a Singapore sub which is inside the India sub.

SPEAKER_00 2:03

Wow, you've done a lot of research on our structure, but uh it's a little bit like that. All our India revenues still come straight to India.

SPEAKER_01 2:09

Yeah.

SPEAKER_00 2:10

All the global revenues uh hit a Singapore subsidiary which is 100% owned by India.

SPEAKER_01 2:15

Owned by the India subsidiary. And that enabled you to go public uh in India. So how did you think about building this structure which it's like a pure Indian ethos company, could go public in India, had all the right uh metrics to go public in India.

SPEAKER_00 2:32

Right. Yeah, so uh uh I'll be honest, we've we we um when we started Camperi, we started it in Calcutta uh in India. This was 2008-9. Uh you come from Calcutta? No, actually. I was working in ITC at Calcutta at that point in time. KK, who's my co-founder, is from Calcutta. So, you know, kind of divine providence, we ended up ended up in Cal. Um in 2012, when we were raising our first uh uh round of funding, um, we had by then opened uh a Singapore office, uh a Middle East office. And uh, and this was just before we raised the money. Uh the problem would be wiring money out of India to even pay salaries for people was every month would be a song and dance. You know, like you needed all kinds of uh and so we were a little frustrated with that. So uh uh so basically what we realized was if you wanted to truly build an international business in 2012, you needed to have a setup outside India. Right. So when we raised money uh from uh Sequoia Nordwest, that was the time when we said, look, uh let's uh let's set up a subsidiary in in Singapore and and raise it into uh into that. So so traditionally the business has always been that way that the India business sits with the India entity. Most of the employees, although even globally servicing, end up sitting out of India, the tech teams in India, all of that. And revenue for international, Singapore is a beautiful country. So uh very easy to you want to invest in a UK, you know, don't bother. You know, you're making money somewhere, you can just move it out, you know, like zero capital gains, yeah, all of that. So that structure worked out uh really, really well.

SPEAKER_01 4:13

So you went from an India Incorporated to a Singapore Incorporated with India as a subsidiary.

SPEAKER_00 4:19

Subsidiary. And uh when we had to uh like in 2021, when we decided that let's list, and when we flipped, the India entity went and brought out the business of the Singapore entity.

SPEAKER_02 4:30

Understood.

SPEAKER_00 4:30

You know, so that way it uh and we were just turning profitable in that year. Yeah in 2020, and you know, uh Singapore doesn't have a capital gain stack, so the transaction was uh the flip is zero. The flip is very easy, unlike the US ones where it is very complicated.

SPEAKER_01 4:45

Like company like Misho and Razor Pay paid a lot of flip flipping tax.

SPEAKER_00 4:50

Correct, correct, correct. We didn't have to thankfully go through go through that.

SPEAKER_02 4:55

Yeah.

SPEAKER_00 4:55

I do I do firmly believe that uh India will have many more listed product companies. Uh kind of what happened with IT services in the last 20 years, right? Or there was the big three, four that listed early. You know, you've had like the persistence, the KPITs, the co-forges. That's all been a story of the last 15 years, right? I feel India is at that tipping point on you know, multiple SaaS companies beyond a 50 million, 100 million, profitable. So yeah, I'm I'm very hopeful that people like us listing, people like Amagi listing are are going to help get more companies out there. And India will hopefully have not just IT services, but a good large chunk of market cap in the product space as well.

SPEAKER_01 5:40

Yeah, and that's like really helped uh position India as a product nation, the effort that you have almost put like a decade in along with the community.

SPEAKER_00 5:49

Yeah, no, I I'm very hopeful here. And I and you can start seeing that in multiple categories now. You know, if you take us, you know, if you pick the Forester Report, we are a global leader at what we do. If you pick WhatFix, they are a again, if you look at uh any independent analyst like a Forester or a Gartner, et cetera, you will see that you know what fix comes right at the top there. Uh, you pick a Zenot on the spa side. So there, or you pick Amagi on the digital broadcasting side. So there are multiple companies now which are leaders in in our specific product categories, and and I feel those leaders will eventually get to like 10, 15% market share globally, will hence have, you know, can can list and show a good growth rate and a good, a better delivery for many years to come.

SPEAKER_01 6:38

I think another playbook that uh you know Capillary has pioneered is uh, and I think now RateGain has also followed in footsteps, that uh you integrate external companies, specifically Western world companies, because software as a concept is pretty old in Western world. Correct. And companies have existed there for decades. So either the Western world concept is in the US, primary Europe, you either go big or go home. But software as a category, there is never a one-pair wins at all.

SPEAKER_00 7:08

Absolutely. In B2B, you will always have a tail, right? Uh and unfortunately, I feel, especially in the AI world now, that uh the average company, uh, you know, the average product or the average company, unfortunately will not make money. Like if you look at any any uh US public markets, right, uh every category has four, five companies that I've listed.

unknown 7:30

Yeah.

SPEAKER_00 7:30

Right. The first and the second sometimes make money, the third, fourth, fifth, sixth don't make money. You know, and I feel that is a that is going to be even more pronounced in the AI world, right? That the average product will not make money. So suddenly now all of these three, four, five, six, seven, all the way to twenty uh don't really have a right to exist in many senses. Right. So uh and and our MA thesis is a little different. It has been that we buy competitors out and we integrate uh them into our stack, we upgrade customers over. Uh because what we realized, like you said, was uh that it is a red ocean market in the US. A lot of uh the Fortune 500 already use some product or the other. And uh so that thesis has worked very well for us. You know, half our acquisitions, uh half our growth comes from MA, half our growth comes from organically winning. We just recently bought uh uh you know the Session M business from MasterCard, uh, you know, which is their merchant loyalty uh business. They have other loyalty businesses as well in Session M, but we uh in uh MasterCard. So this one gets us clearly to 115, 120 million, right? So uh yeah, the last few years, if you see, and we'll continue to do this, right? So uh in if you have the best product, you want to milk it with you know more number of customers and more number of uh uh Fortune 500 companies on the on the platform, right?

SPEAKER_01 8:59

So the companies that you acquire, you replace their product stack with the capillary stack.

SPEAKER_00 9:04

Correct, correct. Uh we typically what we do is we upgrade those customers over to so uh like you know, we've done five till now. Uh three out of those five are all companies which are featured in the uh Forester wave. Now uh if you have to be in the Forester Wave, you have to be in the top 15. Forester generally, I mean they have a longer list of 50 in a landscape report, but the Forester Wave is a much more deeper. Uh so these were like three of the top 15 in uh some senses, right? Uh and uh but you know, you're the best there, right? So for all your customers, it's a it's a clean upgrade. Yeah that uh you know you're moving from someone who's probably 10th or 12th or you know, seventh, something like that, to uh uh a number one uh platform, right? So the customers, it's a big upgrade. Uh a lot of these companies were also built with very old tech. So they're usually loss making or very low margin. Uh that's a lot of companies in the US. If you look at any category, uh number of software companies which are going nowhere, uh low growth, low margin. Uh, and I don't, it's pretty natural that they would want to sell out and uh you know become part of a larger platform where the customers benefit, the employees of that org benefit, as well as the, you know, the the shareholders get some money, they exit and so that's been our thesis. Uh you know, yeah. So let's see.

SPEAKER_01 10:31

Yeah. And these US companies are available at one to two x of their revenue because the the growth is so low that the market there doesn't really give them a multiple just purely based on revenue.

SPEAKER_00 10:43

Yeah, that is the case even now in India. Right? If you are if you're not a market leader, I think just what AI has done to uh yeah, eventually uh eventually every business has to trade on a multiple of earnings.

SPEAKER_02 10:56

Yeah.

SPEAKER_00 10:57

Right? Uh might be a slightly future-looking view of earnings. Uh, but in some senses there was this whole belief in the US that gross margins will convert to EBITA.

unknown 11:07

Yeah.

SPEAKER_00 11:08

Which hasn't happened, uh, to be fair. Right. So and what's happened with a lot of these large uh these companies in the US, the SaaS ones, is you know, you're just constantly spending a lot of money to be in the same place.

unknown 11:22

Right?

SPEAKER_00 11:22

Your sales cost is just so high, it's 60, 70% of revenue, uh, that you're just burning so much money to be in the same place, your churn is high, all of that. Uh right. So I think the market had to correct somewhere. Uh in the name of this AI garb, I think it has really, really corrected. So uh yeah, so you you're surprised the quality of companies you're able to get in the US at one times to two times revenue or half times to I'd say two times on the outside revenue is not small. Right? It's it's just incredible.

SPEAKER_01 11:56

Then then probably you know, it's a tangential thought that a roll-up, if you raise 200 million in roll-ups in India and acquire five to six companies in the the US, you would be able to acquire more than 200 million in revenue, then possibly take this structure public in India, why has not happened?

SPEAKER_00 12:20

Yeah, so I think the value is like I said, you will trade on Ebatar multiples, right? Like look at us, we will eventually trade on eBatha multiples. So if I were just putting these 50 companies together, yeah, uh, and let's say they were all these 45% margin businesses or no percent margin businesses, you will not get the value, right? Now, what we are doing is essentially you're saying, okay, this is an also run uh, I mean, it was a company which was great at some point in time, or whatever, right? Uh, but their tech stack hasn't evolved, or something might be the thing there, or they're sitting in an entity which doesn't think of them to be strategic enough, whatever is the reason, right? So uh now the value in the capillary, and this is uh there in our DRHP as well, comes from actually upgrading those customers from that platform to ours, where suddenly a 15-20% gross margin business becomes a 60-70% gross margin business, which then allows us to reinvest in the product. So the customer constantly keeps getting a best in class product. Unlike in a 5% margin business where the business is barely able to uh, you know, what we've also done is a bunch of these companies that we have bought were very services heavy. Like, you know, to serve one customer, you need 15 to 20 employees.

SPEAKER_02 13:36

Yeah.

SPEAKER_00 13:36

In the capillary stack, you know, like our customer success team is roughly, you know, on an average, we have 115 uh customers today and 150 people in customer success, right? So very thin compared to like a 10, 12, 15, right? The problem with the 10, 12, 15 is also that, you know, your uh uh time to get anything done is very high. So it's a win-win for the customer, it's uh improved margins for us. So just to add to the thing you were saying, you had 200 million, you bought 200 million revenues, but can this 200 million of revenues deliver me like 35 million of habitas? Yeah, then there is value, right? Then there's value because the markets will say this 35 million of habitat is actually worth like whatever, a billion dollars.

SPEAKER_02 14:21

Yeah.

SPEAKER_00 14:22

Right? Or 2 billion dollars or 3 billion dollars, whatever is the math, right? Depending on how, you know, whether you're giving a 20 multiple or 30 multiple, et cetera. If this 200 million of clobbered up revenue is at break-even or is at uh 5 million, I think actually you're at more risk. Right? Because uh it's like 20 different products and you've not like got any synergy going. Right. So I feel the the value in the roll-up is the value that you add to uh the businesses that you're buying. Uh I don't think a uh a constellation type model of just clobbering up many companies uh will work.

SPEAKER_01 15:00

So you really need a best in class product to make it work and replace your best in class product with their with what they have.

SPEAKER_00 15:10

You know, because eventually like the cost of innovating and building a platform uh is quite a bit, right? If someone has to bid uh build the capillary tech stack again, we every year now spend a couple of hundred crores on on product, right? So, and that's just keeping it, you know, at a good place, more features. If I had to rebuild this whole thing, it's probably six, seven hundred crores.

SPEAKER_02 15:32

Yeah.

SPEAKER_00 15:33

Right? So it's at least like eighty, ninety million dollars, right? If you want to spend eighty, ninety million dollars uh or even twenty-twenty five million dollars a year, you need to be at that hundred, hundred and fifty million revenues. Right. So so if you're below fifty million in revenues, I I don't know if you have a have a have a you know good reason to like have the best product in the space and keep innovating and keep investing.

SPEAKER_01 15:58

And which brings me to my next uh conversation uh point, right? On AI, where they're saying the cost of literally building a product is going towards zero is already zero using Cloud. Correct.

SPEAKER_00 16:12

You're absolutely right. Right.

SPEAKER_01 16:14

So where where does it take you know the inherent advantage that a company like Capillary has in its domain?

SPEAKER_00 16:21

Right. So that's what I was heading to. Like the average will become a see the cost of building is definitely uh coming down, if not to zero to one fifth, one third, whatever is the math, right? But what to build is still uh, you know, is still something which uh, you know, I don't think has got commoditized. Yeah. Right. So the what to build is is still a uh and we see this all the time, right? The the customers that we work with uh are all like we have two of the Fortune 10, we have uh, you know, we have 25 of the Fortune 500 now as uh as customers. And for these guys, whether they're paying capillary 2 million, 3 million, doesn't matter, right? Uh in their in their hundreds of billions or tens of billions of revenues that they make, this is all pocket change, right? So for these enterprises, it's it's a little bit of a certain functionality that I might have or a certain workflow that we might have, because we have deeply researched and we've uh uh uh uh industry leading product, could easily save them five, ten million dollars compared to an average product which didn't have that functionality, right? So, and and hence I believe that what will happen in this AI world is that the best will get even more differentiated from the uh average, because the average can be built by you.

SPEAKER_02 17:39

Yeah.

SPEAKER_00 17:39

The best will be harder to build, right? Uh so which is things like great feature depth. Uh second is for a lot of large enterprises, risk is a is a is a uh is a bigger thing than cost, right? So if like like for us, we sit in the core transaction flow, like you get your points or rewards for every every purchase you make, every redemption you do, all of that stuff, right? So if I have a downtime of you know, whatever, like even a even uh even a few minutes, right? That's going to be like a serious impact for now. Will a large enterprise CIO take that risk of saying, I will build it in-house? It might have 99.9% uptime. You know, that that 0.1% of uptime is, you know, I don't know, like a 20, 30, 50 million dollars of revenue lost. Uh, right. So I feel some of those, so the the best will get differentiated and will still kind of make the uh which is why at least our view on AI has been that build more, right? Like build more products? Uh more build more than building more products, go deeper in your product.

SPEAKER_01 18:46

Okay.

SPEAKER_00 18:46

Right. Uh and we happen to be a system of record because all of this customer data, all of this, uh, you know, all the points, all the liabilities end up sitting on us. So our view has been a little bit more saying, you know, if can you be the most intelligent uh uh customer system of record, which then also does all the workflows and all the you know analytics for them. So we're building not more products. I kind of want to be that one software which uh you know anyone who has a loyalty use case should use, right? So we're expanding into side areas and not building new products in supply chain or new products in advertising or or stuff, but we be saying, look, can we go sidewards on on what we do a lot better?

SPEAKER_01 19:30

Understood. Uh our view as a fund has been that verticals are hard to replace. Correct. For example, we have a company in construction tech called Merlin. Uh the founder belongs to construction background for the last 10 years. And thereby she has deep networks in in the US region because she lives in LA. Similarly, we have a company in life sciences called Pinomial, which is deep in pharmaceutical life sciences, right? One of the top five pharma companies pays them like a million dollars a year. I think verticals are very hard to replace because the institutional knowledge you have in vertical cannot be copied.

SPEAKER_00 20:10

Okay. Actually, I'll say depth is very hard to replace. You know, verticals is one way of uh doing depth, but the deeper the product, the harder it is to uh it is to replace. You're absolutely right. Like so, even in our case, we started with retail, we do, we add one or two verticals each year. But the intent is that if you're a Fortune 500 and you look at our product and you have already put out an RFP, uh, you should see at least 10 things in my product which you didn't think of till that point in time.

SPEAKER_02 20:41

Yeah.

SPEAKER_00 20:42

Right? So only then do we have a right to win. You know, if I am match for match saying, oh, you wanted this and this is what I have, then I I don't think our product teams or the product is doing justice to uh to that, you know, whatever, to that customer.

SPEAKER_01 20:56

I think the other uh reason where companies will win is uh companies where let's say an enterprise, you are sitting in their internal workflow versus you are sitting in their customers' workflow. I believe capillary sits in the customers' workflow. Then companies don't touch it very easily. If it's an internal workflow, they still might try to build it uh themselves or you know, try to replace it. What what's your thought on that?

SPEAKER_00 21:25

I think you you hit a very good point, right? So I feel what will get commoditized in the build cycle will be stuff that doesn't change fast. Right? Uh what I mean by that is I built it once. Uh you know, why should I pay subscriptions for stuff that I've built once and is not changing much? Right. While anything customer facing tends to change very fast because the customer is moving, your you know, your competitor brand has done something, you want to respond to it, you want to do something else. You know, there's a constant movement. That's happening. And internal IT teams are not structured to change very fast. Internal IT teams are structured on risk, on stability, on one year go lives, and then it is there for five years. What they don't want to hear is Ramzan is here and I will take three months to build something for you. Ramzan is gone now. Which is another reason why I feel Marttech has taken off a lot more on the SaaS side. Some of the largest, you know, as compared to probably back-end-ish type type products. And I think that will continue to stay. If you talk to like a lot of the CIOs that we also work with, they are actually very happy with giving this piece off because they have a better product for marketing to use. They don't have to deal with this constant change that's happening on the marketing side. So I do agree with you that customer-facing or fast changing products, I think will continue to earn the value of a subscription. In the AI world, something you can build once and forget.

SPEAKER_01 23:18

So some of the instances that you can share from your journey, you're right in Capillary, where you think you really hit product market fit.

SPEAKER_00 23:30

Right. Nine, I think. Early 2009. Basically, it was a recession. Yeah.

SPEAKER_01 23:47

The worst time to start a company.

SPEAKER_00 23:49

I'd actually say it's the best time to start a company, but you know. So what happened with us was, you know, we were trying to, it was a recession. So we said, you know, what will people buy in a recession? So we went around asking people, saying, look, we're we we can build good software, we are from IIT. Uh tell us what your problems are, right? Uh to our luck, Lehman had just crashed. Uh, right. So this was, we started the company on the 11th of August 2008. Uh, Lehman had crashed on I think 11th of September 2008. And so when we were meeting these folks, a lot of folks were telling us that look, customers aren't coming back to stores, there's a recession. So that made us question this thing of saying, okay, like, do you know who your customers are? So we understand why they're not coming back, what will make them come back. And we realized that that was all a uh most retailers were traders, you know. So it was not like they really knew who their customers were. And, you know, uh, and um a few of them had a loyalty program and they would expect you to fill a form, carry a card. Who likes to fill a form in a retail store? Who you you have enough cards in your wallet, you throw your cards out. So we said, look, can we replace this whole thing with a mobile? Right. So it was still a recession. So our initial pricing, I remember the first two, three proposals we said, we sent out saying five lakh rupees very early, right? So five lakh rupees and then 20% AMC, which was the model then. Uh so one of these customers he was at uh uh Future Group, uh she actually said look, uh, it's a recession. I'm not going to buy servers to install your software and all that. Uh and uh you know, can you charge us a per month fee? We had not heard of Salesforce, like you know, we we had not heard of Salesforce by then. And uh we said, okay, fine,$50 per store per month, 2000 rupees dollar used to be 40 then. You know. So we said$50 a store a month. Uh, you know, we will uh and it was crazy because what would happen is they would try this out in three, four stores uh and suddenly see that 80% of customers are signing up. They would run a campaign at the end of uh two months, and we would have customers coming to us and saying, now I want to roll this out.

unknown 26:02

Right?

SPEAKER_00 26:02

So our to a meeting to uh pilot was like a 50% conversion rate. To a pilot to a full rollout was a 100% conversion rate. Right. So uh it just so uh the math in our mind was you know, we were pricing it at a price where uh you know even a three-month pilot was 50,000 rupees. Yeah. So it was not breaking the bank for them. The upside was a 4.5% incremental sales if it worked. You know, so it was a very affordable loss, which could deliver a pretty solid outcome, right? So uh, and that's kind of stayed with us for many years now. We now, uh unless we can clearly say what the ROI of that to a customer is, we don't want to get into that uh space as clearly, right? So recently, RAI stuff. I have not seen self-serve takeoff at a see what happens in large enterprises is self-serve is a little bit of a myth.

SPEAKER_02 26:57

Yeah.

SPEAKER_00 26:58

Because no senior guy in a large enterprise wants to learn a UI. Right? No one wants to sit in a two-hour training and learn a UI. So you unfortunately you get delegated out to an agency or to a you know a system integrator or someone using your software on their behalf. Yeah. You know, like SAP maintenance.

SPEAKER_02 27:19

Yeah.

SPEAKER_00 27:19

Essentially, you know, the enterprise doesn't want to use SAP themselves. So we have like, I don't know, two million people here in India who are using SAP for these large enterprises. Yeah. I mean, now with with some of this AI stuff, it's a I don't need to learn software anymore, right? It's a chat box. I, in plain English, what I would have told someone sitting on the other side of the email or other side of a call, I'm just selling that here. Right. So our usage cohorts on the AI stuff, even though we work with large enterprise, is just been unbelievable. So the kind of the the kind of uh I would say MVP we saw very early, we are now again seeing that, because I don't need to teach anyone anything. It's simple, plain English, you're asking something and gets it done for you. Right. So yeah.

SPEAKER_01 28:04

So this is product market fit, which you beautifully described. What are the things that worked for you when you put pedals on scale early on and during the journey?

SPEAKER_00 28:14

Right. Uh yeah, so pedals on scale, I feel uh uh uh two, three things. Uh you know, um now this is where I think it's interesting because uh the US thinks very differently from Asia, right? Asia is a very high ROI market, right? So uh in Asia, what got us scale uh has always been saying you're putting$5 on us, you will make$25 of margins, or you will make$20 of margins, right? So it's uh always a try a pilot, show them that look, their revenues grew, their margins grew, you know, and hence, you know, you're you're making a 5x ROI on margins, no brainer, you'll pay. India's always had that mindset of you know, value, value, value, right? US on the other hand, is can you discover what the pain point of that individual is? Right? US is a very consultative uh uh sales model, right? So unless I have a pain point, even if you're coming to me and saying, you know, you will make 3x the margins or 5x the margins of what you're paying me, mostly that customer will say, not in my AOP, you know, I need to, like, you know, like whatever, right? It's like very different mindsets. Uh, Europe is also very, very similar. Unless it's in their AOP or it really solves a real pain point. You can be sure whatever your pricing is or whatever your uh value prop is, you will not make the cut. Yeah. Right. So so in our head, it's always been like scaling for us uh on the sales side has always been saying how good is your discovery? How good, how well are you able to discover the pain point of the customer and the value that that customer attributes to this pain point? Right. If you do a good job, even a half decent job of that, you usually tend to win very well. You know, and then of course, another line of saying, uh, why should you win? What is your right to win? Which is where I was saying the depth of product and okay, you said you need these 15 things, but by the way, you also need these five, right? Showing them that some of those uh has helped, uh, right. So that's from a sales standpoint. When you meant scale, were you talking also people and everything else? Or was it?

SPEAKER_01 30:27

But mostly on the revenue scale.

SPEAKER_00 30:29

Revenue scale is this, right? So large enterprise, I feel the things you have to solve for is great discovery, uh, really understanding pain points and what value you can deliver. Second is the whole risk versus referenciability curve, right? If you're a large enterprise, you know you can get fired for taking a wrong decision. SMB, no, because the guy is taking his own decision, so it's very different. Right. So you have to answer this risk versus referenciability thing very well, which is why the foresters become important, which is why the the the best of the products keep making more, right? So uh so in our case, this risk versus referencibility when we opened US was really saying uh like we want the best of the analysts to like really say we have the best product, which is we we we spend a lot of time taking feedback from analysts because they also meet a lot of customers. They have a good ringside view of what our customers are looking for. Like our letting our road our roadmaps are actually quite influenced by what we hear from analysts. Because, truth be told, they are also meeting 50 customers, so they have a good view, right? So the second thing was uh like more than 55, 60% of our revenue today is partner or analyst influenced. You know, because as capillary, we are not a big brand, right? But each of these large enterprises has a partner that they really respect, right? So you're again reducing risk by or and increasing referenceability by going through a partner, right? So some of those have been good, good, good, good uh, you know, uh ways in.

SPEAKER_01 32:07

So, what is the geographical distribution of the revenue today? Like how much percentage comes from US, Europe, Asia, rest of the world?

SPEAKER_00 32:13

So today about 55% of revenue comes from the US. Uh, about 1718 comes from Europe, 26 something comes from Asia. So that's been the split.

SPEAKER_01 32:23

And you have had a very interesting journey to the US, right? Initially, you went to the US and had to come back with four months of runway and left. And then you build your internal system, scaled here, and then went back again. So can you tell us to share the journey of because for Indian founders building global software, US is the ultimate destination. And it's never easy. Like nobody can crack it in the first goal.

SPEAKER_00 32:48

Correct. So, yeah, in our case, like I said, uh, we did very well in Asia, uh, 2008 to 2012. Uh and our sales model was a very ROI sales model, uh, what I described to you, right? Uh so in 2012 and 2013 early is when we opened US the first time. And um uh KK, who was my co-founder, uh uh and our CTO at that point in time moved to the US. Uh uh so the first myth I want to bust is this a founder moving to the US means you will get success. It doesn't happen. Right. So uh and uh we took our sales model from here, this very ROI heavy, pilot-heavy sales model, and tried to force it in the US. Fell flat, right? So we we spent like four, five, six million dollars in the US and we got to a$50,000 ERR. Right. So, and back then six, seven five, six million was a lot of money. Today it is not, but back then it was genuinely a lot of money, right? So uh so I I I thought what broke for us really was what we needed was a very consultative uh sales model in the US. The US is also uh uh uh a country where uh people really like very good products. They're willing to pay value for a good deep product. And at that point in time, uh, you know, we weren't our our product wasn't as great, right? Uh it definitely evolved over the next few years. And and what we were also doing in the US at that point in time when we were trying to win was uh if a if we got on a call and someone said we were a loyalty company, if someone said, Look, I want an NPS product, we'd say, okay, we can build it for you. You know, you know, it's a very Indian mindset, right? So uh, and that never worked, you know, because you were starting to just go like instead of going deeper and building a best product, you know, you were going sidewards and building many, many things, which kind of didn't actually help our cause. So when we went back into the US uh in 2020, uh, I mean the learning then in 2020 was that we had kind of got to this 28, 29 million revenues. Uh, we were already working with some of the best companies in Asia. So we're a good product. Uh but Asia, as you know, is not a great paymaster.

SPEAKER_02 35:05

Yeah.

SPEAKER_00 35:05

Right. So could we build a$100 million revenue company just on Asia? Answer was unfortunately a no for us. Can you build that in a horizontal HR type space like a Dominbox has? Answer is yes. Right. So for us, it's pretty clear this will take you only this far. Right. So uh and so when we wanted to open the US again, uh, we started totally the other way around. We first went to analysts, they saw our product and started saying, Okay, look, why are you guys not in the US? We went to uh CEOs of companies, COs of uh uh companies who were big on loyalty, right? So like uh like people who had built like 50, 60, 70 million dollar revenue companies in the US in the loyalty space, showed them our product, right? Like uh, and they were all like, look, you guys have like a lot more than like there's this guy who uh he basically said, Look, what I have been wanting to build for 10 years is what you guys have. So why are you guys not in the US, right? So uh and even when we opened the US, we said we will only sell our loyalty stack. Although we had an e-commerce product, we had an engage product. So we were now like we did exactly the Ulta of what we did the first time around. And I also answered risk and defensibility in a very nice way. I said, look, it'll take us five years, and we had we had opened many countries by then.

SPEAKER_01 36:27

But at that time, I think you must be in 10, 15 million in ARR.

SPEAKER_00 36:30

Uh we were actually, I think, yeah, we were about 27, 28, but COVID got us down to 15.

SPEAKER_02 36:36

Yeah.

SPEAKER_00 36:36

So we were like actually 15, 60, 16 crores or revenues or something like that in that year. Uh and uh uh we we we we basically, you know, uh for this risk versus referenciability thing, we went and did a small acquisition. It was a 25 crore revenue company, five customers, 15 employees. But suddenly, and they were in Minneapolis, so you had 15 employees in the US, and that basically made a lot of these large enterprises feel that they are a safe option to work with. So it was that team, which is very excited about a great product that we had, that combo really worked. Right. So uh, you know, so I I I feel if you want to do the US well, some of these, right? Deep product, good referenceability. Uh the founder moving to the US a lot of times is essentially reducing risk.

SPEAKER_01 37:26

Yeah.

SPEAKER_00 37:27

Right. That the individual is in the.

SPEAKER_01 37:29

It's a necessary but not a sufficient condition.

SPEAKER_00 37:31

It is. I I don't know if it's a necessary condition, also. Okay. I'll be like I haven't moved. Yeah. But the comp like we've we've gone from, I don't know, zero to sixty million in US revenues in about four years.

SPEAKER_01 37:44

Yeah. I think uh when people see capillary, people see an 18-year-old company, but they don't see this part which you just mentioned that your US revenue is only four years old, which is four or five years old.

SPEAKER_00 37:55

Right. So I think if you're smart enough about dealing with some of these pieces, I think you'll be fine.

SPEAKER_01 38:01

So to iterate again, because you know a lot of our founders would would want to learn this on. Go with US with a lot more focus. Correct. With a lot more consultative mindset, with a lot of pain discovery mindset. Don't try to sell everything to everyone.

SPEAKER_00 38:16

Yeah. The US is definitely not a market that you sell to. It is a market that buys.

SPEAKER_02 38:21

Yeah.

SPEAKER_00 38:21

And there's a difference there, right? So if you're solving a pain point, they'll buy. If not this year, they'll come next year, but they'll buy. Right. So India is the other way around, right? So unfortunately, we are all very value focused and you know that doesn't work in the US.

SPEAKER_01 38:35

And Indi India teaches you very push-based selling that you have to show up again and again and again, right?

SPEAKER_00 38:41

Uh in but but even in the US, you'll have to show up again and again and again uh in a nice way.

SPEAKER_01 38:46

Yeah.

SPEAKER_00 38:47

But not just screaming RY. Yeah. Right? Like you have to show up again and again saying, look, this is a pain point, I will solve it for you.

SPEAKER_01 38:55

Yeah, but but through through more brand mechanisms rather than push-based mechanisms by being at conferences.

SPEAKER_00 39:00

Which is absolutely true. Like all our lead funnel now is either inbound or partner-led.

SPEAKER_01 39:05

Yeah.

SPEAKER_00 39:05

You know, I've rarely seen like pure outbound work in the US. You know, so it's just a, I think, uh while in Asia you see a lot of outbound work pretty nicely.

SPEAKER_01 39:16

And can you describe this more like in nuanced detail?

SPEAKER_00 39:19

Yeah, so uh outbound is what? You have a you do a gazillion emails, you do a gazillion, you know, you have a whatever uh inside sales rep sitting and calling.

SPEAKER_02 39:28

Yeah.

SPEAKER_00 39:28

Right? Uh uh I haven't seen that. Uh that works very well for us even now in Asia, but I have not seen that work for us in the US. US is a lot more, you know, you get featured in an article in a CRM magazine or a retail magazine, someone reads up about you, comes to the website, or you know, you have a network of partners. So if someone's coming up with an RFP, this partner gets to know and they push you in, or you're on a forester. So it's a a lot more, I want to do my research and then go to who are the top three, four I should reach out to type market, than you know, okay, the guy called me 15 times and you know, like hence I will buy from him. Right. So yeah. Uh and that's like like even now, right? I feel uh we do a lot of work now on trying to be, if you search on loyalty in in a chat GPT or a Gemini, we want to come up there saying, look, uh, it need not be about saying I want to buy software, but you you talk about something, I want to say, look, okay, here, and it by the way, I reference this article from the capillary website. Right. So things like that. Right. So it is a lot more US is definitely uh uh a lot more of an inbound-led play for us at least than than just outbound.

SPEAKER_01 40:48

Got it. Uh uh, we discussed before our podcast that you have been doing Vipassana for the last six years. Right. Uh right. Can you tell us about your journey, how you got initiated into it, and uh what's the change that you have seen in yourself and the people around you, your company, your relationships?

SPEAKER_00 41:07

You know, I think um uh, you know, slightly long answer there, but uh uh uh I think by the time I went for my first Vipassana, uh, you know, it was already 12 years at uh Capillary. Uh I think what happens as a founder is uh, you know, when the when the going is good, it's all good. But when the going starts getting tough, uh at least I had this thing that I was blaming myself for a lot of stuff that had happened. Uh and you know, there's always this voice in your head which is critiquing uh what you do, right? I mean, like uh you speak more to yourselves than you speak to anyone else, yeah. Like by a uh by a margin. And when that when that voice in your head is constantly critiquing you and saying, hey, you're, you know, whatever, you weren't good on this, or this was a bad decision, you blew so much money up, you should have done this better, you know, and and it just got to a very noisy place in my head. Uh and uh I I turned 35 in 2020, uh 2019. And a bunch of us school friends, like really uh school friends as in uh from nursery together, right? Uh I'm very lucky to have lots of good friends in life. Uh but seven, eight of us, uh eight of us actually went to uh Goa to celebrate our 35th. And um uh and we were all sitting in a in a group together, and we were talking about what life's done to us over the various years. And when it was my turn, I I somewhere said uh that look, I think life's all downhill from here, right? Uh and everyone else in the uh in the group was a little shocked. He was like, What's this guy saying? Like, uh, you know, he runs a good startup, he's done well in life. And uh one of my friends there, he happens to be a VC actually, uh, he said, Look, uh, I think you're really like your mind is playing funny tricks with you. You should try this uh vipassana thing up. And uh he had done a vipassana about two, three years before. Uh and at that point in time, this is obviously a gang I really trust and I'm very vulnerable with. Uh, and I said, Okay, perfect. This was December. Uh so Jan and I went for a vipassana. Uh and and there was just a lot of guilt in my head on, you know, like capillary doing well and then going through a lot of issues. And uh, you know, it was just, I think I was just criticizing myself a little too much. Uh and it was a 10-day vipassana, Feb 1st to Feb 12th. And uh, when I got out of the Vipassana when the 10 days ended, uh, I felt like I was like 15 years younger. Because you know, all these uh critiquing voices in my head, all the uh angst I had, all the anxiety I had on stuff kind of evaporated out like very, very nicely. Right? It just felt like I was again. Out of IIT and you know had all the raw energy to do stuff. Uh and it's been six years. Uh, you know, and the last uh COVID came in the middle, and we were a retail tech player. Uh, it's really, really uh uh really helped me. So like uh the company's also done phenomenally well in the last four or five years. We were, I'd say by the end of 2020, we were almost written off. And then we really reinvented ourselves to uh have a pretty meaningful uh last four, five years as well. Uh yeah, for a founder, uh, you know, I think we end up accumulating a lot of garbage in our heads over a period of time. Uh, you know, every failure, every uh, you know, sometimes success also, right? You success also hits your head like way too much. Uh I feel there is a need to like keep cleaning your mind up. You know, when you grow too fat, you go do a detox, you know, you don't eat stuff for like whatever, right? A week, two weeks, a month, uh, you know, no sugar, this, that. We really don't do that with our minds, right? We are constantly like absorbing, you're constantly thinking, you're constantly even when you sleep, you're half the time your mind is like active and doing something, right? So uh vipassana that way, I feel is a is a is is a great way to like keep cleaning your mind up. I do I do a vipassana every year now. Uh and do you practice daily also? Yeah, yeah. Like the come what may, like morning 45 minutes to one hour is a given. Right. So I I don't do it twice a day, and it's usually recommended you sit in the evening as well, but I'm super tired by the time I uh get to uh get to that. Uh but yeah, uh on a in a year, at least 250 days in a year, I would sit in the morning for an average of 45 to 50 minutes. Right. So uh and you also asked how did how does it help the company and stuff, right? So uh uh so surprisingly, a lot of my folks in the company came to me and said, You have changed.

SPEAKER_02 46:03

Yes.

SPEAKER_00 46:03

Right after my first vipassana. And uh we've had about 40 people in the company now go for a vipassana themselves. Uh and I don't think we have forced anyone to. It's basically people seeing uh change and saying, I also want to be as calm, right? I also want to not react as much and you know, uh be more present, all of that, right? So uh, and we now have a thing that uh, you know, beyond the 20 days of personal time off you get, uh, you can do a vipassana every year. So there's another 10 days of vipassana leave you get. Right. So uh, and I think it's it's uh I now believe there are multiple advantages to it. Uh, you know, so the the the first one is people who go and when they come back, I think more than make up for, like we are we are not in the brickmaking business, right? We are in a creative business, you know. Uh and I feel once they come back, they're so much more effective. They don't hold all the baggage they had. Like decision making is so much more clarity in decision making. Uh, so that's a big, big advantage that you see. A lot of founders who've been around me have also gone for a vipassana. It's interesting. You know, I think it's a it's a great way to I think making yourselves more sharp and yourselves more uh you know clear in your decision making and thinking.

unknown 47:29

So yeah.

SPEAKER_01 47:31

So what is the clear difference between Anish pre-2020 and post-2020?

SPEAKER_00 47:36

Yeah, I think uh like most uh like from, you know, I I think I definitely operated from a place of fear and anxiety a lot more uh uh before uh 2020. Uh right. So you're you're constantly afraid of this employee who might leave, who you have to retain. I mean 100 use cases, right? A customer who might churn, a competitor who's like undercutting you, like and and some of those fears not don't necessarily convert to great decision making. Right? Uh I I definitely believe that uh like taking decisions from a point of calm, from a point of acceptance, is a far better way to take decisions than taking decisions from a point of fear or worry or anxiety. Right. So I I feel the post-2020 uh uh Anish was a low baggage, you know, accept things the way they are uh and you know, sit calmly and decide. Now, in fact, I have a I have a kind of a rule that if there is a big decision I need to take, I usually think after I have sat in the morning, right? So like six to seven is usually my morning sit. Used to be 5:30, 6.30, but whatever, right? So uh and after that I sit down and think, right? So and I I I I really think it's helped with a lot of clarity on uh on especially the big decisions, right? Like, you know, opening markets, closing markets, deciding to IPO, this, that, and all. I feel uh I take some of those decisions not out of greed or not out of anxiety, but from a place of calm now.

SPEAKER_01 49:17

Yeah. And uh one thing unique about the capillary culture, since we talked about that, and uh your team gets 10-day uh Vipassana leave also, right? Is out of 730 members in the team, 100 plus have stayed for more than 10 years. What has led to this kind of a culture?

SPEAKER_00 49:36

Yeah, so that's I think I've been extremely lucky as a founder, uh, you know, to have like really, really good team members uh all along. We we are now 17, 18 years old, right? We have 17 years as a firm now. Uh and out of the 730 employees, about 130 have spent more than 10 years with us, right? So it's uh uh like if you compare that to Bangalore, you know, I think we are like 5x better in terms of retention. Uh our monthly churn is 1%. 1% of our team leaves every month, which is very low. Till COVID, it used to be 5% a year, right? So I think a few things that have worked for us is uh, you know, one, uh we're not the best paymaster. You know, we are uh like there's there's always been this belief that when we started Kapillary Off, uh a bunch of people who joined us were kind of people who knew us, not necessarily personally, but would have you know uh worked with us at other, you know, at the other companies that we worked or were uh juniors from IIT Karakpur. Uh and so if there was always this feeling of a community more than a company, right? So uh and I do believe that uh you know uh there is a lot of value for uh employer and not just thinking of an employee as compensation and title, but going beyond, right? Uh so we do a lot of stuff uh like uh like we do a lot of uh you know I like to think of Capri as like the college hostel that uh you know we went to, right? There was a very healthy dose of sports, there was a very healthy dose of like just great friends, right? Uh like um so we do a lot of that, right? So uh as the company started maturing, as people started getting uh uh you know, like high tenure on the firm, right? Five, six years, we realized that, you know, uh people started, you know, there were a few of them who left saying, look, I'm bored, right? I'm bored, I'm tired. Uh we started realizing that burnout seems to be like a big part of why uh people leave. People leave, right? And uh so we now consciously, uh every four years, uh like uh anyone in the company, every four years you can take a full month off fully paid. Right. So the idea being that go for a sabbatical, learn a new skill. And every single time someone's gone on a sabbatical, they come back more energized. One. Second is their team ramps up a lot faster because the individual is gone, uh, they don't have access to their email, all that stuff. So the team below them actually moves up.

SPEAKER_02 52:23

Yeah.

SPEAKER_00 52:23

Right. So multiple benefits. Uh now what happens is when this individual comes back, now they have bandwidth to take a new role, they have bandwidth to rotate, right? Uh so that's one thing that's really worked. I think uh uh you you avoid burnout, you help the team scale up with this whole semantical thing we have. The the the the other things that you know we've done, which kind of works uh uh uh very well for us, is every two years we actually rotate people. You know, uh I I do believe that beyond just compensation, people also want quality of work and quality of learning, right? Uh and thankfully, if you're a high learning mindset uh individual, you know, that's more than like more valuable to you than you know, are you really making the most money? Right. Uh yeah, and I also believe that beyond a certain value, right, uh money doesn't have much meaning, right? So that that value that might be five crores, ten crores, fifteen crores, something. Beyond that, money is just a uh, you know, like a number uh somewhere. It doesn't significantly improve the quality of your life.

SPEAKER_02 53:32

Yeah.

SPEAKER_00 53:33

And if you think about it, you're working, you spend more time working than actually at home or sleeping or any of that stuff, right? So uh I think we've tried to solve for that equation of saying, look, quality of work, uh more learning, more new roles, uh, and taking care of you not as an employee, but more as a well-rounded uh individual. I think these four have really worked for us.

SPEAKER_01 54:00

And that's what has led to people sticking to the market.

SPEAKER_00 54:02

Yeah, yeah. And and you'll be surprised, we are not the best paymaster. Our pay is like I would say at least 15-20% lower than what the uh what the market is. The best companies in your space offer. Yeah, I'd say actually 25%. And we now have data to prove that. So unless you uh usually when people leave us, uh they get an 80-90% hike. 80 to 90%. I mean, we would measure this very religiously. That what is the pay parity that allows uh you know uh allows us to do some of this? And uh, you know, it's if usually there are 30% comp difference, people don't leave in capillary. You know, it's usually uh 70, 80 which gets. So that's quite a lot of difference. Yeah.

SPEAKER_01 54:50

And what are the companies that uh capillary alums have started?

SPEAKER_00 54:55

Yeah, we've had a ton of uh, you know, I think we've had like 50 plus companies, uh, I don't know, probably more actually. I like very very uh, you know, I think it was 2012 or 2011 when one of our very early employees went and started up. Uh and we were extremely pissed. Right? Uh both KK and I were very pissed. Uh uh This is Shub Shub, actually. Shub is one of the co-founders and NPL. Um and he was our he was a second employee, right? So when he started off, we were like extremely and to our bad luck or to his luck, when he said he'll start, a couple of good folks also said we will also join him.

SPEAKER_01 55:39

That's what you were trying to, right?

SPEAKER_00 55:41

No, no, no. I mean, it was it was also a little bit that look, why is he starting up, right? I mean, it was uh and then within a few weeks, I think we kind of made peace that if you have good people, they will obviously want to go and start, right? So since then, at least our view, at least my personal view has has changed to saying it's okay. I mean, if you have good people, let them go do uh so sometime after those six months, we went and said, look, we want to see a hundred startups coming out of Capillary over the next whatever 10, 15 years, right? So we've had very good ones come out. We've had uh, you know, MPL, uh, Shubiz, uh uh there was File, uh, you know, uh there's Gambary Labs, uh, there's Nectar, there's Facetz, there's quite a few now. You know, there's quite quite a few startups that are out of capillary now.

SPEAKER_01 56:29

And what I learned from FaceEt's Neon being an investor, first check in FaceHets, is that like you can really build stuff inside Capillary, which is not it cannot or should not be useful for the business just because uh, you know, and it the company was really incubated inside Capillary.

SPEAKER_00 56:47

Yeah, you know, the FaceHit story is a very unique one, right? So uh they had built a DevOps platform for us to do multiple things, uh, you know, improve our uptimes, reduce our uh AWS costs, like auto-scaling, all of that. And uh yeah, when Prabhu walked up saying, look, yeah, I mean I want to kind of spend this out, we said fine, you know. So and the culture has always been since that 2012 incident has been a little bit saying, you know, uh, if you want to start up, go ahead, start up. We've had multiple cases where, you know, a third of our hiring comes from people joining us back. So it's not just that we have a low attrition, but even a lot of them come and join back. So in many cases, we've also had founders who have left the company, uh, you know, didn't work out, came back. Uh, you know, some of that whole cycle has also played out uh very nicely. Yeah.

SPEAKER_01 57:44

Then the other thing as a as a as a CEO is how do you beat the narrative of or counter the narrative that the best of the SaaS stocks are down because Claude did something.

SPEAKER_00 57:57

Right. Yeah, so a few things. Uh look, I think is is all the fear wrong? Answer is no. Right? There is crazy disruption that's uh happening now. You can very well see that what was probably uh what a seven, eight member engineering team could do or a pod of seven, eight devs could do, can now be done by three, four. Right. Uh so the disruption is is real, uh right. And and uh after I don't know, 17, 18 years, I've started to build stuff myself.

SPEAKER_01 58:30

Oh, really?

SPEAKER_00 58:31

I mean, I uh not into the core product. I've built small applications for myself. We spoke of Vipassana, right? So I built an application now where, you know, uh if I'm smiling, like my way of being aware is if if I have a smile on my face, it means that I'm aware, right? Because I try to keep a smile on my face as a uh so I have an application now where on my Mac where anytime it sees me not smiling, I have a smiley which goes red.

SPEAKER_01 58:55

And this is a always on application?

SPEAKER_00 58:58

This is an always-on application. So whether I'm taking emails or whether I'm like on a video call. So it's constantly telling me that, you know, hey, you have to be aware now.

SPEAKER_01 59:06

And uh what what tool did you use to build it?

SPEAKER_00 59:09

I I mean I built it on like I I I've actually tried both now, right? So I built it on Gemini initially, then I built it on Cloud to see which one's better. It's on Xcode, so it basically uses the Apple, you know, visual framework and all that stuff. But uh and look, uh like there is a real change, right? Like people like me who last wrote code in MATLAB in 20, 2008, not even 2008, 2006, are now like can build stuff, right? So it is a uh so the fear is real, right? Uh now unfortunately what's happened is I think markets have painted everything in in one pain brush. Yeah. Right? In one flat pain brush of saying all software is gonna die. Uh I don't think that'll happen. So at least if we have a in like the framework in my head is uh, you know, are you a system of record? Are you a system of engagement or workflow, or are you a system of intelligence? I think the system of records will still stay. Like AI or no AI or bank ledger will still be a bank ledger. You still need a 100% auditable, 100% accurate uh platform uh to deliver it, right? Uh so if you're not a system of record, start moving towards a system of record very quickly. Uh because I think AI will replace workflows, you know, AI will replace uh all of that. Intelligence, like we have some beautiful bots now which can do the work of an analyst uh like sitting in an agency outside, right? Uh uh So I think the the I believe the markets are also hopefully starting to get smarter. That instead of painting everything on one paintbrush, you know, what kind of a software are you? Is it a seat-based pricing? Do you serve SMBs or enterprises? Will you benefit in a in an agenti commerce world? Right? Some of those are questions that I didn't hear three, four months ago, which I'm starting to hear from uh investors now. So I do believe in a six-month, ten-year time frame, you will probably see a checkout on what survives and what doesn't.

SPEAKER_01 1:01:14

And in in this journey of let's say building from zero to 60 mil ARR in the last four years, what are some of your other learnings which we have not covered?

SPEAKER_00 1:01:25

Uh what has been the learning uh sales side, I think we discussed uh uh a fair bit. I think people is another we should touch on. Uh right. So uh the first time we raised uh big money from Sequoia Norwegians, this is what I'm talking about 2012, uh, we went from 100 to 400 people in about 18 months. Right. Uh uh it took us four years to get to 100. It took us another 18 months to get to 400. Uh and I think the one big learning then was money is not is never the rate determining factor of how fast you can hire. It's actually how fast you can onboard. Right? So it's how fast you can onboard people, right? And I believe inherently you are restricted there. Like I have this rule now that uh I will not hire uh more than one direct report in a quarter. And no one should. You know, because when you're getting a direct report, it's also a lot of work to For you also to onboard them, get them to a productive place, like you know, and and in startups especially, if uh if an individual is not delivering in the first six months, there's no chance they'll deliver. You might have hired someone thinking of the next five years, but if that individual is not like able to cross the line in the first uh, I'd say three, six months, you know, you're getting nowhere with that individual, right? So, because in startups, you're in in in large companies, hierarchies work. Someone is an SVP, some employee will listen to it. In startups, your right to exist is, you know, I can get stuff done. I mean, as an employee, your right to exist is not your title, is not your seniority, is really whether you can solve a problem and get stuff done, right? So, um, and hence I feel key, you know, like your your your rate limiting factor on like adding team members or adding is actually, you know, uh like how many can I onboard at any given point in time, right? So uh so that's been a good learning, right? So we we now uh I think we make far fewer mistakes on uh on uh on hiring uh and onboarding and not working because our pace of hiring is a lot more slower. Uh the the the second thing I would say is you know, people from big brands uh will work for you if they have solved similar problems in their in their life as the problems you are trying to solve now are. So the way we hire has changed significantly over the last, I would say, seven, eight, nine years. Today, if I want to hire someone uh in a senior role, we actually go to them saying, Look, this is my problem statement. Here are the problems that I am struggling with right now. Right? Uh I mean, you know, and and it's usually a thing of them coming back and saying, How would you solve these five, six? Right? And and are intuitively those solutions making sense to you. Right? Not just on face value of saying, oh, yeah, Oracle may solve it. Because you're culturally you're different, your context is very different. Uh I feel, I feel so not just hiring someone because they have a good title in a big place, but really uh uh can they be successful in the first six months? Uh because here are the six problems I'm going to give them, anyways. Right. So uh and uh some of that has helped us uh in uh third, third, I mean a few things, take the hard call sooner. You know, there is uh like insane value to taking the hard decisions uh soonest. Right. Uh uh because you're once you've taken those hard calls, right, then you're not living in a place of anxiety. Yeah. You know, so you're then even the worst news is uh better news than what you had assumed, right? So I I always, even COVID, like uh we took calls like extremely like, you know, we uh March 27th, uh the country went into lockdown on March 28th, right? March 27th, we basically let go like a third of the team. And we then focused all our efforts in getting them placed everywhere.

SPEAKER_02 1:05:39

Okay.

SPEAKER_00 1:05:39

So 220 out of the 250 were had jobs by you know April 20th. Right. If I had done the other way around of saying I will keep waiting for what happens, and it was good that we did that because our revenues actually fell by 50% and then.

SPEAKER_01 1:05:53

Because all retail outlets stopped.

SPEAKER_00 1:05:55

We were all retail, right? So our like non retail survived, good business. Like good groups like the Tatas, the Birlas said we will still pay you. But majority was gone. Right. So it really helped us reset and do the right things for our employees, for our vendors, for everyone, right? So some of those are learnings, but yeah.

SPEAKER_01 1:06:15

So tell me, you know, I think one of the most important questions that I want to focus on is on the people side.

SPEAKER_00 1:06:20

Right.

SPEAKER_01 1:06:21

Right. So first is when you initially said within the first fundraising, institutional fundraising, you went from 100 to 400 people. What are the things that broke? And then how soon were you able to fix what measures you took? And then on slowly building the team to the current stage.

SPEAKER_00 1:06:39

Right. Yeah, so uh what broke um many things, uh like uh it was a colossal mess up. Uh um and I'll like at multiple levels, right? So first is um I do believe that if you're getting someone new into the business, micromanage for the first three, six months. Uh, because context is the is the thing in a startup, right? Because your documentation is not great, your processes are not great, etc. etc. Right. So uh now what would happen here was we would hire someone, I would keep traveling around the world uh, you know, for meeting customers, is that and all. Uh the onboarding was terrible. Uh, right. So, and what would end up happening with these folks was they were all good people, right? So I don't think their failure was about uh them being bad people. I think it was a little bit more that we didn't deal with them well. They would come now, they would like any good person who comes in will obviously want to hire five more, five more people who think like them. Now you get those five more people, now they're also not onboarded very well, right? So it's a uh and so what what ended up happening was you suddenly had these very deep silos. Like the tech guy is doing his own thing, the customer success guy is doing his own thing, the you know, the the HR guy is doing his own thing. Like, and each of them have their own big viewpoints on what to do, and uh, and all I was probably doing was managing politics between them. Uh, you know, it got to a point where it was a little bit like that. Uh and uh luckily at that time we had one of these uh Sikoya had this gentleman called Ganesh who ended up becoming our CEO in much later. Uh and I was struggling with this problem, right? So, and uh Ganesh offered to spend uh a day or two a week with us. And he did this very small thing. He he went into uh he said, Who are the top 30, 40 people in the company who really had stuff done? Uh so I gave him the list, he went and met each of them, and he would ask each person that uh who are the top five people in the company who get stuff done? Right. And when that came back uh as analysis to me, uh basically what came out was it was the older guys who were really pushing, uh getting stuff done. Uh none of the newer leadership I had got. The new 300 people featured in that, featured in that five. Not the new 300, I'm seeing even the leadership team and uh next to them. Right. So it was a very clear, you could make out Kiya to like the the value add is it's it's very questionable, right? And the politics is very high.

SPEAKER_01 1:09:13

And were these people enough tenured in the company to make an impact?

SPEAKER_00 1:09:16

Or this was a couple of years in, right? 18 months into the into the so reasonable uh tenure, if you ask me. And you know, deep down, even you knew key, this hasn't worked out, right? It's just that you were waiting for some data point to show up and and and and take a call, right? So so uh yeah, so we we actually over uh it's actually pretty crazy. So at the end of those two years, sometime in I would say early 2015 or end of 2014, uh I actually overnight said I'm basically removing one full layer of leadership. Uh and we just got like different people up. Uh and and after that, what we did was slightly different. We said, look, I have great talent in the company. Now I need to scale this talent up rather than constantly looking for people from the outside, right? Uh so we actually do a lot on coaching, right? Uh every first-time manager in Capillary gets a coach, gets an exec coach, right? So uh, because I know that that individual, okay, he's only spent two and a half, three years and become a manager now. I know he might last 10 years with me. So I better invest in that individual now. Yeah. So unfortunately, most companies don't do that, right? They say that, look, this individual is not scaling, but what are you doing to make him scale? Right. Is a is a question that you really need to answer with. Yeah. Right. So uh so we do a lot of coaching, we do a lot of uh rotating roles, you know, so that that individual gets empathy. Like our engineering uh leads, our product managers spend insane amount of time with customers. Right. So we in 2015-16, we did this thing that every lead uh uh or every product manager actually owns a customer. There is a customer success guy and all of that stuff, but this individual is also going for the QBRs, this individual knows that there is a so like bringing some of that context closer, uh that's really helped us because you know now the number of times I really need to go out to make a hire is far fewer. Right? Uh and yeah, and if it's someone internal bumping up, culture is better, you know, a lot of that stuff works very well. Having said that, we've got people from the outside also. Like, you know, I mentioned Gani Shubro who headed India for us. Tons of people we've got from the outside who have done very, very well for us. But it's always been this model of saying first three, six months is extreme micromanage. You know, and once they are part of the culture, once people have seen successes with them, is when people also start trusting, and then you're by yourself.

SPEAKER_01 1:11:52

You know, in your journey, if you have to attribute the the current success of capillary to five major decisions, what would they be?

SPEAKER_00 1:12:03

Uh five major decisions, what would they be? Uh wow, that's a very deep question. Uh yeah, first is uh uh I think when we started, uh we did some things very smart, right? So uh that whole period of you know uh not just going to build what we wanted to build, but we spent six months speaking to customers before we wrote a line of code, which I think was a very, very good decision. Because by then we knew who our first five customers are. We weren't selling, we were listening, right? A lot of that played out very, very well, right? So the initial part I would say that was a uh that was a very, very big uh big aha for us. Uh the second decision, I think, was uh you know our um like uh our ability to show value, like uh quick value delivery, right? That in three months I can show you value, uh meant that not only did our India customers roll very fast, like customers like a Puma, customers like uh them, actually took us international as well. It's very funny. Our international journey didn't start with us wanting to go international, started with our customers saying, no, what you solve for her us in India, can you solve for me in Singapore and a Dubai?

SPEAKER_01 1:13:24

Puma India took you to Puma US?

SPEAKER_00 1:13:27

Took us to Puma, Singapore. Uh and then of course, you know, once we had some referenceable customers in each of these markets, those markets grew by, grew by themselves, right? So this whole quick unlock of value and being able to show that, I think was a definite, uh, definite uh big tick. Uh uh, I'd say I'm just trying to chronologically go through, you know. So I'd say 2015-16 when our approach to uh do we just want to give the highest pay package and titles, or do we want to become more than that? Uh really happened in like 2014-15. And this was a very interesting conversation I had with uh a wingy of mine, a wingmate of mine from IIT who um joined us uh from Yahoo, worked with us for five years, did very, very well for us. Uh, and then he's a wingmate, right? So I can clock anything with him. And and he said, Look, I want to leave now. And uh and it was a very deep conversation, it was like kyawa, right? Like uh, you know, and when people like that leave, it's very personal. Very painful. It's like even for you, it is very personal as a founder, right? This was not an employee for you, right? This was a like like uh, and that's when I realized this whole burnout and this whole piece of, you know, uh, and our policy changed significantly at that point in time. We said, take your sabbaticals, you know. I and I started doing this thing that uh, you know, if someone's not taken a holiday in the last two, three months, I actually push people to take uh take breaks, right? So what I realized is your your best people will burn out. They will not leave for comp or for uh some of those other reasons, right? Uh our actually our our HR, uh I won't call it HR, but our people policy or people philosophy, I think is very unique. That I would say is like a where I said I want to do this, a lot of people questioned me saying, like, like what are you doing? Right? We spend a we do these inner peace retreats, we do these, we do a lot of stuff to uh like uh go beyond just being an employer.

SPEAKER_01 1:15:42

Uh no, I have been part of Morpheus along with Samir Guglani. I have seen Capillary conduct some of those retreats as Morpheus.

SPEAKER_00 1:15:49

Oh, very interesting. Got it, got it. I didn't realize you were part of that gang as well. Right. So we we so that that I would say is a is a third big one. Uh the fourth one I would say is uh during COVID. Uh this this thing of saying take your take the hard calls sooner, right? Uh I think is is something that stuck with me forever because I think that was the difference in us surviving or us dying. You know, uh and you know, I I did see a lot of other companies who were in similar spaces, travel or or retail or where uh they just couldn't make it. And good companies, but yeah, you know, uh and it was even harder for us because a lot of the 250 people I let go had spent 10, 10 years with us. So it was also like soul crushing. Uh, but I thought the end outcome was great because we could get all of them placed. If you had ever called me saying I this question helped me, I had made all those calls back to them saying, Look, I had helped you, now hire from me. Right. So I I I still strongly believe that uh take the hard calls uh sooner is a uh the fifth one I would say is you know, um a lot of times strategy in startups is usually a shiny object problem. Yeah. Right? The founder has changed his gaze towards it, the founder has changed his gaze, the whole team has also changed their gaze towards it, right? I now strongly believe that strategy is something you do once in two, three years. Because you have to let it play.

SPEAKER_02 1:17:27

Yeah.

SPEAKER_00 1:17:27

Right? You have to let it play, and and hence, you know, uh like these pivots that we did in, I would say, 2021 uh type time frame of saying we'll open US, we'll shut down our e-commerce business, we'll shut down our uh you know, SMB business, we will focus only on large enterprise. You know, those were all very deep in a sense that you know it it was part of that coming down of revenue and all that stuff. But without that, we wouldn't have gone from that 15 million to whatever 115 million run rate now in like in a I'd say a four, five year uh time frame, right? Uh if we were carrying all that baggage. Uh I I I I hence feel here, do your extremely deep work on if you're like on on deciding to what you want to focus on, right? Uh like the 2020 capillary was we did seven things. We were great at one, we were also rants at many, and we were doing some 27, 28 million of revenues. Today, the businesses we do only one thing, but we are the best of the world at it. That took a a lot of like soul searching to shut things, focus on a few things. Uh but I think that really, really worked. Right. Uh, we had Psyche at X210X help us with coming up with this. But yeah, that I think was those that year of deep work and then taking all the hard calls uh really worked for us. So yeah, five. I think I got to five.

SPEAKER_01 1:18:59

Yeah, yeah, thanks. No, thank you so much, Anish. Love this conversation. Would want to do part two sometime later. Sure, sure. I think for our audience, uh I'll I'll tell you some anecdotes. Like, so uh I was in a board meeting at CloudSec. Uh right, the company had just crossed uh let's say double digit million in uh ARR. And uh then you know, founder Rahul shared a slide with, and I was not supposed to be part of that board meeting, like I was traveling at that time, but I came. He shared a slide where uh we had the podcast with Ravi from Moeing Age. He said, This is the playbook that they are going to adopt, right? You know, what they learned from a podcast, you know. So I wish to make this conversation similar for us.

SPEAKER_00 1:19:44

No, no, happy to be of help. You know, we've been we've been very lucky to have great people, you know, pick our calls, help us through our journeys. So happy to uh pay it forward.

SPEAKER_01 1:19:55

Thank you so much. It's been a pleasure hosting you today on the podcast.

SPEAKER_00 1:19:58

Thanks so much. Thanks, Anat.