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Month: June 2021

Embedded Ecosystems Built on Motherships Using API Networks/Gateways

Posted on by Kae Team

Understanding History – Digitization Waves and How They Took Place

The Indian digitization story has been a unique one – the Jio rollout and low smartphone prices led to an unprecedented digital inflection point, which in turn led to rapid adoption in new technology paradigms like mobile first and on-demand (eg. Uber, Swiggy). Large consumer tech companies in Edtech like Byju’s, in E-commerce like Flipkart, heralded the first wave; the emergence of social commerce companies like Meesho and a new wave of SMB SaaS players like Khatabook, Dukaan heralded the second wave.

As a result, various technologies – which include new-age startups/platforms, legacy on-prem and cloud softwares have penetrated different markets creating distinct layers over the years.

If we look at the current landscape, very broadly – there would be three markets categorized by different levels of technology penetration –

  • New age consumer and business technology plays which have been created in the last 5-7 years – think Flipkart, Byju’s, Swiggy as consumer plays; Shopify as business plays
  • Legacy technology products being used primarily by businesses – think Tally, miscellaneous legacy AutoCAD technologies being used by architects
  • Semi-offline markets where smartphone and WhatsApp penetration is high – think Kirana stores and small retail businesses. These are semi-offline because they have reasonable WhatsApp and phone penetration and have recently seen Khatabook, Dukaan adoption.

Each market has seen the emergence of what we may think of as Motherships

Our objective is to identify these Motherships where embedded ecosystems can be built. The future of venture backable businesses will be embedded growth – built on the back of Motherships whose core functionality is limited to one or two use cases. The goal is to significantly expand their use cases and subsequently expand their TAM – by solving for the end-user through functionalities which are difficult to build and scale.

Creation of Embedded Ecosystems on Platforms Solving for Single/Limited Use Cases

We want to make platforms into Ecosystems which give users more reasons to use the platform and drive greater network effects. Potential motherships have 1 or a maximum of 2 use cases – for example, Tally’s main use case is data entry for accounts, Swiggy solves primarily for food delivery and restaurant discovery, or a Khatabook solves primarily for accounting/maintaining ledgers, but each of these platforms is used by a large chunk of the population.

To summarize – A few common traits of motherships

  • They are technologies (software/hardware) which have a reasonable presence/penetration in core industry categories
  • They have 1 or maybe 2 core use cases – and their bandwidth is restricted to these specific use cases
  • There is a potential for new functionality which is not their core competency

Motherships can be single platforms OR multiple distributed touchpoints:

  • Shopify – Single Platform
  • Credit Cards – Distributed across several users

Mapping out possible motherships (this list is not exhaustive, would love your thoughts on this, do write in – sarthak@kae@capital.com)

Building for the B2B2C/B2B2B Users, Where Platforms Face Significant Challenges in Developing New Capabilities/Functionalities

We will notice most platforms have a dominant position in their respective markets, so what is to stop them from developing the functionality in-house?

The counter to the above argument is to tap into those APIs/functionalities which need high bandwidth to develop and maintain. These will be easier to “outsource”/ “unbundle” – and solving for this seamlessly is needed to be done.

Additionally, new functionalities may add a structurally different revenue stream, significantly driving up TAM – Embedded marketplaces, Embedded NFT gateways are strong examples of such functionalities.

The possibility to charge per API call opens up potentially massive markets with highly scalable models.

The new functionalities can include (and are not limited to) –

  • Embedded product marketplaces for procurement – imagine excel sheets/Tally with an embedded marketplace, where building supply is a challenge
  • Embedded service marketplaces
  • NFT/Blockchain functionality which requires high processing power/costs
  • Deep learning which requires high processing power/time, very deep expertise
  • Cybersecurity
  • Reverse Fintech – Fintech players/Fin. Institutions being used to distribute other products/services

Embedded Marketplaces, Deep Learning, Blockchain – and then some more!

These are some of the plays which we are exploring, and we would love to hear from you if you are building something out in this space.

We are particularly interested in discovering –

  • Embedded Tools (for Eg. NFT API Tools, Cybersecurity API Tools, Deep Learning API Tools) being built on B2B Marketplaces

AND

  • Embedded B2B Marketplaces on commonly used SaaS/Software tools like Excel, Tally (including platforms like Khatabook maybe!)

Similarly, Embedded tools built on Consumer/Prosumer Platforms/Marketplaces are of interest as well.

If you feel you are working on something of this sort, or know someone – we would love to speak to you!

Do write to sarthak@kae-capital.com

Booming Indian SaaS Ecosystem

Posted on by Veenu Choudhary

Indian SaaS ecosystem is at the cusp of transformation. According to Nasscom, India’s total SaaS revenue breached the $3.5 billion mark as of March 2020, growing at a CAGR of 30% and the SaaS industry has the potential to grow 6X to $13-15 billion by 2025. Indian SaaS has evolved into a multi-billion dollar industry today with startups raising growth capital from both domestic and international VCs. Homegrown B2B companies like Zoho, Freshworks, and Chargebee have become top global companies, which reinstated the confidence of investors in the Indian B2B SaaS business. Indian SaaS startups are now getting valuation multiples at par with global peers.

At Kae Capital, we are very bullish on India’s SaaS potential and have been investing in SaaS since 2012. Around 25% of our portfolio consists of SaaS startups. We were the first institutional investor in SaaS startups like Mayadata, Hippo Video, and Disprz. Our broad thesis on SaaS has remained built from India for the world and founders with unique insights about the market. (Please write to veenu@kae-capital.com or gaurav@kae-capital.com if you are building interesting SaaS businesses and want to have a discussion)

Sales Stack- The pandemic has accelerated the adoption of Remote Selling

Sales stack existed long before the pandemic and the pandemic has only accelerated this evolution. With the advent of remote work globally, we are forced to work from our homes and companies are looking for solutions to work and collaborate with their globally scattered employees. Managers are looking for solutions to onboard, train, monitor and increase the productivity of their remote teams.

The set of softwares have evolved to meet the needs of the sales team. The Sales Stack is a set of softwares that teams can use to ensure that Sales, Marketing and Growth are aligned and able to efficiently work together to maximize revenue.

Pandemic has increased the need for such softwares to manage remote teams efficiently, which has led to evolution of many startups focusing on revenue teams. According to Gartner, by 2025 80% of B2B sales interactions between suppliers and buyers will occur in digital channels and 60% of B2B sales organizations will transition from experience and intuition-based selling to data-driven selling. Sales teams across the globe embraced the new normal and learned to collaborate and sell digitally with the help of different technology solutions.

Sales Stack can be broadly categorized into four interconnected functions-

Sales stack works on top of systems of records like CRM and systems of communications/engagement like Zoom, Slack, and LinkedIn.

  1. Sales Enablement– It is the core of the sales stack, it enables the sales team with the content, guidance and training to perform their job effectively. It helps reps understand what to know, say and show to the prospects.
  2. Sales Engagement– It equips sales reps to reach and communicate with customers in a personalized and efficient way. It helps reps send the right information to the customer and keep track of actions on the leads.
  3. Conversational Intelligence– It helps managers monitor and interpret the conversations of reps and prospects. It is helpful in identifying the areas of improvement for reps. Simply put, it helps to listen and learn from sales calls.
  4. Revenue Operations– It is an end-to-end business process to provide transparency across marketing, sales, and renewals. In simple words, it streamlines the processes to align revenue teams, providing them with better visibility of the sales funnel.
We at Kae Capital are very keen on the sales stack. We have been analyzing this space for quite some time, there are many startups that emerged in the last year. Startups are working on land and expand strategy, entering with a piece of problem in the above four core functions with an aim to eventually provide integrated offerings for the entire sales stack. We believe a product-focused team with unique insights about the target category can tap this expanding opportunity. If you are building a sales stack software or intrigued to have a discussion, do write to me at veenu@kae-capital.com