One of the only ways to get out of a tight spot, Sumit Ghorawat reckons quoting Amazon founder Jeff Bezos, is to invent your way out. Ghorawat found himself in a sticky situation four years back. After co-founding ShopKirana, a business to business (B2B) supply chain-focussed startup working with mom-and-pop (kirana) stores in December 2014, Ghorawat decided to run a three-month pilot in Mumbai and Indore.
The idea was simple, yet compelling: To find out which of the cities provided a better product-market fit for his fledgling startup. The choice was either to start in a mega city like Mumbai or in a smaller one that presented a big opportunity. At stake was a pie of an estimated 12 million kirana stores across India.
“We were keen to explore both options,” says Ghorawat, as he bites into a slice of cheesy pizza at his headquarters in Indore’s Zanjeerwala Square, one of the busiest intersections in the largest city of Madhya Pradesh. The time taken to reach Zanjeerwala Square from Indore’s Devi Ahilya Bai Holkar International Airport—a stretch of over 11 kilometres—is just 25 minutes during peak hours.
With the mercury hovering around 34 degree Celsius, Ghorawat switches on the air conditioner (AC). The summer here, underlines the alumnus of Carnegie Mellon University, is not as cruel as Delhi’s or as humid as Mumbai’s. “Travel time within the city too doesn’t blow off your fuse,” he smiles, flashing a global report released this year. While Mumbai is the most congested city in the world, Delhi is ranked fourth, according to the Traffic Index report by TomTom, an Amsterdam-headquartered independent location technology specialist. “Welcome to Indore,” he breaks into a hearty laugh, as he grabs another slice of pizza.
Just under the AC in the meeting room, three words—Two Pizza Rule—are boldly inscribed on the wall. Two other co-founders—Deepak Dhanotiya and Tanutejas Saraswat—along with the chief technology officer Akhilesh Gandhi step into the room. “We are here to finish the pizza,” beams Dhanotiya, decoding the Two Pizza Rule propounded by Bezos. During the early days of Amazon, the American entrepreneur believed that every internal team should be so small that it can be fed with two pizzas. “We too started small, with a team of not more than a dozen,” recounts Dhanotiya, as he sheds more light on the Mumbai-Indore pilot of ShopKirana.
The result was positive in both the cities. Demand among kiranas was encouraging, the void in the market was conspicuous and an entrepreneur’s desire to solve a ‘pain point’ was satiated. “We were in a fix,” recalls Dhanotiya, who takes care of supply chain operations. What helped the co-founders resolve the dilemma was inspiration from yet another business gem of Bezos: The common question that gets asked in business is, why? That’s a good question, but an equally valid question is why not. “We said why not Indore,” smiles Ghorawat. “And the gambit has worked brilliantly for us.”
Mom-and-Pop Rocks From just ₹12 crore after the first year of operations, ShopKirana has leapfrogged revenues ten times in four years. The other growth metrics are also promising. It now operates in three cities, including Indore. The target is to add a dozen more by March next year. Headcount has jumped from 26 to 130 over the last five months. “Our growth has increased over eight times during the first five months of this year,” claims Ghorawat. From 1,000 kirana stores that it worked with in the first year, the number swelled to 12,000 by May. “We have just touched the tip of the iceberg,” says Saraswat, who takes care of marketing.
On another crucial metric to gauge the growth potential of a startup—backing by venture capitalists (VC)—ShopKirana scores high. While Japan’s Incubate Fund invested an undisclosed amount in 2016, Info Edge—the parent company of job portal Naukri, and an investor in Zomato—pumped in around ₹14 core last December. “You don’t need to be in Mumbai or Bengaluru to start up,” reckons Saraswat. “Indore is the place where the action is.”
After decades of flaunting the moniker of being the snacks (namkeen) capital of India, Indore is spicing up the startup ecosystem. While 359 startups were founded between 2012 and 2015, over 250 began operations in the past four years (till May 2019), according to Tracxn, a technology data tracker. What’s also comforting is that the city boasts of four ‘minicorns’, or startups that are good candidates for early-stage investments due to their potential to grow in a big market or with great execution in a small market.
A clutch of factors has propelled the city’s startup ecosystem: Low operational expenditure, economical cost of living, better work-life balance, minimal attrition, high infrastructure growth, negligible traffic gridlock, and the availability of top-end higher educational institutes. Indore is the only city that boasts an IIM and IIT. Gandhi explains the tectonic shift. The city grads from the IIM and IIT used to migrate for jobs and venture. “Now there is a reverse brain drain,” he avers.