In a tete-a-tete with Entrepreneur India, Bhanu Chopra, CEO, RateGain, shares his entrepreneurial experience.
A bootstrapped start-up, RateGain was established 10 years ago with 3 employees on board. RateGain clocked net new sales of $100,000 in its first year. Ten years later, RateGain has over 500 employees with net new sales of $50 million.
In a tete-a-tete with Entrepreneur India, Bhanu Chopra, CEO, RateGain, shares his entrepreneurial experience of building RateGain into a Rs 135 crore venture at a time when the start-up ecosystem in India was just developing and securing business funding was a tough task:
Before establishing RateGain, you co-founded Riv Consulting, so what made you to take an exit from Riv Consulting?
I realised that products are the future and I had the conviction to transform our complete business process behind the dream. We were working with some very large firms in the Chicago area. We had four Fortune 500 clients and we helped them implement large CRM systems. We built a very good yet small team of consultants.
In 2002, there was a lot of home grown competition from Indian firms. Indian firms were gaining a lot of traction via outsourcing because of the labour arbitrage. We realised very quickly that our company would be less likely to sustain in future because our business model was based on billable hours.
I had been in the US for about a decade and wanted to move back to India. I was sure that I wanted to build a software product by leveraging the talent that was returning to India. I felt that I could build a product in India more cost efficiently, which gave birth to RateGain.
How did the idea of RateGain come about?
The initial concept was to build a meta search travel site like Kayak and Trivago. Kayak was formed around the same time as RateGain. I saw that there were other companies starting in this area, which meant a few things for me. First, I saw it as validation for my concept. However, on the flip side I knew that it would be difficult for me to compete with a company like Kayak since I was building a product from India without investment capital.
Therefore, I bootstrapped the company. I started it in 2004 and at that time, the VC ecosystem in India was just developing. Access to capital was very difficult. I come from an entrepreneurial background and I have seen businesses run and build on traditional values. You have to build a business model that can quickly turn into a profitable company.
I knew that since I was bootstrapping this company, a B2C business model would likely be a cash drain that I could not afford. It would take several years before I could turn a profit. I flipped the model to be a B2B company, where I could license our technology to other travel players, so they could gain an understanding of what the competitive landscape is like.
What kind of transformational growth RateGain has witnessed since its inception?
While I was building the technology, I was also focused on selling it. Besides, I made several trips to the US and Europe to do road shows. It was a very new concept for people, but everyone recognised that there was a dire need for it. In the first year, I signed up a dozen clients. The first three years of the business were just awesome. We did about $2 million of business in our first three years. As a result, we participated in Deloitte’s Fast 50 list, which tracks the fastest growing companies in Asia Pacific region. We were the number one company on that list in 2007.
The biggest change for us was to move away from being solely reliant on the online travel agency (OTA) market, which actually occurred in 2006. We had a major player in the hotel hospitality industry approach us because they liked our price optimisation software. They had a similar product, but they felt ours had better results and performance. They requested an OEM (original equipment manufacturer) deal, where they would white label our products. That turned out to be a great thing for us because it gave us a way to expand without a sales force.
Though there are many giant players in the IT industry offering software solutions in the cloud platform, what kind of strategy do you follow to gain competitive edge over others?
We believe we have the best products out there. We ensure that we generate more intelligence and more accurate intelligence for our customers than any other competition. We are very aggressive in capturing the market. We continuously focus on innovation in our segment. Our newer products continue to offer us competetive edge over others. We started off with OTA’s and soon started servicing Car Rentals, Hotels, Cruise Liners, Airlines.
What are the growth opportunities that you see in India?
India is among the fastest growing digital economies in the world and we are seeing an enormous interest from India and continue to service it.
How does your revenue model works? What are your revenue streams?
We are a SaaS company. 100 per cent of our revenues are annually recurring. We have a very little churn in our business, which is less than 10 per cent.
What was RainGain’s revenue in last fiscal and what is your anticipation for the next fiscal year?
Our revenue last fiscal year was Rs 135 crore and we aim for a 100 per cent YoY growth for the next fiscal year.
Give a brief about your business roadmap for this year?
We’ve launched two new products this year. One is a price recommendation tool that helps our customers optimise their pricing to achieve maximum revenue. Our other product – Unity is a unified revenue suite, which ties all the essential tools required by a revenue manager. It’s a one-stop shop for revenue managers.