From UK-based Pouring Pounds to India-based Cashkaro, the Kalaari-funded startup is well on its way to popularise the concept of cashback in India in the next one year. In this story, the founders talk about how they intend to create awareness about the concept, and retain their position as a market leader in the Indian cashback industry
“If you are an entrepreneur or are on the road to being one, don’t hesitate to ask or reach out to people,” voices Rohan Bhargava with utmost conviction, as we begin the interview with the one biggest lesson he learnt from his two-year old cashback venture, Cashkaro. His belief is that a lot of people tend to assume that it’s not going to work even before they try, and offers some motivation by narrating their (his and his wife/co-founder Swati Bhargava’s) journey from London School of Economics (LSE) to technology-based entrepreneurship.
It began here
With an honours degree in Economics and Mathematics from LSE, both Swati and Rohan were all set to pursue a career in finance, when a chance encounter with Quidco (a UK-based cashback site) and Ebates (a US-based cashback site) got them thinking about the idea of getting a cash refund for anything they purchase online. “The idea was fantastic and the technology to build it seemed quite simple. Unfortunately, not many people were aware of such a concept,” recalls Rohan. Realising the opportunity, the duo began researching the sector and by 2011, they founded Pouring Pounds in the U.K. “When we started, we had no idea about technology. Despite that, we learnt the nuances of this sector and took a chance with approaching potential clients we could bring on board,” he says and recalls a key lesson he and his co-founder learnt – never be afraid to ask.
Pouring Pounds was designed to be a self-funded B2B brand focussed on enhancing reach (initially) for trade associations and media organisations. One of the key companies they partnered with during the initial stage was the Metro newspaper (part of the Daily Mail Group). “We setup a site called Metro Moneyback. In three to four months, Daily Mail directly reached out to us with a quote, requesting us to run cashback for the main newspaper,” shares Rohan. This led the company to its transition phase wherein it bootstrapped its business and achieved significant reach without investing heavy capital in growing the venture. “We used only a small portion of the capital from the business into learning the nuances of this industry, building technology, marketing and other areas,” he says, and adds, “That is something we did differently as opposed to many others who try to jump into a B2C business and spend a lot of money on day one to acquire users.”
India in 2013
For Rohan and Swati, the aspiration was always to build a business in India. But in 2011, when they founded Pouring Pounds, the Indian ecommerce market had not evolved enough to drive business for the cashback segment. However, that didn’t stop the founding duo from keeping a close watch on the market. “We had setup a team in India to keep us posted about the changing dynamics of Indian ecommerce. We got our first break in 2013,” recalls Rohan.
Although the founders were armed with significant knowledge about the cashback industry, along with the belief that India would follow a similar growth path as other developed countries, they did face several challenges when setting up Cashkaro, the Indian version of the business. “As an industry, most retailers we wanted to work with had never heard of a concept called cashback. We had to invest a lot of time in educating them about how it works and how it helps businesses leverage their growth,” shares Rohan. One of the strategies which helped them overcome this challenge was to present case studies and data from the Pouring Pounds journey. “Once we convinced the larger players like Flipkart and Snapdeal to sign with us, getting on board the other relatively smaller retailers was easier,” he adds.
Cashkaro is today a business dependant on the awareness and strong adoption of ecommerce in India. As Rohan puts it, as more people take to ecommerce as a normal transactional platform, the greater businesses such as Cashkaro will benefit. Typically, the company operates on a revenue model wherein with every sale it drives for the ecommerce partner, it takes a commission. Rohan claims that most of the commission is passed on to the customer and the remaining is invested back into the business.
Making the cut
Unlike its competitors in India or even global players such as Ebates, Cashkaro doesn’t adopt a basic model wherein the customer views the offer on the cashback site and gets redirected to the merchant site (such as Flipkart or Amazon) to buy the product. “The basic model ensured that the merchant sites became popular and led to a lot of traffic coming into their site. However, a cashback site such as ours was limited to being a platform where someone searched for an offer,” explains Rohan. Hence, at an early stage the founders chose to opt out of this model and instead designed a platform where all merchant products get integrated on the Cashkaro site and every user wanting to buy a product can compare prices (offered by different retailers), view cashback (and discount) on each product and transact on the same platform. “This became our value proposition and USP,” notes Rohan.
The founders claim that Cashkaro is already a market leader in India’s nascent cashback industry. So, what is their strategy to stay ahead in the game? “The important thing is to not become complacent. While we are the first movers, we are also cognizant of the fact that things can change very quickly if you sit back,” he opines. A second strategy they adopt is to wait and find the best talent in the market. “There are certain roles in the company which require ample resources. Even then, until we find the right people, we won’t fill that space,” states Rohan clearly.
Fuel for growth
In 2013, when Cashkaro made its foray into India, it raised its first round of (seed) funding to the tune of US $750,000 from a group of UK-based angel investors. The company, as Rohan points out, fulfilled most metrics it had set during that period. “In the past year itself, we have grown 10 per cent to 12 per cent and become more visible as a brand,” he states. The company currently has 50 employees on board, works with just over 1,000 clients and records a GMV of Rs. 70 crore to Rs. 100 crore every month.
As recent as November 2015, the company raised a Series A to the tune of Rs. 25 crore from Kalaari Capital, close to 80 per cent of which will be allocated towards marketing, and the rest towards hiring and other administrative expenses.
Despite investing time in educating relavant stakeholders about the cashback industry, the founders believe that the concept is at a very nascent stage in India. “People still don’t know the difference between cashback and discount,” adds Rohan. Hence, the first task for Cashkaro is to popularise this concept in the next 12 to 15 months, and eventually, to develop a mobile app to cater to the increasing number of smartphone users across the country, and penetrate into the South East Asian markets. “What we have seen in the last two years is a strong validation of the model. Many retailers today see the value we can add to their business,” states Rohan. With the India-model showing signs of success, the founders have charted a clear plan for Cashkaro and its UK model, Pouring Pounds. “The idea behind setting up Pouring Pounds was to make it a nimble B2B business with strategic partnerships. We didn’t see breakneck growth coming from there. Hence, our focus is currently more on the Indian model and taking it to other global markets,” he says and signs off.
Founders: Rohan Bhargava and Swati Bhargava
Concept: A platform where merchants can host their products and users can avail cashback on those products
Investors: A group of undisclosed U.K.-based angel investors and Kalaari Capital
Impact: 1000+ clients, Gross Margin Value (GMV) of Rs. 70 to Rs. 100 crore a month and a record of 7,000 transactions per day on the website
SCALING UP STRATEGIES
Bootstrapping in Phase One
When running Pouring Pounds in the U.K., instead of taking a leap into the B2C segment, the company made strategic partnerships with B2B clients such as Daily Mail Group and bootstrapped its business. This way, it conserved cash (by reducing spends on customer acquisition and marketing) and instead used the capital to understand business better.
Being elephant catchers
When attempting to sign the big ticket B2C clients in India for Cashkaro, the founders adopted case studies and data from the Pouring Pounds journey to provide validation for the model and inked partnerships with Flipkart and Snapdeal in the first phase.
Making the cut
Instead of adopting a basic model which limited a cashback company’s role to being a platform which users referred to for cashback offers, Cashkaro adopted a model wherein all merchant products were integrated on the Cashkaro site and every user wanting to buy a product could compare prices (offered by different retailers), view cashback (and discount) on each product and transact on the same platform.
Evolve into a market leader in cashback
Cashkaro has laid out two simple strategies; One, keep an eye out for what is happening in the overall e-commerce market, and stay ready to grab new opportunities as they arise; Two, hire top notch talent for certain positions, even if it takes time to fill those openings.