The Exchanges

Q Amit, uh, if possible, if you could share some ballpark metrics, like what would be the revenue of Z-Work today and how has it grown over the last three years and the number of suppliers, manufacturers you work with?

A Yeah, no. So, uh, you know, we, uh, just finished our audited numbers. So I'm happy to share those. So last year we did in, uh, the year, we did close to 900 crores of revenue. The prior year we had done close to 300 crores of revenue. So the business grew almost three X, uh, in the pandemic year, uh, today on the sub customer side, we work with close to 500 odd customers on the supply side. Uh, as of September, we transact with around 3000 suppliers every month. So that's a rough scale of the business, the nature of products. Can be very diverse. We work with, uh, industrial companies to make steel pipes. We also work with same industrial companies to make aircraft engine components. So, you know, there is one range of complexity. A steel pipe is a simpler product to make. An aircraft engine, of course, is a very complex product to make. Uh, 85% of our business is industrials. Uh, 15% of our business is consumer products. So we work with a lot of brands, uh, e-commerce companies, consumer brands. Again, the pitch to these brands is, look, you focus on building your brand. We are your backend execution partner. We can make that product for you. So we work with apparel companies. We work with electronic companies. We work with kitchen appliances companies. It's a very diverse range of customers.

AI assessment note: “we did close to 900 crores of revenue. The prior year we had done close to 300 crores”

Q And when did this pivot happen from a pure marketplace to manage marketplace?

A Yeah, it happened, uh, post our series A actually. So we, in terms of our journey, we started the company three years ago in May, 2018. Uh, our origins were actually back then was a software company. We wanted to build software to help large companies manage their supply chains better for a custom manufacturing point of view. Uh, we, uh, raised our seed round of capital with that thesis that look, there is a big, Void in this, in this part of the market. And, uh, we, we built our product also, and then we went back to our customers who are kind of guided us that this is what they needed. And, uh, what we realized was, uh, the kind of brick wall of enterprise sales cycle. Like there is these, uh, uh, all our, all the people we're talking to were the operations people. They loved our product, but the moment we had to convert that, uh, excitement to a sale, they said, look, you have to talk to my IT. And for a lot of these companies, like companies like GE, et cetera, their ITs are based out of Singapore or Switzerland. They're not based out of India. They didn't take software decisions in India. And that's when we realized that, look, it's going to take a massive amount of time to, to, uh, drive that digital transformation for a lot of these companies. And, and, but at the same time, all of these people were asking us, can I use your software to discover new suppliers? And, um, a…

AI assessment note: “Yeah, it happened, uh, post our series A actually.”

Q And, uh, currently, uh, you are serving in India and have started exploring other markets. How is your customer distribution looks like?

A Yeah, it's, um, you know, we are, uh, even today, largely an India-focused business, and, and we think there is a lot of depth in India, and, and in a way, what we are solving, some of these problems have largely been solved in, in, in Western markets. But that being said, uh, what happened last year, especially During COVID, we started getting a lot of inbound from, uh, customers outside of India, largely US. They were hit by two big things at the same time. One was, of course, disruptions due to COVID. Second was this whole trade war going on between like US and China, where the cost of manufacturing overnight have shot up to about 30%. And, uh, we capitalized on that opportunity. Today, almost 20% of our revenue comes from international markets, largely, largely, uh, US focused. Where, um, um, the demand is coming from those countries, supply is largely India. So this is real GDP addition that we are driving. These are customers who have never bought from India before. They have always wanted to explore India, but they struggle to work with a single small manufacturer. Because A, the size of the average manufacturer in India is lower than the average manufacturer in China or US or wherever. So you have to work with a lot of them. Which if you think in India is painful, just imagine a US customer having to work with 10 manufacturers in India. So they were waiting for a compan…

AI assessment note: “Today, almost 20% of our revenue comes from international markets, largely, largely, uh, US focused.”

Q And, uh, once, once you onboard a supplier, right, in the last three years, what has the delta suppliers have seen in the increase in their revenue and average across these 3000 suppliers?

A On, on average, our suppliers see at least a 20% lift in revenue. Uh, it, uh, may happen in two quarters, it may happen in four quarters, but, but that's, that's the, Uh, impact that these guys see. And, and with some of our best suppliers, they see even not the 50, 60% increase in revenue. And, and, uh, bear in mind, these are all small businesses. These are, uh, these are all, uh, family-run enterprises, largely. And, and even a 20% to 50% revenue uplift is life-changing for a lot of these guys. That, uh, you know, it, uh, we sometimes get a lot of photos from some of our suppliers that they bought a new house, they've purchased a new car. And, and nothing, nothing delights us more than to see, uh, the average, you know, small manufacturing entrepreneur be more successful. And in a way our business succeeds if the manufacturers we work with succeed. So if, if, if they are increasing higher revenue or they're seeing higher take home, somewhere down the line, you know, it, it, it benefits us also as a company because we are, we are in essentially a platform company. We are starting with generating demand for the small manufacturers, but over a period of time, we're layering logistics, we're layering financial services, we're layering raw material purchases. So there's a lot of layers which get added onto the platform. And, and, uh, in for any platform, they, the value they crea…

AI assessment note: “On, on average, our suppliers see at least a 20% lift in revenue.”

Q And what are some processes beyond people that have worked for you? Because you come from a consulting background, and consulting is all about processes. Were you able to get some of your McKinsey hat?

A I'm a very atypical McKinsey consultant. So I, and that was, that was also my realization pretty early, that I didn't see myself being a long-term consultant, which is why I left pretty much after 15 to 18 months. But that being said, you know, McKinsey is a great, great organization. I think where some of the, so process orientation starts happening when you have data. Till you don't have data, it becomes very theoretical. One process can be better than the other. So, you know, so one of our values is think data, think process. And, and this is something we, we Instilled after close to one and half, two years of the business, because for the first one and half, two years, there was zero data. The business, uh, uh, you know, first of all, the market did not have much data, and we were building software for which was generating data from the business for the first time. So again, all of these are priorities. In the first one and half years, we were not focused on process much. The way we solved for process was through people, by getting great people. But over the last one and half years, The business is generating tons and tons of data. It's generating so many insights. One key insight was in any manufacturing step, 80% of the delay happens in step one, which is, you know, has the supplier purchased raw material? Um, and, but once you, once you, once they have bought the raw mat…

AI assessment note: “we need to help our suppliers buy raw material better so that we can shortcut”

Q Amit, In your journey, there have been two pivots. Can you share the mental models, uh, that have worked for you during these pivots? Also the mental models or processes that have worked for you, uh, for scaling the company?

A Yeah, it's a very interesting question. I'll take the first one. So the, in terms of how we would, when we started the business, You know, we were, of course, very wide-eyed optimists, and, you know, we, we really felt that, um, there's a big piece of software that is missing in this industry, and this is something which I had personally experienced also, this is my first job at ITC. Um, uh, but what we realized quickly was, you know, the sales cycles will, will be long, and that's where, um, three things are really important, which, which some of this is hindsight, but some of this also was real-time learning. One was, uh, you know, The market is constantly giving you feedback. And, and, uh, sometimes that feedback can happen in one week, in one month. Sometimes that feedback can take six months. And what we realized was that in an enterprise sales model, the feedback would come in six to 12 months. And we were not prepared as an org to have such long feedback cycles at that point in time. The, uh, but the market was giving a more nuanced feedback that look, While software is great, I also need help with transactions. And that's when we picked up on that thread and we made our first pivot. I think the other thing to think about some of these things is founder market fit. Like we all talk about product market fit, which is, which is extremely important. And as a seed stage comp…

AI assessment note: “I'll take the first one.”