Parobyte Technologies

Our 2-hr supply prevents stockouts at small stores.
Batch: 
Status: Unsuccessful

Parobyte Technologies

Our 2-hr supply prevents stockouts at small stores.
Batch: 
Status: Unsuccessful

Company

Our 2-hr supply prevents stockouts at small stores.

We are building a platform for Corner Stores to search and order SKUs that are stocked-out at the time and get them delivered in <2 hours. It works on an asset light model with partner warehouses and partner logistics. Our tools would optimize SKU assortment, warehousing, and logistics. Our product will help in preventing the 15% sales loss that corner stores suffer due to stock outs.

Founders

We decided to start-up together after one of us - Abhijit decided to solve a crucial problem that he faced during his first job in a big government power company.

At the time, the company was using archaic methods to layout the expansion plan of new transmission lines across multiple regions. They brought together data from multiple tools such as AutoCAD, Excel sheets, Garmin GPS, and Google Earth geolocation data, which were painstakingly collected through ground surveys. No application was available that could do interoperability of these tools. This had to be done manually by copying and pasting from one tool to another. On top of it, google APIs were available to get the elevation data along a line.

Observing this opportunity, Abhijit roped in Muneeb and created a desktop application that helped in interoperability of these tools and extraction of elevation data. A downloadable product with a licensing fee was launched. After realizing that the product could be also sold to construction industry, I joined the firm in 2014.We sold the product to 10+ land survey firms, generating a total revenue of 1m INR (US $15k).

We could not scale further as there were only a handful of power and construction firms in India and many big ones had internally developed tools that they were not willing to move away from.

We did our undergrad in engineering in the same university and graduated together. We know one another for around a decade after first meeting in our college dorm.

Progress

We have launched the product. We have 100 paying customers as of now and we get 40 orders per day. This is in just a single locality in Bangalore. As of now, we are not operating warehouses. As and when we get the orders, our team members who would be at the nearby Metro Cash n Carry, procure the products and hand them over to 3rd party logistics riders for them to deliver. The current average order value is ~65 USD and cost of fulfilment is ~1.2 USD.

We have been working on tools for Corner Stores since Dec’20 and pivoted to this product in May’21. Two of us are working full time on this since then - 2.5 months. Abhijith has started full time from June end.

We have 100+ customers all located in and around Whitefield, Bangalore.

Our valuable customers are the ones who do >4 orders per week in the platform. The AOV is ~100 USD for these customers. The good thing about these customers is that they have started using our platform for regular procurement that are outside of stocked out SKUs.

What was your revenue in June? $20,000 What was your revenue in May? $450 What was your revenue in April? $ What was your revenue in March? $0 What was your revenue in February? $0 What was your revenue in January? $0

We are growing at a tremendous pace, and we are set to reach USD 50k in revenue in July’21. Our model is hyperlocal in nature. This growth has been achieved by operating in just a locality of Bangalore. We are planning to add more localities in the city and reach 5,000 customers by end of 2021 and reach a monthly revenue of ~$ 1 million per month.

We pivoted. Our first product - ClearBook was a bookkeeping android app for the small stores to accurately track profit and cash in hand. We grew this app to 5,000 downloads and 200 DAU with zero marketing spend.

However, after spending time with around 200+ customers of ClearBook in Bangalore, we understood that frequent stock-outs are a bigger problem for the stores. This leads to revenue loss and at times, even customer churn. Although this problem is more operationally complex to solve, it is a bigger pain point for them, and the solution is also monetizable from day 1.

Idea

In 2018, as an investment to get additional income, all three of us with a couple of others, invested in a pharmacy store in Bangalore. As we ran into many bookkeeping problems in the store, Muneeb created a simple android app for the store staff to track daily revenue and expenses. The app - ClearBook was published in Play Store, grew to 5,000 downloads and 200 DAU with zero marketing spend.

This made us to spend time with around 100+ corner stores (who were ClearBook customers) in Bangalore. We noticed that almost all of them ran out of stocks of a few SKUs almost every day. In multiple times per week, we could see the store operators rushing to nearby wholesale markets to refill stocks for the stocked-out SKUs. No distributor or B2B ecommerce company delivered products on the same day. Some distributors took even more than a week for delivery.

We volunteered a few times to go to wholesale market to procure the products for a store operator on his behalf. And after helping him on this for a few times, we imagined that we could deliver products to all stores and create a business out of it. We found that Corner stores lose ~15% sales because of stock outs. This is because of lack of digital billing system and tracking of inventory, shortage of space to put excess inventory and lack of working capital. This problem could be solved by multiple small warehouses in a city with optimized SKU assortment, inventory, and logistics. That is how we decided launch Angadi.

We believe that we are the right team to do this. All 3 of us have a passion for retail and have known one another for around a decade. I have managed a $50 million distribution company with a reach to 100,000 small stores. Abhijit has 10+ years in tech and was the Director of Engineering at a major fintech player, with a strong understanding of credit & loan in retail. Muneeb is a CS grad and has developed multiple products for Retailers and Small Businesses during his career.

There is no distributor/company in the market that supplies to the stores within the same day, let alone in 2 hours. As of now, the only substitute that the stores have for stocked out products - is to go to the nearby wholesale market/distributor and get the stock replenished by themselves. Else, they suffer sales loss till the time the stock is delivered by a distributor; this is typically between 2 days and 1 week.

Udaan, Amazon Business and Flipkart B2B, among others, are our competitors. These companies have a slightly different value proposition. They provide the broadest selection at the cheapest prices. We, on the other hand, provide a selection of fast-moving SKUs with fastest delivery.

We fear firms with deep market penetration such as Udaan and Amazon Business. Even though they have evolved as B2B ecommerce firms with a big fulfilment centre per region, it is not impossible for them to add multiple small FCs within in the region/city to cut down on the fulfilment time.

- For 85% of all procurement, the corner stores would check with all the suppliers - Open Market Distributors, Udaan, Amazon Business, Flipkart Wholesale etc before making the order. The procurement decision is then made by the retailers after considering just one factor – who gives lowest price? There is almost zero loyalty for retailers to any supplier here.

- The remaining 15% procurement kicks in, when there is a stockout. For this, stores do either of below:
Roughly ~50% Corner Store owners rush to a nearby wholesale markets to get the products in cash.
And the remaining half decide to suffer sales loss for next 2 days. They make an order in any of the apps/distributors and get the orders in due time albeit suffering the loss in sales (and more importantly customer satisfaction) in the interim period.

- The procurement decision for this “15%” is unique. Retailers are willing to go through the inconvenience, pay in cash for the order and in a few cases willing to pay a small premium for some products. Almost all the companies focus on “85%” market and there is no one that is solving the “15%” problem.

- This “15%” procurement is done for FMCG products. These products have relatively higher margin compared to commodities (sacks of rice, sugar, wheat etc) that retailers plan and purchase.

- The order size of B2C consumer delivery apps such as Instamart (of Swiggy), Flipkart Quick and Amazon Fresh is ~ $6. Our AOV is ~ $65 that could be achieved at the same SKU collection in the warehouse and fulfilled at almost the same delivery expense. And there is more opportunity to become a sole supplier of our valuable customers in due time.

We make money from the margin of the goods that we sell to the corner stores. As of now, we are keeping this as an inventory model with stock in the partner warehouses.

Small stores account for ~90% of total Indian grocery market of $ 800 billion. Our addressable market size is 15% of it – $120 billion dollars. Our plan is to onboard around 1 million retailers by 2025. At an average order size of $6,500 dollars per retailer per year – we could reach a revenue of $6.5 billion.

We have grown to 100+ users as now. 60+ stores were onboarded by meeting and signing up them when they visited Metro CashNCarry for their purchases. We offered them the same price as that of Metro at zero delivery fees. The rest 40 were added by these customers through referrals. All 100 stores are within a locality of 3 km radius.

It is evident that a large fraction of small store operators would require 1-1 onboarding to start using B2B ecommerce apps. Hence, our plan is to grow users through a mix of 1-1 onboarding, referral campaigns and tie up with bookkeeping apps with high penetration to add more users. We do not have a chicken-and-egg problem.

Others

SMB investment marketplace - it is extremely difficult for a small business in India to raise equity investment. Also, individuals with dispensable income are unable to invest in small businesses because of lack of information. We intend solve this problem by resolving this information asymmetry and bringing together small to businesses and small investors.

In my eleventh grade, I (Jeff) used to toy with various equations in physics. Out of the blue, I decided to equate the RHS of Einstein's mass energy equivalence (E = mc2) and Plank's equation (E=hv). I ended up getting an equation: λ = h/mc. Without knowing much on what the equation would mean, I thought that it connected mass and wavelength in some way.

Just a few months later, I ended up realizing in 12th grade that this is actually the de Broglie's equation on wave particle duality and the equation was derived in pretty much the same way. Although, it meant that I wasn't the first discoverer of wave particle duality, I did invariably come up with the concept unbeknownst to me that this is something that all physicists knew for many years. A discovery that I'm still proud of :)

Curious

YC is the ideal next step for us use the exposure and knowledge that we could get from the program to scale our product and make our startup a success.

We have been following YC podcasts and have a pretty good understanding of the program and how it will help us to succeed.

We have been following YC Podcasts/Hacker News for quite some time.

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