Thinks 457

The Token Dispatch newsletter: “Founded in 2019, the FTX exchange has grown to become one of the world’s largest cryptocurrency trading platforms. The three-year-old company is now worth more than business giants such as Twitter, the Nasdaq stock exchange, and Germany’s Deutsche Bank. Quite impressive. The company has attained a valuation of $32 billion and has become one of the most valuable private crypto firms in the world…By trade volume, it claims to be the third-largest exchange.”

Shane Parish: “If small changes create big results, then why is success so elusive? The answer boils down to a single word: discipline. Not many people have consistent discipline when times are good. Even fewer in times of stress…When people say you need to love the process, this is what they mean. Can you do it when it’s hard? Can you do it when other people stop? Can you work on something long enough to let it compound? Can you do it when the results aren’t visible? Putting yourself in a position for success is simple. Doing it day in and day out is hard. Extraordinary results come from ordinary people with uncommon discipline.”

Reading: Books 7-9 of The Expanse; watched six seasons based on the first 6 books y James Corey on Amazon Prime

Bootstrapping a $100 Million ARR SaaS Company: The Netcore Story (Part 6)

Global and SaaS

The one thing we do well in Netcore is learn. That is how we have survived and prospered through the past 25 years. There is a sense of paranoia that we are always one mistake away from irrelevance. And with 25% ESOP, there is a deep sense of responsibility that we are building this not just for ourselves and our customers but also for our employees.

In 2019, we made 3 key decisions: we would need to learn the SaaS way of sales and marketing, we would need to start focusing on developed markets to complement our emerging markets strength, and we would need to look at acquisitions since we would not be able to build the full martech stack on our own. The Unbxd investment and partnership is a perfect example of highlighting all three. Unbxd brings a very good complementary product range – search, recommendations and PIM (product information management) for B2C brands, especially ecommerce companies, retailers and D2C brands. Combined with Netcore’s communications and martech platform, it strengthens the full-stack solution for brands.

We are now going to be up against a different set of competitors. Even as global players from US and Europe sharpen their focus on the growing Indian market, they are also realising what we in Netcore have believed for a long time: that the future is about an AI-driven full-stack solution. So martech companies are also expanding their suite offerings. Interesting times lie ahead.

Netcore has been built with three key tenets: profitable growth, infinite mindset (thinking long-term) and extreme employee centricity. These three pillars have helped us drive 30-40% growth in our Platform (email and martech) business in the past few years. Many companies (even in B2B SaaS) are still losing money even after many years in business. Unlike B2C/D2C businesses where a lot of capital is burnt towards changing buying behaviour and buying customer loyalty, in B2B SaaS capital can be efficiently used towards getting GTM right and locking customers for life. Secondly, the focus of many of the founders is build-to-sell rather than build-to-last, and this drives a very different set of choices. Finally, investors rather than customers and employees take precedence, since the founding team’s stake gets repeatedly diluted over multiple rounds of financing growth (a euphemism for losses). Growth through customer money is more important than growth through investor money.

As I wrote in early 2022: “What got us here will not get us to the future. We will need to transform ourselves. I will need to unlearn and relearn. Most importantly, I will have to ensure that we build a team and culture capable of continuous renewal. The problem we are solving – helping businesses engage better with their customers to ensure retention and growth – will never go away. The methods will change because technology drives new habits in customers, forcing businesses to adapt… We will need to think along multiple operating horizons to make this happen. We will need to become consolidators with smart acquisitions. We will need to tap the public markets so we incentivise employees (25% of Netcore is owned by its past and present staff) and also create a currency for acquisitions. More importantly, we will need to anticipate the tech turns and stay ahead of them. We will need to strengthen our moats and create a sustainable competitive advantage. And who better to learn from than Jim Collins? The 20 Mile March needs Level 5 Leadership, the genius of the AND, a growth flywheel, a culture that encourages the firing of bullets before cannonballs, and of course, a return on luck.”

Thinks 456

Technology Review has Proof of Stake as one of the 10 Breakthrough Technologies for 2022: “Proof of stake offers a way to set up such a network without requiring so much energy. And if all goes as planned, Ethereum, which runs all sorts of applications in addition to the world’s second-largest cryptocurrency, will transition to it in the first half of 2022. The shift has been projected to cut energy use by 99.95%…With proof of stake, validators don’t have to vie against one another, spending big on energy and computing hardware. Instead, their cache, or stake, of cryptocurrency allows them to enter a lottery. Those who are chosen gain the authority to verify a set of transactions (and so earn more cryptocurrency). In some networks, validators who display bad behavior are penalized—they lose some portion of their stake.”

WSJ: “About half of India’s working-age population is employed or seeking work, one of the world’s lowest labor-force participation rates, according to the ILO. Adding to the job squeeze, an estimated four million-plus young people join the workforce each year. To reach India’s economic potential, the country will have to create 90 million new nonfarm jobs by 2030, pulling 30 million workers from agriculture, according to a 2020 report by McKinsey Global Institute. Falling short of that risks a decade of economic stagnation, the report said. Tens of millions of new jobs a year in construction and manufacturing are needed, said Shirish Sankhe, a senior partner at McKinsey and one of the report’s authors. That would require an economic growth rate of at least 8%.”

Watched: Arrival (2016 sci-fi movie)

Bootstrapping a $100 Million ARR SaaS Company: The Netcore Story (Part 5)

Emerging Markets and Enterprise Sales

Netcore has been built without raising any external capital through its 25-year journey. It was not that I have not tried. Like in IndiaWorld, I have had multiple conversations with potential investors through the years. None materialised, but each conversation taught me what I needed to do to fix the flaws in the business. Because Netcore has been profitable, we were never under pressure to raise capital to meet working capital needs. For the past many years, as our profits grew, even as we invested in growth, we also built a healthy cash balance. Cash in a company grows at 4-5% annually. Converting that cash into a business can create far greater value. Hence, we scouted for large acquisitions to expand our footprint both in India and globally but did not succeed in closing any until the Unbxd investment opportunity came along.

Inorganic growth has been just one of many pivots we have made through our journey. The early days of Netcore were as a Linux-based enterprise mail software provider. While some part of that business still continues augmented by cloud solutions, the real growth of Netcore began when we focused on the needs of brands wanting to communicate with their customers. Push messages (SMS, email, push notifications and now WhatsApp) are the most important mechanism for B2C brands to bring their customers back to their websites and apps. As Netcore’s email and SMS business grow from 2007 managing to survive multiple changes in rules (Gmail in email, and TRAI in SMS), we decided it was time to move up the stack. Thus was born our foray into martech in 2015.

Through a combination of internal product development and two tuck-in tech acquisitions, Netcore has built a full-stack martech solution. The goal is to provide marketers with a unified view of their customers for omnichannel personalisation. From campaign management to journey orchestration, from analytics to product experience, Netcore’s CEE platform (customer engagement and experience) combined with its multi-channel communications capabilities has attracted hundreds of B2C brands as customers.

Even as we built our product capabilities, in 2019, we realised we needed to change our go-to-market strategy. Because we primarily sold in India and emerging markets, our focus had been on in-person engagement. We never needed much marketing. Our sales teams had built good relationships with most marketers. When Kalpit and I attended SaaStr in early 2019, we realised we had to change our approach to tap into global enterprises. We needed to adopt the SaaS playbook for the next phase of our evolution.

Thinks 455

WSJ: “NFTs, Cryptocurrencies and Web3 are multilevel marketing schemes for a new generation…There’s a paradox at the root of the growing crypto ecosystem—a disconnect between the technology and the economics. While individual digital assets—bitcoins, pictures of “bored apes,” giant JPEGs of everything the artist Beeple has ever produced—can be unique, the underlying nature of the internet means that there is, in aggregate, a potentially infinite supply of cryptocurrency, NFTs and all the other exchangeable tokens that make up “crypto” and the broader vision for a decentralized internet known as “Web3.” Basic economics suggests an unhappy outcome: When the demand for something is limited—there are only so many people on earth, and only so much traditional money to be converted into tokens and cryptocurrencies—and the supply is infinite, the average price of that asset is going to zero.”

David Fubini on the challenges new CEOs face: “I would spotlight three things as the biggest surprises and blind spots for CEOs. One is the importance of arriving with a plan and with a team. I think a lot of CEOs think that they can just arrive and they’ll have a grace period, which, often they find, even if they did have a plan and a team, they’d be overwhelmed by the sheer volume of constituencies and challenges that they have to actually deal with. And they never had time to really go back and get a plan for what they wanted to do. The second is the belief that they get told the entire truth by their management teams. In order to be a good CEO, you have to be a good strategist. You have to make disciplined trade-offs, and you have to know both the positive and the negative to make those trade-offs. It’s surprising how often CEOs are not told the entire negative truth of things, because there is such a desire of their management teams to tell them only the good. So, many CEOs get surprised by the fact that they don’t hear the negative. And finally, I think it’s also a big surprise to lots of CEOs how lonely the job can be. I know that sounds counterintuitive but, really, suddenly CEOs are cut off from a lot of their fundamental mentorship and groups of people that they used to deal with when they weren’t in the most top job in the company. Once you’re in the top job, you really don’t have access to some of those people and staffs that you used to. And it really does get lonely pretty quickly.”

Tiziana Casciaro: “We tend to personalize power and think, “Power is something that I have as a trait. I have certain characteristics that make me a powerful person.” But in reality, power is always relative. It depends on what the other individual in that relationship wants and whether you can provide it. That’s where power really takes shape. It’s not something that we own. These misconceptions are deep—including that power is essentially a matter of manipulation and coercion. It’s a very Machiavellian view that misses the point that power is energy. It’s energy to change the world around you, to take action, to shift people’s behaviors. Power can be used for good or ill but is always in action. It’s always there.”

Bootstrapping a $100 Million ARR SaaS Company: The Netcore Story (Part 4)

Media Coverage – 2

Times of India wrote:

Mumbai-based Netcore Cloud’s full-stack marketing platform complements Unbxd’s personalised digital experiences that are easily scalable and provide actionable analytics, and real-time reporting. The investment will expand its footprint and access to newer customers. “Unbxd is growing at 20%-30% annually and is at $10 million ARR. Netcore Cloud is at $85 million ARR and together we will be over $100 million ARR. We will make additional investments to accelerate growth to deliver personalised customer experiences,” said Rajesh Jain, founder and MD of Netcore Cloud.

Jain said Netcore equips B2C firms on the path to profitability. “Retail SaaS has good recurring revenue, and we are a profitable business. We plan to IPO in the next 12 months,” he said. Netcore Cloud caters to over 5,000 customers across the globe. It delivers 17 billion emails and tracks 100 billion marketing events every month.

Unbxd’s Sondur and Kumar said, “With our unique combination of personalisation solutions and Netcore’s robust full-stack marketing automation tech platform, it’s a perfect partnership that can capture cross-selling opportunities and scale the business globally.”

YourStory wrote:

“Unbxd’s AI and ML tech stack will empower our customers to track their shopper’s interactions with search and implement site-wide personalisation, merchandising, along with shopper-focused recommendations. This will enable brands to optimise their entire customer journey, providing the best-in-class customer experience,” [said Kalpit Jain].

“Netcore Cloud platform is growing rapidly at 40 percent YoY (with international markets growing 100 percent YoY). We are positioned as the digital proxy in emerging markets. Added to that, this investment will enable us to get a strong foothold in the US and other developed markets. Furthermore, the combination of Unbxd and Netcore Cloud’s capabilities will bolster our full-stack product offerings,” said Nishant Jain, Chief Strategy Officer and Head of M&A, Netcore Cloud.”

Mint wrote:

Software-as-a-service (SaaS) startup Netcore Cloud, which picked up a majority stake in Unbxd for $100 million, will acquire at least one more company before launching its initial public offering (IPO) early next year.

“That is the thought process —one more acquisition before we get to the IPO point,” Kalpit Jain, group chief executive, Netcore, said in an interview.

…“There is so much to build in marketing technology, but we cannot build all by ourselves. The idea is to look for companies that we could potentially acquire before and after the IPO,” said Jain. Netcore eyes both tuck-in acquisitions such as Quinto.ai, Boxx.ai and Hansel.io, and the likes of Unbxd which helped expand its presence. “Unbxd gave a good head start for us in the North America. We are on the lookout for a good company in Europe,” he added.

Inc42: “Commenting on the acquisition, Kalpit Jain of Netcore Cloud said that the AI and ML tech stack of Unbxd will help Netcore’s customers to track shopper’s interactions with search and implement site-wide personalisation, merchandising, along with shopper-focussed recommendations.”

Thinks 454

Scott Alexander: “A prediction market will strike it big when it gets three things right at the same time: real money, easy to use, easy to create your own subsidized markets.”

Sam Altman: “Key early-stage investing questions: Of all the things you could work on, why this? How does this eventually become a $100 billion business? What do you understand about this that others don’t? What progress have you made in the last week? What are you really great at?”

FT: “Vimes Boots theory…demonstrates the choices denied to those on a low income that could save them money. Those who can afford the $50 for a high-quality pair of working boots may get more than a decade’s use from them, while those who cannot will buy a $10 pair that lasts little more than a year. Hence the poor will spend $100 over a decade and still have wet feet, while the wealthy spend half that. Vimes theory is that the rich were rich because “they managed to spend less money”.”

Bootstrapping a $100 Million ARR SaaS Company: The Netcore Story (Part 3)

Media Coverage – 1

The story about the Netcore-Unbxd partnership was broken by Saritha Rai of Bloomberg. (Incidentally, Saritha had done a story for TIME magazine in February 2000 about my IndiaWorld’s sale to Sify for $115 million. IndiaWorld was also bootstrapped and profitable – a proficorn!) From the Bloomberg story (an ungated version is available at Business Standard):

Rajesh Jain, 54, a pioneer of India’s internet industry, is readying his second startup Netcore Cloud Pvt. for an initial public offer within the next year, fresh after a $100 million acquisition this month.

“We’ve had initial conversations with half-a-dozen bankers and the formal process will start in the next couple of months,” Jain said over a Zoom call discussing the acquisition and the IPO. “We are targeting an IPO within the next nine to 12 months.”

Mumbai-headquartered Netcore is a software-as-a-service, or SaaS, startup that specializes in offering customer communication and engagement solutions to businesses. It bought about a 90% stake in San Mateo, California-based e-commerce search-personalization company Unbxd Inc.

The acquisition would strengthen Netcore’s offerings to its roster of global customers such as Pizza Hut Inc., The Body Shop Inc. and Tommy Hilfiger Corp. The deal would also boost the company’s subscription revenues to $150 million annually within the next 18 months from about $100 million now, Jain said.

Economic Times wrote:

Netcore sells marketing automation software to ecommerce firms and D2C companies, a crop of internet businesses for whom quality of search is critical for purchasers to close transactions. The search optimization algorithms of Unbxd would help Netcore’s customers offer better discovery on their platforms. “Many of the ecommerce companies other than the large ones such as Amazon, search is a big gap, and this is what unbxd cracked very well. It solves a problem for customers. Secondly, there is a big cross-sell opportunity through this acquisition for the both of us,” Jain said.

Jain said the slew of acquisitions also reflect the market reality of the need for consolidation, given the profusion of marketing technology companies in the market. “There are 8-10,000 martech companies in the world, so consolidation has to happen. As martech becomes more and more critical, marketers have to work with fewer companies, because the integration costs would become very high across multiple products.”

VC Circle wrote:

Unbxd, rolled out by Pavan Sondur and Prashant Kumar in 2012,  offers search solutions to improve retention and conversions for ecommerce retailers and direct-to-consumer (D2C) brands in the US, UK and Australia.

Currently, the company claims to power 3.5% of all the US e-commerce on-site search queries spread across 150 customers.

Unbxd has a host of clientele including Mattress Firm, Express, Ashley Homestore, Home Shopping Network, Advance Auto Parts, The Children’s Place, Mitre10 and Kookai, among others.

The company was backed by investors like Nirvana Ventures, Chiratae Ventures, Eight Roads and Inventus Capital.

“The coming MarTech era will be defined by budget shifts from Adtech to MarTech as brands will focus more on unit economics and valuing existing customers. This will lead D2C/ecommerce brands to accelerate their spending towards delivering personalized customer experiences.

Unbxd’s AI/ML tech stack will empower our customers to track their shopper’s interactions with search and implement site-wide personalization, merchandising, along with shopper-focused recommendations,” said Kalpit Jain, Group CEO, Netcore Cloud.

“Netcore Cloud platform is growing rapidly at 40% YoY (with international markets growing 100% YoY ). We are positioned as the digital proxy in emerging markets. Added to that, this investment will enable us to get a strong foothold in the US and other developed markets as well,” said Nishant Jain, Chief Strategy Officer and Head of M&A, Netcore Cloud.

Thinks 453

Neil Hoyne: “When we’re talking about the move from clicks to conversations, what we’re really talking about, in its essence, is the movement from short-term to long-term value. To move away from individual sales— individual leads—and look at larger concepts like customer lifetime value, to look at how valuable those customers are going to be over the relationship with your business, instead of saying that they need to spend and do everything right away.”

Andy Kessler on how sixty years after John Glenn orbited Earth, the private sector leads in space travel. “Silicon Valley’s venture-capital industry came of age when the government got out of the way with President Reagan’s capital-gains cut. Treating capital well gets companies funded with enough competition to keep them honest. The stock market provides access to expansion capital, sometimes even for the crazy ideas like space tourism. Let’s celebrate Glenn’s orbits but remember that progress may begin with basic research, but it scales with the private sector.”

Anticipating the Unintended Newsletter: “Inequality crusaders must realise that taking money from the billionaires through a new surcharge is not going to make any significant dent in poverty in India. The only solution is economic growth, as we have discussed many times before in this newsletter. Much of the global inequality is between countries and not within countries. Across countries, variations in many important dimensions — literacy, life satisfaction, and health outcomes— can be explained by one single variable: incomes. Tackling inequality then essentially means increasing the incomes of poorer countries rapidly. Economic growth is a moral imperative.”

Bootstrapping a $100 Million ARR SaaS Company: The Netcore Story (Part 2)

Netcore + Unbxd

From Netcore CEO Kalpit Jain’s blog:

Founded in 2012, Unbxd provides AI-powered search-personalization to leading eCommerce retailers and D2C brands. They offer best-in-class product discovery and search relevance to significantly improve customer retention and conversions. Their customers include marquee brands across the USA, UK, and Australia, including Mattress Firm, Express, Ashley Homestore, Home Shopping Network, Advance Auto Parts, The Children’s Place, Mitre10 and Kookai.

Bigger, Better, Stronger.

  • With Unbxd, we now have a strong foothold in the US and developed markets.
  • Strengthen our dominance in India and SEA.
  • Immense cross-selling and upselling opportunity
  • Unbxd’s AI-powered search solutions augment Netcore Cloud’s full-stack Digital Experience Platform (DXP), enabling eCommerce retailers/ D2C brands to deliver a rich shopping experience.
  • Beyond the product, the Unbxd team shares our strong commitment to solving  customers’ problems through technology and innovation.

What does this mean for our customers?

  • Enhanced capabilities in product discovery and search optimization, eCommerce retailers and D2C brands will be able to forge connections with consumers by delivering a relevant and memorable experience.
  • A unified view of the consumer, with an entire user journey in a single platform delivering bespoke experiences.
  • Interactive feedback loop for crafting an effective customer retention strategy.
  • Excellent monetization capability, harnessing the power of search personalization and a full-stack digital experience platform.
  • Delivering 5-8x times the ROI on marketing spend by increasing conversion rates and lifetime value.

Since 2019, Netcore Cloud has undertaken three major acquisitions, the first being Quinto.ai (Conversational AI platform), followed by Boxx.ai (AI-First Omnichannel Personalization & Recommendation Engine) and Hansel.io (Real-time no code, product experience platform).  These three platforms, teams, and capabilities are already successfully integrated with the Netcore Cloud Platform.

Added Unbxd co-founder Pavan Sondur: “From a place where we had no money, no product, we quickly grew to be one of the most innovative eCommerce search engines to ever exist in the market. Our goal was to provide a seamless eCommerce experience that can generate profitable growth and recover the lost revenue of businesses. And there were several investors along the process who believed in our vision and pushed us forward…Joining that league today is Netcore Cloud. Netcore Cloud is a bootstrapped SaaS company that helps B2C brands and marketers create AI-powered new-age customer experiences at every touchpoint of a customer’s journey. Netcore Cloud’s full-stack marketing platform enables highly personalized digital experiences that are easily scalable and provide actionable analytics, real-time reporting, and quick to implement solutions across channels.”