Why ApartmentAdda waited for five years before raising a funding round?Jubin Mehta
ApartmentAdda is an online housing society accounting and management software that was founded by Venkat Kandaswamy and Sangeeta Banerjee back in 2008. Venkat and Sangeetha both have a background in technology and have worked at a few multinationals before getting together to startup. They also happen to be life partners which adds another twist to entrepreneurial journey.
“When we came across this vacuum of online ERP for residential communities, we realised our skills and work experience were complimentary towards building and selling this product,” says Sangeeta. The company has laid low over the years and carried out their work over the five years. 3600 Apartment complexes across 70 Indian cities have their ADDA and using the Online Billing application, a total of Rs.45Crore of Maintenance Invoices are raised every quarter by various Associations.
In a recent announcement, Apartment has raised a funding round from Bhupen Shah and Raghu Tarra of Sling Media, Sharad Sharma of Yahoo R&D, Nasscom products and iSpirt, Tushar Patel of a Global Investment Banking firm and Zaheer Rattonsey of Real Estate and Film Production. The question what many would ask is why raise funds now or what was the thought process here? We got in touch with Sangeeta who wrote back to us with a lot of introspection into what has gone into it:
We wanted to answer the below questions convincingly to ourselves first, before approaching Investors, and before putting the Business on a true scaling path.
“Whose Problem are we Solving? Are they Willing to Pay for it? Can their payment ‘sustain’ the business?”
To answer these questions it was important for us to build the product to a certain level of maturity, as well as to test the deployment, usage and subscription renewals in a couple of markets.
We needed time for research and product development more than we needed money/resources.
Targeting a loosely organised and evolving customer base (management committees in Apartment complexes) where Problem Statements are not yet clear, and no Best Practices or Benchmarks are available, a good amount of R&D was required.
Last 5 years, Research and Product Development was 90% of our total effort.
Here’s a quick split of the 5 years:
First 3 Months: We built a prototype, with what we gathered from our own experience & those of friends.
Year 1 and 2: Demo-Listen-Build-Demo
We Demo-ed ApartmentADDA to Management Committees of 300+ Apartment Complexes more with the target to gather requirements, than to make a sale. Many Demos lasted 2 hours plus. It was a phase of building the Communication and Facility Management applications closely with Customers, who were almost all Engineers building or evaluating ERPs as their Day job! Bangalore was the exact right place to be.
During this time, several Investment interests started showing up, everyone wanting to give the Product for free, and make money elsewhere. Many suggested that it is impossible to sell software that promotes transparency, to management committees who are almost always corrupt. From talking to those 300+ apartment complexes, and selling to quite a few, we knew better.
Year 3 & 4: Differentiate
Other players started entering the market. We focussed more on strengthening our differentiators- payment gateway and complete accounting started to get built. The latter took substantial time as it was built from scratch.
Year 5: Test new Market
Product was proven in Bangalore - the city of DIY (Do-It-Yourself) culture. But we needed proof in Mumbai - the city of services and the most mature Society Management & Accounting practices. This year, the Billing & Accounting features of ApartmentADDA got 3X more enhancements than it did in Bangalore. We also figured a different way of Selling for this market.
We needed to be in a position where we can ‘choose’ the right Investors for ApartmentADDA. Investors who could make our Product focus stronger.
Perhaps above were the reasons why each of the 7 Individual Investors we pitched to (first pitch in April-2013), confirmed their commitment over the very first meeting. Sharad, to who we often went for advise when on crossroads, did not even see the Pitch, his words were, “Don’t bother with the Pitch, I am investing."
What the investors have to say and the road ahead
“I've known Sangeeta and Venkat for some time and have been a fan of their way of building value in a systematic fashion. It was a decision based on past conversations and a trust relationship that had formed over the years,” says Sharad.
On the overall plan, the team is looking at providing a better experience to users on ApartmentADDA, stronger support, bring the entire ADDA to mobile, have physical presence in major cities, work with Government agencies, conduct more of our workshops, and build a stronger ecosystem of facility management experts & accountants. And with funds in to push, this 25 member team will now scale and take the product far and wide.