WATCH: Through the Eyes of the Investor - why getting a foothold in the US market is critical for AI-powered HR tech startup worxogo
How does an investor make an investment decision? What guides this decision? What prompts them to rally behind an idea, an entrepreneur, and a certain product with their support, and, more importantly, with their money? And once they do, why do they choose to stay the course?
All of this and more answered in YourStory's new video series, Through the Eyes of the Investor.
What ails an organisation’s performance?
If reports are to be believed, poor employee engagement and productivity are among the top reasons. Globally, as per a McKinsey report, more than 80 percent of organisations struggle with poor employee engagement and low productivity that adversely impacts business outcomes.
In the US, disengaged employees cost the economy close to $350 billion every year. A disengaged employee further costs an organisation approximately $3,400 for every $10,000 in annual salary. These numbers are undoubtedly grim, and representative of the state of affairs not just in the US but also in the domestic market.
In desperate need of tech-enabled and innovation-driven solutions, the sector has been attracting the attention of entrepreneurs and innovators alike.
In the third edition of Through the Eyes of the Investor, we tell you the story of Bengaluru-based AI startup worxogo. With Naganand Doraswamy, Founder and Managing Director of Ideaspring Capital, as the host, this episode explores worxogo’s pioneering persuasive technology products that align employee behaviours with organisational objectives to drive higher business outcomes.
Watch the third episode of Through the Eyes of the Investor, hosted by IdeaSpring Capital’s Naganand Doraswamy.
In this episode, Doraswamy spotlights worxogo, charting the future course for the AI startup as it tries to gain a foothold in the US market.
Meet Mia, a personal digital coach
“In this show, we give you insights about our investments into startups and our continued engagement with them. In this episode, we cover Worxogo,” says Naganand Doraswamy, introducing the Bengaluru-based startup that uses AI and behavioural science to improve employee productivity.
A YourStory Tech 30 company, Worxogo was born out of years of consulting experience. The founders, Ramesh Srinivas, Ravi Bhamidipati, Sudha Bhamidipati, Suneel Aiyer, Anant Sood, and Sivaramakrishnan, have all worked with major IT companies and led transformation programmes at large enterprises in the financial services sector and other industries.
During this time, leading and advising various organisations, they realised how employee performance was a universal challenge for every large enterprise – one that even held potential for technology breakthroughs.
This prompted the six consultants to brainstorm, working with AI, behavioural sciences, machine learning, and other tech tools, and come up with a product that would offer “actionable insights” to the employees on an everyday basis, or as they are called, “nudges”.
“At the heart lies Mia, a personal digital coach for employees, that provides actionable advice to improve performance,” the founding team says.
But what is a nudge?
Nudge is a concept that proposes positive reinforcement and indirect suggestions as ways to influence the behaviour and decision-making of groups and individuals. Proposed and suggested by behavioural economists, a “nudge” is believed to be a powerful mechanism capable of improving teams’ outputs and, in the process, an organisation’s overall performance.
Benagluru-based worxogo uses nudges (and the concept) to increase productivity on an enterprise level, a fact that not only caught the attention of the investors but also got them hooked for a longer ride.
“When we looked at Worxogo for the first time, the fact that they were using this concept to increase productivity in an enterprise was very refreshing… we thought that this is something we should look deeper into,” Doraswamy says.
In October 2018, Worxogo raised Rs 16.5 crore in funding. The round was led by both Ideaspring Capital and Inventus India, a VC firm offering venture capital in both India and the US. The fact that Inventus also showed faith in the startup and its AI-led product served as a major impetus, says Doraswamy, for Ideaspring to fund the venture.
However, the most important reason behind Ideaspring’s investment decision was the validation from customers.
“The fact they, the customers, were using this product, vouched for it. They said that ‘these nudges have been extremely good and enabled them to be more productive’, which was refreshing to hear,” he says.
From consulting to pure product play
Worxogo’s AI product essentially falls under HR tech. HR tech – or human resource technology – is an umbrella term for software and associated hardware for automating the human resources functions in organisations.
Globally, by 2021, the HR tech market is projected to reach a mammoth size, worth $34 billion. The changing trends will have a sizeable impact on the market closer home as well, with HR tech commanding a billion-dollar market size in India. More so, in the face of disruptive technology breakthroughs, which have completely changed the game.
Incidentally, the HR tech nature of Worxogo’s AI-led product was one of the top concerns for Ideaspring.
“We are not very comfortable with HR tech,” Doraswamy says. With this kind of tool, his concern was that if someone else in the organisation was using it, the usage could become difficult. “Either the sales cycle becomes longer, or, if sales are done, the usage is a question,” he adds.
“But, in this case,” Doraswamy continues, “the founders told us that they would sell to the business heads directly.” This would not only crunch the sales cycle but also help with fast adoption, because “it will be driven by the business folks and not by somebody else in the company”.
The years of consulting background that the founding team had was another area of concern for Ideaspring Capital. The founders were all seasoned professionals with years of experience in organisations such as PwC, IBM, KPMG, and EY.
As Doraswamy explains, the concern was around how they would evolve and bring the consulting experience into a pure product play.
“We had an open discussion… they said that with the investors coming in, it would enable them to have a sharper focus on the product,” Doraswamy adds.
The nudges to productivity ratio
Worxogo has sent more than 70 million nudges till now. On a daily basis they send about 500,000 nudges.
While these numbers are impressive, the crucial part is the impact these nudges have on productivity. According to Doraswamy, customer feedback indicates a 20-30 percent increase in productivity following the execution of ‘nudges’.
While the traction in India indicates a positive impact and response to this well-functioning product so far, the real test of worxogo would be a successful run in the US market.
“The next year and a half, like with other portfolio companies, will be critical for worxogo to go and see what does it take to grow and scale in the US market,” the Ideaspring MD explains.
He adds that expanding and getting a foothold in the US market is a difficult proposition. But here’s where Ideaspring’s expertise comes in. With several of their portfolio companies having tried and tested this path, the investor feels confident that he will be able to use past learnings and translate them into success for worxogo.
“Nudges and behavioural science coming together is a great concept, and it will be great to see this get traction in the next two-three years,” Doraswamy says.
Concept: Tenzin Pema
Director: Aditya Gowtham
Camera: Rukmangada Raja
Editor: Shlok Bhatt
Writer: Sutrishna Ghosh
Content Editor: Teja Lele Desai