Shunned by ex-staffers, supported by clients – Kumar Vembu’s 'GoFrugal' journey towards $100 million

The lesser-known brother of Zoho Corp’s Sridhar Vembu might not have built a global business yet, but how he won a loyal clientele in India is a story worth telling.

Shunned by ex-staffers, supported by clients – Kumar Vembu’s 'GoFrugal' journey towards $100 million

Tuesday March 19, 2019,

6 min Read

It is not every day that one decides to leave a company they helped build and scale, and go back to the starting point. And yet, that’s exactly what Kumar Vembu did. The company he left behind was none other than Zoho Corp, which is today among the biggest bootstrapped success stories out of India!

But that’s not the only thing that defines Kumar. He has the ultimate endorsement that a founder can get - his clients stood by him even when everybody else believed it was the end of the road.

Kumar set up GoFrugal – a ERP software aimed at India – in 2004, and in 2012, realised that the era of cloud computing was upon them. To scale, drastic measures needed to be taken. And they were. Kumar doubled the pricing of his enterprise resource planning application for retailers.

“Before 2011, I believed in best product selling at the lowest price. I realised that this had to change because the product was creating value for retailers. I also wanted to slow down the legacy business too and focus on the cloud,” he says.

Kumar Vembu

Also Read: Sridhar Vembu on the global economy

His decision, though, did not go down well with his senior employees, and around 100 of them quit in 2011 and 2012. The entire senior sales team also left. To make matters worse, by 2013, Kumar realised his former employees had spread word in the market that GoFrugal was done for.

This, Kumar says, was the moment of reckoning. The company’s clients continued to put their faith in the product, putting their weight behind Kumar and supporting his move to the cloud, even with the higher pricing.

“Straightaway, I said there would be no more discounts, and told my technology teams that they focus on building a frictionless service,” says Kumar.

If that does not speak for the founder and product, we are not sure what will.

Early days

Kumar’s tryst with entrepreneurship started with AdventNet, the company his elder brother Sridhar Vembu started in 1996. The global, cloud-based CRM provider – later renamed Zoho Corp – made headlines as it became a global success delivering cloud-based CRM and productivity applications.

In 2004, Kumar took the plunge and left Zoho Corp. The company was then clocking in $20 million in annual revenue, and had reached this scale without any external funding. However, Kumar had different plans. He decided to focus only on India and founded GoFrugal.

“It was an easy decision for me to start up at the time because I knew how to build product and scale up,” he says.

According to Kumar, the Indian retail sector had not experienced the benefits of technology in the form of ERP applications, and Kumar wanted to change it. The entrepreneur started GoFrugal from Zoho’s old office at Velachery in Chennai, and began with building legacy software that allowed retailers to capture information on their desktop in real-time. GoFrugal’s product could manage sales, inventory, and customer analytics for retail stores, and work efficiently with distributors.

Over the next eight years, by 2012, 5,000 retailers were using GoFrugal’s platform. The company was clocking an annual turnover of Rs 12 crore, and had 225 employees. Taking lessons from Sridhar, Kumar did not raise any funding, focussing on Indian businesses.

It gave strong competition to the likes of Microsoft, SAP, and Oracle, who were limited by the fact that they could not work with one- or two-store retailers as the product licence would be prohibitively expensive. GoFrugal, on the other hand, charged a one-time fee of Rs 10,000, and took annual maintenance contracts.

Beefing up the product

In 2012, in addition to the price hikes, Kumar also took a few decisions to drive growth:

·        The website showcased customer self-service.

·        The app’s download size was brought down from 350MB to 45MB.

·        The company began training the user on how to use the product.

·        It brought down the number of days to set up from 30 days to just six.

·        The product synced up with all modern payment systems like UPI and Paytm.

·        Cut backend complexity.

Once GoFrugal moved to the cloud, over the last six years, the company has scaled from 5,000 customers to an impressive 30,000 customers. It can work with single store mom-and-pop retailers, as well as franchisees. Some retailers it works with are C K’s Bakery, Total, TVS, Smiling Baby, Go Chemist, and Royal Touch Supermarket.

Reliance Jio, in an internal report, said there are eight million small stores in India, and believes that all of them will go digital in the next 10 years. Today, Reliance Retail plans to sync up with Reliance Jio to offer services to over 50 million SMBs in the country.

Kumar says he has set himself a target of reaching half a million of these small stores, and achieve a revenue of $100 million by 2025. Impressive, we say, as this target would be ten times the current value of $10 million annual revenue run rate.

“India will be run by small business entrepreneurs for a long time. If you look at it, everyone from Paytm to Future Group to Reliance are going after the small and medium businesses,” says Kumar.

How does the product work?

The GoFrugal ERP software is built for retailers and distributors, the product, once downloaded on a tablet or phone as an app, shows point-of-sale reports, allows digital billing, integrates customer feedback, and provides analytics on inventory and sales.

It has a product for restaurants, which allows tablet-based ordering, along with similar features for retailers.

For distribution businesses (GoFrugal has 6,500 distributors as customers), it has products that allow them to take orders from small stores, collect payment, track inventory, offer reports, and analyse their business. The company’s tech is used by roughly 10 percent of all distributors in India. All products by GoFrugal offer chatbots and a real-time query engine. Of its total customers, 21,000 are small businesses, of which 60 percent use the cloud, and the other 9,000 are enterprise customers.

“The reason we were able to scale is because the technology is easy to use. It puts the client first, and is built for Indian businesses that want to move to digital, away from their legacy applications,” says Kumar. Today, the team is 300-member strong, half of whom are engineers.

Why ‘GoFrugal’?

Kumar, like Sridhar, is frugal and effective in his strategy. “Kumar was instrumental in the early part of Adventnet’s success, and he scaled it up before branching out on his own,” says Sridhar Vembu, Co-founder of Zoho Corp.

Now, all of Kumar’s bets seem to be in the right place with consumption on the rise. Per capita income in India has crossed $2,000 per year according to the World Bank, and digital adoption is on the rise. As per an estimate by EY, the Indian retail industry is worth $650 billion, of which only 10-12 percent is organised.

Kumar is also part of the Vembu family’s “Family Office”, which funds entrepreneurs and their ideas to take their products global. One of their recent investments were PickYourTrail where they invested along with Girish Mathrubootham of FreshWorks.