Unable to keep up with the fundraising capabilities of rivals Grofers (now Blinkit) and BigBasket, Mukesh Singh and the other two cofounders of ZopNow took the tough decision to shut their seven-year-old consumer-facing grocery-delivery platform in 2018. Singh and his cofounders, Raj Pandey and Vikash Kumar, bought out their investors with their personal capital and transitioned ZopNow to a business-to-business (B2B) enterprise, offering its omnichannel retail expertise to retailers globally under a new name, ZopSmart.
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In four years, the company has recorded a strong profit pool. ZopSmart clocked a net profit of Rs 200 crore for the financial year ended March 31, 2023, on revenue of Rs 300 crore. It is now targeting 25-30% annual growth in business for the next five-six years before planning to raise external funds or going for M&As.
Taking note of its successful and extremely tough transition to a B2B model from B2C, the elite jury of The Economic Times Startup Awards 2023 selected ZopSmart as the winner of the Comeback Kid category.Even though they folded up the ZopNow business in 2018, the founding team had conviction in the grocery delivery business and that it could be built in a sustainable manner, Singh told ET in an interview. “We knew our tech stack was quite strong and the team was confident they had built a valuable technology infrastructure,” he said.
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Also read | ET Startup Awards 2023: Here’s how we selected this year’s winners“However, the flavour of the season was consumer delivery businesses and that had the most attention from risk capital investors,” said Singh. This was one of the reasons ZopSmart did not pick up any venture capital funds.
Singh said the critical pivot to B2B was executed with the realisation that the founding team wanted to be in control of their own destiny, and they had to buy out the investors to be able to chart its own path.
Amazon, Walmart entry
“An investor, a venture capitalist or hedge fund manager, will have a timeline of five years or at best 10 years and then pressures come in… It will take 10-15 years for anything respectable to be built. For something really good, it would take even 2-3 generations. We were very clear about it from the start,” Singh said. “Even at ZopNow, we had a profit of Rs 2-3 crore on a Rs 400 crore business.” This meant conviction was proven by numbers, he said.
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According to Singh, he would have wanted to run both the consumer and the B2B businesses despite market rivalry, but the entry of Amazon and Walmart (by acquiring Flipkart) made it clear these two strategic players would be playing for the long-haul.
“As a founder, between passenger (not a bad option) and driver seat, I prefer the driver seat,” Singh said.
“A passenger seat would have likely given me more money but that was never the agenda,” he said. “Investors were right in their place. I had an honest talk with them and I got their point of view as well. We had conviction on tech but were not able to convince investors on our current business. Investors were very mature, but they still wanted a consumer business and were exploring M&A and other options.”
Accel, Times Internet (the online arm of The Times Group which publishes The Economic Times), Qualcomm Ventures and Dragoneer Investment Group were ZopNow’s investors and the firm had raised about $15-20 million including personal investment of Singh. He, along with cofounders, used personal wealth to buy back their venture from the investors.
ZopSmart is now Singh and his cofounders’ identity, but he still wears the ZopNow t-shirt. According to him, it was the failure of ZopNow which taught him a lot more in life than the success of ZopSmart.
“It was tough (to shut down) and very emotional for me. I wear the t-shirt because I want to remember it,” he said, adding that failures teach more lessons than success.
“Success has a huge luck factor to it…it never teaches you major lessons. Behind every success there is 90% luck and 10% hard work. Failure teaches you a lot, but you have to look deep into the failures. Most of the time it will teach you something, but you don’t have to change yourself…it’s all about fine tuning,” he said.
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In hindsight, was shutting ZopNow and starting anew the right call?
Singh thinks so. “There is a part of me which feels we should have been able to convince investors but yes it worked for me personally. It also means I can spend more time with my family,” he said. “From a company perspective it may not be. We were lucky to get the initial set of clients.”
Singh, a sports lover, says he has two sons: ZopSmart and Naman.
A new beginning
Once focused on ZopSmart, the company was able to get new clients through its founders’ networks along with its key tech stack.
“Around the same time, Amazon acquired Wholefoods and globally it was clear omni-channel was no longer good to have but a must have. We got our first breakthrough in the enterprise segment,” Singh said, adding that an enterprise customer is willing to pay for the service if it sees the results. “We got traction in Singapore first and then in the Middle East. Those accounts gave us a lifeline. At that time, we were just 30-40 people and we were very frugal. So, if we signed a couple of good deals, that would give us a 15-18 months’ runway,” he added.
Going forward, the company aims to grow annually by 25-30% for the next five to six years before changing gears to get more aggressive. This is linked to both Singh and Pandey’s plan to spend more time with their kids. Singh said in six years, he will turn 53, indicating that Pandey’s and his children will be old enough for the ZopSmart cofounders to focus full time on the business and push for higher growth.
The company could also look at opportunities to add inorganic heft if its cash position improves, Singh said. “For the next five to six years, we plan to grow in the current form, which means we are not looking to raise any external funds. Hopefully our cash balance scenario will grow even more, which will allow us to do some interesting M&As,” he added.