How dotcom survivors built a $950 million startup in India

Bloomberg

Tech startups are typically founded by young entrepreneurs with more passion than experience. This is as true in India as it is in Silicon Valley. Then there’s Bigbasket, whose founders are veterans of the dotcom bust and mostly north of 50. Drawing on their successes and failures, they’ve turned their six-year-old startup
into India’s biggest e-grocer and are taking on a host of competitors, including Amazon and brick-and-mortar chains operated by the nation’s biggest conglomerates.
Bangalore-based Bigbasket delivers everyday cooking essentials like ghee (clarified butter), diced coconut and basmati rice, as well as 18,000 other items from bread to laundry detergent to eight million customers in 25 Indian cities. It’s mostly targeting upwardly mobile young Indians keen to avoid traffic and the drudgery of supermarket runs. Bigbasket raised $300 million in an Alibaba-led round that valued the grocer at $950 million—just shy of unicorn status.
In a country where groceries account for half of the almost $1 trillion retail market, Bigbasket is using knowledge learned the hard way during the dotcom era.
“We want customers to get hooked, and make our service harder to replicate,” says Hari Menon, 56, co-founder and CEO. He, along with V.S. Sudhakar (58), Vipul Parekh (53), Abhinay Choudhari (47) and VS Ramesh (62), founded Bigbasket parent Supermarket Grocery Supplies Pvt, in December 2011 in a nondescript building in Bangalore’s Indiranagar neighbourhood.
In 2011, the founders were approached to regroup for an online grocery. Plenty of people told them to stay away from perishable produce in a country so obsessed with freshness. The founders pressed on all the same.
But their timing was propitious: smartphones were proliferating, broadband was becoming affordable, and online payments were in place.
Delivering fresh food is challenging everywhere, but India presents steeper obstacles. The country lacks a cooling infrastructure—walk-in freezers, chill rooms, refrigerated trucks and so on. Eventually, Bigbasket put together its own refrigerated warehouses and a fleet of trucks. These moves let the company source the food more cheaply and in 2016 led them to launch Express, a 90-minute delivery service for milk, eggs, bread and emergency supplies.
By investing in “the dysfunctional food and grocery supply chain,” says Arvind Singhal, chairman of retail consultancy Technopak Advisors, “Bigbasket’s managed to get a head start.”
Still, there was a lot of competition, including LocalBanya, Sequoia-backed PepperTap and SoftBank-funded Grofers. To stay ahead, Bigbasket needed to invest in technology: web-connected, temperature-controlled trucks, GPS-traceable vans, inventory-optimising algorithms. “The days of experimenting were over,” says Parekh. “We needed to step on the pedal.” This all cost money and by then venture firms were more willing to invest. Starting in the fall of 2014, Bigbasket began mopping up capital—$35 million from Helion Venture Partners and Zodius Capital Advisors, $15 million from Bessemer Venture Partners, $150 million in a round led by Dubai-based Abraaj Group. By mid-2016, Bigbasket was in eight large Indian cities. Then it was time to target smaller cities.
Attracting and keeping customers is a challenge for all e-commerce companies, and doubly so in India. Shopping habits vary widely from city to city and are deeply ingrained. So Bigbasket plies customers with samples: leafy greens in Mumbai, a rice called Sona Masoori in Bangalore.
It’s customised software automatically guides drivers to their destinations, which the company says has helped it achieve a near-perfect on-time rate. Late deliveries earn customers a 10 percent discount. Missing items are refunded, plus 50 percent of whatever the item cost.
Bigbasket was now in cities with a combined population of 150 million people, had good brand recall and was making money on each order. But, “we’d barely scratched the surface of the cities we were already in,” Menon says. “It was time to bring in a strategic partner.”
After initial conversations with Amazon, Walmart and others, the founders zeroed in on Alibaba, which runs a large online grocery business in China and has built its own delivery operations.
They’re now preparing for the next phase of growth by plowing money into warehousing and delivery systems in the 25 cities to bring down delivery times to three hours. In two years, the plan is to double the range of products to 60,000 SKUs, and more than double the farmer base to 5,000, expand private label items and use Alibaba’s muscle to source and import a range of merchandise to six times that of large-format supermarkets. “A customer should be able to buy whatever he wants,” Menon says.
Even as Amazon and local rival Flipkart push into groceries, Bigbasket’s founders profess equanimity. Grocery is different from electronics or fashion and they’re confident that strength
in one category doesn’t necessarily translate to another.
Bigbasket is growing quickly and aims to double sales each year to hit $2 billion by 2020 to take the third spot in Indian retail.