At VentureBasecamp, we regularly invite leading entrepreneurs for AMA sessions, to share their learning and wisdom with us. Our recent AMA was with Waycool founder Karthik Jayaraman, who recently raised USD 25 million to scale his agriculture supply chain venture. This is the second part of this 3-part blog series, where Karthik answers questions about building Waycool while addressing different challenges and stakeholders in the agriculture ecosystem.
Q. You come from a background in automobile supply chains. How similar/different did you find the supply chain issues in auto vs agriculture?
1. When we build an automobile, we buy components from various vendors. It is almost guaranteed that these components will be virtually identical and error free. The real quality levels at the component stage are way beyond six sigma nowadays. However, it is not so for food. A field does not produce a uniform crop. Only 30% of what a field produces is good enough for retail. Another 30 to 40% are probably oversized and misshapen, and will be usable by hotels and restaurants. The balance can only be crushed for pulping or destroyed. Hence, it is important to design a multichannel supply chain, where the non uniform production of a field can be liquidated without loss.
Moving an auto component is like moving goods. Moving food, especially fresh produce, is like moving a critical patient.
2. Food is alive till we consume it, and is rapidly deteriorating as we move it. Hence, the logistics of food supply chain, especially sensitive items like fresh produce or dairy, is more like ambulance movement and less like truck movement
3. Auto components have fixed prices. Food has prices that vary every hour. Planning the sales and margins in such as business is far more sophisticated than in the auto sector.
Q. What are the three key areas where startups from Agri-tech sectors must focus upon?
Build a solution that can be free standing and cash flow positive with not more than 2 rounds of investment. Risk capital beyond series A is a challenge for agritech. Hence, beyond series A, the company must be in a position where it can attract purely growth capital.
Focus on the customer’s real problems and corresponding willingness to pay, without having to resort to discounting. Discounting is a very slippery slope in our space.
Get some experienced people early, so that we can learn from them, especially if you are from outside the industry. However, place them in roles where they can share their skills or build skills, rather than pure operational roles, where more energetic youngsters can drive. Agritech requires domain knowledge, as well as energy. Hence, this is critical.
Q. I’m trying to cut down the middlemen for farmers in villages. Any suggestions?
This is the goal of many ventures in this space. We look at this slightly differently. In the areas we operate in, we do not see middlemen making too much money either. We see greater losses in the supply chain due to wastage and inefficiency. If we unload a bag of onion from a minitruck and load it onto a larger truck, we have straightaway added 75 paise per kg of cost. Hence, my submission would be for you to build a solution that is focussed not just on disintermediation, but also elimination of all unnecessary steps in the supply chain.
Q. What would be the impact of blockchain and similar tech affecting the supply chain business?
There is growing demand for traceability of food products. Today, the demand is driven by markets abroad e.g. the EU and UAE of late. However, domestic QSR chains have also started asking for this. Hence, the element of traceability is of immediate use in select segments. Blockchain adds to this. It gives us immutable traceability. This is important when our customer is at a distance and doesn’t really trust us e.g. importers abroad. Thus, the technology is relevant and useful, albeit niche as of today. However, the critical success factor will be how simple we can make it for each stakeholder in the supply chain. If we make the farmer or truck driver or warehouse staff do anything more than scan one barcode, the system will not take off.
Q. What differentiates your venture in your industry?
1) We are a full stack, broad line company. We offer over 1500 SKUs across fresh, staples, dairy and processed food. In over half of these, we control the supply chain end to end.
2) We are a phygital business. We are not a digital marketplace but are an end to end physical operator. We control 51 collection centres, 150 trucks and 14 distribution centres to serve 5000 clients.
All of the above physical entities are seamlessly integrated to our digital backbones. A purchase order from our customer on excel is seamlessly read and sent as a PO to our farmer. The farmer can scan each crate and we get an ASN on the cloud automatically. We can compute ETA of our trucks automatically using their GPS. Our Warehouses are automated and seamlessly talk to our ERP.
Q. Do you work with the Governments and NGOs? How did they help?
We work with Governments, NGOs as well as CSR arms of companies in our procurement process. We found it critical to have one of the above as a constant presence in our interaction with farmers, as a neutral observer and moderator.
Being city slickers, we were less aware of the dynamics in our source areas and hence the above was important.
While the NGOs and CSR arms guided us on the softer aspects of interaction with FPOs and identified the right FPOs for us to go to, the Government has supported us by providing thehard infrastructure for these FPOS to use e.g. pack houses, grading centres and cold storages.
Q. Are CSR arms of companies willing to work with for-profit social enterprises? How did you develop this partnership?
Many CSR arms of companies are trying to engage with farmers but face a critical challenge – they are not able to provide an immediate commercial benefit to the farmer and hence, he does not engage back. If a for-profit enterprise is brought into the picture with a commercial proposition, the CSR arms also find it easy to engage and push their agenda.
Q. People talk about UX (User Experience) a lot in software businesses but it is a concept applicable to all businesses. What kind of UX gaps did you identify in the supply chain business and how did you make those customer interactions delightful?
We faced, and continue to face challenges in this. Firstly, if we consider our farmers, many of them are still on feature phones.
Farmers do not have the time or patience to do anything more than one click, or one bar code scan. Simplicity is the key for any digitization.
At the customer end, oddly enough, we found even more reluctance to use an app or a web UI to place an order on us. Our enterprise clients wish to stick to placing orders on a spreadsheet. Our smaller clients simply scribble their order on a piece of paper and WhatsApp it to us!
In fact, we had to build a bot that would auto read excel spreadsheets and pump the orders into our ERP! We are trying to navigate this by making the customer ordering and tracking UX as simple and familiar as possible. We are just starting to experiment with pictorials instead of text, but it’s very early days.
Karthik demonstrates how domain expertise, sustainable differentiation and understanding your customer are crucial for a startup to get right, especially when the offering is a commodity and the stakeholders are not too tech-savvy. Further, partnering with NGOs and CSR bodies helped them refine their Go-To-Market strategy.