With 500 million transactions a year, Capillary Technologies targets to be cash positive by the end of 2016

When Capillary Technologies, a mobile customer relationship management (CRM) platform, was incubated by IIT Kharagpur in 2008, it was no more than a crawling baby in an equally fledgling startup ecosystem. Eight years later, this Bengaluru-based omni-channel engagement and commerce platform has presence in 12 locations across Southeast Asia, eastern Europe, Middle East and China.

The company has catered to 30 countries empowering over 20,000 retail locations and 250 enterprise e-commerce businesses, with more than 20,000 Point-of-Sale (POS) logins every day. They are now processing over 500 million transactions every year and engage with more than 200 million shoppers worldwide.

Capillary boasts of building an ultimate client list, comprising Unilever, Walmart, Calvin Klein, Gap, Tommy Hilfiger, US Polo Assn, Starbucks, Pizza Hut, KFC, Puma, Landmark, Madura Fashion and Arvind Group.

Clients vouch for company and the difference it has brought in their operations. “With Capillary’s Intelligent Retailing Solutions, we have been able to unlock our database insights and offer customers with targeted message and deals. Their analytical solutions have helped us identify our customer’s responsiveness to different product segments. We also leverage Capillary’s automated Lifecycle Marketer programme to engage customer to prompt future purchases and retain their loyalty,” says Juliana Lim, Senior Marketing Director, KFC Singapore.

Getting into M&A deal

According to Aneesh Reddy, Co-founder and CEO, Capillary Technologies, the company’s recent acquisition of the Hyderabad-based multi-channel commerce platform MartJack yielded multi-fold revenue growth. Post-acquisition, they managed to add Asters Pharmacy in their client list.

This acquisition helps the company enable an ecosystem of partner solutions like WebEngage, CloudCherry and Ruaha, to help brands with multichannel user engagement, customer experience management and online monitoring.

We have a very strong focus on unit economics, cost discipline and sustainable growth, but at the same time, we keep fuelling aggressive hi-tech innovation and new product ideas at Capillary,” says Aneesh.

From scratch…

Capillary Technologies was founded by three IIT-KGP alumni Krishna Mehra, Aneesh Reddy and Ajay Modani. The trio were keen on starting up, and the idea was to capitalise on the intersection of mobile and retail, given the growth potential of both the segments. However, Krishna and Ajay quit the company few years ago.

The company was started in Kolkata in August 2008. It was a time when the trio was diligently pitching their idea to the local shopkeepers in Kolkata (basically testing the product on small scale). ‘Shopbook’ was fundamentally their first invention, a Facebook-like product over SMS, through which merchants could send out offers to their clients.

In May 2009, they decided to move out of the city and set up base in Bengaluru. From 10 employees in 2009, Capillary has now grown to more than 500 employees.

The first set of flagship products includes InTouch (cloud-based mobile CRM platform for enterprises), TruTouch (a CRM platform for small and mid-sized businesses (SMB)) and Clienteling (in-store customer engagement, offering a single view of the customer). Its business intelligence tools help retailers with real-time data capture, analysis and customer engagement.

InTouch was built when Capillary just began operations, to fulfill a very specific need in the market - cardless loyalty programme. Eventually, they have added analytics product equipped with a Campaign Management Tool (CMT). Then the company shifted its focus towards omni-channel engagement and commerce offering a comprehensive digital transformation for brands.

The product offerings grew from one to 10 in eight years. All of Capillary's products are delivered via Amazon Web Services and Microsoft Azure. Capillary follows a SaaS model of pricing, allowing clients to pay every month based on the number of stores or PoS.

Financial assistance

Capillary Technologies was bootstrapped for the first three years. In September 2012, Sequoia Capital, Norwest Venture Partners (NVP) and Qualcomm Ventures together invested $15.5 million in a Series-A round, helping the company expand its offerings into healthcare and hospitality.

Capillary Technologies, today, caters to apparel, FMCG, footwear, supermarkets, groceries, hypermarkets, jewelry, QSR, F&B, entertainment, malls and health & wellness market. Sequoia and NVP continued to back the company by investing $14 million in a Series-B round in July 2014.

Last September, the company raised $45 million in a Series-C round led by private equity firm Warburg Pincus, along with existing investors.

“We will be cash-positive by the end of 2016. Before making any investment, we always keep in mind the return-on-investment and value addition as measurable outcomes and this guides our unit economics,” says Aneesh, adding that Capillary is growing at a rate of 4-5 percent month-on-month and 60-80 percent year on year.

Managing the risk

In 2014, the company came under the limelight for its failed attempt at penetrating the US market, despite spending a significant amount of money. According to various reports, the company had also on-boarded six to seven local employees to dive deep into the market for direct selling. However, unable to generate profits, it discontinued the operation, and ended up partnering with both India and US-based system integrators to pursue trading in the US.

Aneesh explains:

We are now an Asia-focussed product company, and products are best suited for Asian markets and we do exceedingly well here. Our market expertise in Asian market acts a strong catapult for our growth. We saw a bigger opportunity in Asia as its growing at a breakneck speed with all factors in place - growth in GDP, per capita, digital adoption, consumer acceptance to name a few.”

Growth trajectory

Since Capillary has pivoted into an omni-channel customer engagement, it helps brands increase consumer reach, sales and loyalty across physical and digital channels - stores, web store, mobile store, mobile app, on social media and in in-store kiosks.

We will continue to build new innovations in e-commerce, customer engagement and analytics space. There are many products in O2O (Online-to-Offline), social commerce and machine learning space, which are in the lab and will be disclosed very soon,” Aneesh says.

The company will soon launch a social engagement product for China and the Indian sub-continent. And geographically, it plans to dive deeper in India, Southeast Asia, Europe, the Middle East and the African and Chinese markets.

Vertically, the focus will be on optimising the supply chain for manufacturing or distribution space such as business-to-business-to-consumer (B2B2C) commerce. Capillary's solution suite is already integrated with more than 100 third-party systems, including logistics providers Aramex and Bluedart, and payment gateway solution provider PayUmoney. It is targeting a growth of 3-5X over the next three years and aims to be the SaaS leader in Asian markets.

SaaS-based CRM market

 According to a report by Gartner, the CRM space has witnessed a revenue growth of $23.9 billion in 2014 and is predicted to grow rapidly for the next three years. SaaS or cloud-based CRM deployments currently represent more than 40 percent of all CRM deployments.

A survey conducted by NASSCOM stated that the SMB market is expected to grow at a CAGR of 15 percent. With this growth number, IT spends of such companies are expected to grow further with CRM platforms as their top priority.

Capillary Technologies