The digital ledger helps small businesses keep a record of receivables even as it sends alerts to debtors to pay up.
6th July 2020: Kirana shops always have a huge credit backlog. It’s not only consumers from the vicinity who promise to pay on a later date, but shopkeepers also get supplies from wholesalers and distributors on credit. Recording these transactions and settling these payments is a pain point for small businesses. Khatabook enables them to not only keep an account of receivables but also send regular reminders to debtors.
The startup was launched in December 2018 by four IIT Bombay alumni as they found asymmetry between the millions of new internet users and the fact that most transactions were still not digital. Khatabook succeeded in onboarding 8 million active merchants on its platform within a year, a feat CEO and co-founder Ravish Naresh describes as ‘rocketship growth’. He says Khatabook is the leader in the space now as it has 2-3 times more users than peers Paytm Business and OkCredit — which incidentally are better funded.
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The startup recently raised $60 million in Series B funding round from investors led by Facebook co-founder Eduardo Saverin’s venture firm B Capital, taking its total funding to $80 million. Other big names associated with the ledger app are Sequoia India, Tencent and partners of DST Global. Former Indian cricket team skipper Mahendra Singh Dhoni too has been reported to have invested an undisclosed amount in the young company.
Naresh says that the money will be used to expand its engineering team which currently is only 15 techies-strong. It plans to tie up with NBFCs and leverage the vast amount of data on its platform to disburse loans to small businesses. Apart from lending, more add-on software services are in the pipeline and Khatabook is looking to start monetising its platform with the help of these sometime next year.
Khatabook aims to have 3 crore active merchants on its platform within the next two years. According to a government report, India had around 6.33 crore MSMEs last year, a huge target group for the app. Naresh says that the word travels very fast in the tight-knit merchant community and if a tool is helping someone managing finances and recovering debts, it’s all the more probable it will be adopted by others. He calls the SMS alerts sent out to remind a person of how much he owes a user a ‘viral hook’ that helps instantly communicate the use-case of the app. Interestingly, the startup says that regular reminders help speed up recoveries to the extent that receivables drop by half in the first few weeks after a merchant starts using the app.
The biggest challenge for any company in the space is how to make the interface simple for a first time internet user. “The challenge primarily is design,” says Naresh. As of now, user experience on the app ranks high. As Khatabook adds more features, it would be interesting to see how it retains its trademark ease of use.