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Bengaluru-based Capillary Technologies has emerged as a leader in providing Software as a Service (SaaS) solutions for the retail industry in Asia. It started when Aneesh Reddy, co-founder & CEO, and Krishna Mehra and Ajay Modani, all from IIT Kharagpur and in their 20s, decided to quit jobs after about a year at work and put their savings together to follow their dream. They were not propelled by the one big idea they shared; they had to look for one. After much research, they zeroed-in on the new growth areas—mobile and retail. The aspiring entrepreneurs combined both when they launched Capillary Technologies in 2008.
The biggest challenges consumer brands were facing then included an inability to capture customer data, identify consumers visiting their stores, and communicate effectively with them. This is where Capillary stepped in. Built on a big data platform, the Capillary CRM solution enabled brands to use their existing infrastructure to identify and understand each consumer, and directly communicate with them through mobile technology. Capillary made possible what was revolutionary for that time, i.e. card-less, mobile-first loyalty programme for the customer.
As it happened, the founders made the right choice as the cloud-based SaaS was emerging as the next big thing in India. According to trade body Nasscom, as software products move from on-premise to a cloud-based model, the SaaS market has seen a rapid evolution. Instant decision-making, cost-effectiveness, low risk, greater flexibility, combined with an increasing mobile workforce and customers is driving the adoption of SaaS.
Capillary’s investors also thought as much. By 2012, Capillary had raised Rs 60 crore ($15.5 million) from venture capital firm Sequoia Capital, Norwest Venture Partners and the from existing investor Qualcomm Ventures.
Until then, the company was run on a shoestring budget. With this kind of money, the founders became overambitious. They were also still very young. “We opened 10 offices in 2012 in the US, the UK, Australia, South Africa, Hong Kong and New Zealand.” Reddy says, adding that all the money was blown up in 18 months. His two partners were also exiting from the company for different reasons.
By 2014, it was time for the company to pull itself by the bootstraps. Reddy took the tough decision to shut down the loss-making foreign operations. As the company was still doing well in other markets where so much investment had not gone in, investors continued to help Capillary. “We are now focusing on four large geographies—India, West Asia, South East Asia and China,” he says.
But how did Capillary enter new markets? Reddy says the existing customers opened up international markets. “Lee Wrangler, our client in India, asked us for solutions for their stores in South East Asia. This is how Capillary entered China three years ago. There was a big white space to be filled in retail-focused CRM products in China. We had to do a lot of localisation for the Chinese market,” he adds.
The first step towards building the business was to understand China’s digital ecosystem. China is a key market as retail is one of the most developed industries and consumers are also way more informed than their Indian contemporaries. They expect the same kind of experience on both the online platform as well as the offline store from a brand.
Capillary then had to work on localising their existing product. “It included two components: language and functionality,” Reddy says. They chose Shanghai as the first base as they had won their first customer there. They also set up an office in Guangzhou in southern China. Capillary was able to quickly localise their product as per market needs. This includes WeChat integration, personalised CRM models, and integration with local platforms like TaoBao.com and JD.com to provide an online and offline customer behaviour analysis capability. It has been able to establish its product acceptance; most of the employees are local, with only three Indians operating out of China. The company has become the main competitor for most of China’s CRM service providers.
West Asia is another big market for Capillary. It has recently signed a strategic joint venture agreement with Saudi-based Veda Holding to form Capillary Arabia. The JV will allow Capillary enhanced access to the Kingdom’s rapidly growing retail, F&B and manufacturing sectors.
Capillary has been nimble on its feet, keeping up with fast-changing technology and customer needs. To cater to the growing e-commerce market, Capillary acquired e-commerce services and technology company Sellerworx in 2015. It was a year of acquisitions that included digital commerce solution provider MartJack and machine learning company Ruaha.
It has recently launched its first exclusive deals and coupons shopping app DealHunt. The app is a one-stop destination for best offers and deals across 20-plus categories. Consumers can choose from more than 1,000 trusted brands on both online and offline platforms, including fashion, beauty, food, health, travel, electronics and more.
Capillary has today emerged as one of Asia’s leading SaaS product companies. Over 400 marquee brands across more than 30 countries, including Pizza Hut, VF Brands, Walmart, Madura Garments, Valiram, KFC, Starbucks and Samsung, come to Capillary to enable easy and seamless consumer experiences. It has over 300 million consumers and 30,000 stores on its platform. Over 700 Capillary associates across 11 global offices are working on new ways for brands to make their consumers’ lives easier.
Reddy adds Capillary’s growth has been higher this year. “We will turn profitable this year. We will get our P&L in shape and concentrate on internal accruals of 25-30%. Retail in Asia is still growing. Saudi Arabia, Indonesia and Thailand remain big markets. We hope to end this year with a $100-million turnover.”