Everyone, who’s anyone, has been saying India’s information technology (IT) sector needs to shift its focus from services to products. That the two are chalk and cheese, and it isn’t easy to make the leap, is an understatement. Amit D. Mishra learnt this the hard way after he sold his seven-year-old business automation services company in Pune to build a software product.
Mishra started his software-as-a-service (SaaS) company, Interview Mocha, in November 2012 when funding had just started to flow, and software products like Freshdesk were competing with the best in the world. Mishra, an ex-IBM-er, had struggled to find candidates with the right tech skills to fulfil project requirements at his IT services firm. His SaaS product was designed to solve this.
Interview Mocha is a skill assessment software tool. It has tests for over 1,000 skills, spanning IT, coding and communication. Its clients are large enterprises, including investment banking company Credit Suisse.
Resumes can lie, so enterprises need reliable tests to assess if applicants are skilled enough for the job and can hit the road running. Every industry undergoing a digital transformation needs a whole new crop of skills. They need to assess the skill levels of employees, train them, and assess them again to check the effectiveness of the training. Interview Mocha helps them do this.
Before it got here, Mishra and his team had a steep unlearning curve to cross, starting with something as fundamental to business as cash flow. In the IT services industry, you begin a project after you get a purchase order from the client. Mishra’s services company Radix Business Models would make a pitch to a client armed with use cases of past projects. With a purchase order in hand, Radix would put together a team and get paid in phases.
“That’s like washing dishes. Someone knocks on your door and says she’s been working with three of your neighbours; you like her pitch and employ her; she gets paid a few thousand rupees at the end of every month. But if you’re building and selling a software product, you’re in the Vim—soap—business."
That’s Mishra’s favourite analogy to describe the difference between the tech services and products sectors. “Now you have to start a factory, get the soap’s formula right, make it, spend on advertising, create and manage a supply chain, and finally sell the soap for ₹10. The customer will still ask you what’s so special about your soap."
Mishra had moved from beginning a project with a $100,000 (around ₹70 lakh) purchase order in hand to scrambling after hard-to-please customers for $299 (less than ₹21,000) a year per head. “Everything was different. In services, it’s usually the salesman or account manager who gets sold. With software products, your product has to do the selling."
Plus, there was money trouble. Mishra took home no salary for three years. His co-founder and chief technology officer (CTO) Sujit Karpe was working part-time with Interview Mocha till December 2017 because he needed an income. They had pooled in around $25,000 to start Interview Mocha with a two-person team in 2012. Within a year, the money had run out. Mishra borrowed the following year, and raised $70,000 from angel investor Wolfgang Hoeltgen.
The Interview Mocha product hit the market in February 2015. By May, it had 300 sales leads, of which around 40 turned paying customers. Of the 300, around 30 were large enterprise companies with annual turnovers well over $1 billion in the US. The rest were medium- and small-sized companies in the US, Europe, and India.
“We were in multiple customer segments and the sales cycle wasn’t repeatable. We had customers ranging from a one-person company to Credit Suisse, a 50,000-strong company. It was unpredictable. We were getting about one paid customer daily and we were treating all of them the same," Mishra recalls. “The first one and a half years went in unlearning the services mindset."
By the end of 2016, Interview Mocha had 600 customers in 50 countries, and monthly recurring revenue of $15,000. Is that a matter of pride or shame, someone asked Amit, and the penny dropped. By then, Mishra had mortgaged his house to get a top-up on an overdraft at his bank. His wife was scared and he was upset. Three years on, the company was still struggling despite having a good product.
Mishra and Karpe had met Prasanna Krishnamoorthy at an accelerator programme when he was CTO of Microsoft Ventures. When he started a business-to-business SaaS-specific accelerator, Upekkha, Interview Mocha was the first to join.
At Upekkha, Interview Mocha started tracking its lead flow closely. It had enough customers—large and medium enterprises that could afford to pay them much more than $299 a year. The founders started calling them to understand their needs better and find out how much they valued the Interview Mocha product. Based on the feedback, Interview Mocha bettered the product, added hundreds of new skills to their assessment portfolio, and increased the price of the product to $700 a year.
Interview Mocha’s average ticket size has now climbed further to $50,000 and even $100,000 a year. The company—with a 35-member team—is currently clocking $120,000 monthly revenue with customers like Capgemini, Fujitsu, and Altran. It has big rivals like Gartner’s CEB Global, Mercer’s Mettl, and SHL, but Mishra believes the market is large enough for multiple players.
In hindsight, Mishra says, they made the right choice in building the firm the “value SaaS" way instead of venture money pushing them to go for the moonshot prematurely, before they had figured out a business model that could scale faster. Last month, it turned an angel investor in Upekkha.
Malavika Velayanikal is a contributing editor with Mint