CEO, Indiamart Intermesh Ltd
on how he went about setting up indiamart.com
At a time when virtually nobody in India even heard about the Internet, Dinesh Agarwal had been thinking about setting up a comprehensive website connecting Indian businesses. His main clientele was – and still largely is – the Indian exporters who were unable to reach out to a larger audience overseas.
Through his website, http://www.indiamart.com, Agarwal – who had come back to India in September 1995 after working for HCL America in the US – presented a platform for them to get business queries from abroad in their respective industries. Providing links on the site for free and setting up their web sites for a relatively small cost, Agarwal went about establishing indiamart.com as a conglomerate of several vertical portals in the segments of travel, apparel, handicraft, finance, healthcare and automobiles – slowly but surely. Today, the site boasts a searchable database of over 70,000 organizations, more than 450 product/service categories and Rs 70 lakh in annual revenues. Among its clients are reputed names like MTNL, Nirula’s and Panasonic. Agarwal is a computer engineer from Harcourt Butler Technological Institute and has worked for six years in CMC, C-DoT and HCL America before venturing out on the Web. Here’s a tete-a-tete with this pioneering netpreneur on how he did it.
What was the idea behind starting indiamart.com?
The basic idea was to put Indian business masses on the Internet. I wanted to make a complete business portal covering the entire spectrum of business.
What made you start a business on the Net on your own?
I went to the US while working for HCL America in 1992. As a software professional, I worked on several projects. Chief among them were a Bank of America project executed by AT&T and a network management system project for Novell. As I continued working on the projects, I felt that I was beginning to reach a plateau in my career.
So how did you take the plunge? What was it that inspired you to go ahead?
I had been receiving queries from my relatives in India for various kind of information in the US. At certain times I used to make phone calls for two entire days and try and get the information they wanted. Then somebody told me, “Why don’t you look up the Internet?” That was in 1994 and the Net may not have been as widely available even in the US as it is today. But being a software engineer, it was easily available to me. So I logged on…and within a few minutes I got so much information on a particular subject that I could easily do advanced research in it! I tried to inquire about the Internet’s situation in India but it hadn’t come to the country in that year. So I sat down for another year before I could start doing anything about it.
I returned to India around September-October 1995. Coincidentally, VSNL had just opened Internet access in the country.
Tell us more about how you went about setting up the site.
I didn’t start the site all of a sudden. While working at HCL, I began working part-time on developing software for the site. It took almost three months for me to develop the initial version of the software. Then the big question before me was whether to start now or first contact some companies. What I did was I sent out mailers to about 3000 corporates, explaining to them what the Internet was and how it could help them. The mailer carried a form for free listing on indiamart.com. We got very good response to the mailers.
What were your start-up costs and employee strength?
The startup capital was mainly provided by my family. When we set up the company in April 1996, the cost of the space must have been a little less than RS 5 lakh, plus the startup capital was about RS 40,000. We took up about 20MB of server space for the site in the US. We were just three people initially, but by the end of the year we grew to about 10-12 people. Today Indiamart employs more than 100 people countrywide and we are growing…
What kind of hurdles did you face in the business?
Well, office space has been a major constraint right from the beginning. If you see in the US, most of the Internet companies are in the smaller towns. As it is a manpower-intensive industry, it’s very unlike for these companies to grow in a metro city. Here in India, I could not have gone to a rural or remote area, as there were little infrastructure facilities available in those areas.
Secondly, when we started speaking to the various industry associations, they were very unsupportive to us in terms of providing information or any other kind of help. Another problem that we faced when we were developing our travel site was in collecting the information. Till date, there’s no nodal agency where you can get all the travel information – countrywide. So we had to make franchisees all over India and ask them to get the information along with pictures from the local travel offices. We even asked them to get the postcards in case no detailed brochures were available. As regards technical issues, one problem was that we didn’t get many programmers to work for our site.
How did you make those franchisees?
Initially, we did it through our website and also through offline advertisements.
What is the revenue model of indiamart.com?
We didn’t want to make a portal without getting some revenues. My idea was that apart from the initial infrastructure costs, the business should be self-sustainable…because on the Net, there could be an endless waiting for revenues. In fact, we have been meeting all our operational expenses from revenues obtained mainly through website design and hosting services.
What is the business direction that indiamart.com is taking?
Today we are the largest business content site in India. We will continue to build on it by launching another 4-5 vertical portals in the areas of education, real estate and employment – which will be in addition to the existing seven. We went for one major expansion in 1997, increasing the product categories from 40 to over 400.
The next step for us is to make indiamart.com more interactive and take it to the city level. Something like delhi.indiamart.com, lucknow.indiamart.com etc. In fact, we are also talking to a couple of venture capitalists to get funding for further expansion and marketing.
Speaking of venture capital, how would you compare the funding situation when you started and today?
At the time we started out there was no such thing as venture funding but now you do get venture capital support. In fact today, it is very difficult for an Internet startup to do it without venture capital. If someone has a good Web idea, they can go ahead and do it on their own – but they will need venture capital support for advertising and creating hype.
How do you think can an Internet startup get venture funding?
In order to get venture funding, I think you have to show something before you can get any money. Maybe you have to start on your own and get 25-30% of the work done before you can get venture capital money.
What happens is that venture capitalists are unable to judge whether the idea can be successfully implemented or not. There is no dearth of ideas on the Net in India – what is more important, especially from the venture capitalists’ point of view, is the commitment of the person behind the idea. And whether or not he has the clear vision to see that idea through, while adapting to the fast-changing Internet technologies.
What technologies and trends should a netpreneur watch out for?
Well, the most important trend to watch out for is the merging of technologies – telephone, the Internet and TV will ultimately merge. The only thing is, we’ll have to wait and see how and when it happens. Other trends that one should keep any on include interactivity on websites and information management. One should build the inner strength of content and the back-end support before going on and creating hype about the site.
A good lesson for web entrepreneurs to remember is the Folklore story. A couple of years back, Mumbai-based Folklore Comm created a lot of noise about its website, madeinindia.com. They overdid it – especially at a time when the market was not ready for the Internet. However, the Net population is quite sizable now and things today are quite different from what they used to be 2-3 years back.