How Dinesh Agarwal built the Alibaba of India


It was in 1996 that Dinesh Agarwal started to write the names and addresses of small businesses from his apartment in East Delhi. His wife and parents would help in the stamping and sealing of the thousands of envelopes that would be sent across India.

Dinesh would then go to the post office and deposit those huge bundles of envelopes in the mail. About 2 percent would post back with their contact details, phone numbers, business details. He would then list them on a website he built.

That’s how India’s largest business listings website Indiamart began. He managed to get 100 paying clients on board during 1997-1998. The company now has about 1.8 million suppliers on its platform and about 100,000 paying customers.

From Indian railways to exam paper checking

Dinesh had earlier worked at a government-owned IT corporation in the early 90s. He was posted at the New Delhi Railway Station where he would oversee the freshly introduced computerized reservations system.

Getting to know real-time availability was a huge task which technology solved. The success led to a computer revolution even in telecoms where manual exchanges were replaced with automatic telephone interconnect systems, leading to fewer cross connections and higher chances of getting a call through.

He was also tasked by another government agency to work on a technology that would ease paper checking for government exams.

Dinesh correctly realized that the internet would soon change the world. So he decided to return back to India in 1995 to turn an entrepreneur.

“I come from a business family and had saved some money to sustain the business and household,” says Dinesh.

Surviving the dot-com bust

Dinesh, an engineer with HCL in his US stint from 1992 to 1995, got back to India just as the internet was being born.

Everyone was opening a dot-com. And there was a flush of money through venture capital, a game we did not understand.

He returned with a passion to build small websites – and to build a useful database.

He started scanning directory books of the Federation of Indian Exporters and government data to get the names of businesses in sectors like garments, handicrafts, spices, gems, and jewellery.

“Everyone was opening a dot-com. And there was a heavy flush of money through venture capital, a game we did not understand,” says Dinesh, sitting at the 13th floor of his Greater Noida-based office, which overlooks lush green farmlands away from the buzz of nearby Delhi.

Meanwhile, Jack Ma had already started Alibaba in China.

Soon, the bubble burst and lot of dot-coms around the world shut down. Dinesh is known in India as one of the few survivors. ”Dot-com became a bad word. And we became untouchables by prospective clients, employees, even media,” he says.

The September 11 attacks made things worse. Global exporters shrunk, leading some clients to stop renewing their pricey subscriptions to the store.

“We did not fire even one person. And about 50 early employees still work with us,” he says.

Indiamart evolved from simple listings to become a business supply store – like Ma’s Alibaba in China. It survived the crashes and busts and managed to reach 1,000 paying customers in 2001, which paid about US$1,000 per listing. He also cut a lot of costs and froze salary hikes for some months to get past the downturn.

In 2008, Indiamart took the first investment money from Intel Capital to the tune of about US$10 million. And it opened 16 new offices. “For the first time we were spending money and in the next quarter we posted a loss,” he says, indicating at the current models of ecommerce which run on losses and external money. In 2009, the company crossed 14,000 paying customers.

Since then Indiamart has remained cash positive.

Shifting from the big city

The company has moved away from the city to near Greater Noida, which is mostly farmlands surrounded by a few residential buildings. Over 80 percent of its staff travels from New Delhi or Noida to the office. Indiamart arranges pick-and-drop facilities for employees who live in New Delhi or adjoining areas.

“Productivity increases when you move to a cleaner and peaceful environment. Yes, commute time may increase by a few minutes but then people leave early leading to a better work-life balance,” tells Dinesh, who hails from the small town of Nanpara, near the Nepal border. His family owns a gas station there.

From the New Delhi city centre, the commute to the new office takes about one hour. Dinesh is not worried about the distance as he has not seen a lot of staff quit since the shift. He’s also keen to make Indiamart’s offices look as cool as the other startups.

Ecommerce and beyond

From 1,000 listed customers in 1999 to about 1 million suppliers listed in 2016, IndiaMart has come a long way.

“There are around 10 million requests for quotations being generated on our platform each month,” says Dinesh. He has gotten smarter and put a payment barrier between a listed supplier and an interested buyer.

“This has removed a lot of spam too. Earlier, insurance companies, loan companies, even other websites would just pick data from our platform and list on their site,” he says.

Now it’s an IndiaMart call center which comes between the supplier and buyer. The call center brokers the deal and provides relevant quotes to buyers.

The company also started Tolexo, a marketplace for industrial goods. IndiaMart earlier this year raised a series C round of an estimated US$19.4 million from investors led by Amadeus Capital, and followed by Westbridge, UK based Quona Capital and existing investor Intel Capital.

The fresh funds will largely be used for Tolexo, which is run by Brijesh Aggarwal, a cousin of Dinesh’s.

The company grossed more than US$45 million last year and this year is targeting an over 33 percent growth.

The firm is also looking beyond ecommerce. Indiamart has invested in ProcMart and plans to float easy financing schemes for small and medium-sized businesses in India.

Does he fear the arrival of Alibaba, Shopclues, AskmeBazaar and others in the business-to-business market? “India is a big market and we are not worried. Let them enter,” he says, though I get the feeling the pressure to deal with such names always looms large in his mind.

And does he fear the verticalization in ecommerce – like a marketplace just for auto parts, or industrial tools, or chemicals? “Both will co-exist,” he states.

Tips to handle failure

Dinesh has also become an active investor in startups, participating in about 30 deals through consortiums. Bangalore-based Little Eye Labs, which got sold to Facebook, was one of his big exits.

Having started dozens of projects and closed them, he offers some tips for entrepreneurs on failure:

  1. “I believe an entrepreneur has a 100 percent chance of succeeding in life. Everyone I think is born with at least 20 percent of luck. But you will have multiple failures in life. So if you try only once, the chance of success becomes zero. But if you try it five times, your luck at succeeding at it become 100 percent.”
  2. “Don’t do a startup just because it is cool. A startup is a big responsibility. You will have to take care of employees, customers. Raising money should not become the end of it all.”
  3. “For every one success, I have had 40 to 50 failures. Over time my theory has become very simple. If the experiment or project is not even contributing 1 percent to the revenue, it’s best to shut it down and move on.”

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