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The next African story will be written by Africans, and there are people crafting the narrative now. Join Dotun as he hosts a series of conversation with people whose ideas and work is shaping the African future.
Deepankar Rustagi on BTF S5
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[00:00:00] Dotun O: Deepankar,
[00:00:00] Dotun O: welcome to the Building the Future Podcast againn.
[00:00:02] Deepankar R: thank you. Thank you, Dotun. It's a pleasure.
[00:00:04] Dotun O: You are one of the first few people I interviewed in the early season of the podcast when you are building another business called V Connect. And it was good to hear your story about how you started it. And a lot of people don't know that you have deep connection to Nigeria.
[00:00:17] Dotun O: You grew up in Nigeria, your childhood friends are Nigerians. And coincidentally, you find yourself back in Nigeria after studying in the us. For people who have not heard your story, I will refer them back to the podcast episode that we had, season one of Building the Future Podcast to listen to your story.
[00:00:33] Dotun O: A lot of that will be the foundation for this, but let me go straight into what you're currently doing now which is omni base or omni retail as is officially known.
[00:00:42] Dotun O: it a B2B e-commerce business. So let's start with an overview of the model B2B e-commerce.
[00:00:47] Dotun O: A lot of people are doing it quite a number of big players who have raised a lot of money. Can you just walk us through what is the fundamental problem that is being solved there? What are the solutions that are being preferred by the other people? What are the challenges and maybe the [00:01:00] general state of the market?
[00:01:01] Deepankar R: Sure. B2B, e-commerce it's basically selling to the businesses and trying to bridge the gap in order generation, order management cycle between businesses and large corporates.
[00:01:12] Deepankar R: As simple as that is in our journey, we realized the major problem that exists in any format of e-commerce business in our markets is the inefficient infrastructure. So the gaps that each one of us is trying to bridge are the challenges in the infrastructure. And how do we bridge that is by enabling the different stakeholders involved in the B2B commerce space to be digitized, to manage their businesses more efficiently.
[00:01:39] Deepankar R: If we can do that, it would lead to manufacturers having better visibility, producing better distributor, doing better wholesalers, having the right sort of working capital, selling efficiently, managing their business, and similarly, all the different stakeholders all the way to the last mile. Retailer who then provides the products to the [00:02:00] consumers next to the house.
[00:02:02] Dotun O: you mentioned something about the inefficiency in the market, which is very common in a lot of the problems that has been solved by technology in Africa. Market inefficiency, infrastructural gaps lack of visibility too many fragmentation in the market and using technology to correct that. In this case, you are not trying to disintermediate people. You are organizing the market and making the value chain more efficient. And that's the fundamental problem that's been solved by every B2B e-commerce in Africa. And maybe for the benefit of people who are not familiar with the model, can you break it down to what you do fundamentally?
[00:02:34] Deepankar R: We basically work in the industry where we ensure the movement of goods from the conveyor belt of the manufacturer happens efficiently to the shelves of the retailers.
[00:02:45] Deepankar R: There are various stakeholders in the process, and we ensure those stakeholders are digitized, unlike some of the other players who try and build their own capacities to replace or disintermediate the existing stakeholders. Our objective here is to digitize [00:03:00] them. So we work with the manufacturers to onboard their different products that they're producing in the market get the details about their products.
[00:03:07] Deepankar R: We onboard their distributors, so we have visibility of what sort of stock is available in what part of the economy, and we enable these distributors to generate orders for the stock that they have from the neighborhood retailers. This has been digitized through our platform. So a retailer now does not have to travel large distances or does not have to plan and keep large number of days of inventory.
[00:03:30] Deepankar R: He can place orders for three to five days of inventory, keep larger number of SKUs optimally utilize the limited working capital he has to get the best return on investment. That's what we do. So there is right amount of goods available at all places for consumers to access.
[00:03:48] Dotun O: You touch on something that I want to get into next, which is how you differentiate yourself from the other players. And by the way, we also spoke to some of the other players like wasoko now part of Max ab, and the others [00:04:00] too, like Trade Depot, and the rest.
[00:04:01] Dotun O: Most start with the hypothesis of being asset light and enabling every players in the value chain working with the logistics and warehouse and all of that. But a lot of them then move quickly into the asset heavy model where and I can understand why they do so because of dependency problem and reliability problem that they will have with maybe the logistics or the warehouse.
[00:04:25] Dotun O: And now some have even gone deeper wasoko , gone into producing their own so deeper vertical integration producing their own goods and maybe at that time competing with some of the FMCG.
[00:04:37] Dotun O: The first time I met you. And by the way, I need to say in here that I'm a board member of your company and I'm an investor.
[00:04:43] Dotun O: The first time I met you, I think maybe four years ago, and we're talking about this idea. You took a very strong stand that you are not going to be asset heavy. You are not going to go further into vertical integration. You're going to enable all the value chain players make it more efficient and [00:05:00] thereby get your own margin.
[00:05:01] Dotun O: And you stay true to that. You learn some lessons and that is a bit of differentiation. Can you talk me through, first what led it to that and two, what has been the struggle or the twist in the model that you've taken?
[00:05:14] Deepankar R: Great. I think this has been a great learning and I would like to.
[00:05:18] Deepankar R: Highlight here that prior to starting this and prior to working at WEConnect I used to work for an FMCG company, one of the large FMCG companies with some of the multinational brands. And the experience there was phenomenal. I used to lead marketing for some of their important markets and understanding of what are the challenges faced in the value chain in the distribution of goods was instrumental into us deciding what our stand is going to be when we work towards solving the problem.
[00:05:48] Deepankar R: The challenge of asset heavy asset light. Many players say they're asset light, and some of them then end up moving towards owning assets in the process because it's actually very difficult to [00:06:00] manage assets that don't belong to you. Unless you have built a structured incentive model that enables you to get the most out of the assets and this management of asset in this value chain is one of the most difficult things to solve.
[00:06:15] Deepankar R: If you are an asset heavy company over a period of time, instead of thinking about solving the problem faced by the retailers, you end up having a problem getting the maximum return on investment on your assets, and you end up working, as first, let me buy asset, then let me build my own brands, then let me start manufacturing or let me start importing.
[00:06:35] Deepankar R: Then I can get the highest margins and get a return on investment on the assets that have already purchased. And managing assets in markets where maintenance is a problem is tough. Again, spare parts. I mean everything. These are decentralized assets. You can't buy them and keep them in a central place.
[00:06:50] Deepankar R: If you buy 5,000 vehicles, these 5,000 vehicles are gonna be in 50 different cities. And for you to supervise the uptime of these vehicles is not a easy job. It's a [00:07:00] different state of managing these assets. When we started we ensured that the team, the people who were coming together to build this with us, had the same understanding, had the same intention, and knew what it would mean to manage assets owned by someone else, what it would mean to align incentives.
[00:07:18] Deepankar R: And that is why we invested the first two years into building that ecosystem, going from zero to one and proving that an ecosystem that is created of decentralized warehouses, third party logistics providers being tracked through technology can give you the same or better returns rather than owning them.
[00:07:35] Deepankar R: We believed if we can prove that we would be able to build a large company that would have 3000 different warehouses, that would have 30,000 different vehicles working to deliver goods from the manufacturer to the retailer. And we will not have to raise capital to own those 30,000 vehicles.
[00:07:51] Deepankar R: And I think that's why we stuck around in ensuring how can we do this best rather than moving the other side.
[00:07:56] Dotun O: And how did you do that, by the way?
[00:07:58] Deepankar R: Yeah in the process, [00:08:00] built a solution called Amplify, which is a distributor management system which any warehouse can use to manage their inventory, gives them visibility, gives us visibility, helps them solve the insurance problem around the stock, helps them reorder more efficiently.
[00:08:14] Deepankar R: So they were benefits and it came at no cost to them, but also gave us a great view of their inventory and then gave us the position where we could go back to them and say, Hey, retailers in your area would like to order from your inventory. Would you like to put your prices? That worked well with us and similarly on the logistics side of it, we went to markets.
[00:08:33] Deepankar R: I take two steps back. Markets like Nigeria, even though we call it one country North, behaves totally differently from south or southeast and one logistics provider servicing the north, the southeast and the South is very difficult. You cannot have national partners in this. You need very regional partners who understand the market, who have their assets there in that location, and have local partnerships to get goods delivered.
[00:08:57] Deepankar R: So we realized third party logistics [00:09:00] providers can be onboarded to a platform where we can have live visibility of these vehicles when they start their day, and we could assign batches of pickup and delivery to them. And once they have done that, we could pay them. And that is when we realized how important digitizing the payments in the entire system is.
[00:09:18] Deepankar R: if you are going to pay them at the end of the month, they don't have the sort of credit required to run without getting paid every day. And to do that, we had to pay them as soon as the deliveries were done and the reconciliation for that day was done So. giving them the power that anyone who has two vans can come on the platform install our tracking devices so we have visibility of the vehicle, and then start receiving batches of pickup and delivery through our system.
[00:09:42] Dotun O: it seems you use technology work with your partners and got that into their hands to have visibility, but also make it more efficient. But I also understand that you go deeper than that. You, in some cases, you supply, the fuel for some of your logistics provider.
[00:09:56] Dotun O: what is equivalent of that for your warehouse [00:10:00] provider?
[00:10:00] Dotun O: the question behind that is what does that entail and what is the cost of that to you?
[00:10:06] Deepankar R: Yeah. So big challenge here is most of these partners that we had. Whether it was the retail partner, logistics partner or warehousing partner to build this supply chain, they were not part of this Financial economy in an organized manner. So they didn't have credit worthiness in the system. Nobody knew how much business who was doing consistently in the past because there was no track record. And if we could build that track record, we would be in a position to fuel them. We would be able to provide the logistics provider with daily essentials they need or provide with working capital for them to get fuel to pay their drivers, advances, repairs.
[00:10:43] Deepankar R: We would be able to back the working capital required for the distributors, which is a challenge. We would be in a position to back the retailers. So I think that came in handy for us. To tell them, not just, Hey, come digitize your business, but also tell them, Hey, digitize your business and quadruple [00:11:00] your business.
[00:11:00] Deepankar R: If you digitize, the benefit that you see in the short term is you can run your business consistently, but the long term benefit is you will not be doing one X of business, you'll be doing four x of business in a short duration of time. Once we could prove that the motivation these partners had to retain with us to stick with us to grow was phenomenal, and I think they were willing to change that behavior.
[00:11:23] Deepankar R: Any form of digitization requires you to have enough motivation to break out of the escape velocity for you to change the behavior, and I think that was instrumental. Their motivation should not be small.
[00:11:36] Dotun O: what are the risk of doing this that you face maintain that asset light model, especially in the fragmented market. Yeah.
[00:11:43] Deepankar R: Yeah.
[00:11:43] Dotun O: And how do you mitigate those risk
[00:11:45] Deepankar R: So risk of building an asset light model is you are depending your growth journey on your partners. this was one of the reasons we took way more time to raise early stage capital than some of the other players because our future was not only in our [00:12:00] hands, for us to deliver millions of dollars of goods every month, we would need to depend on smaller partners.
[00:12:06] Deepankar R: And no one saw that happening seamlessly. But the reality was this also breaks the amount of effort we have to put in. Once the partners are aligned to scale up. That means we don't have to have 3000 drivers working for us and getting trained, it doesn't mean us to have the risk of inventory in 300 different warehouses.
[00:12:27] Deepankar R: Completely on us. Somebody else is willing to take the responsibility of managing inventory. Stock counts insurance every day. So there are risks involved in scaling up a decentralized network or an asset light network. You rarely have to ensure that there is enough asset available in the market and there is enough motivation you could provide to the asset owners for them to change their behavior.
[00:12:50] Deepankar R: And I think that was the biggest fight we had, that if we need 300 more trucks in the next month, if we need 300 more vans would we be in a position to [00:13:00] deliver that?
[00:13:00] Dotun O: One can say as well, that because you're using asset light, you can scale faster than someone who is using their own balance sheets to do it. But it's a two-sided thing. It could be a risk as well.
[00:13:10] Dotun O: I wanna double click on another risk that it might be worthwhile deep diving into, which is reliability and dependency risk , which is the fundamental reason why a lot of, big businesses in Africa are vertical integrated, because the infrastructure is not there and the third parties are not as sophisticated as your business model.
[00:13:29] Dotun O: So you need to be vertical integrated. How do you view that risk? And how has it manifested itself in your own model?
[00:13:36] Deepankar R: No, absolutely. I think this risk comes from the landlord era of thinking.
[00:13:42] Deepankar R: When an asset belongs to you your control on that asset is way higher. But, in the last decade. We have seen the evolution of booking.com. We have seen the evolution of Uber and we have seen how important it was for these platforms to have rating, reviews, feedback and [00:14:00] align those rating reviews, feedback into the incentives that go in.
[00:14:04] Deepankar R: We've seen how Google reviews have changed the behavior of smallest of restaurants. We have seen how Uber drivers today request you for a five star rating to control the behavior and finding a way to control the output of your own driver or an asset owned by you and driver or asset owned by somebody else is a different feeling. So I think what we got right, was irrespective who owns the asset. We need to align and find a way that at each stage we are measuring the quality of delivery. Irrespective whether we own the warehouse or we own the fleet, we still need to ensure at the point of delivering the value, we need to check the quality of the service being offered.
[00:14:45] Deepankar R: And that helped us ensuring that asset light never reduces the quality of service that we were offering. I totally understand that this is a risk in the minds of a lot of people, but I would say this quality risk [00:15:00] is not a factor of who owns the asset is genuinely a factor of are you measuring the quality at each point in time
[00:15:06] Dotun O: Got it. One of the other thing that differentiated you from the others again, having a privileged information is your drive towards profitability. Which is a lesson that you held from your days at V Connect. I'm always amazed at how you emphasize this , even on the board, how you report around. Margin expansion and growing that and measuring yourself against that. Can you walk us through that and as much you can, as much information as you can give certain to break it down for entrepreneurs who are maybe struggling with profitability now to get there at scale,
[00:15:40] Deepankar R: No, absolutely. I think the question of profitability is one in the minds. First within the team, does your team believe this business is going to be profitable? And the most important thing for us was to ensure we don't just hire people who have past experience in building businesses, in running something similar, but also [00:16:00] believe this can be done profitably.
[00:16:01] Deepankar R: And also aligning that our competition was not what a neighboring B2B commerce company was doing. Our competition was actually with the $40 billion market of traditional trade, which would only work on profits. So a distributor makes money every day, every month, there is no month they make losses.
[00:16:21] Deepankar R: Similarly, a logistics provider does not run a loss making business and without being digitized, if they can run a profitable business, for us to run a digitized value chain across and not making profits does not make sense. So this was the thought process that we had. Across the company. And then we ensured and benchmark each of our margins, the cost of origin generation, the cost of warehousing, the cost of logistics, people cost with what is the industry stance.
[00:16:55] Deepankar R: You cannot digitize the industry and say, we will have 5% extra [00:17:00] cost because we are tech guys and we will make losses for 10 years and then eventually we'll become profitable. I think having won failure cleared that out for us, and we didn't want to get that competition. We were okay. Our early stage investors were very helpful in this.
[00:17:17] Deepankar R: We, as a operating management team took the decision that we are okay to grow slower than some of the other large companies. But we would prefer to grow at margins that are sustainable. Doing negative gross margins or zero gross margins was not part of the strategy because in B2B, you're not just acquiring a customer.
[00:17:37] Deepankar R: It is more important for you to retain that customer than just to acquire the customer. So I think that mindset was super critical. Onboarding people in the team, the culture part of it. Profitability became a very strong part of our culture.
[00:17:51] Deepankar R: Our team members, their discussions, their motivation, and their way of looking at the business.
[00:17:56] Dotun O: the argument for lack of profitability in tech companies has [00:18:00] always been around investing in technology, which includes people the software and the product. Which can be very high at the beginning, but does not grow proportionally as you scale.
[00:18:12] Deepankar R: absolutely.
[00:18:12] Dotun O: And that's why a lot of tech companies might be negative at the early stage and then aim towards profitability later. And so I can understand why people will say, I cannot benchmark myself against the traditional distributor because they're not investing in tech. They don't have 20 tech guys like I do who are building product.
[00:18:32] Dotun O: That over time my investment in that technology we pay off because it doesn't grow proportionally to my scale.
[00:18:39] Deepankar R: I think the thing to understand here is profitability at a unit. Economics does not take your technology cost into the picture. So when you are investing in 50, 60, a hundred developers and product managers and analytics team members who are expensive. Who require you to invest and build over a period of time and then reap the returns of it when [00:19:00] the company has rescale.
[00:19:01] Deepankar R: But what I meant when I meant that we needed profitability at day one, it meant transaction based profitability. That means if you're buying something at a hundred nara and if you are going to do warehousing for it, or you are going to get somebody to do warehousing and pay him, if you're gonna get somebody to do logistics for it, and if you're gonna pay them something, the benchmark should be that is being done in the industry.
[00:19:23] Deepankar R: Even in the traditional industry, those costs are being anchored. So if you end up selling what you buy at a hundred, at 101 or 102 and subsidize the cost of warehousing and logistics the traditional industry will end up using you. And I've been using the capital that you have raised for their growth. Seeing unit economics from a profitable standpoint, from day one, is important to understand what you can sustain. Absolutely. There's gonna be technology cost. There is going to be infrastructure cost various other things that you want to build from a technology standpoint, because you don't want to handle a very small company, .
[00:19:58] Deepankar R: You want to have great leadership who [00:20:00] can build national or much larger multiple geography business. So in that case, you will need people who have been there and done that, which are distributed, does not need to hire. So unit economics from a profitable standpoint is what we felt should be embedded in everyone's culture, and that's, that was important.
[00:20:16] Dotun O: One of the key thing you've done to also expand your profit margin is your push into FinTech. And you mentioned that earlier around. Digitizing even the payment, but it seems you've gone beyond that with how many pay Can you unpack for us what is Omnipay?
[00:20:31] Dotun O: What is the value it's creating and how does that expand your own profitability?
[00:20:36] Deepankar R: Absolutely. So in any transaction, movement of goods and movement of funds are two sides of that transaction. And the minute you keep these two independent it brings in more and more challenges in reconciliation, in moving. The discussion forward. We realized this because a large part of the transactions in traditional trade were cash and collecting cash and doing reconciliations every day was a tough [00:21:00] one.
[00:21:00] Deepankar R: This was also the problem we faced in our previous venture. We connect because collecting cash from small businesses was a tough one, but then we didn't have so many financial service providers. We didn't have banks with their APIs ready. So once we realized that banks today are equipped to offer APIs to digitize transactions
[00:21:18] Deepankar R: we didn't shy away from it. We said, as much as possible, we should focus on carrying the two sides of every transaction together, so we should get every transaction digitized at source. It was not easy because. It's a huge change and it requires change at the consumer level. Only when a consumer pays a retailer digitally, only then can a retailer pay a distributor digitally or can pay us digitally.
[00:21:43] Deepankar R: So it required a lot. But then somewhere in the journey we realized we've been blessed and we were lucky. When demonetization happened. We had already put the entire structure in place to digitize the transactions, and we were ready to offer our retailers with a solution to a problem they were facing.
[00:21:59] Deepankar R: [00:22:00] We could give them multiple bank accounts, virtual accounts embedded into a single wallet from the biggest of the banks, and they could receive transactions seamlessly from their customers. At that point in time, it was a push change. By the government and everyone had to adapt to it. But we were ready when that change came in.
[00:22:17] Deepankar R: And I think we took a huge benefit from that. We digitized the entire value chain, the transactions in it digitally, and that gave us incremental margins. That gave us visibility into everyone's credit worthiness. That enabled us to reach out to development finance institutions and tell them, Hey, these retailers who have not grown substantially in the last decade or so, We have visibility of their working capital, we have visibility of their credit worthiness, and we are willing to take the risk to invest in them by providing them the working capital in kind to grow. And we were supported pretty well. So I think that part of digitizing the transactions became our edge in the journey forward
[00:22:57] Dotun O: the transaction you're digitizing is the one [00:23:00] that you are selling to them rather than the one they're selling to customers. It's the backend of the transaction,
[00:23:05] Deepankar R: yeah, that's the interesting part. So we offered them a complete solution. Obviously the adoption of it was in phases. The first thing that got digitized was them making the payment to us through our platform, but then we showed them the extra charges that they are bearing, their customers are bearing.
[00:23:19] Deepankar R: So we gave them this QR code called the Omnipay QR code, which enables them to receive payments from their customers with zero cost of transaction. And we give them and their distributors account because large number of distributors of all manufacturers are using Omnipay. To pay to your distributor. If you use Omnipay, there was zero error transaction again, and that became huge.
[00:23:38] Deepankar R: So now we have visibility of 20 times more transactions than what we supply to them.
[00:23:45] Dotun O: Got it. So you also, provide the payment solution rather than just normal POS. Somebody can come to the store and these are small. What sort of retailer are we talking about here? Is it a wholesale retailers
[00:23:55] Deepankar R: These are retailers who do between 2000 to $5,000. Depending on what dollar it [00:24:00] is. But yeah, 2000 to $5,000 on a monthly basis. Neighborhood shops supplying bread, egg noodles, pastas, biscuits
[00:24:07] Dotun O: So when customers come to them, they want to buy like a crater egg. They can pay using omnipay
[00:24:13] Deepankar R: QR code.
[00:24:13] Deepankar R: QR code, yeah.
[00:24:14] Dotun O: and pay through their bank account.
[00:24:16] Dotun O: And how do you then see all that is happening in the store beyond what you're supplying to them if they are also collecting cash or maybe have a separate POS as well?
[00:24:25] Deepankar R: so we run a drive into the markets where they buy, so They would be buying 40 to 60% of their overall shop requirements from US Omnibus, but then there would still be a 40 to 50% requirement of products which we might not supply or are getting credit for from their distributors for which they go to market still. And when they go to market, each of those distributors, we provided the Omnipay account and they could pay seamlessly at zero cost of transaction.
[00:24:49] Deepankar R: That visibility was the additional visibility that we got. So a retailer who is collecting payments and making payments to their distributors as well as to Omnibus, gave us [00:25:00] visibility of their entire wallet and not just the one they're buying from us.
[00:25:02] Dotun O: let's quickly gear now to growth and expansion. I heard you say something two years ago, when we are talking about, oh, can you scale to Kenya or scale to Uganda, whatever, and he said, yes, you want to be careful about this because what you get from idu, which is a geographically, small part of Lagos, the population is huge. It's bigger than some other countries in Africa. But it seems you've done a lot of expansion recently. What is your framework and mentor model for expansion?
[00:25:29] Deepankar R: So I think when we started looking at expansion, we were in two minds because we started operating from one of the largest countries in Africa, from A GDP perspective, from a population perspective. And in Nigeria there are many states where we still don't have the strongest control.
[00:25:42] Deepankar R: So we wanted to be sure, should we grow geographically outside of Nigeria? And are we ready for that? What we figured out in this, and I would share with all my co entrepreneurs and friends in the ecosystem that whenever you're looking at your expansion journey, you should be sure of what gives you the edge in the [00:26:00] expansion journey.
[00:26:00] Deepankar R: If there is nothing providing you an edge and you are doing it to satisfy the needs of your investor, forget about it. The edge that we got while evaluating, was that there was a sure shot technology edge. The product that we created could be reused in these geographies with minimal change, which was a language, time and currency.
[00:26:20] Deepankar R: The second edge that we thought we will have is just learning of the market, and as much as that is an edge, it's not instrumental because the people you're competing with the traditional trade, they've been functioning in those markets for decades, so their edge is much larger. The second edge we saw was.
[00:26:36] Deepankar R: Instead of going to East Africa, we should continue to expand in West Africa because each of the manufacturers we are working with, let's say a Unilever, Nestle, a Coca-Cola. They have strong ties with markets within West Africa. And East Africa is seen as a different zone. So if you wanna expand within West Africa, there is a West Africa office based out of Ghana, and you can showcase the growth that you have done with [00:27:00] Nestle in Nigeria and that would be appreciated and there would be opportunities for you to partner with the supplier in the other neighboring markets.
[00:27:07] Deepankar R: So I think having the supplier support, having the technology support, we knew the edge that we had to expand within West Africa rather than going ahead and renegotiating contracts and structures with manufacturers in different geographies. That's when we started we realized francophone.
[00:27:24] Deepankar R: Anglophone are just two different language markets, but there are various similarities in the way traditional trade operates. And yeah, frankly we've been happy that we only expanded within West Africa.
[00:27:35] Dotun O: From market perspective, what would you say are the commonalities between Nigeria, Ghana, code of War, all part of West Africa. I hear you that UAC, for example or Guinness will have distribution across that and maybe from the same office but what are the commonalities and differences between those key markets?
[00:27:56] Deepankar R: I think some of the francophone markets are more open to [00:28:00] importation. Some of these markets are smaller, so instead of working with manufacturers directly for a large number of SKUs, you will end up working with an importer.
[00:28:07] Deepankar R: Their investment into trade, which is marketing and establishing a brand is smaller. Number of SKUs are much larger because smaller quantities can be imported. So structure wise, they were minor differences. But from a margin perspective, from a supply chain perspective, from a challenge perspective for different stakeholders, challenges faced by logistics providers, challenges faced by manufacturers distributors were very similar.
[00:28:32] Deepankar R: And that is why? The same technology. So when we went back to the manufacturers and said, Hey, this is what we can show you for your Nigeria business, where you can now see which product is available with which distributor. where are you out of stock, where are you about to go outta stock?
[00:28:48] Deepankar R: You can tackle the problem immediately. You are not talking about a past problem of why was our market share low in the last quarter. You can talk about solving a problem which might come up in the next week or two, and that's super [00:29:00] exciting for manufacturers. So having that sort of product, having that sort of edge, understanding their problems helped us in going into these markets.
[00:29:08] Deepankar R: And we saw a huge similarity between the stakeholders. So it made it easy for us to scale in these markets.
[00:29:13] Deepankar R: I know there has been some consolidation in this B2B commerce, for example, was Soca and Max have come together.
[00:29:20] Deepankar R: region
[00:29:21] Deepankar R: And be the solid one. That's one perspective. The other perspective is consolidation from a stronger, bigger company, trying to map up the smaller ones as a way to scale . What is your perspective about this kind of consolidation
[00:29:34] Deepankar R: I think consolidation is inevitable. There won't be 50, 60 different players doing this at scale. The consolidation would be key in making large, scalable businesses, structuring more profitable entities.
[00:29:47] Deepankar R: I see the consolidation between Max and was Wasoko and I feel both. Were asset heavy companies and operated in different markets. And this was more of a geographic play where a single entity now [00:30:00] operates in larger number of countries within Africa, and this also enables them as a entity to raise more capital, to distribute in larger number of places.
[00:30:09] Deepankar R: Also do structural partnerships with manufacturers who want to distribute in these areas. So I think from that perspective, these consolidation make a lot of sense. There is another thing which is different form of value additions that come in geographic expansion, which we just discussed is one of it.
[00:30:25] Deepankar R: And others are there would be consolidation between a FinTech company and a B2B commerce company because payments is an instrumental part of the B2B commerce and structuring that out would be important. There would be certain companies who have figured out something. Stronger about how to minimize the cost of logistics, which would be instrumental for the larger entity to eventually learn from and then rule out in the entire entity.
[00:30:49] Deepankar R: So I think consolidations here going ahead, would be seen from a perspective of what value edition is each player bringing in and how does that value edition offer better unit [00:31:00] economics, better profitability today, no one is looking at growing their overall losses in the consolidated entity.
[00:31:08] Deepankar R: If you can consolidate and certain departments like technology, certain teams like acquisition, retention or payments can be merged into reducing cost and still delivering much higher value, that would be a great consolidation. So I think how we see it. Partnering in geographic expansion within West Africa or within areas?
[00:31:29] Deepankar R: We are interested in scaling up to partnering with different stakeholders who have done great at warehousing logistics or payments in the B2B segment would be great partnerships for us to consolidate and build a stronger, scalable ship to own the market.
[00:31:43] Dotun O: fundraising has been hard especially recently, and you also have the disadvantage of being in a market where a lot of money had gone into that space And people have taken a view about the viability of the market, about players the return profile of that market. even though you're coming with a different [00:32:00] execution strategy and profile, large investors have taken positions and view, what has been your experience and learning, especially in this market environment and the context?
[00:32:09] Dotun O: I just provided
[00:32:10] Deepankar R: fundraising in this market has been really hard. There are global challenges that the investors have faced more so coming from a perspective of where their LPs are from, there are local challenges these investors have faced because if they're investing in regional companies, which local currency risks, and if they have to return money in dollars, they have to find an exit and they have to be sure at the point of exit, they would be able to return a larger amount to their investors in dollars. I always think about this. No one grew up thinking that I wanna be a venture capitalist. It's a trade which is still structuring. So especially venture capital for Africa is still finding its way and its sources. And what we have figured out in the last year or two is those who are here with long-term perspectives of investing in the continent are [00:33:00] way more stable investors with the understanding of what they will reap out of this.
[00:33:04] Deepankar R: In the longer term, we would position them as, they could be venture capitalists, but they would more be strategic venture partners who would invest I respective of the short term challenge that the company or the economy is facing. So I would say. They will ask you questions, which are tougher to answer, which is, what does profitability look like?
[00:33:24] Deepankar R: They would have very stringent metrics to valuations, but they would have great amount of knowledge and a cleaner perspective to how a scaled up organization looks like. Don't look at your startup from a short term perspective, or somebody will acquire it and you'll make some money in three to five years time and exit.
[00:33:42] Deepankar R: What we have realized is this is a long term game. We are changing the shape of retail on a continent. We can't do it in two to five years. It would take time and it would require strategic partners who would benefit, not just from this investment, but also this change would benefit their various investments.
[00:33:58] Deepankar R: So strategic investors, [00:34:00] long-term investors who are here to stay should be your primary target in raising capital in such tough times and undoubtedly it's tough. You can't take the, toughness out of it.
[00:34:09] Dotun O: what is your view of exit?
[00:34:11] Deepankar R: I think exit is a very interesting discussion and that's when genuine value is captured for everyone, whether it's the founder, for the investors, for everyone, but an exit is completely dependent on the genuine value the venture has created.
[00:34:25] Deepankar R: If we talk about our business, there are various people who have invested significant amount of capital within Africa to try and create modern retail. You talk about the shop rights, you talk about the spars, you talk about Walmart, you talk about Alibaba. They have found different ways to invest and have not made significant investments.
[00:34:44] Deepankar R: Some of us even heard that Amazon was gonna invest into Nigeria for e-commerce. But I think all those would be strategic investment partners. Large financial institutions would be probable in exit partners who would want more transactions, a larger commerce, a [00:35:00] more systematic commerce where large number of goods can be sold and purchased.
[00:35:03] Deepankar R: A system which offers more organized credit into the system. So I would feel large trade players who see Africa as a continent, which is growing and will have, larger amount of transactions and commerce would be great partners and I think those are the sort of partners we are looking at.
[00:35:20] Dotun O: You've been a leader one of the important leader in the technical system, remember when I started coming to Nigeria, you're one of the people that know of as the CEO of V connect and now omni base, larger business. And I assume that you have evolved as a tech leader.
[00:35:34] Dotun O: What has changed and how has that evolved for you personally leading your organization?
[00:35:38] Deepankar R: Yeah, no, absolutely. I think it's been a interesting journey. I became an entrepreneur pretty early in my life. When we started reconnect.
[00:35:45] Deepankar R: I think was 26 or 27 and today I'm 40. In the last 13 years of this journey, I've understood what it means to be a leader. It's not really the title that you go by, it's more on how [00:36:00] many people actually see the vision that you see, how many people actually follow and help in creating the value that vision brings in.
[00:36:08] Deepankar R: So with Omni Retail we have seen that transition where. When we started with an asset light journey, when we started with digitizing the retail, there were some people who followed us. There were some industries who supported us. But today, in the toughest of times, we feel that leadership and that vision is getting echoed and getting responses from various industry leaders, not just from the team.
[00:36:31] Deepankar R: When other leaders in the industry see your vision, see the team that you have built, and see the value that your team is creating and respect that, and is finding ways to partner with it, I think that's what true leadership is. That's what scalable value is.
[00:36:46] Deepankar R: And I think that gives you immense motivation to keep going
[00:36:50] Dotun O: are the key Failure, your lessons, that you carry from vnet, things that you learn the hard way
[00:36:56] Deepankar R: I think we connect as a journey was a very important [00:37:00] journey for the learnings that we as a team and me as a leader have built. The most important parts were you're actually building a product. For your stakeholders. So don't fantasize about your product in a boardroom. Go out there and see expressions and responses from real stakeholders on what they feel about the product or what they feel about the technology.
[00:37:21] Deepankar R: They might not understand every bit of it, but if they understand the value that you're trying to offer, if they are willing to change the behavior a little for accepting that value, then you're working on the right direction. I think another important one, which I can't miss out, is focus on building infrastructure that would build industries
[00:37:40] Deepankar R: one of the things we failed to do effectively in WEConnect was having recurring payments come into the system seamlessly. And I think payments was never a part of our journey then. Today ensuring that we partner and build the infrastructure to ensure even if we fail to exist as a company tomorrow, we would've created great value [00:38:00] from an infrastructure perspective where companies would be willing to acquire us, companies would be willing for us to become a part of their company.
[00:38:07] Deepankar R: So building infrastructure, building genuine value rather than a GMV and rather than a transaction is what we have learned. Time is precious.
[00:38:15]
[00:38:15] Dotun O: This has been good. I'm, gonna end my conversation with you with two sets of fire round questions
[00:38:21] Dotun O: the first one is, what view did you hold before that you no longer hold now
[00:38:27] Deepankar R: When we got on this journey we were not sure if lending through the chain would be a possibility. But today, and we are very clear that credit risk in our markets is overrated. So there is risk, but I think doing it we could have the right amount of credit across our value chains, consumer credit, business credit, and so on.
[00:38:49] Deepankar R: And I think that's underplayed. So I didn't see this before. I felt credit was a area nobody should go in. It's risky, it's dangerous , but today I feel doing it [00:39:00] right. It's a huge opportunity and it enables businesses in various forms and factors.
[00:39:04] Dotun O: How do you de-risk that? 'cause it's still a risk, right?
[00:39:07] Deepankar R: It is. I think de-risking. Credit is just embedding that credit with incremental information. So credit should not be done without substantial amount of information about that customer. Today, the way we do credit, it's impossible for a retailer who earns his livelihood from the business to run away from that business.
[00:39:27] Deepankar R: That's his primary and the only source of income. So if he's taking credit in the right quantities, he would continuously work towards servicing it. So more information you have about your stakeholder, who you're providing credit and you can hold him with that information, you would surely de-risk credit significantly.
[00:39:42] Dotun O: my second firing question is, which book are you reading now or have you read lately?
[00:39:47] Deepankar R: Yeah. I'm a magazine person, so I read. Articles. I read snippets and on
[00:39:53] Dotun O: which magazine are you spending your time on
[00:39:55] Deepankar R: I think Business Insider, entrepreneur.com.
[00:39:58] Dotun O: Normally I hand this podcast as [00:40:00] a bonus question. I can't but ask you this and it's coming from my privilege information. You are one of the entrepreneurs that I know of. Being able to grasp the debt of this ra devaluation and the risk of Forex. before it even became a big issue from last year.
[00:40:15] Dotun O: You tackled it in a way that I find interesting and manage that risk for your business. Can you tell us a little bit about that?
[00:40:22] Deepankar R: Yeah. So raising capital in dollars for not just one country operation, but for multiple geographies and then depending on the currency, risk on different geographies is a very difficult game.
[00:40:36] Deepankar R: And these are factors which are out of your control. So there are various entrepreneurs who have done everything right but have taken a dollar loan, and then to service a dollar loan in an economy where a hundred percent evaluation has just happened is practically impossible, it would completely shut down the business
[00:40:53] Deepankar R: we. Define the parameters that were in our control. And the currency parameter was totally not in our control. So we tried to carve [00:41:00] out the risk of currency dependence We, as a business ensured that we take only local currency debt at all points in time to service the working capital requirement of the business.
[00:41:11] Deepankar R: And this is, I owe it to my mentors, those who have been in the market, those who have been in the industry for long, who've guided us in various ways. They were very clear that in Nigeria, taking a dollar currency risk can be a problem. And I think that's something we've done From day one. we've said no, even if there was dollar debt available, and we've tried to convert dollar debt into Naira debt. In various forms and factors to ensure our business does not have the insecurities of devaluation
[00:41:40] Dotun O: thanks to Deepankar. It's been a pleasure having this conversation with you, and again, I'll refer people to the previous episode that we had many years ago as the background to this conversation. Thanks for coming to the podcast again.
[00:41:50] Deepankar R: Thanks a lot, Dotun. It's always amazing talking to you.