Karthik Venkateswaran has raised tens of millions of dollars to modernize one of the biggest markets in the world. His startup Jumbotail has raised $45M from top-tier investors like Klinkert Investment Trust, Discovery Ventures, VII Ventures, and Peter Crosby Trust.
In this episode, you will learn:
- Jumbotail’s business model
- Why they prioritized profitability over burning outside capital
- Building a company based on values, not short cuts
For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
About Karthik Venkateswaran:
Karthik did his MBA from Stanford Graduate School of Business. He worked at eBay and then joined Flipkart, where he understood the importance of controlling the full stack. Realising the gaps in the supply chain, he co-founded Jumbotail along with Ashish.
Connect with Karthik Venkateswaran:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a very exciting guest joining us here from India, and he’s had an incredible journey. A remarkable journey that goes from being in the military to going to the U.S. to going back to India to doing corporate to doing startups, and now he definitely has something very unique with Jumbotail, which he’s going to be telling us about. So, without further ado, let’s welcome our guest today. Let’s say hello to Karthik Venkateswaran. Welcome to the show.
Karthik Venkateswaran: Thank you very much for having me in the show. I’m very excited to share my experiences with your audience.
Alejandro: You were born and raised in India in the southern part, and you were born in a family that had functions in the government. How was life growing up there?
Karthik Venkateswaran: It’s very slow – very slow, low tech, and lots of family and very deep bonds in network and very close to the ground.
Alejandro: I can imagine. What about in your town. Were there a lot of entrepreneurs, or were there, for the most part, workers?
Karthik Venkateswaran: My town is called Temple Town. It’s the coolest location in India. It has a fascinating temple called Meenakshi Temple that was once a contender for Seven Wonders of the World. It’s a fascinating place. A lot of foreign students come there. I grew up there in the town – not many entrepreneurs. But, hey, India is the land of entrepreneurs.
Alejandro: It is.
Karthik Venkateswaran: There are 50 million small and medium businesses operating, so quite literally, everybody is an entrepreneur.
Alejandro: 100%. I think there are like 1.3 billion people there, so talking about a machine of entrepreneurs. One of the things I really like about India is that there’s a big push toward engineering. Many of the people that come out of India, and especially the people that I have interviewed that end up being founders is that they have that engineering mindset of knowing how to resolve problems already. So, why are there so many engineers there in India?
Karthik Venkateswaran: People are always looking to improve their lives, and India has always invested in math and science. If you look at it, in 1947, we got independence from the British, but despite our poor population, the Western space, we invested in atomic energy, we invested in science. If you look back in the history, India, zero was [3:42]. There are a lot of rich traditions and a deep cultural background of education, so people started investing again in human resources is all what we had, and our focus, especially for me. My parents also wanted me to go and join engineering. In fact, I actually went and joined an engineering school. I dropped out of engineering, and then I went to the military. I was very clear as to what kind of life I needed to pursue. I wanted to be a more forceful life – a life that sells my country, and therefore, I thought that a better opportunity would be to go to the military. But many of my schoolmates went into engineering as a career choice.
Alejandro: That’s what I wanted to ask you, actually. So, in your case, you did go the engineering route, and you ended up dropping out, and you joined the military, the infantry. That was a ten-year journey. Talking about lots of stuff that you could do while you’re in the army, but I’m sure that you were exposed to circumstances full of uncertainty, circumstances where maybe they were not as pleasant. Really, building startups is like going to war, so to a certain degree, you were able to experience the whole feeling and emotions that you go through with a startup, but probably at a different level in the army.
Karthik Venkateswaran: I don’t know. I haven’t attempted to compare the startup life with the military life, but there are some things that come deeply connected, which are mission-oriented. In both places, we are very mission-oriented. A startup entrepreneur is very deeply mission-driven and mission-oriented. The second aspect is survival. You’re always living in that world where your survival is not guaranteed. It poses a lot of cognitive decisions in your mind, and you need to be able to live and make decisions very calmly in that environment in both places. If you go into the nitty-gritties, obviously, military is a very hierarchical organization, which is hundreds of years old and very set in the way of doing things, and a startup is like independence. But, ultimately, I think the sense of accomplishing what you set out to achieve the mission, that sense, for me, was safe.
Alejandro: What does it mean when your mission-oriented, especially for the people that are listening? There are many founders that are thinking, “I’d love to know what mission-oriented means so that I can implement it in my own journey. What does it look like to be mission-oriented?
Karthik Venkateswaran: As an entrepreneur, there are many different ways in which people entrepreneurs. I am one of those people who had a very specific problem to solve that I was deeply connected to, and I answered to it as a calling. I thought that I am specifically capable of solving this very hard problem, and therefore, I chose to solve this problem. Solving the problem becomes the goal that becomes a life purpose. When you solve the problem, the goodness that it brings to the society, the transformative ways in which they can live differently. That becomes your mission. Every single day, you have that five-year ahead of time, you are taught about what that life should look like, and you’re painting that, and you’re feeling that, and that is the sense of purpose in the mission that I have. You already have a way; you already have a picture of the world, a picture of success that you think in the most benevolent ways is right for this world. Then you are steadfastly creating that, persevering, enduring, finding all ways and means to make that happen – your goal, and you are willing to sacrifice everything in pursuit of that goal.
Alejandro: Got it. In your case, you were in the army for ten years. Obviously, tons of experiences, but one thing that is super interesting is that you land in Stanford. How did you land in Stanford doing your MBA coming from ten years in the army? That’s such a weird transition, so can you walk us through what happened there?
Karthik Venkateswaran: I was posted in the Kashmir Valley, and I got into Silicon Valley, and divine intelligence is the only term I have. I can’t explain. I really don’t know how to explain this, but the genesis of that was I gave my ten best years for fighting, but I was deployed in combat, but I quickly realized that the most powerful nations are the ones that are economically very prosperous. The people actually end up doing the last mile fighting. If you’re economically sound, no one dare attack you, no one dare touch you. That is the level in which I saw my country. I want my country to be in that level that you are economically prosperous. Your people are very prosperous. You are having a very important strategic location in the political canvas. To that end, I think 1.3 billion people at that time would want a billion people in the country consuming food which is at a very subsistence level. Farming was a very large part of our GDP, and also 52% of our population was involved in farming. It was all done very inefficiently, so I thought that I should spend the remaining part of my life transforming the food value chain in the country. Way back in 2008/2009, I was prototyping a platform called [9:35].com, and I think the coconut farmers of my zone to distant buyers who had a similar-based platform, so Nokia in ‘17 was the smartest phone then. But I quickly realized that this wasn’t just connecting two sides of the platform – sure, information was rampant, but how do you ship the goods if you get the order? How do collect the cash and the cash economy? How does the seller get the money back? So, the problem was way too big. So I, as a person, had spent ten years in the military and four years in the military army. I was not acute to solve the problem; I didn’t know how to run a business. I only had the passion. I didn’t have the talent, and none of the market was ready. Now, I wanted to reskill myself, and then I applied to business school, and I luckily got into Stanford. I don’t know much beyond that.
Alejandro: Wow! Probably the people that reviewed your application were like, “Wow. This is definitely unique,” to say the least, because ten years in the army is amazing. So, an incredible transition here and a pivotal moment for you, and also, you get to meet your co-founder. It doesn’t get better than that. How was it to meet your co-founder and that process because it took some time before you guys actually launched Jumbotail? You went to eBay. Then you did Flipkart, and then you finally got started with the business. What was that like? Did you guys meet, and then eventually, later on, you gave him a call? Or you guys met and knew you were going to do this, but it was just waiting for the right time.
Karthik Venkateswaran: During the school time, we just know that we both are connected, so Ashish Jhina – let me spend a minute in his background. He’s a professional farmer, so his entire family farms for a living. They have apple farms. He went to the top schools in the country, Ivy League, and after that, we went to BCG. He was a consultant in BCG for six years. Four years prior to business school and two years after business school. During his six years, he worked on projects for the government of India for streamlining the public distribution system, which is a food procurement arm of the government. The people procure a lot of food from the farmers and then store it. Then they have their own retail outlets, the common retail outlets through which they supply this food on a subsidy to the end consumer. There are a lot of leakages, and there are a lot of black market, and the government wanted to ruin this, so they commissioned along with [12:12] program, they commissioned VCG to find the solution for this. Ashish worked on projects that eventually led to the [12:20] identification of every citizen in the country. That’s today the backbone of the social security system of the plan. So he comes from that level of background. Not only is he a farmer, but he’s spent a lot of time working on these projects. When I came to know him, we were always talking. But, yes, for about a good three years, we were not actually specifically discussing many ideas. When I came back to India, I was quite ready. I was systematically progressing toward my goal, and Ashish was doing the same thing with his set up of farmers and trying to advocate his farmer network and everything. The third colleague – one of the classmates in Deli, [12:59]. We met, and then we bounced off this idea. “We will spend this much time – at that time, I had a very concrete idea, so I pitched to him, and then he joined us.
Alejandro: And you got a concrete idea that was shaped up, too, with your experiences because you were working in the U.S. at eBay, obviously, an amazing company – a great, great company. Then you did Flipkart. Before we go into Jumbotail, I’d like to understand what was the biggest lesson that you learned from your time at eBay because this was your first real working exposure to the American culture. I’d like to understand why you go from being in the U.S., the land of opportunity, the American dream, to go back to India? I’m sure your parents were like, “Karthik, what’s wrong with you?” So, walk us through that lesson learned or what you got from being at eBay and why you made the decision of going back to India, which obviously, now, everything worked out very well. It’s amazing what you’ve done, but perhaps some people thought you were taking a step backward.
Karthik Venkateswaran: To be honest, I already knew Jumbotail was in my mind, even when I came to Stanford. I came to the U.S. for a short period of time to learn the superset so that I could go and solve the subset problems. I believed that would give me the diversity of the network, and that would give me the exposure. That is why I chose eBay, which is the most complex marketplace. To me, eBay was a university that was paying me to learn how to build eCommerce marketplaces. I can’t be more thankful to my colleagues and the company itself for giving me all the opportunities. I worked on very complex problems, but most importantly, you’re right. I started learning how to work in corporate environments, how these [15:04] designs and set up, and how all of these things work. Of all the things that it taught me was being a product manager, so I was the product manager there. What was very fascinating to me was that [15:18]. It had a way to democratize the data and was accessible to people, and it was a land of opportunity even within the company if you really went through the system and grow your products and things. I learned how to do data review and product management. I learned how to work with highly talented engineers. At one point, I was a product manager for research, so I was working with nearly seven or eight doctorate fellows from various top universities across the U.S., and they were all solving very hard problems, and neither was fully effective to them because they got a lot of data to work on – real-world data. They were very attracted to eBay. I got the opportunity to work with them, so I learned a ton of stuff there. What in the world marketplaces? That is #1. The second one is I was fortunate to serve under Mr. John Donahoe, who is a Stanford GSB alumnus. He had come and taken over eBay and was transitioning eBay from quite literally a non-developing company who are very highly developing company at that point in time. One thing that actually changed the culture of eBay was that eBay was a very seller-focused marketplace. It was, focus on the seller-side of the ecosystem – they focused on the supply. They never really bothered about customers before Mr. John Donahoe. Once the mobile came and the full focus on the customer, and I learned that if you focus on the customer experience and get it right, everything else falls in place. If you are paying at eBay, who is the paying customer for eBay? The sellers. They pay the commissions. Now, eBay was heavily focused on them. Now, the customer – if you don’t have the end-customers, and if you don’t care for them, and if you don’t solve for trust, and if you don’t solve for high experience, and if you don’t even bother to present your own identity to customers in a very clear, concise manner, then you have no business. These are two very solid learnings that I had on eBay.
Alejandro: Got it. Then, why go to India?
Karthik Venkateswaran: Because I have to build for the Indian food ecosystem. One of the interviews in eBay – today, she’s the vice president of Google. That entire interview was about my idea that I would do after three years. I told her in the interview that I would work here for three years and then I want to go back. I was as transparent as that.
Alejandro: So, you had a vision. You knew what you wanted to do, so you reverse-engineered and understood, “I’m going to get this knowledge, this knowhow.” Then, you go back to India. You start working at Flipkart. You go there for maybe a year-and-a-half, and then there, you had the exposure of being part of building the marketplace, being part of a rocket ship, doing a lot of hires. At what point in time would you say it was that moment that pushed you over the edge to say, “I’ve got to start Jumbotail. Now is the right time for this.”?
Karthik Venkateswaran: 2014 was a particularly explosive year for Indian venture capital. If you look at 2014-2015, hundreds of millions of dollars were being invested in eCommerce companies. Veracity was one sector that was receiving hundreds of millions of dollars. The sector was about directly shipping an Amazon model then from Zuma, which people were interested in chasing. Flipkart also started a service called Nearby – Flipkart Nearby. I was watching that performance quite closely. From day one, I was convinced that the way to solve Indian Velocity is not that if you go to the consumer – yes, you will probably have a 1% or 2% market share, but the 98% of the market is still going to be with the mom & pop. It’s going to be very large, and they are a consumer-scaled business, so they think and act like consumers in many forms, yet they’re running their businesses, and we need to provide a solution for them. I was looking at it. Then, it’s a question of timing. What they say at Y Combinator and Paul Graham says, “Paint a picture five years from now. Think about what the world should look like and what is missing?” I was very feared that five years from now, there should be a robust B2B commerce platform in the country, which is serving these mom & pop entrepreneurs. What was missing at that point in time, I asked them, “Why are you not building for–“ because they were too busy building for the consumer. That’s #1. 2) Ideologically, they are connected to the idea that these small businesses can be wiped out, and the U.S., Amazon, and large populations will survive. I didn’t subscribe to that. I was fundamentally believing that nobody can wipe out the small businesses. 3) People are not so persevering and, frankly, find the solution for an internet [20:22]. If you actually look at the mom & pop storekeeper, at that point and time, they’re not having the smartphones. They didn’t even have the internet connection. India didn’t have 4G at that time. Over a period of time, I thought that we just have the time as well. The best that Ashish and I took was [20:43] going to come, and India [20:45]. This is what [20:47] has worked for us. [20:48 – 20:52]. We just got the timing right. The second one is, we said that the smartphone option could be a challenge. Maybe a $100 smartphone may not be possible; maybe a $50 smartphone may not be possible. In the worst-case scenario, we may give advice. At that time, we were thinking that way. But a smartphone option also became prevalent, and people started buying their own devices. These two problems got solved. Then the third problem is how do we make this similar illiterate population to use a computer device? Then I went back to my army roots. I served in the infantry, and I actually served in [21:28]. My people used to come from Nepal, all of my soldiers, and had a deep part of religious rights. The army had all these complex gadgets. Quite literally, very complex gadgets, even GPS navigation. All of these things are used by these similar illiterate people. I had been an instructor in infantry school training them, so I was very accustomed to this set of population. I knew that if you build it right, you’ll be able to solve the problem, and nobody was even building for them. We said that we’re going to build something that works for them. These are the Indian [21:59] perspective. I know you said there should not be any selfish arts here – we don’t have a salesforce. We are serving 20,000 mom & pop retailers without a salesforce. 100% of our orders come from that. They are self-initiated. They open the app. It completely eliminated the cost of sales just by building for them. What works for them? What do they think? We are modern actors. We call ourselves modern actors. We live the lives of the mom & pop entrepreneurs. We think for them, and we build them, and we largely succeed at that.
Alejandro: How do you guys make money? Karthik, how do you guys make money at Jumbotail?
Karthik Venkateswaran: We have multiple revenue streams. First of all, there’s a marketplace. First of all, what is Jumbotail? Jumbotail is a wholesale eCommerce platform serving the small mom-and-pop stores, thousands of them. Then, we also have a new retail platform that transforms the mom-and-pop stores into modern stores called [23:02], which would be your 7-11s. We go to these existing markets, traditional stores and transform them using our brand, our technology, our supply chain, and training multiple other layered services. We make money with the mom-and-pop stores when they sold from us. We get a commission from the sellers like a typical eBay, Amazon model – third-party sellers for a commission. You have an inventory model. There are some markups, so in a source of revenue transaction. Second is the shipping. We also have a full-fledged logistic sale. We have a company called Jumbo Logistics. We provide logistic services, fulfillment centers, large fulfillment centers, large distribution centers, and we do the storefront delivery. The mom and pops pay for shipping. Then we have a fintech platform, which connects non-bank and new banks to these mom and pops for lending, so there is an interest arbiter. What’s the cost of capital? Through that, the mom and pops actual pay more than that and through the cost of capital, but they’re paying far less than their actual cost of capital outside of the platform, so there’s an arbiter – finally, the retail services. For the [24:19] stores, we provide a lot of services, technology, programs, and stuff. For that, we get a share of the retail sales. You can equal it to a [24:30]. These are the [24:31].
Alejandro: Got it. In this case, how much capital have you guys raised to date?
Karthik Venkateswaran: We have raised about $54 million. We recently completed our $27 million round – [24:45] million, our first two rounds in December.
Alejandro: I’m sure there have been a lot of creativity to make that happen because here you are pushing quite a unique business model. Also, perhaps going up against big, big giants, so it probably took a lot of belief to invest in Jumbotail. How did you go about that?
Karthik Venkateswaran: Fortunately, the business model that we have chosen is one of sustainable scale and profitability. We are very proud to say that we are an operationally profitable company. We don’t discount; we don’t sell below cost to gain traction. We have not chosen any such part, and we are growing organically. This is introduced to [25:32]. First of all, the color of the money. What kind of investors are you attracting if you choose profitability or scale early on? We wanted to be perfect. We wanted to make sure that we get our model right in one zone of the country because it’s like a $500 million market. You can always take growth and get to billions of dollars, and we’re losing hundreds of millions of dollars. That’s not what we wanted to do. I had personally seen this journey in Flipkart. In Flipkart, we raised a billion dollars [26:00] and then grow [26:02] Then somebody else comes and faces up for a high valuation because you have a higher GMB. This is not what I wanted to build because ultimately, that company would sell, and I want to go IPO. As founders of this company, we’re looking at a 100-year enduring company, and that is exactly what our mission vision was before we focused on profitability from day one, doing it right, and knowing what we’re building is being valued by the user or not. [26:31 – 26:34]. That was very important. Feedback was very important to us. When you make those choices, then you also make the choices for the capital you end up attracting. That is #1. The second one is that, obviously, this is a very large market where everybody – Alliance is there, which is a very large company, India’s largest retail company. Amazon, Walmart, and now there are a few other wealthy companies in the startup space, all having raised hundreds of millions of dollars, which everybody is trying to do. And, here we are, building the right way. How do you convince large people that you won’t get wiped out? People are simply trusting, so we are the trust. We never doubted ourselves. But then if you go to these fund managers, like people who are managing somebody else’s money, they’re not going to take the risk if they think that somebody else can always build it. They want what Google builds? What if Amazon builds? That is out of the question, and we are a very high executive-oriented business, and we are specifically looking for investors who are proud entrepreneurs who understand what it takes this business with [27:46]. When you have a physical relationship with your retail customers to a supply chain to fintech to tens of relationships that are so hard to build, the moat is very different. Today, I’m very proud to say one more selfish shot here. We have the highest customer NPS in the segment, period, and we have raised 120th of the dollar that other people have raised on deploy. We have the highest customer segment in business. This is not my survey. Somebody else did this and they published it in the ecosystem. We invest in that. That is exactly what we ended up doing. Our fundraising journey has been one of raising to ultimate models of capital. We have an extremely good set of backers, both venture capitalists, but for our cities, we are investors from the U.S. and Canada. We raise funds from family officers who actually built these businesses. Today we have investors from 11 countries, from Australia to South America, the U.S., Canada, Germany, and all of them have a very big faith in the execution power that we have. These people are not afraid of “What is the Amazon business model?”
Alejandro: I’m sure that the distinct culture that you guys have has contributed to this, so tell us about the culture, and how you’ve gone about putting the culture together for Jumbotail, and what that looks like, and what are the three key factors or the three key fundamentals behind Jumbotail’s culture?
Karthik Venkateswaran: Right from day one, we were very clear about building a very value-driven organization, so we initiated 15 core values, and we published them. We hire from those values, and we work for those values. One of the unique things about our company is our pilot system. We have people leading each other only on adherence to values. What are the values that they adhere to? What are the values that they like? [29:54] 80% of the rating [29:59] on my experience working with my peers, how likely am I going to come to Jumbotail [30:05]? That is the only perimeter that we are. We do not have an appraisal system based on targets. The only thing that we care about is do people subscribe to the value system? Everybody knows. The second one that we actually changed was for managers. Again, only 20% is a rating from his manager. The remaining 80% is coming from a combination of their direct [30:35] performance. Why this is important is because as a manager, you are a function of your data reports. It should be impossible that all of your reports are average and you’re outstanding. It’s something very wrong. Therefore, you’re rating by force is an average rating of your [30:52], and then, what your peers feel. What you manage inside every step, what your manager thinks about you, is not a question at all. That is a 20% rate. It’s a ceremonial rate. Therefore, from day one, people know that if you are to grow in this company, we need to admit to the values, and we need to live the values, and they are your values. Think long-term. [31:17]. The second one is managers know that the only way they can grow is to build a very strong team that is performing very well. They are rated very well. Therefore, we wanted to just set this entire culture traditionally into one that is supported by an institutional system of performance management, institutionalizing the performance management system that values what we stand for. It’s not something we wrote or set out. This ended up helping us hiring two missionary people who can withstand competition. Again, [31:55] when somebody raises $100 million because the customer is on our side. We are doing it right for the customer. We are making money. We are profitable. Why should we bother? [32:06 – 32:13]. In that way, I think we are building a very strong company.
Alejandro: It’s amazing how laser-focused and driven you are, and I’m sure that’s a great thing that the company is getting influenced by because, ultimately, the founders are the ones that establish that culture. Then people take it and run with it. If I were to put you into a time machine, Karthik, and I bring you back in time and bring you back to when you were in Stanford, thinking about how that world is going to look like in five years and build something, and perhaps even launching a business. If you were able to talk to your younger self and give your younger self one single piece of advice before launching a business, what would that be and why given what you know now?
Karthik Venkateswaran: To some extent, follow the money. It will be easier. Staying to ideal and not following the money. If I want to build out a company and get built, but then you need that equal amount of perseverance. It’s not that I don’t have the perseverance, but I would advise all entrepreneurs to say that if you choose to do it the right way, the right way is not the easy way. All across, the people are looking for the shortcut. Investors are looking for the next one who is going to come and get [33:44 – 33:48]. Your employees are looking for a quick buck, and it’s always easy to hire that engineer that can join tomorrow who is not a cultural fit but who can build you that stuff. It’s always fall for that short-term [34:03] game to show your GMV and your revenue. But if you want to build the right thing, it’s going to take a long time, and then the perseverance matters there. But then, you choose the right money, and you follow the money. I don’t know if I articulated it well or not, but I was already following this. I’m not going to do any different otherwise to myself, but I would still say if there is any difference that I need to give to myself, for the majority of the ecosystem and the company, the scale matters. If there is anything that is fast-scaling, anything that is sexy. If you want short-term success, then fast-scaling stuff. You are to figure out a way to get there.
Alejandro: I love it. Karthik, for the people that are listening, what is the best way for them to reach out and say hi?
Karthik Venkateswaran: My email is firstname.lastname@example.org.
Alejandro: Amazing. Karthik, thank you so much for being on the DealMakers show today.
Karthik Venkateswaran: Thank you very much. Thanks for giving me this opportunity, and thanks a lot to all the listeners.
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