We're looking at strategic partners in other markets: Aneesh Reddy

Interview with Co-founder & CEO, Capillary Technologies

Bangalore-based cloud software services provider Capillary Technologies, backed by Sequoia Capital and Norwest Venture Partners, recently announced a strategic investment by American Express Ventures, the corporate venture arm of American Express. Co-founder and chief executive Aneesh Reddy speaks to Itika Sharma Punit about the growth plans. Edited excerpts:

Recently, you announced a strategic investment and partnership with American Express. Are you looking at more such tie-ups?

We are looking at more strategic partners in other markets. We have already partnered Blue Label Engage in South Africa, Abrar Telecom in Saudi Arabia, Galore, I-ripple and Genie Tech in the Philippines and Triforce and Prosoft in Thailand, among others. We are also in talks with other large players providing solutions to retailers around the world.

When do you plan the second round of funding?

Currently, we are self-sufficient and don’t need money. With the $20 million raised so far, we are quite well-placed. This is a high-margin business (accounting for about 65 per cent of the gross margins) and our churn is sub-10 per cent, which makes us quite comfortable. We will look at series-B funding in early to mid-2015. This round of funding will help us expand faster in developed markets like the US and China.

You have been investing in expansion.

Till last year, we were present in six countries. Now, we are present in 16, including the US and others in Europe, West Asia, South Africa and the Asia-Pacific. We are expanding in the US, the UK and Australia. In the past year, the contribution of our global markets has increased substantially. Markets such as Southeast Asia, West Asia and the UK are breaking the $1-million annual SaaS (software-as-a-service) run rate. We are able to record strong business around revenue opportunities. Last year, we  increased our headcount by a fifth, with more focus on teams built to scale up business to the next level.

This year, you hired from some A-list colleges. What kind of talent are you bringing on board?

This year, we have made about 30 offers across functions. We believe in delivering quality and better service experiences to clients. For this, we attract top talent from the best schools in India. We are bringing on board senior leaders, who will contribute to driving the next phase of growth. As we grow in regions, we plan to hire the best talent.

Mergers and acquisitions have increased in the Indian products market. Are you open to merging yourself with a global giant?

I think we have many more years to go. We continue to grow well and the investors are only two years into the company. So, there is no focus on an exit right now. Our focus is to join the billion-dollar company club in the next few years.

You are a part of software product think-tank iSpirt, which is taking several initiatives to boost M&As. What do you think of the buyouts in the product space?

I think the start-up ecosystem needs both large and small exits to grow. It is very encouraging to see the small exits in the last few months, as these tend to fuel more start-ups and keep the money rotating to fund more ideas and products. However, for really large product companies (more than $1 billion in size) to emerge from India, the ecosystem has to mature. Though we find good engineering and delivery talent in India, we need much better talent for roles in marketing, sales leadership and product management if we really want much larger global product companies to come out of India. Some product companies (such as Inmobi, Eka and Druva) will be breeding grounds for the ecosystem. These will spawn the next generation of product start-ups in India. We have already seen about 10 product start-ups from ex-Capillary employees, and these are doing well.