At a time when several investors are placing bets on Indian enterprise software product startups, Capillary Technologies, which provides cloud-based software solutions for retailers, is faced with multiple road-blocks in its seventh year of operation.
While sources have earlier said that Capillary's co-founder Krishna Mehra is on his way out of the company due to differences with other founders, it is now learnt that a second (of the three) co-founders, Ajay Modani, has also decided to step down.
Mehra is the currently the chief technology officer at Capillary, while Modani serves as the chief operation officer.
While the Reddy confirmed Modani's plans to part ways with Capillary Technologies, he said Mehra was not quitting. "We are parting on very good note (with Modani)," Reddy said.
"Krishna is not leaving Capillary. He is focusing on creating an advanced technology group and has expressed interest in exploring innovative technologies that can only be found in a place such as Silicon Valley, California."
Capillary Technologies enables retail marketers to manage customer data, gather insights from the same and personalise engagements through social media, mobile, e-mail, online, and in store channels. The company is backed by marquee venture capital investors such as Norwest Venture Partners, Sequoia Capital, and Qualcomm Ventures.
It was also the first Indian company in which American Express Ventures invested earlier this year. Capillary Technologies has so far raised around $34 million in institutional funding rounds, as per online startup database CrunchBase.
According to the company's website, its clients include retail giants such as Marks & Spencer, Nike, Puma, Raymond, Peter England and Lifestyle, along with food chains like Pizza Hut and Faaso's.
Additionally, after making some serious investment in trying to expand directly in the US, which is the world's largest technology market, Capillary Technologies has now decided to re-work its strategy.
The company, which had moved co-founder Mehra to the US more than a year ago and hired some local employees in order to find deeper inroads into the market, has now decided not to continue direct-selling there. The company is planning to tie up with Indian and US-based system integration partners to sell in the country.
"Capillary invested heavily in the US for the last few years, and they could hardly make any money there," said an industry source privy to Capillary Technologies plans. "It's good that they have decided to change their strategy because their earlier plans were clearly not working for them."
The company is also letting go of six to seven employees it had hired in the US, sources said. "There is no cause of worry, it happens all the time. Capillary is doing well," said Pramod Haque, senior managing partner at Norwest Venture Partners.
"The reason for not continuing in the US is because a small company cannot be doing five things at the same time. They have to make everything work one market and prove the scalability, reliability and functionality. Once you have all that working, then you go after multiple markets."