Noise sinks into losses in FY24 as founders take a 'leap of faith'

As per IDC, Boat is the largest wearable brand with a market share of nearly 27 percent. It is followed by Noise and Boult, which have a market share of 13 percent and 8 percent respectively. Noise, a leader in the smartwatch segment, is valued at roughly $420 million currently.

 

“As a brand, as we grow, we started realising that if we have to pivot to the next step, we need to make the right investments in terms of people, technology and innovation. Also, we started spending on marketing. I think it will shape-up well in the coming time,” Amit told Forbes India.

 

When pushed to give an earnings guidance, the founders suggested that some of these spends would continue in the coming quarters as the Gurugram-based company invests into expanding in global markets. “You'll have your numbers soon, but investment is just not watering the plant once, you have to keep doing the things for the long term,” Gaurav said. “We have been profitable for 10 years and we know the formula of how to do it. Now, it’s time to take a leap of faith and create a brand which is ready to explode outside India.”

 

The duo claims it has shifted its focus from outsourcing to manufacturing to remain relevant in a competitive industry. In fact, the Khatri brothers say they are currently investing in R&D to drive innovation and differentiation. "We are creating technologies and that's a piece that can't be copied," they claim.

 

Noise was bootstrapped for close to 10 years until global audio giant Bose Corp bought a 2.4 percent stake for $10 million in December last year. The Khatris are hopeful that this strategic investment will help them accelerate growth despite a slowdown in the wearables market. “Their partnership allows us to do things much, much faster and better versus anybody else,” the co-founders explain as they discuss their journey as entrepreneurs. Edited excerpts:

 

Day 1 Agenda: ‘Build a Sustainable Business’

Amit: Honestly speaking, the background I come from, I've not seen people raising money. My first business was also built from the capital I had from the savings of my first job, which was Rs50,000 to Rs80,000. So, always, our focus was to build a sustainable business. In 2014, there was not much funding available, it came a little later. Now, it's common. You have an idea, go and raise money, but at that time, it didn't exist. So, with that thesis, the right fundamentals of what I learnt, I started the business from there.

Gaurav: We were not that exposed to the investor world. For us, the day one agenda was to create a business which is sustainable and profitable. For the first few years, honestly, we were making decent money, and we were just putting it back into the system, and growth was coming in. I think being naïve, and not knowing what the world looks like, and how other businesses are allowed us to do things our own way, and probably in a different way than how other people were doing it, and fortunately it worked in our favour.

 

Amit: Profitability… I think we broke even in the first sale. People used to call and say that they are burning so much money. I was never able to understand what is this ‘burn’. Every unit you sell you need to make money. So, from day one, the first unit we sold, we used to make money and till now every unit we sell, we make money.

Also read: Make some Noise for the profitably bootstrapped

 

Focus on Profit: ‘It’s not a Sprint, it’s a Marathon’

Amit: Definitely, sometimes, one tends to get affected by the speed of growth. When you see people around you are growing [faster]… but I think we've also realised that it's not about growth, it's about sustainable growth. It's not a sprint, it's a marathon. So, I'll tell you what people do for growth. They keep on entering different categories. They will do categories which are maybe not relevant for the business. This means you lose your focus from one space and move to another one, which we never wanted to do. We said, ok, where we are, let us excel here. Let us master this and let's have sustainable growth.

Gaurav: I think global brands are probably doing great. But fortunately, Noise became the number three brand in smartwatches after Apple and Samsung. The ambition was there for sure. But I think more than that, our focus was very, very high. We wanted to excel in the things that we are trying to do instead of just doing a spray and pray approach. I think going into detail and being focussed allowed us to become a giant in one category and do great there.

 

USP: ‘We Own and Control The Database of Millions of Users’

Gaurav: For us, our strength, in the last five years has been the technology investment that we have been able to do on creating and owning the technology. We have our app. Basically, when you use a wearable device, we are the largest downloaded app in the country in the health and fitness space. We have 20 million downloads. We have 10 million users coming every month and a million every day. So, look at the kind of consumer data coming, we interact with them, we know their patterns, where they are spending time, and accordingly we're able to have better offerings. Maybe that is helping us to leap ahead in the market.

 

There is hardly any Indian brand that owns its own app and controls the entire database and has the entire legacy to customise and personalise the experience of a consumer. But other than that, there's been a lot of hardware innovation that we are now controlling, working very, very closely with the giants of the world, Bose is one of the examples, creating technologies, and that's the piece that can't be copied right. We have an incubation centre that we have opened in-house. There's a lot of new innovation that we do under that.

 

Amit: We have set up our manufacturing facility based out of Noida and we produce 85 percent of our goods in India right now. The government started this initiative of wearable manufacturing almost two years back. I think in two to three years, you will see more and more components getting manufactured [domestically] and India’s reliance on nearby geographies would go down. We'll still have some reliance, but it's going to be lesser.

 

Deal with Bose Corp: ‘Allows Us to be Faster and Better’

Amit: Bose is helping us understand how an evolved consumer thinks rather than a first-time buyer, which means how tech needs to be used. So, they are helping us to amplify the entire user experience for our audio device for a great listening experience. They're also helping our team to learn and come up to the international level. If you see, there is no other brand from the country that has gone to the globe. So, I think with this partnership, Noise will be geared to cater to international market needs.

 

Gaurav: So, how each country behaves, how the supply chain distribution behaves, and how the technology partners behave… their partnership allows us to do things much, much faster and better versus anybody else. I think one of the reasons for them [Bose Corp] to invest was also because we were very closely working on innovation and technology creation. They wanted a partner who is future-proof and is trying to do things very differently. I think that's where the synergy matched.