Bhuvnesh Gupta (left) and Shashank Singh, Cofounders, Poshn
May 2021, Gurugram. Shashank Singh and Bhuvnesh Gupta were going against the grain. And it made ample sense to the co-founding duo, who were a year into their second venture. In fact, it had been just 60 days since the friends resigned from their respective jobs and started taking care of Poshn on a full-time basis. They were confident of hitting the jackpot from the very first month. “What all does one need to raise money,” asked Gupta during one of his funding parleys with his co-founder.
The first-generation entrepreneurs started working on Poshn on a part-time basis in June 2020, and were now ready to take their agri-trading platform for wholesale processed commodity distribution and financing to the agri processors, distributors, SMEs and investors in a grand way. “Do we have all the ingredients,” probed Gupta, an XLRI grad, who had around 14 years of corporate experience in companies like Udaan, BharatPe, Ericsson and Oyo. He, in fact, had spent seven years running a commodity venture in trading and distribution of FMCG goods in Phillaur, Punjab.
Singh, for his part, was confident. “Only three things needed, mate,” he grinned, and answered in a reassuring tone. “Pedigree, a good product and some kind of recurring revenue,” reckoned Singh, who had worked for a decade in companies such as Michelin Tyres, BlackBuck and Uber, and had co-founded a tech startup Appsfly.io before going back to the corporate world. “We have all three in perfect doses.”
To be fair, the co-founders did have the ‘right kind’ of funding ammunition. If the XLRI and IIM tag was a great educational pedigree to flaunt, then running a venture and long corporate careers gave the duo the edge over rookie and first-time founders. “My friends told me that VCs [venture capitalists] have a hidden bias for such a blend,” Singh continued with his self-assuring reasoning. After working on the tech stack for a year and fixing it for all possible glitches, Poshn had a reasonable offering. And yes, the fledgling startup also ticked the recurring-revenue box. “We had an ARR (annual recurring revenue) of $1 million,” says Singh.
Buoyed with an inflated sense of achievement, the co-founders started to pitch VCs. “So, what is your ask?” said one of the VCs after an exhaustive funding pitch. “$10 million,” came a quick reply from the co-founders. The year 2021 saw an excess inflow of money in the startup ecosystem, and all kinds of entrepreneurs were getting generously funded. When raising money seemed like a piece of cake, Singh took a punt. While the accepted amount for an early round of funding—pre-seed and seed—used to be under $2 million, he asked for $10 million.
It turned out to be too much of an ‘ask’, and VCs started declining to invest in the startup. After a few months of futile pitching, the co-founders got a reality check. It had been more three quarters since they had quit their job, the bootstrapped venture was running out of money, and there were still no takers. “Getting repeatedly declined was like third-degree torture,” recalls Singh.
There was more grilling awaiting the co-founders on another front. “Kya 50 ka 75 hoga (will my Rs50 become Rs75),” asked a bunch by SME traders and agri processors who were being wooed to come on the Poshn platform. “What is the tangible value of doing business the way you guys are suggesting? Can you quantify the benefits,” were some of the questions hurled at the founders who were confident that their tech platform would attract thousands of users.
After a few months of hard pitch, Poshn started witnessing some traction. But it resulted in another problem. “We could not monetise. People were using it but not willing to pay money,” recalls Singh, who, after a few months, rejigged the business model, assumed full control over the demand and supply, and started afresh. The co-founders were convinced about the big opportunity that they were chasing, and even a much bigger problem they were trying to fix.
To begin with, sellers in the agri-trading business have always struggled to scale. “There were three historic problems: Fragmentation, absence of digitisation and operational inefficiency,” reckons Gupta. While on the one hand, sellers have grappled with unreliable distribution and demand forecasting, inefficient working capital management, sub-optimal capacity planning and utilisation, and limited visibility in the value chain making life tough on the other end of the spectrum.Also read: NEERX: Nikita Tiwari and Harsh Agrawal's sensor is improving farmers' lives
Meanwhile, buyers had been grappling with a broken procurement cycle. First, they had low visibility and control over pricing. Second, they had to contend with inefficient and multiple vendors, which meant unreliable fulfilment and limited quality assurance. Third, there was a high dependency on purchase managers. And lastly, there was a low fill rate for bulk quantities and complexity in managing multiple vendors. “We knew we were taking a stab at a big problem, and that it would take time,” says Singh, who confesses his naivety of being too ambitious in asking for a higher amount of maiden funding, and raised a small angel round of funding in October 2021. “We were also confident of a higher growth after a full year of operations,” he adds.
The co-founders soon reaped a rich harvest. Poshn closed the first fiscal, FY22, with an operating revenue of Rs110 crore, and posted a loss of Rs31.48 lakh. A month later in April 2022, Poshn raised its maiden institutional round of funding of $4 million from a clutch of investors including Prime Venture Partners and Zephyr Peacock.
The backers explain why feeding and funding Poshn made sense. While India has seen significant investment flows at the farm gate (first mile) and at the retail and consumer end (last mile), the middle mile seems to be largely ignored, reckons Pankaj Raina, managing director at Zephyr Peacock India. The agro-commodity industry was ripe for consolidation. “There is potential to build digitised supply chain solutions for several agro commodities,” he says, pointing out the pluses of chasing such an untapped segment. “It’s a $200 billion+ market, has a high sales velocity, and offers potential to generate a superior return on capital,” he says, claiming that Poshn was one of the first startups to spot this whitespace and build for it.
Amit Somani, however, had another reason to back Poshn. The agri supply chain in India is highly fragmented, and unorganised and has seen very little to no technology adoption, reckons the managing partner at Prime venture partners. One of the most critical parts of this value chain, he explains, is the procurement of commodities between food processing units and wholesale buyers. While the buyers struggle with price discovery, on-time delivery, quality of the produce and working capital, the supplier's challenges are around demand predictability, timely payment, working capital management, and a limited and inelastic distribution network. Also read: Can agritech startup GramHeet uplift the lives of distressed farmers?
Poshn is operating in this space and addressing the challenges faced by hundreds and thousands of food processing units and more than two million wholesale buyers, adds Somani. “The company is also solving for the financial needs of various stakeholders,” he underscores. The startup, he lets on, has also frugally scaled its way to meaningful traction. Poshn’s operating revenue jumped over four times to Rs481.5 crore, claims Singh, sharing the unaudited numbers for the fiscal. The loss, meanwhile, has increased to Rs2.34 crore.
A brisk revenue growth, and a not-so-alarming bottom-line notwithstanding, can Poshn continue to grow at an aggressive pace? As it furiously scales its operations and also adds a financing layer to its offering, can it control its losses from spiralling? And most importantly, as it keeps diversifying its services, can it seamlessly do multiple things at the same time?
The co-founders are confident of maintaining the pace and keeping a firm control of the bottom-line. "We have been extremely frugal in building the company, and have a strong focus on profitability," says Singh. His partner shares an ambitious goal. "We want to be the largest global commodity trading platform offering full-stack fulfilment services with embedded finance," says Gupta. With building blocks firmly in place, he adds, the founding team has realistic expectations and goals. “We are in for a long run, and will wait to reap a sustainable harvest,” he signs off.