Darwinbox is a cloud-based HR platform that handles all HR needs across the employee lifecycle including recruitment, onboarding, payroll, employee engagement etc. The Hyderabad-based startup has recently raised USD 15 million in a Series B round. The Passage spoke to the cofounder of Darwinbox, Rohit Chennamaneni, in the wake of the fund raise. “In Asia, HR tech is a five billion dollar market,” said Rohit, adding 30% of the firm’s business comes from referrals. Darwinbox competes with the likes of SAP, Oracle and Workday in Asia.
The Passage: Could you give us a brief background on Darwinbox?
Rohit Chennamaneni: We founded the company in 2015. I used to work with Mckinsey and before that, with Google. My cofounder and childhood friend Jayant went to IIT, Madras and IIM, Lucknow. Third cofounder Chaitanya was an HR consultant. He completed his MBA from XLRI, Jamshedpur and was working with EY.
HR technology is one system every organisation needs. It's a platform used across sectors and by all employees. We felt there is a huge potential to make HR tech more powerful, engaging and empowering. That’s the basic tenet at which we started.
We had a good understanding of Asian enterprises. Unlike US enterprises, they have evolved from different kinds of organisational structure which is reflective of the culture of the respective region. Take any system, for example, supply chain or finance, there could be a global perspective. But HR processes and policies are generally reflective of the local culture.
We saw the opportunity and thought we could build a credible alternative or a better product than SAP or Oracle to serve the HR needs of the Asian region. Today, we have around 200 enterprises and around 500,000 employees using Darwinbox. Our primary focus is to ensure we give end-to-end HR experience for our clientele. We also make sure we’re solving for the large organization context better than any other player in the world. There were a few sectors we initially picked to focus on such as tech firms and pharma sector. Now, we have clients across banking, manufacturing, hospitality and healthcare etc.
Darwinbox’s emphasis is on adoption and usability. The best ROI comes when people use. Higher adoption means more data and with more data come more insights. When people use it more, it becomes all the more powerful. Compared to other HRMS, we are very quick in terms of getting clients on board and bringing intended results.
The Passage: Tell us about your client breakup
Rohit Chennamaneni: Most of our clients come from India. We have about 15-20 clients present in other countries. We have a lot of global clients which means our clients are present in more than 50 countries.
The Passage: Being an Indian company, what advantage do you have to drive expansion in Southeast Asia?
Rohit Chennamaneni: There are two parts to this. One is similar work culture. The second thing is, if you look at the structure of organisations and the structure of technology adoption, Southeast Asia is akin to India. Most of the enterprises don't have a better alternative to SAP or Oracle in the region, just like India. We’re seeing a faster traction in SEA compared to India.
The Passage: Many Indian B2B or SaaS company see America as a bigger market than India or Southeast Asia. Do you have plans to launch in the US?
As of now, our focus continues to be on Asia because there is immense opportunity in the region. Thanks to the smartphone penetration, all employees who didn’t have access to a laptop in the past to use HRM can now use HRM on their mobile phones. The timing is great for the product to take off in the market.
Developed countries have about five hundred million employees in the work force. In Asia, there’s more than a billion. All of them need technology as a platform. That’s the big opportunity we see.
The Passage: Are the markets crowded in the US and China?
Rohit Chennamaneni: Not so much in China, but definitely in the US. It is important to understand that they have gone through the technology evolution before the rest of the market which means they have different products for different sectors, whereas Asia is waiting for one big product to take over the market. There is available opportunity across Asia at this point of time.
The Passage: Do you think language will be a barrier in China and SEA?
Rohit Chennamaneni: We already have clients present in China and the language capability in the HR system. What we need to do is to have few features to solve for the local nuances. In other countries, Darwinbox hires locally. We don’t work remote. For example, in Jakarta we have hired from the same region. There is a cultural context to HR that locals understand better. We will follow similar model in China as well.
The Passage: How did Darwinbox evolve over the years?
Rohit Chennamaneni: Think of our product as Lego blocks. The two fundamental aspects about a product are workflow and data. Everything else can be built on that. Darwinbox gives the flexibility for the clients to create the workflow on their own without any need of intervention from our side. The configuration feature of our product solves most of the customer needs.
The Passage: What role does AI play in shaping the product?
Rohit Chennamaneni: There are two major use cases. The first use case is in terms of understanding what kind of people would do well in the organisation while recruiting. The HR tech helps to figure out the best ten profiles from thousands of applications in quick time. The machine looks at the employees within the organisation who are successful and what kind of people have been short listed in the past and based on the data it gives you suggestions on the best fits.
The second use case is, in every organisation, there are different indicators of engagement, excitement and detachment. It could be based on your attendance patterns, performance or engagement levels etc. Looking at all the data, the system tells which employees are at the risk of leaving or who could really be successful in the organisation in the long term and based on the inputs you can tailor your intervention for them. This use case is company specific as different companies have different predictors for success and failure.
The Passage: How did you land your first client?
Rohit Chennamaneni: The first few clients came from our network. We worked with a lot of organisations and we understood their problems. What we were able to do is basically convince some of the past clients of us as to how we would be able to help them through a platform like this. Though the product was not fully evolved, they were willing to test it with us and go through the journey as we built it out.
The Passage: At what point did you realise your platform has a differentiated product from the incumbent players?
Rohit Chennamaneni: Our intention was always to be differentiated. While we could always make the product better, it is very difficult to win against big players because they have strong references within the organisations. They also have other systems within the organisation for other functions. Against all those odds, we won against them based on the power of our product alone.
The other confidence booster was, we were able to replace the global players in multiple situations. To replace HR system is very difficult because all your employee data and the habit of using the platform are centred on the system. When we are able to replace a global player who’s been in the organisation for more than three years, you will confident that you have a very strong proposition than the incumbent players, because otherwise they will never change.
The Passage: Have you broken even? What is your next plan in terms of funding?
Rohit Chennamaneni: We have broken even in India but we need to invest in other regions. A B2B enterprise requires a lot of upfront investment to build a brand that competes with global players. Since these purchases don't happen online, you have to be present in the region to implement the product. Also, you are competing with deep pocketed players.
It will take at least 6 months to get your first few clients in the region. And that happens only after you invest quite a bit. This changes from country to country in terms of how much you need to invest, how long you need to stay invested etc. That’s why we need funding to grow globally. We use the fund to grow into multiple geographies.
The money we have raised has two year runway, and hopefully we will be profitable on all these regions by that time. We are looking at growing into 1,000 clients in the next two years.
The Passage: What prospects do Indian B2B companies have in going global?
Rohit Chennamaneni: Because of its strong IT industry, India has seen B2B companies going global. There is a lot of talent within India working in such companies. We have good profiles readily available for SaaS companies, especially on the sales and customer service side. The sales and customer support ability makes it a lot more powerful as a sector for us to take over the world. But when it comes to B2C, the growth largely depends on how the internet adoption happens locally. For example, if we take China, the speed of internet adoption and doing business online is much faster and much bigger. While there is not much difference in terms population, the ability and intent to work online put China a cut above the rest. That’s why the B2C story is different. But in B2B, if you have a great product, you can easily expand across the globe.
The Passage: Once you evolve further, do you think you would phase out human from human resources?
Rohit Chennamaneni: I don't think so. If you look at HR function today, it’s 70% transactional and 30% strategic. People go to business schools to learn the strategic work, and hopefully it will become 100% strategic.