Why CarDekho and Infra.market bet on strong foundations over fast growth

Startups need to focus on building a strong foundation even if it means they grow slowly, said Amit Jain, co-founder and chief executive of the CarDekho Group, an online marketplace for buying vehicles.

“It took us 8 years to reach the first ₹100 crore. And it was a bootstrapped company, so we never raised funds till 2014. That’s when we were actually funded. So, as a bootstrapped company we had kind of hit the ₹100 crore scale without actually utilizing any cash, and it was profitable everywhere,” he said, speaking at the Mint India Investment Summit in Mumbai.

“Since we did not have money we had to build a strategy to get traffic free of cost, and I think because of that a lot of innovation happened,” Jain said.

Infra.market’s trajectory was similar. The building materials platform was started in 2016, and it wasn't until 2020 that the company got to its first ₹100 crore sales landmark. That said, the company founders knew their market.

“What was unique to India at the time was that a majority of building material companies were single-product companies. We started with the vision to create a one-stop platform around building materials, where people were primarily catering to construction companies,” Infra.market’s co-founder and CEO Souvik Sengupta said.

The company has since expanded to include retailers alongside a business-to-consumer focus.

But the journey to get there wasn’t easy for Infra.market, which Sengupta and his co-founder Aaditya Sharda had bootstrapped. “We built how every entrepreneur in India who is not a startup builds. We mortgaged everything. We mortgaged our parents’ house. I think Aaditya mortgaged his in-laws house,” Sengupta said.

Beyond the first ₹100 crore

After CarDekho reached the ₹100 crore sales target, Jain realised the company had only penetrated only a certain percentage of the market. That led to him seeking problems adjacent to the existing business at the time, which eventually led CarDekho to add a financial marketplace.

“We entered the insurance marketplace. That’s how InsuranceDekho was formed. We helped dealers sell insurance to customers who are buying used cars. In that segment, 50% of cars are not insured,” Jain said.

InsuranceDekho now has 20,000 insurance agents on its platform. “The thought process was very simple: how can we capture adjacency. Every time we went into adjacency there was a new TAM (total addressable market) that opened up. That new TAM was what was helping us grow,” Jain said.

As for Infra.market, the company made a series of acquisitions to expand its business. “It’s not a one-thumb rule decision,” Sengupta said referring to the company’s growth strategy, adding that it was about knowing which capabilities a company can build for itself versus which capabilities it wants to acquire and “bolt on”.

With Infra.market on its way to going public, the company is now focusing on improving its profitability and enhancing its cashflows.

“Growth has never been a very big concern for us considering the kind of spend India does on construction every year, the way real estate construction is going to overcome in the next few years, considering the bookings of the past few years. (But) it’s about profitable growth, high quality revenue that we are focused on,” said Sengupta.

Learning from failures

CarDekho has had several successes but seen some failures as well, Jain said.

“We started used car retail where we would buy a car, refurbish it, put it in our own showroom, and sell it. We were a digital platform already and we were backward integrating the process of buying in an attempt to extract more margin pool. We honestly miserably failed, we couldn’t find our profit pool,” said Jain.

He said that while the company lost money in the used-car business he has since never allowed good money to chase bad money. “It’s okay to live with the fact that a business didn’t work out and you had learnings because every founder who fails honestly learns a lot.”

However, Jain warned that while founders sometimes get excited about building several things parallelly, it is a better idea to bring focus. Jain had begun building businesses across car accessories, road side assistance. “A year and a half later, I realised that we did a very mediocre job because I was personally stretched very thin across all these projects, and with little focus you don’t build something great,” he said.