SUMMARY
Atomberg is one of the few Indian startups witnessing sustainable growth, having built and scaled a brand from 0 to almost $100 Mn annual revenue run rate in a fairly capital-efficient manner
"Our operations are extremely capital-efficient. But it was slow growth, and we could scale up only after 2018," cofounder Shibam Das told Inc42
The startup aims to surpass INR 1K Cr ($121.7 Mn) in total revenue in the current financial year, and Das believes that the business can clock organisational-level profit without compromising on growth
The sales team of Atomberg Technologies was quite apprehensive when the smart fan manufacturer was about to launch its new model, a compact motor fan Renesa in 2018.
Isn’t it too small for a ceiling fan? Kya ye hawa dega? Kya ye bikega? Too many questions popped up just then, but cofounders Manoj Meena and Sibabrata (Shibam) Das were unfazed.
“Why not?” was their response as the duo tried to reassure their team.
There was nothing rhetorical about it. It simply reflected their robust optimism, a penchant for innovation, and the courage to take on powerful incumbents.
Of course, experimentation could have been tricky in a category where on average only 2 units are sold per consumer per year and the replacement cycle is around 7-10 years. But Atomberg has earned its success in the $26 Bn+ small home appliances market (growing at a CAGR of 4.8% between the period 2023 – 2028).
It has already sold 3 Mn units of this energy-efficient (comes with 5 star BEE rating), feature-packed model in the last four years. And this is just one model.
Since entering the market in 2015, the Mumbai-based D2C brand for small home appliances has launched 20+ models of smart fans under different categories such as ceiling, wall, exhaust, and pedestal. The products are available across 6K+ offline retail stores. Its newly launched mixer grinder is sold on all major ecommerce platforms and across the brick-and-mortar stores of Mumbai, Chennai, Kochi, and Bengaluru.
Although Atomberg was incorporated in 2012, its operations kicked off in 2015 with a handful of B2B clients, including the Tata group, Infosys, and the Indian Railways, among others. But it forayed into the B2C domain within a year via online marketplaces such as Flipkart and Amazon and later entered the offline retail space in 2018.
Making strides in the home appliance sector was not easy, though. During their near-decade-long operations, IIT-Bombay alumni Meena and Das had to fight off legacy players like Havells, Crompton and Usha to build their consumer brand. From identifying the entry point in the B2B space to cracking the B2C business online and offline was nothing short of a “nightmare”, recalled Das.
In spite of these challenges, Atomberg is one of the few Indian startups witnessing sustainable growth. In a Twitter post, it also claimed to have built and scaled a brand from 0 to almost $100 Mn ARR in a fairly capital-efficient manner.
In FY22, it registered an operating revenue of $43.3 Mn (INR 358 Cr), a 149% jump from $17.4 Mn (INR 143 Cr) clocked in the previous financial year. Again, its advertising and marketing expenses grew 178% to INR 37.8 Cr in FY22 from INR 13.6 Cr in FY21. This means the startup earned an operating revenue of INR 9.3 for every INR 1 spent on marketing and advertising.
“Everything looks very fancy now, but the journey was very difficult. We went through so many near-death experiences that we are immune to these things,” Das told Inc42.
The Journey From Zero To One
Atomberg’s journey started in 2012 when Meena and a friend set it up. Meanwhile, Das, who was two years junior and in the last year of his engineering, used to dabble in startup ideas and launched 24X7STYLES in the same year. It was a Nykaa-like venture, but the idea did not take off even after raising funds and working on it for a year.
“That’s when I was looking for other opportunities. I met Meena and came to know that his cofounder had left. Finally, we decided to do something together at Atomberg,” reminisced Das.
The duo lacked direction at the time. For the next two years, they attempted different projects to identify a suitable market where they could build a bootstrapped business. But none of these ideas promised the scale and growth they sought, and the duo had to return to the drawing board repeatedly.
The much-needed breakthrough came in 2015. While working on electric motors for a project, they realised that most white goods – major home appliances like washing machines, refrigerators, air conditioners and more – have seen loads of tech advancements. But small appliances like electric fans or other household gadgets like mixer grinders did not see much innovation over the years.
More importantly, reputed MNCs like Sony, LG or Samsung were quite popular in the white goods market, thanks to the country’s aspirational buyers. Electric fans were different, though, and homegrown companies still ruled the quintessential market minus the smart solutions pursued in other fields.
“We realised two things. First, the Indian market for small home appliances is very geography-centric as the climate and food preferences are different region-wise. A mixer that sells well in northern India may not get any business in the south. Second, the heart of a small appliance was its motor, and we could bring some timely tech innovation there,” Das added.
To start with, Meena and Das raised INR 1 Cr ($122K) in an angel round, of which 80% was used to set up manufacturing, basic assembly line, design, and building the core product.
After production came the real challenge – finding the customers. As the consumer market was highly competitive, the cofounders decided to explore the B2B route. But despite their perception that the business-to-business market would be easier to crack, they found it challenging. The duo travelled across cities for live product demonstrations, grappled with trust issues and had to convince clients regarding warranty and after-sales service.
The first order for 100 fans came from a Mumbai school. Words travelled fast, and big corporate houses like the Tata group, and the Indian Railways got added to the client list, giving them a firm foothold in the B2B space. Atomberg started selling 1,500-2,000 units per bulk order.
Nevertheless, moving to the mainstream consumer market was mandatory. “B2B accounted for just 10% of the overall fan market, and building margins within that was difficult. So, we had to enter the B2C segment,” said Das.
How Online & Offline Retail Helped Crack B2C
Atomberg raised a $1 Mn seed round in 2016 and had enough capital to experiment with sales (via ecommerce marketplaces) when it entered the online retail space towards the end of that year. But B2C was also fraught with troubles. The average order value was low. Trust issues were high. And founders had no source to offer after-service sales commitment,
“We decided not to aggressively target sales numbers in the beginning. In fact, our first product was sold online after four or five months. We only wanted to ensure a good experience with a good product and service even if there is just one customer,” observed Das.
The team also made it a point to work on customer feedback and keep innovating until most of the initial survey respondents say ‘yes’ to repurchasing.
Atomberg faced three critical challenges in the consumer domain that had to be addressed fast for long-term growth. These included:
Providing after-sales support: As the company initially lacked a network of service centres, it offered a no-questions-asked return and refund policy. Today, it has set up service centres in five cities and tied up with 400 partners to provide after-sales service at the pan-India level.
Pricing it right: Atomberg’s cofounders were dead against gaining market share through deep discounting or providing high margins to retailers. They have maintained the pricing from the beginning as it befits the premium segment, given the innovative features and product differentiators. On the margin side, it is either on a par with established players or even outperforms them, claims Das.
Minimising marketing costs: Whether it is online or offline retail, product manufacturers (especially new entrants) are bound to incur heavy marketing costs. However, Das does not differentiate between these retail formats and believes there is no end to marketing expenses. Ideally, one should have a rule book that determines how much to spend in overall marketing activities, irrespective of the sales channel. Interestingly, Atomberg’s marketing spend is not even 10% of its total revenue.
“Our operations are extremely capital-efficient. But it was slow growth, and we could scale up only after 2018. We were sharp in identifying target segments and took the risk to leverage the opportunities at hand and innovated at the right time,” he added.
How Atomberg Built A Product Playbook To Solve ‘Invisible’ Issues
Unlike many startup peers, Atomberg cofounders fundamentally believe in discovering and solving ‘invisible’ (hidden yet critical) problems. For instance, consumers may not mention energy efficiency upfront when buying fans. Similarly, no one will ask for a slow-mode operation in the context of a mixer grinder.
“But we realised these are problems, and consumers would accept the products [more readily] if we can solve them. We were also determined to solve a lot of ‘invisible’ problems in sales, marketing and distribution during our journey,” said Das.
However, understanding the problem was not enough. The primary task for the cofounders was to design a prototype of their core product (smart fans, to be precise) and start manufacturing.
Quiz Das about their choice of the core product, and he cites the vast market and the lag in tech advancements. According to their research, electric fans have the largest market share in the small appliances domain and 99.9% use induction motors. This technology has existed for decades but is more suitable for lift cranes, crushers, hoists and large-capacity exhaust fans. Although induction motors are less energy-efficient, all major companies use them because they are cheap
To make its fans cost-effective and energy-efficient, Atomberg started working on brushless DC (BLDC) electric motors, which use less power than induction motors. A BLDC fan typically uses 35W compared to a traditional fan guzzling up to 80W, thus reducing power bills by 65%. Moreover, these new-age smart fans operate quietly, have a long life span and are equipped with remote controls for added convenience. Better still, more design flexibility makes it easier to develop compact, plush-looking models.
“Today, BLDC is a 12% market, and everyone wants to shift here. Plus, we made design innovations, made the products more compact and added a luxurious look and feel. It totally changed how ceiling fans used to look,” Das added.
Fund crunch, too, was a major hurdle. Things took a turn for the worse in 2018 when the cofounders were unable to convince investors and raise funding. They were about to shut down the business in the next three weeks but were saved at the last minute when A91’s general partner Abhay Pandey responded to a cold mail.
In the past 10 years, Atomberg raised more than $50 Mn in funding from A91 Partners, Inflexor Ventures, IDFC Parampara and the Suman Kant Munjal Family Office, among others. As per media reports, Atomberg is also in talks to raise a fresh round of $75 Mn at a valuation of around $425 Mn.
One thing that has remained constant in Atomberg’s journey is the cofounders’ endeavour to build an engineering startup with an emphasis on technology, innovation and customer-centricity.
When asked if Atomberg will be profitable in FY24, Das came up with the typically optimistic response – “Why not”?
Atomberg has also increased its production capacity. In June 2022, it launched a state-of-the-art manufacturing unit in Bhamboli (Pune) with an investment of INR 25 Cr. Sprawled over an area of 3.5 Lakh sq. ft, it is more than 4x the size of the company’s previous plant in Nerul (Navi Mumbai). The new unit can produce 7.5 Lakh fans and 25K mixer grinders per month.
The startup aims to surpass INR 1K Cr ($121.7 Mn) in total revenue in the current financial year, and Das believes that the business can clock organisational-level profit without compromising on growth.
[Edited by Sanghamitra Mandal]
