How Mygate Reduced Cash Burn By 85% In FY24, Turned Ad Sales Into Biggest Revenue Generator

In January 2023, the cofounders of Mygate, a visitor and security management platform for gated communities, were experiencing turbulence. Set up by Vijay Arisetty, Abhishek Kumar and Shreyans Daga in 2016 and widely lauded as a category pioneer, the Bengaluru-based startup was about to close FY23 with dismal numbers. Eventually, it earned INR 77.2 Cr in revenue against a loss before tax (IND AS) of INR 226.4 Cr, a 57.9% YoY increase from INR 143.3 Cr loss in FY22.

Mygate’s financial health raised eyebrows over the years as the startup sold subscriptions to apartment complexes. No doubt its revenue grew significantly year over year, but so did its losses. Plans were afoot to expand beyond its three core services – gate security (visitor and delivery management), in-community operations (booking amenities, managing clubhouses and related payments) and home management system (home services, help desk, household staff management, recurring bill payments). However, more advanced features like end-to-end security (think of integrated security cams or automated boom barriers) or collaboration with ecommerce firms for a ‘hitchless’ delivery ecosystem did not happen on-ground.

The app had reportedly spent a lot of cash on several features it introduced and subsequently took off, especially during the Covid-19 pandemic. But the outcome of FY23 posed dire challenges, and a permanent solution had to be sought.

A key reason behind the growing losses was a runtime error oft-experienced by startups at home and abroad. Flush with investor dollars, myGate chased expansion without a clear focus on steady revenue generation and sustainable growth.

The startup raised two major rounds, $56 Mn in Series B in October 2019, followed by $12.2 Mn in November 2022. A clutch of major investors, such as Prime Venture Partners, Horizon Ventures, JS Capital, Acko and the homegrown home services firm Urban Company, were initially attracted to the unique concept. However, the business disruptions during the Covid-19 pandemic and the emergence of a few deep-pocketed competitors affected its early-mover advantage.

From Sluggish Growth To Rapid Expansion & Revenue Refocus, At A Cost

“In FY21 and FY22, we scaled aggressively and went from 5K to 25K communities. But throughout the pandemic, most services were offered at minimal prices or even for free. Mygate was burning cash excessively across technology, product development, personnel, sales and operations,” said Kumar in a recent interaction with Inc42.

Earlier, he was the startup’s COO but currently heads the business as the chief executive officer after a recent rejig at the top. Former CEO Vijay Arisetty was elevated to the chairman’s role earlier this year. Kumar did his B. Tech from IIT-Kanpur, got an MBA from IIM-Ahmedabad and was a vice-president at Goldman Sachs before founding Mygate.

The concept of a ‘full-service’ gated living (more on Mygate’s recent rebranding later) initially surprised many. However, Kumar clarifies the fundamental purpose of the app in simple terms. Essentially, it is a B2B2C product, which means an individual can download and use the app only after their resident welfare associations (RWAs) or similar bodies pay for the service and onboard the entire community.

After signing up, front gate guards and society residents can access the Mygate app, which streamlines security and communications. When a delivery executive arrives at the gate, the guard logs the details into the Mygate system, prompting an instant notification to the resident for approval. This approach is more secure and convenient than keeping front office log books and manually filling in the details every time a delivery is in or a guest visits.

Convincing communities to adopt a novel concept and hiring the right people for a young company were particularly challenging. No doubt Mygate was selling a consumer-facing technology service, but it needed extensive support from sales and operations for the service to take off.

“What helped at that stage was our vision to solve a significant problem across gated communities and our goal to emerge as the largest and most comprehensive community platform,” said Kumar.

Growth was sluggish in the early days, with just 20-25 gated communities in its network by 2017-18. But the onset of the Covid-19 pandemic marked a turning point. “With the communities restricting the entry of household help, drivers, delivery personnel and non-residents, manning the gates became increasingly critical, and there was a clear opportunity to scale up,” noted Kumar.

This rapid expansion led to operational glitches and massive cash burn as Mygate and its competitors pursued growth at any cost. At times, these platforms provided free services as a goodwill gesture, and some even offered incentives to RWAs to join their networks. Understandably, this approach was unsustainable in the long run.

“Around February 2023 (FY23), we took a tough call and stopped offering freebies. Our focus shifted from community acquisition to revenue generation, prompting a significant change in strategy. Mygate also laid off nearly 200 employees between December 2022 and February 2023 as part of the business restructuring, bringing the headcount down to 400,” the CEO clarified.

Refocussing on revenue, job cuts and belt-tightening eventually paid off. Within a year, the percentage of member societies contributing to the startup’s revenue rose from 15-20% to 50%. All new communities were acquired on a paid basis to rectify the earlier mistake. Total revenue reached INR 109.1 Cr in that fiscal year, a 41% jump from FY23. Mygate also reduced its cash burn by 85% during FY24, with zero cash burn recorded in Q4 (January-March quarter).

How Mygate Beefed Up Tech To Push Cost-Cutting, Deliver Value    

If culture eats strategy for lunch – a quip attributed to management guru Peter Drucker – such culture needs to be realigned with the most effective approach to deliver competitive advantage. As Mygate is a technology business at its core, it must leverage its tech stack better to eliminate an employee-heavy operating system and provide unique value. Essentially, the business required lean growth or the capability of doing more with less if it had to stay away from the cost trap without giving up on expansion.

Mygate’s founders realised that to scale the business 10x, they could not spend tenfold or grow the team size at the same rate. Instead, they needed to keep expenditures flat and the revenue curve going north. Cofounder and CTO Shreyans Daga emphasises that MyGate runs 24/7, catering to a growing user base and supporting frequent feature additions. Balancing this scale with stringent SLAs (service level agreements) while controlling costs is a formidable challenge.

To tackle multi-pronged issues, the platform has adopted a microservices architecture capable of handling 600K check-in requests per minute. This setup has ensured quick scaling to meet fast-expanding business needs. The platform is technology-agnostic, deploying the best solutions for specific problems – a horses-for-courses approach.

To wit, an enhanced core notification platform now works across various devices, significantly increasing visit approvals. Other features include pre-validated entry integrations for food and quick commerce services like Zomato, Swiggy, Blinkit and Zepto, enhancing community security and convenience.

In addition, Mygate has rolled out many industry-first features such as private guest invites (no personal details needed for entry), pet directories with vaccination reminders and enhanced tech tools for invoicing, dues reporting, user controls and payment workflows for residential communities to boost collections and management efficiency.

Its backend technology stack includes Java, Python, Node.js and Spring Boot. Specific use cases and access patterns determine the choice between RDBMS, NoSQL, or graph databases.

“Despite 100% business growth since 2023, our infrastructure costs have only risen by 10%. We control costs by adopting new technologies and re-architecting bottlenecks,” said Daga.

For instance, Neptune is the preferred database for maintaining graphs in the feed system, while RabbitMQ and Kafka form the core of efficient message distribution across microservices. Its mobile tech stack features Kotlin for Android and Swift for iOS, with some components using Flutter and React to accelerate releases.

Although the startup handles a vast data pile, data privacy and information security remain its fundamental business principles. “We comply with all Indian regulations, including ISO 27001:2022 and the Personal Data Protection Law. We are also certified as GDPR-ready, the EU framework and guidelines regarding information privacy. We do not track or sell data to advertisers, as user privacy is our highest priority,” the founders said.

By leveraging its technology prowess, Mygate anticipates 75% YoY revenue growth in FY25. It competes with Gatekeeper (by ApnaComplex), NoBrokerHood and JioGate and claims to be the largest community management app in India, with a presence in 4 Mn+ homes in 30+ cities.

Mygate Draws Flak, But Its Revenue Hunt Hits Ad Gold

Unsurprisingly, Mygate’s drive to build more revenue streams took the advertising route, featuring online ads via the app and on-premise campaigns (offline promotion) across gated communities. This has always been a lucrative proposition for brands, given the platform’s ready access to apartment complexes that house people with high disposable incomes and the mindset to explore and adopt new products.

For instance, a jewellery outlet opening in a specific postal code can use Mygate to announce its launch and promotions to 100-200 communities within a 10 km radius. The startup’s precise targeting capabilities make it a unique advertising platform at the postal code level.

Even during the pandemic, the startup saw a surge in advertising enquiries from brands eager to leverage the platform. Soon enough, it started running ads on the app, but many users cried foul, saying the push notifications were too intrusive and a distraction they did not like. In response, Mygate introduced an ad-free option for users and communities willing to pay an additional SaaS fee or revise their revenue agreements.

Incidentally, ad revenues earned from offline campaigns are shared with the RWAs, where promotions get underway. This is an additional incentive for communities to opt for the platform’s services. In addition, all communities run by Mygate can access the home services offered by Urban Company under the ‘Services’ tab on its app. Again, the default promotion is not surprising, as Urban Company invested in the startup.

The community management app now earns 65-70% of its revenue from advertising. Schools, hospitals, automobile companies and other businesses increasingly rely on Mygate to run their campaigns.

Major brands like Flipkart, Amazon, Swiggy and Zomato also advertise with Mygate, leveraging its unique capability to display ads to users as delivery executives enter their communities. This targeted advertising has been particularly effective for companies introducing new products, dark stores or grocery services. Hence, they utilise Mygate’s advertising inventory for extended periods.

Working with leading agencies like GroupM, Madison and Dentsu and collaborations with renowned real estate players, have further validated Mygate as an effective advertising platform and boosted its revenue in the past two years.

Mygate’s Endeavours: A Past Imperfect But A Future Secure? 

Mygate’s long run, wrought with trials and tribulations, made everyone curious whether the startup could eventually crack the market. Its initial business model saw few takers and the following splurge to grab market share proved near-disastrous. On the other hand, the platform continues to develop its tech muscle to cater to the evolving requirements of gated living and successfully leverages targeted promotions to amass advertising dollars. Collectively, these strategies, along with other cost control measures, have pulled it out of the high cash burn zone and improved the startup’s financial health to a large extent.

Mygate is still in the red, but a quick look at its numbers shows it is well on its way to long-term, sustainable growth. Consider this. In FY21, it posted INR 8.4 Cr in operating revenue, with expenses soaring to INR 130.9 Cr. By FY24, operating revenue surged to INR 96.2 Cr, while costs remained stable at INR 129.5 Cr, a significant operational milestone for the company.

“Many initiatives were introduced during this period, enabling us to examine the business holistically from a P&L standpoint. We reviewed each revenue item to explore scaling opportunities and analysed each cost item to enhance efficiency and service quality while increasing revenue. The FY24 results are the culmination of those efforts.”

The CEO thinks more business opportunities can be developed on the existing tech stack, as the founders aim to create a comprehensive ecosystem around community living. Mygate has already enabled access to an exclusive classifieds platform, leading to the discovery of local service providers. It is a win-win for consumers within communities, brands and the platform. But the startup is now deep-diving into this approach, integrating home services, healthcare, insurance, property buying and other features with its offerings.

This is in sync with its recent rebranding as a living experience tech company that extends its services across all aspects of everyday living. The Urban Company has already been integrated with the app as a default home service provider. The team is now piloting an emergency ambulance service in collaboration with healthcare providers. Users can request help with a single tap during medical emergencies.

The startup has also partnered with the insurtech firm Acko to distribute its products and obtained a corporate agency licence from the insurance regulator IRDAI. This permit will allow the platform to offer a wide range of policies and exclusive pricing. Mygate currently focusses on car insurance but may soon venture into health, life and liability insurance cover for RWAs.

These collaborations and consumer-facing services will be foundational for diversified revenue growth but also bring to mind what global startups like Flow could be trying to achieve. On the outside, WeWork cofounder Adam Neumann’s Flow is in a completely different sector and pretty drab – rental housing, to be precise. But what has created a lot of excitement is how it may reinvent community-driven living by providing a web of lifestyle, financial and other services around its real-estate offerings.

Mygate, with its recent branding makeover, may take a similar route and breathe fresh life into gated living, creating a bond of care and convenience among people and the places where they reside. Meanwhile, it would do well to identify more growth opportunities, monetise every product and stay sustainable to follow its newfound vision.

[Edited by Sanghamitra Mandal]