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How Yellow Messenger is planning to win big in the chat-based commerce space

 

YM Product

 

What compels a veteran of the chip design industry to quit his comfortable job and attempt a foray into the hypercompetitive world of mobile commerce? Raghu Ravinutala, CEO and founder of Yellow messenger, answers this question and in the process covers Entrepreneurship 101 – the idea, the minimum viable product (MVP), validation, iteration, funding, pivoting, growth, and the concept of “affordable loss.” Raghu’s breezy “Just do it” philosophy makes starting up sound a lot less daunting and more do-able.

QUICK FACTS
Company BITONIC TECHNOLOGY LABS INC.
Brand YELLOW MESSENGER
Value Proposition An AI-powered chat interface through which consumers can shop for products and services from online and offline stores
Revenue Not Available
Funding $40,000 from accelerator Start-Up Chile

(Looking to raise $3 million Series A funding)

Valuation Not Available
Team Size 4
User Base Downloads: 19,000-20,000 ; Monthly active users: 8000
Growth 50% month-on-month growth on the number and value of transactions made through the app (in the last 4 months)

Top Quotes

  1. “I believe that if you want to start something, just do it and you’ll learn everything you need to along the way.”
  2. “I had worked in the corporate sector for 16 years and decided that taking 2-3 years off now to try to start a business is an ‘affordable loss’.”
  3. “We had created a team and raised seed money even before I quit my job, so there was not the least bit of doubt in my mind that this was the right thing to do.”
  4. “We believe that a long-term differentiation in the chat-based commerce space is going to be the number of businesses with which each app is able to integrate deeply.”
  5. “We found that markets abroad are in fact more conducive to this product because consumers and businesses there are more homogeneous; they talk and respond in similar ways.”

The Yellow Messenger Story

“Think different.” – Apple

“Imagine you’re chatting with your friend on your favorite chat app and you decide to meet up for a movie. You click on a button – a bot integrated with the chat app – right there in your chat window and buy your tickets for the 6 o’clock show. The bot then reminds you that the movie theater is an hour’s drive away and asks if you would like to book a cab for 4:45 PM. You say yes and ask the bot to also suggest good restaurants near the theater for dinner. The bot shows you your options and you reserve a table right away. This is the seamless, one-stop consumer experience that we are aiming to achieve with Yellow Messenger,” explains Raghu, the soft-spoken, affable CEO and founder of Yellow Messenger.

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Image Courtesy: Unsplash, Maliha Mannan

Raghu is one of many entrepreneurs of late to bet on the suitability of chat for B2C interactions. Many industry observers too believe that chat will soon be (or already is) a preferred medium for shopping for goods and services.

Raghu’s conviction about using chat for commerce, though, arises from his own personal experiences. “I play tennis regularly and had bought a pair of sports shoes from an online retailer. A few days later, when I went to a neighbourhood shop to get my racket stringed, I saw a better version of the shoes at a similar price.

I thought then that if I had access to information about all businesses – online and offline – I would have made a better purchase decision.

But as I started to consider this as a possible startup idea, I realized that it was nearly impossible to get visibility on the inventory and prices of millions of businesses in one go. Another personal experience presented a solution to this problem. Around that time, I was looking to buy an apartment and saw how easy it was to send queries to my agent and have him check on inventory, price, features, etc., and get back to me via chat app. I was also struck by the ease with which my wife’s jeweler would stay in touch with his clients by sending them messages every time he had new designs or special offers. I then realized that using an asynchronous interface – such as chat – where we can receive requests and then check with stores about price and availability, could be the solution to providing information to customers on demand,” he says.

 

“Just Do It.” – Nike

So convinced was Raghu of this idea that he decided to start building a basic product right away. “I believe that if you want to start something, just do it and you’ll learn everything you need to along the way,” he says.

He was working as a senior manager at Broadcom at the time and got permission from his employer to work on his business idea as a side project. But he knew that his experience in managing cutting-edge chip design groups would not help him write code for the app and he went looking for someone who could do that for him. “My brother referred Jaya Kishore Reddy, who was working at Myntra, and Kishore agreed to take on the project on a consulting basis. He developed it for three months and came back asking if he could come on board as a co-founder. Kishore then left Myntra and is now the Chief Technology Officer (CTO) at Yellow Messenger. Next we wanted to expand the team and went to my college, NIT Warangal, and conducted a hackathon. During the event, two students – Rashid Khan and Anik Das – built the business end of the app in two days flat and we offered them an internship. After college they took up corporate jobs in Bangalore but soon got in touch with us and said they would like to work with us full-time.

That these people quit high-paying jobs to join us was validation in itself,” says Raghu.

YM Team

Yellow Messenger’s founding team. L to R: Raghu Ravinutala, Jaya Kishore Reddy, Rashid Khan, and Anik Das

In what other ways did you validate the product? “We didn’t validate it any further; we just launched it. I didn’t want to run surveys because this product is new to the market and would have been very tough to explain to consumers. Plus, creating the product was not very expensive,” says Raghu.

How did you get the word out about Yellow Messenger? “At first, mostly through outreach; we called up family and friends and asked them to try the app. Plus, we presented the product at events and conferences. Initially we did not sign up any businesses and responded to customer messages ourselves to see if consumers were taking to the product. We found that we got 4000-5000 users without spending anything on marketing. People were checking out movies, restaurants, etc., and it looked like consumers liked being able to find multiple categories of products and services in the same place. That convinced us of the idea. There was also a good amount of interest from investors,” replies Raghu.

“Now we’re exploring other means of advertising and promotion including direct discounts (cash back) on recharges, putting up posters at apartment complexes, email campaigns, Facebook advertisements, referrals, and so on,” he adds.

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The Yellow Messenger team in Chile for the Start-Up Chile program

How did you meet your early fund requirements such as paying your team, etc.? “The initial funds came from my own savings – I invested close to Rs 10 lakhs to get this off the ground. I was still with Broadcom at that time so I could afford to spend that amount. After I moved to this full-time, friends and family gave us about $75,000, or Rs 40-45 lakhs. Also, last August we were selected for Start-Up Chile a Chilean government-funded accelerator for promising new ventures), which gave us another $40,000.

We were also lucky enough to catch the eye of a company in Spain – EUDigitals – who are now our channel partners in the country and have sold a solution called YellowCRM to businesses there (more on that later). This venture is already generating business worth a few thousand dollars a month. That revenue alone is covering the cost of our small team,” Raghu says.

The company is also participating in the Microsoft Ventures program this year.

Did you have any doubts about quitting your comfortable job and starting up? “No, not really. I had wanted to turn entrepreneur for a while before this idea came along.

I had worked in the corporate sector for 16 years and decided that taking 2-3 years off now to try to start a business is an “affordable loss.

Plus, for almost one year I ran the business as a part-time side project. We had created a team and raised seed money even before I quit my job, so there was not the least bit of doubt in my mind that this was the right thing to do,” he says.

 

“Innovation and you” – Philips 

Chat-based commerce, though a new space, is a crowded one. Several players, such as Lookup and Helpchat, have entered the market in the past couple of years and attracted investor attention.

What sets Yellow Messenger apart from the competition?  “We offer two key points of differentiation. First, we’re the only ones worldwide who are carrying out transactions using an artificial intelligence (AI) based chat interface. Using AI helps us to be more responsive – a computer can generate options and answer queries much faster than a human being. AI also helps us to be more consistent and reliable in our communication. Plus, using AI enhances the business’s scalability considerably.

Second, we’re working towards building synergistic B2B models. For example, we have tied up with a major airport in India that was looking to launch a new smart chat assistant to connect with travelers. Their app is powered by Yellow Messenger and our AI-interface will show up on their website and mobile app. So consumers who use the chat assistant to check flight information, etc., will be able to access Yellow Messenger. This way, we will be able to integrate information from the airport within our app,” explains Raghu.

“We believe that a long-term differentiation in the chat-based commerce space is going to be the number of businesses with which each app is able to integrate deeply,” Raghu adds.

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When customers now use the app does Yellow Messenger field the chat requests or do the businesses handle it themselves? “Many of our registered merchants – Medlife, for instance – do use their own chat reps. We handle communication for all unregistered vendors. One of our learnings these past few months has been that while consumers like to chat, businesses don’t – they like to get orders,” says Raghu with a smile. “Another lesson learnt was that consumers expect peer-to-peer, human interaction but businesses are not always able to respond immediately to customers’ messages. So we realized that B2C communication needs to be moderated by technology. Taking and responding to basic requests, like, say, a restaurant booking, can be automated to a large extent. In fact, four of our top categories are almost completely automated right now. But the model that we think will work across businesses will involve a combination of automated and human communication. Our aim is to at least have the order formulated before it reaches the business so that they can just focus on fulfilling the order,” he adds.

What percentage of your chat interactions are currently being handled through AI? “That number is pretty high now – 80-85% – partly because we are focusing more on marketing the categories that can be automated easily – phone recharges, Medlife, and shoes right now, and movies and mobile phone purchases next,” says Raghu.

Yellow Messenger has revenue-share agreements with its registered businesses and receives commissions on transactions generated by the app.

 

“Karo zyaada ka iraada” – Max New York Life

shopping-1165437_1920How do you plan to grow the business? We aim to be the one-stop shop for all chat-based commerce, but not necessarily only as an app. These days messaging services are fast becoming platforms. Slack and FB Messenger, for instance, are soon going to allow bots to come in. When that happens, we can be an app on Android and a bot on FB messenger or Slack. This will allow us to operate through multiple channels and offer a holistic experience to the consumer.

What numbers are you trying to hit in the short term? In the next year we’re planning to get to 400,000-500,000 users. At the same time, we need to balance the supply side too and make sure that as we increase the number of users, we also increase automation so that we can keep the call center staff requirements to a minimum. Once we have the balancing act figured out we will scale more sharply.

Another important goal for us is to register more businesses so that they can handle customer interactions themselves and take orders directly. For that to happen we will need to offer businesses more density of transactions; this will be done by identifying categories where we are already generating a good number of transactions and seeking registrations in that space.

So we’re looking to create supply in response to demand rather than in anticipation of it and will look to register businesses for which we can provide a steady supply of orders.

 

“Taking India to the World” – Aditya Birla Group 

8498-849762_originalTell us more about the partnership with EUDigitals. “EUDigitals was actually planning on starting something akin to Yellow Messenger but did not find the technical expertise in Spain. So they searched online for partners, found us, and flew in to sign the deal. Through EUDigitals we’ve sold YellowCRM, to automotive firms in Spain who use the app for chats with customers and among partner stores. We are treating our current efforts in Spain as a pilot and will “productize” this model and create a website for it as soon as we’ve learnt what works and what doesn’t.

This partnership’s worked out beautifully for us as we’re getting a presence in Spain without spending a dollar. EUDigital even represented us at the Mobile World Congress in Barcelona. We’re looking at building similar partnerships in other markets too. Our experience with a new market has also gave us some fresh insights in the product.

We found that markets abroad are in fact more conducive to this product because consumers and businesses there are more homogeneous; they talk and respond in similar ways.

Indian consumers and businesses, on the other hand, vary widely in how they communicate (and, consequently, it is tougher to automate communication through AI). So we will be looking at taking this to suitable new markets,” says Raghu.

Do you see yourself shifting focus from Yellow Messenger to YellowCRM? Raghu replies, “These two are not entirely different products. Both involve chats between customers and businesses. YCRM just has features that allow businesses to manage their customer relations better. For instance, it makes it easy for businesses to group customers and send them messages about promotions. But YCRM is not in the space that, say, Salesforce occupies. In fact, our goal is to integrate our system with Salesforce and other CRM software.”

What KPIs are you tracking? “I believe that customer life time value (LTV) minus customer acquisition cost (CAC) is the key metric for consumer businesses.  All other metrics and numbers such as repeats, referrals, retention, ticket size, etc., will lead to this metric. Right now we’re seeing good numbers on repeat sessions and are working to improve our retention,” says Raghu.

Yellow Messenger has won the attention of peers, investors, and accelerators in the short time that they have been around and are now looking to raise series A funds of $3 million.

Project Deep Dive wishes them luck and looks forward to seeing the Yellow Messenger bot on our favorite messaging platforms soon!

 

Link to the Yellow Messenger Android app in Google Play Store.


As part of  our exercise in generating new business ideas for startups – we had asked Raghu to list challenges his business is facing that he would love to have someone take off his hands and solve. Click here to see his response.

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