Xelpmoc, a technological incubator, has ventured into the incubation space as a pioneer, bringing technological prowess in the country’s startup industry.
While there are many such entrepreneurs who face similar problems of technological expertise, Xelpmoc strives to relieve them by providing them all the technology they require to make a successful and profitable enterprise. Here’s how—
What exactly is Xelpmoc?
Xelpmoc is ‘complex’ spelt backwards, which according to its founders signifies simplicity and innovation.
Xelpmoc is run by Sandipan Chattopadhyay CEO & ex-CTO of JustDial, Srinivas Koora CFO & ex-Deputy CFO at JustDial, Jaison Jose COO & ex-partner of IKYA capital (an HR firm that recently had a huge IPO). It can be defined as a technological incubator, an accelerator, a tech co-founder or a ‘Venture Intellectualist’—a term coined by Sandipan Chattopadhyay.
Xelpmoc invests in technology on behalf of a firm in return for a stake in the company (equity) and a cash component once cash starts flowing in. It provides all the resources that a company requires on the technological front.
“Here’s the analogy: You have allotted Rs.10 for technology. If you aren’t sure of how to allocate it efficiently, Xelpmoc would help you invest it on your behalf and would give you the value of technology worth Rs.30. Thus relieving you from the burden of appointing the right people, fees and management,”
explains Sandipan Chattopadhyay.
But the catch here is that Xelpmoc takes in equity instead of a fee or commission.
What differentiates Xelpmoc from any other VC or incubator is that while a VC would only invest hard cash into the business and an incubator would invest in office space and general management including accountants, Xelpmoc would provide a startup with a technological team. Thus it helps a startup to acquire technological expertise. This is the main reason why Xelpmoc sways away from labelling itself as a VC or an incubator.
Apart from providing a tech-team, Xelpmoc also actively participates in the day-to-day affairs, giving feedback on a real-time basis. This is done as the company has its interests vested in the growth of the firm they have incubated.
The Big Indian decided to speak to some of the startups incubated by Xelpmoc to understand it’s working.The Big Indian spoke to Rahul Mohata (co-founder of 121policy) and Anjani Mandal (co-founder of 4tigo).
121policy.com is an online insurance marketplace—founded by Ideal Insurance brokers—and is also one of the several companies that have been incubated by Xelpmoc. While 121policy.com claims ‘hassle free policy purchase’ and ‘friendly assistance in claim processing’, it also attributes the functioning of its entire technological operations to Xelpmoc.
“We have partnered with Xelpmoc for outsourcing our entire tech team thus making us the subject matter expert for the job. We tell them what we expect from our website, and it is then their job to develop the entire backend of the website by tools like web designing, creation of APIs and coding,”
Rahul Mohata co-founder of 121policy.com
He further adds, “It is not financially viable to hire individual professionals or train in-house employees with technology. At the same time, it is not safe to outsource resources from a vendor. Having a partnership with Xelpmoc, keeps us secured as the main agenda is the growth of the company. In addition to that, we get the technological prowess that Xelpmoc offers. We get live feedback on a daily basis which adds value to the firm and ensures efficiency.”
Anjani Mandal, co-founder of 4tigo–a logistical platform that connects the truck network and fleet owners technologically– says that Xelpmoc is “An integral part of all matters that have a technology manifestation – essentially in most facets.” They have also helped the company in “Architecting, Designing, User Interface, Application Development – on mobile & the web – for all category of users in the Road Transportation Industry”. Anjani has also expressed that since the beginning of their association in October 2015, he has been recommending Xelpmoc to other entrepreneurs all the time.
Intellibuzz, an AI-based Telecom Robo Adviser, is a startup that is in the process of being incubated by Xelpmoc. Pranay Sanghavi, co-founder of the startup, in an interview with the Big Indian, said, “Tech in itself can be developed by many companies, but why we were eager to be partnered with them is due to the massive intangibles they bring to the table–stuff we don’t even know, the unknown unknowns, like robustness in a scalable architecture, resistance to security attacks, the accommodation of multi-dimensionality of things in a venture, etc.
So how does Xelpmoc decide which startup to invest in?
“One good thing or a bad thing about Xelpmoc is that everything is predestined,” marks Sandipan. At Xelpmoc, the sectors to be invested are already decided. One can discern about them from their website.
“If an entrepreneur comes to us with an idea of a dog shampoo, we wouldn’t approve of it. While someone comes up with an idea of solar farming, we would be interested and go ahead to discuss the deliverables”.
What is the process of selection like?
Once an entrepreneur approaches Xelpmoc with a business plan, the team reviews the idea and analyses its feasibility. This could take about few weeks or months depending on the team’s convenience. The criteria normally are:
- If there is a need for the product or service in the market.
- If it adds to the country’s GDP.
- If it comes under the sectors they have already chosen.
After the company decides to go ahead with the product, the company discusses the commercials with the entrepreneur. The company undertakes a back calculation based on man-months required and arrives at a contract price value. This is further split into a cash component and stake component. These calculations are done by keeping in mind the ESOP (employee stock ownership plan) that would be given to the allotted tech-team.
However, not all startups go through the same process. “It depends on the entrepreneur,” says Srinivas Koora.
So what is the structure of a tech-team allotted to a startup by Xelpmoc?
Xelpmoc follows a model of verticals and horizontals. ‘Verticals’ are members of the project team that work closely with the project i.e the enterprise. They are a set of team members that work over a long period of time. The responsibility of the verticals is to take care of all the operations on the technological front.
The entrepreneur issues work orders to verticals to solve problems. On the other hand, horizontals are the ones who undertake specialised functions such as data warehousing, designing and other jobs that do not require their presence in the project on a daily basis. They move across projects.
“There are times when the tech team that we have allotted to a particular venture, gets emotionally attached to the firm. At Xelpmoc they have the choice to stay with that enterprise or join us back,” says Jaison Jose.
How many employees does Xelpmoc have?
Xelpmoc currently has a team of 80 technological professionals. Out of which a segment consists of senior members and the rest comprises junior members.
Xelpmoc also has a development centre in Bangalore and an R&D centre in Kolkata.
On speaking of the team Jaison says, “As an ethos, we believe in picking up fresh graduates with great attitudes, passion and human value. We pose more importance on these aspects than experience. This model works for us.”
“We also have senior members who have worked in a variety of environments. Some have worked in Microsoft, Yahoo, Bing news and other MNC’s. All of these professionals come in at a discount to market. This is because they believe in the cause and also in the strong ESOP that is attached to the job. Though we pay a premium to fresh graduates i.e. junior management but the senior management come in at a discount of almost 50%.”, he adds.
What do entrepreneurs think about Xelpmoc?
The Big Indian approached a few well-established entrepreneurs (coming from a tech and non-tech background) working on tech startups, to understand what were their thoughts on Xelpmoc and if given the opportunity to be incubated by Xelpmoc, would they accept it?
Ashissh Raichura who runs a medical equipment manufacturing firm under the name of ‘Scanbo’ feels “The idea is very good. I have seen a lot of entrepreneurs who come from a non-tech background struggle for years. The reason is that they struggle with technology and the scale, they don’t get the right advice, the right mentors and the right resources. So, a company like Xelpmoc is a boon for such entrepreneurs. I am not sure how much time and effort they would render to each startup but knowing that Sandipan Chattopadhyay as the co-founder, they would be taking care of all that. He is a gem when it comes to technology. But if you are a tech company i.e. if your core business idea is technology like mine, I do not believe it would appropriate to outsource technology from somewhere else, because that would be your core strength.”
On being asked if ‘eBZaar’ would like to be incubated by a company like Xelpmoc, Viral Thakker says, “It would be of great help to us. In these last couple of years of setting up a business and being associated with various entrepreneurs, I have realised that it’s not only me but there are also other startups who face a gap as far as technology is concerned. Everyone is on the lookout for a CPO or a tech co-founder. It has been a consistent pain to develop a great tech team. So I believe Xelpmoc would be a big differentiator, who can not only provide a tech team but also strategically advise the firm and help build a more acceptable and robust product for the enterprise.”
Xelpmoc’s risk factor
“We do not make supernormal returns. We focus on a highly sophisticated, well balanced and a high yield business model. We face low risk as we are hedged across sectors. So the total failure is minimal. We give better-than-normal returns and may outperform the Sensex but we do not see a 2x-3x increase. Our model is based on an ecosystem building initiative and hence we need to keep a long-term perspective.” expressed Sandipan.
According to the chart, in a positive scenario, a typical company which gets funded by a VC/Incubator, let’s say the VC-funded begins to grow exponentially. After a period of time, it plateaus and starts to decline. On the other hand, the profits of Xelpmoc is relatively lower when the VC-funded company is growing exponentially.
However, Xelpmoc outperforms theVC-funded company when it starts to decline. This is due to Xelpmoc’s steady growth model.
In a negative situation, the VC-funded company makes way more losses than the Xelpmoc-funded one. This is because it has hedged itself through sectors.
“We do not make severe losses because of the overall theme that the salvage value of the elements would be recoverable. You are looking at 24 projects, but we are seeing 134 components that are being reused and repurposed all the time.”
On speaking of the success rate, Xelpmoc claims that five of the 11 companies that they have incubated have already raised seed funding or have gone through Series A funding. (This information has been verified by the Big Indian)
Moreover, Xelpmoc claims that along with providing a tech team they have also invested hard cash into their startups though the funding has not exceeded Rs 1 Cr in each startup. However, they’ve also told the Big Indian that the value of the equity they hold right now is worth approximately $5mn (The startups themselves have had valuations of more than $40mn).
If it’s true, this underlines the massive returns that Xelpmoc has earned by investing in startups.
This also shows that the cost of running their entire tech operations is actually overshadowed by the value of the equity they hold.
Is there any competition for Xelpmoc?
On being asked about competition, Sandipan says that they have not encountered any firm that uses the same business models as Xelpmoc’s. However, Xelpmoc hopes that in the near future, organisations having the same business model as theirs emerge, as this would stimulate the economy.
“The saddest part of our system is having to say ‘no’ to an aspiring great entrepreneur. At Xelpmoc we plan to change this”, says Sandipan. Talking about their future plans they add, “Our goal is to incubate 24 companies in the next three years”.
A company like Xelpmoc which aims at eradicating such limitations for the entrepreneur is a welcome initiative.
Which is why Xelpmoc is indeed the beginning of an evolution.
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