Profits, a by-product for Urban Farmer
There are tomes and tomes written about the necessity of marketing for any business. In fact, it is impossible to perceive that a business can grow without it. To grow without any promotion or marketing, from a startup to be valued at an indicative 15 – 20 million USD in seven years is huge! And that is exactly what Vijay Narayanan, founder of Urban Farmer, has done.
Really, No Marketing?
Since 2002 Vijay has been interested in growing his own vegetables. “I have been pottering around with hydroponics and microgreens for a long time. Being a finance guru, farming as a profession seemed highly unlikely. But in 2016, I realized that the finance industry was not for me.”
Since hydroponics was a constant factor in his life, Vijay started studying the possibility of doing business with it. “Having been an investor, I had access to a lot of people who did market research, were biotechnologists and manufacturers.” These were the people who eventually would get involved in his new venture.
The idea of doing business for Vijay was not just profits. “Profits should be a by-product, I wanted to see what good I could do for the industry. We spent a lot of time with strategy. We did not want to be one more hydroponic consultant who will set up a farm. We wanted to work for the benefit of the industry rather than compete with existing players. The industry is too big for one guy to say that I will capture it. So, we chose to be a B2B player who will help other hydroponic players set up farms. Working for common welfare is better than saying ‘I know better than you.’
Still, how did sales happen?
His personal belief dictated that he should not promote his goods. This meant that he does not undertake any sales and marketing activity for his goods and service. So how did sales happen? Says Vijay, “We had put up a website in 2017 when we launched Urban Farmer. This was meant to be our digital brochure. I guess it was the way we projected ourselves, we were not focused on a sale, we stated that this is what we wanted to do. To be of help to a farmer.”
Perhaps God helps those who want to help others. Yatin Patil from Nasik had a two-acre farm that he wanted to convert to hydroponics. He was on the lookout for the equipment and saw Vijay’s website that stated what they could do. He approached Vijay. Says Vijay, “We told him very honestly that we could not set up all two acres at one go since we had never done it before, but if he was interested, we could help him with 2000 sq ft to start with.” Patil agreed. After the success of the small 2000 sq ft, Patil asked him to do the remaining two acres.
“We believe in attraction rather than promotion. We have our collaterals but we will never advertise. We will never say that we are the best person to do this job. We were not confident about doing two acres at the start until we did it eventually. We are continually learning. And passing on our learnings to our clients. It helps them, and so it helps us.”
The key to sales lay in the alternative that his clients have. Which is buying from some seller in China at an exorbitant price and not having any person to go to after-sales or buy from a local person whose product worked (Patil’s was a successful Proof of Concept) and who is answerable for it. Moreover, Vijay provided all that you needed under one roof, from aqua hardware, automation, grow lights and nutrients. This otherwise had to be bought separately from different sellers.
Word spread. People who generally sought to get their equipment imported realized that here was an Indian company that was manufacturing equipment, that gave good results and was also accountable for it. One sale led to another in a short span of less than a year, and Vijay hit about 50 Lakhs turnover.
To date, Vijay does not get into any marketing activity, no sales channels, no trade shows, nothing. Just a website and a business listing. “We spend Rs. 7,500 per annum for our website hosting. That’s it.” The business is not just about identifying a need in the market but exceeding the expectations that make the customers your promoters.
The Money Story.
Vijay invested his personal savings of Rs. 50 lakhs in his business. “I did not borrow from family or friends. I decided that I would not seek funds because that puts pressure on you and you get focused on returns which would pressurize me to change the way I do my business.”
So far, the business funds itself. “We have a net operating margin of 25 to 27%. We have an indicative value of $15-20 million but that is meaningless unless we want to sell our equity. We’ve had four VCs who wanted a stake in our company but I refused. Instead, we have invested in three agritech subsidiaries through internal cash flows.”
However, Vijay has some of his employees as stakeholders. “Since we are always learnings, doing research, from making dyes to making nutrients, to now automation. Alpesh Sondegar is a tech guy who has developed the AI and automation part. He has a small stake in the company in the sense that he gets a dividend on our profits. In case we get listed he holds a stake.”
Besides providing the requisites to hydroponic farmers, Vijay plans to plug the leaks in the industry. “The problem is that because there is no storage facility all the produce, organic, hydroponic, microgreens are sold at the same rate. No one will give a premium because no one understands what you are doing. So, we are trying to create awareness with institutional buyers in Mumbai. We explain to all large hotels how they can gain from hydroponic produce.
“We also aim to become an aggregator for all such produce. Durgesh Desai and I have started Valence where we both have a 50% stake. We want to help hydroponic farmers sell their produce which we aim to do starting with Mumbai’s large hotels. We will sell all this at a small commission. We will also start this service in Pune soon.”
From equipment, nutrients, grow lights, and advisory, to selling the produce, Urban Farmer is growing “because we want to take care of all the issues that hydroponic farmers face.” Success, it seems is a by-product for Vijay.