How we’ve Landed 200 Customers by Intelligently Bundling Virtual HR Services with our HR Software

Hello, everyone.

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Welcome to the B2B SaaS podcast.

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I'm your host, Upendra Verma.

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And today we have Surendra with us.

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Surendra here is the founder and

CEO of a company called M Gage.

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Hey Surendra, welcome to the show.

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Surendra Varma: Thank you.

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Thank you for having me.

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So,

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Upendra Varma: Surendra, so

let's try to understand, right?

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So what M Gage does and right, why our

customers are willing to pay you money.

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Surendra Varma: uh, so engages basically.

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So how do we project is engages

basically a virtual HR platform.

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So, uh, so initially when we

started, we started with the

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vision of building HRMS platform.

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Uh, uh, and we realized that,

uh, you know, in, in, in

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very quick time saying that.

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Uh, the segment that we're actually

catering to which is startup and MSMEs,

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the biggest challenge that they had

in terms of implementing these HRMS

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problem because implementing HRMS

system because what happens is the

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data says that 70 percent of companies

don't even have HR departments.

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90 percent of HRMS implementation

fails because of the vulnerability

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of the HR resources and the

maturity of the HR resources are

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managing that implementation.

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And we saw a big, uh, Gap in terms of

what HR companies are doing versus what

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customers were looking, especially in the

startup and SME segment, we said that,

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why don't we kind of create an entire

ecosystem and, you know, help them right

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from, you know, in terms of setting up

them to get the right HR department to

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give them HR resources to manage their

HR and then ultimately digitalize Right.

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So, so, so what we do is we take the

entire the customer, uh, through the

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entire journey right from first stage in

terms of setting up the HR department to

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kind of help them in terms of, uh, giving

the virtual HR managers who are qualified

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HR managers to run their HR departments.

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And then, of course, everything

of this happens on the platform.

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So, so we kind of do things end to

end, uh, and that's what primarily,

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Upendra Varma: it's, it's software

and services packaged together that

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Surendra Varma: Correct.

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So, yeah.

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So, you know, somebody, when I

was talking to someone, uh, you

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know, they taught, they, they were

asking about what is SAS, right.

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And, and, and a lot of people say that

it is software as a services, right.

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And, uh, you know, what I realized

is hard time is in SAS, everything

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starts software, but ends with service.

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Right.

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So, so that is something which is

pretty hard to kind of, uh, understand

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and but, but what makes customer

to stick with you is the services

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at the end of the day, right?

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Of course, you will have to have a

great product to kind of serve some

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of them, some of your customers.

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But then what matters at the end of

the day, especially in the startup

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and MSME segment is, is the service.

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Upendra Varma: sell.

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So I want to deep dive a lot,

a lot, a lot into it, right?

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So I just want to understand how

this is all structured, but before

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that, I just want to get a sense of.

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Who you're primarily selling this

particular package to, right?

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So like, just talk about

your customer base, right?

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How many paying customers do

you have on your platform today?

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Surendra Varma: So we've got

close to 200 paying customers,

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Upendra Varma: And, and what

sort of customers are these?

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Like, and, and I'm just strictly

trying to understand, right?

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So what sort of deals

are we talking about?

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Right.

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So is it like a 10,

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Surendra Varma: Yeah, so no, so we are not

we are not that big in terms of deal size.

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Upendra Varma: 000

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Surendra Varma: Our average, you know,

deal size is is is I would say in terms

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of one customer average out, I would say

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Yeah, per year with say employee

base of around say 20 people.

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Okay.

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Uh, so, so our ICP, I would say that,

you know, when I say my ideal customer

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profile is companies, which are say

around 20, 25 people organization.

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Right.

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They, they have validated their product

ideas, they validated their organization.

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Now they're at a scale where

they are looking, the, the

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founders are facing challenging

in terms of managing the people.

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They don't have any now hr.

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So far, the founders are managing the

HR and now they feel that now they wanna

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grow and they, they rob things in their

plate they cannot manage, and they're not

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expert in terms of managing HR is where

they, they probably, they're the kind

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of ideal customer for us, and then we

take them through the entire journey of.

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Setting up HR to kind of managing their

entire HR, freeing them up from the HR

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operational hassle from day to day so

that they can focus on business and we

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can become their HR arm or extended HR

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Upendra Varma: sense.

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Surendra Varma: arm to kind of

do everything on the platform.

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Upendra Varma: So help me understand

this for a typical thousand

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dollar deal that you would do

with your ideal customer, right?

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So how do you, you know, provide these

services or consulting services, right?

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So like how many people from your

team typically engage with them?

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Like, how does that resourcing work here?

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Surendra Varma: So what happens

is the biggest challenge, uh,

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uh, in HRC, a lot of times what

happens, startups and Amazon, we

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think that HR is a one person job.

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I'll give you a very typical

example of a marketing team.

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So if you want to create

a marketing team, right?

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Marketing Is a combination of multiple

skills, for example, you have to when you

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want to build a marketing team, you'll

have to kind of have a team of people

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who are expert in SEO, people who can do

graphic, people who can build website,

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people who can write content, right?

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People who can do

digital marketing, right?

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So these are all combination

of four or five skills.

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You cannot expect that one

person to do everything.

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Similarly, what happens is in HR, you

expect one person to do everything

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right, right from recruitment,

onboarding, managing payroll,

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compliances, employee engagement,

talent management, not possible,

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Upendra Varma: Yeah.

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Surendra Varma: right?

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And what we do is like what and how

we've been able to do it and you

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know, keep keep the entire service

offering at a very decent price so that

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it doesn't actually, you know, hit.

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Uh, SMEs and startups so that they

don't need to even, you know, think

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twice to kind of outsource this,

uh, is because we have kind of built

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up, you know, practices within the

organization saying that we have one

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team, which does onboarding, we have

one team, which basically does payroll.

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And then, so you have one.

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Uh, account manager or say we say

that virtual HR manager who is

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responsible to communicate with you.

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But in back end, there is a team which

does, which is actually, uh, you know,

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expert in doing what they do, right?

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So we have compliance expert,

we have payroll expert,

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Upendra Varma: Teams, you know,

specializing in those particular

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aspects and they're serving multiple

customers across their various use

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Surendra Varma: correct.

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And then of course, the tool helps us to

kind of, uh, reduce a lot of manual work

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Upendra Varma: And so can

I, can I, I'm just saying to

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get some numbers here, right?

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So how, like, how does

this arrangement work?

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Right.

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So like my question is like, for example,

a typical, you know, HR consultant

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that you have on your payroll, right?

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How many customers do

they typically serve?

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And I mean, just divide by total

customers, but you know, maybe the total

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number of people that just to get a

sense of, you know, how that's scaling.

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Well,

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Surendra Varma: correct.

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So, so ideally, how do we, so

rather than, you know, getting into

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a number of customers, we kind of

map it with the number of users.

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Right.

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So we say that we say that one,

uh, you know, a virtual HR manager

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should ideally handle anywhere

between 250 to 300 employees,

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uh, with one, uh, extended help.

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Right.

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And, and we ensure that, you know,

the, the ARPU, which is, uh, average

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revenue per user is decent enough

to, so that we at least have,

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you know, 60, 70 percent margins.

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Upendra Varma: That's, that's like

10 customers that I'm hearing, right?

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So two people working for like, if

your, that's, if your ideal customer is

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around, you know, 20, 25, you know, users

on your platform, like 10 customers.

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But this looks like, you know,

less of us consulting services.

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And it looks like more like a customer

success manager that I typically

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hear, you know, SaaS companies

have, like they have them, right?

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So, so what's, what's the

thought process for you, right.

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To sort of, you know, package this, you

know, software and services together.

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Like, and do you do, do you just sell

the software itself or you don't do that?

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Surendra Varma: No, we do.

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We do.

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We also sell softwares alone.

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Um, but we sell it to typically companies

where they have mature HR teams, right?

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Where we see that the HR is primarily

not very stable and things like that.

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We always push them to kind of have

services because we know that even if

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they buy product, they are not going to,

they will not be able to implement it.

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They will not be able

to get the ROI of it.

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So rather than they doing it, burning

their hands and we say that, you know.

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Upendra Varma: Yeah, I got the sense.

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Right.

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So I think you talked about that.

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Right.

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So can you just quantify like how

many people, like how many customers

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would just, you know, buy the

software aspect of it so that I

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could understand your focus here,

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Surendra Varma: yeah.

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So typically companies just 50 plus right

where they have one or two HR, you know,

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people on site would primarily look for

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Upendra Varma: what percentage

of them are they, you know,

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Surendra Varma: I would say out of 200,

I think 50 percent of them buy software

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only 50 percent buy with with services.

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Upendra Varma: Makes sense.

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. So now I want to move forward, right.

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So in terms of, you know, your, I think

we talked a lot about your customer base.

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Right.

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So just help me understand that.

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So where are you getting all of

these customers from strictly from

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a top of funnel growth perspective,

where are they discovering Engage?

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Surendra Varma: Right.

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So there are two aspects.

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One, of course, is we, we are our

digital presence is quite good.

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So we've been trying to kind of

get hold of how digitally we can,

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you know, probably be available

whenever somebody searching for HR

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outsourcing, HR consulting, HRMS or

solution for startup or founders.

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HR issues is we, we write a lot of

blogs, is something which is primarily,

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uh, there are certain keywords that we

probably would want to rank pretty well

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and we are ranking pretty well with

whether it is virtual HR, virtual HR

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services, virtual HR team and things

like that, uh, is, is one source.

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Of course, second is the referral model.

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Referral model, because now we have a

decent set of customers and, and this

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is the problem which is common, right?

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Everyone needs it.

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It's like an insurance, right?

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Everyone needs it.

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But.

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You know, a lot of people buy

it proactively, a lot of people

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wait for trigger, and there are

certain people who would never buy

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Upendra Varma: Yeah.

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Surendra Varma: Right?

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So, so, you know, that that's

how it works primarily.

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So, you know, every organization

has this problem, right?

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They want to solve it.

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A lot of people are not

aware how to solve it.

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So they go on Google and ask it and

probably they're going to probably

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be available whenever they're

looking for a customer reference.

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Yeah, I mean, you know, one of the

biggest thing that we are looking at is.

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Customer is referring big time and

you know, I think 20 percent of our

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business comes from customer reference.

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Um, and, and, and, and we are also trying

to create a lot of channels, uh, you know,

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like incubators where a lot of startup

comes in, a lot of funded startups are

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there, accelerator programs where you're

offering them discounted, uh, you know,

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service offerings where Uh, we can partner

and we can actually, you know, uh, get to

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a, you know, many startup being, you know,

we're part of those accelerator program

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or say startup ecosystem is, is what

primarily is the, uh, uh, is the idea.

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Upendra Varma: Got it.

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So like, I'll, I'll try to ask

a tough question here, right?

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So the past 12 months, right?

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So you mentioned, you know, three or

four channels that I'm hearing that SEO

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and content marketing referrals, right?

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And maybe you partnering with, you know,

accelerators and all of it, which one of

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them actually led to, you know, most of

your new growth over the past 12 months.

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Surendra Varma: So I think, uh, today

it is more of push sales, uh, is, is

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what my, my, my team is reaching out.

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So content and, and, uh, and

the outbound sales, right.

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As I told you, my, my.

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My 55, 60%, uh, business

comes from push sales,

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Upendra Varma: What do you mean by

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Surendra Varma: as I told you already,

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Upendra Varma: it's essentially

you reaching out to this

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cold customers and is it a

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Surendra Varma: uh, yes.

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So when I said, you know, so when, so

usually what happens when we talk and

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tell the customer to a customer, they

really love it, saying that this is what

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I needed, but uh, is it something that I

need it urgently because it's hr, right?

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It's not going to impact my business.

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Uh, you know, because

I've been managing so far.

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Right, so we'll have to push saying that

if you don't do it, you will not be able

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to scale up, you know, you'll be, you'll

still be doing manual things and you will

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probably be spending a lot of your time in

terms of doing operational then focusing

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on core is what we'll have to push.

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We'll have to make them aware

of these things and somebody who

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understands it probably buys it

but most of the time it is push

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Upendra Varma: Got it.

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Right.

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And then what about

the sales cycle, right?

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So, I mean, I'm assuming it's

a thousand dollar deal, right?

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How much, like what, what's a typical,

you know, sales cycle look like?

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How long

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Surendra Varma: or you will be

surprised saying that, uh, you

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know, our, our average sales

cycle is around maximum two weeks.

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Upendra Varma: two weeks and then

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Surendra Varma: if they're not

buying within, if they're not

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buying within three, two weeks,

it means they're not interested.

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Upendra Varma: Got it.

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And what happens during these two weeks?

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Right.

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So is it you, how do

you showcase your value?

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Surendra Varma: So there are two things.

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One is, of course, uh, uh, there's

a conversation which happens as a

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detailed demo, which happens is a

detailed product demo, which happens.

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Uh, and, and, and there are a lot

of free things that we offer saying

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that, you know, if you really want

to build policy, these are the free

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tools, tips that we probably offer.

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So we, so people, when we think that

they are not kind of interested,

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we start sending them certain.

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Thank you.

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free tips, free tools so that, you

know, so just to help them, right.

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So it's, it's more about consulting

sales, you know, primarily then, then

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going and pushing, because it's like,

if you don't feel that you have a need,

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you will ultimately not buying it.

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And even if you buy it, you'll

leave it beyond a point.

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Upendra Varma: Okay.

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And you are in fact

selling consulting, right?

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I think you can easily

demonstrate the value, right?

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And now it's going to be working with you.

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Got it.

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That makes a lot of sense, right?

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So, and then just help me

understand it where your customer

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base is primarily based out of.

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Surendra Varma: We're quite spread

across India, so we've been, we've

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been India focused as of now because

we see there's a huge potential, uh,

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the way the startup ecosystem and M

m E things are going in our country.

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Uh, I think, uh, you know, 40,

50% of your G D P is being driven

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by startup and M S M E, uh, and

they are the highest job creators.

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Right.

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So, and I'm pretty bullish

about the way things are growing

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and the way the ecosystem is

growing and getting mature is.

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You know, this is going to be one

of the largest, largest market

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when it comes to HR as a service.

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Upendra Varma: any plans to move to, you

know, us market or something like that?

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Because at this price point, right.

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I mean, if you can crack it, I mean,

it's going to be in that state.

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I mean, you could just

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Surendra Varma: Yeah, so even if we go

to the US, probably, yeah, so we even

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if you're going to US, this is not going

to be the price point, of course, right?

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So, but yeah, we are looking to get into

a market which is getting developed.

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So we have set, we have started some

of the partners, we have a couple

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of customers that we built up, we're

just trying, you know, because the

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US is a very mature market, right?

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Upendra Varma: Yeah.

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Surendra Varma: And their

expectation is very different.

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Now, when you are very mature, uh,

you don't need, uh, you know, uh,

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certain services like this, right?

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When you are not mature or when you

are not, you don't have skills and

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resources to kind of have these things.

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Uh, and, and when you are able to, and

India is, is, is a pretty difficult market

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to kind of, you know, because there's

no standardization when it comes to HR.

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US is pretty standard, right?

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So there you know that, you know, a one

plus one is going to be two, right here,

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India, you know, there are, there are

leaves policy, there are things like that,

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which is very, very customized, right?

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And people don't follow the

complies and things like that

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things are getting strict.

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Now everything is getting online.

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From a taxation perspective,

GST perspective.

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Now people have realized the

importance of being structured.

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Upendra Varma: Got it.

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And so as you talk

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Surendra Varma: there is a huge potential,

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Upendra Varma: Got it.

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Yeah.

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And then like best of luck

on that journey as well.

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Right.

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So, and let's talk about

that zero to one, right?

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How did it all start for you?

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I mean, I'm, I'm sure you didn't start

on day one and say, okay, I'm going

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to build a HRMS platform with, you

know, consulting services around that.

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Right.

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There must have been a story

on how you reached here.

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Right.

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So what's, what's that story?

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Did you just

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Surendra Varma: Correct.

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So I so

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Upendra Varma: of that?

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Surendra Varma: yeah, so I

started my background is I'm

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basically an HR professional.

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So work with a lot of midsize

growing organization and I've seen

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HR challenges getting multifolded

or evolving as the organization was.

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So when you are 50, the

problem is very different.

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When you're 100, the

problem is very different.

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When you're at 500, the problem

is very, very different.

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Right now.

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So HR also has to get evolved, get

mature to understand what are the

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business challenges and then probably

we'll be able to kind of Uh, create

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that ecosystem to help organization

to grow beyond a point, right?

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It goes in hand in hand, right?

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I mean, and then, you know, while using

a lot of HRMS system, I've realized that

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though there are a lot of HRMS players

in the market, this market is cluttered.

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Uh, there are so many players, but

what is missing is You know, in terms

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of so far, a lot of products have been

built by IT people and been sold to HR.

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Uh, it was never been looked at from

an HR perspective saying that what are

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the problems with HR people and how do

you solve that and make it very simple,

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don't make it so complicated, right?

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Uh, you know, uh, and

that is what we tried.

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So that's how it started.

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So I started with a recruitment

firm and then got into consulting.

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Started considering a

lot of, uh, companies.

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And then, you know, we were also

implementing a lot of other third

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party products because they were, uh,

you know, expecting us to implement

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and automate the HRMS process.

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Uh, and then we realized during the

process implementation that this is so

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Upendra Varma: so you had an

agency, successful agency, you know,

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before this and then you eventually

transitioned with, you know,

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Surendra Varma: Correct.

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So we initially started offering services.

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We realized that only service is

not going to help so that, you

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know, we started building platforms.

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Upendra Varma: Mhm.

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Got it.

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And then you

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Surendra Varma: That's how the journey

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Upendra Varma: And then, and I'm

assuming that's where you got

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your first few customers, right?

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Surendra Varma: Oh, yes, absolutely.

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Upendra Varma: Yeah.

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So have you raised any external

funding so far to build your company?

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Surendra Varma: We did.

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We did.

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So, you know, as I told you, like,

I was working as part of one of the

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tech company, which probably came

from 13 million to almost 200 million.

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And they're there.

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So one of the VPs, you know, from

that organization, and the CEO

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of the last organization is my

angel investors on board, right?

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And they're not just the angel investor,

they are also advisors, and they They

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advise us because they have, they have,

they've taken a journey of a company

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from say in 10 years from say 2 million

to almost, uh, you know, 100 million.

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Upendra Varma: and then how

much did you raise there?

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Surendra Varma: So it

was around, uh, 200 K.

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Upendra Varma: 200 million.

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Got it.

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And yeah, and whatever, talk

about the team today, right?

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How big of a team do you

have and what do they do?

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Surendra Varma: So the team size

is around currently 40 people.

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Uh, you know, and I, we've had

a pretty decent experience guys.

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So my sales is from a HR tech

background who comes with

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almost 14 plus years experience.

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My, my tech directories is from

a similar background where.

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He was working with Oracle

building similar h c m products.

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Uh, my customer success head

is almost 20 years experience.

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My HR practice team or HR services team,

uh, you know, the average experience is

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Upendra Varma: how many, how

many in that HR services team?

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Approximately

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Surendra Varma: We have around,

uh, 15 people in HR services

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Upendra Varma: That, that, that adds up.

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And then what's, what's the vision here?

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Right?

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So how do you get to, let's say, a hundred

k r r or 500 k r r and how, how soon are

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you, you know, anticipating to get there?

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Surendra Varma: right?

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So, so we are, we are just, we, we have

just become, uh, you know, uh, breakeven.

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The idea is to now raise the next

level of funds or to, you know,

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so, so growing set, two x three x.

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Is what has been we've been able to

do it so far now what we are looking

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at to grow say, at least a text and

x right and and and the vision is to

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kind of, uh, not approach as a company

only as a HR HRMS company, you want

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to build an ecosystem, we want to

play only in startup and MSME segment.

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So any company which is starting

from zero to 500 is what the journey

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that we're looking at is primarily

the the ICP that we're looking at.

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And we are looking to kind of build

an entire ecosystem saying that

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Anything or everything related

to employee or employer problem.

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Everything is available on the

platform as small as employer.

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So employer wants to offer, say,

mediclaim to or any extended help, right?

430

Employees looking for, say, as small as

help in terms of finding a house or, or,

431

or a school admission for their kids to,

to getting the loan and everything is

432

going to be available on this platform.

433

So we are looking to kind

of make it Thank you.

434

As a holistic ecosystem, which

basically not only helps our

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organization to manage employees, but it

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helps to attract and should

become a differentiator see and

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get should be a differentiator in

organization, wherever they are

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implementing that's what my vision is.

439

Upendra Varma: Got it.

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Thanks.

441

Thanks for taking the time to talk to me.

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Hope you scale engaged to

much, much greater heights.

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Surendra Varma: Thank you so much

for having me I think it's pleasure,

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always pleasure to interact with you.

445

Upendra Varma: Thank you.

446

Thanks for watching the

B2B SAS Podcast channel.

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Please make sure to subscribe

to the channel here.