In this episode, Surendra Varma, the founder and CEO of Emgage, shares insights into their journey of scaling from zero to 100 customers by offering virtual HR services alongside their HR software.
Here’s what you’ll discover in this insightful conversation:
- Introduction to Emgage: Get acquainted with Emgage, a virtual HR platform designed to cater to the needs of startups and MSMEs. Surendra Varma shares the company’s vision of simplifying HR management for growing organizations.
- Identifying Market Gaps: Learn how Emgage identified the challenges faced by startups and MSMEs in implementing traditional HRMS solutions due to lack of resources and expertise, leading to the inception of their holistic ecosystem approach.
- Product and Service Offering: Understand Emgage’s unique proposition of combining HR software with consulting services to provide end-to-end HR solutions. Discover how their platform assists clients in setting up HR departments, managing HR operations, and digitalizing HR processes.
- Customer Base and Revenue: Surendra reveals that Emgage has acquired close to 200 paying customers, with an average deal size ranging from $1,200 to $1,500 per year per customer. Emgage primarily targets organizations with around 20 to 25 employees facing HR management challenges.
- Sales and Growth Strategy: Explore Emgage’s sales approach, which involves a mix of inbound digital marketing efforts and outbound sales outreach. Learn about their short sales cycle of around two weeks and the importance of consultative selling in demonstrating value to potential customers.
- Customer Acquisition Channels: Discover how Emgage leverages digital presence, SEO, content marketing, and referrals to attract customers. Surendra discusses their focus on targeting startups and MSMEs in the Indian market due to its significant growth potential.
- Funding and Team Structure: Gain insights into Emgage’s funding journey, with an initial investment of $200,000 from angel investors. Learn about their team of 40 members, comprising experienced professionals in sales, tech, customer success, and HR services.
- Vision for the Future: Surendra shares Emgage’s vision of becoming a comprehensive HR ecosystem, offering solutions for all employee and employer-related challenges. The company aims to continue scaling its customer base and ARR, focusing on serving the zero to 500 employee segment.
Transcript
Hello, everyone. Welcome to the B2B SaaS podcast. I'm your host, Upendra Verma. And today we have Surendra with us. Surendra here is the founder and CEO of a company called M Gage. Hey Surendra, welcome to the show.
Surendra Varma:Thank you. Thank you for having me. So,
Upendra Varma:Surendra, so let's try to understand, right? So what M Gage does and right, why our customers are willing to pay you money.
Surendra Varma:uh, so engages basically. So how do we project is engages basically a virtual HR platform. So, uh, so initially when we started, we started with the vision of building HRMS platform. Uh, uh, and we realized that, uh, you know, in, in, in very quick time saying that. Uh, the segment that we're actually catering to which is startup and MSMEs, the biggest challenge that they had in terms of implementing these HRMS problem because implementing HRMS system because what happens is the data says that 70 percent of companies don't even have HR departments. 90 percent of HRMS implementation fails because of the vulnerability of the HR resources and the maturity of the HR resources are managing that implementation. And we saw a big, uh, Gap in terms of what HR companies are doing versus what customers were looking, especially in the startup and SME segment, we said that, why don't we kind of create an entire ecosystem and, you know, help them right from, you know, in terms of setting up them to get the right HR department to give them HR resources to manage their HR and then ultimately digitalize Right. So, so, so what we do is we take the entire the customer, uh, through the entire journey right from first stage in terms of setting up the HR department to kind of help them in terms of, uh, giving the virtual HR managers who are qualified HR managers to run their HR departments. And then, of course, everything of this happens on the platform. So, so we kind of do things end to end, uh, and that's what primarily,
Upendra Varma:it's, it's software and services packaged together that
Surendra Varma:Correct. So, yeah. So, you know, somebody, when I was talking to someone, uh, you know, they taught, they, they were asking about what is SAS, right. And, and, and a lot of people say that it is software as a services, right. And, uh, you know, what I realized is hard time is in SAS, everything starts software, but ends with service. Right. So, so that is something which is pretty hard to kind of, uh, understand and but, but what makes customer to stick with you is the services at the end of the day, right? Of course, you will have to have a great product to kind of serve some of them, some of your customers. But then what matters at the end of the day, especially in the startup and MSME segment is, is the service.
Upendra Varma:sell. So I want to deep dive a lot, a lot, a lot into it, right? So I just want to understand how this is all structured, but before that, I just want to get a sense of. Who you're primarily selling this particular package to, right? So like, just talk about your customer base, right? How many paying customers do you have on your platform today?
Surendra Varma:So we've got close to 200 paying customers,
Upendra Varma:And, and what sort of customers are these? Like, and, and I'm just strictly trying to understand, right? So what sort of deals are we talking about? Right. So is it like a 10,
Surendra Varma:Yeah, so no, so we are not we are not that big in terms of deal size.
Upendra Varma:000
Surendra Varma:Our average, you know, deal size is is is I would say in terms of one customer average out, I would say somewhere around 1200 to 1500 per year. Yeah, per year with say employee base of around say 20 people. Okay. Uh, so, so our ICP, I would say that, you know, when I say my ideal customer profile is companies, which are say around 20, 25 people organization. Right. They, they have validated their product ideas, they validated their organization. Now they're at a scale where they are looking, the, the founders are facing challenging in terms of managing the people. They don't have any now hr. So far, the founders are managing the HR and now they feel that now they wanna grow and they, they rob things in their plate they cannot manage, and they're not expert in terms of managing HR is where they, they probably, they're the kind of ideal customer for us, and then we take them through the entire journey of. Setting up HR to kind of managing their entire HR, freeing them up from the HR operational hassle from day to day so that they can focus on business and we can become their HR arm or extended HR
Upendra Varma:sense.
Surendra Varma:arm to kind of do everything on the platform.
Upendra Varma:So help me understand this for a typical thousand dollar deal that you would do with your ideal customer, right? So how do you, you know, provide these services or consulting services, right? So like how many people from your team typically engage with them? Like, how does that resourcing work here?
Surendra Varma:So what happens is the biggest challenge, uh, uh, in HRC, a lot of times what happens, startups and Amazon, we think that HR is a one person job. I'll give you a very typical example of a marketing team. So if you want to create a marketing team, right? Marketing Is a combination of multiple skills, for example, you have to when you want to build a marketing team, you'll have to kind of have a team of people who are expert in SEO, people who can do graphic, people who can build website, people who can write content, right? People who can do digital marketing, right? So these are all combination of four or five skills. You cannot expect that one person to do everything. Similarly, what happens is in HR, you expect one person to do everything right, right from recruitment, onboarding, managing payroll, compliances, employee engagement, talent management, not possible,
Upendra Varma:Yeah.
Surendra Varma:right? And what we do is like what and how we've been able to do it and you know, keep keep the entire service offering at a very decent price so that it doesn't actually, you know, hit. Uh, SMEs and startups so that they don't need to even, you know, think twice to kind of outsource this, uh, is because we have kind of built up, you know, practices within the organization saying that we have one team, which does onboarding, we have one team, which basically does payroll. And then, so you have one. Uh, account manager or say we say that virtual HR manager who is responsible to communicate with you. But in back end, there is a team which does, which is actually, uh, you know, expert in doing what they do, right? So we have compliance expert, we have payroll expert,
Upendra Varma:Teams, you know, specializing in those particular aspects and they're serving multiple customers across their various use
Surendra Varma:correct. And then of course, the tool helps us to kind of, uh, reduce a lot of manual work
Upendra Varma:And so can I, can I, I'm just saying to get some numbers here, right? So how, like, how does this arrangement work? Right. So like my question is like, for example, a typical, you know, HR consultant that you have on your payroll, right? How many customers do they typically serve? And I mean, just divide by total customers, but you know, maybe the total number of people that just to get a sense of, you know, how that's scaling. Well,
Surendra Varma:correct. So, so ideally, how do we, so rather than, you know, getting into a number of customers, we kind of map it with the number of users. Right. So we say that we say that one, uh, you know, a virtual HR manager should ideally handle anywhere between 250 to 300 employees, uh, with one, uh, extended help. Right. And, and we ensure that, you know, the, the ARPU, which is, uh, average revenue per user is decent enough to, so that we at least have, you know, 60, 70 percent margins.
Upendra Varma:That's, that's like 10 customers that I'm hearing, right? So two people working for like, if your, that's, if your ideal customer is around, you know, 20, 25, you know, users on your platform, like 10 customers. But this looks like, you know, less of us consulting services. And it looks like more like a customer success manager that I typically hear, you know, SaaS companies have, like they have them, right? So, so what's, what's the thought process for you, right. To sort of, you know, package this, you know, software and services together. Like, and do you do, do you just sell the software itself or you don't do that?
Surendra Varma:No, we do. We do. We also sell softwares alone. Um, but we sell it to typically companies where they have mature HR teams, right? Where we see that the HR is primarily not very stable and things like that. We always push them to kind of have services because we know that even if they buy product, they are not going to, they will not be able to implement it. They will not be able to get the ROI of it. So rather than they doing it, burning their hands and we say that, you know.
Upendra Varma:Yeah, I got the sense. Right. So I think you talked about that. Right. So can you just quantify like how many people, like how many customers would just, you know, buy the software aspect of it so that I could understand your focus here,
Surendra Varma:yeah. So typically companies just 50 plus right where they have one or two HR, you know, people on site would primarily look for
Upendra Varma:what percentage of them are they, you know,
Surendra Varma:I would say out of 200, I think 50 percent of them buy software only 50 percent buy with with services.
Upendra Varma:Makes sense. So now I want to move forward, right. So in terms of, you know, your, I think we talked a lot about your customer base. Right. So just help me understand that. So where are you getting all of these customers from strictly from a top of funnel growth perspective, where are they discovering Engage?
Surendra Varma:Right. So there are two aspects. One, of course, is we, we are our digital presence is quite good. So we've been trying to kind of get hold of how digitally we can, you know, probably be available whenever somebody searching for HR outsourcing, HR consulting, HRMS or solution for startup or founders. HR issues is we, we write a lot of blogs, is something which is primarily, uh, there are certain keywords that we probably would want to rank pretty well and we are ranking pretty well with whether it is virtual HR, virtual HR services, virtual HR team and things like that, uh, is, is one source. Of course, second is the referral model. Referral model, because now we have a decent set of customers and, and this is the problem which is common, right? Everyone needs it. It's like an insurance, right? Everyone needs it. But. You know, a lot of people buy it proactively, a lot of people wait for trigger, and there are certain people who would never buy
Upendra Varma:Yeah.
Surendra Varma:Right? So, so, you know, that that's how it works primarily. So, you know, every organization has this problem, right? They want to solve it. A lot of people are not aware how to solve it. So they go on Google and ask it and probably they're going to probably be available whenever they're looking for a customer reference. Yeah, I mean, you know, one of the biggest thing that we are looking at is. Customer is referring big time and you know, I think 20 percent of our business comes from customer reference. Um, and, and, and, and we are also trying to create a lot of channels, uh, you know, like incubators where a lot of startup comes in, a lot of funded startups are there, accelerator programs where you're offering them discounted, uh, you know, service offerings where Uh, we can partner and we can actually, you know, uh, get to a, you know, many startup being, you know, we're part of those accelerator program or say startup ecosystem is, is what primarily is the, uh, uh, is the idea.
Upendra Varma:Got it. So like, I'll, I'll try to ask a tough question here, right? So the past 12 months, right? So you mentioned, you know, three or four channels that I'm hearing that SEO and content marketing referrals, right? And maybe you partnering with, you know, accelerators and all of it, which one of them actually led to, you know, most of your new growth over the past 12 months.
Surendra Varma:So I think, uh, today it is more of push sales, uh, is, is what my, my, my team is reaching out. So content and, and, uh, and the outbound sales, right. As I told you, my, my. My 55, 60%, uh, business comes from push sales,
Upendra Varma:What do you mean by
Surendra Varma:as I told you already,
Upendra Varma:it's essentially you reaching out to this cold customers and is it a
Surendra Varma:uh, yes. So when I said, you know, so when, so usually what happens when we talk and tell the customer to a customer, they really love it, saying that this is what I needed, but uh, is it something that I need it urgently because it's hr, right? It's not going to impact my business. Uh, you know, because I've been managing so far. Right, so we'll have to push saying that if you don't do it, you will not be able to scale up, you know, you'll be, you'll still be doing manual things and you will probably be spending a lot of your time in terms of doing operational then focusing on core is what we'll have to push. We'll have to make them aware of these things and somebody who understands it probably buys it but most of the time it is push
Upendra Varma:Got it. Right. And then what about the sales cycle, right? So, I mean, I'm assuming it's a thousand dollar deal, right? How much, like what, what's a typical, you know, sales cycle look like? How long
Surendra Varma:or you will be surprised saying that, uh, you know, our, our average sales cycle is around maximum two weeks.
Upendra Varma:two weeks and then
Surendra Varma:if they're not buying within, if they're not buying within three, two weeks, it means they're not interested.
Upendra Varma:Got it. And what happens during these two weeks? Right. So is it you, how do you showcase your value?
Surendra Varma:So there are two things. One is, of course, uh, uh, there's a conversation which happens as a detailed demo, which happens is a detailed product demo, which happens. Uh, and, and, and there are a lot of free things that we offer saying that, you know, if you really want to build policy, these are the free tools, tips that we probably offer. So we, so people, when we think that they are not kind of interested, we start sending them certain. Thank you. free tips, free tools so that, you know, so just to help them, right. So it's, it's more about consulting sales, you know, primarily then, then going and pushing, because it's like, if you don't feel that you have a need, you will ultimately not buying it. And even if you buy it, you'll leave it beyond a point.
Upendra Varma:Okay. And you are in fact selling consulting, right? I think you can easily demonstrate the value, right? And now it's going to be working with you. Got it. That makes a lot of sense, right? So, and then just help me understand it where your customer base is primarily based out of.
Surendra Varma:We're quite spread across India, so we've been, we've been India focused as of now because we see there's a huge potential, uh, the way the startup ecosystem and M m E things are going in our country. Uh, I think, uh, you know, 40, 50% of your G D P is being driven by startup and M S M E, uh, and they are the highest job creators. Right. So, and I'm pretty bullish about the way things are growing and the way the ecosystem is growing and getting mature is. You know, this is going to be one of the largest, largest market when it comes to HR as a service.
Upendra Varma:any plans to move to, you know, us market or something like that? Because at this price point, right. I mean, if you can crack it, I mean, it's going to be in that state. I mean, you could just
Surendra Varma:Yeah, so even if we go to the US, probably, yeah, so we even if you're going to US, this is not going to be the price point, of course, right? So, but yeah, we are looking to get into a market which is getting developed. So we have set, we have started some of the partners, we have a couple of customers that we built up, we're just trying, you know, because the US is a very mature market, right?
Upendra Varma:Yeah.
Surendra Varma:And their expectation is very different. Now, when you are very mature, uh, you don't need, uh, you know, uh, certain services like this, right? When you are not mature or when you are not, you don't have skills and resources to kind of have these things. Uh, and, and when you are able to, and India is, is, is a pretty difficult market to kind of, you know, because there's no standardization when it comes to HR. US is pretty standard, right? So there you know that, you know, a one plus one is going to be two, right here, India, you know, there are, there are leaves policy, there are things like that, which is very, very customized, right? And people don't follow the complies and things like that things are getting strict. Now everything is getting online. From a taxation perspective, GST perspective. Now people have realized the importance of being structured.
Upendra Varma:Got it. And so as you talk
Surendra Varma:there is a huge potential,
Upendra Varma:Got it. Yeah. And then like best of luck on that journey as well. Right. So, and let's talk about that zero to one, right? How did it all start for you? I mean, I'm, I'm sure you didn't start on day one and say, okay, I'm going to build a HRMS platform with, you know, consulting services around that. Right. There must have been a story on how you reached here. Right. So what's, what's that story? Did you just
Surendra Varma:Correct. So I so
Upendra Varma:of that?
Surendra Varma:yeah, so I started my background is I'm basically an HR professional. So work with a lot of midsize growing organization and I've seen HR challenges getting multifolded or evolving as the organization was. So when you are 50, the problem is very different. When you're 100, the problem is very different. When you're at 500, the problem is very, very different. Right now. So HR also has to get evolved, get mature to understand what are the business challenges and then probably we'll be able to kind of Uh, create that ecosystem to help organization to grow beyond a point, right? It goes in hand in hand, right? I mean, and then, you know, while using a lot of HRMS system, I've realized that though there are a lot of HRMS players in the market, this market is cluttered. Uh, there are so many players, but what is missing is You know, in terms of so far, a lot of products have been built by IT people and been sold to HR. Uh, it was never been looked at from an HR perspective saying that what are the problems with HR people and how do you solve that and make it very simple, don't make it so complicated, right? Uh, you know, uh, and that is what we tried. So that's how it started. So I started with a recruitment firm and then got into consulting. Started considering a lot of, uh, companies. And then, you know, we were also implementing a lot of other third party products because they were, uh, you know, expecting us to implement and automate the HRMS process. Uh, and then we realized during the process implementation that this is so
Upendra Varma:so you had an agency, successful agency, you know, before this and then you eventually transitioned with, you know,
Surendra Varma:Correct. So we initially started offering services. We realized that only service is not going to help so that, you know, we started building platforms.
Upendra Varma:Mhm. Got it. And then you
Surendra Varma:That's how the journey
Upendra Varma:And then, and I'm assuming that's where you got your first few customers, right?
Surendra Varma:Oh, yes, absolutely.
Upendra Varma:Yeah. So have you raised any external funding so far to build your company?
Surendra Varma:We did. We did. So, you know, as I told you, like, I was working as part of one of the tech company, which probably came from 13 million to almost 200 million. And they're there. So one of the VPs, you know, from that organization, and the CEO of the last organization is my angel investors on board, right? And they're not just the angel investor, they are also advisors, and they They advise us because they have, they have, they've taken a journey of a company from say in 10 years from say 2 million to almost, uh, you know, 100 million.
Upendra Varma:and then how much did you raise there?
Surendra Varma:So it was around, uh, 200 K.
Upendra Varma:200 million. Got it. And yeah, and whatever, talk about the team today, right? How big of a team do you have and what do they do?
Surendra Varma:So the team size is around currently 40 people. Uh, you know, and I, we've had a pretty decent experience guys. So my sales is from a HR tech background who comes with almost 14 plus years experience. My, my tech directories is from a similar background where. He was working with Oracle building similar h c m products. Uh, my customer success head is almost 20 years experience. My HR practice team or HR services team, uh, you know, the average experience is
Upendra Varma:how many, how many in that HR services team? Approximately
Surendra Varma:We have around, uh, 15 people in HR services
Upendra Varma:That, that, that adds up. And then what's, what's the vision here? Right? So how do you get to, let's say, a hundred k r r or 500 k r r and how, how soon are you, you know, anticipating to get there?
Surendra Varma:right? So, so we are, we are just, we, we have just become, uh, you know, uh, breakeven. The idea is to now raise the next level of funds or to, you know, so, so growing set, two x three x. Is what has been we've been able to do it so far now what we are looking at to grow say, at least a text and x right and and and the vision is to kind of, uh, not approach as a company only as a HR HRMS company, you want to build an ecosystem, we want to play only in startup and MSME segment. So any company which is starting from zero to 500 is what the journey that we're looking at is primarily the the ICP that we're looking at. And we are looking to kind of build an entire ecosystem saying that Anything or everything related to employee or employer problem. Everything is available on the platform as small as employer. So employer wants to offer, say, mediclaim to or any extended help, right? Employees looking for, say, as small as help in terms of finding a house or, or, or a school admission for their kids to, to getting the loan and everything is going to be available on this platform. So we are looking to kind of make it Thank you. As a holistic ecosystem, which basically not only helps our organization to manage employees, but it helps to attract and should become a differentiator see and get should be a differentiator in organization, wherever they are implementing that's what my vision is.
Upendra Varma:Got it. Thanks. Thanks for taking the time to talk to me. Hope you scale engaged to much, much greater heights.
Surendra Varma:Thank you so much for having me I think it's pleasure, always pleasure to interact with you.
Upendra Varma:Thank you.
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