Three Idiots & Hyderabadi Biryani

The novices had two options: dance with the devil or swim with the sharks. The non-swimmers — Jayant, Chaitanya and Rohit — decided to jump into the red ocean…

Only idiots could have ignored the warning sign. It was written in bold and caps: DANGER. SHARK ZONE. ENTER AT YOUR OWN RISK. “Why are you guys doing this? You are going to be ripped apart by the sharks,” cautioned scores of well-wishers. “It’s a red ocean,” they tried to instill fear in the minds and hearts of the greenhorns. “There is only blood.”

Only knuckleheads could have exhibited their bravado. The well-established conventional wisdom was clear: DREAMS OF THE TECH STARTUPS COME TRUE IN BENGALURU. CHENNAI IS ALSO OKAY. BUT HYDERABAD. REALLY??? “Are you building HR tech or biryani tech,” mocked a pack of naysayers.

Only daydreamers would have dared to lovingly embrace a nightmare. Well, disrupting a fossilised HR industry was nothing less than a nightmare! There was no place for investment bankers, consultants, and novices.

Only zealots could have exhibited extreme levels of naivety. There was an acute pain point, there was an opportunity to create something big, and there was a brilliant solution that could have ended the headache and heartache of the companies in one go. However, there was something that inhibited the legacy companies. “HOW CAN WE TRUST ROOKIES? WHAT IF YOU FOLD UP TOMORROW,” was the concern, fear, and valid apprehension.

Only disruptors could have thought of disrupting themselves. The unwritten SaaS rule was: START WITH AMERICA. BUILD FOR THE US MARKETS. “You guys are starting with Asia? What are you smoking,” exclaimed industry experts who were aghast at the outrageous move to start the entrepreneurial innings by bypassing the US.

Yes, back in 2015, three friends — Chaitanya Peddi, Rohit Chennamaneni, and Jayant Paleti — were daydreamers, knuckleheads, disruptors, zealots, and idiots. They went against the grain, they defied norms, they confronted formidable odds and yes, they dared to have immense conviction in their dream. But to understand the story of three ‘conservative South Indians,’ we need to rewind and go back to 2010.

Bank Account, Do Something

It was the graduation day of Jayant Paleti, and his parents were at IIM Lucknow for the ceremony. What, though, made the day more than special was a priceless gift that the IIT Madras alum got from his father. “I had a humble childhood,” confessed the doting father who grew up in Tenali — yes, the same village in Andhra Pradesh where Tenali Rama was born — toiled hard but was inhibited by the circumstances to grab the opportunities that came his way.

The father was overwhelmed by the occasion. “My childhood defined me,” he shared the reality of his life. “I was not able to take risks,” rued the patriarch who wanted his son to be enterprising and bold enough to take ample risks. So, the wise man offered him a ‘parachute.’ “I am gifting you a bank account, which has a decent amount in it,” he told his son. “Don’t be like me. Go take some risks and do something with your life,” he urged Jayant. “Even if you blow it up, I won’t ask a question. But do something,” he reiterated.

Jayant stayed mum. The touching gesture moved the son. He too wanted to be on his own. “I wanted to start with a big idea and started scouting for it,” he recalls. Ironically, as the open-ended search dragged on, the message of his father inadvertently got safely parked in the subconscious mind of the young grad who joined Deloitte in May 2010. A year later, the finance grad from IIM joined EY as part of its M&A and private equity funding team. Months lapsed, and a busy banker life proceeded for four more years.

Then one fine day in 2015, something happened at the smoking zone of Jayant’s office. The subconscious search — remember, it all started in 2010 — ended abruptly, and Jayant decided to discuss the idea with his colleague Chaitanya Peddi, another engineer who went on to complete his MBA in HR (human resource) from XLRI Jamshedpur and was content with his ‘resourceful’ life. “What do you think about this idea,” Jayant continued with his conversation.

Before we continue to narrate how the conversation panned out, it’s essential to visualise how ‘smoking zones’ look. The area is less noisy, smokers enjoy their impromptu ritual, punctuate their drag with hyphens, ‘hmm,’ ‘um’ and ‘well,’ and the space is full of smoke rings. And for the non-smokers like Jayant and Chaitanya, who were just looking for a secluded space to talk, the air could be suffocating. But it’s not intoxicating enough to either make you giddy or fall unconscious. That’s why the way Chaitanya reacted was perplexing.

No Smoking & Laughing Gas

Now, let’s go back to the smoking zone, where Chaitanya collapsed the moment Jayant finished his pitch idea. “He just fell on the floor,” recalls Jayant. “And burst into an uncontrolled laughter,” he adds. Chaitanya couldn’t believe his ears. “What is wrong with you, JP? You want to start a venture in HR Tech. Really?” he asked. “Don’t you know that you and HR are strange bedfellows,” he erupted in guffaw again.

A few minutes later, Chaitanya highlighted another hiccup with the HR tech plan. “Enterprise HR tech is over 40-year-old category, JP. This segment has been done to death,” he made a fair point, adding that big daddies (remember sharks?) such as SAP and Oracle ruled the roost in enterprise HR tech. “How are we gonna survive,” he asked a valid question.

Meanwhile, JP aka Jayant Paleti, didn’t utter a word. He just absorbed the feedback. Yes, the segment was old. Yes, the plain-vanilla problem statement had been existing for decades. Yes, there were deeply entrenched and legacy players in the business. Yes, HR has been used to working in a particular way and was at peace with it.

JP, though, pointed out what was missing rather than what was present. What has been sorely missing was an ‘effective’ technology solution. What has been glaringly inconspicuous was software that was built on the foundation of the employee’s pain points and not just for the administrative roles. Lastly, what has been lacking was a refreshing new approach to an old problem. “I don’t think the legacy solutions or anyone else has questioned the status quo in a long time,” he said. JP was convinced that if he could rope in Chaitanya, and his childhood friend Rohit Chennamaneni — another IIM Lucknow alum who has had stints at McKinsey, Google, and P&G — then together, they could boldly swim with the sharks. “Only if we could come together,” he wished!

Two months later, God granted his wish. Chaitanya, Rohit, and Jayant started Darwinbox towards the fag end of 2015.

Roti, Kapdaa & Penthouse!

So, three Musketeers armed themselves with HR tech muskets and started their valiant march. There was only one problem, though. They had not yet decided on their base camp! Much to the chagrin of industry observers and startup veterans, Hyderabad emerged as a unanimous choice. For the trio, though, the place was a no-brainer. JP’s wife was from the city, Rohit grew up in Hyderabad, and Chaitanya’s wife too belonged to the City of Biryani. “So, we got roti, kapdaa, and penthouse,” laughs JP.

Did he say penthouse? Sorry, I have heard garage stories, but the penthouse is mind-blowing. So, what is the backstory? JP flashes his enigmatic smile and decodes the puzzle for us. His father-in-law’s penthouse (a terrace floor with a room and a bathroom) on the fifth floor of a building was vacant. “But have you checked the vastu,” asked Chaitanya. It was JP’s turn to return the laughter outburst. “Man, it’s for free, there is no rent, and you want to check vastu,” he quipped. The Vastu Man, though, did his checks, gave a go-ahead and the penthouse became the first office of Darwinbox.

But something was still missing. Chaitanya and Rohit were the first ones to identify the missing stuff. “Where is the company’s vision, mission, and values,” they asked. JP freaked out. “Bro, what are you guys talking about? Let’s get down to business,” he urged but eventually yielded. The trio walked downstairs to the ground floor (the lift was not working), carried some chairs, and then sat in a chanting circle for hours, and eventually filled in the missing parts. JP explains the seamless dynamics among the cofounders. “We are a complementary group. We disagree on things easily. But if we do, we know it is for the right reasons,” he says.

The chemistry has yet another dimension. JP explains. “Chaitanya and I are intense. We are prone to our fits of passion,” he laughs. Rohit, in contrast, is a good balancer. He always inserts logic into everything. “He is more like ‘Lord Vishnu’ who believes in preserving peace” he smiles. However, over the last eight years, JP points out, the cofounders have rubbed off on each other. “Rohit has now become a bit more like us,” he smiles.

Back in 2016, a few months into the nascent journey, the friends bumped into ‘then mighty ones,’ who had the clout to muzzle the fledgling dream of the cofounders. The big enterprises — yes, they had power, reach, and money — thought that a bunch of Johnny-come-lately was playing a prank. “You want us to trust rookies. Right? What if you shut the shop tomorrow? Who all have you worked for? Who can vouch for your credibility,” the potential buyers bombarded the freshers with searing questions.

Davids Rescue David

JP was distraught with the tepid response. He tried to add heft to his business pitch. “We compete with SAP and Oracle,” he asserted. Ther attempt, though, evoked a different kind of reaction: laughter and applause. Nobody took the bunch of boys seriously. “If you think that there is a ‘David versus Goliath’ play here, then you are living under an illusion,” said many.

The banks remained cold, the financial institutions remained indifferent, and the insurance industry asked an interesting question. “Which life insurer do you guys work with” asked the life insurers. “Which general insurers have onboarded you” was the question asked by the general insurers. Poor JP used to vent his frustration by pointing out a cruel irony. “Somebody must give me a chance. Then only I can say that I worked with any of the big guys,” he used to retort. The struggle continued, and the venture plodded. “First four years of our journey, just 4% of our revenue came from BFSI (banking, financial services and insurance),” says JP.

Interestingly, the HR tech Davids were lent a helping hand by new-age internet Davids. Players like Swiggy, BigBasket, and ecommerce startups gave high value to hustle, passion, speed, innovation, and effective solutions. Legacy background or pedigree ranked poorly in their scheme of things. “In the first two years, around 85% of our revenue came from internet commerce,” says JP.

Eight years down the line, the equation has changed. Darwinbox has entered the unicorn club, is Asia’s fastest-growing cloud-based HR tech platform, has operations spanning 12 countries, and has ventured into the US and UK over the last two years. The Hyderabad-based company has raised $117 million in funding, roped in Microsoft as a strategic investor, and counts SBI among its long list of backers. “The revenue pie has also changed,” says JP. Around 25% of the revenue now comes from BFSI, less than 10% is contributed by internet players, and close to a dozen small finance banks have Darwinbox as their HR partner.

Though Darwinbox’s journey has been dotted with countless mistakes, two notable ones stand out. First, they tried to compensate for the lack of planning with enthusiasm. It didn’t work. Second, there was a delay in leadership hiring. The cofounders, though, are not complaining and are grateful for the way the journey has shaped up.

Hug, Hotel California & RRR

The highest point of their entrepreneurial journey came in the form of a priceless hug, which even dwarfed a billion-dollar valuation. It was sometime in the second half of 2021. Chaitanya, Rohit and Jayant went to attend a housewarming party. The venue was decked up, there was an Ertiga parked on the ground floor, and the centre of the action was the fifth floor. The moment the cofounders stepped inside the flat, emotions ran high. Raghunandan Reddy, who joined Darwinbox as a fresher after completing his education at a rural engineering college in Andhra Pradesh, started sobbing inconsolably.

What happened next was something that changed the life of the cofounders. “His father came and hugged us,” recalls JP. Back in 2015, he explains, Darwinbox was not a great paymaster and multiple times, Raghunandan got lucrative offers over the last eight years but he stayed back. In May 2021, when Darwinbox did its first ESOP buyback, Raghunandan was one of the few employees who participated and bought a flat and a car. “Darwinbox is like Hotel California. Many people check in but only a few check-out,” says JP. “We have had a fairly stable leadership,” he says, adding that there have been employees who took a massive salary cut and joined the startup to be a part of the mission and journey. “Over five hundred more such hugs and we will count it as the biggest impact of Darwinbox,” he says.

There is another cultural shift, and impact, that JP is now proud of. Till two years ago, he confesses, Darwinbox would have done anything for ARR. “That was the only metric that mattered,” he says. The new metric now is a meaningful ARR, which sounds more like the Blockbuster RRR. “It indeed is RRR,” says JP. “It means ‘Resolve, Relentless, and Rise,” he smiles.

Now this is what is called thinking out of the box! No wonder, the three idiots have outsmarted even the smartest, and Darwinbox is now complete with three essential ingredients — Dare, Win, and ‘out of the box.’