In December 2020, Indian cloud telephony SaaS startup Exotel raised raised VC Circle Exotel closes A91-led round; Mumbai Angels investors exit with bumper returns Read more a new funding round. Unsurprisingly, it earned cursory media attention. In a world where rounds of hundreds of millions of dollars are de rigueur, a Rs 40 crore (US$5.4 million) fundraise is hardly worth more than a passing mention.

But this round was unusual in many respects.

Bengaluru-headquartered Exotel is an unusual software-as-a-service (SaaS) startup.

The traditional funding/growth playbook for SaaS startups is a tale of three “R”s:

Raise early.
Raise big.
Rinse and repeat every two years.

Exotel took the path less trodden.

Founded by Shivakumar Ganesan, Ishwar Sridharan and Siddharth Ramesh in 2011, Exotel provides APIs APIs Application Programming Interface Application Programming Interface (API) is a software intermediary that allows two applications to talk to each other for voice calls, messages, and user verification services. The company raised a small Series A of Rs 2.3 crore (~US$500,000) from venture capital firm Blume Ventures and angel network Mumbai Angels in 2012. That was the sum total of its fundraising until last month’s funding round from VC firm A91 Partners.

Even without the funding rocket fuel that has powered other SaaS players, Exotel managed to build a big business. It is said to have a topline in excess of Rs 10 crore (US$1.37 million) per month currently. It’s also grown rapidly and reliably—40-50% year-on-year—for the last several years.

Even more unusual, Exotel is a profitable company.

How Exotel went against the grain to build a large, profitable business in less than a decade is a story we’ll get to soon enough. But before we do, here’s a question for you to ponder—having done well for so long without the need for a fresh fundraise, why did Exotel decide to buck its own tradition and raise a new round? More significantly, why did the company decide to raise such a paltry round—the Rs 40 crore (US$5.4 million) raised is just a third of its annual topline, which is well in excess of Rs 120 crore (US$16.5 million)?

The most meaningful way to answer these questions requires us to collate perspectives from three dramatis personae—the founders, the existing investors, and the new investors.

The founder perspective

Exotel co-founder and CEO Shivakumar Ganesan, known as Shivku, is quick to dispel any notions that Exotel’s contrarian approach was the result of some farsighted strategic genius.

“I would like to tell you that this was part of a grand plan—a contrarian SaaS playbook,” Ganesan told The Ken, referring to Exotel’s fundraising inactivity for most of its existence.


Sumanth Raghavendra

Sumanth is a serial entrepreneur with more than eighteen years experience in running startups. He is currently the founder of Deck App Technologies, a Bangalore-based startup attempting to re-imagine productivity software for the Post-PC era. Sumanth’s columns appear regularly in leading publications. He holds MBA degrees from the Indian Institute of Management, Bangalore and Thunderbird, The American Graduate School of International Management, USA.

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