Hobbyist coder makes it big

MTV, NASA, Pearson, SEGA, ICANN, and the University of Illinois all have a little bit of Punjab in them. If you’re guessing culinary delights such as sarson da saag and makki di roti served in cafeterias or the beats of bhangra, think again.

In fact, think harder. When did you last hear of ‘bedroom IT start-ups’? Jalandhar boy Varun Shoor’s Kayako has 50,000 organisations hooked on its helpdesk and customer engagement software product.

Shoor was just 17 when he spotted the opportunity. He created a product (literally in bed) that would help bigger companies and organisations collect customer feedback and offer them an online route to ask for assistance if something went wrong. So, anytime you come across problems or kinks in any service or product and you want to file an online complaint, it’s Kayako’s software that carries it to the company.

In the early days, the software proved to be too small for the big IT firms to market and sell, and there were products such as WonderDesk available in the market already. “But I had nothing to lose,” says Shoor, the founder CEO. “Writing code was my hobby and I had a family business as a backup. Sabeer Bhatia had just sold Hotmail and I dreamed of creating something like that.”

SHOOR, 27, DISLIKES CLASSROOM TEACHING and barely managed to clear his class 12 exams. In fact, when he flunked class 9 he almost got inducted into his family’s hand tool business.

“Academics never attracted me but I read a lot of books on software and code writing, and, of course cookery, which is my hobby. I was never trained in formal coding and learnt it from books,” says Shoor, pointing to his library stacked with books on IT, software, management, and cooking.

But while he had learnt software coding skills, he had no funding to market his product, as hosting a website needed at least $100 (Rs 4,595) and another $50 to activate an online payment gateway. “My first brush with IT was in website designing which was a terrible flop. My father refused to lend me Rs 30,000 for the new venture so I had to look at other avenues,” says Shoor.

He went to his virtual home—the chatrooms—looking for help and soon found willing friends. A Japanese chat friend agreed to lend him a domain name, which was to expire in three months, and gave him the choice between Kayako and Akimbo. Shoor opted for the former and made his first online sale to a Canadian customer for $50 in November 2001. The money went to the online payment solution provider.

By end of the month, Shoor had another customer paying him $300 for a copy of his product. “We like big and beautiful creations,” he says. “So, I created a good-looking website and the word-of-mouth publicity across chatrooms started bringing in business. Obviously, my parents did not believe it till they saw the dollars flowing into the bank accounts.” Till 2005, he earned a comfortable Rs 80,000 to Rs 1 lakh per month, 98% of which was profit, and lived a lavish life.

Much of Kayako was built through stealth. (Even today Kayako’s financials are a secret, to build conjecture around its size.) Shoor says one reason for attracting so many customers is that they did not know where the company was based (a bedroom, initially), how many people were behind it, and the academic qualifications of the managers. “From the beginning I gave them an impression of being big with a website with a fancy name,” says Shoor. “Even though we did not have executive rooms in glass buildings in one of the IT parks somewhere in the world, they took the bait. But hey, I’ve never faltered on customer service and support.”

Then, in 2004, he made his first important hire, Ryan Lederman , a techie based in California, as chief operating officer. Thereafter, Kayako kept expanding and along the way picked up Leeds-based James Edwards as chief business development officer. They are part of a team of 75 with an average age of 23 years.

Interestingly, Shoor didn’t meet his foreign partners face to face till January and had never even spoken to them over the phone till last year. All conversations happened in chat rooms, including the hiring and allocation of work. In fact, all the partners got together for the first time when Fortune India met them. “We often undermine the value of trust and relationships in our quest to succeed. We were lucky that all of us had similar entrepreneurial mindsets, came from small towns, and were willing to work hard and make a few sacrifices to reach here,” says Lederman.

The dream of making it big has fuelled Kayako’s success. Though the company refuses to divulge revenue details, profit margins are over 40%. “In absolute terms, both revenue and profits should double this year,” says Edwards.

Unlike big IT product companies, Kayako is not involved in proactive marketing and sales activities and intends to continue in the same breadth in the future. To date, the company has not spent more than $20,000 on marketing, which has been limited to buying online ad space on Google and other sites.

ACCORDING TO NASSCOM, there are over 4,200 registered Indian companies like Kayako, that fall under the emerging (Rs 50 crore-plus revenue) categories. Add another 8,000 mobile and internet companies, and the reason for Indian IT product startups, like Shoor’s, making it big globally is plain to see. Historically, it is the country’s IT services companies that are globally recognised.

“Unlike in Israel or China, where government support and domestic demand is driving small and emerging IT companies, Indians are driven purely by passion and global demand,” says Avinash Raghava, director, Nasscom.

Though India has yet to boast of a Silicon Valley-like platform for its emerging and startup IT companies, Indian professionals are fast learning to leverage developer communities across the world to deliver world-class products such as Kayako.

Kayako is targeting the big league and has identified a few weak areas to be addressed fast. Among them is the need for a good developer team. The company is aiming for a team of 500 developers, based out of its 8,000 square foot headquarters on the outskirts of Jalandhar. “Shoor alone cannot handle the pressure now and do everything himself. We will be hiring and training people like the global corporates do,” says Lederman. Kayako is also looking at new offices in Gurgaon, San Francisco, and London.

The company is getting aggressive on pricing. The fourth version of the product, with new features such as live chat, is priced nearly double the previous version. “We have almost a third of the Fortune 500 companies using our products and an analysis showed that we were losing revenue by pricing our products around $500. This has changed and customers have taken well to the increase, which again gives us the confidence to grow in the future,” says Edwards.

If there is a successful company, private equity and venture capitalists can’t be far behind. The Kayako team admits to having exploratory discussions with potential investors. Appropriate valuations that may push the company to grow could swing the mood, but as of now it is in no hurry to sell stakes and is busy building its global IT corporation. No time to hit the sack now.