Software for the businesses GST created

We’ve bought software companies since 2014. This is the first time we’ve written down how we think about it.

Right now we’re focused on one kind of company: small software businesses that sell to small Indian businesses. Here’s why.

GST made software mandatory

When GST launched in July 2017, it changed what it means to run a small business in India. A trader who used to keep books in a ledger now has to file returns online, match invoices with suppliers, and claim input tax credit correctly or lose money. For millions of businesses, software went from optional to required.

At the same time, Jio made mobile data cheap enough that a shopkeeper in a small town can run their business from a phone. UPI, launched in 2016, gave them a way to collect payments without a card machine.

Put together, that’s a huge number of first time software buyers. Most of them don’t need much. They need to send a GST compliant invoice, track stock, know who owes them money, and file returns on time.

The companies serving them are small

Hundreds of companies were started between 2015 and 2018 to sell this software. Some built billing apps for kirana stores. Some built inventory tools for distributors. Some built GST filing tools for accountants who serve dozens of small clients.

Most of them are small. They charge a few hundred or a few thousand rupees a month. Their customers rarely leave, because once your invoices and stock live in one system, moving is painful. Many of these companies are profitable, or could be with a few changes.

And most of them won’t get much attention from venture capital. Investors in India are focused on consumer internet companies chasing very large markets. A business that will make steady money for twenty years but never become a billion dollar company is a bad fit for a venture fund.

Where we come in

That’s the gap we fill. Many founders who started these companies four or five years ago are tired. They’ve built something useful. They don’t want to raise another round, and they don’t want to run it forever. Until now, their options have been to keep going or shut down.

We offer a third option. We buy the company, pay the founder for what the business earns, and take over from there. Some founders stay to run it. Some move on.

We’ll keep doing this as long as the companies stay cheap and useful. If you run one, we’d like to hear from you.

Happy Diwali.