Qwikcilver’s story as an end-to-end gift card solutions provider recently culminated in a $110 million acquisition by PineLabs. Their journey offers an interesting window into what it takes to build a technology business in nascent Indian markets and beyond.
In 2006, if you caught sight of someone across stores in Bangalore asking for gift vouchers and observing salespeople as they billed customers, it could have been Qwikcilver’s early team figuring out how stored value worked in India.
Raising $20M in total from Accel India and other investors, Qwikcilver grew steadily from being a bootstrapped startup to powering an annual transaction value of $1.5 billion across India, West Asia and South East Asia. Its tech is behind 9 out of every 10 gift cards sold in India today, including Amazon gift cards.
Mahendran Balachandran and Prashanth Prakash from the Accel team met the Qwikcilver founders in 2006. It was still early days for organised retail in India and there was little to no adoption of the gift card concept at the time. But the founders’ conviction in the massive potential of gift cards, their drive to evangelise the concept and get early adopters on board led Accel to fund Qwikcilver’s seed round. We’ve been with them on their journey ever since.
But having a persuasive and viable business plan was only a part of it. As an investment firm, Accel looks for two main elements in early-stage startups. The first is the potential of the business to grow and generate returns in the long term. The second is the quality of the journey we’ll have with the people building the business. Prashanth believes Accel has been fortunate to find both in Qwikcilver.
What came out of this partnership is a story of persistent seeking. Qwikcilver didn’t set out with a crystal clear problem statement and grand goals to disrupt a market or create a category, although that is what they ended up doing. They started with the simple view to observe what wasn’t working, and use the skillsets and domain knowledge they’d built up over years to fix it. For any startup founder wondering ‘what should we be doing to win in a new space?’, Qwikcilver’s journey offers valuable insights into starting with what is familiar, while seeking to revolutionise new markets.
Finding founder-market fit
The founders Kumar Sudarsan, TP Pratap, and Bhaskar Vasudevan had studied together at BITS Pilani and all came from SaaS backgrounds. They were eager to build their own product, but didn’t know what exactly they wanted to do. Nonetheless, Kumar and Bhaskar bootstrapped the business together and looked into their combined professional history to find the right fit for them.
Since both founders had technology backgrounds and Kumar had a strong grounding in the fintech domain, they decided to look into the payments sector. While walking around malls and exploring India’s high street, something captured their attention: buying gift vouchers was a a pain. In some stores, they even encountered salespeople who were protecting gift vouchers like cash and fetching them from secure treasury rooms.
We began to ask ourselves why this process was so archaic.
Because gift vouchers weren’t backed by tech, they were highly susceptible to fraud. For retailers, it was akin to handling currency without any controls around them. Since vouchers were treated like tender, people could simply make photocopies of them. Entire shipments of vouchers could get lost in shipping. In-store fraud was prevalent, where a few vouchers could be torn away and used as petty cash.
Meanwhile, Kumar started digging into the gift cards and stored value sector in the US and found that it was a $100 billion market. A gift card was a win-win for retailers. It held prepaid value for goods that weren’t purchased yet, brought in new footfall and facilitated upselling. The segment was virtually nonexistent in India. When Qwikcilver entered the gift card space, there was no established market leader.
With Pratap joining the team after a serendipitous meeting with Kumar at an airport, he brought his sales and marketing expertise to the mix. Finally, the founders knew what they wanted to do and who their customers were. They believed all that was left was to build the product.
On building trust in evolving markets
No matter how prepared you are to take on a market, there will always be variables and unknowns that change your view of the problem you’re trying to solve, and the people you’re trying to solve it for.
The initial gestation period for the product was long,’ says Kumar when we talked about Qwikcilver’s foray into the market,‘ But it was a good way for us to explore if our platform was capable of handling what retailers needed and generating revenue.
Building a stable product was relatively easy for the team. But they came up against a more challenging hurdle, one that tech couldn’t fix: gaining retailer trust. While they expected to face problems like cost to the retailer(a paper voucher cost 60 paise, while gift cards cost 10–15 rupees each), they found that the fear of the unknown was a bigger barrier to market adoption.
For retailers, moving away from familiar ‘safety’of paper vouchers to a new reality where a small, unknown company was offering to manage their money on the cloud was an uphill struggle.
The Qwikcilver team had done their market research and anticipated questions like,‘whatif my data gets compromised?’,‘whycan’t you have dedicated hosting for my data?’ or‘whathappens if you vanish one day?’ But Qwikcilver needed more than well-prepped answers and a credible tech background to overcome this fear of the unknown. Ultimately, they also needed a leap of faith on the customers’ end.
Accel, Helion Venture Partners and other investors helped open doors for our business. They connected us with people within the retail industry who believed in what we did and were willing to work with us.
Accel was also able to connect Qwikcilver’s founders with retail domain experts who could help them understand the drivers behind decision making in large retail businesses. Subsequently, the first major Qwikcilver launch happened with Landmark in 2008–09.
Qwikcilver could now test the platform on multiple channels, and other retailers followed in Landmark’s steps. Soon, retailers moved from engaging in conversations with the team to setting up projects. This was only the beginning. The founders’ product building skills had stood the test of starting up and launching with a nation-wide retailer. They had an initial customer whose feedback helped co-create the Qwikcilver platform. But they still had a large learning curve ahead of them. They needed to learn to pitch their platform, educate retailers about gift cards and build enduring brand relationships.
Kumar jokes that when they began seeing other presentations that were being shown in the industry, they understood why people didn’t get tech. Soon the Qwikcilver team was carrying physical cards for demos and had a carefully crafted presentation that was aimed at helping people understand their offering.
Moving on from a pure tech play
Once it gained traction in the industry, Qwikcilver moved on to capture an impressive 90% market share in India. The Landmark launch had helped them in more ways than one. They started reframing their goals by moving away from the loyalty segment which required a lot of customization and strengthening their position with the gift card play, eventually expanding into corporate gifting as well.
This was game changing for us. We wanted to focus on one vertical and be the leader in that vertical. So we picked the one that was feasible for us.
There were further market challenges: gift cards weren’t easily redeemable in Tier 2 cities where high street shops and malls were thin on the ground. But Qwikcilver was focussed on enabling security and controls for gift cards through technology. The form factor didn’t matter. When eCommerce boomed, they started powering online gift cards, and solved the logistics and acceptance problem plastic cards faced.
The introduction of a prepaid license by RBI further helped them fortify their moat. With the new guidelines and licence, entities like Qwikcilver could create gift cards across merchants. The RBI licence enabled them to power marketplaces like Flipkart that weren’t eligible to get their own authorization. In 2013, Amazon entered the Indian market and quickly teamed up with Qwikcilver — both for their proven track record and the RBI authorization to issue prepaid gift cards to merchants.
Qwikcilver also moved into the B2C industry with Woohoo — an online consumer portal for gift cards. This move brought with it a wholly different set of challenges in terms of product marketing. The Accel Portfolio Services team worked closely with Qwikcilver over the years, providing guidance with web and mobile growth strategies, consulting, benchmarking and hiring to raise their visibility online. Woohoo is now India’s largest consumer gifting e-commerce platform and mobile app.
At this stage, Qwikcilver realised that gift cards weren’t just a tech play. They found that programme management and end-to-end solutioning were big differentiators. Qwikcilver took on the role of manufacturing, shipment and bulk activation to cement their place in the market.
We told retailers — you sell the card, we’ll manage the rest.
Growing with Pine Labs
After its success in the Indian and global gift card market, Qwikcilver is now characteristically taking on the next challenge to bridge gaps in the gifting chain. With this acquisition, Pine Labs, a multi-product fintech solutions provider, offers Qwikcilver better integration into billing systems, acceptance at the front end and the ability to create new products in the gifting space. And Pine Labs aims to leverage Qwikcilver’s gift card capabilities and its presence in the online sector.
For Kumar, the partnership is synergistic. Both Qwikcilver and Pine Labs operate on the same fundamental principle: being merchant-focussed. At Accel, we’re happy to have been a part of the Qwikcilver journey, right from their inception to the point where they’ve found the right partner for greater global reach. And we hope to continue telling the stories of more homegrown startups like Qwikcilver as they take on the world.