Founded on the rubbles of dotcom bust, i2k2 had a slow and turbulent route to success. It now seems poised to break into the big league.
STARTING SMALL WITH A BIG IDEAIt was amid the carnage of the dotcom meltdown that Rahul Aggarwal co-founded i2k2 Systems, a web hosting company, in January 2001, with Rajinder Singh Virach, a batchmate from Thapar Institute of Engineering and Technology, Patiala. Both were very confident that the Net would become a useful and sought after business tool. While Virach was based in the US, Aggarwal decided to grab the opportunity to set up a business. Moreover, ARS Software, where Aggarwal worked as a project head, was about to shut shop.
RAHUL AGGARWAL, 34
|Education: BE (Electrical), Thapar Institute of Engineering and Technology, Patiala|
|Last job: AR Software|
|Last Salary: Rs 16,500 a month|
|No. of years as employee: Five|
|Age at starting business: 27 years|
|Initial investment: Rs 16.5 lakh|
|Sources of fund: Rs 1.5 lakh (self; from savings); Rs 15 lakh (loan taken by partner)|
|Company: i2k2 that provides solutions in areas of web hosting and website applications development|
|Turnover: Rs 2.2 crore (estimated for 2007-8)|
|No. of employees: 30|
The idea was to help companies create and maintain an online presence. As web hosts, their role was to provide space on a server they would own, as well as provide Internet connectivity. “It was a business that would be profitable in the long run. More important, we had the technical expertise and didn’t need to hire staff and increase our overhead costs,” says Aggarwal, who had armed himself with knowledge of software development.
SCOUTING FOR CUSTOMERS
While Aggarwal went about setting up the i2k2 office in Delhi, Virach leased two servers and obtained licences for software applications. Virach was also the company’s pointsperson in the US, from where they expected a majority of their business to flow in. It was through a contact in June 2001 that Aggarwal found his first client—Polyplex Corporation, producers of thin polyester film. The first billing was for Rs 12,500. “Polyplex remained our client till 2004,” he says.
SURVIVING THE DOWNTREND
Even though business was not pouring in, i2k2 got a chance to work with clients such as Honda, OWM Nahar group and Trident. They closed the year (2001-2) with a turnover of Rs 9 lakh. “The company was still in the red and our loans had touched Rs 22 lakh. We couldn’t even pay our sole employee’s salary regularly,” says Aggarwal.
“Thankfully I never had to ask my parents for money, though they were always very supportive.” Normally, web hosting requires a comprehensive package that provides database support and application development platforms. These facilities allow customers to write or install scripts for different applications. Within a year, Aggarwal was confident that i2k2 could take on the challenge of handling web applications.
The company expanded its bouquet of services, and also launched a “domain name protection service” to save websites from hackers. When they got their first US client — environment consultants Pechan — the monetary pressure eased a bit. Four web designers were hired. The company could now provide multimedia solutions along with technology support. Paying salaries became a little easier.
|TIPS FOR STARTING A WEB HOSTING FIRM|
|Minimum investment: There is no entry barrier. One can start as a reseller to an existing hosting company with no investment. But the returns are very low. To be a niche company, at least Rs 25 lakh is required|
|Skills required: One needs to continuously learn about new technologies|
|Break-even period: 2-3 years|
|Attitude: Technological challenges can test even the most tech savvy|
|Bottomline: Get a client first, build a customised solution, go generic later|
ROAD TO RECOVERY
In 2004, the company recorded its first profit. A majority of its revenue came from two of its US-based clients—Regions Bank and WrapAir. “We repaid all our debts by August 2004,” says Aggarwal. The year 2005 also started on a very positive note. Aggarwal and his partner managed to rope in one of their biggest clients—AIG Insurance. It was a big contract and they hired more people. Aggarwal is proud of the fact that all their clients have been through referrals. “In the end, what counts is client satisfaction,” he says.
By 2006, the company had hired 12 people as work poured in. Their first employee still works with them as the chief operating officer. Globally, meanwhile, the survivors of the dotcom meltdown were emerging stronger with tie-ups that made headlines. For experienced players like i2k2, it was time to cash in. Virach kept up his contribution by garnering new business and remained the company’s one-man army in the US.
The company’s inability to provide its clients enterprise-level applications that help create business-oriented tools such as online shopping, payment processing, interactive product catalogue, automated billing systems, security, content management, etc proved to be a stumbling block in their growth. “To make the upgrade worthwhile we needed big clients first,” says Aggarwal. It was techTribe, a career and social networking platform for technology professionals, that offered to assist them in the upgrade.
By January 2007 the company was ready with it. This not only helped them strengthen relations with existing clients but also assisted them in expanding the list to include biggies like Bennett, Coleman & Co, Aakash Institute, Whirlpool India, Fortune Park Hotels, the government of Madhya Pradesh, Amity University, Omni Globe International, Indian Angel Network and TiE, among others.
The company also decided to focus on sectors with high-growth potential. “Travel, education and human resources are our focus areas,” he adds. However, to be able to compete with the best in the industry, the company can no longer depend on its clients for funding. “We will now need a venture capitalist’s help to expand further,” says Aggarwal, who will soon be moving into the company’s swank new office in Noida—their fourth since inception. i2k2 is finally looking good on the books also, with 76 servers hosting 3,000 websites. “We can now afford to dream big,” says Aggarwal.
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