Furnishing predictability in fit-outs
Accel-backed HomeLane is trying to organise the fixed furniture market by positioning as a reliable alternative, reports Ranju Sarkar
When Shireen Paul bought a flat in Mumbai, she remembered the pain her brother went through while furnishing his house. He had hired a local carpenter, who took twice the time and money than estimated.
Paul looked for a reliable, branded player, and zeroed on HomeLane.com, an interior design firm offering solutions for new homes. The company sells fixed furniture or fitouts like wardrobes, wall units in kitchens, crockery units, TV units and vanity units, each customised.
Earlier this month, HomeLane raised $10 million (~64 crore) from Accel, Sequoia Capital India and others. Overall, it has raised $22.5 million in three rounds of venture capital funding. ‘‘We are trying to solve the problem the middle class faces with fitouts. When people buy homes and engage a local carpenter, they are often taken for a ride. We are trying to organise this market and offer a credible alternative,” says Srikanth Iyer, co-founder & chief executive. “In an industry known for unpredictability — a carpenter often says four weeks for a job and then takes eight and twice the budget — we are trying to bring convenience and predictability in delivery. We deliver in 45 days or we pay you rent.”
Iyer had co-founded Edurite in 2000, a start-up which was bought by Pearson, along with TutorVista in 2011. Online tutoring firm Byju’s acquired part of this business from Pearson in July 2017. Started three and a half years earlier, HomeLane has done 1,700 projects and is present in five cities. In November, it acquired interior design firm Capricoast.com for $13.8 million (~90 crore).
Customers like Paul also like the experience and help they can get in designing their homes. Once a customer shares her floor plan, she can meet a designer, using the startup's virtual design platform. Based on the floor plan, the designer offers quotes and shows her how the kitchen will look. The designer could also suggest what sofa or other furniture would go well with the colour of walls or curtains. Opportunity
HomeLane estimates a million new homes are absorbed or handed over in India every year. This is different from the number of units sold, as there could be a gap of two to four years between a unit sold and absorbed. With an average price of ~7 lakh or roughly $10,000 for fitouts per home, Iyer estimates the size of the market to be $10 billion (~64,000 crore). Only a fifth of this is in the organised sector. With entities such as Godrej Interio, Asian Paints’ Sleek Kitchen, HomeTown, Homestop and start-ups such as HomeLane, Livspace, Furdo, MyGubbi and Custom Furnish.
Iyer is banking on brand promise and referrals, as word of mouth helps a lot here, to make inroads. The company has also opened a showroom in every city that brings footfalls.
Business model
The company spends money to make, design and install a (fixed furniture) unit; the rest is its profit. HomeLane claims to be profitable at unit level and a gross margin of 40-45 per cent. It hopes to achieve a cash break-even in calendar year 2018 if it can double revenue per month. Iyer says it is an asset-light model, as the company uses existing manufacturers to make the units.
Ahead
In three years, HomeLane wants to be a ~400-crore company, profitable and largest in its space. Once it gets there, it would like to do an Initial Public Offer of equity. ‘‘We are three and a half year-old company. If we can get there in another three years, it is not bad,'' says Iyer. The hope is to end FY19 with ~150 crore and double it the next year, before touching ~400 crore in FY21.
To achieve that, it needs to be present in eight to 10 cities. It is now in five cities — Bengaluru, Hyderabad, Chennai, Mumbai and Delhi NCR (which it entered recently). The next challenge would be to get its supply chain right. ‘‘We have managed to get the products on time and at competitive prices. If we can crack that, customers will find it appealing,'' says Iyer.
What will it take for customers to switch from local carpenters to entities like HomeLane? Iyer says convenience, predictability and lower price points will help it emerge as market leader in this segment.