Can Atomberg Spin a Unicorn in Indian Smart Appliances?

Last fortnight, Atomberg disclosed a path to 1,000 Cr of revenue, soon after reports of raising $90M in deep funding winter

Fanboys

Manoj grew up in a small town in Rajasthan. 

As with most remote villages and towns in the country in the 80s, Manoj’s town received only 2 hours of daily electricity. The village and his farmer family used those two hours judiciously – turned the motor on to pump water and irrigate the fields, generally charge appliances and get their work done, before the town plunged into darkness again.

Manoj developed a penchant for using energy judiciously.

Even as a child, Manoj was curious. He’d break open objects to understand how they functioned. After he went to pursue a dual degree in Electrical engineering from IIT Bombay, his things of creation changed. 

But the zeal to create stayed on.

Manoj took a particular interest in robotics, algorithms and programming. He was involved in technology competitions and consumed boundless knowledge about electrical systems.

Soon, it was time for Manoj to graduate. He landed his maiden job with the Indian Space Research Organisation (ISRO) in 2011. His family always expected him to be a government employee, and the news of his placement made his family very happy. 

ISRO was Manoj’s ticket to a stable, high-profile life.

But Manoj needed to be more content. He wanted to start a company. He dreamt of building a technology company that significantly solved problems.

He started his entrepreneurial journey. Atomberg v1.0 was born.

To give himself a year to experiment with, Manoj told his family that he has got an extension and would join ISRO after a year. That was a tough call – there was no extension in reality, no money that he could expect from his family to pump into the company and no venture funding.

He turned to his friends, took a loan, and shifted to a chawl. He was out there trying to survive on his own in Mumbai. He believed that a year would be enough for him to strike gold. 

Soon, his co-founder left to prepare for the civil services examination. Unperturbed, Manoj incubated Atomberg at Society for Innovation and Entrepreneurship (SINE) at IIT-Bombay. He had a space to spread his wings but depended on his friends for money and survival.

A year passed. Things did not look up. 

Manoj had exhausted the loan he had taken from his friends, the idea of creating a vehicle tracking system that he had started with did not work out, and he was mentally in a terrible situation.

Meanwhile, Manoj’s junior from college, Sibabrata Das, was struggling too. Das had started a website development company, which did not work out. He then started exporting silk from Assam to Dubai. In his fourth year of college, Das started an online cosmetics marketplace 24X7STYLES. He raised funds and worked on it for a year. But the business did not scale.

By 2013, Das was supposed to graduate. His entrepreneurial stint had yet to kick off despite three tries. 

That’s when Manoj met Das, and they decided to run Atomberg together.

Atom of a Business

It was time for them to try out their next new idea. 

Manoj was cognisant that his last endeavour failed because he had yet to create any business plan. This time, he was determined to avoid making that mistake. 

In 2014, the duo returned to the drawing board. To sustain themselves, Atomberg ran a tech consulting business. All this while, the duo picked up crucial knowledge of motor control and process control systems from the projects that they were doing. 

While that was not the core business, they had yet to stumble upon their big breakthrough. While they sustained on projects, three more ideas failed. By that time, three more years had passed. 

The world looked at them as if they were failures.

Their mentors, friends and seniors advised them to quit. The pressure was starting to crack them. But they knew that the audacity of their dreams warranted failure. 

Manoj was already neck-deep in debt. In that situation, it is only natural for them to shut the shop and move on. Manoj and Das, however, stayed put to struggle for one more day, give one more try and iterate on one more idea.

In 2015, the founders stumbled upon the idea of disrupting the ceiling fan business. 

The ceiling fan industry has not seen any disruption in the last fifty years. The only stride it had taken was in anti-dust coatings on the fans, which were innovations in the paint industry and not in the electrical industry. 

The heart of the fan is the motor. No one innovated in that space. 

But the ceiling fan industry in India was at least $1.5B. Anyone who had electricity and could afford to own a fan. The same space of home appliances has seen a lot of innovation in the form of IoT, connected devices and higher energy efficiency. 

Manoj tore down the existing models of ceiling fans and realised that he could build a sustainable business in this segment. Could they do something about it?

Enter BLDC (Brushless Direct Current)

This technology was already in place for decades. But it had yet to be used in ceiling fans. The duo had learnt all about it while doing projects for government institutions.

Using BLDC ensured fans were more resistant to voltage fluctuations and ran three times longer on an inverter than their traditional counterparts. 

Manoj and Das met potential customers, retailers and offline distributors to validate the idea of an intelligent, energy-efficient ceiling fan. Based on the feedback they received, they iterated. By April 2015, after 10-15 prototypes, Atomberg finally hit upon the product that clicked.

The PMF was validated when Manoj had 1500 pre-orders. Armed with this win, his first in 4 years, a buoyant Manoj went to meet potential investors and mentors. 

But none was ready to write a cheque. 

Shocking Rejections Electrify Success

Daunted by competition, investors didn’t want to back a little fan startup

In 2015, Meena and Das raised INR 1 Cr in an angel round. Within a year, they used up 80% of the capital to start manufacturing.

An initial production facility was set up at Navi Mumbai. Developing the supply chain took 6 months. The last few units were designed in mobile torch light to release their first batch of fans in time.

Now that they had their product in place, where would they turn to for customers?

Ceiling fan sales in India in 2016 were 95% offline driven, Retailers and distributors controlled the market and sales. E-commerce was just beginning to pick up. Social commerce was nonexistent. Das turned to some of the distributors for help.

The distributors dismissed Das.

As young 28-year-olds, they did not inspire confidence that they knew much about the business. The brand was unknown to the masses, and the product seemed overpriced. Those products were not supposed to sell.

The offline channel closed its doors to Atomberg.

Unfazed, they turned to the B2B channel. The duo travelled across cities, met schools, colleges and hospitals for live product demonstrations, grappling with trust issues and convincing clients regarding warranty and after-sales service.

Even then, if their clients had to replace the existing fans, the vast capex made the proposition unattractive to the client. 

They had almost run out of cash by then. Problems just wouldn’t stop for Atomberg. Just then, they stumbled upon a pocket in Saurashtra that gave them a lifeline. 

Saurashtra was the mecca of the ceramic industry. Industrial estates there used fans to dry the ceramic creations. A single plant would have thousands of fans running 24×7. Electricity was their primary raw material cost.

The pitch? Save INR 2.5K per year, per fan. 

The payback period would be just a year, which meant the additional investment made in the Atomberg fan would be recovered in just a year. The fan came with 3 years of warranty, meaning the appliance’s investment would be safe. 

Within a year, almost half of these plants were using Atomberg fans. 

Soon, IDFC Parampara pumped in Rs 7.5 crore in Atomberg. By April 2016, Atomberg produced 30 fans per day.

The hunt for B2B clients materialised when a school in Mumbai ordered 100 fans. Before long, big corporate houses like the Tata Group and the Indian Railways got added to the client list. 

They had cracked the B2B code. But 95% of fans in India are used by consumers in residential settings. 

Ceiling fans, however, are an infrequent purchase, with replacement periods stretching up to a decade. Even then, only some purchased fans online. Retailers had shunned them. 

Atomberg chose to list on Amazon, Flipkart, and their website. With e-commerce, what took Havells and Crompton decades to build trust, Atomberg could do in a few months. The duo were onto something.

The consumers loved their products and left good reviews. Atomberg was selling, and people loved the fans.

Offline still needed to be solved. The core problem of demonstrating sales can happen was solved. When Das returned to the dealers, to his surprise, the same folks who had dismissed him earlier welcomed him back with open arms.

The fan of the business was spinning. 

Getting Wings

India’s fan market was one of the largest in the world.

In 2018, the fan market in India was estimated at a modest Rs 6,500 Cr (~$800MM).  Since then, the market has grown tremendously, registering a CAGR of 8.4% to reach Rs 9,000 Cr. This was increasingly driven by an increase in the purchase of premium fans and increased living standards.

In the pre-Internet era, the purchase of fans was primarily restricted to the ‘nukkad’ electrical appliances store. This unorganised market witnessed regional dominance by retailers.

Purchases were primarily restricted to 2 (in some cases, maybe 3) fans per household, with an average replacement period of 9-10 years. Ceiling fans dominated the bulk of this fan market.

Innovation and dominance in this market could happen only by unique marketing and GTM strategy, and the Internet had a role to play.

The Internet and social media gave birth and wings to companies like Bajaj Electricals, Crompton Greaves, Havells, Orient Electric, and Usha.

While the average replacement period for a fan largely remained the same, penetrating into a larger consumer wallet share has been driven by marrying unique aesthetic designs, aggressive marketing, and more significant presence through networks

Leveraging technology on top of that, the space witnessed ‘connected fans’. The Internet of Things (IoT) brought turnaround innovation in the connectivity of fans. We were just a click away from switching on a fan and another click to gather data about energy consumption.

By 2018 end, electric fans in India had a TAM of 286MM households and has grown by a modest 1.8% year-on-year since then.

Improvement in the standard of living, climate change leading to higher temperatures, rising disposable incomes and easier access to credit has increased the volume of fans in the country.

Electric fans in India had evolved to be oligopoly. It has kept the market share of any player under check. No player has a market share of more than 30%.

Innovation beating legacy is difficult and impossible in a consumer electricals market like fans.

But Atomberg had a plan in mind. With the right innovation in a large market, Atomberg now needed to figure out a suitable business model to lift off. 

They had a product that could kill. 

Kill Bill

Ceiling fan motors were inefficient. 

A traditional ceiling fan motor consumes around 75 watts of power but delivers a mechanical output of only 22 watts.

BLDC would step in here.

The price of an Atomberg fan is around Rs 4,000. It seems expensive when you can find fans for only Rs 1,500 online by trusted brands such as USHA and Bajaj.

However, the upfront cost of owning a fan is one of many things to consider. Electricity costs of running fans needed to be incorporated. 

If you use an Atomberg fan that consumes 25 watts of power for 10 hours daily for an entire year, your total consumption will be around 90kW. The average household electricity rate is around Rs 6 per kWh, so it will cost you approximately Rs 500 to run your fan for a year.

In contrast, conventional fans consume three times more electricity costing you around Rs 1,500 annually. In just two and half years, you could recover the extra investment you made in purchasing an Atomberg fan. 

Furthermore, the more years a fan is used, the more power consumption keeps increasing by 4-5% due to winding damage.

But that’s not all. Assuming the life cycle of a fan is 10 years, you will save a total of Rs 8,000 by using an energy-efficient fan like Atomberg!

In India, 20% of households still don’t have electricity, and load shedding is common. Any electricity wasted is hence criminal. 

Atomberg served as a pioneer in bridging that gap.

When you own the product end-to-end, you save on distribution margins which can range from 2-5%. This allowed Atomberg to channel these savings to market their fans and build a trusted brand. With direct customer feedback, the company could iterate fast and find a product-market fit while keeping costs low. 

As sales increased, they scaled their operations to produce 1,000 fans daily by April 2019 to meet the growing demand. But they ran out of capital. 

Atomberg operated in the hardware manufacturing industry, which required more capital than others. VCs were still lukewarm on backing Atomberg. 

The startup hadn’t paid their 100-member team for months, they had about a month’s operations runway left. Slashing the company’s size seemed to be the only option. 

However, things turned around for the company when it secured a lifeline Series A funding of $10 million in 2019.

David had survived, they needed to persist in taking a crack at the Goliaths

Hot Demand for Cooling

Atomberg saw a surge in sales in FY 20 and clocked a revenue of Rs 69 Cr. 

They expanded their product line to include pedestal, wall and exhaust fans to expand wallet share and serve other consumer use cases.

Atomberg did small product innovations understanding the consumer psyche. Their fans were IoT-compatible with intelligent remotes. As a consumer, nothing was more comforting than adjusting the fan speed while relaxing on the bed.

Because of its low electricity consumption, Atomberg fans run 3x on inverters. This is especially beneficial for India, where more than 50% of households face power outages daily and rely on inverters. 

The inverter market was projected to grow at a CAGR of 15%. 

Not only do Atomberg’s fans provide superior air delivery, but they are also designed to withstand voltage changes. Load shedding and frequent power cuts can affect a fan’s life, and Atomberg realised it to build an India-centric product. 

Their fans could serve not only the mass premium segment, which might desire an IoT remote but also Tier 2-4 markets and the rural areas where consistent and reliable electricity was a big concern. 

Atomberg implemented a strong SEO strategy by focusing on niche keywords such as BLDC fans and smart fans instead of generic keywords like fans and ceiling fans. They were ranked #1 in all such keywords within just one year. 

Atomberg also launched its maiden TV commercial to reach a wider audience focusing on T2-4 markets.  

Since 80-90% of fans’ sales happen in offline stores, Atomberg increased its retail offline presence to 3,000 stores by the end of 2020. Offline stores helped Atomberg build trust with their customers as they could visit the stores and check out the products in person. 

Around Mar 2020, the world changed.

Like every other industry, the electrical appliances industry was hit hard by the COVID-19 pandemic. The world came to a standstill, and consumer behaviour changed drastically. 

People were spending more time at home, which led to a surge in demand for home appliances. However, the supply chain was disrupted, and companies had to adapt quickly to stay afloat.

But they quickly pivoted their marketing and sales strategies to adapt to the changing consumer behaviour. They focused on digital marketing and e-commerce channels to reach their customers. 

Atomberg focused on organic growth more than inorganic influencer-led growth.

With organic revenues from a solid online presence and increasing offline retail partners, Atomberg fans gave their revenue wings. By the end of FY 21, their revenues had reached Rs 144 Cr. 

It was an astonishing 100% revenue growth for two consecutive years

Investors rewarded the hard work, and the company raised another $20 million in December 2021. It set up a new state-of-the-art manufacturing facility, expanded the product mix and created a strong brand. 

But the giants were starting to notice the rise of the tiny upstart. 

Incumbents had started doing R&D on BLDC fans the innovation lead Atomberg had was closing

Loyal Fans

The fan giants were fighting to gain market share.

Havells and Orient introduced a range of energy-efficient ceiling fans, promising high airflow and energy savings. With a digital marketing campaign called “Summer Like Never Before,” Havells emphasised the advantages of their ceiling fans. 

Havells, Orient, and Crompton launched marketing campaigns, such as “Summer Like Never Before,” “What a Difference,” and “Crompton SilentPro Awareness Drive,” respectively. These campaigns highlighted the advantages of ceiling fans and aimed to encourage customers to upgrade their fans.

Atomberg had to define its brand message, pillars, and positioning to make a name for itself. Atomberg took the time to craft a brand that people could genuinely connect with, which ultimately paid off.

First, they went blade to blade with the giants. Then they put on fancy thinking caps and infused their products with intelligent technology. Their fans were now remote-controlled and app-enabled, leaving the competition feeling a little uncool.

But what differentiates Atomberg from the competition is its service and marketing efforts!

Atomberg was fantastic at customer service. Initially, they didn’t have a network of service centres, so they devised a no-questions-asked return and refund policy. 

By 2022, they had service centres in 5 cities and tied up with 400 partners to offer after-sales service all over India. With their response times, they showed customers that they cared.

Atomberg utilised Google, Facebook, and YouTube ads to target potential customers ready to buy. Furthermore, the company ensured that inquiries would be answered promptly by implementing automated support through email and WhatsApp.

The purchase happens through Amazon and Flipkart ads to seal the deal. 

Atomberg had to keep a check on its marketing expenses to ensure that they were within the budget. As marketing is costly, the company had to optimise its platform spending to keep its budget under 10% of the total revenue.

In the end, Atomberg’s strategies worked like a charm. They fanned the flames of innovation and sent their competition re-volt-ing.

Product Circulation

Atomberg used unorthodox ways of marketing to win in an intensely competitive market

It pushed for a great unboxing experience. When they opened that box, they wanted their customers to feel like kids on Christmas morning. 

10% of their sales came from happy customers’ word-of-mouth recommendations alone. With their excellent and sleek energy-efficient products, it’s no wonder customers keep coming back for more Atomberg products.

But they couldn’t keep the good times rolling with just fans. 

Atomberg was evolving into a consumer tech company specialising in producing intelligent appliances. With their expertise, it made sense to venture into other categories that haven’t seen innovation in decades. 

Atomberg decided to spice things up by venturing into the mixer grinder and smart lock categories.

With MG 1, Atomberg’s mixer grinder boasts a powerful and energy-efficient BLDC motor. The core USP of this beauty is that it grinds your food to perfection while producing less noise than traditional grinders. Talk about making a stir!

Similarly, Atomberg’s SL 1 smart lock offers advanced features like fingerprint, PIN code, and critical access. The core USP of this nifty gadget is its high level of security and convenience, which eliminates the need for physical keys. Plus, with multiple users having different access codes or fingerprints, it’s perfect for a home full of tech-savvy family members.

To achieve its expansion goals, Atomberg needed more space.

Atomberg inaugurated a new manufacturing plant in Pune in 2022, which spans 350,000 sq. ft. This facility can produce up to 750,000 fans and 25,000 mixer grinders per month, enabling Atomberg’s entry into the kitchen appliances market. 

These new facilities will help the brand meet the growing demand for its products and ensure that it can maintain its reputation for quality and innovation.

The company reported an annual revenue run rate of Rs. 700 Cr from fan sales and has served over a million households with its products.

Investors are also impressed by Atomberg’s enthusiasm and drive.

As of 2023, the company was in talks to raise a funding round of $75m to fuel its growth trajectory.

Taking a full circle from when it had almost run out of cash to become a $100m ARR brand, Atomberg had proven its naysayers wrong with a terrific swing

Electrifying India

Atomberg’s decision to diversify its product range and expand into new categories is a testament to its commitment to innovation and customer-centricity. 

With the support of its investors, the brand is well-positioned to continue its rapid growth and become a leading player in the Indian smart home appliances market.

Atomberg has cracked the production, supply chain, pricing and distribution for small appliances.

As of 2023, the brand has a balanced sales distribution, with 60% of sales generated offline and 40% online. The company operates two manufacturing facilities in Navi Mumbai and Chakan, Pune, with an annual combined production capacity of over five million units!

Atomberg has done an electric job of expanding its market share. 

With a 15% market share on e-commerce platforms and a powerful presence in over 100 cities through 7,000 retail touchpoints, Atomberg has made a name for itself in the Indian small home appliances market.

The fact that their best-selling product is on e-commerce platforms is a real kicker, indicating that Atomberg’s strategy of elating customers with energy-efficient and technologically advanced products has genuinely resonated with them. 

But they still need to be finished

Atomberg can charge ahead by expanding its product portfolio and leveraging its expertise in energy-efficient technology to create more innovative and high-performing products. 

They can continue to light up the way by investing in their distribution network, particularly in untapped rural markets, to increase their reach and electrify even more customers.

Atomberg is eyeing the mammoth white goods market.

The Indian white goods market is $15B (over Rs. 1 lakh crore) and witnessed significant growth over the past few years due to the increasing disposable income of consumers and urbanisation. 

The air conditioning market in India is expected to witness a CAGR of 12% during 2021-2026, driven by rising disposable incomes and increasing demand for energy-efficient products.

The washing machine market in India is also expected to grow at a CAGR of ~9% during the same period. Factors driving growth in this market include increasing awareness of hygiene and the importance of cleanliness, rising urbanisation, and the availability of affordable washing machines.

A similar story will play out for the refrigerators and other products in the white goods category. 

Given the potential for growth and demand in the Indian white goods market, Atomberg may consider expanding its product range to include air conditioners, washing machines, refrigerators, and vacuum cleaners, all while retaining its key USP in each new SKU.

By leveraging its energy efficiency and innovation reputation, Atomberg could capture a significant market share and continue its rapid growth trajectory.

Atomberg, once an underdog, aims to become a significant player in the Indian consumer durable market. The company has set a lofty goal of becoming an Rs. 5,000 crore brand by 2026

Macro trends such as global warming, rising temperatures and sustainability concerns will only provide strong tailwinds to the company. 

Atomberg’s vision is to develop unique, energy-efficient, and intelligent consumer-durable products that can potentially compete with global giants like Apple. While critics might scoff at the comparison, Atomberg, true to its ethos, would say, why not

Writing: Keshav, Parth, Raj, Satpreet, Vishal and Aviral Design: Abhinav and Saumya