Last fortnight, home security upstart MyGate raised $56MM to expand its technology offering to more Indian homes.
Ordinary Security is No Longer an Option
It doesn’t take data to tell you that there are more strangers visiting your home today than people you know.
Even if you’re not a lonely person.
They say experiences from your past inform your future decisions, and this is exactly how MyGate was founded. Vijay Arisetty served in the Indian Air Force for 10 years, and upon returning to civilian life was struck by the stark contrast in levels of security.
An ex-banker by profession and Air Force man by choice, Arisetty was a technologist at heart. As India rode the smartphone and data boom, he reflected on the fact that tech-enabled security was overlooked in India despite being a $20Bn industry with 8MM employed security guards.
In his mind, technology wouldn’t replace the human element, much like companies like Ring and Alarm.com aim to do in the West, but instead would enhance human ability to do their job effectively.
Joined by Shreyans Daga, Abhishek Kumar, and Vivaik Bhardwaj in early 2016, Arisetty’s insight gave birth to MyGate. By tapping technology, the goal was to create a seamless connection between the internal and external world of these gated premises.
As Mr. Arisetty elaborates in his interview, MyGate began with a mobile app allowing residents to approve entries/exits for various people coming to their homes.
If you look around, e-Commerce is growing rapidly. Soon there will be close to nothing which cannot be delivered to your doorstep.
There’s the kicker – your doorstep.
Today, come to your doorstep than ever before, and there lacks a system in place to manage this flow of people and packages.
MyGate wanted to be this system.
A Delivery Hero Amongst All Of Us
The flow of peoples and packages is only going to go up, as the internet proliferates.
Companies such as Flipkart, Big-Basket, Swiggy, 1mg, Pepperfry and Urban Ladder, among others, are planning to increase the number of delivery workers leading to an overall increase of about 20%.
We estimate that there are almost 45MM entries of e-commerce players per day in gated communities, assuming close to nothing in the heydays of 2013.
Shouldn’t the ability of gated communities to manage this influx scale as well?
That’s where MyGate steps in. It is an end-to-end “community management” platform that provides real-time information and alerts to its users
The idea is simple — to make interactions at gated premises smooth, simple, silent, and secure and to bring down the time taken at each stop of the delivery down to 2 seconds.
To do this, MyGate operates on both ends of the marketplace.
On the B2B side — the companies who are delivering to these gated communities; MyGate has inked partnerships with several ecommerce companies and brands such as Swiggy, Zomato, Dunzo, and Grofers.
On the resident end, MyGate not only makes security a community goal but also allows various stakeholders in a single residency to add reviews on domestic help employed by them.
In a Zomato meets UrbanClap meets Flipkart of user-generated content and quality operations, MyGate hopes to enhance the interactions of these communities with the outside world while bringing people together within their communities.
By the time of MyGate’s $8.7MM Series A, it had been adopted by more than 250,000 homes across 1000+ communities in Bengaluru, Hyderabad and Pune and was looking to aggressively expand to 10 cities including Chennai, Mumbai and Delhi/NCR.
Its sell to communities across the country a software driven solution. This solution manages operations at the gates and saves cost for deploying any isolated systems like RFID cards, fingerprint biometrics, access cards or vehicle stickers.
While these seem like problems, what was the size of the market?
A Friendly Neighborhood of Millions
There are roughly 240MM households in India, of which 45MM are in gated communities.
The private security industry in the country is estimated to be worth USD 15 billion by 2020 with a CAGR of around 20%. Incidentally, India also boasts of the highest ratio of private security personnel to security forces with the ratio being 83:17.
The private security sector, is witnessing a massive shift from the unorganised to being an organised one due to factors such as GST, re-categorisation of workforce under skilled and highly skilled category with higher pay scales and compliances under the Private Security Agencies Regulation Act (PSARA), 2005 formulated by the Ministry of Home Affairs.
Of the previously 90% unorganised sector, as much as 60% has been organised now.
Most of this organization has been driven through physical services. MyGate turned the problem on its head by putting the power of security in the hands of people living in the houses.
By using this acquisition channel, MyGate could use scalable technology to solve security. Historically, this had been solved using people.
MyGate can expand the market by making security more “accessible” or democratized. What may have been in the safe havens of societies that could afford high quality security people, MyGate can bring to them.
MyGate is not the only player announcing its arrival. JioGate, Gatekeeper by ADDA, NoBrokedHOOD, Lockated, ApnaComplex, DigitalGorkha are some of the other players who find the space lucrative as well.
The upstarts could not only capture a large portion of the market, but help build it.
My Gift is Not My Curse
MyGate’s technology first approach would hold it in good stead to scale.
Unlike hardware security solutions that dominated the market, MyGate would be able to continuously update its application, effectively gather data and build solutions based on what they found, and drive network effects through a growing user base.
MyGate categorizes visitors into three buckets – support staff, delivery, and known visitors (relatives/friends).
For the support staff, a digital profile can be created on the app and each staff is provided with a ‘unique citizen code’. So, when a maid reaches the gate, she provides the code to the guard and her digital profile will appear on the app, thereby informing the resident about her check-in through a notification.
For the second and third category of people visiting the gated community, options like ‘Pre-approve’ and ‘Leave the parcel at the gate’ are also available.
But, most of the time, the guard punches the details of the delivery guy — contact, company, vehicle number, contact person, flat number, etc — into the app and the details are forwarded through a notification to the concerned resident. The procedure is similar while allowing guests (friends, relatives, and others) to enter.
MyGate involves two end-users: the security guard and the resident(s). The device used by the security guard doesn’t run any other application and is preloaded with a 4G sim.
The touchpoints for both the personas are the mobile application itself.
FOMO Powers Growth
MyGate’s user adoption story of organic growth can be better understood by comparing it to two very different industries – social media and college admissions counselling.
Instagram drives new users to join and post on the platform through the 4 letters that every millennial is all too used to – FOMO. Morals and personal opinions aside, platforms like Snapchat and Instagram grew the way they did because people felt like they were missing out on something important.
In the same vein, parents will spend large sums of money on advisors to help their children through the college application process because other parents are doing the same, even if all the information that you can get from these counselors is readily available online.
MyGate capitalized on this insecurity that drives decision making by emphasizing the importance of security guards being ‘MyGate trained’ upon adoption of the MyGate service in a community. This level of trust and safety is what encouraged individual apartments to come on board the service, and the community is what got them to stay.
This is not very different from new age SaaS businesses like Dropbox, which drive revenue by getting users to adopt, who then advocate for purchases.
Disrupting a $20Bn private security industry in India where 8MM security guards are employed, MyGate has brought down TAT from ~15mins to 20 secs for a single verification, and eyes at achieving it in 2 secs in the future.
It almost as swiftly began to scale revenue.
Being The Fastest is The Best
Like any other SaaS product, MyGate has a subscription based revenue model where the subscription fees charged to a society varies with the number of houses in it.
Keeping in mind the price-conscious Indian consumer, MyGate is priced at Rs. 20 per month per apartment (28 cents) but claims to be profitable even at that price point. All encompassing within this price is an agreement with the entire gated community to have MyGate train their guards as many times as needed for the duration of the contract.
For an average society of 300-500 flats, this amounts to INR 6,000- 10,000 per society each month.
MyGate already counts leading real estate developers such as Prestige and Lodha as its clients. However, like any B2B business in India, though securing big-ticket projects is highly valuable, the real opportunity lies in capturing the large and growing number of smaller players, in this case, smaller societies.
MyGate generated INR 13L ($20K) in revenue in FY17, less than a year after its inception, and closed FY18 with ~INR 2Cr ($300K) . While revenue jumped 20x, operational losses in the same period grew by a little more than 3 times, going from INR 1.1Cr ($200K) to INR 3.7Cr ($500K).
What are some signals of a large, fast-growing, market? A natural guess would be inflow of venture capital into the sector.
However, a less transient and, some would argue, a stronger signal would be a $90b multinational conglomerate setting its eyes on it. In September this year, The Reliance Group entered the community of security management, with JioGate. Despite being a newbie in the space, it carries the potential to trigger unprecedented growth in the sector. Unsurprisingly, as opposed to being worried about competition, Vijay and team looked at the move as a validation of their market.
While JioGate might have deep pockets, MyGate enjoys a deep understanding of the market as a first mover. Afterall Vijay and Kumar had worked as security guards for three months before founding the company to get to the roots of the problem.
Buoyed by growth and market potential, investors poured $56MM (INR 390Cr) into MyGate, the current market leader.
With its recent fundraise, it aims to invest heavily in brand building and technological infrastructure to achieve 10X growth by the end of next year. This translates to going from serving 1.2MM homes currently to close to 15MM homes. xto10x might actually be feasible for this startup that scaled 6x this year (250K homes to 1.5MM homes) with just $11MM of funding.
As of today, they have amassed more than 1.2MM home customers from over 5,000 gated communities across 11 cities in India.
MyGate currently employs around 700 people and has plans to take their headcount to 2,000 and reach 15 million homes across 41 cities, scaling to almost 60,000 gated communities by mid 2021.
The upstart has evolved into India’s leading mobile based security management solution.
Getting Everyone’s Trust
Bringing more and more homes under its watch is not the only opportunity that MyGate can tap.
Moving beyond residential complexes, it aims to secure any building that currently involves a tedious and inefficient process of authenticating visitors, such as commercial spaces, government buildings, factories, or even warehouses.
Going forward, MyGate can evolve into a fuller ‘facility management’ app. It already allows residents to discover household help through reviews on the app and can develop these features into a complete service discovery platform. With its information on houses in the society, MyGate can even enter the real estate brokerage segment.
Starting off a pure security management app, MyGate has quickly innovated to involve features such as vehicle management, bill payments and household help management to evolve into a ‘full-stack’ model for community management. It has gained excellent traction and displayed strong growth for a 4 year old startup.
Though it is first among new-age companies, the leader in the private security market in India is an INR 66Bn ($1Bn) worth company, SIS (Security and Information services). It remains to see if MyGate, with its tech algorithms and customer focus approach, will grow to compete with its public comparator.
But looking at MyGate as simply a security company is limiting the mind boggling possibilities. In what sounds almost Orwellian, MyGate quite literally knows everything and everyone going in and out of your house.
MyGate could be less SIS and more Google.
With Great Power, Comes Great Responsibility
As long time readers would know, if you sit in the flow of money you’re likely to make more money, like Razorpay.
But if you sit on the flow of transactional data, you can become Google. By knowing the entire flow of goods and people to your doorstep, MyGate has a lot more information than any of the big tech companies. Amazon, Swiggy, Flipkart only know what you order through them.
MyGate knows everything.
This should ideally be raising a privacy question, as MyGate is so well integrated with what is happening on your doorstep. As we have understood in the product, MyGate backward integrates with all delivery partners.
It makes MyGate a data gold mine for companies battling at your doorstep. This transactional data could be mined for nudging purchasing or transactional behaviour.
MyGate knows that every time you have a certain friend home, you order from Swiggy. Swiggy would build intricate models to uncover this mysterious “variable” to nudge you to purchase.
MyGate simply knows this very “obvious” fact.
We can very easily come up with multiple use cases as to why MyGate is so powerful because it knows who you are with and if you are at home. MyGate could become an attractive acquisition target for any e-commerce company, more specifically Amazon.
By making your neighborhood more secure, MyGate now sits on the flow of every physical transaction happening with your household. Monetizing through subscriptions is only the tip of the iceberg – you are paying MyGate for your own data.
The value of this data is much more than the revenue MyGate makes, and would contribute to increase the company’s valuation. Depending on the beholder, the beauty of this data could be worth a billion.
MyGate could become your friendly neighborhood unicorn.