Guest Articles

Tuesday
February 2
2021

Sachi Shenoy

When ‘Hibernation’ Is Not an Option: How a Small Business in India Fought to Stay Alive During the Pandemic

Editor’s note: This article is part of NextBillion’s series “Recovery 2021,” which explores how impact-focused businesses and development initiatives are building greater resilience for a post-pandemic future. For news updates and analysis, virtual events, and links to useful resources related to the COVID-19 crisis, check out our coronavirus resource page.

 

Maneet Gohil still remembers the exact moment when a terrible dread gnawed at his stomach and he knew something was wrong. 

Gohil, a 31-year-old entrepreneur from India, was in Frankfurt, Germany at one of the world’s largest consumer goods trade expositions. As co-founder and CEO of Lal10, Gohil and his co-founders were there to drum up international interest in the hand-crafted textiles produced by their network of nearly 1,700 artisans across India.

It was late February 2020, and while Gohil had heard in the news that COVID-19 cases were raging in China, it had seemed distant until that day. 

“Every buyer we spoke to in Frankfurt – even those from Europe and Australia – was very concerned about the virus. At first, we thought this was amusing. We thought the virus would be confined to one corner of the world,” he recalled. “But buyers met with us only if we wore a mask and showed that we had sanitized our hands. That’s when we realized this was bigger, and it was bad.”

Gohil struggled to reconcile this feeling of impending doom with the exuberance and energy he had been riding only weeks before. He and his team had just closed a round of equity funding, had cash in the bank, “and we had plans to grow very aggressively on every front in terms of our business, our impact, our technology,” he said. 2020 was all about rapid growth. 

The Frankfurt exposition was their big break – a chance to meet buyers in person, close on deals, and walk away with contracts in hand. Instead, Gohil left empty-handed. No buyer was willing to commit. The virus loomed large, and no one could predict what would happen next.

 

A young company battered by uncertainty

Lal10 was founded by Gohil, Sanchit Govil and Albin Jose in 2014 as a platform that connects India’s indigenous artisans to formal markets. 

Though the young team had garnered media recognition for its work and was growing steadily, Gohil still remembers the stress he felt in his initial fundraising campaign in 2019. “We hustled a lot in raising our investment round,” he said. After pitching non-stop, finally between September to December, “we were very fortunate to close the round of $1.1 million (USD).”

There was a sense then among the Lal10 team that their hardest days were behind them. Starting in January, they’d have to put that investment to work and prove their execution ability, but they had well-articulated plans and were confident they could pull it off.

The last tranche of funds hit Lal10’s bank account on March 12th, 2020 … a week later, the country was locked down. Announced with a few hours’ notice by Prime Minister Narendra Modi, it was the strictest lockdown of any major country in the world.

Gohil, already worried about international orders on his return from Frankfurt, suddenly saw all his domestic business dry up before his eyes. 

“It was a sudden shock. We had spent so much money, time, and effort [on these contracts]. The team was very demotivated because all their hard work just went away,” he said. 

Those close to Gohil suggested that he consider imposing a “hibernation period” on the company, or even shutting it down temporarily. There was too much uncertainty in the air. But Gohil did not entertain these options – all he could think about were his 38 employees and 1,700+ artisans. 

Gohil and his team divided up a list of Lal10’s 30 cluster leaders – senior artisans who manage the affairs of groups of 40-50 artisans each – and immediately checked in with all of them, asking them how they were coping and what they needed. 

“They were so scared,” he recalled. “The ones living in rural villages in a way were the safest from the virus, but were affected the most economically.” There was simply no work.

We have to help these people, Gohil thought. If Lal10 couldn’t help, nobody else would, and the potential fallout was too grim to think about.

The first step was to alleviate the acute worry: Lal10 negotiated and purchased COVID-19 insurance policies for all employees and artisans. The policy ensured that if any of them fell sick with the virus and needed hospitalization, their households would have access to emergency funds of up to Rs 1 lakh (around $1,300). This helped provide some peace of mind.

The second step was to restore some semblance of their regular routines, although the situation was far from normal. Case in point: The end of March in India is the end of the fiscal year, and Gohil felt it was important to do the standard accounting and reporting. Because of the lockdown, all commerce had been halted, shipping was suspended, and the team was unable to fulfill their final orders and process invoices. But they still closed the books as best they could, though they’d generated 15% less than their original projections.

Closing the books on FY19-20 felt like the end of an important chapter in Lal10’s story. Now, heading into early April, the next chapter was as yet unwritten.  

 

Reinventing Lal10’s business model during the pandemic

Two weeks into the next quarter, it was painfully clear there was no demand for Lal10’s standard products – like saris and other textiles – primarily because shipping of non-essential goods was banned during the extended lockdown.

“At that moment, I realized it was a fresh beginning for Lal10. It felt exactly like it did when we first started the company – we had to start over,” Gohil said.

One of Lal10’s investors lined up leads for the company in the healthcare space – a new focus area. By mid-April in India there was intense demand for personal protective equipment (PPE) for healthcare providers, and Lal10 rushed to help fill the void. It filled orders for masks, gowns, face shields and gloves, and earned enough gross margins on these products to carry them into mid-May, when the lockdown was lifted.

“The biggest pain point then was of course every Tom, Dick and Harry was acting as a manufacturer of PPE,” Gohil said. “This created a lot of issues with our buyers, because some of them got burned by fraudulent manufacturers.” It was critical for Lal10 to ensure quality and earn buyers’ trust.

The initial drawings and specifications from the Lal10 design team, and the final face masks.

This is when Lal10’s design team swung into action. After interviewing healthcare providers, they realized that masks were expensive, uncomfortable and unattractive. The designers worked closely with healthcare workers to produce a design that addressed all three of these factors, and simultaneously made use of the spare swathes of cloth the artisans had. Once these mask designs had met professional requirements, the Lal10 team purchased sewing machines, and trained 56 of their artisans to produce these masks in large quantities – up to 3,000 masks a day at their peak.

The design team was undeterred by their relative inexperience in the healthcare space. “One of our designers – she approached this in a very smart way – researched white papers from American universities and told us we could substitute coffee filters as an effective-enough shield in these masks,” said Gohil. “So we designed our masks with pockets that could hold this coffee filter paper.”

Gohil chuckled when he talked about training sessions for the artisans, which all took place over WhatsApp video calls. “It was a cakewalk for them. Here we have women that are highly skilled in creating complex garments with different patterns. The masks were not at all challenging!”

 

Adapting once again to a changing market

By late May, the Lal10 team reached another juncture. The market for masks and other PPE was getting saturated, and in the longer term, it was not the team’s core competency to serve the healthcare industry. Another category, however, was growing rapidly with the global shift to work-from-home routines, and was more aligned with Lal10’s strengths – home furnishings. Lal10 pivoted once again.

A Lal10 artisan sewing and assembling a mask.

Lal10 designers created sketches for new products, ranging from lampshades and cushion covers, to work-from-home furniture and decorative accents for home offices. Their existing buying channels, however, were still largely concentrated in retail outlets – and these outlets kept saying they were unsure when in-person shopping would resume. They hesitated to place any orders. So even though the Lal10 team knew they could create products that were in demand, they weren’t able to get them to market through their existing channels.

In June and July, “it was clear that the world was moving more and more to online commerce,” said Gohil. “Like crazy guys we pushed ahead with all the e-commerce companies we could name. We called each and every one of them.” Lal10 is now working with a wide range of buyers – from small Instagram shops all the way up to Flipkart, Myntra and Amazon.in. 

For the last two quarters, Lal10’s volumes trailed their projections, but Gohil is proud that the company is now scaling aggressively. He is confident his team can still catch up and achieve their targets for the year. They are also slowly re-building their artisan base: Though the network is still down from its 1,700-artisan peak, as of this writing, Lal10 is actively working with 420 artisans.

Yet despite all the adversity his company has faced, Gohil admits there have been silver linings to the pandemic. Without the sudden jolt, Lal10 may have never:

  • Built more efficient processes: Lal10 had never adopted a work-from-home system, and COVID-19 forced it into one. The team quickly realized it needed more efficient project management systems, communication channels and ways to track deadlines. The co-founders upgraded their information systems, and together with creative uses of WhatsApp, they now have solid company-wide processes that Gohil says will serve them well even once they return to in-person work. 
  • Instituted company-wide values: Early in the pandemic, Gohil and his co-founders felt handicapped by their new limitations. “Our values system failed miserably when we first had to work from home,” he said. They had been accustomed to seeing their team daily and managing them in-person, making decisions on the spot – and possibly micro-managing at times. 

Now with a distributed workforce, his colleagues were making decisions on the fly. “The only way to trust they are making the right decisions when you cannot observe their actions is if they know the company values,” said Gohil. “Strong values will drive the behavior you want.” The co-founders documented their values and, with help from one of their advisors, held a virtual town hall meeting in early August to focus on team-building activities and communicating their values clearly. 

According to Gohil, the town hall was a turning point. His employees were grateful for the clear direction and adopted the values quickly, and morale noticeably improved in the following days. Citing the values has now become part of the team’s daily routine, and it has created a shared language within Lal10.

  • Carved out time and space for employee mental health: Gohil admits that the scariest moments for him – the ones that tested his leadership ability most acutely – were during one-on-one conversations with employees struggling with depression or anxiety. He wasn’t prepared at all for these sensitive conversations, but knew they were critical to have.

Gohil credits his wife, who is experienced in counseling, for giving him tips on how to have those conversations. He now checks in regularly with staff on a personal level. “This was the first time I realized that everything we are doing, it’s not about a company, it’s about people. This made me really internalize that.” 

Ever the optimist, Gohil is excited about the months ahead. He lights up as he talks about how technology will benefit even the most rural artisans. Before COVID-19, he explains, artisans would often attend exhibitions or urban marketplaces to market their products. Even Lal10 would previously recruit artisans primarily from these channels – but only artisans with adequate means could afford this exposure. Gohil knows that thousands of artisans work in relative obscurity, far from high-traffic areas: Since they rely on smaller, hyper-local markets, they are inherently limited in what they can earn. 

To better reach these individuals, last November, Lal10 rolled out a test version of a mobile customer relationship management tool that will allow any artisan with access to a smartphone to create an online profile and market his/her products directly to a large online marketplace, like Flipkart, Amazon or Etsy. Gohil said this approach was inspired by both Faire.com and Etsy – smiling, he said his dream is to connect with these companies’ teams, to understand their journeys, and to explore how Lal10 may be able to emulate their success to help artisans in India. His goal is to reach 9 million artisans.

Gohil is also hoping to connect with a technology mentor, someone with ample experience building and scaling business-to-business platforms, to help Lal10 scale its customer relationship management solution. Despite the volatile year his company has experienced, his focus, it seems, has not wavered from connecting artisans to dignified work.

“The women who sewed the masks for us, and the ones who are now working on our new products, their confidence has really grown,” he said. “In our society’s hierarchy earlier, they weren’t seen as that important, but with the lockdown suddenly all the other family members lost their jobs. These women were the only ones working – the roles were reversed. This was amazing to see.”

“We’ve been able to provide ample work to only 20% of our artisan base though,” he said. “I’m hoping that by digitizing the inventory of the other 80%, we can get their products to market and create even more impact.” 

 

Sachi Shenoy is co-founder and chief impact officer of Upaya Social Ventures

 

Main photo caption: Members of the Lal10 team gather at the head office in fall 2020 to brainstorm new product lines and how to respond to the pandemic.

Photos courtesy of Lal10.

 


 

 

Categories
Coronavirus, Entrepreneurship
Tags
business development, coronavirus, entrepreneurship, small and medium enterprises, small business, social enterprise