Neal Thakker of Magma: Procurement Solutions for Manufacturers

YouTube Interview - Video format
Neal's Twitter - https://twitter.com/nealzyneal

Transcript of our interview with Neal Thakker, 22 year old CEO of Magma, a B2B manufacturing platform in India that has raised over $3.5 million in funding since its inception.

Neal Thakker:
Indian manufacturing in general, you know, when you when you talk about SAAS in general line, just like, you know, the implementation of software thing, it's a very rural and conservative industry, you know what I mean. And to get the tech adoption, it's to be a really strong moat on the back end. More often than not, it's always the price, right. And I think that was one key piece of learning that we had that no matter how good your software is, gonna get mass adoption, only if it is backed with the right set of slides.

There's this company in India, I'm deeply inspired by they're one of the leading b2b companies out there a unicorn. From what I've heard, and seen in the videos, their story also started off with the SAAS based approach. I think over time, like, you know, you end up connecting the dots that okay, I have so much data in front of me so much intuitive elements in front of me, because of the like, you know, everyone starts with SAAS, and then you end up analyzing, exactly exactly like you end up realizing the purchase price and the sales price and everything. So it's really natural for you to diversify into selling the commodities and the product itself. So yeah, I think I'm, I'm aligned with what you guys are building, but I wouldn't be surprised if you guys like diversify into actual product itself. Yeah.

Akshay Lulla:
So you know, what's interesting is in the US, there's a company called paperless parts, they do things similar as in for a custom component manufacturers like SAAS, but the way they started was a manual marketplace, and then they were burning too much money. So then they switch to

Neil Kanakia:
this was, this was a little bit of the opposite, like, approach where they started with the marketplace, but then they realized the actual problem and some, so yeah, I think initially, have you noticed that issue of finding the real problem?

Neal Thakker:
No, that's, that's a very valid point. Because marketplaces in general are notoriously hard, right? Because you've not got just one site to cater to, but the other side as well. So it's really easy to, you know, like you mentioned, burn money if you're not, like, you know, hitting the right metrics, getting the right audience, getting the right products, commodities out there. It's funny, you mentioned that because there's when we started at magma, we were taking a very low MOQ based approach. So there's this company in the US. I lived in the US for a couple of years as well, I did my bachelor's there. And there's this company called fair and tundra. And, you know, these are primarily b2c based marketplaces. But yet we do you know, so that's, that's something we started off as. But But I think like you mentioned that, you know, people just figured out as they go with what sort of products they want to inculcate. Yeah.

Akshay Lulla:
That's really cool. So do you think you took like, in like, Did you research those companies a lot while you're starting the ones in the US?

Neal Thakker:
Yes. So actually, magma started when I was also two weeks away from graduation. And I was actually working at that time, I was working at this company called MSI in the US, it was in Hayward in California, North Northern California. And it was in the b2b space, similar building material ecosystem. But I think, deep down, we were always inclined on Commerce and the role of tech. And you know, like, I think Neil mentioned, I also came from a very similar background. So it was it was kind of easy foot into the door, to actually build a layer on top of it, and then see how it goes. So So yeah, I was researching about fair and tundra and everything when I was in the US, and that's how things went along.

Neil Kanakia:
So like to get started, can you tell us what is what is magma because we like looked around we went through so we were so now it says a marketplace, but it also says AI technology company and it helps like businesses upskill, or manufacturers upskill their shops. So what exactly do you think you guys, what is the main problem that you guys want to solve? Yeah, no, that's

Neal Thakker:
a great question. So magma is a b2b manufacturing platform. We typically work with factories, with a vision of enabling them to manufacture better and sell better. I think our broader vision is revolved around the China plus one thesis. Leave that a lot has been talked about the shift of Chinese manufacturing to India to Southeast Asia, with of course India being on the forefront, but very little about whether these factories in Asia are actually ready You know, the good example I always like giving and I think Neil can attest to it is that, you know, in a in a average factory in Asia, you know, say the machine needs to be heated at 1400 degrees. But you would be surprised if it's running at 800 degrees, because hey, it helps you save your gas costs, you know. So in an industry which is deeply penetrated with, not so standardized factory floors and SOPs, I think the broader vision was, how can we build a platform that across these multiple touchpoints enables these factories to manufacture better, sell better, and most importantly, eliminate the churn in customers they are facing? So I think to talk a little deeper about our operating vertical. So under magma, you know, we upskill the factory in a couple of ways, starting with raw materials. So we've got the raw material business where we act as a procurement marketplace for these factories. So every raw material that's required on a process level for these factories, we act as a marketplace for that. We got energy and logistics business as well, that access, again, a procurement marketplace for these factories for their daily consumption requirements, and pursuit of tech products to digitize the factory floor. So I think the broader vision is that, you know, as a factory, how can we power you, whether it's your commerce, procurement, sales, or just factory floor dynamics?

Akshay Lulla:
That's awesome. Do you start with the you started with the procurement? And then now you're moving on to like the modern technology? Or did you start with the technology and then shift to the procurement first?

Neal Thakker:
Yeah, I mean, so for us? I don't have the right answer for that. Because it would be unfair to say either of the two, I think we are on the job. But I think I think the right way to look at it is procurement first, because you're dealing with factories in India. And you know, the only way you can get a seat in the table is if you're giving the right products at the right price at the right service. Yeah, yeah, exactly. That's awesome.

Akshay Lulla:
So what were the like your three years of college leading up to you starting magma, or even before that, like your experience? Yeah.

Neal Thakker:
Ya know, I was always fascinated about manufacturing in general. And I think the kind of ecosystem I grew up in, you know, commerce was always, you know, something of a keen interest. I think, I think what really spurred a lot of my vision and approach in life was when I visited China, when I was 16. And I accompanied my dad for his procurement. You know, he had some work. And I think just looking at the vision and scale of manufacturing, you know, I knew it would be a pretty cool industry to like, you know, sell down into, but that being said, you know, we never came from a background where, you know, we could set up industries ourselves, invest so much capex, but But deep down, you know, it was always a dream that if I could, like, you know, play a role somewhere where I get to visit factories, I get to be a part of the ecosystem. I knew I'd be pretty happy. And I think I think growing up in and just spending time in the US, I think that's what I've noticed as well. Yeah. That the over reliance on China as a manufacturing hub, I think, I think that was real. I mean, I come from Gujarat. I speak Gujarati. So part of my part of my like, role at the company I was working for was procuring materials out of the Morbi region in Gujarat. Right. So I think I think that was just one another added factor to really like, you know, take the leap of faith.

Neil Kanakia:
Yeah, that's awesome. I mean, the China problem is definitely like, it's in. Like, you can see that even the US like, people are just like desperately looking for, like different options. And I noticed like one of the things you tweeted was, like, there's a huge, I don't remember exactly, but I think you said, being able to fulfill customers internationally across borders, allows, that's like the next level of going from, like, just, I was saying, I'm paraphrasing, but I don't remember the exact

Neal Thakker:
I get what you're trying to say. I recall that I think what the broader vision is that, you know, there's a factory in India, right. We're going through a macro shift. There's procurement processes moving out of Southeast Asia to countries like India and Vietnam. And a lot has been talked about how cool that is how exports are rising, how great the economy is looking. But very little is being talked about whether the factory is actually ready. That tomorrow say For buyer from Italy is procuring out of a factory in India? Could you be as excited to see the SOPs and communication and the production quality and the parameters and the supply chain being met on the same level as that of the Chinese counterparts? Nine out of 10 times the answer would be no. Right. And I think that's the sweet spot for us to really solve, especially the youth, including you guys to really build something in this space.

Neil Kanakia:
Yeah, definitely. I think Indian companies don't have enough like skin in the game to know exactly the quality of what it takes to work, like the quality of the logistics, quality of the packaging, what was expected the standard standard way of working internationally, that just like that, like they have not been exposed to that. They're just, like cutting corners and like allowing you to like, the cheapest thing out. Yeah,

Neal Thakker:
yeah, absolutely. And I feel like that's one of the reasons why, you know, despite so much anti dumping duty and trade wars, yet, despite that we're doing so well. So imagine, like, once, like, it's at where it should be, things would be rocking, rolling, right? Honorable salon?

Akshay Lulla:
So um, yeah, of course, like very young founder, and magma is doing, like really well. Should? And what are some, like the challenges that you faced while growing this at such a young age?

Neal Thakker:
Yeah, you know, I get asked this question all the time that, you know, you're young and like, you know, you're sitting with folks who probably do business in a much more conservative fashion. Manufacturing is a very high velocity, high scale industry. People think twice before making decisions. And it's a very high LTV oriented model, right? manufacturing supply chain, these things need to happen on a routine basis. They don't change overnight. But I feel like the answer to that question is that the color of money in screen no matter whether you're 20 to 32, or if you like, if you are able to procure and sell a product, at a rate, which is ideal to all parties, and of course, keeping in mind the right value added services. I think there is a lot of, like scope for anyone and everyone to come and play in. But that being said, I think the some of the challenges that I recall during the days was rolling up the sleeves, because you know, you're not coming with a privilege that you will get at any member team. From day one, you'll get to like, have your distribution team, you'll get to have your sales team. It's something you over the course build onto it. I for one have been fortunate that we have ended up raising rounds of funding. And you know, we're in the private equity space, venture capital space that we've gotten that unfair advantage. But I feel like, you know, the more you shake hands in this manufacturing ecosystem, it's a very belly to belly space. So everyone will know everyone. And I think I think that's, that's one way to build upon it.

Neil Kanakia:
Yeah, I think I think you're just being humbled by saying that it's unfair. I mean, it's definitely like your hard work. And like, it's pretty impressive to even be able to raise that kind of money. With like, having, like, my blue like to prove yourself, you know, even though investors was pretty impressed.

Neal Thakker:
I know, I think, you know, one thing we always internally discussed as a team, you know, most of our team members are older than me, much more mature. And I think one way, I always like to frame it is that yes, we've worked very hard. You know, it's been, it's been a good time spending time doing what we love. That being said, there's been a lot of luck as well. It's, it's, of course, not too normal today's so much funding in such a short period of time. But I feel like market is always good for good companies. And if you hit the right metrics, if you follow the right discipline, and just have that sort of irrational optimism, good things come along the way. Yeah,

Akshay Lulla:
that's, that's awesome. And so amazing that you brought that up, because that was another question I had was like, what was your like, for the first, like, precede round? That is? Was it a tough decision for you to go and responding? Or was it clear that you needed to raise around like, did you ever consider staying bootstrapped and not raising money?

Neal Thakker:
Yeah, no, I considered that. I think, in the in the first two months when I was transitioning out of my time in us back to India, I think the early thought was that I'm gonna give this few months, bootstrap it, build what needs to be done, and then kind of decide to go on and explore the venture capital path, but I think over the course, you know, we've, I had a couple of mentors. I think credit goes to them. You know, who helped us shape the vision and really put us out there. I think at that time, magma was just a paper plan, but to be able to raise funding even at that stage, I think it's all credit to our mentors who have ended up like building great companies themselves, right. So one way one, one thing that I would never suggest to people is always have like a mentor who's a little more help than you in the journey not to head but a little ahead. Because you'd be surprised, like people are always ready to help if you ask

Neil Kanakia:
differently. Yeah,

Akshay Lulla:
that's one thing. That's amazing. Like, even for example, right now, like, you just got on call with us like, yeah, like, just by asking. Yeah, yeah.

Neil Kanakia:
So what's the grand vision? You said that you? Some people like how do you even like, define the vision? What's the like, the massive vision for the company like in the next 10 years, for example?

Neal Thakker:
Yeah, you know, I think we see ourselves working with, like, you know, the 20 million small and micro manufacturers that we have across Southeast Asia, I think you always want to look at the bigger picture. Because not just one industry, we don't want to still limit it to building materials. But across how many factories how many industries, different units across different verticals, we can ensure that magma powers them magma upskill them and ensure that the kind of products commodities, we supply branch down into catering to these wider industries, I think that's going to be the broader vision. I think ceramic industry building material industry is just a starting point for us. We we've already started making inroads in the energy business. And yeah, just ensuring that while we scale as a company, we continue building that share in the wallet on a on a per factory basis, you know, because like I mentioned, b2b is a very LTV oriented, you know, business, these things need to happen on a routine basis. So how fast we can scale without, you know, compromising on the wider vision that there's going to be every factory that's going to be powered by magma one day.

Neil Kanakia:
What is the LTV, so you getting

Neal Thakker:
LTV essentially stands for lifetime value. So customer lifetime value essentially means how long the factory stays with you. So say you're a factory, who's procuring raw materials from magmas marketplace, procuring energy from like mass marketplace is like, you know, part of the magmas tech stack. Something LTV essentially refers to like factory staying with you until the churn happens.

Neil Kanakia:
So when you say procuring energy, what is that? Like? What is that? What do you mean by?

Neal Thakker:
Yeah, so we are suppliers of bulk LPG and bulk propane. These are required by our factories for their

Akshay Lulla:
production processes. So it's Yeah. They are Thank you for clarifying that. And And do you like in terms of like competitors? Do you view someone like in Florida market as a competitor? Or like, what are some people that you like watch watch out for in this space?

Neal Thakker:
Well, you know, there's, there's definitely been a lot of players building in different spaces, right? Like, you got a set of folks building the digital layer between factories and retailers, you've got folks like magma building a layer between factories and their procurement processes. And you've got like folks building a layer between factories and the end consumer, which is sometimes going to be a trader or exporter, or just like a large, large ticket size buyer from another country. So the answer to that is it's not a zero sum game. Currently, in our industry, I think we're the fastest growing company we are not competing directly with with any folks because we've, we have a demographic, we have a cluster, we have a different GTM. But that being said, Yeah, I think there's room for enough players to play in the same space because I think building materials and manufacturing in general is one of the biggest spaces to build a business

Neil Kanakia:
that I think we are, there's so many different, like problems to solve that. So many of these companies plug into each other and work badly and even in the US. So there are some companies like fulcrum, which is like an ERP system, and then so many small or like paperless pots, which is what we're looking at, plugs into that and there's like four other, like other software things that plug into vulgrim as an ERP. Yeah, I think it's really interesting. Like you said, it's not it's not a zero sum game because of young Stress focuses on fixing one problem really well. It's with each other.

Neal Thakker:
Yeah. And I think I think one should not overthink it. Right? I think if your factory requires and you're able to provide it, I think there's no need to overcomplicate things, you're actually building enduring business with a with a broader vision.

Neil Kanakia:
So, did you always know that you wanted to come back to India after finishing university?

Neal Thakker:
I always knew I wanted to start a business. I think I tried a lot not to enter this industry. Frankly, during COVID, I actually took over my father's business, because classes were online, you know, I moved back from the US to India. But But at that time, you know, I think one thing that I was not too keen on was the traditional practices and the way business is being done on a routine basis, just how like, you know, any average Indian factory would be operating. And I think that's one split second where I thought that okay, maybe a life in the US may not be a bad idea if I could just stay in the same ecosystem, but you can't take it out of out of like, what do you really want to do? So I think just looking at, like, some examples in my life, watching some mentors doing really well. Just allowed me to, like, take some really cool decisions that okay, you know, I'm 22 I and for the next two years, I've earned the right to actually like, you know, go after my dreams, because, you know, you won't really get these chances too often in life.

Akshay Lulla:
Yeah, that's, that's awesome to hear.

Neil Kanakia:
Who Was anyone? Is there anyone specifically, who really inspired you? Or anyone you saw on yesterday for like, any inspiring Indian entrepreneurs or even in the US who did it?

Neal Thakker:
I definitely read a lot about like a lot of people actually. But I fundamentally believe that, you know, as a young entrepreneur, when you're starting out in your journey, it's, it's those people in your early days, who helped you actually set your career on a good pedestrian, right? For me, it was. You know, I had a great time being mentored by Sabine Mitra, founder of CRO they're backed by like alpha wave Tiger global. I think I think, you know, I think Rovio is one of the best b2b companies in the world. I know. And I say that with a lot of humility, because I would want magma to be the best b2b company in the world, but we still haven't got there, I think there's a level of metrics they take in that company, there's, there's just still so much hustle left in that company, right. So I think that's one person. And I think all in all, in my personal life I've ever really looked up to the journey of just my family. You know, that it doesn't always have to be business, but just like, like, things and accomplishments in life, so, yeah, that's awesome. Yeah, so I have a question for you guys. Actually. So this is all of this. I don't have too much context. But I would love to know like, where you guys are at your journey and if you can just talk a little bit about your company and yeah,

Neil Kanakia:
to other very early stage men actually, like you want to you want to do

Akshay Lulla:
so. So we just saw in March, I was visiting India and like, towards the end of March, beginning of April visited a friend's factory which are where they do like injection molding with plastic and, and stamping and he was complaining to me about how they had to respond to about 70 RFQs or request for quotes that month. And we had already built a project that was based on like creating codes but for complex industrial like service businesses. So I thought maybe I could could help out with that. And I also knew that Neil also had like a background in manufacturing so decided to like see his physique his unit and visited it spoke to his salesperson, I think that's what like, that's what convinced us to like start working on it. And over time, like it's been almost two months now and we've just been trying to like soak up as much as we can over the past two months and the I think right now we're still like

Neil Kanakia:
so yeah, we currently we went to like a bunch of expos in the US. spoke to some dude like you know, narrowed down our ideal customer Is the market really in in India? Or is it in the US? Do people in India even face this problem? Are they willing to pay for still in that process of, you know, like just getting a lot of iteration and like, Yeah, speaking to a lot of people, which is kind of why we created this to get some like to be able to speak to more people and the, you know, get to know the industry much better by

Akshay Lulla:
saying also, like, we've been developing a product

Neil Kanakia:
that's still in progress. So so we both we both are like CS majors. So we just like building products. So in the first unit, we just kept like coding coding coding with like, no customer, we just kept the product and realize that, okay, this is like, something that already has been done a lot. This is a previous thing you're building. So now, different approach, like trying really hard not to, like write software, and like really understand that. So that I guess things could have been a good journey to learn. But yeah, of course,

Akshay Lulla:
also, yeah, I think like, a vision with this is also like, get more like, like younger people excited about manufacturing. Of course, that's not like on the audience. But goal is to like have, like more?

Neil Kanakia:
I mean, yeah, like Gen Z, general opinion of manufacturing in our generation is not like the most exciting, right? People don't be like, oh, yeah, I don't think I want to do that. I don't think I want to work in this industry. So it's about understanding.

Neal Thakker:
It's not a sexy industry for like, young folks to tap into. So I get

Neil Kanakia:
thing, rockets are like something that's like, you know, like, actually, so it's about understanding what is like, what is that gap between? I think a lot of people are just not even exposed to the industry unless they have some kind of family background or some guru. So people don't even know what's going on in the industry.

Neal Thakker:
Yeah, absolutely.

Neil Kanakia:
Yeah. I think what do you think

Neal Thakker:
I can I, I can take one final question. And then I have to jump into another meeting. But yeah, it's it's been great, like, learning about your guy's journey. And if I can be helpful in any way, I think you know, where to find me. You've got my whatsapp number, and not as active on LinkedIn. I. Yeah, but you'll definitely hear back from me if you ever reach out. So

Akshay Lulla:
yeah, definitely. We'll keep you posted on that. And we'll send you like a quick demo video once we have a product.

Neal Thakker:
Yeah, sure. Happy to float it.

Akshay Lulla:
Had one last question. What are some books that you've read recently that have inspired you

Neil Kanakia:
know, just recently or, or whatever? Yeah.

Neal Thakker:
Yeah, you know, I've I have found myself to be more of a podcast person in the past few years than books. And I love listening to like novels. And, like, you know, of course, David Sinclair Talib. I used to read a lot about Christopher Hitchens. And there's this book called Letters to a Young contrarian. That was when I was 18. I was applying for my colleges in the US and I remember actually quoting one line out of that book as part of my essay, so it was like a hunt. Like the essay should be like 120 words or so but I just like wrote one line and submitted it. And that was out of that book. So that's how like that book is. Yeah, like ever since I was young. That book has really like helped me shape a lot of