BR Research recently had a chance to catch up with Haroon Sethi, CEO of an exciting new start-up called Khareed (www.khareed.pk). Haroon graduated from Yale University with a double degree in mechanical engineering and economics. He started his career in corporate and investment banking working at Citigroup, leaving eventually to start his first entrepreneurial venture in the manufacturing sector in Pakistan. After a successful exit in 2007, he joined McKinsey and Company, a management consultancy, where he spent 8 years, initially in their Middle East Office before returning to help launch McKinsey’s Pakistan office in 2014. In 2016, Haroon launched Khareed, a business procurement platform aimed at bringing transparency and efficiency to corporate procurement in Pakistan.  We discuss how Haroon hopes to change procurement processing in Pakistan and the concept behind Khareed.

Below are edited excerpts from the conversation.

BR Research: How did you come up with the idea for Khareed?

Haroon Sethi: From my own experience in the manufacturing sector, procurement was one area that I always found very difficult. Broadly, the issue was that whenever we had to buy anything, you had to go out and source three to four quotations. There’s a great challenge in price discovery. What is the true price of the product you want to buy? Is it based on your negotiating ability, or is there a clear market price?

I always thought it would be amazing if there was an online platform where buyers could post their procurement bids and people just send in quotations. Like how tendering works basically, but in a more cost-effective and efficient way. From that experience and my time at McKinsey, I felt a lot of companies have room for improvement in their operations, and I wanted to create an intuitive tool that helped to streamline procurement.  That’s what led me to come up with Khareed.

BRR: Please walk us through Khareed’s model and how it works towards solving procurement issues for companies.

HS: The aim was basically to set up a platform for transparent discovery of pricing.  Khareed provides B2B e-procurement software to companies that enable them to request competitive price quotes online. Companies can directly send requests to any vendor of their choice, including their existing suppliers, whether or not they are registered with Khareed. Vendors are able to submit their responses and quotations directly into the system, and companies can further negotiate rates and log all the communication and discussions for purposes of transparency and documentation.

The system provides a comparative view of different rate quotations and minimizes manual market visits and data entry, saving procurement teams hundreds of man-hours every month. Structured as a Software-as-a-Service (SaaS) offering, Khareed provides packages tailored for companies of all sizes, starting at Rs20K per month.

BRR: What kind of return on investment will it generate for users?

HS: Companies that use Khareed can expect productivity gains that generate a minimum 10 times return against the cost of the software.  We want to convince people that there is a lot of time saving by using Khareed. You save a lot in terms of time, effort, and fuel spent in continuous market visits. As an added benefit, you automate your documentation and filing and generate a clear audit trail as well.

BRR: Why focus on B2B and not the retail segment as well?

HS: Having been a consultant and banker previously, I have always been more comfortable on the business to business side. Not only is this an area where there is an existing gap in the market—industrial products currently cannot be readily sourced online—but it’s also a space where there is huge opportunity for efficiency gains and a large savings potential from price transparency. Improving transparency and increasing efficiency is our core competence.

As a start-up, we also don’t have the resources, logistics infrastructure or marketing budget to compete in the retail space where you have established ecommerce giants such as Daraz, Homeshopping, and Yayvo.

BRR: Fair enough. How many buyers do you currently have on your platform?

HS: We were lucky to get a couple of large companies on-board early on with Pak-Elektron Limited (PEL) in Lahore and Atlas Batteries Limited in Karachi. With their support and volumes, we started organically building the vendor side.  An interesting thing was that the first investors in Khareed were also our own clients, which was a great validation of the quality and applicability of our product.

Currently Khareed has about 60 large corporate clients that are using our platform on a regular basis and more than 200 smaller firms that periodically use it.  Our customer base now includes companies such as JDW Group, TCS, Shield Corporation, Punjab Beverages, and Treet Corporation.

BRR: And what about the number of vendors on your platform? Also, are there any restrictions for vendors to be listed on Khareed?

HS: The Khareed platform is fully open meaning companies can to send their procurement request to any vendor they wish you, without the vendor needing to be registered on Khareed. Khareed went through a lot of technological hurdles to create an infrastructure where if you are a company doing your procurement, you can put in the name of any vendor and their email address, which allows them to reply on Khareed’s portal.

However, we do allow vendors to register and maintain online product catalogues. Currently, the number of registered vendors who are actively using Khareed is 600, and we have a larger directory listing of about 3000 potential vendors that our buyers can look up as they do their sourcing.  To maintain quality of the vendors, we register only active taxpayers, verified through their NTN number. It’s our litmus test for gauging the quality of companies, and it ensures only serious vendors on the platform.

To encourage vendors to offer competitive prices, we do not charge vendors for using the platform. There are no commissions or lead based charges. We only charge buyers for use of our software, which helps them strengthen their procurement systems.

BRR: How much funding have you raised so far?

HS: Earlier this year, Khareed raised $500,000 in an over-subscribed Series Seed funding round.

BRR: What features does the current platform have?

HS: In the tech sector, the right way to start is always with a minimum viable product.  After receiving feedback from our clients over the years, Khareed has transformed from a simple web portal to an enterprise-grade software platform. Last year, the company re-branded itself as a Software-as-a-Service (SaaS) firm and created paid packages for different customer segments. Smaller firms can opt for the basic version, which has limited features but is cheaper while large companies can choose our enterprise packages which have data, reports, and workflows and can include multiple users and offices.

BRR: Is your software compatible with Oracle and SAP as most companies already use these?

HS: We are an add-on to SAP and Oracle and have spent a lot of time in making Khareed compatible with them. The advantage here is that it enables companies to smoothly link up their existing ERP systems to Khareed and augment their capabilities.

If you’re a CEO and have integrated Khareed with your existing SAP or Oracle system, you have everything in one picture.

BRR: What are your plans for the future?

HS: By the end of this year, Khareed is on track to achieve approximate Rs2 billion in executed transactions. Our strategy is to spread and entrench in Pakistan and make sure as many companies as possible are coming online to sell and buy.

The software can be easily spun out on its own, and we eventually hope to also market it internationally and the plan is to do this within a year or two. We are going to raise more financing later this year for expansion.  We will also be launching our mobile application for vendors next month and this will be followed by an application for buyers shortly after Eid.