The protagonist is Amit Mehra MBA2001. But his co-star is LBS, which has been involved throughout.
“From building talent to structuring deals, my first port of call invariably has been the LBS community. Faculty inspired me and remain relevant to my work today. At every major turning point, from the time I landed in India in 2008 to the last investment round, there has been one or more LBS connection,” says Mehra.
Mehra founded Reuters Market Light (RML), a business unit within Thomson Reuters, in 2006. It has been widely celebrated by The World Bank, the Financial Times and indeed, the UK’s Prime Minister. It is an innovative media solution offering customised, localised and personalised agricultural news, market intelligence, crop prices and weather forecasts via text messages to Indian farmers.
Almost 600 million people living in India are dependent – directly or indirectly – on agriculture. Mehra’s goal, back in late 2007 when he formally launched the venture, was to aid farmers working in an industry notorious for price inequality and to grow a successful business at the same time. More importantly, he envisioned that if the business was a success in India, it would create a multiplier effect and serve as a model in rural areas in Africa and China.
Mehra’s story comprises three phases:
1. Phase one (2006-2011) – starting a tech venture in a large company
2. Phase two (2011-2013) – management buy-out
3. Phase three (2013-2015) – scaling up for commercial growth.
Phase one: starting up
At the end of 2005, Mehra was head-hunted to join the Reuters Innovation Programme, an internal venture capital fund programme. The programme’s mission was to incubate experimental businesses that had the potential to contribute to the company’s long-term revenues.
He was handed a one-page description of ‘Project Market Light’: an initiative to bring transparency to the agriculture industry and offer news that would affect the prices farmers could earn for their harvests at market. The concept had been created by his colleague, Mans Olof Ors, a research fellow at the Reuters-sponsored Digital Vision Programme at Stanford University, a team that researched technology-based social entrepreneurship opportunities.
Proving the idea
In January 2006, while straddling responsibilities from his previous role as the vice president of content for Reuters and based in Canary Wharf, London, Mehra was given £100,000 in initial funding and tasked with building an investment case – to build a business that would sell news, advisory crop pricing and weather forecasts. He had three months to do it.
By the end of the first month, Mehra, who had no previous agricultural knowledge in India, had assembled a small team of Reuters colleagues from around the world and set to work. The team conducted research with 400 farmers and 150 traders across India – and met with a host of private sector, government and civil society organisations engaged in telecoms and agriculture.
“We discovered that there was a huge unfulfilled need amongst farmers for decision-critical information. And the mobile phone industry was going through the roof – they were adding three to four million new connections each month,” he says.
With the price of mobile phones and network charges dropping, there was finally an affordable, accessible way to deliver critical content. The potential was significant, said Mehra: “We estimated that the global market for an SMS-based agricultural information service could be £200 to £400 million in 10 years. We were optimistic that our share of the Indian market alone could become £25 million in three to four years.”
Confident that the project, renamed Reuters Market Light, was a good strategic fit for Reuters, he pushed on. Reuters’ CEO Tom Glocer described Mehra as “highly persuasive”: “What immediately captured my interest was how the project promised to combine an attractive business case with a vision deeply consistent with Reuters’ tradition of bringing transparency and fairness to world markets. This project was an example of doing well by doing good.”
Making it work
The first step was to find ways to collect the media content that farmers needed most: crop prices from local disaggregated markets, news relevant to their crops or geography, customised market intelligence and local weather forecasts – all in their local language. None of this previously existed, so it had to be built from scratch. To start with, the team chose districts in Maharashtra, which had one of the largest populations of farmers as well as rapidly growing mobile phone penetration.
So, how did they do it?
- Reporters were hired and trained to collect live information on crop-pricing and arrivals from local markets
- These reporters built a diverse network of traders, government officials, crop experts and other market participants to obtain information
- A new, centrally-located RML team created granular longitude and latitude codes to map all key weather locations
- This content was collected using mobile phones.
The real challenge, however, was to communicate in simple, local-language SMSs and personalise it for each farmer. After many quick and failed experiments, the team reached their innovative solution. It was a technology that registered farmers through a voice-enabled service: it captured individual profiles and preferences.
Within just a couple of crop cycles, the impact was evident – farmers who used the product were able to make better decisions. They could now negotiate higher prices and reduce their crop losses thanks to well-informed, timely interventions.
Choosing the business model
Mehra needed to quickly prove the technology’s economics. That meant selecting the right customer segment and business model.
There were four key options:
1. A subscription model – whereby customers subscribe to the service
2. An advertising-based model – customers receive the service for free in return for accepting ads on their mobile phones
3. An enterprise sales model – RML sells to companies that sell to farmers (such as fertiliser companies or motorcycle dealers)
4. A transaction model – offering media for free but making money on transactions.
At this time, the subscription model won out, targeting both mid-income and low-income farmers.
From selling door-to-door to negotiating commercial alliances with leading telecom players, handset manufacturers, agricultural input companies and local media outlets – the team found a cost-effective formula. It centred on acquisition and revenue-sharing in a distribution partnership with one of the largest public sector banks, which had more than 18,000 rural branches. Soon, RMLDirect, as the product was named, became the only one of its kind to be on the bank’s core banking platform. Farmers bought an annual subscription in return for text messages four times a day. The bank got a commission. With the distribution model in place, the content, sales and service operations were scaled in nine languages to cover 11 agricultural states in India.
But marketing a totally new category for a new segment was far from easy. The revenue numbers seldom met the projections. And, as awareness gradually grew, so did competition from players such as Nokia and Intuit. During this phase, RML was brought under Reuter’s markets division jurisdiction. This meant even more pressure on delivering quarterly numbers.
As is well known, complex organisation charts can make operations more complex, too. Mehra says: “Reuters became Thomson Reuters soon after we launched RML in 2007. The merged company had 60,000 people, and a more than $12 billion top-line. So a parallel challenge was getting attention for a tiny fledgling business internally.”
By the end of 2010, RML had reached around half a million registered users. It had also added an enterprise revenue model where subscriptions were sold in bulk at discounted prices, but it still had tiny revenues and no profits. Not yet.
Read part two to find out what happened next.