Excitel: Bulgarian Internet Conquerors, Indian Chaos and a €4M Deal

“When we first went to India with the idea to connect them to the Internet, the normal speed there was around 256 kbit/s (the international average is 5.6Mbits/s – ed. note)”, Nikolai Gorchilov recalled. Gorchilov is an internet veteran. Back in 1997 together with Victor Francess and Konstantin Petrov, he started a business that was later named one of the reasons for Bulgaria to be ranked among top 5 countries with fastest internet – Orbitel. As they sold the company to the Hungarian Magyar Telekom in a €8M deal in 2007, the partners needed a new direction to transfer the obtained knowhow. India seemed the most logical choice – huge market, very limited internet penetration, similar obstacles to the ones in Bulgaria some ten years ago and English as official language.

This is a story about five Bulgarian families that rented a house and moved to Delhi, four entrepreneurs that found a way to deal with the local Wallah (any person that is involved in an activity, worker – ed. note), put into business the unorganized grey economy and three Bulgarian investment funds that might get huge returns. Excitel was founded in 2015 after series of other internet business experiments and two other Indian ventures of its founders. It was initially backed with €1.5M by the investment fund NEVEQ. The company that provides wireline internet for households has just raised another €4.1M from Bulgarian NEVEQ, Impetus Capital and Black Peak Capital.

Indian digital flavor

There are some things you could never experience as a tourist in India – the culture of working and the organization of businesses. “Everything is organized in small groups and gangs and nothing is centralized, it is chaotic”, Gorchilov explained. Small groups or entrepreneurs rule every sector  – there are almost no large companies.

That’s the way even television works – the cables of each block of streets and households are guarded by one person and his 5-6 employees. This group would take care of the cables, protect them from the neighbour gang, collect the TV payments and receive commission from this business.

Having the experience from Bulgaria where they laid fixed broadband cables next to the TV ones, Excitel’s founders decided to reproduce that approach in India. “We’ve always build on the hypothesis that internet is the new television, both as entertainment and infrastructure. We also saw that TV providers simply don’t know how to operate internet services’, Gorchilov explained. According to him, there are estimated 250M households market and 150M of them already have TV cables and infrastructure, which would make their business easier. “The broadband market for large telecoms is around 8M in the newest urban areas. Close to 90% of the houses and households, however, don’t really exist on the cadastral map which makes it almost impossible for large telecommunication companies to invest in infrastructure there”, Gorchilov told us.

Excitel decided to go down the road of utilizing the already existing infrastructure, the gangs and the given factors. They started a company that provides internet, takes care of support, sales and standards, keeps the accounting and lets the local cable guardians be part of the process and the benefit. In other words, Excitel is a brand that is the face to the customers and works with partners (the locals that still operate as small scale business owners in their blocks) who take care of the last mile infrastructure. The locals would then get the chance to offer internet services and receive 40% of the paid cash. This approach allowed Excitel to penetrate 200K households in Delhi and Hyderabad in two years, to have 830 employees and to work with 850 partners. Last year Excitel generated €15M revenues.

A fixed broadband unicorn?

Connecting households to internet doesn’t seem like a unicorn type of business at all. However, the rules in India are different. “Every company that manages to find a business model which could organize the chaos here, impose some standards and utilize the dispersed micro businesses under a big brand has the potential to be a unicorn”, Gorchilov explained. This is the case with the Indian version of Uber – Ola for example, which has managed to organize the small taxi and rickshaw entrepreneurs by giving them user-friendly technology.

As of the technology Excitel is using, it is all developed in Bulgaria by a team of 15. The company behind the brand Excitel, which is also the entity that has received the investment is called Interteynmant Services.  “We are currently working on a software that would automate some of the processes like notifications for payment deadlines etc.”, Gorchilov said. The whole tech IP of Excitel is in Bulgaria.

“The company’s development exceeded our expectations. Even though it’s not a high tech business, it has the potential to grow enormously”, Pavel Ezekiev, partner at VC fund NEVEQ told Trending Topics.

According to Gorchilov, the fixed internet market in India looks that way: 250M households, 50M of which are in the cities. Around 150M of those households already have television, which would make the job of Excitel significantly easier. With its over 460 million internet users, India is the second largest online market after China. Forecasts show that there will be over 635M users by 2021. However, in 2017 the internet penetration rate in India is one of the lowest in the world – 35% of the population, according to Internet and Mobile Association of India.

The market seems to be huge. “Our long term goal is to acquire 5M users, for now and with the current investment of €4M+ we will focus on acquiring 500K users and expand to more cities in India starting with Bangalore in the next two years”, Gorchilov explained. According to him there is no fixed internet provider, which operates in the whole country and Excitel aims to be such a player. According to Viktor Manev, partner at Impetus Capital, the company has become the third biggest internet service provider over a period of 18 months and is eyeing a next round of up to €30M in the next 18 to 24 months.

Even in its relatively early stage, Excitel indicates potential to be an important player. But could a Bulgarian fixed internet company be the next Indian unicorn?…