Khatabook Business Model – Digital Accounting Made Easy

From a cramped college dorm in Mumbai to a $300 million USD business in just two years – How Khatabook’s business model has transformed the way businesses maintain and manage expenses.

The internet is a vast space. And it’s only growing bigger every single day. Gone are the days when you had to walk to your nearest supermarket for groceries or to the mall to shop for clothes – you can just order stuff on platforms like Swiggy, and have them delivered to your doorstep. Need to go somewhere? Book a cab online. Internet Banking, ordering homecare services, getting items picked up or delivered to you or your clients, it’s all becoming possible thanks to the internet, and businesses are taking note of this.

With nearly everything being digitized today, it makes sense that businesses also take their operations online – cloud platforms and SaaS products provide tools that help these businesses handle their work more efficiently, and in a cost-effective way. So when every operation in your business is just a click away, why should bookkeeping be ignored? Enter Khatabook, a one-stop spend-management solution for businesses.

What is Khatabook ? A Digital Khata!

To put it simply, Khatabook helps you maintain all of your accounts digitally, without having to burden yourself with the task, all of them recorded safely in your pocket. It was officially brought to life in October of 2018, but you could say its founding bricks were laid way back in 2016, when Khatabook founder Ravish Naresh, along with his college buddies started an AI-powered SMS platform that helped businesses keep track of their accounts.

Ravish and his team started out with a humble app called that potentially helped businesses track their accounts by capitalizing on the power of SMS. When pitching this idea to Y-combinator, however, they were led towards a more insightful approach. This pivot led to the birth of the MS Dhoni backed Khatabook as we know today.

Khatabook MS Dhoni and Ravish Naresh - Twitter Screenshot

About Khatabook

Legally listed as Khatabook Inc., the Bangalore based B2C and B2B company is changing the way small business owners maintain ledger books. Khatabook is relatively new, with only a couple years in the fintech industry. Naturally their team is also small, consisting of only 21 to 40 members, with Ravish Naresh, co-founder and CEO, sitting at the very top. He is joined there by co-founders and friends Dhanesh Kumar(CTO), Jaideep Poonia(Product Lead), and Ashish Sonone.

Khatabook Founders
Image Source – Surge

Currently valued at an estimated 275 million to 300 million USD, Khatabook has been made available all across the country, with 11 languages for ease of use, and made available across India, Nepal, Pakistan and even Bangladesh.

Khatabook Funding/Investors – Growing Big, and Fast

With the SMS feature and the simplicity of the Khatabook app in place, the company started getting traction. A lot of businesses depend on ledgers for their day to day spends so they saw Khatabook as a lifesaver. By November, the app had already recorded 5 billion USD in transactions.

Big numbers attract big investors. Ravish’s app gained a lot of attention from investors like Sequoia, partners of DST global, GGV capital, Tencent, Hummingbird, B Capital Group, RTP Global,, Falcon Edge Capital, and Y-Combinator.

Khatabook Investors

This would eventually skyrocket them to the position of one of the world’s fastest growing startups in Surge in 2019.

How does Khatabook work?

Khatabook’s business model really revolves around(but is not limited to) the kind of business owners operating outside the chief metropolitan cities in India. Because grocery retailers exist everywhere in India, and not many attempts made to reduce their pain points, Khatabook was welcomed as a godsend. The most important pain point for these local vendors, perhaps, was maintaining who they were lending to, and who was paying them – essentially, they were having trouble maintaining their ledger books, or “khata(s)”.

Image Source – Google Playstore 
Image Source – Google Playstore 

Khatabook solves this problem, through the existing power and reach of services like WhatsApp and SMS, by sending easily readable, multi-language reminders through different messaging platforms. Leveraging this, merchants can easily track pending payments and facilitate easier returns. By digitizing their ledgers, they’re also making it easier to fetch records that would’ve otherwise been lost to time. A simple online ledger on your phone – does that seem like a million dollar idea? Some would say it’s worth 300 million, actually. But how does Khatabook make money off of this? Is Khatabook free? Or is there something going on behind the scenes? Let’s find out.

How does Khatabook make money? – Khatabook’s Revenue Model

Surprisingly, for a company that’s valued at 300 million USD, Khatabook has yet to produce a single penny for itself. Then why are investors more than willing to part with their money, even though the risk is so great? It’s their trust in the way Ravish Naresh is leading the company, and the direction they’re heading towards.

Khatabook most recently announced its MyStore feature, that lets users set up their online store in just 15 seconds to a minute, and get them up and running in a digitally strengthening economy.

The company is also in line to introduce UPI payments for faster payment processing and accounting. All these will definitely help the company gain a significant amount of revenue, and seeing the 2.5 million customers who’ve already set up their online stores on MyStore, things are looking really good for Khatabook.

To bait merchants into using its UPI payment facility, the company also provides attractive incentives. After you’ve completed your first transaction through the Khatabook QR code, you will receive 11 rupees cashback (INR), which will be settled into your account immediately.

This offer works in a pattern – you’ll receive another cashback after the 5th transaction, and then another upon completing the 10th transaction, the incentives increasing with the number of transactions being made. A lot of Khatabook’s competitors like OkCredit and PayTm use the same method, and it’s not relatively new, but it is effective in keeping customers coming back to your payment channel, eventually leading the way for monetisation as well.

Closing Thoughts

According to recent reports, Khatabook has more than nine million daily active users, with over 20 million registered downloads. Its competitor, the Paytm Merchant app, has around 520,000 users and OkCredit has a little over 352,000 users. There is also a PhonePe, that has 231,000 users and BharatPay, with a little less than 120,000 users. So Khatabook is way above its competition, and is planning on staying there for a long time to come.

Customers find the user experience of Khatabook positively different and trustworthy, and it only helps that the company records over 200 million USD in transactions daily. The company has already penetrated inside 700 districts, home to around 800 million merchants who use the app. 

It is being predicted that the payment market of India could reach 1 trillion USD by the year 2023, and this only brings further good news to fintech companies like Khatabook. The coming decade shows a lot of potential for India, and Indian startups in general. Keep watching the Growth Insights blog as we stay on the hunt for potentially disrupting startups, and businesses that truly change people’s lives for the better.