Over the past decade, the business world has had a real attraction to making everything a service. And rightly so. Would you rather struggle to repeatedly sell your product to the same customer? Or would it be better to offer it on a subscription model where you can keep improving it over time, and charge users a regular fee for using it? From furniture and tech products to cars, web hosting and food apps. I’m all for the services model.
However, you can’t help compare the process of buying good ol’ products whenever you would need them, to subscription based services. Let me know what you think..
In FMCG products, larger SKUs are more expensive, but (almost) always cheaper per unit than smaller quantity SKUs.
Increased manufacturing, distribution costs, and profit margins affect the price of a product. But that price applies to all customers, new or loyal ones. As does any promotion, that does not differentiate between old and new customers.
Compare that with technology and web service companies. You pay a monthly, quarterly or annual fee for services they offer. Technology companies, like any other business, have costs that tend to grow over time. And their discounts to convert free-, or non-users to paid users are far more tempting than consumer product discounts. Rightly so.
But these discounts strain the operations of many of these tech companies, forcing them to create lean models of operations. That’s the upside! Is anything more fascinating than Uber needing only a 3-member team to manage every new location it expands to?
But once that discount period is over, fees of many tech services companies goes up, year after year. And similar to consumer product customers, there is no growing advantage of staying loyal (apart from a superior offering itself) to a brand. While customers of consumer products still benefit from any benefits offered to new/ non-paying customers, that often does not happen with tech services companies.
And therein lies the anomaly. Alert consumers of a tech service would find themselves reviewing the service and its benefits, comparing with competitors, or even just weighing the pros and cons of retaining any such service, each time it is up for renewal.
I’ve been using the MS Office 365 service for almost 8 years, and the older MS Office software before that. And while my subscription was on auto-renewal for many years, at one point I realized how the fee had steadily risen. While new users were still getting it at a price almost 40% lower (and as a friend mentioned, even lower on Amazon on festival days). It seemed unfair, and there was nothing stopping me from simply registering as a new user with a new email id, and simply moving files from one cloud to another.
Similarly, hosting is a ruthless market for service providers. All service providers offer heavy discounts on new subscriptions, but those fees skyrocket once that initial period is over. And in many cases, you don’t want to avail the heavy discount and commit to many years subscription without knowing the quality of the service and support.
I wonder if this anomaly seems more in price-sensitive markets like India, or it is a pattern across the world.
And I wonder if there is a better model that might help fix this apparent anomaly (for customers) and challenge that service companies face. One that is adequately fair to the service companies that work hard to bring incredible services our way, and to stand apart from the competition. And that is also fair to the average user of those services who is not thrilled about being fleeced for a service he or she has been using loyally for sometime, and then finding out that it is being offered to newcomers at a fraction of the cost they pay – with no extra benefits to show for the loyalty.
The ideal model would be one that adequately compensates tech service companies, while also avoiding the highly skewed pricing between newbies and loyalists. And tech companies need to lose any fat.
I am always reminded of Uber and Ola. It is popularly known that Uber just needs a 3-member team to expand to a new city. And in 2012, I remember forgetting an empty gym bag in an Ola cab, and ended up being sent to two of their sprawling offices in Mumbai!
The business model that extends from the founders’ vision and extends to become part of the culture of the organization, will determine how soon and how much profits your business can and will make.
What was missing before and during the 2007-08 global financial meltdown, and during the Covid-19 pandemic?
Or during the Spanish Flu? Or in Nazi Germany? Something that perhaps could have prevented the resulting tragedies?
In 2002, somewhere on the outskirts of Mangalore, I was part of the way through third-year engineering. One day, we had classes in an adjoining campus building, one we thought was exclusively for junior college which was also on campus.
After class on the first floor, a few of us close buddies were talking about random topic by a large open window. It was the first time we were in that building which seemed empty on that day. One of my buddies, this giant we call ‘Bear’, was suspiciously quiet through the conversation between the rest of us. Known for the occasional prank, it was almost as though he was concocting something sinister while the rest of us spoke. Then, and without warning, he picked me up, and held me outside the large window. It was a sunny afternoon, and I could feel myself slowly slipping out of the Bear’s hands. As I said, ‘WTF’ and asked him to pull me back in, he very calmly goes, ‘nothing’ll happen, man’. Horrified, my head was doing a ‘time-to-eventuality’ countdown, as I struggled without much success to get a grip on his arm. Finally, after the prank probably got boring, he got me back in. And while I was still breathing a sigh of relief, he seemed really calm, almost like he was confident of his estimates on the safety margin he had for that prank. And yet, I knew that I had little grip, and that I was mere seconds away from slipping to the tipping point from where there was nothing Bear could have done to stop the fall.
(Mis)calculations, and (over)confidence is a cocktail we humans seem addicted to. And sometimes we get the proportions right, and sometimes, terribly wrong. And the worst times are where we are overly confident of the proportions despite glaring evidence to the contrary.
This excerpt from the book ‘The Signal and the Noise’ by Nate Silver mentions one such instance. The global financial meltdown of 2007-08, triggered by the collapse of suspicious mortgage-backed securities (MBS) and collateralized debt obligations (CDO). [Excerpt at the bottom of the post]
As per this excerpt, apart from overlooking the obvious risks of these precariously balanced investment instruments, even as late as 2005, S&P conducted a simulation to assess housing prices. It found a potential 20% drop over the next 2 years. But S&P perhaps was content in knowing that their simulation successfully captured the risk. And that was it.
Cut to more recent times. There are far lower chances of a developed or developing nation getting into a full-scale war, than there is of a virus outbreak.
And yet, most countries across the world, many of whom probably have dozens upon dozens of battle possibilities and multiple theatre scenarios, most were caught with their pants around their ankles when Covid-19 hit. From delaying shutting down international borders, to shutting state-borders and trying to contain the spread.
Covid-19 was of course, a virus more dangerous than most the world has seen in recent times. But yet, the countries that did manage to contain it in the months that followed, were not the most confident or the ones most capable or equipped in containing it. It was almost in all cases, those countries whose leaders accepted (either publicly or in private), that they were dealing with something beyond their abilities and experience; so they followed a more basic, first principles approach to tackle the challenge. And emerged largely successful.
As is common knowledge now, there are known knowns, known unknowns, and unknown unknowns (Donald Rumsfeld). The quicker we accept the situation when something is outside the realm of our understanding, and resist the urge to apply our standard actions and reactions to it, the faster we can begin to deal with it.
The problem is, these instances keep repeating and will continue to repeat. In our personal lives, and also in more far-reaching world events. We are wired in such a manner, that each time a crisis is approaching or presents itself, we tend to react in the same manner. By wasting time in applying what we know, without attempting to first understand.
Answer: Humility
Jacinda Ardern, Prime Minister of New Zealand, and the face of humble leadership the world yearns for.
In my book, I briefly discussed the topic of quality in the world of innovation and automation.
My view was that through the quality revolution in the US and Japan and then other parts of the world, logically back then, someone visualizing the year 2021 might have assumed a world where everyone has quality integrated into their lives. From punctuality to cleanliness, to meeting deadlines and creating high quality products efficiently, and designing efficient processes and having employees adhere to them.
However, general human behaviour and smartphones really did a number on that possibility. Now, a lot of us tend to waste a lot of time mindlessly going down rabbit holes on the web. And how many of us are punctual? We also buy things we don’t need, and spend money we don’t have yet. And our general sense of quality isn’t much to aspire to.
So, what was the upside of the quality revolution, you might ask?
I think it was more of an educational diversion from our normal human behaviour so that we could then get our machines to be efficient instead of us.
And right now, I see something similar happening on the tech development front.
I recently got familiar with the project management software Jira. And user stories. And all I can think is, it isn’t going to be long before AI will handle a good part of all tech development. And we humans would simply have to communicate our tech requirements in a very simple manner to a system that will build it for us.
Tony Stark: Paint it.
Jarvis : Commencing automated assembly. Estimated completion time is five hours.
Imagine something similar with the next website or app you want to build in the coming years.
Not sure y’all heard, but Segway stopped production in 2020.
Founded in 2001, those incredible-looking, futuristic two-wheeled, self-balancing personal transporters were priced at a prohibitive $5000-8000 a unit.
Probably why, despite their universal popularity and appeal, only some 140,000 sold in two decades.
Along the way, Chinese robotics startup Ninebot started selling Segway rip-offs.
They then raised funding (from Xiaomi and Sequoia), and acquired Segway in 2015, offering it as part of their mobility products portfolio.
However, as of June 2020 however, due to low sales and some past accidents, Ninebot decided to stop manufacturing Segways. They seem to be doing well selling their own range of kick scooters, go-karts and other personal transport products though.
An odd end for what was once a fascinating, seemingly ahead of its time, self-balancing personal mobility solution.
I suppose that’s how progress works.
And perhaps ‘affordability’ should be an important element of it? Especially if the product has a mass appeal and can be made cheaper than you are.
Along their entrepreneurial journey, some entrepreneurs constantly think of better and simpler ways to describe their business. This is an evolutionary process, as their business model undergoes refinement. So, when they meet new people or investors, they can often quickly describe what their startup exactly does.
Then of course, there are others, who build their business identical to another already-successful startup. Or, their business model is similar to a successful startup in another domain.
While taking inspiration from innovative businesses is one thing, it is dangerous if you only look that far. It is amusing and unimaginative to hear things like, ‘my startup is an Uber in the ABC industry’. Or, ‘ours is an Airbnb’d Samsung.’ Wait what!
Or the fact that Ola has invested/committed a little fortune towards the acquisition of food delivery service Foodpanda’s India business from DeliveryHero to be able to compete with UberEats. While Uber would have understood (hopefully) a customer need, and worked to build it into their business model and possibly the very soul of what they do, seems like Ola simply reacted and followed suit. Something that could prove disastrous in the long term, considering all the financial burden Ola already bears.
But there is a deeper concern. While your business or the revenue model takes inspiration off of another business, it can lead to a short-sighted strategy approach. Because your focus remains that startup or company you take inspiration from. You might not have much of an idea about where that company is getting is inspiration from, and therefore innovating toward.
For instance, am sure a lot of startups must have taken inspiration of some sort or the other, from Netflix, a visionary entertainment company. But who would have guessed, till when its co-founder and CEO, Reed Hastings announced that Netflix doesn’t exactly compete with the likes of Amazon, but rather with with their customers in general, and specifically with their customer’s sleep. How cool was that!
Which means Netflix has far greater clarity on present and future strategy, compared to companies who are simply modeling their growth strategy based on what they see or read about Netflix.
It completely transforms how you see the customer and therefore, how you evolve and grow. Better than being reactive with something like, “Prime’s launching a show around XYZ, what can we do ASAP!”
What inspires your startup?
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This is a heads-up for Tata Sky satellite television provider customers.
Here’s something Tata Sky has been doing as standard procedure, that I find questionable.
If you’re subscribed to an annual plan, and say you cross your billing deadline by even a day, they automatically switch you to either a 6-month billing cycle, or worse, a monthly one. Like all things bulk, obviously, the 6-monthly and monthly plans are incrementally costlier per unit than the annual plan. Only, they don’t tell you about the switch.
For the main connection and one add-on connection at home, I just found out the main one was on an annual billing cycle while the add-on was on a monthly billing cycle. They’re not two separate connections, but part of one connection. So it makes you wonder who at Tata Sky thinks of devious schemes like this?
So next time you recharge on their site, it will tell you prices of different packages, but on the recharge page, doesn’t have specific package options you can select. Instead, they just give you an empty box to fill in the amount you want to recharge for. You might probably see the cost of the annual package on their site, and enter that value. But, because they moved you to a 6-month or monthly plan because of the delay in renewing the plan, you in fact burn through the ‘annual plan’ much quicker than 365 days!
What you’d want to do, is each time you need to recharge, call them before and after you’ve recharged, to make sure you’re signed up on their annual plan.
I’ll be referring to them as ‘Tata Sly’ for now.
On the lighter side, here’s how my last call with them went:
Customer Support: sir, your main TV is on the annual plan, the second TV on a monthly plan. Main plan is actually valid till May. The add-on pack expires tonight.
Me: Eh. How does that happen? Anyway, I’d like both on the annual plan. What would the total fee for that be?
CS: sir, total annual recharge amount will be INR 11140/-. But you have INR 1042.88 balance, so what you can do is, when you are going to expire, you can recharge it after that.
Me: but it says today is the last date (for one of the two, I’m getting confused now)
CS: ok sir, then you deduct the existing balance (probably opens calculator app, calculates) sir, you need to pay INR 11000 only, after deducting existing balance.
Me: but deducting existing balance of INR 1042.88 from INR 11140 means I need to pay only INR 10097.12.
CS: yes sir, I just rounded off the amount for simplicity.
Me: how do you round off by adding INR 900+!
CS: err (calculating again), oh sorry. That’s right. You can pay INR 10100, rounded off.
When starting one’s business, a set of people will advice you to keep a sharp focus when it comes to offerings or purpose. Another group might suggest offering as many products or services as possible, to minimize risk. And both groups could defend their views till the cows come home.
However, in most cases, it is most prudent for you to start your venture with a relatively sharp focus, ideally with 1 offering. So that means, you can’t start an eCommerce site and try to rival Amazon’s breadth of categories on day 1. But it also doesn’t mean you start with offering only women’s’ jackets on your e-store. It could mean a focus on selling the latest European fashion online, in which case, that, is your focus. It’s what your customers should know you for.
It doesn’t mean the company should not diversify. What it does mean, is it should diversify within the sharp focus. When you need an app built, will you remember the person who builds apps? Or will you remember someone who builds apps, does web development, content development and social media marketing among other things?
Being an automotive company that builds premium sports cars is memorable. Being a auto manufacturer who builds low-cost hatchbacks, premium sedans and rugged SUVs on day 1 will not register in a customer’s mind.
While a lot of startups struggle to sharpen focus, a lot of older companies too, lose focus with each passing year. And it affects growth, whether or not they acknowledge or even realize it.
A scene from one of my favourite movies, Andaz Apna Apna perfectly captures the thoughts an unfocused mind.
One of the early screening processes to make it to the defense forces, is that of physical fitness. It is one of the more fundamental requirements of the job. Of course, subsequently, those who make the cut are broken down and rebuilt to be stronger, both mentally and physically.
In the corporate battlefield, potential candidates are put through interview boot camps which are at best, spread over a few days. But are these processes measuring the fundamental requirements you need from the candidate? Skill, while ever-changing, can still be taught. But what are more long-term character traits you’d want your next hire to have?
Once you’ve identified those traits, what if you took the hiring process and turned it on its head?
What if you then shortlisted applications based on simple initial screening criteria, and on gut feel? And then, have them come and work with your team for a week or two, or more. At the end of the period, both parties can decide where to take things from there.
One of the bigger concerns might be the transition and uncertainty, especially for people already in jobs.
Compensation is the easy bit. Even an approximate pro-rata salary-type compensation given to the candidate if rejected, would be far cheaper than the cost of hiring a wrong candidate.
From the point of view of ‘interaction time’, interviews, case-studies and other hiring processes can only be so effective. In comparison, working on a live project, albeit factoring in necessary confidentiality, might be a better way to assess a candidate. To assess traits like integrity and mettle, among other important qualities, which go far beyond a quick and temporary display of skills at an interview. The little I’ve watched of the mentally disturbing Big Brother and Big Boss, it is evident what a short amount of time spent in the same reference (a common project, not an interview) can reveal.
These are times when many MBA students and even experienced professionals focus more on being interview-ready, rather than on cultivating a curious mind. And it is partly because of the illusion of limited time.
Instead of hiring people to work, having people work to be hired might be a better way to build a team that is more suited for one’s company in the medium-to-long term.
Your views are welcome. I will revert at the earliest. And if you liked this post, do follow or subscribe to my blog (top right of the page) for similar topics that encourage reflection and discussion. You can also connect with me on LinkedIn and on Twitter.
The aftermath of ousting of Tata Group Chairman, Cyrus Mistry was probably not what the Tata Group, or Mr. Ratan Tata would have anticipated. Then again, could there have been sufficient signs even as Mr. Tata was looking for the next Chairman for the group many years ago?
A little short of 4 years ago, the challenging task of identifying a successor for Mr. Tata was completed. Cyrus Mistry seemed like a strong and obvious fit. A strong choice, given his qualifications and abilities. And from purely a cold, financial angle, it probably felt obvious too. After all, Cyrus’ father, Pallonji Mistry, is the single largest shareholder in the Tata Group, with a whopping 18.4% in the holding company, Tata Sons. In that sense, no other individual or family was as incentivized to want the group to grow and prosper.
However, Mr. Tata’s task was to identify someone to surpass his vision, dedication, and passion toward a large conglomerate and its home country. And in such a scenario, lending disproportionate weightage to the most financially invested individual or family, while seemingly a no-brainer, was not particularly prudent or without risk.
Mr. Mistry had initially demanded a free hand and little interference, as conveyed by his recent letters to the board. Those requests, while reasonable, could have been a little too much to expect. After all, he wasn’t merely handed the keys to one of the biggest conglomerates, or a group of profit-making companies. He was handed the keys to 148 years of vision, passion, rich culture, traditions and practices. It takes a lot more than business acumen to run or improve on that.
The business world thrives on profits, loud marketing, overwhelming sales pushes, and frequent deception or misrepresentation. But while the Tata Group may have its shortcomings (read this insightful article by The Economist on the mess facing the group currently), I’d even go a step further and call the Tata Group a religion. Few people in India feel as strongly about any other Indian company.
Ratan Tata and Cyrus Mistry in more cordial times | source: link
In his eagerness and urgency to find a successor, many years ago, Mr. Tata probably made a critical mistake. Perhaps forgetting that passion and intention always beat qualifications and skills. Recent emails by Mr. Mistry suggest that he was offered the position back then, which he declined on more than one occasion. While Mr. Mistry is probably as capable as anyone else shortlisted for the position, the fact that he needed much convincing was perhaps a clear sign he was not the right fit for the role.
“Passion and intention always beat qualifications and skills.”
So in the Tata Group’s search for a Chairman, did they underrate important qualities in favor of someone most financially invested, assuming such a person would be naturally inclined to do his or her best for the group? Passion, however, is not an easily replaceable or interchangeable quality.
The unfortunate result was best described by Oogway‘s subtly put pearl of wisdom to Shifu – ‘one often meets his destiny on the road he takes to avoid it.’
Feel free to share your views. I will revert at the earliest. And if you liked this post, do subscribe to my blog for similar topics that encourage reflection and discussion. You can also connect with me on LinkedIn and Twitter.
Is there a bubble forming in the Indian startup scene?
The Hubble Space Telescope
Is the Indian startup space fast becoming a bubble? Let’s take a closer look and find out.
At the Goldman Sachs technology conference earlier this year, leading venture capitalist of Benchmark, Bill Gurley expressed concerns to attendees, of a possible bubble, caused by some over-valued startups in the US. His concerns were directed at the young companies that had almost magically reached over a billion dollars in valuation, which according to him, was largely fueled by investor fear of missing out (or FOMO, as the VC community knows it). He said that investors were making investments of sizes previously reserved for listed companies. Aptly, he said “a founder pursuing a $40 million IPO offering takes the process more seriously today than a founder raising $400 million in private capital.”
Another reason for his concern, was the presence of public market investors like hedge funds, etc., investing in the space earlier catered to only by venture capitalists. Bill isn’t wrong in saying that hedge funds, mutual funds, etc., have traditionally had a different investment appetite and strategy. FOMO, clubbed with this new blend of different investor classes and styles of investing, is perhaps what is fueling his growing anxiety of a possible bubble. Benchmark has funded numerous industry-altering young companies since 1995, including Twitter, Instagram, Snapchat, and Uber, and around 250 other startups.
The Wall Street Journal’s Billion Dollar Startup Club saw at least 73 young private companies valued over USD $1 billion this year, compared to only 41 last year. Nearly half the investors in some of the most invested startups too, were institutional and strategic investors, with Tiger Global (TG is an international firm that manages hedge and private equity funds) leading the pack with 12 investments in private billion-dollar companies. TG also raised the most money last year, $4 billion to be more specific, amounting to nearly 12% of all venture capital raised in 2014. (source)
Coming back to India, should this over-investing and over-valuing in US startups be of any concern to our booming Indian startup scene that is currently fueled by online travel, e-commerce retail and logistics, classifieds, online food ordering, radio taxis, etc.? Let’s find out.
Firstly, one of those aggressive investors that Bill Gurley mentioned, Tiger Global to be specific, is also the most aggressive investor in Indian startups. In 2015 alone, TG disclosed investments in over 17 companies, investing in rounds totaling to about $1 billion. Some of its investments include a $150 million round (series H round!) with other investors in Quikr, India’s largest online and mobile classifieds portal. Then there was a series D round of $ 100 million in Shopclues, an e-commerce portal. We could argue that the exact investment exposure by Tiger Global is not known, and could be somewhat small. Or that perhaps these startups are actually worth the millions or billions they are said to be worth.
Tiger Global, among others, may have helped inflate a startup bubble in the US. But that is a significantly different market than India, with a more mature and aggressive investor community. Therefore, a race to get a piece of what is hopefully the next Google or Uber in the US might have led investors to try and outbid each other with sweeter deals to promising startups. But is TG’s strategy or tendency to overvalue being carried to India too?
In February, a reasonably well funded ‘mom and baby’ products portal, BabyOye, also a Tiger Global funded company, was acquired by Mahindra Retail for an undisclosed sum; in the hope of boosting their own brands Mom & Me, and Beanstalk, that have not been too strong online. BabyOye raised $12 million in 2013 from investors, partly used to acquire another company (Hoopos.com). After an earlier round of funding in 2011, BabyOye spent extravagantly on TV advertising using a former movie star in the ads.
Mahindra’s acquisition to gain online strength seemed concerning, given that such a large group felt the need to acquire a small company with only 1500 followers on Twitter (now up at 2003 followers), to bring in the capability of selling online, even if the acquisition didn’t cost them much. And at a time when a lot, if not most of those products were already available on Amazon and Flipkart. Did that make good business sense, or is e-commerce happening so fast that even the heavyweights of Indian industry are feeling the pressure to jump on this bullet train?
US’s popular classifieds service, Craigslist, only had one known investor ever; eBay. And that too not for too long. And was Craigslist popular enough? More than it perhaps ever expected. In comparison, a similar service in India, Quikr, has raised upwards of $350 million so far, and we can only wonder why. To buy and sell other companies, maybe?
And just then, in comes news of a possible acquisition of the nearing-a-billion-in-valuation Housing.com, by none other than Quikr. If the acquisition does happen, it might be a progressive step for Quikr. But it also leaves me wondering about the vision of these startup promoters. With growth strategies and business direction that seems to be going all over the place. In many ways, this startup mania is turning out to be more of an exit ground for investors, rather than an effort to give the world the next great company that’s made in India.
Looking at the magnitude of investments themselves, a layman could argue that ‘the more the funding, the better’; after all, is there anything like too much money? Or for that matter, even a sky- higher valuation. Imagine the pride and respect in your social circles when they read in bold, the value of your young company. But venture capital and investing isn’t as simple. If one funding round happens at a significantly high valuation, the next round becomes that much tougher to raise, as does getting a suitable exit for your existing investors. Of the $51 billion worth of private equity deals in India from 2000 to 2008, there have been only around 30% exits, according to a McKinsey and Co. report.
Over-investing in companies brings with it, the tendency to spend it, whether it makes perfect business sense or not. As the world, and more importantly India, is getting increasingly interconnected online and socially, it is worrying to see the amount of money young online businesses are investing into expensive traditional media, with the likes of Amazon’s catchy ad, or Flipkart’s loud and confusing one, everyone’s on TV and on billboards, trying to push their way into the heads of prospective customers.
About 5-8 years ago, it was comparatively tougher for companies to scale. Building capacities, adding servers, fleet, manufacturing capacity, manpower, etc., took a lot more time and more money.
So, while salaries are much higher today, many services and business functions can also be outsourced efficiently. This allows companies to focus on core activities and scale faster. There is the evolution of analytics, contractual manpower, hired CXO’s and everything in-between available. Basically, the seemingly impossible tasks that earlier needed a small army, can now be pulled off with a small team.
All this brings us back to “how do we make sense of the heavy investments into these, still nascent startups?” And more importantly, will such heavy spends only on marketing guarantee a successful future for these young ventures? And, is any funding being spent on better listening and understanding of customer needs? Or on empathizing with problems customers are currently facing?
The notorious, multi-billion dollar Uber for instance, has an extremely light operating model, asset-light, limited overheads, and is highly scalable. But has it done anything to address woman passenger safety in countries where it operates? Not so far. Even Indian taxi aggregator Meru (2 years older than Uber) had a panic button on the app long before Uber decided to put one there. Uber waited till after unfortunate incidents occurred, before putting a feature that was so logical and obvious. All that funding seemed to be spent on technology and marketing. Then why do customers still shower so much love on services that don’t feel the same way about them?
Between aggressive promoters and aggressive investors, focus has gradually shifted from the customers’ best interest. It now seems to be more about startup and investor’s best interest. Online food ordering businesses too, for example, have built strong websites and apps. And they have been advertising like there’s no tomorrow. But their internal processes remain shockingly primitive. Back in 2008, I had toyed with the idea of starting an online food ordering service, and had listed some concern areas that needed figuring out, in an effort to shape the idea better. While I eventually didn’t pursue it, online food ordering startups today, surprisingly still live with those same problems, despite the advancements that have happened in the interim.
The possible risks of overvalued and over-invested startups are many. From VC firms going bust, to startups not being able to raise the next round of funding. Or for that matter, those being made redundant by other startups. And with every startup that shuts shop, it also affects a large number of other individuals and businesses. Everyone from logistics businesses to small suppliers to even home businesses and employees. Anyone who has come to serve these super-valued startups.
And finally, in an effort to boost entrepreneurship, India has considerably relaxed rules for listing startups in the recent past. But this bold step will take its time to see benefits, especially since there is poor liquidity in this space. And the experience in valuing new age businesses isn’t anywhere near accurate.
The sky-high valuations of startups would make for interesting conversations with friends and a few rounds of beer. However, lack of clarity in funding and growth strategy in these heavyweight startups could be a matter of concern. For young stars of a new and emerging India. And India’s big startup contributions to the world would hopefully be those that are highly profitable and scalable. And most importantly, solely focused on delighting its customers.
Originally posted here: http://yourstory.com/2015/07/startup-bubble/
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Pic: source
