The Gray Hair Speaketh

Advice that is largely Unsolicited..

Year 2035: a viewer call on a live program on CNBC-TV18

*This post is in lighter vein*

Let’s visualise a call coming in on a live market analysis program on CNBC TV18, in the year 2035.

Okay, I hear some of you go, “will traditional TV even be around in 2035??”

So, let’s not get into that detail. The doubts about traditional TV’s survival do remain. But for now, indulge me. Let’s assume live TV is still around, let’s assume that TV18 is still around, and in case these are not, then visualise this happening on some equivalent program on some popular web platform, of 2035.

Again, before we jump there, let me give a historical reference:

This video is from Sept 2017, and since it is in Hindi, I will give you a small summary of it. Here on a live business program, a viewer calls in to say that he has some shares that were left behind by his late grandfather, that they are in physical form, and that he wants to sell them. While the experts explain the process to him, only as a matter of fact, the journalist mentions to the viewer that the shares that he has accidentally discovered now, are 20,000 shares of MRF, and which are worth a princely sum of INR 130 crores!!

With this historical background, we now switch to the year 2035, and where there is a similar business program going on, on your favourite business channel.

Year 2035

We have the host, Balaji, and the experts Mr. Kuber and Mr. Cryptic, engaging on the program. Clearly, the program is all about crypto currencies now, as normal stocks and mutual funds have been reduced to a tiny fraction of the investment pie and are traded on small niche exchanges, and there is no discussion program for those, as the interested segment is a very tiny audience. There are a few amongst those who have been holding ITC Ltd shares and have been waiting for the “imminent” rise in its share price, for almost 30 years.

On the program now, Mr. Kuber is commenting how the crypto markets have remained stable last few days, and have seen only a swing of 30% up and down, over the whole of the previous week. As he says, “I guess investors are happy with the current valuation numbers and seeing the currencies settled in the 30% swing range, which should give a lot of comfort to everyone holding these. Compare that to last month, when we were seeing an 80-90% up and down in the prices.”

Just at that moment, the host Balaji interrupts him saying, “we have a live caller, let’s hear from him”

The live caller is Ravi and he says, “Hello, Sirs, I have a question for the experts here. My grandfather had passed away in the 2021 pandemic and left behind a lot of things. We have been busy surviving and slowly figuring out his various assets. Few months back, we had found his iphone and wanted to see if there was anything on it that might be of value.

As it turns out, it was an iphone 11 and since we are now in the iphone 24 era, there is hardly anyone who can open up anything earlier than the iphone 19. So, it took us a long time to find someone who could open and read through the contents of the iphone11.

Finally, as we managed to do this, we saw some reference to some Dogecoins on his phone. We don’t know how to validate them. And whether they are worth anything. “

Mr. Cryptic responds “Ravi, this is a good question. Dogecoins are definitely around, and yours should also be valid. You can just go to the mycrypto app, put in your details, and it will give you a confirmation of their validity as well as their value, if you’d like to know.”

Ravi says, “Okay, give me 1 second to download the app (*my note: at those speeds, app downloads would literally take 1 second only!) and then let me put the details and see.”

Saying so, Ravi quickly downloads the app, while still being on the live call. After doing that, he puts the reference information from his grandfather’s iphone and finds a match. User experience designs have gone up (finally) by 2035, so that the app is intuitive enough to fetch the data quickly and not wait for the user to make 10-15 attempts with different combinations etc.

And Ravi responds back on the program, “Thank you, Sirs. Indeed, the Dogecoin shows that it is very much valid. Thank you for leading me to this app.”

And he adds, “But I think the app is misbehaving? The value that is is showing has far too many zeros. I don’t think this may be correct.”

Mr. Kuber was intrigued. He asks Ravi to share his screenshot, so the experts can understand what is happening. And Ravi finds a way to share his screen.

At which point, Mr. Kuber, Mr. Cryptic and Balaji, all of them, after reading the screen once, after re-reading it to confirm that they were reading it right, screamed wildly and jumped off their respective seats!

Ravi was startled, almost scared. He was not sure what had hit these guys. Was there some virus or something that he had shared via the screenshot that he had shared.

After they regained composure, they screamed back to Ravi, “Ravi, you are one lucky person! You know how much you are worth, thanks to this stray discovery of your grandfather’s iphone??

You are worth, ONE TRILLION DOLLARS!!

You have become India’s richest person! OH MY GOD.. !!”

May 9, 2021 Posted by | Uncategorized | Leave a comment

Why I cannot comprehend some types of valuations?

If you are thinking that this must be about some astronomical valuations that unicorns are getting, well, this piece is NOT about those valuations.

(I cannot fathom many of those valuations also, but that is a subject for another post, someday!)

As I have been reading about the hot new topic of NFTs (“non-fungible tokens), while I appreciate the tech behind it, and the concept of NFTs per se, one of the consequential story around suddenly finding a lot of value in say, a sports card, or some other random memorabilia, got me thinking about a peeve that I have had, around some kinds of investment areas.

Say, gold, for example.

Why And How To Invest In Gold?

Gold or sports cards or a T-shirt autographed by someone, while of some value to you for sentimental reasons, can continue to command a rise in valuation, only provided the demand for these, continues to be higher than it’s supply.

Let me elaborate the idea.

Yes, almost everything is valued fundamentally, on a demand vs supply scale. If there were ample diamond stones available and being sold to you by street vendors, they would have cost a few cents and not the thousands of dollars of price that these command. Everything else about the product remaining the same.

It is only the limited supply and a larger demand, that continues to give the diamonds a higher price.

And then came factory manufactured diamonds, with qualities that were so close to the mined stones, that it made it hard to decipher the difference between the two. Factory manufactured diamonds, not being constrained for volume productions, suddenly skews the demand-supply gap, potentially leading to a drop in prices. While this phenomenon is a work-in-progress, the idea just explains how something valued only on basis of a demand-supply gap, can have challenges.

Let’s consider gold.

At a fundamental level, it’s a shiny yellow metal, with certain qualities, and used for jewellery making, and maybe some small industrial uses also. But often held in. raw form, as blocks of the metal, in vaults (folks who would have seen the popular series, Money Heist, might remember the vivid details!). So, just sitting idle in that vault, doing nothing “productive”, how does the value just appreciate? Since that has been the basis of gold being viewed as a part of your asset mix, in your investment portfolio?

Think about sports cards or some limited edition Barbie dolls or Marvel comics, etc., and other such “assets”! They are not even a shiny metal that can convert into a necklace. The value of these is only and only based on the assumption that there will be a continuing demand for these, from people, and being limited edition, therefore, the price will keep going up.

Is there a risk that the appetite for some sports cards or an old Barbie doll goes down? Or that people are not that fascinated by gold anymore? Since, as a hedge to currency risks (for which also gold is used), there are now other options like Bitcoins, say?

Considering the fact that these items are almost worthless, except for the inherent demand to hold them, anything that goes out of favour, stands a big risk of a sudden devaluation!

So, the question can then be that, this aspect of demand-supply drives valuation of everything, and not just the kind of examples that I listed above. You may say that an equity share is also valued thus, because of the limited number in the market, or that silver and copper or foodgrains or a piece of real estate, etc. are also valued on the same basis of demand-supply gaps.

Right, that is a fact. However, as long as these items have a functional role to play, besides the demand-supply gap, that potentially drives their value, then there remains a difference in the way you perceive them.

Say, when you invest in equity. While the price may have been dictated by the demand for the stock, once you invest, your money is part of that pool, which is being used by the company to create value, and which translated to an appreciation of the value of the stock.

The value of silver or copper is also connected to their respective utilisation in industry. And if the prospects of the produce of those industries are good, the demand for the products, and hence the supply chain in terms of silver or copper, go up. Leading to the value appreciation.

A piece of real estate may be valued on it’s demand, but it serves a purpose of housing an office block or a factory or providing residence to people, and creating inherent value in doing so. And as long as that core functionality keeps growing, the demand and hence, the value of the real estate asset also grows.

What you see in these examples is that while, value is decided by the demand, the demand itself is not based on people’s fascination and interest to hold that asset, but rather, on basis of a core value that the product is enabling to create.

Which is why, I am unable to reconcile putting much of my money in gold (irrespective of the history of price and demand growth, whether it will continue to do so, in a changing scenario of bitcoins, NFTs etc. remains a question mark) or in sports cards or similar limited edition items (irrespective of NFTs!).

I feel more comfortable putting money in equity knowing that my money is contributing say, to more medicines being manufactured to serve the sick of the world, or to producing food stuff to feed our millions, or to entertain people with their sports or video games etc.

I know that my financial advisor is not very happy, as she shares her conventional wisdom of distributing my assets into different classes, including gold. But as you can see, somehow, I am not fully convinced.

March 31, 2021 Posted by | Uncategorized | Leave a comment

Why is Ola getting into 2-wheeler EVs manufacturing??

Few days back, I caught the news about Ola’s plans to get into EV manufacturing at a very large scale.

While the idea is undoubtedly impressive and it is clearly a project at scale, I was wondering about why Ola would get into something like this.

As I understand their core business, it is an Uber look-alike. A cab-on-call, a business that connects freelance cabbies to passengers who need a cab, wherever, whenever. To scale that business itself across the country has been an amazing achievement. To add nuances like tying up with regular yellow-black taxis and getting these traditional taxis into the Ola system, or introducing auto-rickshaws also into Ola, or even enhancing the service to include 2-wheeler pillion seat hops, is all a great thing to do. And all of these make for the most natural enhancement of the services.

So, what are the essential elements of business that Ola has mastered in doing this?

  • A very good consumer app, with the right UX / UI,
  • A great back-end software that keeps the complex operations going, connecting drivers, passengers, ratings, payments, refunds, etc.
  • An ability to connect across large groups of potential drivers and motivate them with the right policies and incentives, to join the Ola movement,
  • Continuing engagement with government bodies, municipalities, trade unions etc. to manage the permissions and policy matters, around their services,
  • Investors and investment management, since a business of this kind, with the scale they are driving at, and while keeping consumer rates to a reasonable level, would keep demanding investments and cash burn for a long time.

At a different level, one can say that the business is about efficient consumer mobility management, and doing all that it takes, to manage this operation.

This being the core, and being the skill strength that the business would have built over time, ideally, an expansion of their services, which plays to these same strengths, and continues to provide them scale growth opportunities, would be ideal to pursue.

What kind of such expansion opportunities, then, come to mind?

  • Getting to other modes of transport – say, small aircraft, helicopters, yachts, luxury vehicles like limousines, etc., maybe. With the same fundamental intent of consumer mobility management
  • Getting to other geographies, maybe, beyond India
  • Perhaps investing into driverless cars as their business dependence on drivers is huge; some day, even in India, driverless cars can be a thing (hard as it may be to visualise that today!)

There is significant ground that Ola needs to cover in its current business and then there are these other ones that make for more natural extensions, that Ola could get into.

What then, makes them get into 2-wheeler EV manufacturing, and that too at a scale that is way bigger than their own needs, as a mobility service provider?? As far as I can see, this is a completely independent, new project, and has almost nothing in common to whatever businesses they are currently in.

Let’s consider other companies who make such moves. Put in large investments and get into business areas, that appear to be vastly away from anything that they are into, at that point.

Companies like Reliance, or the Tatas come to mind in India.

The thing with these industrial groups though, is that they are otherwise into traditional, organic growth kind of businesses, which are currently driving nominal single or low double digit growth rates. And yet, due to their business size, and earlier reserves in their balance sheet, they are sitting on large pools of cash, that need to be deployed.

In such cases, the concerned industrial groups do consider and invest into completely new areas of business, as a means to diversify and perhaps looking for higher growth rates in such businesses, compared to their current areas of business.

Any company with significantly large base of reserves, earned out of profits over the years, can potentially contemplate such completely new and diversified areas of investment. Names like Microsoft and Apple come to mind, as companies who may have the luxury to get into new areas of business, on account of the large pools of cash they are sitting on. But in reality, even they choose their battles with care, and are generally seen to go into areas of relevant interest and extension.

A company sitting on a large pool of cash that it has got in the form of investment capital (and not accrued out of its profits) does not sound like a perfect candidate for someone who should be putting that cash into completely new areas of expansion! Ordinarily, the investors who have put in their moneys, would find this to be a problem. They would have put the money with the idea that the company is going to thrive in their identified area of focus and leadership, and not into something totally new!

Which is where this move of Ola seems to be a surprise, to say the least.

Why would the investors agree to let a mobility business to get into hardcore manufacturing in this manner??

Maybe the major investors, including Softbank, want to make 2-wheeler EVs in India, and use this as a hub, to supply these to other geographies? And think of using Ola as a vehicle (pun unintended!) to be that manufacturing hub? While I am trying to digest this possibility, I still find it questionable since the investors would typically prefer China as a manufacturing hub, rather than India?!

If that is not the case, WHY should Ola be getting into this??

2-wheeler EVs may be thought as a very exciting business to get into. But why should a company specialised in a consumer business like Ola, with software skills, skills of managing drivers and trade unions, and managing payment gateways, etc., be thought of as the perfect business / management, to handle a large scale manufacturing facility, with assembly lines, robots, supply chains, battery tech, sales distribution logistics, etc. etc.??

Yeah, everyone’s response to such questions is that if Elon Musk can straddle an EV company, a space vehicle business, a batteries business and what not, all of which are at high growth, why can’t Ola do so too? Fair question. But it’s like the typical question we marketers get asked that if Apple can manage such fandom and get traction for their brand and business, from its consumers, why can’t their business do so too? Just like Apple is exceptional, so is Elon Musk. One cannot make that as a reference, and reckon that “we too can do it”. And at least not until the point that your own core business provides enough growth opportunities that you have not fully exploited and until you have not given a profitable return to your existing investors!

So, clearly the move by Ola to get into hardcore 2-wheeler EVs manufacturing surprises me, and I would be happy to hear logical perspectives to some of the points raised by me, here, to challenge my thoughts on the subject.

March 9, 2021 Posted by | Uncategorized | 2 Comments

A counter viewpoint to Vaithee’s piece, “the dark side of starting up”

It was nice to see my friend and old e-commerce industry compatriot, K. Vaitheeswaran (fondly referred to as Vaithee), in the Times of India today, with this piece around the dark side of starting up, in the e-commerce space.

For those who don’t want to follow the link and read the piece, here’s a snapshot of the article:

Image

It is an interesting conversation here. But I have a viewpoint slightly different from Vaithee’s on some of the questions, and I thought this will be a good time to give my perspective as well.

During these times of social media activism, I need to put this disclaimer! The purpose of my counter viewpoint is absolutely not to create any controversy, nor to discredit Vaithee, for a moment. I have a lot of respect for him, and we have been contemporaries for long, in the early stage of the e-commerce industry in India. I respect him for his persistence in the space, and the tremendous learnings he would have picked up being there for so long.

So the point of this piece is just to share a different viewpoint on some of these questions, from yours truly who had also been in the space for about as long and who has since moved into other facets of the digital space and seen some more of startup world and investments and M&A and the like. Yeah, that’s me.

For those who may not be aware, I co-founded Homeindia.com, one of India’s earliest Internet businesses, and e-commerce companies (to slightly correct the editors of Times of India who mention in the above piece, Fabmart as being India’s first e-com venture, in fact, Homeindia.com was founded in 1997 and was doing B2C e-commerce on the site, since 1998!), and ran it for 9 years, before divesting our stake in 2007, and then moving on to start a digital media agency in 2009, which has since been acquired by WPP group, and now runs as a full-services digital agency called Mirum, and where I am the Joince CEO. So hopefully, the perspectives I bring will be appreciated to be coming equally from hands-on experience, and not armchair commentary 🙂

So on to the questions posed to Vaithee in this piece, and my perspective on those.

  1. The first question posed was “Were you caught on the wrong foot by trying to build a profitable company at a time when big bucks were coming in?” 

Vaithee speaks about profitability vs GMV (gross merchandise value) and contends that GMV won out.

The way I see this is that in retail, you can opt to be a successful local store / kirana or have a vision to be a pan-India organized retail player. The business models are very different. The kirana can and will easily be profitable. In spite of there being organized retail around, he will spell out his value to his local customers and keep his margins. But he runs that as a boutique business. As soon as a retail player aims to go national, become a brand, there are other factors that come in, and which include a variety of costs. And for which money needs to be pumped in. For supporting infrastructure and for getting marketshare.

The profitability vs GMV debate is somewhat of that nature. Through very focused, differential value creation for your customers, even an e-retailer could remain profitable. But it will be a niche business, and would not compete with the larger players on size. On the other hand, if one wants to play the scale game, there is no choice but to fight for your share of that large and fiercely growing market. And the game is also not just about discounts, but also about bringing in sharp operational efficiencies. But as the market is growing rapidly, and you want to maintain or grow your share of it, and for which there is no choice but to pump in more and more cash.

 

2. Another question posed to Vaithee was “Do you think the current Indian e-commerce companies will ever be profitable?”

Vaithee’s opinion was that he didn’t think so. Because someone will always pump in more money and then businesses will keep throwing more discounts etc.

That is a fair visualization of where this could go. However, I believe that with Amazon going so aggressive and strong, it is a matter of time before a lot of the viable competition folds down. What will be left is Amazon and some niche players. Whether it happens in 2 years or 5 years, I cannot say. But once the growth of new users to acquire starts slowing down, and the need to desperately acquire customers at any cost reduces, gradually the survivors will find a way to make money. Also e-commerce differs from physical retail, in that it is not just about selling physical goods that you carry inventory of. What a successful e-commerce player is doing is attracting large number of users to its destination with a promise of good service and value. That can translate beyond selling physical products, to conveniently sell insurance or loans or advertising banners or subscriptions etc. And thus, the ARPU can substantially go up, enabling a quicker passage to profitability, at that point.

3. A further question posed was “How would you take on a company like Amazon?”

I am not sure if too many people on the planet know this answer, so I am not going to hazard one! However, I want to comment on a sentence Vaithee uses in response to this question, where he says that “you have to be clear that you are a retail company, not a technology company”.

I wonder about this! Technology is so integral to retail today, even in the physical stores, and most certainly in the online stores, that it is hard to say that you’re only a retail company. Can a e-commerce company for example, outsource it’s technology? I would emphatically say, ‘no’! Technology and core retail are working together to make success happen. And this is true whether you are taking on Amazon, or not.

4. Another question: “Isn’t Flipkart doing that with its focus on smartphones and electronics?”

And I absolutely agree with Vaithee’s response here. That Flipkart plays in the low margin categories, there is little hope of overcoming the large overheads to ever become profitable.

Most retail businesses, especially multi-category types have some low-margin commodities to draw the consumers in. Even kiranas would have those – the grains and the cooking oils, and such. However, the game is to get the consumer to enhance his cart with a mix of few higher margin items too. Like apparels in case of e-commerce, or imported chocolates and cheeses in case of the neighborhood kirana, because that is the ONLY way you come out on top, in terms of profits.

The lament of the online travel portals has also been that their biggest volumes are from domestic air tickets which are wafer thin margin products, and they have just not managed to sell hotels or tour packages at scale, where larger margins are available!

5. Felt sad for the system and for Vaithee in context of this question: “How did you deal with the aftermath?”

All I can react to in this case, is to feel fortunate to have had an amazing set of investors. We too, were clearly ahead of our times with the e-commerce startup that we built from way back in 1998 to 2007 (before divesting out). Thankfully, it was the investors who prodded us to take a few big bets, and then if they didn’t work out, then get out and do something else with our lives. And that we managed to exit with very clean books, taking care of all liabilities of our team as well as vendors.

But it could so easily have been different. Quite like what Vaithee seems to have gone through. Yes, we were fortunate comparatively.

6. This was an interesting question posed to Vaithee: “You compare the startup ecosystem to the caste system”

And I agree with him, that the Indian VC system is a cosy comfort zone of staying with what are perceived to be “safe bets”. Like they say, no one’s going to fire you for buying IBM, likewise, perhaps no investor in a VC fund is going to fire the VC management for backing an IIT / IIM team, or someone from an HBS network or a Goldman Sachs name!

But if they back a smart young team that does not have these badges on them, they may be questioned. Which is where good startups may starve for funds sometime.

However, I don’t believe that is the case with the global investor space. I have heard more than 100 startup stories via podcasts and I can recall several who were completely unlikely entrepreneurs, with none of those so-called badge values. And yet today these are super successful brands and stories, and these happened only because, at some stage, someone took a bet on their ideas and backed them.

7. This was an interesting question: “You say ‘Don’t pivot, don’t fail fast.’ It goes against the current popular narrative of failing fast.”

Well, Vaithee mentions, as an example, a period like 6 weeks. So yes, most certainly, one cannot be knee-jerk to keep pivoting every quarter or something like that.

However, if there is one big learning I retain from our Homeindia.com experience, it is simply that we should have attempted to scale much faster, and if that did not happen, we should have exited quicker. While the nine-year stint was great experience, the one wish that I have in hindsight is that it would have been great if I had managed to shrink that entire experience in 5 years, instead of 9. Do almost all that we did, but took lesser time on it. So yes, I believe in “Fail Fast” in that sense!

Overall, it was really good to see that exchange with Vaithee as it took me back to the days of our previous venture. Almost nostalgic in many ways!

And like Vaithee, we have a book on its way too, based on the learnings from those days. So watch this space for news about it!

 

July 9, 2017 Posted by | Uncategorized | Leave a comment

A core consumer fundamental driving the success of Uber and Airbnb

Uber_-airbnb_logos.jpg.1440x1000_q85_box-0,3,404,283_crop_detail

Over the last couple of decades, where the world has seen many unicorns emerge, these have pursued different fundamental business models, as a path to their success.

There have been many that created new paradigms that did not exist, and got people to behave differently, and yet had them hooked to this different behavior. A Facebook that connected all of your known contacts at one place, and enabling you to literally bring together various aspects of your life (childhood, work, student days, family, etc.) and interact with them, all at one place, was unheard of. Although the desire to stay in touch with your various contacts, was probably more intuitive to human behavior and which is why, the model worked.

Or perhaps how a Twitter goaded us to communicate in short form or an Instagram proposed that we talk through pictures, etc. These are all examples of a ‘new way’ that didn’t quite exist before, and which people embraced and stuck on to (beyond the fad value), due to some inherent connect with what humans like to do, anyway.

Then there are business models that enabled us to do things we were already doing offline, but brought immense efficiencies and scale, thanks to being on the Internet.

A jobs site than enabled job seekers and recruiters find each other, or a matrimonial site that connected prospective brides and grooms, are examples of these.

In fact, these sites are also examples of what are called as ‘exchanges’, which at the most fundamental level, play the role of matchmaker, while taking a small sliver of a fee, in return.

So coming to Uber and Airbnb, at one level, these are also matchmakers or exchanges, connecting vehicle owners / drivers to those seeking a ride, or home / room owners to those seeking an overnight stay.

So what is it that Uber and Airbnb are doing, BEYOND being matchmakers, and what in particular, has led to their amazing success?

Yes, sure they have great software behind them, and the mobile phone has been instrumental in driving rapid adoption, especially in the case of Uber.

But here’s something that is even more fundamental, and which has contributed to their big successes, as per my reckoning.

Both of these services are using assets that people own, and which are grossly underutilized (and hence, there is spare capacity) and putting these to use!

Take Uber first.

Many, many people in this world own cars. To go from one place to another.

And yet, for most people, the actual “use time” of the car, is no more than 10% of their waking hours. For the rest of the time, that asset is sitting idle in a garage, or a parking spot (maybe, even COSTING money, to be parked there!).

Uber finds a way to put that to use.

Likewise, take Airbnb.

Here again, a very large number of people around the world own homes which are somewhat bigger than their immediate needs. Now there’s nothing that one can do about the extra room or two in your own home, except continue to maintain it, pay taxes on it, or pay rent on it, if it’s a rented property.

Airbnb put that to use.

What you can see as a pattern here is as follows:

There are assets that you own (car / home), that you need to use partially (the car for limited time, the limited number of rooms in the home), and whose excess “capacity” could seemingly not be sliced out and offered to anyone.

Until Uber and Airbnb found a way to do so!

There have been other manifestations of this same core consumer insight.

For example, shared vacation ownership businesses. Where you “own” a week of a vacation home, but the rest are “given out” to others. As against you investing into your own vacation home, using it just for a week or two, and the asset being wasted for the rest of the year.

While vacation ownership businesses of this kind have been successful, the secret of Uber’s and Airbnb’s success is because of its usage of a far more prevalent asset around the world, a far more day-to-day usage of the same (and one ‘one week in a year’) and the flexibility of offering the slices of the asset for others to use, and for you to generate some value from the same.

The one more use of an “asset” that people have space capacity of, especially in the case of Uber, is “TIME”.

So you’re a student or work part time or even work full time, but still have a few hours of waking hours on hand. And these are a different number of hours, perhaps a different time each day, which you have free.

It was not the easiest thing to find a productive use of such excess hours.

Till Uber gave you the option of using them (along with the available unused time of your car) productively, while driving around passengers from one place to another, and make some money out of it too!

In some sense, the original model of Ebay, when it started out as a pure P2P service, was also around a similar insight.

People had excess of stuff at home. Clothes they had grown out of. Toys that the kids had gone beyond. Gfits received that were not likely to be used. Or simply the excess that one sometimes piles up, due to impulsive shopping binges.

Over time, when the basements start swelling up, or when you get fed up seeing stuff all around, you want to get rid of those things.

Before Ebay days, one used to do garage sales, and such, to get rid of such excess at home. And sure enough, one would find a buyer, most of the times, but also because you were selling at next-to-nothing.

Then came Ebay, and it enabled you to sell off such stuff more easily, and almost always at better value. This was also accomplished by the auction model then, as it allowed “water to find its own level”, in terms of getting the right ‘market price’ for any product that you put up for sale there.

So again, while the simplistic Ebay model was one of person-to-person buy-and-sell via the auction model, more specifically, it thrived on the fact that people always had excess of assets (see the connect to earlier explained Uber and Airbnb models), which they wanted to sell off.

And in all these cases, there was a connected demand, for sure.

Ample number of people looking for rides (Uber), ample number of people travelling to different places and needing overnight stays (Airbnb) and ample number of people wanting to get into that size of T-shirt that you have outgrown, or having younger kids who can use the toys that your child has grown beyond etc. (Ebay).

Are there other “unused or underutilized assets” that you can identify, that people have, and which you can find a way to monetize?

Hey, you could be on your way to creating the next unicorn!!

Think about it!

🙂

February 27, 2016 Posted by | Uncategorized | Leave a comment

Want to be the next Uber? ITS a 3-step plan to get there!

 

uber

 

Uber’s going to do $11 bn in 2015, and $26 bn in 2016??! And it’s valued at more than $50 bn??

Now where did THAT come from?

The taxi business was local, and relatively small. Till Uber came, and turned this industry on it’s head. And generated scale and expanded rapidly. And became a game changer and an icon, so much so that the brand name has become a verb to describe such a business model – one that connects a hitherto disconnected latent demand and latent supply, through a mobile app! “Uberize” is what one does, in creating such a connection.

So yes, you may slurp as you see the sexy valuations and the revenue numbers of models like Uber and Airbnb, both of which fundamentally “uberize” their industries.

And now we have other industries following suit, in some or the other way, e.g. Practo, which connects doctors and patients!

So are you tempted to make an Uber yourself? If you are, and don’t know how, consider looking at it, as a simple 1-2-3 step model. And let me explain to you how it works:

  1. Identify an industry that is fundamentally local, but one that is an essential need, and would quite likely be found in all localities across the world. Like taxis that Uber identified. You think that is difficult? Don’t get stuck on taxis and overnight stay rooms (viz. Airbnb). Go beyond these. To as I said, “businesses that are essential, that are local, and that are found pretty much everywhere in the world”. Still find it difficult to get some examples?? How about milk delivery business, how about the laundry or just the service of ironing of clothes, or hair cutting saloons, etc.??
  2. Industries like these are typically served on basis of location proximity, and quality of service or rates are given lower priority. Just the comfort of having someone around, nearby, is the reason one keeps going to one place or getting served by one service provider. This is a perfect opportunity to disrupt! Why should it remain a local service provider? Why not the most efficient one, when you need it? And as a consumer, it doesn’t matter if the service provider comes from the next building, or from a few lanes away, or from a different corner of the city, does it? A mobile app that connects service providers to consumers, on real time basis, and based on demand and supply, at that moment, is this next step. So this is basically the Tech stage here.
  3. Once you’ve got these two steps done, simply throw it open and make it global! And you could be the Uber for getting clothes laundered, or for a home service of a hair cut, or whatever. Scale’s the thing. Scale’s the route to high revenues and high valuations!

Yes, at the fundamental level, these are the simple 3 steps.

Identify – Technology – Scale or I-T-S model! That’s it.

Of course, for ultimate success, all of these need to be done very well, but that is a necessity for any large success!

So are YOU ready to Uberize a new industry? And make riches for yourself? Go for it! And since you read it hear first, I don’t mind a small percentage of equity for “triggering you forward”!!

All the best.. !

 

October 5, 2015 Posted by | Business Model, Startup, Technology | , , | Leave a comment

Why I think same-day-delivery models of Ebay Now and Flipkart are unsustainable?

Ebay Now and few others in the US have launched same-day-delivery business models.

There have been fanciful launches of services in the past, and a launch is NOT the same as success.

So whether this works or not, the jury is still out.

Here’s a story on the ebay Now model in the US.

And I have seen the Peapods and the Webvans which struggled (not just with same day delivery but with the general business model that they took on) and failed. And I have a sense that these same-day-delivery models are also unlikely to win.

I hear that Flipkart is also gunning to start these in India, and I see challenges in the same.

Why do I say so?

Here are a few reasons:

  1. It cannot be economical. Earlier traditional models of delivery of such kinds, got challenged on economics, and gave up. Bundled, slightly longer delivery schedules to get some economies of scale (rather than deliver your one package, can deliver 4 in your area, once in 3 days?). So don’t know how this current trend can sustain.
  2. It is not scalable. You may end up needing warehouses at various locations, and then a network at each of these.
  3. You’re competing with the local kirana, local vegetable vendor, etc. who will deliver anyway.
  4. You’re spoiling the customer. Most times, he doesn’t need it same day anyway. To get your edge over your competitors, you’ll do this, after a while find it hard to sustain, then drop it. Customers will feel let down. Curse you for withdrawing.
  5. You’ll burn some money for the 6-12 months that you will attempt to do this. Customers are not going to pay a huge premium to get this. So all the local warehousing, and the set up of the network, and absorbing some of the cost to acquire a few fussy customers. Will all go waste. As withdraw it, you will, in time.

Meanwhile, it is an interesting story to get the buzz to happen..for ebay Now there, and soon for Flipkart, here..

July 30, 2013 Posted by | Business Model, Ecommerce, Retail | , , , , , , | 2 Comments

Short term vs Long term, Constant Trickle vs Big Bang, Product vs Service: It is an Attitude Choice, more than anything else!

Besides the variety of other differences that one may find in business plans and business models, one crucial difference between business plans is what I am discussing here.

I come across business plans that involve a few years of building out. Maybe it is a prototype, maybe there is R&D effort, maybe the big software piece needs to get done.

Till the point of time that this happens, there is only investment, and no revenues.

Someone needs to fund the entire effort.

Of course, the conviction in such cases usually is, that once done, the product that has been made, can be a rip-roaring success, making it worthwhile to have invested the time and the money.

But the big risk in a model of this kind is that, while one is building it out, there could be someone else also doing the exact same thing. And that they could go to market say, a few months before you are ready. And steal the thunder and the market.

OR in this period while you are building out, some fundamental inflexion point occurs, that puts the entire business model at risk. And that after, a lot of investment has already gone into building it out.

The alternative to this model of course, is something that requires lesser development time and effort, can get to market sooner, can perhaps be made in phases, so that first phase product is out, getting tested, getting validated, and perhaps earning revenues too. In a sense, there is some amount of de-risking that takes place, in the process.

The fact is that we NEED businesses with an R&D base, we need businesses that may have a long development cycle because only then, will the interesting product get born. But the validation of the model, the technology or the idea must be really strong, to justify the long time and money investment, before the product sees the light of the day.

Most importantly, the entrepreneur working on this project needs an attitude that sees such a long term vision. That sees the day-to-day progress, works with the timeline of the end delivery, keeps costs under control, and yet, is relentless in pursuit of the dream, of the big picture. Notwithstanding the fact that there are no revenues and that money is getting sunk into the project, each passing day, and the fruits will come, one day. Hopefully.

Only people with the right attitude of this kind, can nurture business models of this type.

Another scenario that this attitudinal difference can be seen is in running businesses, with a particular kind of revenue model.

There are some businesses where the revenue cycle is dependent on just a few large transactions happening in the course of the year. Say, a revenue cycle dependent on winning 3-4 large tenders in a year. In such cases, there is immense effort at the pre-sales level, often a matter of several months, in working towards a favourable closure of these revenue opportunities. And at the end of the year, getting say, 4 such deals, is a winning situation. Getting 2 deals may be break-even, getting a 3rd may mean nominal profits, and the 4th generating the large profit opportunity that the business is working towards.

For all the efforts put in the pre-sales activity, it is quite possible that ultimately, the sale does not close in your favour. WIth a binary situation of a yes or a no, in each of these large revenue opportunities, it can easily happen that there was a bad year, and one ended up with only one success.

How vulnerable is this model?!

Then again, if you are in a business of this kind, you have no choice.

Many others though might prefer, a constant trickle into their cash boxes rather than the few big-bangs.

Whether you as an entrepreneur opt for one or the other business model again depends completely on your attitude.

If you are working on the 3-4 large deals to happen in the year, can you maintain the confidence that you will get those, that you are able to fund your regular expenses even while you wait for those big deals? Can you keep investing the efforts without any sense of panic around “what if these deals don’t come in?”? That kind of attitude is required to support the business model dependent on a few large deals.

If on the other hand, you need to see the ringing of the cash box, to get comfort that ‘all is well’, you are better served doing a business model that generates regular cash, and not just the big bang large deals.

It would be a gross misfit if you were to attempt a business that gets few large deals and no cash is generated rest of the year. There is every chance that you will end up with panic very soon.

This analogy extends to the individual too. After all, the individual is akin to a proprietary business of sorts, isn’t it? Especially if you consider the professional, someone who bills for his time, on projects.

Here again, there are different kinds of professionals. Some like practising doctors or fashion designers or interior decorators, who have a “running business” and an accompanying regular inflow of revenues.

And then there could be others like film actors say (not the very top notch ones who are working three shifts, but the second notch and below ones), who work when they get a project.

Sometimes they sign on a film, which has to go to the sets in 6 months, and the earnings will really start after that. And for some reason, that start gets delayed.

Or one is just waiting for the right project. Which takes time to come in. And in the meanwhile, there is not much to do.

So again the question comes, “what if the projects do not come at all?”, “what if the project I signed up, and committed my dates to, gets delayed, and I don’t earn till it starts?”.

If one is susceptible to such insecurities, then this kind of a professional career is certainly not for that person. On the other hand, if one has adjusted to this kind of uncertainties, has prepared for the same, and has enough confidence that some or the other project WILL come by, and the incoming revenues will keep happening, that person is well suited for a career of this type.

So considering this blog is focused to startups and for startup entrepreneurs, the thought to consider is an examination of your personal attitude on these fronts.

Can you work for a big prize, wait it out for a longer duration for the same, be confident and comfortable in the waiting period, be focused to keep working towards the goal, then and only then, should you opt for a business model of that kind.

Else what you need is something that can go to market fast, start generating revenues fast, and keep funding your cash flows, as well as soothing your nerves!!

What do you say??

November 25, 2012 Posted by | Business Model, Startup | , , , , , | Leave a comment

Can India have it’s own Instagram? A Perspective on the Numbers game..

Like everyone else on social media, I was fascinated and stunned by the story of Facebook’s acquisition of Instagram.  The fact that Instagram had recently launched it’s Android app and which was doing well, and that only about a week ago, Instagram had raised a good $50 mn of funding, made this acquisition look very surprising and sudden!

Be that as it may be, it is an amazing story.

One of the side stories that went around last night was whether India can at all have it’s own Instagram. And this post that I read suggested an emphatic “no”.

I also see the challenge of building an Instagram like idea in India. For various reasons. And I will come to those in a bit.

But one of the most important, relevant and significant reasons is the number story. We need a perspective and a strong drive towards numbers.

Let me share with you three very independent stories, all about “numbers in 24 hours”.

1. The Android app of Instagram clocked 1 million downloads in 24 hours of it’s launch.

2. I met this person whose company sets up Internet kiosks in villages of West Bengal, on a franchising model, and hence, has to create income opportunities for the franchisees, on these kiosks. They have put many paid services on offer. He mentioned that he clocks 20 air tickets in a day – yes, 20 air ticket bookings in 24 hours – via those village kiosks!

3. A personal experience. I spoke at the India Social Summit on April 3. I put up my presentation on slideshare on April 4, and put out exactly one tweet and one Facebook update about this, and in a matter of 24 hours, the presentation got close to 450 views.

Yes, three disparate facts. And a matter of numbers!

I was impressed by all three of these. What it showed me clearly was that:

– we live in a small and connected world

– and hence, we can reach a large, far flung consumer base, for products and services that we can offer

You’d say that these facts are true from the time that the Internet came into being.

True. And I should know. Having been in the space since the time Internet came into India! Since 1997-98.

What impresses me today is the natural, organic viral growth opportunity. And the possibility then, of clocking significant numbers rapidly!

What made the three cases mentioned above, to happen?

1. Instagram was already a hugely popular app, on the iPhone platform. Widely talked about. The Android app was way overdue. It was announced and people had to sign up in advance. With all that pre-release build up, it was not surprising that when they actually released it, Android users were rushing to go and grab it. Quite like the queue you see at an Apple store when they release a new iPhone or an iPad. Yes, it is going to be available the next day too, but one wants to be amongst the earliest ones to get it!

2. The case of the air ticket bookings in the village kiosks is akin to the success of IRCTC for rail bookings. Irrespective of the quality of the website, since it met a dire need, and the alternate way to get that service had a lot more pain, this one was lapped up. What was true of IRCTC for many years was now true for the air ticket purchases in villages!

3. As for my deck on slideshare, I guess it was a series of factors. On April 4 when I uploaded the deck, the event was still on, and many were following it on Twitter. The hashtag #IndiaSocial12 was popular that day. And I tagged my post with the same hashtag. Where other speaker presentations of the event would go up later, post-event, mine was up that day, even as people were following the live proceedings. And it generated interest for people to click and view. And hopefully the content gave it a little organic push, and it hit those 400-odd views that it did.

So in all three cases, there was a reason – be it content or a needed service – which got across to the target audience, and a viral push happened. And numbers followed.

That is the beauty of our times! You could be sitting in any corner of the country, but if you can get this content or service mix right, hit the specific target audience pockets, it CAN fly!

So with that scenario, can India have it’s own Instagram? And if not, what are the challenges?

Note the facts first:

Instagram has run for about two years now. Has almost no serious revenues. Has had a small team of a dozen or so now (for a long time they were even smaller), but they probably work with some outsourced partners too, I reckon. That said, the costs to support are the small team and large servers and bandwidth capacities, mainly.

So first of all, if you have a product of this kind, with a potential upside of this nature, will an Indian VC buy?

I don’t think so. The Indian VC will put his money on the 27th daily deal site and the 45th e-commerce site, because it is the flavor of the day, but rarely if at all, will he bet on a new concept, unproven, something that could potentially be a global winner. So you are stuck if you are dependent on VC financing.

But say, you had inherited wealth or you begged, borrowed or even stole money to support your venture. Where is the next pitfall?

From my experience with startups in India – and I have met several over various interactions at various fora – the one trait that I often see, is that they get excited about the initial numbers and get somewhat complacent.

How often have I heard stories like “we just started few months back, and I have already got 40 orders” or “we get 3-4 email enquiries daily” or things like that. There are ventures that clock up a few thousand subscribers / users and get pumped up. Most of the time, these are free registrations, and so people have not really spent money on the platform. But there is excitement and a feeling of achievement.

While I have nothing against this excitement, the reality is that a few hundred or a few thousands are NOT GETTING YOU ANYWHERE. If you are looking to do a big one, the world is your market potentially, and you need to think in millions of users.

So the two biggest reasons holding us back, from creating our own Instagrams or what have you, are potentially a lack of funding for such business models, and secondly, a tendency to not see the very large picture. For the latter part, obviously there have been the exceptions and which have succeeded big time, like Naukri, Shaadi, BharatMatrimony, Cleartrip, MakeMyTrip, Carwale, Games2Win, IndiaGames and a handful others.

But the typical startup that I encounter at TiE or at some Startup event, is somehow not seeing the big, big picture. And which is where we don’t have our potential Instagrams!

But I hope to see change. As I am the eternal optimist.. next one, hopefully from India. Happening in some lab somewhere in Mumbai or Gurgaon or Bangalore, even as I am posting this.. 🙂

April 10, 2012 Posted by | Uncategorized | , , , , , , , , | 3 Comments

So impressed by this Korean retail revolution..

So for all the innovation that the retail industry is supposedly doing, as a consumer, how different is the shopping experience at an organized retail outlet, in say, last 5 years?? Or more, if you have also shopped in organized retail, outside India??

I would think the difference, if any, is marginal. At least perception wise.

Sure, there are more options, perhaps some innovation in loyalty programs (marginal again), etc. If anything, there are challenges as you shop. All the time.

Long queues at the checkout counter. Not finding the item you are looking for, as it is tucked into some inner shelf (because of space constraints, among other things), hassled shelves with products here and there, as people have handled them and the staff has not been able to rearrange them.

So yes, it’s pretty much the same-old-same-old. Retailers have not been able to really crack the code and make the shopping experience significantly better for the shoppers.

And then you see this amazing innovation from Korea:

A virtual store that is “real”!!

So sure, we had e-commerce. Where you saw a picture on a computer screen, small in size, not getting the perception of just how big a packing it may be, and then paying by credit card or whatever, and then waiting for the finite time to receive the products.

And it worked to an extent. But did not significantly dent the offline store business.

People, it seems, still wanted to go to the store and shop. And get a feel of the real thing. Pick up the bags and come back. Make it an interesting experience of walking around, window shop, see new things that have come, maybe talk to someone, and then shop. That experience still rocked! Compared to the computer screen one.

But this Korean way gets you the best of both ways.

Visualize this…

Put these LCD screens with full sized product shelves look inside your store. Beautiful back-lit screens with absolutely life-life images. In anything, better looking than the packaging!! Leave ample space for people to walk around. Except without the shopping carts.

Packaged goods are finally bought largely from the packaging, not so much from touch-and-feel.

Use QR code or some other device* to enable shopping.

She walks around, selects what she wants using the QR codes, and then lands up at the check out counter.

If technology of automated assembly is implemented at the back-end (like a warehouse management system that is used in busy warehouses), the customer’s selected order could be ready by the time she comes to the check-out counter, duly packed. She pays and picks up the bags and walks out. Since the entire billing process is eliminated at the check out counter, the queue also moves rapidly.

Seriously path-breaking, what?

And why can’t some retailer make a first move of this kind in India? I think all it requires is to be bold enough?!

Yeah, yeah… you will ask, “what about the non-packaged products like fresh fruits and veggies, or what about those packaged products that customers like to smell (soaps, perfumes, maybe..)?”

Okay, so a small hybrid model can still happen. All of the packaged goods lines, which do not require anything special (which will be what, 80% of the items at least?!) can still be the virtual LCD panel way, and then 1 or 2 aisles can have the rest of the stuff.

It will still have tremendous impact, and will be a “real” innovation, as compared to trivial ones that retailers love to talk about..

Guess someone’s got to make the first move? Looking forward to this..

(* “Some other device”? – how about giving a small hand-held scan unit to a person when he she walks into the store. Unit has it’s unique code, so whatever that shopper scans around, is recorded for HIS ‘virtual shopping cart’; the code does not have to QR or it could be. Alternate simple coding structures could also be adopted. Shopper brings the unit back to check-out counter and picks up his bags!)

April 1, 2012 Posted by | Retail | , , , , , , | 8 Comments