club catalyst. From start-up to ‘scaled up’

Updated - January 16, 2018 at 10:20 PM.

‘Got funding’, ‘valuation’ et al are passe. How about saying start-ups are those that sustained the show?

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There is no denying that India’s e-commerce start-up “ecosystem” has come a long way. From a time when the only source of funding available to start-ups was the capital that passionate founders had to put together from friends and family, the situation has changed so dramatically that today funds chase ideas.

Indian start-ups have acquired valuations which make them bigger than manufacturing companies that have been listed on the Bombay Stock Exchange for decades. But a serious moment of self-reflection happened for this sector during the first half of 2016, besides dismaying tales of employees getting downsized or ventures going belly up.

And while there has been a fair amount of focus on the financial indicators by which start-ups need to be assessed post that moment, there has not been much talk about their current brand attributes versus desired brand attributes to make this a vibrant and vital sector of the economy.

Forget ‘Funding’

The first brand attribute that needs to be recast is ‘Funding.’ In a gold-rush like mentality, many investors will put in money in half-baked ideas, hoping for an exit. Take the tiny example amongst many funded start-ups, of TinyOwl, the food ordering app which got $16 million of Series B funding after an initial $4 million in Series A. Even an esteemed publication like Techcrunch announced this funding with the following additional information conveying TinyOwl’s potential — “India’s food ordering space is just one market booming in response to the growth of smartphones and mobile internet access in the county. An IDC report found India the fastest growing smartphone market in Asia — over 23 million smartphones were shipped in Q3 2014, according to the firm, which represented an 82 per cent growth on one year previously.” We all know how the TinyOwl story ended.

This attribute of “Got Funding” where the amount of funding obtained defines the buzz around a start-up needs to be totally recast into the attribute of “Sustained and Scaled start-ups.” The biggest brand attribute that needs to be built for the start-up ecosystem is to make an example of start-ups that have sustained and scaled over three or may be five years. After all, the failure rate of start-ups is 90 per cent and if we add the factor of inability to scale, then that rate may go beyond 95 per cent. India needs to know stories of start-ups that have not just sustained but also scaled significantly beyond three to five years by building a solid business.

And it is these sustaining start-ups that need to be encouraged to go to campuses as they can not only provide a learning ground for freshers but also allow these freshers to channelise their change-the-world ideas.

Let’s drop ‘valuation’

The second brand attribute that needs to be recast is “Valuation”. This “valuation” attribute needs to change into the attribute of “Unique or Well Adapted Proposition.” For decades, the cornerstone of success in India for global giants like Colgate Palmolive, Unilever, Procter and Gamble and Cadbury’s has been their ability to adapt their core propositions and make them relevant both in terms of product formulation and packaging. Think Sunsilk Sachets to Colgate Tooth Powder and the unique messaging adaptation of their core brand values. Who can forget the “Kuch Khaas Hain” campaign from Cadbury’s attempting to take chocolate consumption away from being just children-centric to young adults and doing it with a very Indian tone.

Now think of the adapted propositions in the e-commerce space. Most of them are just blind clones from other markets. If we look at the 9 unicorns in India which have a valuation of $1 billion, then one realises that only Paytm, Inmobi, Zomato, Mu Sigma and Ola stand out in terms of “unique or well-adapted propositions.”

Inmobi and Mu Sigma are absolutely unique in the mobile advertising and analytics space while Paytm has adapted the concept of digital wallets for Indian markets. Ola has done the same for cab hailing and Zomato for restaurant listing and reviews. Others are mere clones of Amazon, ebay, Craigslist or many such global companies. That creates vulnerability for these unicorns, given India's distinct market dynamics and consumer preferences but also provides a window for them to adapt and innovate.

Beware discounts

The other attribute that has got associated with today's start ups is “Deep Discounting.” The only aspect that draws customers to these e-commerce sites is discounts. And when the funding dries up, the discounts disappear, the valuation plunges and the vicious cycle of lay-offs and closures begins.

The attribute that this needs to be converted into is “Customer Experience.” Even if the start-up has a brilliant, game changing idea, if the execution and linked customer experience do not match up, then the start-up will not sustain.

For all B2C e-commerce brands, the reference shifts to Amazon. But Amazon has been investing for years in never-before customer engagement algorithms to provide an unprecedented shopping experience at one end and in creating an incredible logistical infrastructure to deliver ahead of customer expectations at the other end.

Speaking to Amazon’s physical growth, Jeff Bezos said in a rare interview that much of Amazon’s profit goes directly back into development projects aimed to take Amazon even closer to its customers. Fulfilment centres geared around ultra-quick online-to-doorstep delivery and pick-up services are one such investment Bezos considers an important link between online and offline convenience.

Today, apps in India and sites claim food delivery in 30 minutes in India’s crowded cities but except for putting pressure on a poor delivery boy on a bike, there is no clarity on what they are doing differently to support this claim.

Stories of such start-ups need to move away from this unsubstantiated claim and focus on whether they have done anything at all differently to deliver on such promises. Also, there is very little media focus on assessing the customer experience and satisfaction of e-commerce start-ups that have got lots of funding or have unprecedented valuations. From site experience to delivery to call centre to complaint handling, there are serious customer expectations that these start-ups need to deliver upon. Horror stories abound of unmet promises, wrong delivery of items, non-delivery and no shows and what not.

There needs to be a benchmark measure of customer experience across all e-commerce start-ups that media covering the start-up sector needs to focus on. At present, media coverage is centred around making celebrities of start-up founders simply because they have secured $5 million of funding or achieved a valuation in someone's estimate of 500 million. Nothing on the user experience and the service standards of these entities.

Start-ups that achieve these will not only continue to attract talent from India's top tier institutions but will never have to defer or rescind offers. And they will never be short of funding or valuations because the game changing ideas and technologies from these freshers will always help them stay a step ahead of competition.

Published on October 27, 2016 15:46