A voice for startups

Why would a customer buy from a startup?

Never before in India’s history, has there been a better time to be an entrepreneur. Indeed, there is a certain romance in the term ‘start-up’ nowadays. We have seen our share of success stories in India and there is a certain pride in seeing Indian start-ups make it big. There is a fair amount of media coverage, especially about the ones that get high valuations, though arguably, the numbers may be ‘frothy’ in many cases.

But at what point does the romance cease – when does a start-up stop being a start-up? Is it based upon time (say, 5 years from inception)? Or turnover based (say, 100 crores in revenues, or to use a recent industry term – ‘Gross Merchandise Value’)? Or should it be employee base (say, over 100 employees)? Unfortunately, there is no single benchmark and everyone has a different answer to this question.

While there is romance in doing a start-up, no entrepreneur wants his start-up to remain a start-up forever; there is an ambition to scale for sure. In fact, the only facet of a start-up that companies of all sizes want to emulate, is the scrappiness in decision making and the ability to execute quickly on calculated risks. Other than those aspects, every company wants to mature in terms of scale, size, and processes. Entrepreneurs look for funding, industry connects, and mentoring to help scale their company.

From an investors standpoint, the ability to scale is very important. At the end of the day, an investor is just that – an investor. They want to put in their money and see a return in multiples, over a period of time. So, minimal downside (risk) to the business plan, with lots of upside, is what investors typically look for.

Customers have a different lens. There is an inherent risk in being a customer of a start-up, as against buying from a larger, more mature company. Therefore, there only two reasons why a customer will buy from a start-up. One, if the product (or service) is very unique and not available from a larger, more established company, or Two, if it is delivered at a far superior value (read price), which balances the risk of buying from a start-up. This is why there is a deluge of young companies offering unbelievable deals and discounts, to lure customers to try out their services.

Over the last few years, we have seen largely seen innovations in the ‘aggregation’ space, be it information or delivery aggregation. We have seen several start-ups bringing multiple products and sellers onto a single platform (e-tailer or marketplace), aggregating taxi services, or even bringing about the ability to conveniently order from different restaurants. But the underlying essence in all of these has been about aggregation.

I heard a speaker at an event talk about the last revolution being about moving electrons (information age), and the next one being about moving atoms (product delivery services, people transportation, drones, etc.). This certainly sounded like an interesting take on things.

We would like to see innovation in solving some of India’s most pressing problems. We all know that farmers make a very small fraction of money as compared to the price customers pay for his farm produce; the supply chain is very inefficient with several middle-men, and a lack of cold storage facilities. How do we get farm produce to their end consumers more efficiently, so that the consumer pays less, and the farmer earns more? Bangalore produces 5,000 tons of garbage every day. Most of urban India struggles to dispose of its domestic waste. How do we dispose of this waste in an efficient and ecologically friendly manner? The typical urban worker in India spends 1-3 hours each day in trying to get to work and getting back home. How do we return this time back to their lives?

It would be great to see a section of the newer wave of entrepreneurs focus on solving some of India’s pressing problems.


This post is republished from First Post first published on 31st Jan 2016

Mahesh Bhalla

Mahesh Bhalla is the Head of Business for Uber in India. He has over 20 years of industry experience. He is an active angel investor and involved in the startup space. The opinions expressed here are his own.
  • Subhradeep

    Very nicely articulated Mahesh.