Health Care Startups – Generic Analysis

Health Care Startups – Generic Analysis

Indian healthcare market today is worth US$ 100 billion and is expected to grow to US$ 280 billion by 2020, a compound annual growth rate (CAGR) of 22.9 per cent. Healthcare delivery, which includes hospitals, nursing homes and diagnostics centers, and pharmaceuticals, constitutes 65 per cent of the overall market. Rural India, which accounts for over 70 per cent of the population, is set to emerge as a potential demand source.

All such factors of extensive demand and growth are attracting entrepreneurs to provide cost effective and time saving solution to people via their ventures. Sector consolidation, better customer experience, accessibility are few of the major drivers of Health Care Startups. So if you are planning to start a business model in domain of Health Care, FS brings you the first cut planning on the same.

Health Care Startups – Models

[A] Directory Portals – Directory portal of health care provides the information related to any of the vertical of health care. Eg – a portal for the information of all the doctors available in the city, portal for locating the nearby medical store, portal for providing the information about medicines, tests etc. Practo is an example of healthcare directory portal that provides information about the nearby doctors in the city and also acts as a platform for online booking and consultation.

[B] Consultation Portals – Consultation portal of health care provide one way or two way communication for patient. One way means indirect interaction between doctor and patient ie via email, over chat etc and two way means direct interaction between doctor and patient ie video conference, phone call, home service etc.

[C] Service Portal – Service portals provides the services related to Health Care domain. Eg – home delivery of medicines, home service of blood testing etc. Healthkart is an example of e-commerce of medicines.

Health Care Startups – Generic Analysis

FS Labs Health Care Startups - Generic Analysis

Health Care startups require a lot of ground work and planning prior to its execution. So if you are planning to start a Health Care Startups, Here is FS Analysis on first cut planning factors that needs to be taken care at initial stage–

Assumptions for Case Study – For the entire analysis of Health Care Startups first cut planning; let’s assume that we are planning to start a portal to locate the doctors available in the city and consultation as per consumer demand. So the basic model of our startup is as follow –

  • Free Listing of Doctors – to get the traction on the website
  • One way Communication Consultation – small fees to generate the revenue
  • Two way communication Consultation – high fees for specific requirements

[A] Selection of Business Model – Suitable, Sustainable and Scalable

First requirement for any of the startups is an idea that is suitable for mass, sustainable in terms of revenue generation and scalable in long run. So, any of the above mentioned models could be implemented as separate or as permutation.

Once the model is selected, the major focus should be on analyzing the feasibility and long term survival of the business model in the market. So, the concept should be evaluated on the following parameters –

  • Achievability Analysis – Check for the feasibility of idea in terms of its execution within desirable time frame, cost etc.
  • Market Acceptance Analysis – Check if the targeted market base would accept your startup concept.
  • Sustainability Analysis – Check if the idea is sustainable in long run.
  • Scalability Analysis – Check if the idea could be scaled up into other verticals or it would get limited after certain expansion or time span.

Case Study–For our case study of a portal to locate the doctors available in the city and consultation as per consumer demand, following are the initial selection analysis –

  • Idea is feasible in terms of creating the portal, listing all the doctors address, fees etc.
  • Idea is acceptable by targeted students as it would help them in saving the time, cost etc.
  • Idea is sustainable in terms of continuous demand and revenue generation.
  • Idea is scalable to other locations, verticals, services as well.

[B] Market Analysis – Market Size Valuation and Competition Analysis

The next requirement of Health Care startup is to estimate the size of market that you are planning to capture and the market competition that you are going to face against your concept.

For the market analysis following market analysis should be done –

  • Problem Facing Market Volume – Check for the total volume for your concept
  • Targeted Market Volume – Check for the potential market base
  • Direct Competitors – Check for the Strengths and Weaknesses of direct competitors
  • Indirect Competitors – Check for the players that would stop you once your concept start growing
  • Infiltration Rate – Estimate the rate at which your concept would capture the market

Case Study – For our case study of a portal to locate the doctors available in the city and consultation as per consumer demand, following is the market analysis –

  • Concept of doctors locator is beneficial for all the population of the City
  • Targeted market volume of our concept is all the population having access and interest in online search and consultation.
  • Direct competitors are the players working in same domain
  • Indirect competitors are the players that have sufficient resources to enter into the market
  • Progression rate or market penetration rate can be estimated by the combination of marketing strategies, portal features etc.

[C] Getting the Required Resources – Database/ Manpower

Next constraint of Health Care startups is confirming the availability of required resources to execute and smooth running. E.g.– a strong database is required for directory portals, doctors with good experience for two way communication portal.

Following are the resources required to execute the Health Care startups –

  • Database – For directory portals, accurate database is required
  • Manpower –To execute the startup, technical, managerial, doctor staff etc are required
  • Technical Support –Resources to conduct the online execution etc.

Case Study –For our case study, following resources are required –

  • Doctors – to execute the online consultation
  • Technical Staff – to develop the website/app and other technical support
  • Managerial Staff – to manage the activities, database etc
  • Marketing Staff – to get the business expended

[D] Website / App Development – Eye-catching, User Approachable

Website or App is the interface between backend team and front end user. So the User Interface must be eye-catching and user approachable to make visitors able to convert into users.

Eg – Directory portal for doctors could be made attractive by map based tracking of their location, time availability etc.

Case Study – For our case study of a portal to locate the doctors available in the city and consultation as per consumer demand, following could be the center point of attraction-

  • Map based tracking of doctors to locate them easily
  • User friendly chat option for support
  • Information related to diseases, diet plan etc.

[E] Revenue Model – Profit Generation

Basic aim of any of the business model is to generate profit margins that are sufficient enough to run the operations smoothly. The potential revenue models for directory portals could be registration charges from doctors etc. For one or two way communication portals the revenue model could be the consultation fees, registration fees etc.

Case Study – For or case study, the model is a combination of free and paid services –

  • Free Directory Portal – to get the traction
  • One Way Consultation – small fees for email, chat supported service
  • Two Way Consultation – high fees for specific requirements

[F] Marketing Strategies – To Capture the Maximum Market Volume

Before and during the actual execution of startup proper marketing strategies are required to capture the market. Since the targeted market for Health Care startups is huge, so combination of general and targeted marking strategies is required.

Case Study – For our example, following could be the marketing strategies –

  • Social and press media marketing for publicity of the portal
  • Targeted marking at doctors clinics, hospitals etc.
  • Discounts / Cash Burn for initial traction

[G] Long Term Vision – To Get Acquired or To Become Leader

Startups have two major objectives in long run, either to become leader of the specific business vertical or to get acquired by big player. Having clarity on your long term vision at the starting point itself helps in moving in the right direction.

Health Care startup of directory portal could be targeted to get acquired by some big player of same domain or to become leader by introducing all the verticals etc.

Case Study – For our online portal, target could be to sell it to some big player who is potential client for acquiring it.

[H] Scalability Model – Future Growth

For future growth of any of the business model, it must be scalable in long run. The scalability could be defined in terms of enhanced market presence, enhance reach or introduction of other verticals as well. Health care startups have a huge scope of scalability. Any of the business models, as explained in starting, could be extended by incorporation of other verticals.

A directory portal could easily be extended to one way communication portal by introducing the chat support system, email etc.

To have scalability model helps in deciding the right direction and time span to transform or encompass the business model.

Case Study – For our case study, the model could be extended in following manner –

  • Enhanced geographical presence
  • E-commerce of Medicines
  • On Demand Home Service, Visit facility

Wish you luck for your startup. Stay tuned with FS to know more.

Urban Commuting & War of Bus Aggregators

Urban Commuting & War of Bus Aggregators

Transportation sector in India is large and diverse including railways, roadways, civil aviation, shipping and urban transport and contributing 5.8% to the nation GDP. The large sector of transportation is one of the biggest magnets to attract entrepreneurs to organize and consolidate the market volume. Goibibo, Yarta, Makemytrip, Ola, Uber, Shuttl, rBus, ZoomCar, JustRide are very few of the known name of transportation startups that have made their presence visible in the market and are growing continuously.

Transportation startups now a day have major focus on market consolidation, better consumer experience and cost effective consumer services. Air travel booking combined with other supporting service like pickup and drop to home, hotel books etc, aggregation of separate cab providers, cost effective car-pooling etc are few of the basic visions of these startups.

Urban commuting is the latest problem which has hooked the entrepreneurs. And why entrepreneurs are advised not to stay away from the trap? As per the industry experts, only bus based commuting is a business worth Rs 60k crore in India. Urban commuting problem doesn’t ask for mere pumping of more and more vehicles – taxi aggregators have done that – it asks for carefully planned mode of transport which would not only reduce the traffic but would also be a source of revenue generation and would provide satisfaction to customer.

Urban commuting – Taxi Aggregators are Not Enough

Mumbai has around 1 million private vehicles out of which 75% run at single occupancy. Speed at which traffic runs is pathetic in peak hours. Delhi government is already mulling on “Odd-Even Formula”. And then, in India there are around 2 million buses which are contracted with schools or companies. These buses merely operate for 4 hours per day. Government bus services, which are somehow managing the intercity run show, provides cheap and not so good option of travelling with poor bus condition. Delhi’s DTC bus service had posted a net loss around $1 Billion only couple of years ago and its condition has seldom improved.

Ola/Uber and other taxi aggregators utilized their early inception to their advantage and they captured the thick cream from the market because taxi service sits at the top of commuting pyramid at 8-15 Rs/Km. State operated bus/train service made the bottom of commuting pyramid by operating at meagre 1-4 Rs/Km. Mobile revolution along with boom in app based service provided the link which was earlier missing between a service provider and customers.

Evolution of Bus Aggregators

To solve the major problem of urban commuting – affordable, comfortable and effective, a new gang of startups has evolved – bus aggregators. A bus could easily replace 15-20 (mini bus), 35-40 (normal bus) odd single occupancy personal vehicles and provide consumers an affordable solution which is between cabs ( @ 10 Rs/km) and state owned bus service ( @ 2 Rs/km) along with the benefit of comfort level during journey. Startups are utilizing these facts that incentivizing drivers of private buses (which would otherwise stay idle for 20 hours a day) would bring them forward for helping in managing the exploding urban commuting.

Benefits from these urban bus aggregators are great. Tangible benefits are – Comfortable travelling, Cost effectiveness, more productive time for vehicles, more revenue to fleet owners etc. Intangible benefits are – Reduced traffic, lesser vehicle on road, Solution to parking problem, lesser pollution, lesser fuel consumption, reduced time for travelling a distance and many more.

Startups aggregating buses in the country include Mumbai-based Rbus and Cityflo, Gurgaon-based Shuttl, and Bengaluru-based Zipgo.

War of Bus Aggregators – Delhi NCR

FS Labs - War for Delhi NCR Urban Commuting

Evolution of Bus aggregator startup community in Gurgaon has been so far a tumultuous war between the new players and old market players. Though it’s only eight month old, yet the competition and strategies for attracting bus fleet owners, for attracting customers, for luring bus drivers has already ensured an early sector consolidation. FS Labs brings to you the real strategies used by the various players against each other and what is the current market scenario.

Let’s get introduced which are the major players who took part in this cutthroat battle –

1.Shuttl – They are undoubtedly reaping the benefit of starting early. The company started operations eight months ago, in April 2015 and was founded by Deepanshu Malviya and Amit Singh. Earlier, it had raised $3 million in seed funding from a group of angel investors.

It’s a bus aggregating platform which offers shuttle bus service to its commuters in Delhi-NCR. It claims to offer services such as good buses, reserved seats, flexibility in timing and economically viability. The mobile based minibus service is aimed at making daily commutation more convenient. The company’s vehicles are air-conditioned and operate with high frequency on fixed routes at a very economical price point.

One can access the service using its mobile app. There are three simple steps required to book a seat on Shuttl operated bus service: register account with the app, pick up a boarding point & drop point and time of commencement and you get the riding pass. All the payment has to be done either through mobile wallet.

Current situation is – Shuttl claims to be offering around 15,000 rides on a daily basis. The price points for a ride range from Rs. 20 to Rs. 100. Since the company started operations, it claims to have facilitated more than 8,00,000 rides. It is now targeting 50,000 rides a day with 600-700 buses on the platform by the coming six months.

Currently, on 22nd December Shuttl grabbed Series A Funding worth $20 Million from Lightspeed, Sequoia and Times internet. Company has said it would utilize this funding in further expansion to new cities. As per founders of Shuttl their major focus has been “building a platform that will bring in predictability, trust and dignity to the consumer.” They are trying to increase the service and plying more buses on right routes by using extensive data modelling on traffic patterns.

Shuttl has also started corporate tie-ups as per the routes required by office personal and industrial shit timing to enhance its market base.

2. Trevo – The co-founders of talentpad – a technology recruitment marketplace that shut shop in August, started a bus pooling app for intra-city travel with an aim to build a bus aggregator startup which would work in coordination with tourist and chartered buses. Trevo was started in August 2015 by IIT and IIM alumni Mayank Jain, Raghav Jain and Nikhil Vij.

Trevo launched operations in Gurgaon with a team of 15 with an aim to cover 25000 commuters across the 100 routes in Delhi NCR by year end. Trevo claimed to have offered rides to about 2,000 passengers every day at Rs 5 per kilometres. It was reportedly scouting for Series A funding of up to $10 million.

Facing aggressive battle from Shuttl and Ola Shuttle, Trevo was forced to shut its operation by November 2015. Such was the might and strategies of other players that Trevo not only struggled to make a loyal commuter pool but it also struggled in keeping bus fleet owners loyalty.

3. Ola Shuttle – Looking at the success of rBus, Shuttl etc OLA decided to plunge into Bus Aggregator business. This move not only put the panic button on for small players, but also raised a hope of early recognition by funding sources.

It started with 500 shuttles on 100 routes in September 2015. Sundeep Sahni, VP of New Initiatives at Ola, at the launch of OLA Shuttle said that the shuttle service would target commuters who might otherwise opt for taking their own cars, bikes or auto-rickshaws. Rides would cost less than $1, which equals Rs. 66 compared to the average $4- $6 price of a ride in a private taxi. The users would have to share with between 12 and 20 other people. The shuttles would come with air conditioning, WiFi access and in-vehicle entertainment.

How Trevo was Forced to Shut Down its Operations

FS Labs - Shuttle War - Trevo Shutdown and Potential Saver

Here are few of the strategies followed by Ola to penetrate the established market volume of other players –

Fight For Bus Fleet – Initially bus fleet owners were persuaded (first come first basis) to align their buses to any of the bus aggregator at a generic cost. Initially it was around 60-80k/month. Trevo and Shuttl were doing fine and suddenly Ola enters the market and rate of attaching a bus on monthly basis rose to 1 lakh/month plus rate. Shuttl was already having a loyal fleet and was able to take the early beginner’s advantage. Trevo being the late starter couldn’t stand against this cash burn tactics of Ola.

Incentivization of Drivers – Driver’s incentive is the next straw which was waiting for little friction to start burning. Cash rich OLA started incentivizing drivers on trip basis. It was purely a cash burn tactic to outplay the rivals. Investors backed Shuttle was managing its business well and its deep penetration and investors backing made it bear the push of OLA. Trevo however already in cash crunch battle due to losing money on associated buses was not able to burn the cash for driver incentivization.

Not opting to work with market leaders – when you are up against a mighty rival who is cash rich and can simply flex a single muscle to run you out of business, the wise would love to act in sync with such rival. It will not only keep your share of business intact but would also help in gaining insight of operations of the bigger players. Trevo somehow failed to look out for any kind of association with either Shuttl or Ola shuttle and had to leave the market just after couple of months of its operation.

Trevo Least Priority to CRM – CRM is one of the biggest factors for startup success. Ola started and managed the relationship with its customers in a decent way by providing additional services to its consumers like Free Wi-Fi, lower cost etc. On the other hand, Trevo distributed the “token of insult” to its iOS and Windows consumers stating “Trevo wish it would be so easy to create iOS and Windows App as of Android. So we wouldn’t be able to serve iOS and Windows users”. This was sufficient enough to show the strength of technical back-end of Trevo and to loss its loyal consumers as well along with the group of different phone operating system users.

Founders themselves cannot do Everything – Many time founders think they are the only one who could do the entire job with perfection. This stops them from selecting the talented public from market who could extend their support in making a new business a successful venture. Too much optimism also acts as a cancer. Running a business for two months by running on the streets chasing customers was leading nowhere. Proper planning and a great support team were always felt needed in case of this war.

Ola Customer Trust Tactic – Last week, Ola introduced a feature called ‘number masking’ where the user’s number would not be disclosed to drivers, and calls made by the drivers would be recorded and stored by Ola, across its operational cities in India. The company has integrated a cloud telephony solution which sends an encrypted number to the driver, through which all further communication is routed via the cloud number. Such kinds of initiatives are good step towards gaining consumer trust to use all the business verticals of player.

How Trevo could have Survived

Here is a small analysis on Trevo, how it could have survived in spite of the stiff market competition-

Strategic Selection and Sourcing of Fleet – Trevo could have aligned its selection of routes and sourcing of vehicles in following manner to get the loyal consumers –

  • Tie ups with corporate could be a good strategy to get the targeted market base. Since most of the daily commuters of Gurgaon are office going personnel, so it could have given an advantage to get their startup endorsed by the corporates itself.
  • Running the fleet as per the industrial shift timing could be better strategy for Trevo to keep its business running. In industrial corporates, approximated 2000 persons work in a single shift, assuming 50% of that are using public mode of transportation, so these targeted fleet timing could have given an advantage to Trevo.
  • Selection of routes where Ola and Shuttl were not active could be a good strategy for initial survival.

Introduction of New Business Verticals – Instead of remaining dependent on a business vertical which was facing stiff market competition, Trevo could have introduced other business verticals like Auto, Bike Taxi etc and act their aggregator as well to expand its business model.

Consumer Relationship Management – Instead of distributing token of insult, Trevo could have gone for –

  • Development of iOS and windows App by third party, friends etc.
  • Office payment option for iOS and Windows users till any way was figured out.

Consumer never has any problem to pay for the service he/she got addicted. Online or offline, it hardly matters.

Stay tuned with FS Labs for more updates.

Education Startups – Generic Analysis

Education Startups – Generic Analysis

Education Market in India is having worth of $100 Billion as of now with 1.4 million schools with over 227 million students and more than 36,000 higher education institutes and expected to grow at 15% year on year basis. In this high potential market of education sector, transition is happening. Brick and mortar class rooms are getting transformed into online classes. That heavy bag which you used to carry daily to your school has now become outdated and altogether a new mode of carrying books and notebooks has evolved, courtesy – tablets and mobile.

Rising education market of India and lack of infrastructure has ensured that these digital classrooms will surely go a long way. EdTech is the third industry – after Ecommerce and healthcare- which is gaining traction in terms of investment. Toppr, PagalGuy are some of the known names of education startups.

So if you are planning to start an education startup, here is the generic analysis of the same, what factors needs to be taken care while moving forwards in education startup.

Education Startups – Models

[A] Directory Portals – Directory portals of education provide the information related to any of the verticals of education system. E.g. – portal for recommending the best study books related to the particular subjects, portal for providing the information of all the colleges, portal for providing the information of entrance exams – important dates, application procedure, exam pattern, cutoff trends etc.

[B] One Way Communication Portal – Education portals that one step ahead of directory portals can be categorized as one way communication portal where direct interaction of human is only at user end. E.g.– portal for test practice, result analysis and rank comparison, portal for discussion, portal for video lectures and study material etc. UEducation, launched in 2015, which provides courseware sourced from industry and academicians is one such portal. Toppr, which was launched in 2013, is one such portal which assists students for JEE & Board preparations.

[C] Two Way Communication Portal – Education portals that include direct human interaction at both of the ends can be categorized as two way communication portal. E.g.– portal for online coaching, portal for online consultation and guidelines, portal for conducting classes etc. Vedantu, which was launched in 2011, is one such portal.

Education Startups Generic Analysis

Education startups require a lot of ground work before execution. Here is FS Analysis on first cut planning of education startups –

Assumptions for Case Study – For the entire analysis of education startups first cut planning, let’s assume that we are planning to start a portal of online tuition for High School Students and the basic model is as follow –

  • Free Study Material – to attract the students
  • Batch Study Program – small fees for money constraint students
  • Individual Study Program – high fees for specific requirements

FS Labs Education Startups Generic Analysis

[A] Selection of Education Startup Model – Acceptable, Sustainable and Scalable

The very first requirement of education startup is selection of model that you want to implement. As mentioned above, any of the three models, directory portal, one and two way communication portal could be implemented as individual or as combination.

If the model is already decided major focus should be on analyzing the feasibility of that model (that starts from point B). If the model is not decided, following parameters should be considers for selection-

  • Feasibility Analysis – Check for the feasibility of idea in terms of execution.
  • Market Acceptance Analysis – Check if the targeted market base would accept your idea.
  • Sustainability Analysis – Check if the idea is sustainable in long run.
  • Scalability Analysis – Check if the idea could be scaled up into other verticals or it would get limited after certain expansion or time span.

Case Study–For our case study of a portal of online tuition for High School Students, following are the initial selection analysis –

  • Idea is feasible in terms of creating the portal, getting the required tutors etc.
  • Idea is acceptable by targeted students as it would be time and cost optimum solution.
  • Idea is sustainable in terms of continuous demand and revenue generation.
  • Idea is scalable to other classes as well.

[B] Market Analysis – Market Size Estimation and Competition Analysis

The next requirement of education startup is to estimate the size of market that you are planning to capture and the market competition that you are going to face against your concept.

For the market analysis following points should be measured –

  • Problem Facing Market Volume – Check for the total volume for your concept
  • Targeted Market Volume – Check for the potential market
  • Direct Competitors – Check for the Strengths and Weaknesses of direct competitors
  • Indirect Competitors – Check for the players that would stop you once your concept start growing
  • Infiltration Rate – Estimate the rate at which your concept would capture the market

Case Study – For our case study, following is the market analysis –

  • Concept of online tuition is beneficial for all the population of High School Students
  • Targeted market volume of our concept is all the population of High School Students having resources and access for online coaching
  • Direct competitors are the players working in same domain
  • Indirect competitors are the players that have sufficient resources to enter into the market
  • Growth rate or market infiltration rate can be estimated by the combination of marketing strategies, portal features etc.

[C] Getting the Required Resources – Database / Manpower

Next constraint of education startups is ensuring the availability of required resources. E.g.– a strong database is required for directory portals, tutors with attracting teaching style for two way communication portal.

Following are the resources required to execute the education startups –

  • Database – For directory portals, a large database is required
  • Manpower –To execute the startup, technical, managerial, teaching staff etc are required
  • Technical Support –Resources to conduct the online execution etc.

Case Study –For our case study of online portal, following resources are required –

  • Tutors – to execute the online tuition classes
  • Technical Staff – to develop the website/app and other technical support
  • Managerial Staff – to manage the activities
  • Marketing Staff – to get the business expended

[D] Website / App Development – Attractive, User Friendly

Website or App is the interface between backend team and front end user. So the User Interface must be attractive and user friendly to make visitors able to convert into users.

E.g.- education directory portals of available tutors in the city could be made attractive by listing them on map so that students are able to easily track them. Directory portal of college information could be made attractive by categorizing the colleges as per all the possible combinations, like – placement records, college ranking, fee structure etc.

Case Study – For our case study of online tuition portal, following could be the center point of attraction-

  • Easy integration of camera along with video quality adjustment
  • Archives of pervious lectures
  • Key points report at the end of every lecture
  • File uploading facility for queries etc.

[E] Revenue Model – Profit Generation

Basic aim of any of the business model is to generate profit margins that are sufficient enough to run the operations smoothly. The potential revenue models for directory portals could be registration charges etc. For one or two way communication portals the revenue model could be the program fees, registration fees etc.

Case Study – For or case study, the model is a combination of free and paid services –

  • Free Study Material – to attract the students
  • Batch Study Program – small fees for money constraint students
  • Individual Study Program – high fees for specific requirements

[F] Marketing Strategies – To Capture the Maximum Market Volume

Before and during the actual execution of startup proper marketing strategies are required to capture the market. Since the targeted market for education startups is limited to those people that are interested in your services. So targeted marketing is required for education startups.

Case Study – For our example, following could be the marketing strategies –

  • Conducting seminars in schools
  • Targeted Marketing at Coaching Centers
  • Referral Program – Free Test Series or Discount etc.
  • Social Media Marketing
  • Targeted Marketing to convince the parents.

[G] Long Term Vision – To Get Acquired or To Become Leader

Startups have two major objectives in long run, either to become leader of the specific business vertical or to get acquired by big player. Having clarity on your long term vision at the starting point itself helps in moving in the right direction.

Education startup of directory portal could be targeted to get acquired by some big player of two way communication portal or to become leader by introducing all the verticals etc.

Case Study – For our online portal, target could be to sell it to some big player who is working in same domain.

[H] Scalability Model – Future Growth

For future growth of any of the business model, it must be scalable in long run. The scalability could be defined in terms of enhanced market presence, enhance reach or introduction of other verticals as well. Education startups have a huge scope of scalability. Any of the business models, as explained in starting, could be extended by incorporation of other verticals.

A directory portal could easily be extended to one way communication portal by introducing the related study material, test series, pervious year question papers etc. Similarly, one way communication portal could be extended to two way communication portal by getting tutors on board and technical developments.

To have scalability model helps in deciding the right direction and time span to transform or encompass the business model.

Case Study – For our case study, the model could be extended in following manner –

  • Enhanced geographical presence
  • Introduction of tuitions for other classes as well
  • Online test series etc
  • Exams information, college information etc.

Wish you luck for your startup. Stay tuned with FS to know more.

Better Food Panda

Better Food Panda

Food ordering and delivery startups are attracting entrepreneurs, venture capitalists and consumers. Foodpanda, TinyOwl, Swiggy are some of the big known name of food aggregator and delivery startups.

In recent months Food panda have been in lime light for all wrong reasons. There was news about rocket internet backed company facing stiff competition from other Indian market players.

Still FS Labs is of hope that Food panda could revive its magic back by simply following some of the tricks listed below-

[A] Enhanced Product Base

Product base is the biggest source to attract consumers. For Food panda product base means the data about the food offered by different food outlets.  Larger the product base, more are the chances of customers to get attracted towards a food ordering portal. If consumers have large number of food options available at one portal, definitely it would be able to attract consumers to maintain its frequency of visit to same portal every time for the related needs. Key is to convert a customer and then to retain this conversion into future orders.

The existing setup of Food Panda is limited to the famous restaurants of the nearby locality. One possible way to make better foodpanda is by introducing the more products in it. Apart from famous restaurants following are the options to enhance the product base-

Local/Street Food – Local/ Street food is always able to attract consumers mainly because of cost effectiveness, easily availability and taste attraction.

Street vendors that are famous in nearby area and have proven their reliability could also be included along with famous restaurants. The major problems of ensuring the availability, smooth communication flow and operational cost with these local / street vendors could easily be maintained in following manner –

  • Easy login and logout option to ensure the availability of famous street vendors, so that the cost of order cancellation could be avoided. Same could also be used for other vendors as well.
  • To minimize the communication gaps, the major flow of communication could be made between delivery personnel and consumer.
  • To minimize the operational cost of delivery for these small value orders, it supply chain could be optimized by grouping of orders, advance ordering facility and optimized minimum order value.

FS Labs - Better Food Panda

Nearby Home Based Food Delivery Service – Apart from famous restaurants and street food vendors, there are lot of food providers who work from home basis.

For home cooked lovers, health conscious people and home based food delivery service provider food panda could be made a platform for buying and selling. The major problems with these providers could easily be managed as explained above. The profit margin could be generated by charging registration fees etc. Only pickup facility could be kept as the option of delivery if the home delivery is not cost optimum.

Timely Updating the List of Serving Hotels – In past there had been several issues about Food Panda website accepting the offer even though the restaurant has ceased its operations. Customers have taken advantage of that and have managed to get decent offers from Food panda team (Which did so citing some technical issue). Ultimately Food panda served customers from some other hotel and offered them coupons worth thousands which was ultimately a loss for Food Panda books.

For preventing such events from happening in future, real time tracking of hotel is quite necessary. Food Panda team should ensure that whatever list they are displaying on the website is the real and fit and operational. This way they will gain confidence of customers.

[B] Enhanced Consumer Base

To increase the consume base up to its maximum limit is the basic target of any of the startup. The market volume for food panda is quite huge including the person of every age group that uses internet and have the power to buy food online.

Consumer base of these online food delivery portals is limited in terms of users and their frequency. So food panda could be made better by deploying the strategies to enhance both of these-

[1] Existing Consumers– The main objective for existing consumers relationship management is by ensuring the better frequency of their visits. For existing consumers following strategies could be followed by food panda to make it better –

Better UI – Use Interface is the key point of attraction for consumers, and hence leads towards the enhanced frequency of use.

The existing UI is limited to the listing of restaurants and respective menus. The User Interface of food panda could be made better by incorporating the other filters – like particular food search option and comparison in all the available choices etc.

Targeted Marketing and Discounts – Extensive marketing and discounts are the two major strategies that are being followed by food panda to infiltrate the market base.

Consumers that the getting attracted because of discounts provided by food panda requires the same motivation to stay connected with food panda.One of the best strategies to maintain the frequency of such consumers is by analyzing their pattern of buying and providing them the relevant suggestions and discounts.

Fraud-Free Delivery and Online Order Placing to Hotel – There have been many issues with Food Panda in which fraud orders were being served (Either from a fraud hotel or from a fraud customer). There have been late orders placing from Food Panda team (to serving hotel). These incidents put negative image in mind of customer.

Time bound order placing, Fraud free service and giving customers a live window for order tracking would be an instant hit.

[2] New Consumers –The main objective for new consumer relationship management is to convince them to use your portal for food ordering and delivery. For new consumers following strategies could be followed by food panda to make it better-

Tier 2 and 3 Cities – The present reach of food panda is limited to the metro cities only and few of the Tier 2 cities. The best way to enhance the consumer base is by extending the reach to tier 2 and tier 3 cities as well.

Group Offers – Other way to cash in the groups in various working places is to offer group discounts. This obviously reduces the delivery cost and increases the amount per order.

Targeting Lunch Box at office – Another area of betterment could be the healthy Lunch on offer for corporate world. In cities where most of couples are working, it’s difficult for them to manage healthier lunch. By targeting lunch box and serving t hot and healthy could be next big thing for Food Panda.

[C] Enhanced Consumer Services

One of the best sustainability strategies, once you are out of starting and growth phase and reaching towards stability, is by making your name known for everything related to your niche.

Today food panda is known only for food ordering and delivery service. It could be made better by incorporating following in the existing portal-

Restaurant Tracking – Map based tracking of nearby food panda verified restaurants would be beneficial for both of the stakeholders, food panda as well as vendors. For food panda, it would help in better consumer engagement and for vendors; it would help in increased sales.

Food Related Service – Other food related services like recipe for different dishes;video tutorials etc. could also be incorporated in existing food panda setup to enhance the consumer engagement.

Combined Ordering – The existing setup of food panda allows ordering from one restaurant in one order, multiple restaurants ordering in one single order could be a good strategy to attract consumers.

User Review and Recommendation – User review and recommendation option for restaurants would also be beneficial for users to decide the right choice while placing food order.

Other Business Verticals – Food panda could also be made better by incorporating the other business verticals like grocery delivery etc.

Stay tuned with FS Labs for more updates.

RedBus – Why it was sold to Ibibo Group?

RedBus – Why it was sold to Ibibo Group?

2006 was the time when people struggled to get tickets for intercity journeys. It was more like travelling to altogether a new country. Train tickets were being sold single handed by government backed entities. IRCTC was not that famous. Travelling on bus was a nightmare especially during festive season. At the heart of that nightmare was the fight to get tickets from private ticket agents. Barring few well organized travel agencies whole ticket booking system was mismanaged and full of chaos.

Government bus infrastructure was never enough to cater to the festive season demands. Lack of any centralized logistics management system and missing link between the bus operators and public was well exploited by the middle men – booking agents. They had monopoly in the business. Nobody had ever thought that few engineers with the help of internet would one day side-line them – not at least in 2006.

How Private Ticket Booking Worked in 2006?

Private bus ticket booking was a tedious task for a customer. Customer used to contact ticket vendors or booking agents. These booking agents then use to contact the bus operator’s booking clerks who were having a detailed live chart for bus reservation on daily basis. These clerks then gave confirmation about available seat to the booking agent, who then told same to customer. Next step was price negotiation – bus agencies use to change the prices as per their wish and as per market demand. A trip from Pune to Bangalore could cost from INR 800 to INR 2500 (One side ). And one ticket booking was almost an hour or so job. Problems in that model were many but few worth listing were –

1.One ticket booking agent was linked to only few agencies. If Pune to Bangalore route was served by 20 bus operators then there was no single agent who had contacts with all 20 bus operators. So, customer had to contact number of booking agents for booking a single ticket.

2. Ticket booking required number of phone calls and lots of co-ordination with number of persons involved at different stages. Even if one link got affected, it was the customer who suffered. It was a man dependent service with loads of potholes in it.

3. Time and energy involved in ticket booking was another point of concern. So many resources were not worth wasting for mere travelling. Absence of proper organized system ensured resource wastage.

4. Even if a customer was able to book one side of ticket, he could never be sure about the return journey. The complete charm of spending few days in peace with the loved one’s was used to be pushed aside by the urgency of booking a return ticket.

5. Ticket cancellation few days prior to journey, poor buses, negligence of customer safety and security, absence of competition in bus operators, less luxury travel players.

6. Bus operators were exploited by the booking agents for commission. Also sometimes, due to lack of proper linking channel between customer and bus operator, operators were forced to run buses with empty seats.

FS Labs Redbus - Success Story

How RedBus was Born?

RedBus journey started due to a personal problem faced by one of its founder. After being denied a journey to sweet home for spending Diwali holidays due to ticket unavailability, A BITS Pilani pass out – Phaneendra Sama tried to get to the root cause of the chaos bus in ticket booking industry. Little market research, with help of two more co-founders – Charan Padmaraju and Sudhakar Pasupunuri, was enough to unearth the mismanagement of logistics in private bus sector.

Initially Trio tried to make logistics management software which would help bus operators in managing the inventory. They tried selling the product to bus operators but operators were reluctant to buy new nuisance and were happy selling tickets in old fashioned way through agents.

Then under the mentorship of The Indus Entrepreneurs, they built an online ticketing system on their own, which would bring on-board bus operators and customers, leaving aside the middlemen like ticket agents and booking clerks.

As per Sama, Name RedBus has linking to the red color of virgin brand, Red line bus service from Delhi and a feeling that name should be easy to type and comprehend as it will be the first link between company and customers.

How RedBus Solved a Real Problem and Became Successful?

1.Mentorship and advice of few Mr Anandram at TIE helped them in building what the sick industry actually needed. It needed a website to sell tickets and not a logistics management software. When RedBus was trying to sell software to the bus lines, it was Anandaram who said: Don’t keep trying to sell the same thing, ask what they need and build that. The bus lines needed to sell seats. So RedBus built a site, and bought the inventory itself from the bus lines to list on the site. Once it proved it could move seats, the operators were happy to pay the company a percentage of seats sold as commission.

2. RedBus turned out to be a game changer. It was one stop solution from all the bus ticketing related need of customer. It provided a centralized nodal point for booking tickets, database on bus seat availability on different routes, online & offline distribution network. It turned a hugely fragmented and unorganized sector of long route travel into a well-managed show making the complete process, transparent, quick and hassle free for the consumer.

3. They helped the bus operators keep a track of the seats sold in a centralized manner. This holistic approach to solving the macro and micro issues faced by this industry has been one of the major reasons of their success.

4. RedBus always put customers as their first priority. Having a zero offline marketing expenditure, they had been able to achieve it solely via word of mouth publicity and customer satisfaction. One example is – company practically forced the bus operators to accept an SMS ticket receipt as payment just because it would provide a better customer experience. Its customer retention rates were 4 to 5 times higher than other online ticket sellers like MakeMyTrip and Yatra.

Timeline of RedBus Success Story

FS Labs RedBus - Typical Timeline

2006 – The first year was not a full year and RedBus did Rs 50 lakh (Rs 5 million) worth of business in the first financial year. There were no profits.

2007 – It was a huge success. The turnover was Rs 5 crore (Rs 50 million). RedBus had 25-30 people working for it in three offices and had 50 bus operators. It raised its first round of funding – $1 million through Seed Fund and an unknown investor.

2008 – It grew six times and the turnover was Rs 30 crore (Rs 300 million). It had connections with 135 bus operators and sold 400 tickets per day.

2009 – It had Rs 60 crore (Rs 600 million) as turnover. Company turned profitable. It covered 15 states, 5000 routes and had connection with 300 bus operators. It received its second round of funding -$2.5 million from Seed Fund, Inventus Capital Partners and some unknown investors.

2010 – Redbus claimed to have linking with 700 bus operators and sold around 5000 tickets per day.

2011- RedBus raised $6.5 Million from Helicon venture partners and existing investors.

2012 – It had 250 people working in 10 offices — Bangalore, Hyderabad, Chennai, Coimbatore, Pune, Delhi, Vizag, Ahmedabad, Mumbai and Vijayawada. It covered all the places where the bus industry is active.It sold 5000 tickets per day and had 800 bus operators. It claimed to become profitable.

2013 – It had 600+ staff, sold around 1 million tickets per month. It had linking with 1000 bus operators and its GMV touched $120 Million.It also launched its Android based mobile app to facilitate ticket booking through mobile.

Innovations Brought in by RedBus

1.It chose to go with Cloud Platform for IT Infrastructure and services. Moving to the cloud platform was one of the innovative practices RedBus did when it was not popular. This move was very critical for RedBus as it brought in around 40 per cent saving in cost and provided business sustainability.

2. Redbus stuck to the same amount of commission irrespective of number of tickets sold by them. This move provided the breathing space to the bus operators who were now more than happy to link their bus with RedBus. Redbus thus ended the parasitic influence of agent on bus operators.

Why RedBus was sold?

1.An Eye on Further Expansion – By mid-2013, RedBus were market leaders in India with a market share around 65%. They sold 1 million tickets per month and in no way had any threat from other players in market. It had reached to almost all those parts of India where there was possibility of selling online bus ticket.

Next target was to start its operations outside India, where the market was ripe with opportunities. Setting up its own internet and other infrastructure and then developing altogether a new clientele could have been a test for RedBus. Naspers group with its presence in all over the globe would give them better chance to scale up and consolidate in bus ticketing space.

2. Startup Cycle Completed for RedBus – By mid-2013, Redbus has completed the cycle of a startup. Right from Idea generation to Idea implementation, Seed funding, Base built up, Customer acquisition, more funding rounds, business expansion and being profitable. RedBus has achieved almost everything. They were on the road leading the Indian bus ticket service industry. Investors were happy with the business growth and new investors were looking for a way to invest into this successful venture.

Future of RedBus was bright. It had two options left – Either to run along and gain more valuation and gather more customer base or make an exit so that founders and investors could reap the benefit from the enterprise which they have made.

3. Timeliness of Ibibo Group Proposal – Just before settling the deal with Ibibo group, RedBus founders were looking to raise some funds to make its balance sheet look healthier. And at the same time Ibibo which was building its name as a travel aggregator came up with a really good deal. Timing of the offer was so apt that board members left the discussion about raising more funds behind and started thinking seriously about a worthy exit.

4. It was a Long Term Goal of Founders – As per Sama, after working for two years in RedBus, founding team had a clarity that they would be selling the business some day and that they would have to make an exit. Its timing was not set by them and they waited for the right moment and right offer before making a decision for selling.

5. Lucrative Terms of the Deal – Naspers had agreed to let RedBus remain an independent entity; in that sense it was not a merger. Two, because there was no merger, there was no risk to the company and it would not have to face problems of integration.

Why Ibibo Group Acquired RedBus?

Ibibo Group organically developed horizontal online travel agency platforms called back in 2010. That platform basically started off with flights and hotels and started growing very fast with the essence of what company wanted to deliver everything to the customer very fast.”

With that being the core anchor, Group realized that the bus category was unique with a large volume of sellers and operators in the space. That’s what drove Ibibo to acquire RedBus last year. With that acquisition, Ibibo really grew in terms of volumes of transactions and travellers on a daily basis. It became the biggest travel ecosystem in the country.

Exciting market opportunity was associated with bus ticket booking service as online penetration of the bus market was only 5.7% compared to 28% for air travel, suggesting headroom for rapid future growth.

FS Outlook

Started in 2006 from scratch, Redbus addressed one of the most common problems of human basic necessities and was able to aggregate the bus operators and successfully sold it to Ibibo Group in 2013. It shows a great sign for Indian Startup Eco System. If entrepreneurs are able to address the big challenges of daily life and provide simple, affordable and optimized solution, the chances of acceptance of that business model by large mass are quite high. Starting a business with clear vision on short and long term would definitely help in getting progressed in right direction.

Stay tuned with FS for more updates.

Taxi For Sure Sale – Why it happened?

Taxi For Sure Sale – Why it happened?

At the start of second decade of twenty first century, riding on the booming economy which was left unfazed by the last decade’s slowdown, Indian consumer habits got shifted toward convenience and on demand services. Transport infrastructure in the country paved way for “Not so costly and ultrafast” solution providers for transportation problem. Private commuting took the driver’s seat in driving the growth of previously nonexistent domain of Ecommerce – Taxi on Demand.

Though “Savaari” and “Mega Cabs” were already there, they didn’t have much impact on intra city point to point travel. In 2011 Ola and TaxiForSure entered the market and changed the landscape of the taxi service industry. Taxi rides as cheap as auto rickshaw ride turned the customer’s interest toward these taxi service providers. Though the sustenance of such a model which is being driven on heavy funding is debatable, yet there is no doubt about the potential this industry brings with itself – currently pegged at $10 billion.

[A] Taxi For Sure – Rise

TaxiForSure was one such initiative started in by Raghunandan G and Aprameya Radhakrishnan. Both of them have same Alma matter behind them – IIM Ahemdabad and NIT Surathkal.

Problem which they tried to solve was the classic one – providing radio taxi on demand to solve point to point travel problem. This segment was earlier held by auto rickshaw and rickshaw etc.

Along with problem solving what was more important was the way they solved it – TaxiForSure changed the belief that to run a cab service one needs to own a fleet! Through market research Raghu & Aprameya were able to find the untapped service of local fleet owners. These fleet owners were small players and were struggling mainly because of lack of backend support, such as getting the exact location of taxi and then ensuring punctuality in picks & drops. What these two did was to connect the customer and service provider by using simple technology. They contacted fleet owners and brought them onboard and in return they made a generous cut of 10-12% per order.

Platforms on which TFS worked – Calling, Mobile App and website based platforms.

Different from other Players –All other major market players like Ola, Uber, Meru, Easycabs had different model as compared to TFS. These giants believed in connecting the Taxi Driver directly to the customer. This hyper local business model hence became funding intensive.

FS Labs - Taxi for Sure - Typical Timeline

Taxi For Sure – Typical Timeline

2011 – TFS started its radio taxi service in Bangalore. Founders invested INR 5 Lakh in the company which at the end of year generated revenue of INR 10 Lakh. Since company did not own any fleet, it was less costly to expand its base to other cities. It focussed on Point to Point travel which generated 90% of its business.

2012 – Secured series ‘A’ funding of $5 million from Accel Partners, Hellon Venture Partners and Blume Ventures. Revenue of INR 3.8 Crore was generated.

2013 – Expanded to Delhi and Chennai. It generated positive revenue in Bangalore. It tied up with GoIbibo and offered Airport picks and drop service. It launched its mobile App for android and iOS platforms. It also stared booking through twitter. Revenue of 4.3 Crore was generated. Cash burn due to expansion to new cities and rising competition was huge – It stood at 17 Crore.

2014 – In May 2014, TFS received Series ‘B’ funding of $10 million from Bessemer Venture Partners with participation from existing investors and in August 2014 TFS again raised Series ‘C’ funding of  $30 million from existing investors. It then expanded its operation to Ahmadabad, Hyderabad, Baroda, Pune, Mysore, Surat, Udaipur and Rajkot.

2015 – In March, TFS got sold to Ola Cabs for $200 million suggesting sector consolidation. Incidentally the acquirer – Ola cabs, had received a funding of $210 millions in Oct’2014 from Japanese major investor Softbank which was involved in similar segment consolidation in China where Softbank backed Taxi service provider – Kuaidi Dache acquired Didi Dache.

[B] Taxi For Sure – Lost Ground

Ola Aggressiveness – During June’14 in Bengaluru where the competition was intense, Ola started changing the game of cab service by introducing various schemes. In July it received a funding of INR 250 Crore and started aggressively hunting for drivers and customers. Schemes which Ola introduced were –

  1. Ola reduced prices of its Cab & Sedan services by 3 Rs each.
  2. It introduced driver incentive scheme – Drivers would be able t get 8000 INR as incentive if they competed 40 trips.
  3. It further changed the driver incentive scheme from weekly to daily wherein drivers would be able to get incentive as – 500 for five, 800 for seven and 1000 INR for 10 trips.
  4. Ola introduced Ola wallet and promise of 100% cash back on first recharge till Oct’14.

Ola was losing around 200 INR/order courtesy its cash burn strategy to capture drivers and customers. Incentives scheme for drivers was a instant hit and drivers who were having both devices (dedicated to Ola as well as TFS), were attracted more toward Ola.

TFS waited and watched for Ola to stop the cash burn tactics. But in Oct’14 Ola secured $210 million in funding and was unstoppable.

Taxi For Sure Joined Cash Burn Tactics – Once knowing that Ola is not going to stop the cash burn game, TFS with all its resources jumped into the game. Owing to the customers who generally took TFS taxi for a minimum of 4 kmtrs, TFS were able to revive its rate to INR 49 for 4 kmtrs and 15 INR/Km thereafter. It kept the driver’s incentive at INR 200/10 kmtrs. SO logically TFS too started burning cash at rate 150 INR/Trip. TFS engagement with customers rose and reached 8000 trips per day which accounted for a loss of $1.8 million in Nov’14.

Softbank’s Investment in Ola – Throughout the 2014, people have challenged the longevity of Indian taxi service business. Softbank’s investment changed the sentiments of industry watchers and it validated that investors have trust in this business. Huge investment was now only a matter of time.

TFS All Out attack to gain market – Hoping to raise new funds soon, TFS looked to expand its bases to other cities. Though it was low on cash – only $8 million, it started expanding to new cities like Hubli, Ahmedabad, Mysuru, Kolkata and Chandigarh. As per Aprameya, the co-founder of TFS, “but once you get aggressive, then you go for the kill. Maximum growth, maximum cities, all positive signs.” Most of the investors were considering this opportunity of investing in India Taxi market as a billion dollar game. TFS in mean time started looking for raising funds – $200 million. Initial rounds with investors went smoothly and TFS was sure to raise big funds.

Unthinkable happened, Uber Incident- While TFS founder was in USA for next round of talks with investors, an event in India changed the direction of Indian taxi service industry. Rape of a woman customer by one of Uber’s driver raised the question about the safety and security aspect of the service. Its future became grim with state governments putting a ban on such services.  That incident changed the mindset of investors and TFS got a big no from everyone to whom they approached.

[C] Taxi For Sure Sale – Ola Vs Uber

In January’2015 TFS got an offer from the market leaders – Uber and Ola for acquisition. With No investor ready to fund them, TFS decided to start talks with these two market leaders for “Taxi For Sure Sale”.

Equity stock option (ESOP) acceleration (for TFS stockholders) and two months’ bonus for about 1,800 people became the centre of the conversation and negotiation with Uber and Ola.

Uber Option – Though Talks with Uber went ahead nicely, there were certain points which worked against the deal.

  1. Uber globally has 848 people on its rolls. TFS had 1,800 people in India. If the deal was to go through, it would lead to a massive bloodbath.
  2. Uber has its own backup for product, engineering, marketing, analytics, and tech division. And also Uber believed only in a driver-led model, so our operators (people who own and run a fleet of cabs) would also go. So basically it would have led to a blood bath for TFS employees.
  3. TFS investors had a view that Uber has reached near to peak of its growth and it has potential of at maximum doubling its share value – which was not a lucrative as Ola option.

Ola Option – TFS investor Accel partners were very much enthusiastic about merger of TFS with Ola. And it was a better bet, reason Being –

  1. Ola ensured TFS founders that it will take all the 1800 employees on board and would continue to work with operators.
  2. Ola was on rising trend of growth with a potential of almost 4-5 times growth. It was a better value for investment.

[D] Learning from Taxi For Sure Stint

As per Aprameya, learning from Taxi For Sure Sale were,

  1. Keep the consumers ahead of everything else. Investing in the first few hires will go a long way because you personally are not going to hire all the employees when the company becomes big. Being responsive to the market and thinking differently. If you don’t, your growth will slow down.
  2. As an entrepreneur, you are always passionate about what you have started. It’s like your own child. And you wouldn’t want to ever give it up. But you also need to be cognisant that there are other people who have helped you bring up that child. That’s where you start thinking across the board and take a call. You learn how to be a pragmatic businessman and not be very emotional about things.
  3. Accepting suggestions from Phanindra Sama (Red Bus Fame) regarding giving benefit to employees from TFS sale – Founders provided two month salary as a bonus to all employees. It ensured a smooth transition of leadership without any major clash between staff and management.

Stay tuned with FS for more updates.

Ibibo Acquisition – Pattern and Potential

Ibibo Acquisition – Pattern and Potential

As explained in our previous analysis, “Startup – Fulfilling Basic Necessities” and “Extended Basic Necessities” have more likelihood of recognition of their business model by public. With increase in the frequency of people interaction, travel has become one of the basic necessities of human life. Air, Train, Bus, Cabs, Car Pooling, Daily Bus Commute, Used Cars/Bikes buying and selling, product review and recommendation – every area of transportation has attracted startups to grow their business model with single or combination of these verticals. Makemytrip, Yatra, Ibibo, Uber, Ola, BlaBla, Meru etc are big known names of Transportation Startups.

“Ibibo” name has an inspiring story behind it. As per Mr. Ashish Kashyap (Lead Ibibo Group), around 2005 they picked phrase – I Build. During 2005 the power of creating content and applications went into hands of consumers. Post 2005 interconnectivity of consumers on internet was the source for phrase – I Bond.

I-Build and I-Bond led to ibibo and this phrase is the soul of all the work which the group has been doing since its inception.

Started in 2007 as a Social Networking Platform, ibibo group entered into Ecommerce business and then successfully established itself as a Travel aggregator. Ibibo evolved as an incubator which created startup ecosystem by venturing through different business model by simply keeping an eye on market demand. During its journey Ibibo introduced different verticals into its business model by themselves as well as by ibibo acquisition.

Brain behind Ibibo Group – A Gambler

Before starting entrepreneurial journey Ashish Kashyap had set up and launched Google India’s domestic operations as their Country Head, Indian Sales and Operations. Before that he was the General Manager, E-Commerce at Indiatimes, wherein he built and architected a host of innovative applications for the portal ranging from ‘online auctions’, travel & shopping. This experience readied him for future role at ibibo.

Learning from Indiatimes stint – During 2005 there were six million internet users and less than a million buyers. Indiatimes were able to create a $20-30 million business with transactions through its airline auction engine. It was able to change the way consumers booked air tickets. Biggest learning from his Indiatimes stint was –

  • Open to trial & errors.
  • Being resilient.
  • Trick to attract customers – If you deliver something valuable, which is innovative, the consumer actually embraces it.

Learning from Google stint – As per Mr. Kashyap “The biggest learning from Google was how to build a startup within a large organization. So when I started the incubator back in 2007, we followed that concept, it helped us to execute very fast. Even today, when we are a large company with more than 2,000 employees, we are able to innovate fast by creating self-sufficient and stealth-mode units.”

The key things he learnt at Google which helped him in this journey of Ibibo are:

  • Robust hiring Process
  • De-centralizing / creation of PODs for faster execution.

Ibibo acquisition story is incomplete without a discussion of its failed ventures. Ibibo group has experimented into various business models right from social networking – Losing to Facebook, to Gaming portal – Ahead of time, to Ecommerce portal – Flipkart destroyed them, to Classifieds – Not fitting into core business of Ibibo group. And finally they have settled into travel and hospitality sector which once was a side business for the group. Here are the details of how Ibibo group has walked across different business models.

FS Labs ibibo Group - Business Portfolio

[A] Social Networking Portal – Ibibo was started in 2007 as social networking portal covering the blogging platform, social networking, gaming etc. The direct competition of this social networking portal was Orkut, Facebook, Hi5 etc. Ibibo shut downed its social networking portal around 2012.

Ibibo had about 4 million users, roughly 3% of the total Indian Internet population. By contrast, Facebook had about 63 million users in India. Ibibo was considered as a supporting platform for reaching the Indian market; Facebook clearly dominated the region.

As per Kashyap, “I’m not scared of creatively destroying. We started off in social media and we built up a good amount of traffic, but social media is about the network effect, and that means that it’s a winner-take-all situation. In that particular scenario, you can’t compete with a global leader.” Ibibo though gained a name in internet users; its social network service had not been able to create any buzz.

[B] Gaming Portal – Loosing the social network battle to Facebook, Ibibo was quick to alter its focus area. With entry of online gaming players like Zapak, Miniclips and Yahoogames etc, Ibibo launched its gaming portal to tap the vast potential of Indian gaming community which was predicted to generate the revenue of 1500 Crore by 2014.

Ibibo was trying to become distributor of online games developed by external game developers. Ibibo had affiliate ad network system which was there to help in fast distribution of games to the masses. Ibibo also had local payment system which was there to support game developers for generating quick revenue.

Initially it seemed to have great potential, but subsequently it also failed to take off. Major reason have been – Indian mindset is different from countries where gaming is famous ( viz. – China, South Korea). Ibibo had build free social games on freemium model. One needed to get game for free and then had to pay for virtual items. In India virtual identity was not a priority. People were more interested in real life problems than a virtual world.

[C] E-commerce – With launch of Tradus, Ibibo entered in e-commerce market in 2009. The direct competition for Tradus was Flipkart, Amazon, Snapdeal, ebay etc.

Tradus changed the business model from a location-based mobile marketplace to fresh food & grocery e-tailer in April’14. It added groceries vertical starting from Delhi. In this service, users can order various groceries from its mobile app. Further Ibibo’s hyper local model was not able to face the competition of market biggies and Tradus was shut downed in Oct’2014.

It is said that given the operational nature of grocery business and importantly, the low-margins, there was very little patience left in Naspers group to continue with the experiments.

[D] Travel Aggregator – Ibibo started its air travelled focused portal Goibibo in 2009 and introduced the other vertical of transportation sector subsequently like hotel booking, bus ticketing, carpooling etc.

Today the entire business model is focused on covering all the sectors of transportation. The direct competitions for Ibibio are aggregators like Makemytrip. Yatra etc and the individual players like BlaBla Car etc.

[E] Payment Gateway –Ibibo launched its payment portal PayU in 2010 which was sold to Naspers in 2014 and Ibibo became a stakeholder in Naspers Global Payment Unit.

Ibibo Group – Acquisitions

Here are the details of ibibo acquisition of other business model to enhances its reach –

FS Labs ibibo Group - Acquisitions

[A] Gaadi [2011, Target – to Capture the Business Vertical of Used Cars Buying and Selling, Deal Value –$2 million]

In 2011 Ibibo group acquired Gaadi to develop its business vertical in Used and New Car Auto portal. Gaadi was sold to Cardekho in 2014 with deal amount of 11 Million USD.

Ibibo Group CEO Ashish Kashyap stated for this deal that the acquisition would enable to focus on their online travel portfolio that includes online travel agent Goibibo, bus booking site Redbus, B2B travel portal Travel Boutique Online and the bus tracking site YourBus.

However after selling Gaadi to Cardekho Kashyap added,” We were looking at opportunities in the classifieds space. Later, we realized that it was not fitting into our core business. It turned out to be a drain on our management bandwidth so we got out of it.”

[B] Travel Boutique Online [2012, Target – to Enhance Travel Vertical of ibibo, 51% stake]

Travel Boutique Online offered a gamut of travel services such as airline, train and hotel reservation and holiday package deals. It also provided charter and choppers and helped with car rental, bus bookings and travel insurance. Its revenues stood at 90-110 Crore.

ibibo acquisition signaled a rapid evolution of the country’s travel industry which was poised for strong growth as well as consolidation. In a market that was largely fragmented with almost 85% dominated by small, unorganized or regional players, travel companies are using an inorganic growth strategy to grab a bigger market share and expand faster.

[C] Redbus [2013, Target – to Enhance the Travel Vertical of Goibibo with Bus Booking, Deal Value – $138 Million]

While the group was struggling to carve out a space in e-commerce, and had started off dealing in air tickets under the Goibibo brand, it had made some smart acquisitions was one among them.

The idea of getting into these businesses was driven by removing pain points for end consumers. Ibibo focussed on providing better facilities as per as faster transaction speed and refund of payments in case of cancellation.

Phanindra Sama first visualized the idea of a bus ticketing service when during the Diwali season in 2005, he failed to get a bus ticket from Bangalore, where he was working for Texas Instruments, to his hometown Hyderabad. He thought some agent somewhere might have had a ticket and that ticket might have remained unsold, and all involved – him, the travel agent, and the bus operator – had lost an opportunity. At the time of sale, Redbus aggregated 228,000 seats per day, sold more than a million tickets a month and had over 600 employees.

As per Ibibo Group, the acquisition of Redbus would help it to expand and diversify its existing travel assets such as (online travel aggregators) and Travel Boutique Online (a business-to-business online travel platform for agents). The combined volumes of redBus and Ibibo Group’s existing travel assets would make the group one of the biggest online travel companies in India.

[D] YourBus [2014, Target – to Enhance Redbus Operations]

In 2014, Ibibo group acquired YourBus in a fresh deal for sector consolidation.

Founded in 2011, YourBus was a GPS-based tracking platform, which solved problems for both bus travelers and bus operators. Bus travelers could access real time information regarding the location of a bus on their mobiles as well as online. Furthermore, important information such as bus delays and time of departure was pushed to passengers via both SMS and web notifications.

Ashish Kashyap, CEO of Ibibo Group stated that from technology point of view YourBus sits on the top of Redbus. With this acquisition Ibibo would be able to integrate the technologies and analytics of both the portals into one.

He further added “Our key motivation to acquire YourBus is to enhance passenger experience at redBus and Goibibo, whilst at the same time providing additional technologies and analytics to the Bus operators so as to increase their efficiency in the marketplace.”

[E] Djubo [2015, Target – to enhance Ibibo Accommodation Vertical]

In 2015, Ibibo group acquired a stake in Djubo. Its main services include helping customers in domestic and international flight bookings, hotel and holiday bookings and bus bookings. Djubo was a cloud based 360 Hotels Sales Platform and managed functions such as booking confirmations, room hold requests, room queries, online channel partners, booking engine, payment follow up and much more through a single interface Djubo group had an invisible online channel manager integrated system with a cloud based CRS (centralized reservations system) that represents the latest advancement in technologies that   helped the hotel to maximize its revenues.

With this Ibibo group started a venture of providing a single solutions to the business travelers & tourists by helping them in planning their journey in a better way. Right from flight booking to bus booking to hotel booking, everything was available on Ibibo group offerings.

FS Outlook –Ibibo Acquisition: Future Potential

Since Ibibo is focusing only of transportation sector (already exited from e-commerce and social network), FS believes the future potential of ibibo acquisition is as follow –

  • Travel Guide Portals.
  • Cost effective alternates to accommodation.
  • Map integrators and developers.
  • On journey food service providers
  • On demand car/luxury car service providers.

Stay tuned with FS Labs for more updates.

Logistics Startup – Challenges

Logistics Startup – Challenges

In India, Ecommerce market place has grown exponentially. Its reach in deep inside the Indian cities has now reached to tier IV & V levels. People have come out of bargaining the price of product at brick & mortar stores to ride the discount wave offered by online sellers. With this boom, some challenges have appeared. Controlling the logistics is among major challenges in front of Ecommerce players.

Managing the logistics has various elements – first mile pickup, transporting a product from a seller to a warehouse, to the last-mile touch point and the final journey to a customer in a major metropolis or a tier-4 village. In between these steps, comes micro level management of inventory, warehousing, billing, packaging, labeling, shipping, cash on delivery, payment, product return & exchange etc.

Choosing reputed courier company or third party logistics is not easy. Snubbed by blue-dart and other courier service providers in 2011, Flipkart began its own subsidiary for facilitating delivery of products. But in festive season & peak demand season, Flipkart also battles with the timely deliveries to prospective customer.

Developing a reverse logistics is also very crucial for gaining rapport with customers. This comes into play when the customer requests for return of a product because it is damaged or they wish to exchange the product for its size, color and other reasons thereof.

The global average of Logistics costs accounts to roughly 4 to 5 percent in comparison with 6 to 10 percent of average Logistics cost of India, which means there is a gigantic scope of improving the margins by 3 to 5 percent by improving the supply chain and logistics processes.

As per FS Labs, following are the challenges in front of logistics startups in India –

FS Labs Logistics Startups Challenges

[A] Capital Intensive Operations

Providing logistics solution to industry is a business which is capital intensive. Huge amount of funds are required for following activities –

  • Setting up a new branch.
  • Acquiring required work force.
  • Acquiring necessary equipment- Loading & transport, tracking & immobilizers
  • Acquiring customers i.e marketing capital.
  • Getting the operation running i.e working capital.
  • Hidden costs – Toll tax/ Fuel charges/ Traffic fines
  • Insurance & licensing.

Unless the logistics startup has funds to run its business for at least 10-12 months it would be quite tough to concentrate on work only.

[B] Poor Infra Structure

With Ecommerce reaching deep into Indian consumer base, online retailers in India are under pressure to deliver within short timelines to battle out competition. Alibaba-led ecommerce boom in China was largely facilitated by the growth of state-funded infrastructure, Indian ecommerce companies have to pave their own way to their customers’ doors, and within tight wallets. Any support from government is not there as for as Infrastructure build up is concerned. Due to this logistics is not able to keep pace with the strides of Ecommerce giants.

The startup has patented technology that pulls up optimized routes for delivery boys in real time without relying on GPS. As cofounder of a logistics firm puts in “In India, it’s horizontal players (or online marketplaces) that are driving growth and volume of ecommerce, and no logistics are currently capable of providing the entire supply chain.”

[C] Difference in Billing Cycle

Another hit which the logistics companies take is difference in the billing cycle of payments from customers and payment of dues by logistics firms. Generally customer payment has a billing cycle more than 60 days and payment of dues has a billing cycle of 30 days or less. This puts extra pressure on logistics firms for getting timely funding. Without extra money on-board these companies will not be able to run even for one month. As the operations grow, in term of addition of new customers or business expansion to new area, funding pressure rises.

[D] Not a Choice for Venture Capitalists

Venture capitalists across the globe generally favor a business which could achieve quick value creation by scaling up operations. Rapid expansion brings in quick money. Logistics business is operations intensive. Rapid expansion is not the way which gels well with this industry. Due to this reason VC’s are not willing to put in good amount with logistics startups.

[E] Volatile work force

Work force that actually gets involved in delivery is very volatile. These guys generally deliver anything more than 60+ orders per day at a meager pay of 8 to 10k per month. In such scenarios even additional 500 Rs extra is a big lure for delivery guys. They can change job for even this much amount of money. Most logistics firms face challenge in keeping its workforce intact and running. Indian post which covers almost every pin code in India pays around 20k+ to every postman for daily delivery target of 25 to 30 packets.

[F] Varying Tax Structure in Indian States

Different states levy different tax structure for logistics. Absence of a single tax structure though out the nation asks for different business model for each and every state. Though GST could bail logistics players from devising separate strategy for different states, right now many players chose only selected states for delivery. Different tax structure in different states can slow down the pace of growth. For instance, ECOM Express has not expanded to eastern states and Kerala.

[G] Cash on Delivery Mode of Payment

If a consumer orders a product and then returns it, then seller will have to pay for the logistics for both of the ways, plus commission, plus tax. For a product costing as less as Rs 200, if the customer returns it, total incurred cost would be around Rs 80-100. Cancellations and returns are a big problem that all online sellers face. The risk is especially high in sales made through cash on delivery (COD) mode of payment, which has been one of the defining pillars of India’s e commerce boom. This not only puts extra pressure on the seller but on logistics firms as well due to extra care and lost opportunity.

[H] Tough to Break Monopoly of Old Players

Logistics is a deep pocket game and a major chunk (approx 90%) of the market size is dominated by established logistics players like Fed Ex, DTDC, Blue dart among several others.

While startups think about how much money they need to run their operations, existing players burn little amount to expand their market in new areas.

FS Labs Outlook

Whole E commerce sector is dependent upon the support service like logistics management and CRM. Delivery guy is seller’s representative for customer. Behavior of delivery guys, timeliness of delivery, ease in cash on delivery mode of payment etc are the factors which directly affect the bond between seller & customer. This is the sector to watch for with possibility of unparalleled growth prospects.

There are several startups which have not been able to fare better on test of time. Several companies that have sprung up in the past few years offering logistics services to e-commerce firms have shut shop, stifled by competition from established players, uninspiring margins and a dearth of funds. Among these are – Parallelway and Dialaservice in Bangalore, Earth Movers in Mumbai and Chottu in Delhi. These were logistics companies exclusively targeting the online retail sector, betting on the e-commerce sector’s exponential growth.

Sometimes too much aggression coupled with plan to make fast money and inexperienced investors – who force these logistics firms for sudden expansion, brings upon such fate to logistics startups. India, being a tough terrain and with vast potential for growth, checks the knowledge and patience at the same time.

Stay tuned with FS Labs for more updates.

Directory Portals – Generic Analysis

Directory Portals – Generic Analysis

Are you struggling to find a house on rent in some particular area? Search for any of the urls housing, 99acres, indiaproperty or commonfloor etc. and you will get a nicely managed list of nearby available houses on rent. Do you want to find some grocery shop nearby? Go to justdial and it would give you the details of all the nearby grocery shops. Are you not feeling good today and need a doctor but having no clue of the available doctors in the city. Go to Practo, and get the list of all the doctors at few clicks.

“A customer is the most important visitor on our premises; he is not dependent on us. We are dependent on him. He is not an interruption in our work. He is the purpose of it. He is not an outsider in our business. He is part of it. We are not doing him a favor by serving him. He is doing us a favor by giving us an opportunity to do so” – Mahatma Gandhi

Popularity of these directory portals is getting enhanced day by day. The reason of high acceptance of these portals is because it provides access to all the required information at one place. Entrepreneurs are trying to make these portals more attractive by making these as a communication platform among all the stake holders along with the related services as well.

Future scope of such directory portals is quite high in terms of the verticals that are untouched, improvement in existing portals (Read here about improvement of Housing), consolidation of database and the incorporation of all relevant services in these portals. So, FS believes that entrepreneurs who are looking for great startup ideas shall also focus on this area.

“What I tell founders is not to sweat the business model too much at first. The most important task at first is to build something people want. If you don’t do that, it won’t matter how clever your business model I”. – Paul Graham

First cut Planning of Directory Portals – If you are planning to be the next Housing or Justdial, here is FS Analysis on first cut planning of such portals-

S Labs Directory Portals - Generic Analysis

[A] Decide the Directory – An Area that has Large Market Base

The basic need for any of the startup models is an idea that has large acceptance in the market and high probability of success. So, first of all you need to decide the content of your directory portal. Few guidelines for such idea selection are as follow-

  • Analyze the number of people for whom your portal would be beneficial
  • Analyze the frequency of content to be used by consumer
  • Analyze the expansion possibilities of the content
  • Analyze the new verticals that could be incorporated with progress in time

So, based on the above facts you can easily decide an acceptable concept for your startup model.

Case Study – Suppose you are planning to start a portal that provides the details of all the sports events happening in your city. So the analysis of above idea is as follow-

  • The number of sports lover could be found easily by grabbing the data of sports stadiums available in the city.
  • If the portal is updated on daily basis, the possibility of visitors returning to check the portals is high.
  • The portal could easily be extended by incorporating the other locations as well.
  • The new verticals that could be incorporated in the portal are online booking, sports product shopping etc.

Read here more about market size estimation of startup concept.

[B] Analyze the Other Portals – To get the idea of Basic Model

The targeted consumer is already addicted to the existing portals. If might be the case that your concept is completely new, but still there are directory portals.  So, it necessary to analyze for the pros and cons of the existing portals so that all the attracting features could easily be incorporated in the setup and the limitations could be removed by the new portal.

Case Study – Let’s assume there are 2-3 players that provide the same information.

  • Get the positives of those portals that are attracting people to use them. So these must be incorporated in your directory portal.
  • Get the limitation of these portals and think of the possible solution to remove them. This would become the reason for consumer to switch to your portal.

[C] Design User Interface – Interesting, Informative and Interactive

The biggest challenge for such directory portals is to make them attractive to consumers. The reason for Housing success among directory portals was its map based user interface that was adopted by all other players subsequently. So, think of a portal that would be innovative enough to attract consumers and consumers would feel recommending it to others.

Case Study – For example of sports event portal, following are few ways to make it innovative –

  • Map based listing of daily sports events at different locations
  • Sports wise listing of events for some span of time like weekly, monthly
  • Calendar based listing of events

[D] Analyze the Market Competition – To Survive in Long Run

To analyze the market competition is essential at initial phase itself because it gives the idea of your success probability. Small players capture the limited market by their operational excellence while the big players have everything to capture the market. So it is essential to analyze the level of competition that you are going to face in future. If the competition level is analyzed at initial phase itself, it would help you to decide the relevant and effective strategies for your business model.

Case Study – The market competition of sports event portal could be categorized in following way –

  • Small Players – The small portal providing the same information.
  • Moderate Players – Startups with funds and trying to infiltrate the market.
  • Big Players – Other events portals.

Read here more about market competition analysis.

[E] Get the Vision – To Work as per Need

To have the long term vision of startup helps in developing your business model in that direction only. If you are targeting to become expert in all such event information, booking and other services portals, the target should be towards achieving operational excellence in one vertical and then expanding your business model in other vertical as well. If you are targeting to sell your startup to some big player, the focus should be to become famous for your verticals and its extensions so that big players would notice to acquire your startup.

Case Study – The vision of sports event portal could be following –

  • To become leader in all the events portals
  • To become expert in sports events portal and sell it some of the big players

[F] Get the Required Manpower – To get the things done

To have a perfect team is necessary for the success of your startup. One way to get the desired team is by selecting the people based on skill sets. Other way when you already have team members is by dividing the scope of work among team members as per their skill sets.

Case Study – You need following team members/ skill sets to get the things done –

  • Technical Skills – to design the website/app
  • Managerial Skills – to get the stadium on board and managing & updating the database
  • Marketing Skills – to let the people know about the new portal

[G] Incorporate the Relevant Services – To enhance the scope of portal

Just a directory portal might attract people for some time, but to keep them engaged there should be a reason that people should not move to other portal for further action. So FS advises entrepreneurs to check all the possible related services that could be incorporated in your portal so that consumer should not move to other app or website for other details or service

Case Study – From making it just information portal for sports event, it could be extended by introducing the booking facility in it.

[H] Revenue Model – To Generate Profit in Long Run

To generate the profit is the ultimate aim of any business model. The revenue model shall be clear to keep running your business in long run. Initial cash burnt tactics for market capturing is good but in long run you need to develop a business model that is profitable. So FS advises entrepreneurs to think of all the possible ways of generating money that would cover all the fixed and running cost.

Case Study – For our example of sports event portals the possible revenue models could be –

  • Registration Charges for event details on portal
  • Booking Commission
  • Advertisement on Website etc.

[I] Scalability Model – To Grow in Future

Business model become successful if it has no limitations. A business model limited to some location or vertical etc has least probability of survival.  So check the scalability of your business model at the starting point itself.

Case Study – Sports event portal could be extended by incorporating following verticals –

  • Started with a particular city/location, it could be extended to all the cities.
  • Supporting services like sports items could also be sold on the same portal.
  • The portal could be extended for other events as well.

FS Outlook – FS advice to entrepreneurs who are working in domain of directory portals is that make your portal interactive and innovative beyond the imagination of people. Once people get habitual to your portal, they would definitely pay you for the related services.

Wish you luck for your startup. Stay tuned with FS Labs for more updates.

RoadRunnr Incident – Lessons for Startups

RoadRunnr Incident – Lessons for Startups

Startups are able to remain in news every day. Few are getting highlighted because of their brilliant concept, amazing funding stats, acquisition etc. while few are struggling with hiring firing phenomenon, organizational restructuring, policies change and business model changes. Since last few months, TinyOwl and Housing were in news for their huge firing. Now, it’s RoadRunnr that in is news because of its policies changes that are affecting its stakeholders.

Like TinyOwl – Hiring and Firing Saga, Roadrunnr incident has also developed a lot of lessons for startup. Here is the detailed analysis of RoadRunnr incident –

[A] Get a Business Model – Acceptable, Sustainable and Scalable

Basic requirement for a startup is an acceptable, sustainable and scalable business model. The concept should be acceptable by mass to generate the large market volume, sustainable to keep it running with profit in long run and scalable in different verticals and locations.

The concept of Roadunnr is not a new one. Every shop available in the market has at least one helper that also acts as a delivery boy if required. RoadRunnr is helping them out by providing on demand delivery option. So, the business model limited to the on demand delivery by few restaurants, supply chains and aggregators has limited probability of success.

The areas of improvement that RoadRunnr has are following –

  1. To consolidate the market of on demand delivery chain.
  2. To optimize the on demand delivery chain by incorporating multiple delivery of different demands in one run.
  3. Direct interaction between rider and consumer for the delivery needs of consumers.
  4. Introduction of over delivery verticals in its business model.

FS advice to startups is that the business model should be designed that has the large market volume, suitable in long run and able to accept different verticals at per market need or business expansion.

Read here more about startup idea evaluation.

FS Labs RoadRunnr Incident - Lessons for Startups

[B] Align the Cost of Product / Service and Running Cost with Long term Revenue Model

Cash burnt techniques to capture the market base or penetrate the market volume of other players are good practice at initial stage but not sustainable in long run. Most of the startups are noticed to utilize their funds in reducing the cost of their product/service at initial stage but don’t align it with their long term revenue model. Issues arise when focus gets shifted to profit generation than market capturing. If you cut down the running cost at later stage, it would definitely become a reason of discomfort among the concerned stake holders.

Same is applicable for RoadRunnr as well. To attract the delivery boys to join Roadrunnr, it offered higher than usual. Let’s take a short dive into the costing analysis of Roadrunnr –

  • The average salary of one delivery boy = 18000 inr per month
  • Overhead expanse of petrol, bike, maintenance etc = 4000 inr per month
  • Total expenditure on one delivery boy = 22000 inr per month
  • Let’s assume that Roadrunnr gets 20% of the total order value and the average cost per order = 300 inr
  • So the inflow to RoadRunnr per delivery = 300*20% = 60 inr
  • The number of deliveries required to cover the expenditure of one delivery boy = 22000/60 = 367 per month
  • If we assume the working days as 25 per month, so the number of deliveries per day = 367/25 = 15 per day
  • If we assume the working hour as 8 per day, so the time required per delivery = 30 mins

As the experience with such delivery supply chain suggests, the average time taken for one delivery is almost 45-50 mins, hence the revenue model is not aligned to cover the expenditure on one delivery boy. If the above results are enlarged for the entire chain of delivery boys, the cumulative results would conclude a great loss in the revenue model.

In case of RoadRunnr, the entire business model is dependent on the cash inflow by delivery, so the fixed cost and the other running cost like technical and managerial staff shall also be covered by the same. It would increase the number of deliveries required per day per delivery boy to a very high number.

No doubt RoadRunnr is also aware of the above fact, but still their business model is not aliged with the long term profit generation model.

Similar kind of problem exists with other business models as well. For eg – Ola is offering somewhere around 1.0 lac per month for one traveller bus to operate its business model of “Ola Shuttl” in Gurgaon while charges only Rs 15 per trip to the customers. Another bigger problem which is getting constructed in parallel is that these service providers are getting habitual to such huge amounts for their services and once these startups stop cash burnt techniques, people will experience a huge jump in the pricing of these service providers.

So FS advices entrepreneurs to align the cost of their product or service and the running cost with their revenue model and also keep the long term market need of sustainability of every business model while burning their funds.

[C] Evaluate the Market Competition Carefully and Develop Strategies Accordingly

To evaluate the market competition at the starting phase of your business is essential to evaluate the success probability. The competition of small players can easily be managed while the big players are the major hindrance for market infiltration.

In case of RoadRunnr, the market competition is huge. A lot of on demand delivery startups are working with their cash burnt techniques to capture the market volume. And if you are trying to act as consolidator or aggregator of all these delivery services, the competition become enormous, even with the one delivery cum helper available in the shop. Why would someone spend more money for delivery when it could easily be managed by the available manpower?

FS advice to entrepreneurs is to understand the market competition carefully at the initial phase itself. Better consumer service, consumer relationship management and operational excellence are few of the tactics to handle the competition of small players. To handle the big players, long term vision of startup should be aligned with the daily objectives of the startup.

Read here more about startup market competition analysis and handling tactics.

[D] Move ahead with Proper Planning

To plan your strategies and policies is essential at the preliminary stage itself so that the right progress of your objectives could be tracked with time and no sudden changes should be experienced by stakeholders.

FS is pretty sure that the strategies of Roadunnr were not pre-planned, otherwise the situation of sudden changes would have not generated and the concerned stake holders would have not made any issue for RoadRunnr.

So, FS advices entrepreneurs plan each of the knowledge of areas of activities: Scope, Schedule, Cost, Quality, Communication, Human Resources, Procurement, Risk and Integration at the starting itself to avoid sudden changes in the business model at some point in time.

The best practice is to make a prototype of new business model first and to move ahead based on the feedback of targeted consumer on that prototype.

RoadRunnr has learnt their lesson by this sudden change. FS believes that they would not be repeat such scenarios in future.

Read here more about startup planning verticals.

[E] Expand the Business Model as per Market Need

Expansion of business model should be done when it gets stable in some vertical or location. The benefit of such planned expansion is that the pros and cons of the entire setup would become clear with one vertical or location itself and hence the probability of success in expansion will get enhanced.

So, FS advises startups to test the validity of their business concept, revenue model and profit margins first and then based on the lessons learnt, plan the expansion of their business.