For various reasons, emails from start-up founders reach my mailbox. Some want to work with me as bloggers, some just want to bounce ideas, and by some stretch of imagination, some want me to invest in their businesses or be their brand ambassador. I enjoy listening to new ideas and business models so at times we end up talking and it made me think about Startup Premier League.
This is a perfect example of start-ups that start from investors rather than from having an idea or a problem to solve. Once the investor is identified, they search for an idea sitting with friends or while driving on the road. The plan is to outsource every operation to show a skeleton business that can raise money. They are people looking for a problem or creating a problem that does not exist.
‘We want people to be so lazy that they order everything online’, I heard Ashneer Grover talk about Grofers, now called Blinkit. They should not step out to shop like the previous generations. The implied meaning is that once this habit is formed, you can always milk the customer. So, we have headline-worthy sensational service launches like 10 Minute Grocery Delivery. The human race has been managing groceries ever since it settled down, and do you really think this is the biggest problem to solve?
Let us analyze a typical order. You order two items of grocery. Assume it does come in 10 minutes, though you need to add the time taken to order – say 5-10 minutes depending on user comfort with the App. If one item is wrongly delivered or missing, which happens often in quick deliveries, you spend the next 30-45 minutes talking to their customer care, losing all the advantages of the 10-minute delivery and your peace of mind as well. Customer care calls raise your blood pressure levels for sure. I hope someone is conducting a formal study on this. Now the standard response is – we will refund for wrong delivery, please place a new order for the missing item.
Now what is happening here is that the company has doubled its number of orders, for the same order value. It also shows a repeat order from the same customer. Both the parameters can be served on a platter to investors. It is not without a reason that they insist you download the App and share your details. All this adds to their customer database which has the potential to attract investors way before the company thinks of serving customers. Years ago, one of the biggest e-commerce companies was sending me fake bills of purchase on my email Id. When I wrote to the founder CEO who is quite a celebrity in the start-up world, he did not deny that these were fake orders on an email that was never registered on their website.
Customer and revenue data bloating is a reality. Zilingo’s recent financial improprieties including revenue padding are a case in point here. Now if investors cannot see this or they choose to ignore it, is a reflection of their capability and integrity.
Investors and customers are two sources of money for the business. Investors come with easy money in big chunks – all you have to do is impress a few people managing money for high network individuals with loads of money. There are ample resources available to help you create an impressive pitch for investors using metrics and jargon that they like to hear.
Customers, on the other hand, pay you in little chunks for the product or service you deliver to them. You need to work hard to win the customer’s trust that would eventually turn into revenue for you, a part of which would be your profit. You need to delight customers on an everyday basis to keep them on your side. Few bad experiences and the customer will look at your competition who would be more than happy to oblige. It seems easy to ignore customers or fool them when you are floating in easy investor money. However, if you are really building a business and not just playing the investment game, it is this customer revenue that would keep your business running profitably as well as provide the returns that your investors funded you for.
At the moment, in this Startup Premier League battle between pleasing the investors and customers, the former seems to be winning hands down. Are we celebrating the non-profit making businesses too early? It is a topic for another day.
First Published in The New Indian Express on Jul 07, 2022