The Maximal - By Alap Bharadwaj (@alapjb)

I wrote about Meru and the GPS led innovation it brought in 2011 here. By that point I was quite sure Meru would continue to iterate and thereby dominate the Indian hire-for-transport landscape for years to come. I mean Meru would surely be able to take advantage of the entire smartphone boom that was coming right? 

Wrong! The innovators dilemma strikes again and feisty up-start Ola Cabs has slowly whittled away at the advantage that Meru has taken for granted. While I admit Meru is still the dominant player, if Ola continues on this path they will end up devouring Meru’s share sooner rather than later.

The above opinions got formed over the last 8-9 Months since my move to New Delhi. Due to the generosity of the fabulous company I work for, I dont require a car on the weekdays as I am picked up and dropped off every day. Therefore buying a car made no sense since I only need it on the weekends. Thanks to this I’ve become a bit of an expert on the hire-for-transport area having taken every type of cab known to man in the NCR region.

My analysis will focus on the differences in the business model innovation that both Meru and Ola use. Most of this information has been gleaned from my own observations as well as primary research by talking to the many drivers that work for both companies.

The very first difference that struck me is that Meru’s model is much more capital intensive than Ola’s. Meru owns most of its fleet while Ola owns none. This makes all the difference when it comes to how rapidly Ola can scale and gain share in the market. They don’t need vaults of Venture Capital/Private Equity dollars to scale as long as their team builds significant depth to their fleet by rapidly signing on more cabs.

The next difference is the App. Ola’s app is just phenomenal on the user experience front and truly promises one touch/click booking. When Ola finally figures out its ‘Ola Money’ system, this will lead to cashless transactions as well, and will be a game changer for the company. Meanwhile Meru is app-less (iOS), still depending on call ins and web bookings. Having said this though, Meru clearly wins on demand side considerations due to significantly higher brand equity. Ultimately I feel this simple UX advantage that Ola has is not very defensible - as building an app shouldn’t pose much of a challenge for Meru.

The next few points I make focus on the lifeblood of both company’s operations - the drivers.

Right off the bat Ola takes only 15% of the fare as commission compared to Meru’s 25%. Obvious demand side considerations of being able to provide a better passenger flow (to drivers, thus justifying the higher vig/rake that Meru charges) aside, when it comes to being able to scale their driver pipeline in the future, Ola has a serious advantage on the supply side here.  

Further in terms of tech, a Meru cab needs to be outfitted with a gigantic console for their gps system, while all Ola requires is a simple android powered mobile phone. Cost considerations already put Meru at a disadvantage, but multiple drivers have told me that the ability to carry the gps device, in this case - a phone, outside of the car, allows them not to miss fares and function better. Imagine a part-time driver having a cold drink with his buddies, his phone buzzes, someone close by needs a ride, and boom - he has a fare. 

The point of part time drivers is also critically important, as many drivers belong to this large sub set. Ola makes it infinitely easier for part time drivers to sign on and work whenever is convenient for them. Meanwhile a Meru driver must always sign on for full time shift of 8 hours and sit in his car permanently for fear of losing a fare. 

Finally for tiny cab companies Ola is a much simpler solution to sign up for and at much better terms. Take the example of one of the cab drivers I spoke to: He is the owner of a small fleet of 3 cabs and drove for a large corporate. Unfortunately due to cost cutting his fleet was laid off, as the small providers are always the first to go in these situations. The fastest way back on his feet was Ola and so he put his entire fleet onto their system.

I’ll wrap it up by saying this - in the battle to organize Urban India’s fragmented hire-for-transport landscape Ola has a significantly better chance than Meru due to clear platform advantages, strong supply side drivers and ultimately the inherent flexibility of its model. 

Disclaimer: These are all my own observations and research, and I could be dead wrong about some of the specifics. 

Writing, I’ve always believed, is something that should never be forced. I havent posted in a very long time primarily because B-School, moving cities and getting used to new surroundings are experiences that unfortunately don’t leave much time to reflect and thus to write. 

However, now that I have settled into my new job, new city and new life, I’ve been working on a couple of topics I’d love to write about. It’ll be good to put my thoughts down and hear yours as well.

Cheers!

I’ve been thinking about this topic for a while now (read - years). I first researched this when I launched my first venture - India1st (a tech focused non-profit that provided a social networking product to NGOs and tech consulting services to for-profit companies in the social impact space), in order to raise some capital to fund the operations of the venture. Tapping venture capital seemed like a natural option to me, as I came from a bulge bracket tech investment banking background, and had a lot of contacts in the space. I’m quite sure I did it the right way as well, which included building out a detailed fin model and an information memorandum :). Three years later we got our funding - but from a consortium of individuals. While that was great and gave us a ton of freedom to tackle the startup problems the way we wanted to, it deprived us of the financial muscle and the direction a VC could provide. Post that venture I returned to investment banking for another successful two year stint concentrating exclusively on the venture capital eco-system (working with companies to help them raise Series A - Series C rounds). Through all this time I didnt see Indian VC’s make one non-profit investment which left me with the question - why wont Venture Capital firms invest in non-profits as part of their Corporate Social Responsibility (CSR) initiatives?

I understand the fact that Venture Capital funds are special purpose vehicles that are defined by pre-set mandates, which is why most of them would not be able to invest in non-profit companies given their current structures. I am hoping however that when these firms raise their next funds they come to an agreement with their Limited Partners to allocate some tiny portion of their capital to an investment in one or multiple non-profits.

Why do I want more participation from Venture Capital in non-profits? For two major reasons.

1. Talent Acquisition: the biggest reason Greenpeace continues to be one of the few non-profit organizations that can attract good talent is because they pay (reasonably) well. As a corollary the biggest reason talented people do not work for non-profits is because the compensation is minuscule (relatively) and they have bills to pay. A raise of a couple of million dollars should be able to attract grade A talent to a non-profit startup, successfully aligning their monetary goals with their social ones. Further adding venture money will help in attracting great talent, just by virtue of the legitimacy that a VC investor brings (just like it does for for profit entitities). 

2. Direction & Advice: While this is debated, I personally believe a board comprising VCs adds immense value to startups, and this would probably be even more amplified in the case of a non-profit. The connections, advice, direction a VC could provide a non-profit could lead to immeasurable good. Now, how do we manage to get this done worldwide? I think it’s obvious that it needs to begin with the American VCs setting the example. I would even suggest that instead of the older more established (read: rigid) funds, the cause be championed by lighter, more nimble, trail blazing funds like Union Square Ventures and the Foundry Group. I know that Fred Wilson (USV) and Brad Feld (Foundry Group) already serve as advisers to a bunch of non-profit organizations, but having them give board level engagement to a non-profit would be a scintillating prospect. Once the American funds are on board, everybody world wide would follow suit as well. Imagine the social good a move like this could create.

Venture Capital firms have helped build THE game changing companies of the last two decades - I am dead certain they can help build the defining non-profits of the next generation as well. I look forward to your comments and feedback.

Disclaimer: This might turn out to be a bit of a rant, :).

So i’m preparing to leave for b-school in another month, and the absolute, monstrous, crushing weight of my entire to-do list is clearly getting to me. Whats worse is that I was an R1 admit, which means, I got my admit from my first choice school in December, almost 7 months ago - clearly highlighting one fact - I took the admissions process very seriously - and took the post admissions process a bit too lightly. Now I’m scrambling to organize finances, visas, insurance, pre-reads, language learning and recruitment prep (thank god I got done with housing early) while trying to network and meet as many alumni and important people during my last month and a half in Bangalore. 

The euphoria in the months following your admission often overshadows the preparation required to seal the deal. Honestly getting an admit is just half the battle won, securing your position at a b-school in terms of all the other ancillary stuff is almost as important. 

My suggestion - In the first 3 months post admission, wrap up housing and financing (as you wont be able to sort out VISAs till 3 months before your date of departure). Take the next 2 months to tackle VISAs, pre-reads and recruitment prep (in case you’re going to a school where recruitment starts in the first term itself). 

You could just “wing it” like I did, but I promise you, it ain’t pretty…

Written for the Viedea Blog, on the 30th of June 2011, original article here

Recently, in a meeting with a VC from a tier 1 global fund, the conversation turned to India’s tech companies and the ideas that these companies are built on. The VC made an all encompassing statement to the effect that every single venture funded Indian tech startup recently has ‘absorbed’ its basic idea from a similar company in the US. The statement was loaded but one that could not, for the most part, be countered. It made me feel disappointed and put a serious question mark on the creativity of nouveau Indian entrepreneurs. I have blogged about this before, and to be perfectly honest – the apparent “apathy” tech entrepreneurs are showing towards actually building out a unique idea SUCKS. Has an Indian company come up in the recent past with an idea before its western counterpart? I am sure many have, but have they been able to drive scale using technology before the western equivalent? I am thrilled to report; the answer came to me on a recent trip to Hyderabad.

Travelling from my house to the Bangalore airport, and then to various meetings in Hyderabad and back was all enabled by one phenomenal Indian company – Meru Cabs. Meru, since 2007 has leveraged GPS to the maximum, efficiently allowing cabs to service customers closest to them, provide great service, reduce a ton of consumer frustration and make entrepreneurs of over 5000 drivers in India. I know what you’re thinking right now – so which western equivalent did they beat out to the implementation of this idea? That would be San Francisco based Uber – a company that has been getting rave reviews from the TechCrunch faithful for months now.

An analysis of the two companies will reveal differences in their business models. While Meru is more of a supply player (the company owns every single one of their 5000+ cabs) Uber is an intermediary that consolidates demand via a mobile app. The secret sauce of both companies is the same though – the ability to track, in real time, a cab’s location and then push relevant demand of transportation services to these cabs. Isn’t Uber better in terms of payment you ask? Uber allows users to pay using the credit card that is on file with the app, while Meru allows their customers to pay via a swipe of their credit card right in the cab as well.

The best part about Meru though is the “Indian-ness” of their model, in allowing so many cab drivers to make a better living by allowing them to offer a better service backed by robust technology. To say I’m impressed with Meru is an understatement, but I’d like to end by stressing that I am not in any way shape or form running down Uber. They are a fantastic American startup with a truly disruptive idea, backed by an amazing set of early investors in First Round, Lowercase Capital and a host of angels. I am just ecstatic, as an Indian, to have such a compelling business model be executed so well in India before it was done out of the Valley!

Do let me know the other Indian companies who, in your opinion, have implemented a disruptive idea before Silicon Valley has.

Written for the Viedea Blog, on the 30th of March 2011, original article here

Are you nervous about internet valuations yet? If you aren’t, then you might want to consider checking out this fabulous article on dealbook called – Investing like its 1999! The article discusses the possibility of a new tech bubble and is interesting as it highlights both the similarities and differences between the situation in ’99 and ’11. There are some great anecdotes on some of the more notorious failures from the bubble era and these indicate why it might be different this time around. My personal take is that while the fundamentals are a lot stronger this time around, the problem centers around applying the same valuation exuberance that Facebook, GroupOn and Zynga (companies with proven scale in terms of BOTH users and revenues) command to companies that are in their growth phase.

Written for the Viedea Blog, on the 18th of March 2011, original article here

A quick analysis of the entertainment sector that is served via technology in the US reveals three main areas of interest – Music, Gaming & Video.  Music & Video can be further divided into purchased and radio/streaming and Gaming into console and handheld, all of which are doing fairly well in the west. Given India’s status as a late adopter, the question remains – Will the country’s entertainment focused technology companies see the same success that their American counterparts have?

The answer varies for all three subsections and in my opinion hinges on a critical difference in the engagement propensity of users when interacting with these different mediums. Beginning with music, I don’t believe tech companies focused on this space, be it pay and download or radio, will have much of a future. The average internet consumer in our country has gotten used to downloading music in ‘lossy’ (mp3, etc) compressed formats and widespread piracy of the latest music both in Hindi and English hardly provides much incentive to switch to paying. Hard evidence exists in the form of Apple’s continued reluctance to open their blockbuster iTunes music buying service to the Indian public.

Additionally the problem with offering a radio service in India is plagued with its own issues. The ability to listen to internet radio at work would be disabled for the majority of India’s working public (due to strict work policies against such actions) and the poor quality plus high cost of India’s 3G networks make streaming of radio and on demand music a distant dream. While a case for exception can be made for technology companies focused on providing cloud services for people’s personal music collections, these too would suffer from the access problems mentioned earlier. Above all music as an entertainment medium might have many consumers but suffers from the critical flaw I mentioned earlier – the users are not engaged, thus reducing inclination to pay for such content.

Gaming and Video however do not suffer from this flaw. Both sections boast scores of engaged users with the inclination to pay. The gaming market has largely been tapped and conquered by the Xbox360, Playstation 3 and the Nintendo Wii, but what off the online video market? This is the area I believe with the largest chance for growth. Indian GEC and Bollywood content has virtually no presence online and any exceptions are pirated content that regularly get booted off websites like YouTube. Indian content is crying out for a desi version of NetFlix or Hulu backed by demand across India and more importantly abroad. Investors would queue up for companies that would be able to offer a high quality offering in this space as the model has both a proven growth strategy and significant exit potential due to the availability of appetite from retail investors for public equity of this nature as well as global acquirers.

I strongly believe that video will be the space to watch in the coming years on a variety of fronts. Content aggregators (a la Netflix) as well as companies focused on enhancing the viewing experience and constructing analytics and software for the unique conditions in India will flourish in the coming years. Investors have already backed certain players – Althea Systems, that makes a social video browser called Shufflr, raised US$ 3 MM from Intel Capital in November 2010 and Apalya Technologies, that specializes in Mobile video streaming, has raised three rounds of funding, the latest in January of this year. Given that the video focused technology space has seen investment, we now expect to see significant investor appetite for players in the content aggregation and video destination space.

Written for the Viedea Blog, on the 22nd of November, original article here

With the e-commerce and internet space gaining steam over the past few months, the Viedea team decided to put together a business development exercise that focused on the new entrants into this arena. After speaking to in excess of 30 companies, analyzing their business models and understanding their challenges, I noticed some important trends.

1. The “me too” bane: I’m not sure if there is a dearth of good ideas out there or that Indian entrepreneurs lack creativity, but an increasingly large trend that has taken over the internet space is the proliferation of clones of successful websites from the west.

For example the success of Groupon in America has led to a slew of discounted, daily deal, group buying services based websites in India jostling for market share in an arena where they can only be 2 to 4 players that will succeed in the long term.

In my opinion if you cannot significantly differentiate your offering or provide a compelling platform, the mere aping of a foreign trend will lead to nothing but a failed venture.

2. Hygiene Factors: It still surprises me, how many aspiring Internet business fail to get the nuts and bolts right. You log on to a website that promises you the sky and the earth, but are unable to navigate, search, order, browse in a clear manner. When site design turns out to be poor a visitor is even less inclined to return.

The attitude that “if craigslist did it with plain forgettable site design, so can we” has got to go. Craigslist is a one in a billion company, and that story will probably never repeat itself.

A clean, crisp and engaging design is a must and should not be put off for later. Other factors like 100% functioning payment gateways, customer service numbers, bill generation, clear transparent reporting of extra charges etc are also overlooked just because entrepreneurs believe the “concept” is strong. The concept will get a venture no-where without the hygiene.

3. Business Plans: In today’s world of venture capital investments and blockbuster IPO listings it still surprises me that most young internet companies fail to build out strong forward looking business plans.

As an investment banker the question I look forward to asking most entrepreneurs is where will you be in five years in terms of revenues, profits, manpower resources and funding?

The largely collective lack of enthusiasm to provide an answer to this question is only second to the slipshod, half baked, not thought through, generic response of “$100 MM company”, in terms of disappointing interactions one can have with a burgeoning company.

Vision and holding your company to that vision are key in terms of success not only in driving business but also attracting investors and raising funds, even if the vision is realistic and conservative.

4. Angel Investment: Another surprising trend is the misplaced confidence most entrepreneurs in this space have in the belief that their ventures will be able to raise venture capital funds.

The tech world is not what it used to be and VCs are done splurging on anything and everything remotely connected to the Internet. Unless you are a second or third time entrepreneur with at least one very successful exit behind you, the odds of raising venture money are slim at best. Why so many entrepreneurs miss out on raising money from high profile angel investors is beyond me.

Angels are much more inclined to part with money for first time entrepreneurs, plus they bring in much needed experience on both the operational and execution fronts. Finally the value a high profile Angel adds to your company becomes immediately visible once the venture approaches VCs for their Series A.

Most VCs feel a much larger degree of comfort with an industry veteran on board and this actually leads to an acceleration of the entire fund raising process.

There are many tiny things that differentiate a successful venture from another, but making the four on top are taken care off will go a long way in ensuring the growth and success of young internet companies.

Written for the Viedea Blog, on the 20th of September 2010, original article here

If I was playing a video game fifteen years ago, I would have not expected the gaming industry to have overtaken the movie business. In fact as of today it has become the biggest generator of revenue across the entertainment sector. In April, the Guinness World Records announced that the game Call of Duty: Modern Warfare II had broken the world record for the best launch day in terms of dollar revenues in the history of the entertainment industry. The US $ 50 billion gaming industry is growing, highly profitable and has been historically dominated by two major platforms – gaming consoles (that are solely video game focused pieces of hardware) and the more general all purpose personal computer. Just to give you some market information, today along with the PC the three console OEM’s – Microsoft (makers of the Xbox), Sony (makers of the PlayStation & Playstation Portable) and Nintendo (makers of the Wii and Nintendo DS) dominate the industry with a combined total of 95 percent (Console + Portable) of the market. While this stat might look like plain vanilla at the outset, the interesting point to note is that just a year ago gaming’s bellwethers held 99 percent of the market. Boasting a growth of 400 percent, but there’s a new kid in town and its name is – the “Smartphone”.

There are several reasons for the smartphone’s ascent up the ladder of choice as far as the gaming population is concerned. It is the ease of use and universal reach that makes Smartphones an obvious answer to the next generation’s gaming platform. I feel there are other reasons that are more significant pointers to the growth of this space. Smartphone gaming largely focuses on Social games. These games appeal to many non gamers as they are simple and intuitive and don’t alienate newbies like their much more complex console counterparts. Looking forward I feel this will result in a dramatic shift in the demographic of gamers in the years to come. Further the hardware strength of today’s iOS and Android Smartphones also plays a big role in the increased popularity of these devices as gaming platforms. Today’s top 2 smartphones in terms of processor power – the iPhone 4 and the Samsung Galaxy S boast the following specs:

These are incredibly powerful pocket sized devices capable of running extremely graphic intensive applications. This was demonstrated recently by id software running its new game called ‘Rage’ on the iPhone at a steady 60 frames per second, faster than the Xbox or Playstation 2 (pre cursors to the current Xbox 360 and Playstation 3). Ultimately, the convergence taking place coupled with the unique opportunity to access over tens of thousands of games on various App stores will inevitably push Smartphones into the public eye as the most cost effective and accessible platform to play games on. I personally reckon Smartphones will eventually overtake Consoles in terms of market share, giving the current incumbents of gaming leadership more than a few things to worry about.

Written with Deepak Srinath for the Viedea Blog, on the 1st of July 2010, original article here

For all the hype surrounding social media and its unique ability to reach a wide range of users, the question still remains: does using networks like Facebook and Twitter help brands directly increase sales? A survey by blogworks.in and exchange4media highlights two very interesting facts – firstly over 80 percent of respondents felt that marketers either do not have a good understanding or only have a cursory understanding of social media and secondly almost 50 percent of respondents felt that agencies either have no understanding or only a cursory understanding of social media.

A lot of consumer brands in India have taken to spending a cut of their ad budgets on developing communities, games, activities and apps on various networks. From a numerical standpoint, the sheer number of signups and community members’ that brands boast of having captures some success. But there is no methodology or mechanism to track whether these users are in fact getting converted into sales. Digital agencies specializing in social media marketing have seen an ‘uptick’ in their revenues. However, they will be soon be asked to demonstrate the relation between spend on social media and sales of the product being promoted. According to the CEO of a top digital agency, “unless agencies can demonstrate a minimum monetization of 15-20 percent through social media, brands will start questioning their spend on it”.

We believe that investing in social media is a great tool for brands to increase their awareness, and absolutely necessary for ‘reputation management’ given the proliferation of blogs and online reviews with internet users (especially those in the younger age   bracket). However, driving sales by using this channel will require methods more sophisticated than just setting up ‘community’ pages. The digital medium needs to be leveraged in such a way that it converges its strengths like interactivity while enabling a dispersal of product information and a tracking methodology that can show a brand its social media RoI. There is clearly a gap between the intentions of marketers and the results that social media delivers to them. It might just be a while before we actually see the “massive potential” of social media marketing that everyone keeps talking about. Moreover, we also sense a huge opportunity of establishing market leadership for a digital agency which cracks the analytics and monetization aspect of social media marketing.