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Startup school to SaaS: Binny Bansal’s xto10x stepping stone


What do Indian startups like Razorpay, Meesho, Cleartax, MyGate, and Vedantu have in common? A school called xto10x. Let us explain.

Most people would agree that all they have successfully reached initial product-market fit—they’ve found a large set of customers who have an urgent problem and developed a product that solves it in a meaningful way.

In startup lore, reaching product-market fit is considered as a rite of passage. A majority of startups fail to cross this “chasm of death” and the ones that do, find themselves courted by investors chasing the next big thing.

So all the startups mentioned above have duly raised tens of millions of dollars from marquee investors at valuations well north of $100 million.

But startups are hard

Crossing the product-market fit hurdle does not make things easier. Most of these startups’ challenges pertain to scale—the topline without sacrificing margins, its product portfolio without losing the core original value proposition, the organisation itself to handle hypergrowth?

There are no easy answers to any of these questions and getting even one of them wrong can potentially derail a startup.

So what did Razorpay, Meesho, Cleartax, MyGate, and Vedantu do?

They all enlisted themselves into the startup school xto10x Technologies. Founded by Binny Bansal, Flipkart’s co-founder and former chief executive, along with some former colleagues from the e-commerce company, xto10x is a Bengaluru-based entity. It helps companies like the ones named above manage scale and growth.

So far, this nearly-one-year-old company has been a bit of an enigma. Most people in the startup ecosystem that we reached out to—from startups to venture capitalists—didn’t even know about it. We were met with responses like “I have no view on it” or “I have no idea about it”.

But the most interesting part about xto10x is not what it is, but rather what it isn’t.

It is not an investor.

It is not an accelerator.

Neither is it the “SAP of startups” providing enterprise software tailored for growing startups.

It wants to, however, build software. Starting with a tool to manage OKRs (objectives and key results) by April 2020. The tool, it hopes, would help it translate the strategic priorities for hundreds of people in an organisation. (OKR is a goal-setting and performance management tool that was popularised by Google. Leading social media companies like Twitter and LinkedIn use it. OKRs help understand organisational bandwidth for tasks.)

But why is any of this interesting?

The exit from Flipkart in 2018 made Binny Bansal one of India’s newly-minted billionaires. Most people would have expected him to morph at least partially into an angel investor deploying his new-found wealth into other startups. Much like his erstwhile partner Sachin Bansal—he’s an investor in ride-hailing company Ola, scooter rental startups like Vogo and Bounce, among others. But while Binny Bansal has made a few personal angel investment bets, he has deliberately chosen not to fashion xto10x as an investment vehicle.

Saikiran Krishnamurthy, co-founder, and CEO at xto10x (and formerly the head of Flipkart-owned logistics company Ekart) says that xto10x has a rule about investing, “We won’t invest, we don’t give any capital neither would we be present in investor meetings or take part in fundraising conversations.”

Why this rule?

To answer this question, we need to look at the current state of the startup landscape in India.

The funding-execution chasm
Perhaps for the first time ever, India is in a funding market where there is no scarcity of capital. While seed-level, early-stage funding might still be a challenge, later-stage funding for companies that have found the initial product-market fit is abundant and easily available. Several home-grown, as well as international funds, are jostling to invest in companies that can potentially conquer sunrise sectors in India, the next big market after China.

But there are two problems here.

First, India is not China. The markets are different in every aspect and the playbooks for scaling are not comparable. In India, there are very few startups who have scaled to hundreds of millions of business units, be in terms of users or transactions or topline.


Escalating Bad Loan And Liquidity Crisis


Ironically, the hoopla around fintech lenders was that their algorithms and machine learning could accurately identify the creditworthy, resulting in lower NPAs. Similarly, tech would reduce operational costs.

If tech and underwriting prowess were the markings of a true fintech, the one successful lending fintech to emerge out of 2019 has been the 10-year old Bajaj Finance Ltd.

Bajaj benchmarks itself against Amazon, Netflix, say former employees. It studied Netflix to see how the streaming company uses algorithms to serve different content to different users. Similarly, Bajaj starts all users with consumer finance loans and then puts its algorithm to work to see which would be the best loan to cross-sell to its borrowers.

Although consumer finance loans account for only 12% of its income, Bajaj is able to leverage and sell other consumer loans, which make up 22% of its income. Almost 60% of the total loans it has sold are from cross-selling, according to its latest quarter of earnings in September 2019.

Impact On The Physical Distribution

Fintechs, emboldened by tech-based lending, have also underestimated physical distribution. Bajaj, which isn’t online-only, doubled its presence to 100,000 touchpoints in two years. Combine this with its cost of borrowing. NBFCs’ cost of borrowing is about 10% while fintech NBFCs go as high as 22%, said the founder of a fintech lending company, who didn’t want to comment publicly. Because of this advantage, any operational efficiency tech can generate can’t compete with NBFCs’ cost structures.

That is why even in the toughest of environments for all lenders in 2019, the gross NPAs for Bajaj stood only at 1.54% in the year ended March 2019, with public sector banks at 9.3%. With such a business, Bajaj Finance is valued at $32.4 billion.

Fintech lenders are now playing catch up. LendingKart, for instance, relies on agents to source loans. Consumer finance companies like ZestMoney are going offline to lend. Fintech lenders are searching for niches missed by Bajaj Finance and banks. But the catch here is that once a niche is identified, and a segment has been verified as risk-fee, Bajaj Finance could swoop in to snatch the best borrowers.

It is a vicious cycle that can only be broken with a highly differentiated product. Some startups have their hopes pinned on tech.

Razor-sharp tech focus

Any feature that any tech company launches gets democratised in a matter of months. But payments aggregator Razorpay and discount broking startup Zerodha want to take those fleeting advantages.

Total digital payments volumes in 2019 grew to 31.3 billion transactions, 51% over last year. This momentum has been the wind beneath Razorpay’s wings. Razorpay helps businesses accept all modes of digital payments—from credit card to Unified Payments Interface (a real-time mobile-based payments system).

Up until 2014, two companies held the digital payments volume pie. Billdesk, which earns Rs 1,000 crore ($140 million) by processing utility payments, and Naspers-funded PayU, which accepts payments from the internet economy. In the five years that Razorpay has been around, it has made 8-year-old PayU uncomfortable.

It is on the back of this that Razorpay doubled revenues to Rs 193 crore ($27 million). A feat few Series C funded startups can claim in the year ended March 2019. Razorpay’s growth stands out because it comes at a time when there is large consolidation among online players, leaving few opportunities. That makes retention of those merchants that much harder.

To hold on to merchants, Razorpay is banking on new products—loans, current accounts, corporate credit cards, payment pages for offline stores accept payments, etc. According to Mathur, one of the most valuable metrics for the company is the number of products per customer. Mathur says this has grown from 1.5 last year to 1.8, with the ideal number being 2.5. At that level, Razorpay can better retain customers and close the gap with PayU.

It is this feature-focused approach that also led to one of the biggest fintech successes in 2019, where a startup grew bigger than the traditional incumbents.

The legend of Zerodha

If there is a fintech that is both profitable and fast-growing, it’s Zerodha. It took 10 years for Zerodha to become the largest discount broking company in 2019. A company, which, by charging only Rs 20 ($0.28) for trading, outgrew other broking behemoths like ICICI Direct and HDFC Securities in the last financial year. Zerodha, as of 2019, had 1.8 million active clients racing ahead of market leader ICICI Securities with 924,585 clients.

Indians make $60 billion worth payments in a year, half of which happen online. Razorpay claims it processed $10 billion worth of payments in 2019. A 500% growth over last year. This growth was driven in part by digital adopters spending more online. That alone made for 30% of the growth, said Harshil Mathur, co-founder and CEO of Razorpay.

Bajaj, Razorpay, Zerodha carry the Indian fintech torch


There’s always a sector that’s the apple of the investor’s eye. In the first half of the last decade, that position was held by e-commerce in India. In the second half, fintechs became all the rage, attracting millions of dollars. Among the top 100 global companies by market capitalisation, financial services are worth $3.7 trillion in market capitalisation. That makes for 17.6% of the $21 trillion that the top 100 companies are valued at, says a report by consultancy firm PricewaterhouseCoopers.

With that kind of billing, venture capitalists believe fintech challengers like lending startup Capital Float, payments firm PhonePe, and mutual fund distributor Paytm Money can face off with traditional firms—banks like HDFC, or payments companies like Visa.

Nearly $10 billion has been invested in fintech in the last decade. That’s nearly as much funding as has gone into food tech, hyperlocal delivery companies, and ride-hailing put together in the same duration, according to venture capital data tracker Tracxn.

Less Success Ratio

But very few viable business models have come out of this fintech hype machine.

“The hype sets in when investment dollars take over reality, and that leads to business running ahead of fundamentals,” says Kunal Walia, partner at Khetal advisors, a boutique investment bank. Over the last 15 months, the real picture behind fintechs’ hyped growth has been emerging.

Fintech apps—like payments apps, wealth tech apps—spend Rs 150-300 ($2-$4) to get one app install in India, but 59% of those apps are uninstalled in a day, says AppsFlyer, an app analytics firm. Fintechs aren’t any closer to cracking their core businesses. For example, payments companies like Paytm*, PhonePe, Google Pay, BharatPe bank on the richness of transaction data to then monetise that data through ads or credit. But ironically, fintechs solely focused on credit—like Capital Float—are struggling.

Still, hype has its uses. “It is only when there is enough hype in a sector does it get a lot of dollars and only then those dollars reach those few worthy companies that otherwise may not have got the money,” says Walia.

Besides, it also brings the focus on who’s bringing value to users. And who isn’t.

Should, say, a Paytm, which grew to 140 million users by offering cashbacks to get people to choose its app, really be more valuable than traditional credit card payments company SBI Cards? SBI Cards has an 18% market share with 9.4 million cards but profits worth Rs 863 crore ($121 million). Paytm, on the other hand, saw losses double to Rs 3,960 crore ($555 million) in the year ended March 2019. And yet, Paytm has a $15-billion valuation while SBI Cards, at best, hopes to record a $8.4 billion valuation in its upcoming IPO in the year ended March 2020.

So, while the hype draws attention to the sector, lift the veil and the imminent future of (and threats to) fintechs becomes clearer.

Bajaj’s offline gameplay

The financial sector is reeling from a $200-billion bad loan nightmare. It began with infrastructure lender IL&FS running out of money to pay its dues in 2018. That along with bad loans that Yes Bank and public sector banks made to corporates has choked the supply of capital to fintech lenders, sparking a liquidity crisis.

“No one expected to have a down cycle this quickly [after the financial crisis of 2008]. So a lot of investment went chasing lending companies and that’s why lending till now was loan book led. We are in a down cycle and it will go down further in 2020,” said the founder of a lending fintech.

While the public sector banks mostly face the heat for the extent of bad loans, fintechs’ bad loan skeletons are not fully out of the closet. Yet. A prime example of bubbling bad loans among fintech lenders is Capital Float. The company, which personified fintech lending, saw its gross NPAs (non-performing assets) double to 6.8% in the year ended March 2019 from the previous year. (Gross NPA as a % of AUM was 4.8%), according to ratings firm ICRA. It also wrote off 1.8% of its assets under management, as of September 2019. This, while its loan book grew 2.5X in just two years to Rs 1,403 crore ($196.5 million).

The liquidity crisis should have sent fintech lenders into conservation mode. But fintechs that relied on external capital didn’t want to sacrifice growth. So those like Capital Float wrote loans to users of edtech companies like Byju’s, but suffered defaults thanks to the sales tactics of the company (we wrote about it here. Capital Float itself wrote about what went wrong here). This has left Capital Float with far-from-desirable asset quality.

The Tectonic Changes Of Transforming A World’s Largest Government Insurance To Digital Revolution


The crunch, though, has forced hospitals to get creative. Some, like Max Healthcare, found other avenues for profit. Max took the home delivery route. As of April 2018, Max’s home health business unit was one of the largest players in Indian home healthcare, and their diagnostics arm was one of the largest in the National Capital Region (NCR).

Going online

Healthtech startups, meanwhile, went one step ahead and pulled the sector online. Consultation, prescriptions, doorstep delivery of drugs, sample collections for lab testing and delivery—you name it, there’s a startup out there doing it.

The government, too, seemed keen on the digitisation of the healthcare space but seemed to lose its appetite as it focused on Ayushman Bharat. Take the Integrated Health Information Platform (IHIP)—a health data hub meant to digitise personal healthcare information—for example. A senior executive at one of the three consortiums that sought to build the hub told The Ken in May 2018 that the IHIP file stopped moving once Ayushman Bharat was announced.

The IHIP itself had its roots in the Electronic Health Records (EHR) Standards 2016. The EHR required all patient medical data be uploaded so they could be accessed by any medical personnel, thus promoting interoperability.

While the IHIP is now gone, the EHR Standards 2016 are still only voluntary.

In the private space, however, the digital march was unceasing. Today, there are online pharmacies that deliver drugs to your doorstep, websites that facilitate online consultations with doctors, give you basic and accurate medical information in regional languages, and more.

E-pharmacies, in particular, have had an eventful few years. In October 2015, the Indian Internet Pharmacy Association was set up. The association lobbied for e-pharmacies, seeking regulatory change on the part of the government. At stake was the $13.4-billion market for drug sales, traditionally cornered by small, offline pharmacies.

The Association’s work seems to have paid off. The government released a draft policy for regulating e-pharmacies in 2018. Optimism about the future of e-pharmacies soared. However, the policy is yet to be finalised.

Vaccine wars

Meanwhile, the government’s vaccination efforts hit a number of stumbling blocks. The vaccination programs—Mission Indradhanush and its subsequent iterations—set a goal of 90% immunisation coverage of India with the government-approved list of vaccines by 2020.

But where can these vaccines be bought?

The three public sector undertakings (PSUs) the government leaned heavily on—Central Research Institute (CRI), Kasauli, BCG Vaccine Laboratory (BCGVL), Chennai and Pasteur Institute of India (PII), Coonoor—were shut down in January 2008.

Consequently, the private Indian vaccine sector grew at a CAGR of 18% to Rs 5,900 crore ($907 million) between 2009 and 2016. Pharma major Pfizer led the way by convincing the government to buy its patented pneumonia vaccine.

The government’s attempts to move away from the private sector have not gone so well. Over seven years, it pumped about Rs 600 crore ($84.2 million) into condom-maker HLL Lifecare to develop an Integrated Vaccine Complex (IVC). The cost of the IVC has now shot up to over Rs 900 crore ($126.4 million). All without a single vaccine being produced by the facility so far.

With that being the case, the government turned increasingly towards BMGF. The Foundation ‘fixed’ the supply side of the market by doling out grants to major vaccine producers such as the Serum Institute of India. It is hoping that as it exits the country, the government will step in and fix the demand side concerns by buying the vaccines it helped produce.

The government had also set other targets for itself. Eliminate malaria by 2030. Eliminate tuberculosis by 2025, after previous failed targets of 2017 and 2015. Eliminate polio.

While India was declared polio-free in 2014, TB, on the other hand, was a daunting problem, especially with the rise of the superbugs. In fact, India, for the first time, accepted large donations for bedaquiline and delamanid, the first drugs to be approved in 50 years for drug-resistant strains of TB.

With the superbug war well underway in India — Indians are highly resistant to new antibiotics. But there also seems to be a glimmer of hope (which of course comes with a catch). The country now has a first-of-its-kind test to diagnose TB drug resistance, but it is not accessible enough. Yet. The country is also seeing a resurgence of vaccine-preventable diseases.


Indian healthcare in 2020’s rearview mirror


The Bill and Melinda Gates Foundation (BMGF) called it the “decade of vaccines”. In 2010, the foundation pledged some $10 billion to help research, develop and deliver vaccines in developing countries, including in India. It spent more in India—$282.5 million—in 2017 as compared to any other country, pouring all of it into building a supply chain and ensuring demand for vaccines in the country.

And now it wants to withdraw, leaving the Indian government to foot an enormous bill. This is one of the main reasons the government’s healthcare expenditure could shoot up in the coming years.

BMGF and the network of vaccine makers it funded is just the tip of the iceberg. The past decade has seen a slow march towards privatisation of healthcare. This, in a country that sorely needs government intervention to provide for the millions in need but without the means to access quality healthcare.

Stats From The Last Census

The 2011 census put the population of India at 1.2 billion. That number is expected to rise to 1.37 billion by 2020. That’s an addition of nearly 170 million people—if it were a country, it would be the world’s eighth most populous.

Per capita public expenditure on health has grown in the same period. It has gone up from Rs 621 ($8.7) at the turn of the decade to Rs 1,657 ($23.2) in 2017-18. However, as a percentage of GDP, allocations for health continue to remain inadequate, lagging behind neighbouring countries. Including expenditure by states, this amounts to 1.4% of GDP. Nepal, on the other hand, spends 2.3%, while Sri Lanka spends 2%.

With the government taking up more of the burden of preventative healthcare—vaccinations—on its shoulders, it passed the burden of curative healthcare on to hospitals. The onus, therefore, was on private players to provide healthcare to those who cannot afford it.

Through its ambitious $1.54 billion health insurance scheme, Ayushman Bharat, the government fixed treatment prices, racking up a hefty bill for insurance premiums in its quest to make healthcare affordable for nearly 500 million people. In parallel, hospitals had to lose money in the process, too. They were already reeling after the implementation of the Drugs (and Prices) Control Order (DPCO) 2013, which placed caps on the prices of various essential drugs.

Big banner, big problems

In the first three years of its first term, the NDA government accused hospitals as well as other private healthcare players in the drugs and devices market of profiteering.

The government widened the ambit of the DPCO, allowing it to cap prices of essential medical devices like stents and implants as well. We predicted that capping prices for these devices would hobble the market, choking imports and, ultimately, leaving patients weaker.

Add Ayushman Bharat to the mix and hospitals have been pushed to the brink.

The government, for its part, is painting a rosy picture of Ayushman Bharat, its big banner healthcare initiative. As of October 2019, hospitalisations worth Rs 7,160 crore ($1 billion) were covered by the scheme.

When we wrote about the scheme shortly after it launched, the main drawback was the pricing. The rates prescribed by the government for some procedures and treatments were as low as 10% of private hospitals’ rack rates. This left many hospitals unwilling to be empanelled.

Hospitals in the ICU

To be sure, the hurt in the hospital space began even before Ayushman Bharat was rolled out.

In 2017, we wrote that big hospital chains like Max Healthcare and Fortis Healthcare were losing money. This kicked off a race amongst private equity firms to buy the beleaguered chains. While Fortis initially sought to strike a deal with Manipal Health Enterprises in 2018, it eventually struck a deal with Malaysia’s IHH Healthcare Bhd. In 2019, Radiant Life Care, a two-hospital chain, along with private equity investor KKR bought a controlling stake in Max Healthcare.

In a story written during the 2019 Lok Sabha elections, we illustrated how Ayushman Bharat and the DPCO worked together to drag down the sector—lower margins from medical devices and drugs on one hand, and significantly lower rack rates from procedures on the other.

Smaller hospitals, on the other hand, were forced to sell out to larger players. According to our 2018 story, at least 175 hospitals across the country were looking for buyers, while some, such as Shalby, Aster DM, and KIMS Hospital, went public.


The one sector where companies have grown super fast


By June 2018, Kothari had left the building to join yet another e-commerce, Infibeam. Yet another unicorn, too. We wrote about the almost-mystical Infibeam in mid-2018; shortly after, Kothari moved to the company.

Today, Snapdeal claims to be making a full recovery. Its filings earlier this year showed a significant uptick of 84% in operating revenue.

But as we noted in our story in August this year, “contrary to the company’s claims of reducing operating losses by 70%, there is, in fact, a 32% YoY increase in like-to-like losses.”

Can’t be snapped up.

It Flipped out

For all of Snapdeal and Flipkart’s rivalry in the first half of this decade, for a close second there, Flipkart was actually considering buying Snapdeal. But it didn’t (freeing up $1 billion for other purchases).

Awkwardness aside, this would’ve been a big purchase during Flipkart’s shopping spree. The Sachin Bansal and Binny Bansal-founded company was raising funds and spending as fast as it could. We called its growing warchest a “curse of the capital” back in 2017.
And we made you wonder just what the hell was going on:

“Flipkart in talks to pick up a stake in BookMyShow”

“Flipkart eyes more acquisitions, in talks with Swiggy…

…and UrbanClap…

…and UrbanLadder…

…and Zomato”

Notice anything curious?

If you are scratching your head wondering why all the recent chatter regarding Flipkart has been about acquisitions and investments in seemingly unrelated sectors, join the club.

Between 2013 and 2015, Flipkart raised capital seven times. That’s some $3 billion just there. Its valuation grew with the money growing in the bank—Flipkart’s valuation grew 10X from $1.5 billion to $15 billion in this period.


But come 2016, Flipkart would change too much internally. We wrote about this sudden shift.

It was a company that could do no wrong. A golden unicorn that everyone wanted to touch.

And then, the ninepins started falling. Exactly a year ago, in January 2016, CEO Sachin Bansal resigned and was replaced by his fellow co-founder Binny Bansal. A month later, former Myntra CEO Mukesh Bansal, whose company Flipkart had acquired for around $300 million in May 2014, also moved on.

And two days ago, Binny himself was relieved of his CEO post by Kalyan Krishnamurthy, a nominee executive seconded by Flipkart’s bigger investor, Tiger Global.

We’d also made a little prediction about Krishnamurthy’s tenure. That he’d have to dress up the company for an IPO in 1.5 years or make a sale to a strategic buyer.
And boy oh boy, was Flipkart lucky in landing the second deal. And that too with Walmart, no less.

Mid-2018, financial newspapers were falling over themselves to write about the Walmart acquisition of Flipkart. After all, it was a whopping $20 billion deal—of which, $16 billion was all cash—with Walmart buying a majority stake of 77% in Flipkart.

Flipkart got real lucky.

Not only did it avoid an IPO situation—which could’ve gone south just as well—Flipkart, thanks to Walmart being a public company, is now one by association. In a piece we wrote around the time, we noted:

Walmart has already informed its shareholders that Flipkart’s financials will be reported as part of its international business segment.

What a win.

E-commerce is anything but easy. And Flipkart has found a way to maintain top spot. As we wrote in the story:

Flipkart’s CEO himself, recently admitted that there are only 10 million buyers who actually transact online in India every month.

Except now, all Flipkart has to worry about is how it needs to further Walmart and its own empire in India.

To do so, it’s first attacking hyperlocal delivery. Starting with grocery, but with the intention to build a hyperlocal system for anything from eggs to a smartphone.
We wrote about Flipkart’s inroads in hyperlocal in September this year.

The company is trying to crack the existing $400-500 billion Indian grocery market. The current penetration of e-commerce in grocery is just 0.5%.


As we wrote in our story:

Already, the e-commerce giant has made its ambitions for its groceries arm ‘Supermart’ clear. Flipkart expects grocery to be one of its top categories in the next 3-5 years. To do this, it intends to expand the online-only Supermart stores beyond India’s major metros and into tier-II and -III cities in the coming years, says its grocery head Manish Kumar.

Flipkart started Supermart in 2017 after a short-lived hyperlocal grocery pilot in 2015. The service is now operational in five cities, primarily selling staples, packaged food, snacks and beverages.

Flipkart, Amazon, Snapdeal: 10 years, 3 players, 1 e-commerce story


The past decade has practically been a whole lifetime for e-commerce in India.

Right from birth to baby steps to exponential rises to pivots to crashing halts—to even buyouts. Indian e-commerce—both in terms of Indian companies and companies that have entered India—though big on drama, still only make up 3% of India’s $650-billion retail industry.

Three percent. Why should a 3% market share matter?

Because within retail, e-commerce has occupied the limelight over the last 10 years. According to the India Brand Equity Foundation (IBEF), India has been the fastest growing market for the sector, and will grow at an almost implausible 51% rate. Plus, how entertaining is the sector? There’s Flipkart stumbling before being scooped up by international retailer Walmart; there’s Amazon entering India and capturing both the market and people’s imagination; there’s Snapdeal

Yes, Snapdeal.

While focusing on the loss-making business that’s e-commerce—the four big e-commerce companies Flipkart, Amazon, Snapdeal and Paytm Mall raked up losses of over Rs 10,000 crore in the year ended March 2019—there are three larger stories that emerged in the past decade. From three different companies.

One of a crazy stroke of luck. Flipkart.

One of parental support. Amazon.

And one of trying till you die. Snapdeal.

All have something in common. The existential struggle for e-commerce in India. For an industry touted to grow to $200 billion by 2027, according to global financial services company Morgan Stanley, Indian e-commerce has a long way to go. Morgan Stanley had, in 2018, predicted this $200-billion growth by 2026, but pushed it back by a year early in 2019. This was the second time it revised its estimate.

The company blamed this new revision on India’s latest Foreign Direct Investment (FDI) rules. “The new regulations released in December 2018 strive to tighten the functioning of ecommerce companies in India….We believe these regulations will pose headwinds to growth in the near term as some of the prominent companies restructure their businesses, processes and contracts, to be compliant,” Morgan Stanley said in a report.

Even without the latest FDI rules, though, it would be very hard for this fast-growing e-commerce industry to get to that $200 billion number in eight years. We wrote about this over-projection in mid-2018.

To get to that figure, the market size has to grow to 10X from its current size in a period of eight years. Possible? Sure, if you believe in pies in the sky. It is also interesting that not so long ago, the same analyst firm had predicted that the e-commerce market in India would be $120 billion in 2020. It is fairly certain that the actual number won’t be even half of this figure, which probably explains why the company silently shifted the goalpost from 2020 to 2026.

That being said, the three characters in today’s story have done everything in their power to stay afloat. Or in Snapdeal’s case, resuscitate. So, without further ado, let’s dive into the decade that was.

Aw Snap

Snapdeal could’ve been the poster-boy of this decade—given that it started out in 2010, became one of India’s first unicorns in the first half of the decade, etc. Except it eventually got trumped by Flipkart in 2017—courtesy a $1.4-billion fundraise led by Chinese conglomerate Tencent, American tech giant Microsoft and e-commerce major eBay.

But Snapdeal founders Rohit Bahl and Kunal Bansal weren’t the sort to give up easily. Right from the start. They were willing to open the company up to just about any quick fix, leading to multiple pivots. So open were the duo to keeping Snapdeal fluid in its ambition that we wrote this back in 2016:

“What if Snapdeal could be a WeChat without the chat, Bansal and Bahl asked rhetorically.”

Pretty much anything, essentially.

Snapdeal started strong. It attracted nearly $2 billion in funding from blue-chip investors such as SoftBank, eBay, Bessemer, Nexus and Ontario Pension Fund in its early years. But it just couldn’t sustain.

Things got so dire that Jason Kothari—infamous for laying off hundreds at previous companies, including Housing—was roped in. He became the Chief Investment and Strategy Officer (CISO) and was credited with a Snapdeal 2.0 programme to turn the company around.


Test prep moves online


Fast-forward to 2019 and multiple companies have raised large rounds. Online tutoring platform Vedantu raised $42 million in a Series C round led by marquee investors Tiger Global and Westbridge Capital. Rival platform Unacademy, meanwhile, raised $50 million in a Series D round that included VC firm Sequoia, which also has a significant stake in Byju’s.

Similar to how Byju’s has expanded to cover every stage of learning, today’s Indian edtech companies also exist across every level of education. While the K-12 space served as a launchpad for Byju’s digital explosion, others have zeroed in on different market segments.

Take the aforementioned Vedantu and Unacademy, for example. The two companies want to take India’s test prep market online. This won’t be easy, though. The companies they seek to displace—India’s offline coaching centres—have built their reputations over decades. We wrote about this in a piece earlier this year:

“Offline coaching institutes work on the principle of exclusion—high course fees, entrance exams, the need for physical proximity and 9-12 month lock-in periods. Online platforms, though, are turning this on its head.

Without any physical trappings, online coaching platforms can widely expand on the 1:35 offline ratio between students and tutors, and extend access to many more students in search of quality coaching. There are no benchmarking entrance exams to act as barriers, and there’s even the flexibility of bite-sized courses with lower pricing.

The convenience—of price, variety and logistics—has immense potential to disrupt the old guard.”

No stone unturned

Today, even the offline coaching centres that Vedantu and Unacademy set out to disrupt are waking up to the need to move online. Aakash, for example, the brick-and-mortar coaching behemoth that controls 5% of the $6.6 billion offline coaching market, wants almost 25% of its business to be digital by 2023. We wrote about this shift, too.

The beauty of the Indian edtech space—and why it is so critical for offline players as well—is that it increases the funnel size for user acquisition drastically. Class sizes are no longer governed by physical limitations, and learners can now plug in from rural areas of the country. The potential to scale is tremendous.

Importantly, with advances in machine learning and artificial intelligence, platforms such as Vedantu are also able to narrow the gap between physical classes and digital ones. Through their AI/ML technology WAVE, Vedantu is able to make learning sessions interactive and allow for real-time interaction between students and teachers. As we wrote in our piece on the company:

“The technology helps break up classes into “hotspots”—the tutor can click any part of the concept on the screen and create a multiple-choice quiz on it. The WAVE user interface also features a sidebar chat window, allowing for real-time questions and feedback.”

While test prep and K12 may seem like the most obvious segments, there are many companies identifying far more niche areas to operate in. The likes of upGrad, Great Learning, and Eruditus, for example, have hitched their wagons to the upskilling opportunity. Targeted at professionals looking for a leg up in their careers, these companies offer a variety of short-term and longer-term courses as well as executive education courses.

As we wrote in our piece on the various companies battling for the upskilling pie:

“All of these players are counting on one thing—going forward, learning will be a priority that lasts well into one’s professional life. There’s proof for this as well. Degrees alone simply do not cut it anymore.

Improvement In Stats

Several reports have talked about India’s IT skills deficit. According to a report by industry bodies FICCI and NASSCOM and professional services firm EY, 40% of India’s IT professionals need to reskill to stay relevant. In addition, the report states, 37% of the Indian workforce will be deployed in jobs that call for advanced skill sets. As such, the upskilling and certification market—already worth $93 million as of 2016—is expected to be worth $463 million by 2021, according to a report by professional services firm KPMG. A sizeable pie to play for.”

Other companies, meanwhile, have not gone after segments but rather aspects of education. Like Doubtnut and Brainly. Both companies, the former Indian and the latter Polish but with a sizeable Indian footprint, realised that solving doubts is at the core of any learning process and have turned that need into thriving businesses:

“Doubtnut says it receives 200,000 mathematics doubts every day. It has 7 million monthly active users, with over a quarter of these using the platform daily. Till date, Doubtnut has raised around $3.3 million from marquee investors.


The bricks in India’s edtech wall


Earlier this month, Byju’s—the lone unicorn in Indian edtech—hit a massive milestone. In a press release, the company announced that it had turned profitable, achieving a net profit of Rs 20 crore ($2.8 million) on revenues of Rs 1,341 crore ($187.7 million). Over the past decade, Byju’s, its purple and white logo, and its ever-expanding arsenal of teaching tools have become synonymous with India’s edtech scene. Circa 2010, however, there was a very different sheriff in town—Educomp.

Rise Of The Firm

Today, Educomp is a withered husk of its former self. Its market capitalisation—a grand Rs 7,000 crore ($980 million) in 2009—has shrunk to Rs 11.63 crore ($1.6 million). It filed for bankruptcy in 2017 as its debt ballooned into thousands of crores, and there have even been allegations of fudging company financials.

Before its fall from grace, however, Educomp was India’s great edtech hope. Its approach was to kit out classrooms with hardware and multimedia learning modules. And it saw some serious traction, as The Ken’s Rohin Dharmarkumar, writing for Forbes India at the time, pointed out:

“Educomp’s services (multimedia content, computer labs, teacher training) reach 23,000 schools and 12 million students and teachers. The company has grown at a compounded rate of over 100 percent over the last five years, making 20 paisa of every rupee earned as pure profit.”

Interestingly, it wasn’t a flaw with Educomp’s core proposition that would prove its undoing. Instead, it was the company’s overreaching. As Educomp began offering financing to schools to buy its products and began setting up educational institutions as well, the company ended up taking on a whole load of debt.

Ordinarily, one might assume that a like-for-like competitor would fill the vacuum left by Educomp. And in a way, it did. India’s edtech space has changed tracks altogether. Where hardware was once king, companies in the space realised that software was the big opportunity. However, Byju’s—the heir to Educomp’s throne—bears much of its predecessor’s aggressive traits. It, too, has aggressively acquired companies and gone the financing route as well.

With the Indian edtech space expected to reach ~$2 billion, according to a report by professional services firm KPMG and search giant Google, there has been an explosion of companies in the space. According to one estimate—over 4,500 edtech companies launched between January 2014 and September 2019. While many of these languish in unfunded obscurity, some—such as Vedantu, Unacademy, UpGrad, and others—are expanding the frontiers of Indian edtech. And a lot of this goes back to Byju’s.

A Paradigm Shift In Indian Edtech

Byju’s was born in the first decade of the current millennium. However, in its original avatar, it was just a chain of coaching centres for the CAT (Common Admission Test, a national-level management entrance examination conducted by the Indian Institutes of Management).

Byju’s as we know it today—the online tutoring and edtech behemoth— gradually came into being around the turn of the current decade as the company increasingly realised the digital opportunity. As we wrote in our 2017 story:

“It changed to offline plus online videos of teachers taking test prep classes. Then it changed to completely online videos and weekend doubt-clearing classes. Then it put the test preparation business on auto-pilot and ventured into a learning app for students in grades 11 and 12. It started with mathematics and physics and soon added chemistry and biology. Fast forward, Byju’s has added courses for more grades; Grade 9 and 10, 8, 7, 6, 5 and very recently, 4.”

Unlike an Educomp, Byju’s put its faith in software. Cheaper and easier to scale, it would allow them to, quite literally, put their educational material in the hands of customers.

As internet data prices have crashed and mobile phone penetration in the country has skyrocketed, Byju’s app-based approach has reaped rich dividends. Through its interactive learning modules and with an aggressive sales strategy, it now boasts over 40 million registered users. Its services span the gamut from grade 1 (Byju’s even has a content tie-up with media conglomerate Disney) to test prep for civil services exams.

Byju’s success hasn’t just encouraged other players to enter the space, it also renewed investor confidence in the sector. Consider this: the $130 million Byju’s raised in 2016 was 81% of the overall investment into Indian edtechs.

How Does The Unicorn Count Varies?


Seven of the nine Indian unicorns between 2010 and 2017 were B2C companies, while InMobi and data analytics company Mu Sigma were the B2B entrants.

And that was that. Until 2018, which turned out to be a breakthrough year for B2B companies. There were four B2B unicorns that year and another five in 2019. They include India-focused ones like e-commerce company Udaan, fintech companies BillDesk and Pine Labs, as well as Delhivery and Rivigo.

But it is the globally-focused SaaS (software as a service) companies that have really blossomed—Freshworks*, Druva, Icertis and CitiusTech.

But, India’s SaaS success story almost never happened.

Why Achieving Success Is So Difficult?

While SaaS companies mushroomed globally at the start of the decade, break-out Indian ones were as rare as, well, unicorns. But the hunt for funds meant investors measured these companies using cost metrics over revenue ones. That hit valuations and curbed the pace of startup creation, we wrote in 2016, adding:

“Now, while all of this may come across as bad news for the SaaS sector in general, it is music to the ears of SaaS entrepreneurs in India. Because when cost becomes a primary consideration, India’s arbitrage opportunities come to the fore.”

Not just price, but also value arbitrage—or cheaper products with at-par features. The SaaS startups also invested aggressively in marketing and customer acquisition, targeting small and medium businesses (while the likes of Salesforce went after large enterprises).

The very ingredients that made Freshworks one of the first SaaS Indian unicorns in 2018 and the first VC-backed Indian startup to cross the $100 million ARR (annual recurring revenue) milestone. Freshworks, and the likes of Druva and Capillary Technologies, have set the trend. We predicted earlier this year that:

“Anywhere between half a dozen to a dozen Indian SaaS startups will almost certainly breach the $100 million ARR milestone over the next two-three years. This isn’t just optimistic musing—there’s also the sheer law of averages at work. Remember those 2,300 new B2B startups that have sprung up in recent years, many of which are SaaS-oriented. Such a Cambrian explosion of SaaS startups in India has sowed the seeds for several more $100 million ARR companies to emerge over the next decade.”

And SaaS unicorns? We’ll have to wait and watch.

Even outside the SaaS space, the winds of change are blowing. While B2C e-commerce has well-entrenched players in most retail sectors, the chorus of B2B firms has been getting louder.

Or, “B2B is the new B2C in India,” as B2B online marketplace Udaan’s founders say. The same set of enabling factors that helped B2C startups— the prevalence of internet-enabled phones and digital payments—have fuelled their B2B peers. To boot, the government’s move to open up foreign direct investment (FDI) in B2B and curb FDI in B2C has helped.

Nonetheless, as our story on Udaan noted, B2B e-commerce has its challenges, not least of which is organising a fragmented market where retailers prefer to strike deals offline. Then of course, giants like American e-tailers Walmart and Amazon are amping up their B2B game. (We covered the past decade in e-commerce here.)

The Flow

Even the flow of VC money is gravitating to B2B. Tiger Global is on the prowl again, flush with funds from its Flipkart exit in 2018. Now led by Scott Shleifer, Tiger is just as bullish, but on B2B firms this time around. But after SoftBank’s travails this year, Tiger needs to mind the valuation gap. Why?

“The eventual goal of every SaaS startup is to get to IPO. The valuation gap is the difference between what the public market multiples are pegged at and the valuation that private investors are willing to pay. Unlike consumer-focused companies where proxy metrics such as GMV (gross merchandise value) and traffic can be used to justify high valuations, SaaS companies operate under a much more stringent set of measures typically pegged to metrics such as revenue, profitability and growth.”

In other words, the focus has now shifted to strong and performing business models over high valuations—a harsh lesson two of SoftBank’s marquee companies learnt this year.