INSIGHTS Podcast Series — #5: Markets Opportunities — Evaluate Wise & Execute Nice
“Ideas are cheap, execution is everything.’’ - Chris Sacca
Ideas don’t build a company but converting them to something tangible does. The first step towards this is understanding the market potential of your idea. Every startup knows the importance of market research towards making the product/service successful. But the way you evaluate the market is crucial. If an entrepreneur doesn’t know his market in terms of size, demographics, and the customer’s needs, then it will be difficult for his/her venture to sustain long-term. Also, market evaluation is one of the key factors for any venture capitalist to consider the potential of a startup. Not all markets are created equal, and what works in one geography doesn’t necessarily mean it would work in another. Especially when it comes to Indian markets, the dynamics are different in comparison to global markets.
Prashanth Prakash is one of the founding partners at Accel India, who has been investing in ventures like BookMyShow, Qwikcilver, RentoMojo, CleverTap, and many others since 2004. In this podcast series, he talks about evaluating markets from an investor as well an entrepreneur’s perspective, especially for the tech sector.
Take Ownership for Heavy Lifting
The first thing an entrepreneur should assess is the role his product or service can play. What is that one thing missing in the market and how well can you solve that problem to thrive in that market?
In the early days of India’s internet boom, Prashanth attributes technology’s role to providing ‘predictable access’. The first phase of India’s tech-led entrepreneurship journey really kicked off post Flipkart, and ever since, tech has provided ‘predictable access’ to services ranging from retail shopping and food to cabs and movie tickets. And while access was the major issue, the predictability aspect is where most entrepreneurs took ownership. Even when the ecosystem wasn’t mature, many entrepreneurs in India took ownership and ensured brilliant execution with great customer experience.
“So, the obsession with great customer experience meant an obsession with solving something that requires heavy lifting,” says Prashanth.
Meet the Unmet Need
When considering markets with no predictable access, it is also crucial to check for the needs that are unmet besides doing the heavy lifting.
Qwikcilver, a technology startup for gift card delivery, did the same. Before the advent of technology in the gift card space, the business operations were cumbersome from both the customer and the retailer’s perspective. Buying a gift card meant one had to get paper vouchers that had limitations in terms of access, usability, pilferage, etc. Qwikcilver helped in the transition of this sector from existing paper vouchers to digital cards.
“What Qwikcilver did was to understand the unmet need in a niche market and convert into a meaningful opportunity. It is important to understand changes in customer behaviour over time. A new generation of customers will have a different role in using that access, or the changing customer experience will drive a whole lot of behavioural changes, and that’s exactly what we have seen in the gift card space,” adds Prashanth.
Today Qwikcilver owns almost 90% of market share in this sector.
Tame the TAM, Regionally
Every entrepreneur realises the value of TAM (Total Addressable Market) and why is it important to figure it out for business revenues. While understanding the TAM, an entrepreneur also needs to understand the nitty-gritty about the regional demographics. Not every market is the same, especially when it comes down to the Indian market, things work differently in comparison to the global market.
“India is not homogenous or singular when compared to other countries. While the Internet consumer base has grown drastically, the demographic is not homogenous from a disposable income and per capita spent on the disposable income,” says Prashanth.
“While addressing the TAM as early entrepreneurs, you have to make those leaps of faith regarding tapping latent demand and not always addressing a fully visible demand. When you are doing that, be clear about the underlying monetary behaviour of your audience, and don’t expect too much shift in that behaviour.”
Here are few points he suggests:
● Offer nuanced services
● Understand the buying power of the millennials
● Make early adopters your brand ambassadors by offering great product or service
● Have a broader view of the market to make the TAM meaningful
● Be tactical while choosing areas that are slightly low hanging and monetizable
● Have a vision for the space and the adjacencies to take advantage of
BookMyShow, an entertainment ticketing website, is a fitting example of a team that identified the adjacencies and expanded their TAM accordingly. BookMyShow, while predominantly in the movie ticketing business, realised that the entertainment quotient in India goes beyond movies, and so they immediately started looking at the adjacencies as well. India has a huge cricket fan base, and as soon as franchises like IPL opened up, they grabbed the opportunity and immediately rode on that. Similarly, they started providing services for events & plays.
“There’s no way we could have thought that a company, which is in the movie ticketing space, will become a dominant service for entertainment across a broad spectrum of categories. I think that’s where your belief in the ability of the entrepreneur to actually have the vision for the space and those adjacencies that could be leveraged starts becoming important. In this case, Ashish Hemrajani, founder of BookMyShow, was able to find a reasonably sized market (of movie tickets) and build traction,” adds Prashanth.
Also, sometimes it can be really hard to measure the market at the early stages accurately. For companies like Qwikcilver or Swiggy, TAM turned out to be much larger than what they had expected. According to Prashanth, it is always a good thing to have a pulse to understand the triggers of the market. Even if the business model isn’t clear at the start, one needs to identify the underlying revenue stream. If you take Facebook’s example, even in early days, people in the US were aware what ad monetisation could do over time. Google, as well as other proxies, were already there and the size of the ad market itself, irrespective of whether it was online or offline, was very large.
Understanding the B2B Space
While the B2C segment features effective use case scenarios about how technology plays a role in getting access predictability, when it comes to B2B, things are different. Selling B2B tech solutions is a bit of a task.
So, what’s the difference while approaching B2C vs. B2B?
The approach of taking ownership and solving problems remains consistent across both. The predictability in B2C is more about taking ownership of the problem and finding a solution. In B2B, however, one needs to provide a platform as a whole that brings a change not just within the organisation but extends beyond it, to the relevant stakeholders involved.
Take the example of the education sector, in which technology platforms like Vedantu help in bringing educators, students, and parents together in a more meaningful fashion. They take ownership of providing good grades for the students, which matters the most to the parents.
What the Future Beholds?
Entrepreneurship in India has come a long way. The early starters faced hurdles regarding the ecosystem elements such as technology tools and size of audience who were ready to accept the services. Today, things have changed with many opportunities.
“The interesting and exciting thing about the consumer space is that everything is a white space when it comes to a new generation (the millennials). Everything gets reinvented, the products and services, and brands. In the next 10 years, you will have a whole new generation, where products, services, and brands are up for the challenge, up for reinvention and disruption,” says Prashanth.
He further adds that the consumption behaviour is moving at a rapid pace and the large CPG companies (Consumer Goods) are going out of sync with new generational trends and consumer behaviour patterns. This is creating huge opportunities for entrepreneurs in India. In 5–10 years, entrepreneurs will take the homegrown brands to a global marketplace.
“I am really excited for India going from a brand deficit country (as I would like to call it) to a high momentum brand creation country and that over the course of time, a lot of brands will emerge not only for India but the global market,” he concludes.