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Inside the incredible world of Droom, India’s 6th largest e-commerce company


What does that mean? That’s me, pulling my chair closer to the glass table. Closer to him.

It is noisy inside. The wall fan is growling its mechanical, windy growl. Swinging, left and right. Right and left. There’s a television on in one corner of the room. It’s switching from one advertisement to another, with a smattering of shrill Hindi news in between.

At around, glass table nearby, two men sit chatting about a new automobile classifieds website. Their enthusiastic discussion is almost drowned out by the noise of traffic from the busy, dusty highway outside. It is late in the morning. The sun is beating down, and the temperature is 30 degrees but it feels like 35 or more. We are in a large, crowded town in Uttar Pradesh, India’s most populous state.

The man gets up and switches off the fan. “Huh, what did you say?” he asks.

“What does that mean?” I repeated. “What do you mean by a funding company?”

“Okay. Let me explain this from the very beginning. We are a used car dealership. So, we sell cars offline. So, when customers come in and test drive and if they like a car, we sell them the car. We also sell cars online. On websites like Carwale and CarDekho and Olx and many others.

We have our listings, and if someone likes them, we sell. Now, the Droom salesperson came to us last year with a proposal. He said, ‘Why don’t you sell your cars on Droom?’ I was like, sir, why should I sell cars on your website?”


Login Credential Needed

“So, he said, all you have to do is list all the cars you have on Droom. So, create a login, password and list the cars. Then, whenever a car is sold, I will put a deal on the car, and for every car sold, Droom will give you money.”

I’m sorry. I still don’t get it.

He smiles benignly back at me.

“Let’s say I have listed all the cars that are there in my compound right now. And you come into this dealership to buy a car from me. Now, technically you are a walk-in customer. And I have sold the car to you. Now, I log into Droom. The company is basically saying, show it as if the transaction has happened through Droom. On Droom. So, the process is that I have to make an upfront payment to Droom. 2.5% of the car value. Let’s say the value of the car is Rs 5,00,000 ($6,880). So, I pay Rs 12,500 ($172) to the company using a credit card.

The company calls this a buyer commitment fee, to show that this is a genuine buyer. In some time, the company puts a deal on the car and then records that the car has been sold. The transaction was done. After that, I have to upload the changed registration certificate (RC) of the vehicle. Your [the seller’s] PAN card.

Just basic identification. That is once you get your RC, which takes about a month. Once I upload it, Droom credits 4, 5, even 6 to 8% of the car value to my bank account within one week. So I make a good Rs 20,000-35,000 ($275-480) on every car I sell.”


You’ve got to be kidding me.


How many cars have you sold like this?

“50 or more, I think.”

Wow. And what does Droom do in this whole process?

“Nothing. It gives money to do this, which is why I said it is a funding company.” And just like that, suddenly, the man starts gathering things from the drawers of the table. Round plastic coasters with Droom written on them in colorful letters. A keychain. Door stickers. “The company also gives gifts,” he adds, placing these on the table.

Why? Why would Droom do this?



Sorting it out and moving ahead


“Most of the money [in real estate] is being made in the transaction business (brokerage and co-living), which is the HDFCRealty business, that’s why Quikr acquired them,” said the QuikrHomes executive, who was quoted earlier. Platforms like PropTiger, Quikr Realty, and Makaan.com, he points out, are essentially online brokerage firms with an offline presence. “They predominantly get their revenue from brokering a deal, but all online,” the executive added.

The allure is clear: “There is no doubt about it…the return on investment is the highest on brokerage. Irrespective of industry, for any industry, transactions will have the highest volume, because it is the final conversion for which the company is paying us,” says the same executive.

High risks come with  great reward

But with high reward comes high risk, and Quikr’s brokerage business is no different. “The closer you move to a transaction, the more expensive it becomes,” says QuikrHomes executive quoted above. It isn’t enough for Quikr to get the ball rolling; a deal falling through at the final hurdle means that all the time and effort spent brokering the deal would see no payout.

Quikr’s confidence with its brokerage play stems, at least in part, from its experience managing transactions with rentals platform Grabhouse. Grabhouse runs on an emerging business model based on the concept of co-living. This involves property owners and Grabhouse coming together to provide rooms targeted at working professionals and bachelors. The tenant pays a monthly rental for the room, which is inclusive of facilities like WiFi, appliances, beds, maintenance, etc. Grabhouse takes a cut of monthly rentals since it also manages the rent collection.

With its Quikr Realty platform set up, Quikr now encompasses all three online real estate business models: classified listings and lead generation, managed rentals, and brokerage. The real estate puzzle for Quikr is finally complete. With this in place, Quikr should be an online real estate juggernaut. But that hasn’t happened.

Scrapping it out

The battle right now—for everyone online and offline—is to sell off some 600,000 residential and commercial units that currently lie unsold across the country. And the road forward is proving to be rougher than Quikr had anticipated.

“When you talk about oversupply, brokerage firms get impacted most by this, but classifieds firms don’t. If you have more supply in the market and it’s difficult to sell, brokerage firms will find it difficult to keep earning revenue, whereas classified platforms would actually flourish then since more supply means more ads,” says a 99Acres executive, who asked not be named since he is not allowed to comment on competitors.

As such, Commonfloor should be flourishing. Indeed, Commonfloor’s business head Nimesh Bhandari insists the oversupply issue is a boon for Quikr. “To an extent, oversupply that we are seeing in few localities…helps our business. There is more marketing spends available for the broker or the builder to actually find the demand for their properties,” says Bhandari. But more ads doesn’t always mean more conversions. When The Ken inquired about Quikr’s conversion rates, the company refused to comment.

Desperation to sell

You see, while there may be more advertising in a market where everyone is desperate to sell, there are more than a few issues. Are the ads genuine? And even if they are genuine, how much inventory actually gets sold online? The answer does not bode well for Quikr’s fortunes.

According to Anuj Puri, Chairman of ANAROCK, roughly 20% of any new real estate project’s business comes from the online channel. The remaining 80% still happens via offline channels such as brokers and hoardings, says Puri. Builders’ marketing spends are allocated accordingly.

“As per stats, nearly 30% of the ad spend of a builder is spent on online marketing, while a whopping 70% is spent on print ads. While the former is the cheaper option, the latter is more effective but very expensive,” adds Puri. And even this 30% is not Quikr’s for the taking. It has at least five other companies hungry for their share of the pie. So much for the classifieds business.


Of Zebpay, regulatory arbitrage and policy scapegoating


If one looks back at post-modern history, once every decade or so, there is a major disruption that upends the broad contours of our lives. At the turn of the millennium, the emergence of the internet as a mass medium led to the dotcom boom (and bust). In the last decade, applications built on the Internet and the mainstreaming of mobile phones have led to seismic changes in our lifestyles irrevocably changing the way we work, shop and play.

If you fast-forward to today and look at the shortlist of major candidates that will impact our future lives, there is one candidate that will appear on most lists—blockchain and cryptocurrency (crypto for short). If crypto actualizes the potential that it promises, it will change every market in the world, democratizing entire value and supply chains, altering incentive frameworks and re-imagining finance as we know it.

Struggle at its peak

Needless to say, there is now a veritable gold rush, both literal and figurative, into the blockchain, with a host of companies angling to become the Google, Apple or Amazon of this brave new world. But the problem with gold rushes since time immemorial is that each such race attracts visionaries and charlatans in equal numbers.

And one can tell whether a particular person or company was a visionary or a charlatan only in hindsight, years, if not decades, after the event. Until then, the segment is akin to the Wild West with companies jostling to take center-stage before the curtain raises. One such company is Zebpay. Or rather, one such company was Zebpay.

Until 27 September, Zebpay was India’s oldest cryptocurrency exchange. With a purported user base of 3 million, it was also arguably India’s largest cryptocurrency exchange. But on 28 September, Zebpay sent an email to its 3 million users stating that it will be stopping its exchange business on the very same day.

Why this sudden shutdown?

Zebpay laid the blame squarely at the doorsteps of the Reserve Bank of India (RBI). In its announcement, it said “The curb on bank accounts has crippled our, and our customer’s, ability to transact business meaningfully. At this point, we are unable to find a reasonable way to conduct the cryptocurrency exchange business.” The “curb” refers to a statement released by the Reserve Bank of India (RBI) on 5 April which banned the nation’s banks from dealing with cryptocurrency exchanges and other similar services.

On the surface, this seems like a perfectly plausible explanation. Here was a company that was an early entrant into the world of crypto—Zebpay started operations in 2015, nearly four years back—at a time when blockchain and crypto were largely esoteric concepts that were far from being regulated by the powers that be. Like many other crypto pioneers, the company leveraged this early lead and the surrounding regulatory arbitrage to build a business. But once this segment came under regulatory supervision, the company could no longer survive and had to shutter its operations. Live by the regulatory sword, die by it.

All kosher?

Not quite.

The Ken spoke to several crypto players and observers in India and the common response to Zebpay’s shutdown was not one of understanding the dynamics that led to this. Instead, we encountered the existential question “why?”.

“To be honest, we do not know why Zebpay did this,” says Aditya Naik, the chief business officer and co-founder of cryptocurrency exchange Koinex, a competitor to Zebpay. “The RBI’s directive cannot be the only reason for shutting down operations because that reason is common for all, and everybody has taken a hit but except for the really small exchanges, all other exchanges are still operational,” he adds.

“I didn’t expect them to close down this early. It was shocking to me because it was the biggest exchange in India,” says Shubham Yadav, co-founder of cryptocurrency exchange Coindelta.

While it was almost trivial to scapegoat RBI’s policy as the precipitating factor that crippled the company, a deeper dive indicates that the answer might lie elsewhere.

“The larger players in the industry could perhaps have accrued some amount of cash profits during the 2017 bull run that saw rising volumes coupled with healthy transaction margins. By cutting variable costs like marketing in the current lean period, they are hoping to tide over this phase of low growth and regulatory uncertainty”, says Nitin Sharma, founder of Encrypt, a blockchain investment network, who was also surprised to hear of Zebpay’s announcement.


Health insurers are coming for your data


As Orwellian as this may sound, it comes in response to very basic reality. Insurers in India suffer from a lack of patient oversight once a policy is sold; the consequence of not having a health data repository. Many health providers, both private and public, don’t have electronic health records (EHR)—a digital record of patient information such as hospital bills, diagnosis reports, health history, etc.

In the absence of this, traditional insurers such as MaxBupa, Aditya Birla, and others have decided to get creative. They’re looking at other avenues that may help them paint a more complete picture of people’s health. Healthcare providers, diagnostic clinics, wearables, digital healthcare platforms. Literally, anywhere, because, say, policy experts, there’s nothing to stop them from doing so. Theoretically, they could even reach out to food delivery platforms to map your food ordering habits.

Max Bupa and Aditya Birla Health Insurance have already put out detailed policy documents outlining their plans. Both documents show how insurers intend to categorize insurance holders by using a mix of health data mined from wearables like fitness bands, physical health records, and diagnosis reports. This data, the documents indicate, will help bring to light the true risk that insurance holders pose to insurers.

Categorizing the policyholders

According to Aditya Birla’s policy document, policyholders can be categorized as Red, Amber, and Green. Red is for people who have the highest chances of heart disease.

Those in the minimal-risk Green category could get as much as a 30% discount on their final premium, while those in the Red category may not be eligible for a discount at all. This would mean that while the insurer doesn’t raise premium rates, less healthy policyholders would effectively end up paying more than their fitter counterparts.

From a business standpoint, this seems like a logical progression. From a consumer point of view, however, things are markedly less straightforward. To understand why we need only look at the banking sector from five-six years ago.

Payment Space

Fintech companies had emerged, disrupting the payments space. This forced the RBI to carve out a separate framework for e-wallet companies—from payment processing (PPI licenses) to customer onboarding (KYC regulations). When it comes to insurance though, the Insurance Regulation and Development Authority of India (IRDAI) doesn’t seem likely to go the RBI way.

In its first-ever recommendations on insurance tech (‘insurtech’), IRDAI gave no sign that it would enact separate regulations. This was mainly on account of the fact that selling insurance online now collides with aspects such as data privacy and security standards, both of which come under the ambit of other ministries.

These include the Ministry of Welfare and its draft Digital Information Security in Healthcare Act (DISHA), as well as The Ministry of Electronics and Information Technology’s (MeitY) proposed data protection bill.

But since none of these laws is in force yet, stakeholders in India’s health care system have already started collecting data, controlling it and even modeling insurance products around this. Data points like blood tests, heart rate, calorie count, weight, body-fat index, blood pressure, and others are all up for grabs. The goal here is simple: create an unofficial EHR for India.

But can this health data actually solve the problems plaguing the health insurance market in India? And even if it can, is this legally and ethically sound?

To get to the bottom of this, we first need to understand exactly what sort of visibility insurers presently have of their policyholders.


Which way will India swing?


Depends. On intent.

“If the intent is to bring technology only for distribution, then it might not be so successful. Such platforms will just remain a transactional medium. But if they are able to combine it with good advisory, there will be a lot of traction,” says Deepak Shenoy, founder of Capitalmind, a portfolio management services provider.

Is it really worth?

Several experts The Ken spoke to arrived at a consensus on emulating China—not worth it. The concentration of debt in the portfolios of Chinese investors is, at the very least, disconcerting to regulators. As Beijing steps up to shine some light on the debt situation, there is another competition brewing in China.

More so because despite their lack of credit history, they currently seem more in line with the authorities than banks – this is Alibaba’s Alipay and Tencent’s WeBank. While the former wants to take over the market, the latter wants to link entrepreneurs with banks.

Does the US then provide a better model? Well, ETFs are still a minority in India, and most investments happen through equity mutual funds. Robo- advisory is where, the two can find common ground, to some extent.

Reflecting the truth

Besides, the Robo-advisor model in India is very far from that in the US. There’s a lack of understanding and willingness to pay for Robo-advisors such as Arthayantra. The US includes advisory fees within the investment – tough to make Indians pay up the same way. Experts who have seen this industry closely say that it is the hybrid model that will work in India, which is a robo-advisor plus physical advisor to help and explain.

“Financial literacy levels in India are extremely low. The not-so-savvy investors need a lot of handholding especially during the market downturn,” says Sreekanth Meenakshi, Founder, and COO at online investment platform Fundsindia.

Right now, Paytm Money does not offer advisory. It is just offering transactional ease. But Jadhav says that by the end of this year, they will launch Robo-advisory to customize a portfolio for clients.

ET Money is also considering it, but it promises to do it differently. “We have a lot of insights from millennials who feel that traditional financial planning does not work for them. We will do Robo-advisory, but in a way that is easier for millennials to understand,” says Mukesh P Kalra, founder, and CEO at ET Money. Kalra says that he is well-funded for the next 12-18 months.

Critics are skeptical though. “For any kind of advisory, you need to match resources with aspirations and take a holistic view of that person’s finances. Doing just mutual funds or insurance is not the way to do it,” says Nitin Vyakarnam, founder of the Robo-advisory platform Arthayantra.

What about the winner?

No matter which model succeeds, the winner might be the mutual fund’s industry.

With the entry of Paytm money and its self-professed target of 25 million customers in 5 years, the most significant change industry players see coming in is penetration. After Paytm having become a household name for payments, even in tier-2 towns, it wants a redux in financial management, too.

The potential is vast since mutual fund investments account for only 3.4% of total investment in financial assets by individual investors, according to a 2016 report on mutual fund industry by consultancy Ernst & Young.

But by the July-September quarter this year, according to the Association for Mutual Funds in India (AMFI), the asset base of mutual funds rose to over Rs 24 lakh crore ($330 billion), a 14% surge from the same time last year. This was driven by participation from retail investors and a spirited investor awareness campaign by the industry.

Those hooked to primetime TV in India would remember AMFI’s “Mutual Fund Sahi Hai ” campaign.


Cycling is rich man’s running


Biswas: I picked up cycling this year; a really nice Rs 35,000 ($495) cycle. I’ve cycled nearly 1700 kilometers this year.

Surprises on the cards

The Ken: I’m surprised you bought one. I’d have thought you might have used one of the green or blue cycles popping up all over Bengaluru?

Biswas: That’s for short commutes. This morning I went cycling, and in 50 mins, I covered 24 km. This is cycling for exercise’s sake because I got bored with running.

The Ken: Where were you running in Bengaluru?

Biswas: I start from somewhere near the center of the city, then all the way around Old Madras Road around Ulsoor Lake, then to Indiranagar Double Road, up through Domlur to the military area, then back to MG Road, then two circles of Cubbon Park, and that’s just 15 km. So there’s no way to even run a half marathon in the morning.

The Ken: How long have you been running?

I’ve got data that goes back five years, but, last year, in June, I got really really fat. I went up to 87 kg. Now I’m down to 71. Because one and a half years of Dunzo had really taken its toll.

Last year was a 700-km year. In six months, I ran about 600 km and got close to about 80 kg. But then, I figured, running in Bengaluru is very boring. You can’t go anywhere.

I get out at 5.30 and am back home by 7.30. Started short. Did 2.5-3 km run? The longest I’d run earliest was the dream run in Airtel Delhi half marathon, which was 7 km.

Figuring out the stress

I figured that the stress of Dunzo only goes away if you can find an hour of salvation time, which I find while running.

The Ken: Do you meditate?

Biswas: I’ve tried but I don’t have the focus. I’ve tried a lot. I’ve used Headspace; I’ve tried sitting at a spot and putting the phone away. But at some point in time. I’m just too fidgety as a person. The nervous energy is just a little extreme.

I realized running is the only thing I could find peace with, so, this year, I ran the Bengaluru marathon. That’s 42 km. I can run 25 km easily. I can do a half marathon at 2:10 or 2:15.

I used to run all the way from Frazer Town to HSR Layout and then figure out it was only 19 km.

The Ken: And how did you get back?

Biswas: Uber. The best part about all of this is that you can just run and come back in an Uber. I usually run on Sunday mornings. I take Saturday afternoons to Sunday afternoon off. Saturday first half we’re working and Sunday second half we’re working.

The Ken: Why Sunday second halves?

Biswas: Because Monday mornings are crazy. Because my team has to end up working with me. These 3-4 ppl get impacted instantly. And a larger group of 20 people get impacted thoda thoda sa. So they’ve started calling it “Smonday”. “Iska Monday chalu ho Gaya.”

Setting up the different goals

Cycling gives you very different goals. I’ve realized it’s a rich man’s running. You just have the equipment, cool stuff you can buy. You buy a nice cycle, you buy gear, you buy shorts, you buy a helmet, you buy gloves. The fucking gloves are worth Rs 1,500 ($21.23).

The furthest I’ve done is 115 km in 4.5 hours.

The Ken: But you can’t Uber back?

Biswas: No, you can’t. Though I have once given up. I went all the way towards Hosur. I crossed Hosur, there was a jungle, which I crossed, that was around the 65 km mark. And then I started returning, and that was around the monsoons. I kid you not, this city has winds. At some point, I was cycling as hard as I could, but I couldn’t go beyond 10 kmph. The wind was so heavy.

The Ken: So what did you do?

Biswas: I just got an Ola and paid him Rs 1200 ($16.98) to come back to the city after putting my bicycle in his boot.

So now my fav thing is to do a circle of the city along the ORR route. It’s a nice 75-km stretch. It’s the prettiest thing in the world.

The Ken: What bike do you ride?






What is the demand-supply conundrum?


In theory, all of this seems ideal. BigBasket gets recurring customers, can increase the AOV of BBdaily by offering a wider inventory, and increase margins on these orders by pushing their private label offerings. In addition, says Chowdhri, high-frequency usage on subscription models makes it possible to take care of the marketing cost, or even the cost of acquisition of that particular customer. But as with most things too good to be true, there’s a catch. A few of them, actually.

How are the competitors being differentiated?

Apart from establishing a USP to differentiate from competitors, the glaring problem with subscription models that no one wants to talk about is predicting demand. Grocery delivery startups usually stock their inventory depending on the demand pattern of its customers.

Since BigBasket customers shop 3-4 times a month, the pattern is clear and well laid out. But with subscriptions, where orders are placed almost every day, some experts feel that the maze of putting together supply for high-frequency demand is almost impossible.

The offline subscription market is a good guide as to what works and what might not. “The only grocery product that has worked offline on subscriptions is milk. Even if you look at eggs, it has never become a subscription-based business in the offline world,” says the founder of a grocery delivery startup, who spoke on condition of anonymity. According to him, the only sustainable subscription model (apart from groceries) right now is newspapers.

The reason milk and newspapers work so well, he explains, is because they are standard daily consumable products. “Since customers have already selected what they want, you can clearly lay out the supply required,” he says. BigBasket, with its plans of increasing the scope of BBdaily, is likely to find this out the hard way.

The unpredictability of human behavior

The founder quoted above adds that his startup ran a pilot subscription service for 3-4 months. It was shuttered because of the unpredictability of demand. He figured that although the customer knew what she wanted on a daily basis, she never knew the quantity required. “This means you need to give the quantity control to the customer, and the moment you start taking extra input from the customer the convenience goes away.”

But far from worry about the unpredictability of human behavior, BigBasket thinks it can influence it. Change it, even. One way in which they intend to do this is through their fresh produce, directly sourced from the farm to the customer’s doorsteps in less than two days. “Today, customers tend to order [fresh produce for] 2-3 days or maybe a week, depending on demand.

People usually buy vegetables for a week and stuff it in the fridge. By the end of the week, you’re using really old veggies. We want to try and change that behavior by delivering fresh vegetables and fruits early each morning for that day’s consumption,“ says Varghese.

But even if it manages to influence customer behavior, there are still serious limitations to the micro-delivery play. “The problem is that subscriptions can only be pushed in high-density areas where people are already accustomed to buying groceries daily,” says Stellaris Venture’s Chowdhri.

This limits the potential of the model. And, in addition to this, daily essentials are also low-margin products. Which raises the question: How do you become a very large player by delivering to a limited number of cities with such low margins?

Role of the grocery manufacturers

The answer may lie in BigBasket’s ambitions. At present, the company encapsulates four different business models. A core grocery retail business, which procures and stocks some 30,000 SKUs from grocery manufacturers and retail brands, a private label business which sources raw materials directly from farmers and suppliers, a subscription-based morning delivery unit, and a vending machine pilot.

Each is a contributor to the company’s overall health, but the company is ultimately not dependent on anyone for its survival.

To that end, while the micro-delivery space is the be-all and end-all for their competitors, it is merely an additional revenue stream for BigBasket. One that may turn out extremely lucrative in the long run, but isn’t critical to the company. At least for now.



Understanding the affordable care catalogue


“In medical devices, either you have a recurring revenue model where you sell a device but make money off consumables and keep your cost of customer acquisition low.

Or you sell high-end models where the revenue realization is right up front. The problem with devices like baby warmers or ECG machines is that there really is no recurring revenue,” says Sidhant Jena, co-founder, and CEO of Jana Care, a nine-year-old company which makes point-of-care medical devices.

Spreading the business all over the world

Effectively, the medtech business for multinationals in India is not so much about, ‘can you make it low cost?’ but rather about, ‘can your business model complement it?’

It’s difficult to sell to rural India because of how medtech distribution works. Companies typically have a mix of distributors, who buy inventory and sell at a profit, and direct sales partners, who sell for a commission. When doctors need a device, they’d ring up, say, the direct GE sales guy who will facilitate the sale and earn a commission from the company.

Siemens Healthineers uses both networks as well as a direct sales team today to sell beyond tier 2 cities. It has 120 distributors and sales partners. At present, greater than 65% of Siemens Healthineers’ revenue is now coming from sales to tier 2, 3 and 4 cities, up from less than 40% five years ago, Yagnik said.

But this model has challenges. Direct Sales reps who do well in the districts tend to get hired away to plum positions at metros. That leaves a constant talent gap in the countryside.

Analyzing the potential sales

And distributors tend not to proactively chase leads because their geography is limited, and so are their potential sales. There just aren’t that many nursing homes in a place like, say, Hubli, Karnataka—population 944,000; 13 hospitals recognized by the Government of Karnataka compared to Bengaluru’s 108—to sell to.

In 2013, Philips tried a slightly different model. It hired an outsourcing agency to place direct sales reps across tier-2 towns. They ended the attempt after two years.

“These products are complex in nature, so there has to be a certain amount of education that needs to happen from the sales rep who is trying to sell,” Menon of SKP Consulting said. “If you try to outsource it to a third party, then you can imagine the results are not very encouraging.”

GE, for two years, incubated an internal unit that’d sell directly to tier 2, 3 and 4 cities. While the main GE sales team served state capitals and areas within a 100-kilometer radius of it, the unit served everywhere else. However, the unit was not as successful as the MNC wanted, Ganeshprasad said.

It was operating in roughly 200 districts in the country and at a distance of 700 kilometers to the nearest customers. The affordable products the company had developed were still not reaching the far corners of India.

Starting as a start-up

In 2015, GE decided to spin off GenWorks as an independent start-up. Terri Bresenham, the former CEO, approached Ganeshprasad and asked him to helm the company.

Ganeshprasad was a GE star. He ran one of the company’s most successful portfolios, after all. In his cabin at GenWorks, Ganeshprasad has 11 GE awards on proud display.

“Running [the ultrasound] modalities gave me a view to small hospitals, nursing homes, large hospitals, diagnostic centers where care is provided,” he said. “I had that access for over 23 years.”

GenWorks was announced on 15 Jan 2015 at the radiology conference. It received 60 employees from GE, 110 employees from 40 distributors and a potential Rs 200-crore ($28 million) business. It also got an advance commission for the first quarter. Ganeshprasad and two colleagues invested Rs 3 crore ($424,565) of capital into it.

The business model was initially simple: GenWorks would act as the direct sales partner, keeping reps on its payroll. It would primarily sell GE products for a commission. To a lesser extent, it would buy inventory and sell for profit.



The Godfather offer at its best


More importantly, he said: “I didn’t get a sense that WhatsApp is looking to build out India with the independence of, as much as, say, an Amazon. It is only looking to see how it could make money from the existing base. It is more running of a company job than building something from scratch.”

Difficulties after leaving a corporate job

If that’s the case, for Bose, the WhatsApp job is coming a full circle. Bose, an American citizen, left a corporate job in Silicon Valley 13 years ago to come to India to become an entrepreneur. He was flown down to save NGpay, a mobile payment company in 2007, which ultimately shut shop. And now, he is back to working for a Valley company. And, in between, there was Ezetap.

“I came from Silicon Valley to India to fulfill my vision of being an entrepreneur,” says Bose. “I think I’ve done that in the building of Ezetap and we’re really proud of it… I didn’t want to just do a startup when I came in, I wanted to build an institution that left an impact. Part and parcel of being an entrepreneur are building an institution that outlives you. ”

But Ezetap still has a long road ahead to reach institution status. While WhatsApp, in a sense, is already one.

Work experience matters

As a 45-year old, Bose has about 15 years of work ahead of him. A limited amount of time to go big. So, if there’s an opportunity that is already primed up with all those users on a platter, plus seemingly limitless resources and one that is already positioned at the cusp of changing the way India uses the internet and technology, it comes with a fair bit of allure.

“You gotta love the challenge of being able to accomplish big things… I think this is a once-in-a-generation opportunity when you have something that has the potential to impact these many people on this scale.

It is uniquely at a scale that’s above what Ezetap could potentially [get to] by an order of magnitude. And it’s nothing about Ezetap. It’s a great company in any aspect of Indian business. But then, there’s just another level, given the nature of our country and in the nature of problems that we are solving,” says Bose.

In the course of a 40-minute interview, he reiterates, six times, that his decision to quit was for a singular reason. “WhatsApp is special.”

It is not just the scale that Ezetap won’t be able to match, but also the value of stock options that one would earn from Facebook. A role like this can command salaries of even $2.5- $3.5 million, much of which would be stock options, according to a top compensation consultant. (Bose said this type of number was incorrect and denies it strongly).

An amount like this is not something the board of Ezetap can even come close to offering, not when it has about $11 to $13 million left in the bank, according to a source associated with the company.

Role of the salary package

But founders typically don’t pay for salaries. The rush from creating impact and equity makes it worth their while. According to filings accessed from Singapore’s Accounting and Corporate Regulatory Authority (Ezetap is registered in Singapore), Palihapitiya is the largest shareholder with close to 3.2 million shares of the 8 million total shares. Bose has 200 shares, according to the latest filing. (This may not be fully representative of the shareholding as Bose could own shares through cross-holdings).

“Even if Bobby [Abhijit] gets an exit from Ezetap, he will not make as much money as he will in five years’ time in WhatsApp,” said a senior payments executive, requesting anonymity.

But it is not the opportunity that is under question. What about loftier things like a founder’s duty towards their company and the opportunity they set out to explore?

Bose thinks a founder’s duty is about being fully true to oneself. “When you bring other people on your journey, you have to be kind of true to doing what’s best for them. And what’s best for them is building as honest, professional and constructive a culture as you can. And you yourself are being honest, and kind of make sure that you’re in it to build institutions that’s all you can ask of any human being,” says Bose.


Traditional channels vs Dropshipping, who wins?


According to a KPMG report in 2014, direct selling as a business model has existed in India since 1995. The report estimates that out of the five million direct sellers in India, 3.5 million are women looking for an additional source of income. With the rise of cheap smartphones and society becoming increasingly social media-savvy, e-commerce experts believe that this is the same market that Meesho is now leveraging.

The seller-supplier conundrum

Meesho earns its money from suppliers. It charges them a 15% commission on every sale. Sellers, thus far, haven’t had to cough up as Meesho wants to keep the entry barrier very low for them. This is a pivotal part of Meesho’s strategy—keeping sellers happy.

They’re even able to sell and promote their own products or those of non-Meesho suppliers on the platform. However, this inventory will not be eligible for Meesho’s logistics and payment platform, according to Aatrey. For Meesho, this is a necessary deterrent to keep sellers dependent on its suppliers, but it also has a limiting effect and may dissuade new sellers from signing up.

But if Meesho didn’t do that, its challenge would be this: How do you grow a nascent social-media-based re-selling model without charging a commission from sellers as well? On one side, Meesho will have to bring in continuous sales leads for its 22,000 suppliers, and on the other side, it has to bring enough variety across different categories of goods depending on sellers’ choices.

Aatrey says that Meesho’s model has brought the acquisition cost of end customers down to zero since each seller finds buyers on their own. However, this is an oversimplification of things. The actual cost of acquisition is in training sellers to sell better and more.

Thriving and doubling

To this end, Meesho has zeroed in on geographies where social re-selling is thriving and doubling down on these places. “We also launched mentorship programs wherein the top sellers from each geography coaches new incoming sellers,” says Aatrey. In Aatrey’s experience, it takes around two months to train and grow a new seller to a successful scale.

And it isn’t just growing re-sellers to scale that’s a challenge. Growing its re-seller base is also an uphill task. Aatrey believes that the zero investment policy is what leads re-sellers to the platform, with word-of-mouth being the most common means of re-seller onboarding. Without really advertising to re-sellers, the business has grown to cover over 550 cities in terms of goods movement. And while the company has continued to grow, it has found that growth has come at a heavy cost.

According to data sourced from company research platform Tofler, Meesho saw a 5X increase in its revenue from FY17 to FY18. From around Rs 1.1 crore ($156,508) in FY17, revenue jumped to Rs 6 crore ($853,713). But to achieve that rapid growth, Meesho spent a whopping Rs 10.98 crore ($1.5 million) in FY18, while returning losses of Rs 4.97 crore ($711,433). In FY17, Meesho’s losses were just around Rs 45 lakh ($64,025) while expenditure was at only Rs 1.6 crore ($227,656).

This isn’t going to get easier for Meesho either. According to a top executive from an online re-seller platform, who asked not to be named, the majority of re-sellers on a platform like Meesho are aspirational entrepreneurs. For them to grow beyond their threshold of 150-200 customers, they might need to start owning their own inventory.

Providing small capital loans

The entrepreneur might have to put in her own money, or the platform might have to start providing small capital loans. But this breaks the point of social commerce that Meesho is pioneering: the zero investment model for re-sellers. Aatrey insists that Meesho would never provide financing to its re-sellers.

E-commerce experts, however, say that Meesho may have to make some concessions. What we see today, they point out, is only the first wave of social commerce in India. To bring the next wave of re-sellers onboard and maintain its current growth, Meesho will have to innovate to continue to bring re-sellers on board.

“You can expect a lot of users who never tried online selling before to come in and try out platforms like Meesho. And for this wave to pick up, platforms may need to start offering incentive programs, discounts, etc., to help sellers reach their target audience,” says Chowdhri.