Home > Feature > Mahesh Murthy Vs John Kuruvilla On Why Taggle Shut Down

Mahesh Murthy Vs John Kuruvilla On Why Taggle Shut Down

We present an open letter from Mahesh Murthy, the founding partner of Seedfund and founder of internet ad agency Pinstorm, to John Kuruvilla, the founder of Taggle, on why the company had to bite the dust. Kuruvilla responds to Murthy’s views as well. Plus other comments.

It was with a sigh that I read the e-mail from Taggle saying it was shutting down. Especially because I know people there: I have friends at Battery Ventures who invested there and the founder, John Kuruvilla, and I go back some 24 years, right to the early days of our careers when I would hang out at his barsaati in South Delhi.

John and I have argued many times in the past. He last took offence when I said a few years ago at a conference that Air Deccan was the kamikaze airline that would kill itself and take the entire industry with it. John was earlier the marketing head there and understandably miffed. Seeing how things have eventually turned out, perhaps I was not too wrong.

John and I also disagreed about Taggle. My point was simply this – there was no differentiation among deal sites and till that happened, there would be no real traction for anybody and no chance of building a real business.

I stand by that point. And will add a few more.

Relevant experience. SnapDeal has the advantage that its founders actually ran a newspaper-based deal business and knew what it would take to get a lot of deals and good ones at that. Perhaps none of the other players could match this execution scale.

Deal quality. Most deal sites are all about spas, nail treatments and tattoos. People have tired of those. There’s not very much new to attract folks. In fact, even SnapDeal traffic has fallen by 65% in the last month.

Merchant satisfaction. What I hear from merchants is that the original promise of “offer a deal, win a loyal customer” has not proved to be true. You do – at best – get a few new customers. But they’re bottom-scrapers and will go next time to another deal elsewhere. So justifying a deal through increased customer lifetime value is a fallacy here.

Flawed business model. Acquiring a customer for a deals site typically takes Rs 1,200-Rs 2,500. And the economic value of the customer is around Rs 200 or so per deal. In theory, you should break even as a deals site when the customer buys six deals from you. In practice, he buys six deals from six different people and in your case too, customer lifetime value does not justify the cost per acquisition.

Death march to victory. Given these basics, the only way one can win is to spend more money than the others and lose more money than the others till rivals throw in the towel and drop off the map. Taggle was the first prominent one to do so. But believe me, others have already done so and more will do so. But this is a pyrrhic victory as both investor and deals company have a bloodied balance sheet. And at the end of it all, there’s little or no likelihood of either making a decent exit, given in this case that potential acquirers – the global leaders Groupon and such are doing even worse.

With all this, I don’t want to sound pessimistic. This is a good thing. We need to learn that you don’t win markets and e-commerce by throwing money at it.

We will soon see similar attrition in the broad e-commerce space, too. And once again, it will be healthy for the industry.

Deadwood needs to burn to make room for healthy new plants.

And John, I owe you a drink. Let’s catch up soon!

(As told to Shrija Agrawal)

JOHN KURUVILLA RESPONDS

JOHNKURUVILLA
December 07, 2011

Hi Mahesh,

Good to connect with you here. Some well wishers called me to say ‘Mahesh Murthy is taking digs at you’. I initially decided to ignore the same since I have always operated with the philosophy -Kutta bhonken hazaar…Hati chale bazaar…

But you being a friend..I thought I’d clear the air…so that when we meet for the drink you promised we can talk of family, the birds and the bees.

For the record since you disappeared from the scene at the conference where I spoke after you spoke- in ignorance about Air Deccan’s fall from Grace and why it died(it had died as brand in 2008 and you were speaking at a conference in 2009- long after the dust had settled. The impression you are giving people in this article is that you predicted Deccan’s demise. Dont do that buddy.)

You attributed a major reason for Deccan’s death to the Rs 500 ticket. On every flight 30-60 days out we were giving off 6 seats on a 180 seater Airbus at Rs 500(With an 80% load factor we had 36 seats empty on bad days and 5-6 seats on good days and these Rs 500/- seats were for travel 30-60 days out- it was revenue management at its finest by a very very young but talented team that one had recruited from IIM, IISC, IAI).

On 250 flights a day that worked out to 1500 seats a day.THAT Changed many lives. Will share this magic with you when we meet.

Now for the reasons for Deccan’s demise as a brand. It is available here and in Capt. Gopi’s book SIMPLIFLY.

I get miffed by people who speak out of ignorance.Especially when it comes from people of stature. More so when its from a friend.

Let me clarify once and for all the Air Deccan Issue. Air Deccan provided very healthy returns to its early investors (ICICI Ventures and Capital and the other independent investors will bear me out). In fact the smart retail investors who invested at the IPO at Rs 148 exited at Rs 290 at the peak. Data can be gleaned from MoneyControl.com.

We gave customers value, grew the industry,gave wings to the dreams of the common man and delivered value to the shareholders. Not sure where we erred?

While I was CRO- Till October 2006..the company was operating at the lowest cost, had the highest load factor and was losing money ONLY due to very high no of cancellations. This too was set right between July and September 2006 where we bought cancellations and delays down from 35 a day to 9 a day.

It did well long after I was gone till the Tech fiasco happened. For the record Ryan Air, Southwest, Easy Jet, Virgin Blue and many more LCCs are profitable and growing.Closer home Indigo is financially sound and has been for a while (and this is not just from Sale and lease back). All these companies were written off by the best minds in their countries.

On Taggle the reason I moved on in July was because my partners were very keen to create a solid etailing business- something I did not agree on and despite being the single largest shareholder I respected their views and handed over the reins and chilled for a few months.

It was an emotional decision and not an easy one to make. But at that time since convictions were high amongst my partners and the investor too thought it was a good idea I thought it was good for the company to pursue their goals.

They grew the business 10 fold in 4 months. But they realised early on that it was suicidal to carry on burning money to play the ‘valuation game’. I salute them for taking the decision to get away from the valuation game since they realised that this game was not sustainable for a long long time.And called it a day.

It takes guts and nerves of steel to decide when the sales nos were looking real good.To make this call.Hats off to them.

In its 20 months Taggle spent less than 9% of its investments in marketing AND in September had Revenues close to what companies in the etailing space in India had achieved in years by burning marketing $s.

However your point on differentiation,marketing expenses etc is what every company around the world is worried about and working on…and some will win.

Flipkart for one I believe has built a brand India can be proud of. Via.com is another case of Blue Ocean resulting in profits year on year for the major part of its existence and has achieved significant scale.With a very robust business model.

There are jewels that you should help unearth..and create a positive environment that will help entrepreneurs learn from all our mistakes (I am sure you made some too) rather than be the proverbial crab who will never let others succeed.

Remember Amazon took 8+ years to turn the corner..and had short sighted analysts write off Jeff Bezos every year for those 8 years..and now say..We told you Amazon will be a success. Mahesh with every mistake comes learnings for a new dawn. Taggle has been a great learning. I worked with some great investors and some great people.

I for one am more than happy to spend time with young companies sharing with them where potential minefields are. Did so with one online insurance company this morning. They left with learnings that will help them save time and money. Let’s get positive and help and make that difference based on the years of experience we have gathered.

Let’s stop being soothsayers and become guides…I know you are an early stage investor…but let’s share experiences with as many and not the select few with a financial motive…that’s more valuable than mere money…

Let’s see what the morrow has in store for Taggle. Any Ideas? Jeez I sound very philosophical here..look what you have made me do…

So on an 80 per cent load factor planned, my pricing works out to Rs 1250 approx., a price difference of about 30 per cent.

With proper yield management, the last 10 seats on an LCC is your profit. Deccan was operating in peak season at 90 per cent-plus load factor and in off season at 80-plus.

On innovations, I sold the exterior of my aircraft for crores – my advertising budget came from such advertising opportunities we created. Some of you may remember NDTV and Sun branding on the outside of our aircraft and Idea Cellular inside… We did not have resources, but we’re resourceful.

Every company – start-up or otherwise – must think out of the box on cost rationalisation and revenue optimisation, using analytics and revenue management tools.

As for Taggle, I guess we will need to wait and watch.

It was a company that innovated from Day I with its hologram for security vouchers, pay on phone, selling group-buying in travel for the first time, selling jewellery through group-buying product sale – much before Groupon’s Gap jeans sale… and more… The team could have continued to burn investor money… losing millions and then taking a call… But hats off to the team who put their integrity at work and called it a day. Thereby, losing less… That, my friend, is the true measure of leaders who put their personal agendas second.

For the interest of young entrepreneurs I am attaching a blog that I wrote while I was recuperating… on my experiences and how thinking out of the box and innovating helped the companies I worked with, succeed. These are real examples and not textbook case studies. Examples of working in the trenches and winning over seemingly insurmountable odds. Here is the blog if you want to check it out.

Thank you, once again, Mahesh for starting this dialogue. I am sure it would have set many of the readers thinking…

God bless

John

34 Comments

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Mridula December 7, 2011 17:29

So very true @maheshmurthy.

Deals sites definitely do not generate huge profits, at the most they maybe just ramen profitable. There is already a live example of Groupon as you have mentioned. Studies have been conducted to understand Groupon’s model, but what is revealed is definitely not encouraging. Those customers who run after deals are actually the ‘bottom scrapers’ and it is so unlikely that they will come back because of the product or the service. Maybe just a small fraction of customers do come back. But at what cost?Groupon’s merchants have burnt their fingers by offering deals and some infact have had to re-visit their pricing models. When the Deals sites do not offer much value to their merchants, why will they go through these sites? Naturally, the range of product on which deals are offered will be quite narrow. And this is not what you want on an e-commerce business!

@Taggle either should have closed down instead of entering into electronics segment (which is a very narrow margin vertical with already other established market players) or ventured into any of the niche e-commerce markets. Perhaps they would have done better and their efforts would not have gone in vain.

Nevertheless, Kudos to the spirit of entrepreneurship. Failures are just as important as successes. We all make mistakes and we all learn.

Arun Vijayan December 7, 2011 17:37

So, as I see it, 1200-2500 user acquisition cost is a deadly one. I had an impression that it is 0-200.

Ashwin TS December 7, 2011 18:14

Absolute truth in every word Mahesh. I really cant understand how VC’s are even funding sites that dont have any differentiator or a sound business plan. Huge marketing spends initially for the launch are acceptable but not as the way to do normal business itself. Once you get your customers used to discounts, it would be very difficult to keep them if you change your strategy on that. There is going to be a bloodbath over the next year or 2 as these businesses lose the capability and resources to sustain growth. Right now, the consumer is the only one who’s benefitting….

Sameer Mathur December 7, 2011 18:16

Brilliant piece, as always mahesh.

ashok hingorani December 7, 2011 19:33

correct Mahesh – just throwing money at an unviable product doesn’t make it work. Someone close to me is also planning to develop a loyalty program of sorts and i am not sure it is worth it in India, at least at the moment at least. Your opinion would be most welcome.

thanks

ashok

Firoz K December 7, 2011 20:27

I totally agree with Mahesh and have always been of the opinion that deals space is not sustainable. However, with DealsnYou getting another huge round recently just doesn’t make sense to my mind. If this space is so not lucrative why would BIG guys invest in such a model…is there something I am missing?? wonder!!

Hi December 7, 2011 21:30

Disagree:

Relevant experience: Why is nobody talking of low entry barrier now ? What about Grabbon, Wamaso who all merely copied groupon model and had a decent exit!

Merchant satisfaction: Snapdeal traffic has fallen because of the ban on SMS campaigns by TRAI. Merchant is acquired by marketing pitch and not “offer a deal, win a loyal customer”. If quality is offered then the user spreads the word about the merchant.

Flawed business model: Snapdeal has 250K daily unique visitors. I don’t a reason why they cannot make money now!

Death march to victory: Amazon had to wait for 6 years before they could post profit. The landscape is changing in India. People are actually buying things online. Those who cannot see this are unfortunately living under the rock!

Suresh December 7, 2011 21:51

While one could agree with Mahesh on Taggle, the dig on John for Air Deccan was definitely unworthy. As John so convincingly puts it, Air Deccan was definitely on course to be a successful model, and despite it’s failure, the collective flying public owes it big time for opening up their eyes to the possibilities in Air Travel. As a travel, let’s face it, prices can never go back to what in retrospect were usurious levels being charged by monopolists Indian Airlines and Jet Airways et al before Deccan burst on the screen. And yes, there was a lot of magic everyday on Deccan flights that did take off, with many first time flyers etc:) I think the confidence and ability to dream big that Deccan sowed in these minds was worth far more than we ever realise.

Roshan December 7, 2011 21:55

Mahesh you are a *****. there was no reason to pull John into this. Why is VCcircle becoming a place to showcase ones ego. Mahesh just wants a ego boost by proving that he was right twice when John was wrong.

And Mahesh, I respect you a lot. an article you wrote addressed to your dad on wsj gave me so much confidence that i still read it from time to time.(http://on.wsj.com/tblCDE) Now why are you being the big daddy of indian startup ecosystem and mocking the failure of someone you know for decades!

lets not make it a taboo to fail. Infact we should complement the entrepreneurs , who came out of their high paying secure jobs, raised money and built a company. lets celebrate that.

Cheers

Sanjay December 7, 2011 22:19

But why both of you failed in real estate domain. both of your sites are just surviving.

RT December 7, 2011 23:07

Although, I respect Mahesh a lot, and agree with his thesis, I dont see why this had to be in public domain. In fact I saw his similar response on Quora and was somewhat surprised too, but that is a closed network so it would have been fine left there.

We should encourage failure and learn from it.

Even if there is dirty laundry, why bring it in public. May be we check with few of your exits, and check with the entrepreneurs to see how returns were distributed across investor class. Just saying.

john December 7, 2011 23:55

Talk about disasters: http://www.passionfund.com/htm/investment.htm

Mahesh Murthy December 8, 2011 0:03

Gosh, this is turning into a right royal barbfest.

Let me step in and calm things down.

1. To start with, the intention was never to write to John in public. Indeed, I can connect with him directly at any time.

I was called by Shrija of VC Circle on a different matter and as an aside also asked about my views on the shutdown of Taggle.

Considering I had already put those down in writing before (here, on Quora: http://www.quora.com/Reasons-for-the-failure-of-Taggle-com ) I thought I’d repeat most of what I’d said, and add a small personal note (let’s have a drink) as John’s been a pal for a long time.

This was neither meant to be “scathing” or an “open letter to John” as the editorial team here puts it. If it comes off that way, I’m sorry. That wasn’t my intention.

2. I don’t hold John personally responsible for Air Deccan or Taggle. I believe the founder in the former case and the investors in the latter case had key responsibilities for setting the direction of each company.

In addition to perhaps taking bolder entrepreneurial steps than I ever have and making better decisions than I ever have there’s a lot I respect John for – he’s also created better campaigns than I ever have (the Air Deccan campaign touched hearts like great work should) and he’s connected me to some of the more important people in my life, including the mother of my 13-year old and my best guy-friend on the planet.

My issue was and is not with him – but with the broad business directions in both cases.

3. I was a fan of the low-cost carrier business till I looked deeper into what Vijay Mallya and Jet were saying about this business (here’s one example: http://www.business-standard.com/india/news/the-flightlow-cost-airlines/339049/ ). “In India there are no low-cost carriers, only low-fare carriers.”

It rang true. Ryan Air and all the other international examples quoted fly out of different, cheap airports, into different, cheap airports, with cheaper staff, cheaper landing and parking fees and cheaper infrastructure, while charging for everything from drinking water to even passing water. (http://www.dailymail.co.uk/travel/article-1263905/Ryanair-toilet-charges-phased-in.html )

All the so-called low-cost carriers in India had pretty much the same costs as everyone else. They simply charged less and hence lost more money.

Capt. Gopinath’s claim in the article referenced earlier “keep fares low while costs are high and costs will spread out over more passengers” reeks of the famous “we’ll lose money on every seat but make it up by selling more” joke.

This discussion with John was around 2008 when Deccan was called Kingfisher Red. Three years later, Kingfisher Red breathed its last. Meanwhile, the full-cost-carrier Kingfisher is saddled with debt and its problems are well-known. Jet is not making much money. Neither is Go. Or Spice. Or Air India.

Of course it’s possible that all these airlines have crappy management – but it’s a little more likely that the impact of higher fuel costs and a global slowdown combined with the pressures of unreasonably and insanely low fares has kept them in the red. Again it’s a game where only the ones with the most cash will survive.

Some people hold Indigo as an example of how a low cost carrier can make money in India – but you need to look at its books to see that it makes its money not from selling seats – but from buying and selling aircraft.

I still maintain that till there is a significant difference in costs – for the planes, the crew, the landing and parking fees, the airports and such – there is no viable business for a low-cost carrier in India or anywhere else.

Sure, you can look at the nobility of opening up air travel to those who had only traveled by train before and the social buzz and excitement and all that. All that is well and good from a CSR point of view – but it’s not good business.

It wasn’t good business for Deccan, and it wasn’t good business for the other airlines that followed it down the spiral.

4. Now to Taggle. My points still remain. Without unique consumer delight coming from differentiation, there is little chance for an online business to organically survive. Ctrl-C, Ctrl V is not the way to build a company here.

I take John at his word that the business was fine. But I do wonder why any VC in their right senses would then pull the plug on it.

Of course, I also accept that, like me, there might be other VCs who are also not in their right senses.

5. Now to all the other points on the “greater glory of entrepreneurship”.

Sure there’s nothing wrong with failed companies. It’s what teaches us how to do it better the next time around, because textbooks don’t quite help here.

There’s a lot to learn from Taggle and the other impending closures – or, as they’re called today, “pivoted business models”.

This learning is what helps us do things better the next time around.

We all learnt from the horror that was Indya.com how to never launch a portal again. We learnt from HomeTrade.com how to never do a product strategy again.

There’s more to learn here.

We need to learn and do it right – and it’s important to do so quickly, because the world is looking at us warily.

I just came back from a global investor’s conference where the consensus was that China was a much better investment destination than India as its government stood by its word and the exits were great.

Given the flip-flop men like Manmohan and Sibal we have around, the first is not a likely competitive advantage we’ll have in the near future.

Let’s at least get the exits right. Let’s have reasonably-funded, reasonably-grown profitable companies that make money for all – investors and entrepreneurs alike.

Let the world see there’s real money to be made in India, especially online. Not spent, mind you, but made.

And let more money pour in here as a result.

Amen.

john December 8, 2011 0:09

VCCircle comments from 2006 is worth a look: http://www.vccircle.com/500/content/seed-fund-to-launch-on-november-30?page=4

Sam December 8, 2011 0:59

An excellent argument made by MM (albeit after he lost his senses and shamefully got personal).
Back to deals model – it’s here to stay in India (period) but not in Snapdeal model for reasons cited and already known to the world (courtesy Groupon)
However it will flourish in a model where community already exists eg Travelzoo or Sulekha who recently launched deals. Sites which have community will cross-pollinate their hungry customers with deals and avaid the death trap of illogical user acquisition cost. These companies will also not see the problem of organic growth (compared to Groupon or snapdeal) bcos they ready have a die hard and loyal community.
India customers have starved for too long and they are enjoying it now courtesy deal sites – it’s in the India consumer psyche to look for bargains and deals are here to stay, albeit in a different model.

Sameer December 8, 2011 1:14

I’m surprised that people are upset at Mahesh. I can see why John might take it personally since he was the man behind the failure and this is probably painful for him.

But for the rest of us, we don’t need political correctness. We need to learn from the mistakes of other entrepreneurs. Up till Mahesh’s response, the analysis of Taggle’s failure was pretty weak. He gave specific and accurate reasons for what Taggle did wrong and why the daily deals market is declining. How will we learn from this failure if those who can provide detailed analysis are asked to not speak in fear of airing “dirty laundry”.

Sometimes you have to call a spade a spade.

Saurabh Bhatia December 8, 2011 7:46

Mahesh is a symbol of typical Indian mentality which watches the show from the side and at the end blames people who took part in the show saying “I Told you so”. This is a Startup Forum and we need to celebrate failures. For me Taggle is a success. It did its bit in creating the ecommerce / online culture in India. They have promoted several deals of ecommerce companies. If not for these entrepreneurs or ‘crazy’ VCs, it would have taken an another 3-4 years for the ecommerce to reach the level that it is in now. It is the hype that quickened the pace.

Mahesh is making fun of John as if all his ventures are success. Pinstorm is a loss making entity which is taking the clients for a ride. Would Mahesh be able to share the financials? At least John tried twice with Air Deccan and Taggle and got his hands dirty . What did you do other than sitting in the gallery and giving gyan in conferences about entrepreneurship.

Venkat December 8, 2011 12:53

I dont get Mahesh’s rant at all..if everybody listened to him there would be no startups and nobody will try anything new..

Zubin Nalawalla December 8, 2011 13:33

What started as a talking point on Taggle has unnecessarily gotten into an Air Deccan post mortem. Both Mahesh and John, have unjustifiably gone overboard with Air Deccan remarks and so have the readers and their comments.

The editor too in this case has made the post sensational by terming it as an ‘Open Letter’ whereas its not.

Would really like to read comments on Taggle and the likes from users.

Anon Menon December 8, 2011 17:05

you guys deleting messages a La Sibal?

Sahad P V December 8, 2011 22:15

Anon menon – No. We havent. Your comments are on vccircle.com

http://www.vccircle.com/500/news/mahesh-murthys-open-letter-to-john-kuruvilla-of-taggle

Akhil December 9, 2011 0:16

Good they shut down early. At-least they won on time-to-shut if not on time-to-market!!

A star-burst of e-com start-ups in 2010-2011 will show up in this part of world as amazing fireworks in 2012-2013.. keep an eye out for this once-in-a-lifetime opportunity. There is lot more to witness and story-tell about.

Vijay Saradhi December 9, 2011 9:08

Mahesh & John…

the reading bet… is really good. You both come from different angles.
mahesh is bothered of money.. John about the sweat.

However… you both should come together and put learning together to help. I remember, meeting John at Deccan when I started First Opinions… really nice of him to meet even though 5 min. Deccan made dreams of entrepreneours floursih, but those who fly KING’s plane did are unable to survive.

Start-ups is this country – so called India and Indians as buyers first we need to think of a product which can be free first.. and then products discounts.. then value add’s and later quality service..

I hope I will get a chance to meet Mahesh in my next start-up and see if he can be an angle???

Best

Vijay
+919811842299

Vikas December 9, 2011 10:34

John,

I had never heard about you but I respect you after reading your piece here – not for giving a strong reply to MM’s post but showing that how you are looking beyond valuations and profits and thinking of long term. India needs such entrepreneurs who have guts to take such risks and do something which changes the way we do something – be it the airline operations or be it the ecommerce business.

Let’s stop hearing to pessimist people like MM and do something which we believe would change the way things have been working. Do things right for the customer and money will follow you

I thank god that silicon valley wasn’t full of people like MM else we would have never seen Amazon, Google etc. today and lives would not have been the same. I pity people who would go to him with his ideas for early stage funding – all they would get approval for is the kiryana store

Vishal December 9, 2011 10:43

Both Mahesh & John has some merits in their case point. But E-commerce VC investments is all about fool finding a bigger fool while customers make merry of this fool hunt.

As for big daddy Mahesh’s lessons, Investees & Investors at following 2 outfits are finding hard to find those bigger fools. Search is on even after half a decade…..

http://www.passionfund.com/htm/investment.htm,
http://seedfund.in/investees/

John Kuruvilla December 9, 2011 16:29

Dear All,
For starters the John you see posted here is not The John thats’ in discussion here.( one problem when you have such a common name)

I am glad Mahesh raised the issue on eCom companies and the plausible reasons why many will not work.
The same is true globally.
What I am really glad about is that there is still a lot of passionate entrepreneurs and many in waiting who have strong views. So after all the Mahesh and John bashing some important truths that I learnt:
1. If people do not try and fail and succeed and fail and succeed and fail and fail …there will be no learnings for any of us on what not to do.And what to do.So its important for us to even share where failures have happened. There is enough written on successes.But almost none on failures.Is it to do with the stigma attached to failing? Air Deccan was a ‘successful failure’. It changed the way India flew for ever and even changed the way business was done in our country. But was martyred for all the wrong reasons. Technology.AND NOT PRICE as many perceived it to be.
2. With internet penetration in India so low and credit card penetration even lower I strongly believe that eCommerce companies will need to look at ways to bridge ‘cash commerce’ and ‘eCommerce’. COD is one way but an expensive way.
3. Brands that people can trust and relate to is a critical factor that companies need to work on. I for one believe that Flipkart has done a commendable job on this front. Taggle did not have 1 complaint from June 2010 till June 2011..not one..so finicky were we about customer service.
4. Managing customer expectations and then relations to ensure stickyness through increased relevant engagement is yet another area that needs attention.
5. The most important lesson that we need to learn is to move away from ‘ Cost of customer acquisition’ to focusing on at what price are we acquiring ‘transacting’ customers and whether from a ROI perspective it makes sense. LTV ( Life time value of a customer) as a concept online is yet to be ascertained since trends and category behaviors are still yet to mature.
6. One strong lesson I learnt very early on in life is the importance of Yield management in almost every business and how to apply the same to FMCG and the service sector.

More important are the relevance of companies like VC Circle which helps foster healthy debates without taking sides.
Thank you all for making this a very meaningful debate.
Thank you Mahesh for firing up such a debate.I for one could not resist picking up the gauntlet.
Will for sure catch up with you in Mumbai for a few drinks.
To other entrepreneurs who Mahesh takes a dig at, please respond to him with facts, it will ensure he does a thorough job dissecting failures.Also critical to building a healthy entrepreneurial eco system in our country.

Cheers!
PS:
Mistakes need to be made.So we all can learn.Some favourite quotes on mistakes”
The greatest mistake you can make in life is to be continually fearing you will make one.

If you have made mistakes, even serious ones, there is always another chance for you. What we call failure is not the falling down but the staying down. On Taggle. Time will tell.

People wrote of an icon I hugely respect ‘Mr Ratan Tata’ when Telco produced its first car in 1998. Not only have Tata Motors done a commendable job since then( miles to go still) but also set the ground and confidence for Mahindras’ XUV 500 which will give International brands a run for their money in India and overseas.

John Kuruvilla December 9, 2011 18:26

Correction in the last para:

People wrote off (not of) an icon I hugely respect ‘Mr Ratan Tata’ when Telco produced its first car in 1998. Not only have Tata Motors done a commendable job since then (miles to go still), but also set the ground and confidence for Mahindras’ XUV 500 which will give International brands a run for their money in India and overseas.

Gopikrishna December 9, 2011 21:29

Have been a customer of Taggle and have been reading articles by Mahesh since long time.

What Mahesh pointed out with business aspect of Taggle is something which is true. Unless there is a clear differentiator to the business model which money can’t easily bring in, there is bound to be tight competition. This I had felt much before. Even while seeing lot of etailers coming up this thought comes.

But what John did was a commendable job with Taggle and Air Deccan. Good that Taggle realised the danger early on and decided to call it a day. The Indian online market place for deals and stuff is increasingly becoming crowded and it’s a dirty game out there.

Again, some facts about Airline industry which Mahesh pointed out is true on low-fare and low-cost. But I genuinely feel Air Deccan were pioneers in actually reducing the cost, wherever they could and churning revenue in all possible manner, though certain cost was inevitable.

Gaurav Bhatnagar December 10, 2011 11:13

Perhaps it was not intended, but an article like this, coming from a prominent industry person doesn’t augur well for the ecosystem at all.

Failures are part and parcel of entrepreneurship and while veterans like John will take the failure and ensuing criticism in their stride and move on, spare a thought for younger and first time entrepreneurs. In India, there is enough stigma attached to failure by family and society. Now, if people like Mahesh will pile it on as well, who is going to tell these young entrepreneurs that it is ok to take the plunge and fail before you finally succeed?

CubbyHoleGuy December 12, 2011 10:50

I’d like this community to sometime a build a list of companies that are surviving in India for the sake of survival (and if they were in Silicon Valley, would be shut down). They are so many such companies out there, esp. those who have taken VC funding. Some criteria could be
- 7-8 or more years in existence but not given exit to investors
- Not scaled up beyond $5-10m in revenue

Sometimes I feel that even the VCs want these companies to be around, not only in the hope that the investment will come through, but also to protect the “India story” which allows the VCs to raise more funds!

Radhika December 12, 2011 13:33

Must say, Mahesh Murthy smacks of arrogance and self-centeredness. Hats off to JOHN KURUVILLA who went there and did what he wanted to do.

Whizkid_no1 December 12, 2011 14:49

“But they realised early on that it was suicidal to carry on burning money to play the ‘valuation game’.”

I have been seeing this trend of many first generation entrepreneurs trying to make it big by working on valuations rather than operational profits and net profits at the end of the day. VCs encourage them to work towards volumes/market share rather than short term profits.
Some of the big names mentioned here are also burning cash , but showing the losses as “Deferred Marketing Expenses” to be written off over 5 years!
I do not know the success ratio of valuation driven approach , but can offhandedly list some failures-Subhisksha, Vishal Retail, Taggle, etc etc.
The problem is that many of the professionals-turned-businessman do not understand “money”. They have never understood that money-making requires a conservative approach. Its not a fat-pay cheque which can be blown away and then await the next month’s paycheck to repeat the same thing again.
Money meant to be invested, has to be treated differently from a fat corporate pay-check! It’s NOT A CONSUMABLE.

AT December 12, 2011 16:02

Get back to work guys
It’s done!

Ali December 12, 2011 18:21

Maybe Mahesh should run some world class businesses and show us how to run them?.

I am not sure if I recall any stellar successes or a bowed out exit..

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