The e-commerce boom of the past few years initially led startups to focus on growth while putting profitability on the back burner. However, the focus is shifting towards profitability and managing cash burn.
As a clear path to breaking even eludes this segment, a panel of investors and entrepreneurs at the Techcircle India Ecommerce Summit 2016 held in Gurgaon last month discussed the possible ways to profitability for startups in the country.
Mohit Bhatnagar, managing director at Sequoia Capital India, said entrepreneurs must ensure the business model is clear at the beginning itself because it is difficult to pivot at a later stage.
Nitin Nayar, managing director at Warburg Pincus India Pvt Ltd, was of the view that the category a startup is looking at determines which model to follow. “I can understand why you want to be an aggregator so that you can bring on board all the suppliers. But when the consumer experience is valued a lot, you may want to own the space and go back the value chain and own the supply and delivery,” he said.
The participants felt entrepreneurs can build a defensible business even in a category where bigger horizontal players are present. Neeru Sharma, director of platform business services at Infibeam, said a venture can acquire customers by focusing on hot-selling products with high conversion rates.
Deepak Gaur, managing director at SAIF Partners, said it made sense to choose a category with a high ticket size or high frequency of orders to keep the cost of customer acquisition low. “It is important to see how big the category is while building a business,” he said. “A lot of times the problem is interesting to solve but not large enough. You need to solve a problem that no horizontal player will be able to solve.”