When the going gets tough, start-ups pivot

As funding dries up and with discounting becoming unviable, several e-commerce players are changing their business model to stay afloat. According to data collated by Business Line and research firm Traxcn about two dozen startups are reviewing their current business model and another 20 start-ups have shut down their original idea to ‘pivot’ into a completely new model over the last 15-18 months

For example, hyper-local grocery app PepperTap has decided to shut down its core business and pivot to offer logistics services. Yebhi, previously an online fashion marketplace, is now a product discovery site. Similarly, Haptik started as a platform to connect users with customer care services of large companies has now become a chat-based concierge services provider

The shift in game plan happened primarily due to lack of funding, unviable model or pressure from investors on profitability.

Though its still early days to know whether the change in models have worked for these start-ups, some are seeing better traction already.

For example New Delhi-based petcare startup DogSpot.in is now gunning Rs 100 crore revenue by 2018 after coming very close to shutting down last year. The company has pivoted its model twice from being a blog to marketplace to finally becoming a private label e-tailer. Founded by Rana Atheya in 2007 as a blog-post, the startup is now focusing on selling its own products for pets. The company is now earning higher margins selling its own branded products instead of selling other brands.

Atheya says, “Corporates are all about ‘learn and do’ where as startups are about ‘do and learn’ and this leads to change in models as per customer feedback, market dynamics and investor’s needs. At DogSpot.in we learned that we will never be able to build any proprietor value in the business if we do not pivot.”

Akosha (now called Helpchat), which started as a consumer complaint platform, is seeing growth after becoming a personal assistant app connecting businesses with consumers. “Ever since, the transformation, Helpchat has grown phenomenally and reached 1.5 million downloads. The team presently manages over 90,000 requests per day, and facilitates over 300,000 transactions each month across minimum 2 categories. The team has also grown from 350 to 600 members,” a HelpChat spokesperson said. The transformation of HelpChat happened after it raised $16 million from Sequoia Capital.

Vikram Gupta, founder of VC firm IvyCap said startups go for change in business models after Series A funding, which is when the investors come into picture. “Typically, investors pump in money by betting on the entrepreneur, business idea or the space. But sometimes, things do not work as these models are often good ideas but not scalable. Investors are usually the brain behind pivots as they have more experience of businesses,” said Gupta.

One of the biggest success story of changing business model is Snapdeal, which started as an coupon site. Tej Kapoor, India Head of investment firm Daily Mail Group said the change should not be done under pressure from investors. “Entrepreneur should have full autonomy to take a call if they want to pivot or not. If it happens just because an investor is telling them to do so then it defeats the purpose and outcome can be dangerous.”

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