Siddhartha Ahluwalia 1:37

Hi, this is Siddhartha Ahluwalia, your host at Neon Show and also managing partner of Neon Fund, recognized as among the top three funds in AI in India. Today I have with me K Ganesh, author of the book, Mastering Disruption. And today we discuss with him various business models that he has shared in this book.

What makes companies succeed, companies fail, case studies. And K Ganesh has been a legendary figure in India. He sold his company TutorVista to Pearson way back in 2010, one of the largest acquisitions of that time.

And since then has been a co-promoter and co-founder of companies like Big Basket, Bluestone, HomeLane and several other companies which were incubated at his fund called Growth Story. Do listen to this podcast and subscribe Neon Show for more insights. Welcome to the Neon Show.

Ganesh, you might not know, but I have been a fan of you for the largest part, you know, of my entrepreneurial life.

K Ganesh 2:41

Thank you.

Siddhartha Ahluwalia 2:41

I even pitched to your co-founder when I had built a company back in 2016.

K Ganesh 2:46

Which company was this?

Siddhartha Ahluwalia 2:47

So it was a company called BabyGoGo. It was a…

K Ganesh 2:50

BabyGoGo, yeah.

Siddhartha Ahluwalia 2:52

We had two parts. We had a SaaS solution for doctors and we had an app for mothers where they could track their, you know, child’s healthcare data that was fed into DrCRM. Obviously, you know, the company didn’t pass through the growth stories test, but I followed your journey closely.

Then I was at Prime Ventures and you were a friend of Prime. So I saw you and you had done a couple of companies also along with Prime. So you actively, you know, participate, but been a big fan of your work, the way you have built companies, right?

TutorVista at its point in time, I think was one of the largest exits, right? And then you started Growth Story, which was a very unique model of, you know, partnering with entrepreneurs. You gave 1 million of your own money for 20-25% stake in those companies and became very hands-on.

You were just not a money investor. You were almost like a co-founder in building of these companies. I remember talking to Hari from BigBasket and he mentioned that, you know, you sourced the first 10 million investor check on a plane for BigBasket.

K Ganesh 3:58

Yeah, that’s a nice story. Yeah, that’s true.

Siddhartha Ahluwalia 4:01

So would love to, you know, start with some of these stories, right? Tell us, you know, we’ll discuss obviously today about your book, Mastering Disruption, you know, and how you have simplified various business model innovations, especially for the new age in your book. I loved reading this book.

Very, very simple, I must say that, right? It was nothing jargon in it. I could read it in one go.

K Ganesh 4:23

Thank you.

Siddhartha Ahluwalia 4:24

I got the physical copy today, but had the PDF for a couple of days.

K Ganesh 4:29

Oh, very nice. Thank you for your kind words. No, I think it’s been a very interesting journey.

Of course, there have been a lot of failures, a lot of challenges, a lot of mistakes. Some of them obviously stupid. But like we all entrepreneurs and management graduates too, we’ll never talk about them.

We’ll talk only about the successes. So behind all this, the caveat is that there have been a large number of mistakes. So I had done four serial ventures as founder and CEO, two of them with my wife.

Two of them without my wife, but with other co-founders. Having done four Greenfield ventures, scaled them, sold them to publicly listed companies as well as some of them trade exits. Back in 2011, when we sold TutorVista to Pearson, before the word aid tech was even coined, it was one of the first aid tech.

What we thought was trying to do the fifth serial venture becomes slightly too boring and repetitive and the fatigue has set in. That is when we thought of this concept. It’s more like a venture builder concept.

That’s what people talk about it now as venture builder model. Similar to rocket internet in Germany, if you had seen. So the idea is we look at where the next 10 year opportunities are, write a small business plan, write a thesis and then go and actively seek founders who will be full time into each of these ventures and would run it.

So we call ourselves as promoters. So like you mentioned, it is like a co-founder, but we call ourselves promoters and founders are the people who actually run it. And typically my home is the first registered office.

We start with that and we put the first amount of money in, whatever it takes to be able to prove the idea. And quickly we try to go and raise institutional venture capital pretty early in the stage. And the reason for that is then the company becomes not a Ganesh and Meena company or a Growth Story company, it becomes an independent company with an independent board network and has got a life of its own.

So that’s a model. So and we all dilute, I also do it, we all dilute. How much money goes in, in case of Big Basket is a million, but it’s not always a million.

It can be as less as $50,000 to as high as 3 million, 4 million, whatever it takes. Typically, we take 50% stake and 50% is with the employee and the founders. And then we all dilute accordingly.

And there are more options as the thing goes along. So that’s normally is the Growth Story model. We just came up with that particular model.

It has worked reasonably well. There are a lot of other companies, which we had started, which we had put in money, which didn’t work out because it didn’t pass the master. The founders move on, we move on, we write off all the money and we do that.

So that also is pretty common. So we’ll talk about successes. But I just wanted to highlight the fact that the success is based on a lot of failures and few successes.

But the objective is to keep trying how it works. Sometimes it doesn’t work because of market, because of the founder, because of our bad timing or my own lack of ability to be able to raise money for that business.

Siddhartha Ahluwalia 7:57

And I remember Afsal Salu from Delyver. Afsal was an angel in my company. He connected us in 2016.

K Ganesh 8:04

Oh, I see. Yeah, Afsal was a great story. This was, they were running a company called Delyver.

D-E-L-Y-V-E-R.

Siddhartha Ahluwalia 8:11

The first version of QuickCommerce.

K Ganesh 8:12

First version of QuickCommerce. And I was an angel investor there. In fact, I was brought in by Hari Menon and Sudhakar and Vipul, BigBasket co-founders who are their advisors and also angel investors there.

That was a great example of what Swiggy is today or Zomato is today. Way before the time, way before when Google Maps were not there, when smartphones were not there, where apps were not there. They were actually running QuickCommerce or a delivery service on the phone with a call center.

And that I think was telling, otherwise they were, they were pioneers. Great, great guys. We didn’t make much money out of it.

BigBasket acquired them and they were part of BigBasket. So it was not a bad exit. But example in business model being ahead of its time.

Siddhartha Ahluwalia 9:05

Yeah, and this is a very interesting book. You say new age business models in your book, right? So let’s discuss with some of the case studies that you have backed.

Like how was BigBasket or HomeLane or BlueStone, the companies that you backed, a new age business model than the previous ones?

K Ganesh 9:23

Yeah, let’s take the case of BigBasket, for example. This is back, I think 10-12 years back when we started BigBasket. We were looking at that time, the fact that Amazon had actually scaled.

Flipkart had scaled in India, raised money at a few hundred million dollar valuation. And we were thinking that India, if it’s now ready for e-commerce, for buying online, trusting people online, and the initial green shoots of cash on delivery being working, because that was one of the biggest challenges in India. That in US, they don’t have cash on delivery.

Siddhartha Ahluwalia 10:05

Everyone has credit cards.

K Ganesh 10:06

Everyone has credit card. Here credit card penetration was low. Trust with online was low. There was no delivery ecosystem. In US again, it worked because the overnight delivery.

Remember Netflix, DVD rentals and all that overnight delivery was not there. Because of all the three challenges, there was a lot of hesitancy. But somehow Flipkart had actually shown that this could be overcome and a potential scale was possible.

So this was the scenario. Then we said, if India is going to buy online, why only this. Why not all items online?

Because when the consumer gets used to a certain convenience, he’s not going to go back to buying offline. It’s like asking you and me to go and stand in a train ticket counter to buy ticket. Ain’t going to happen.

Siddhartha Ahluwalia 10:56

Or stand in a queue to deposit your electricity bill.

K Ganesh 11:00

To stand in a queue to deposit electricity bill. None of it is going to happen. So very clearly, consumer has changed.

Then one of the things that came out to us very clearly was that we need to choose areas which cannot become a tab on a Flipkart or Amazon. Because we said horizontal e-commerce is spoken for. We did not know that horizontal e-commerce will be so big.

Okay, right. The conclusion was right, but the logic was wrong. We thought we are too late in the game to be able to mount a real competition to Flipkart and Amazon.

If you are in a category which is one more tab on Flipkart or Amazon. So it was Flipkartable or so on. Because then what will Flipkart and Amazon do?

Wait till the category becomes large enough. Then they will open one more tab and you will be wiped out. And we have seen enough examples of that happening across fashion, across baby…

Siddhartha Ahluwalia 11:53

But in products and baby First Cry was able to build.

K Ganesh 11:56

So real outlier, First Cry is coming to that. First Cry is a real outlier.

There is few that has escaped. Even in US, Toys”R”Us did not. But Zappos did get acquired by Amazon, but they built it almost to a billion dollar.

So rare exceptions are there. But we were clear that we do not want to bet against a Flipkart or Amazon tab and create a category. And our ability to be able to raise money with an investor was also very low.

So we went systematically saying which are the ones which are non-Flipkartable or non-Amazonable. We identified jewelry. We identified grocery.

We identified furniture. Okay. We identified fashion.

Siddhartha Ahluwalia 12:33

Okay.

K Ganesh 12:33

We said fashion cannot be a horizontal e-commerce. E-commerce is difficult. Furniture because of the logistics and size and scale will be very difficult.

Jewelry because of the design element will be different. Grocery because there is a lot of local sourcing. And it’s more hyperlocal than a typical Amazon Flipkart, which is large warehouse national distribution.

So these are four that were there. We almost entered furniture, but the discussion with UrbanLadder, Co-Founders, all the stuff, but did not pull the trigger. Did not pull the trigger there.

Did not fructify or consummate there. We did not enter fashion because we did not get our heads around it. And we decided on jewelry with BlueStone and that is how the thesis originally came up.

But interesting story that you mentioned of funding. Then the question comes, which is the right founding team to be able to execute the plan? Plan is fine, but the whole thing is about execution.

It is about founders. Remember when we go and raise money also from institutional investor and you have been close to prime and you are now running a fund of your own, it is extremely important that the founders who actually run it have to be strong and they are betting on that founder. They are not betting on me.

They trust me and it is one level of credibility higher, but they are betting on the founder. So we need to go and find the right founder who is passionate, who is willing to come on board in the growth story model to be able to come and run this. While we give certain guarantees in terms of fundraising, initial funds, in terms of help with online marketing and technology which are our strength, but still you need to do that stuff.

So that is where, you know, past relationship and network comes in. Fabmart, Fabmall founders were quite well known to us. They in fact were my first customer in customer asset or what is now as first source.

And in fact, we started our first employee in customer asset, first source was in the Fabmart, Fabmall office that I had seen very closely their passion for customer service. And because the way they grew, they acquired Trinethra and they merged with Trinethra and Trinethra sold to Aditya Birla More. Here was a team that was tech savvy, online, perhaps created one of the first online retail companies.

More importantly, knew grocery by heart. Hari Menon can take a bunch of rice in his hand and tell you what the quality is, because they ran actually 300 Trinethra stores, physical brick and mortar grocery stores. That combination is very difficult to get.

How do you get people who know grocery as grocers, traditional grocers and also are tech savvy or also are online. So that is how and it took me about a month to convince them to come on board, to be able to leave whatever job they were in jobs. I mean, Vipul was an advisor and Sudhakar was an advisor, but Hari Menon was working for a corporate for the Manipal group and to do all that to come together, which is very fortunate because nobody else could have done that.

Because we saw as a part of our initial planning, it is as much about grocery. While there is e-commerce, e-grocery, e-business is there, what is really e about it? You are talking about food, staples, rice, wheat, which is physical, which is grown in farms.

There is nothing technology about it, which needs to be transported to your warehouse in metro, which is nothing technology about it, which has to be delivered last minute. So that was the, that is the challenge. So finding the right co-founder.

Then comes this question of funding. We went to raise money. Okay, right.

And like most of the times happens with entrepreneurs, we are foolish enough to believe our idea will work. 10 venture capitalists said no.

Siddhartha Ahluwalia 16:24

Because of webvan.

K Ganesh 16:25

Exactly because of webvan. Okay, I did not even know about webvan. We are all living in India and all this.

Okay, then I came back and first one said that I Googled webvan was the e-grocery, which is the largest flame out of dot com bust across the world, across all categories. They said in US, if a Sequoia Capital cannot make webvan work, how the hell are you going to do it in India? Now, I mean, like typical management shouldn’t be had some nice answers to give and all that stuff.

But the core thing that one, second was that people will buy book online. Okay, right. People will buy.

It’s very interesting. We went and met Noel Tata at that time. Okay, right.

Trent. Okay, right. So for this, he said, listen, people will buy books and all the stuff grocery, nobody’s going to nobody’s going to buy online.

That is those are his words. So he rejected investing in our business because we are looking for this. He was one of the 10.

Okay, right. That we went to for for investing. Okay, right.

He said not going to do so. And we were quite quickly running out of the money which I had committed and which you are spending. So it was coming to a point where if it if I don’t if I don’t raise money, then my main responsibility raising money was in my head.

That’s very clear. That’s my role. Okay, right.

Don’t raise the first round money. Either I had to pony up a lot more money than what I had committed. And the problem with that was this is going to be a deep money sucking category.

Okay, right. Deep pockets. I mean, I’m not, I will not be able to do on my own.

Okay, right. Or shut it down. Fortunately, so happened while we are sending that out.

I was on a flight from Bombay to Bangalore. Okay, right. And next to me sitting was Ascent Capital, Raja Rajkumar, who is a good friend, well known in entrepreneur circle.

And it was a turbulent time. So fastened the seatbelts on. So neither of us could get up even go to the restroom.

Okay, unlike a typical entrepreneur, I opened, I opened the my laptop and said, I want to show you something.

Siddhartha Ahluwalia 18:31

Yeah.

K Ganesh 18:31

And I took him through that. And he said, interesting. But the problem is Ascent Capital is a private equity fund.

Siddhartha Ahluwalia 18:37

Yeah.

K Ganesh 18:37

They have never done, written the first check. They have never written a startup check. They have not done an e-commerce company.

Focus primarily on real estate and infrastructure, large later stage ticket sizes, not a single first check. And the minimum they have done is 10 million dollars. They have not done 1 billion, 2 billion, 3 billion, 4 billion.

And we were planning to raise 3 million at that time. That was our sweet spot on a paper plan. 5, 3 to 5 million, sorry, with that.

Okay, right. Then he went through all of, all of that stuff. And said, it’s very interesting, but I can’t, I wish I could do this.

I can’t do this because 1, 2, 3, 4, all this reason. And pre-revenue. They have never done any pre-revenue.

He says, are you revenue generating? I said, no, it’s a paper plan yet. I said, what is definition of revenue generation?

He said, some revenue you show. So that decision. So we came back.

The flight got over, but he said interest will meet and all that. So I come back and speak to Sudhakar, Vipul and Hari saying that what is to be. And then there was a company started by a guy called Abhinay Choudhury.

Okay. Which was in Whitefield. Okay.

Right. It was called Shop As You Like. I hope I’m getting the name correct.

Shop As You Like, which was delivering grocery. It was a one man show. Okay.

Right. So he says, he is there and we can acquire him. There is some revenue there.

Okay. Okay. And Sudhakar and Vipul used to advise him, you know, friendly advice.

So therefore, they knew him and all that stuff. I said, okay, if that satisfies the revenue part of it, why don’t you talk to him and acquire? He said, I am a good guy and he’s been running it.

So I said, wait, wait, before that, I’ll do the due diligence on him. Right. I was living in Whitefield at that time.

So I called him. So I tried ordering three, four times. Yeah.

The beauty of the model was whether it was customer service, whether it was sales order, only one person used to pick up the phone, which was Abhinay Choudhury and order. I said, okay, let’s do it. Okay.

Right. And that’s how we started. So we are able to meet that criteria and full credit to Raja Rajkumar of Ascent Capital.

He was able to lean on all his investment committee, LPs and others to go outside the mandate, which for a fund is quite difficult to be able to say, let me put this. It is for that they took a large chunk and obviously, because of paper plan, they had to put a large ticket size and did that, which worked out very well. Again, we didn’t mind dilution.

We didn’t mind that the fact that somebody was able to do when 10 people, nine other people had said no, and it was clear that we can’t raise money. That is a story, which of course worked out very well. Rather, I mean, they returned more than the fund.

And as it so happened, the infrastructure and other sectors went out. This is one of the best dream returns for a fund.

Siddhartha Ahluwalia 21:35

So for Ascent, Big Basket alone returned the Ascent Capital entire fund through Tata acquisition?

K Ganesh 21:43

See, I don’t know the full details, but it is quite significant. The fund is a lot more than, the returns is a lot more than the fund. Okay, right.

Let me read this way through different stages. They still own a small portion in the thing because Tata’s now own 66%. Balance 33% is held by us, by founders and by Ascent Capital a bit and much later stage investors.

Siddhartha Ahluwalia 22:10

And how, like you discuss in your book, you know, business models. Here, it’s clear the founder was right. The business model was generating money from day zero.

It was not like a content based model where you will generate money tomorrow. Right. I think on an order value basis, you might have been profitable, I assume from X day.

Right. If not from day zero.

K Ganesh 22:34

Not really, because see, if you see the original eGrocery model and this, this was meant to be slotted delivery for your monthly purchase. Yes. For monthly purchase slotted delivery, which basically means you have to, the fill rate becomes important.

I talk about metrics in the book. So one of the important things is what is the metric that will really drive you like you’re in content business, you know, your metrics. Here, it’s important.

So it was not order value, not unit economic profitable. Okay, but contribution margin was there and all that. That would come really when the order value increases, the basket size increases for which I need to be able to give you a comprehensive basket.

And the density of orders at a locality needs to be very, very strong.

Siddhartha Ahluwalia 23:18

Yeah.

K Ganesh 23:19

Okay, right. So if you take Palm Meadows, as an example, it will be Palm Meadows thing will be profitable. But if you’re talking about other areas where they deliver that, but obviously, over time, it builds up.

Over time, it builds up. The second driver of that is we are always clear that this is a grocery business. We have private brands, private labels, substantial portion revenue comes from this.

So if you look at the business model, one is a online e-grocery business model. Other is a FMCG business model. We compete with ITC’s AASHIRVAAD aata.

There the margins are much, much higher. Okay, so it is really that combination that works to be able to do it. Bluestone, for example, is a different example where you make money on a per unit basis, obviously, every time.

Okay, right. There the question is of when do you reach profitability, but each order is positive. Homelane, for example, each order is positive.

Typical order value is six and a half, seven lakhs. There’s a 30 to 40% gross margin on that particular order. So it varies.

But in grocery, it has to come out of lifetime value. You need to buy again and again and again and again, as a habit, frequency of usage for it to be profitable.

Siddhartha Ahluwalia 24:31

The other thing that you talk about in your book is business, the timing of the business model. How did you figure out in the companies that you built? Like, for example, let’s take Big Basket only.

The timing was right. Because the internet, Flipkart was an indication that the timing is there. But along with Flipkart, you are talking about groceries here, right?

So maps were not there, as you said, mobiles were not fully there. A lot of it happened simultaneously.

K Ganesh 24:55

So one thing I found is that to be successful, you require a lot of luck. I’m a management graduate. I teach at Indian School of Business and IIM Bangalore. I teach also. So gyan, we will give as if we were prescient and we planned it beautifully.

But honestly, 99% of the time, we do something. If it doesn’t work out, we don’t talk about it. If it works out, we claim extra credit for being so much prescient.

So honest answer, a lot of it is luck. You’re absolutely right in saying the evolving ecosystem and development catapulted us a lot. It really helped.

Okay, right? That’s a fact. Some of them, it helps directly.

Uber, Ola, for example, you cannot do without a Google Map. Okay, it’s not possible unless you see the map. Other things like Big Basket or delivery and all that stuff.

It’s good if you have a map to be able to see. It does substantially help. We were talking about Delyver and Afsal Saloo.

That is an example. If you had that, it would have really helped to be able to see that. And this is my personal view.

It could be very biased view. Only one way of looking at it. So take it with a pinch of salt that it’s one man’s view.

I believe personally that it’s very difficult to out-execute somebody else. What I mean is, if you are running this podcast, I will have 10 views on how Neon podcast can be done better. I can troll you on why you are doing this badly.

Okay, right? But if I were to run a podcast, I’m sure I’ll make not 10 mistakes, but 20 mistakes. Maybe not some of them you made, but a lot more mistakes.

Because there is no magic wand I have to be able to out-execute. So I believe I don’t have a magic wand at any of the sectors or any of the businesses while I may have 1000 views about what should be done better. Okay, right?

So then where does that leave me? So I need to do something which is not out-execution. But I’m able to come in, be a first mover, change the status quo by using technology or some sizzle or search, find a new way of doing something instead of out-executing you.

So all our businesses, the common theme has been, can I be the first mover? Okay, can I be the first mover? What it does is not for any other reason.

It gives me a long rope to experiment to fail. Today, if I were to start a software company or BPO company, right from day one, you in the podcast itself will keep comparing my metrics with Infosys, with the First Source and all that. Okay, right?

But if I start a new age company, okay, there’s no comparison. It gives me a lot more room to play, a lot more ability to make mistakes. And I also feel create disproportionate valuation as a first mover.

Siddhartha Ahluwalia 27:45

Got it.

K Ganesh 27:45

Okay, right? So that was the driving force. Take Big Basket, for example, can I be better than Spencers or Reliance or Neil Giris?

Very difficult. I mean, you know, however bad they may be. I mean, many of these brands, the service sucks.

But can I provide better service? Unlikely. But can I come in, use technology, e-commerce, internet, dark stores, something or the other to be able to change the status quo, then I have relatively better chance of success.

So whether it is TutorVista, whether it is Big Basket, BlueStone, Portier Medical, can I create a better hospital than what Manipal has done?

Siddhartha Ahluwalia 28:20

No, no.

K Ganesh 28:21

Very, very unlikely. No, I have no, I’m not a doctor. I don’t have a basis.

I have no clue. But if I say out of hospital health care, same thing with jewelry. Jewelry has been a traditionally generation business.

Two generation, three generation, four generation of jewelers. Krishniah Chetty is fourth generation jeweler. So how do I create something?

Okay, right? If I have to play, then I have to do something different. That is when it came with that online, large design, we can create a new business.

So again, one of the first businesses, Caratlane. Caratlane and BlueStone were the only two, first two. Homelane and LivSpace were the first two in home interiors.

Portier Medical and Health Care At Home. It was slightly earlier where the two early people in that business. So that has been a driving thought and mover.

Big Basket was the number one in grocery store.

Siddhartha Ahluwalia 29:20

And in case of BlueStone also, if I remember correctly, there were no tailwinds behind BlueStone till Mithun Sacheti exited his business completely to Tata. Not even the Caratlane acquisition, majority acquisition by Tata. Because it was not such a great outcome for Tiger Global.

They just got their money back through Caratlane, which they had invested. And Tata got in at quite an attractive valuation when they first got in the company. But what Mithun created with the help of Tata over eight years, I believe, and then exited completely to Tata.

Then is when the global VC ecosystem started noticing BlueStone then, am I correct?

K Ganesh 30:01

No, I would not fully agree with it. I would half agree with it.

So, the agreement part is, are we happy about Mithun Sacheti’s last deal selling the remaining stake to Tata at that valuation? 100% yes. Is that a bellwether?

Does that serve as a comparison? Do our pitch document talk about the multiples in the valuation? 100% yes.

That part of it is agreed. But even before that happened, both Caratlane and Bluestone had already broken through and proven scale. Currently, Bluestone would have over 200 plus guide stores or physical stores.

But at that time, it had already 100 plus. So, to valuation benchmark, to quote and to do that stuff and to peg our thing, yes, it is useful. Rest of it, it is already broken through completely.

So, that is why I do not fully agree with it. Earlier in the Bluestone journey, we have been through multiple ups and downs. There have been times when we had struggled to raise money.

We raised money at flat rounds. All of that is true because the jury was out on that. I think two things helped.

One, the fact that Gaurav Singh Kishore was able to scale the business. Two, the franchise-based store model helped. It is a lovely, largest, omni-channel jewelry business that is possible.

Online, offline. We had something like try at home and all the stuff, those were small. But the real thing is the combination of online offline has worked very well.

And again, to your earlier point, the evolution of the industry and sectors opportunistically helps us. The fact that there are a lot of other similar examples, whether you take Lenskart or others, both globally and in India, where online-first D2C brand, starting online, going offline, proving economics, having omni-channel presence, omni-channel business model gets highly valued. So, that also helped.

All of that, all of the help, but we love the valuation.

Siddhartha Ahluwalia 32:08

And when I heard you initially, not right from the book, but before the book, your thesis was to build in India roti, kapda and makaan. Yeah.

K Ganesh 32:17

So, yeah, that is another favorite thesis behind the way we look at it. Again, not the only way to look at it. This one is, don’t have any wild ideas.

We are not geniuses. We are not smart to come up with a Twitter or a Facebook or something like that to be able to do that. We stick to core sectors, roti, kapda, makaan, education, healthcare and entertainment.

Those are the core sectors. So, we choose for the sectors where people are willing to pay, we follow the money, where whatever we do, people will pay. That means I will give you something, you will pay.

Extremely successful models are there where people give it free and make money somewhere else. We don’t understand it. So, core sectors, big pain points, follow the money, more like the cliche that, you know, people will pay in India for painkillers rather than will they pay for vitamins or vitamin supplements.

So, that has been the thesis. That’s what we have stuck to because more easily understandable. I wish I had the mindset, IQ and the geniusness to be able to create something out of thin air.

Siddhartha Ahluwalia 33:32

But I think in India, everybody starts with very hardcore things as an entrepreneur. Hardcore means something which people can touch and feel.

K Ganesh 33:42

Yeah. So, that’s one of the things which I feel is a huge opportunity even today for entrepreneurs in India. In India, everything is broken. Everything is broken and I’m an Indian.

I lived all my 63 years in India. I want to live in India. I never studied or worked abroad or anything like that.

So, 63 years of Indian experience. So, I’m very proud of India. But the fact is even today, everything is broken.

You step out in prime Bangalore, you will have potholes on the main roads in the richest areas. Anytime there is rain, there is a challenge. We generate our own water.

We generate our own power. We take care of everything on our own. So, essentially, two of the top things which people in developed countries take for granted, health care and education, which are provided by the government, are the worst in India.

My driver does not send his two girl children to a government school where which is right next door. He sends them, spends 40% of his salaries sending his two girl children to a private school. Unfortunate part.

So, in India, everything is broken. Even education, health care, government does not do. Water power we have to generate on our own.

I think that is the biggest opportunity for entrepreneurs. So, the ability for us to be able to do hardcore touch and feel things, look around you, see the pain point and start it. Take with grocery for example.

It is not a rocket science. What is glamorous or sexy about sending bread and milk to your thing. But it is a broken thing.

In Bangalore, try and go and buy grocery. You will go first somewhere, there is no parking place. You have to park somewhere and then you have to carry go to the shop, stand in a queue, check out counter.

And I have faced it with my mother. Check out counter and then go and carry those bags, jump over potholes. By the time you come to a car which is parked, where you are not supposed to park, the car has gone away or somebody is shouting at you.

Then you put that. I mean, it is a miracle that people do not trip or fall down or do not lose their sanity. And this is an everyday affair.

How nice is to have. Now today, of course, Big Basket is not the only one. There are so many competitors.

But you do not have to go out. But it took me so many years to be able to do that. So I think that is a great opportunity in India.

If you are in US, it is very tough to be an entrepreneur. You have to be genius. Twitter, somebody selling characters.

I remember in 2005 when I went to raise money for TutorVista o this and they talked about Facebook. Somebody in Harvard University is trying to send some messages. Somebody is there, a valued company.

They were, I think, raised money at 100 million dollars. I said, who will pay? Where is the money?

Who will pay? What is it? That is, for me, it is difficult to understand.

Forget about coming up with such an idea. And then Snap came that you take a selfie, you put some gooey-gooey filter and you send it and it will disappear. I mean, why would first of all somebody want to take a selfie?

If you look like me, I do not want a selfie. I do not want to take a selfie and send it to you. Would you like to see my selfie?

No. Okay, be honest. But other part is true.

If my selfie goes out, I want it to disappear in 17 seconds. And for a long time, I did not understand. It became a rage, now they are making money and people like this.

I mean, this is, you have to be a genius in US. So, my advice, India, look for basic core problems. Look what is broken.

Every goddamn thing is broken. You can start anywhere and build a company.

Siddhartha Ahluwalia 37:11

You are right to a certain extent on that. What I would say is entrepreneurs of India have tried to copy and become the Twitter of India, like Koo. Brilliant second-time entrepreneur who sold his previous company Taxi for Sure to Ola tried it.

It did not work out, right? Similarly, there are companies and content who raised billions, but still the revenue does not match up to their valuation. Do you think is this the reason like the basic stuff is so broken that we should not touch fancy stuff?

K Ganesh 37:48

No, again, I am a bald old man. Okay, right. So, I think old age.

Okay, right. I would not recommend it for you. I would not recommend it for youngsters who are listening.

Okay, right. By all means, dream big. Think about different new ways because I come from a time when AI was not there.

Google Maps was not there. Internet was not what it is today. TutorVista was started with dial-up modems.

Okay, right. When people had to connect through dial-up, okay, broadband itself was not there. So, my thinking is shaped by those.

Okay. Today, the ecosystem has changed completely to be able to think of, in my view, crazy. Okay, right.

In your view, opportunistic. And for youngsters who are grown-up digitally native, create models to be able to do it. So, I would not say this is the only way.

All that I am saying is, if you do not have any of those thoughts, India because everything is broken in the core sector is still an opportunity which is not there in the US. All these basic problems are solved for in the US. Okay, right.

Or Europe. Okay, right. Healthcare is very strong there.

Okay, right. So, that is what I meant. Okay, right.

But I am sure today with generative AI, okay, right, with robotics process automation, with so many of these new tools available, you can do that. Other thing also I feel is, with the digital public infrastructure that has been available, today’s entrepreneurs can build on top of that lot of products or services. Okay, right.

That can be extremely useful. In my book, I have a chapter on digital public infrastructure. And people are already building it, whether it is Phonepay or the Paytm or any of this built on UPI.

So, the ability to be able to build even lending, for example, on the basis of account aggregator on the basis of this lending tech, all of that is so much of opportunity. Okay, today. Okay, right.

So, it does not have to be big basic pain point, but still safer if you build for this sector.

Siddhartha Ahluwalia 40:02

And one thing that I want to discuss with you is you discuss about, you know, platform and marketplaces in your book, which are the best examples that you would quote on business models, in your experience that scaled, not taking, you know, Big Basket and Bluestone?

K Ganesh 40:22

Yeah, no, I think what has happened very clearly at the broad level, which I talk about in the book, the traditional models were based on different strengths, different metrics to track, and different assumptions, which we call as a pipeline business model, where you had a manufacturer at one end, you put assets, you raised capital, and those assets were deployed, there were economies of scale, as you scale the volume, and distribution service and consumer.

So, linear flow of value through the pipeline, that’s why it’s called a pipeline business model, take Tata Motors, Tata Steel, and they were vertically integrated, all of it was being done by that. Then came courtesy internet, courtesy digital, this entire platform business model concept where the companies didn’t, the value flow was not linear, the companies were not vertical full stack companies, they were companies that stood in between, there were two sides, the producer side and the user side. All these platform companies did was to facilitate interaction between the two sides, the consumer and the producer and exchange value, information, product or service and take money in between, take money in between.

So, suddenly after 100 years, the concept of business model, what we all learned, the Philip Kotler’s of the world, Porter of the world and all that, that suddenly changed. No longer economies of scale mattered because there is no fixed asset or investment. And it is a different rules, different game altogether.

How do you facilitate interaction between two sides and make money? Suddenly, the metrics and the measurement changed, that’s one of the reasons why I wrote the book, because when I talk to people, whether they are students, whether they are managers, whether they are wanna be entrepreneurs or even the common man, why is Somato valued so much and they don’t make money? How are loss making companies can be valued so much?

How can they public? What is earnings per share? There is no earnings, therefore there is no EPS.

Return on capital invested doesn’t make any sense because they’re not investing capital in capex. So, that was the faceted thing. So, suddenly you’re talking about businesses where not only is the business model different, the metrics, measurements, the right to success is very, very different.

So, that is what is fascinating. So, if you take, for example, Airbnb, take Swiggy, Somato, forget my companies. What they are doing, how they are scaling, scaling both sides.

So, what suddenly has become important, not economies of scale, but network effects, what we call as demand economies of scale. How do I create network effect? How do I create a virality in the product?

So, that virality coefficient is more than one and that is able to do a perpetual growth. How do you create a flywheel effect? And just simply explain, take for example, in this locality, when Uber is operating.

Today what is happening, you can get a Uber within 3 to 4 minutes. So, you are very happy. So, all the people in this thing because they can get 3 to 4 minutes Uber, they rely on Uber.

Because all the people rely on Uber, there are more drivers here in this locality. Because there are more drivers in this locality, you can get in 3 to 4. So, typical network effects kick in.

The flywheel is moving. Now, the beauty of platform businesses is when the flywheel is moving, the platform can actually sit back. They do not have to do anything.

But look at Tata Motors. That does not apply. Competitors are there.

Competitors bring new products. Every day the manufacturing plant has to work. All the suppliers have to supply.

Power has to be there. So, it is an everyday operationally intensive business. In this case of Uber, it is not an operationally intensive business.

They have to handle the escalation. But the fact that multiple riders are there will take care of drivers being there. Multiple drivers are there, multiple drivers come.

That positive network effect is there. So, the new age business models, we need to build in these parameters. These are the ones that make a difference.

Uber, for example, is known to have a virality coefficient when they launched of 2.4 because of the referral programs they had with drivers and they are with riders. That is what made it so. Take Dropbox, for example.

When they launched, how did they scale? They scaled dramatically because they offered a referral program for which every referrer and referee will get additional storage when they refer. So, it becomes a network effect, exponential, and scales exponentially.

So, suddenly you are talking about business models. This is days before Generative AI and all that stuff. I am talking about pipeline to platform.

Business models for which the rules of the game, the drivers for success, the metrics to monitor, all of which I talk about in this book are different and need to be monitored. Now, the biggest question that existing companies need to ask for is how are they going to compete with new age companies? How are they going to compete and scale and survive and capture the opportunity using the principles of new age or I call platform principles?

How do we make it asset light? Can I do something to be able to get multiple players into the ecosystem? And companies are doing it.

And that is fascinating. And that’s a greatest opportunity, whether you call it digital transformation, whatever you call it, but I would call it platform thinking, platform businesses to capture value using in traditional businesses using these principles.

Siddhartha Ahluwalia 46:09

And when you were building GrowthStory and your top three companies, you know, I would say are in the order of first Big Basket, Bluestone and HomeLane. Portea

Portea, right? And Portea. And Portea, right?

But none of these companies are either a platform or a marketplace. So you think that from an investor or an entrepreneur point of view, you missed having a platform or a marketplace?

K Ganesh 46:39

Yeah, I do. No, you’re absolutely right. We did try platform and marketplaces business, those comes under the category of those mistakes and businesses that didn’t work out for multiple reasons.

Happy to share.

Siddhartha Ahluwalia 46:53

One would love to dive into that.

K Ganesh 46:54

Share a couple of it. We had a company called Qtro. Qtro is like Etsy of India.

See it like that. It was a marketplace where curated products could be sold.

Siddhartha Ahluwalia 47:04

Yeah.

K Ganesh 47:05

Okay. And buyers will buy. The idea was simple that it’s a marketplace like Etsy.

Etsy thrives despite Amazon. So Qtro can thrive despite Flipkart and Amazon. We raised some money, it scaled and all that stuff.

The idea was that for artisans, for not popular items, but niche items, handicrafts, specialized items, Flipkart and all platforms will not work. You need a specialized platform like Qtro, similar to Etsy model. Similarly, when you are buying, say, a gift, you don’t want to go and Flipkart and Amazon buy the lowest price gift.

You want something which is slightly unique, differentiated from artisan in Jaipur, Rajasthani foldable chair, which you want to get gift for your cousin’s birthday or something like that. You will come to Qtro and do that stuff. But just did not, the business model did not work.

So after a lot of money, which is our personal money, we had to shut it down. Maybe some other person, not me, somebody else, slightly more savvy, slightly better could have made it. But that’s one example.

The other example was we tried to create from India, an app in the US, by which people could get handyman services.

Siddhartha Ahluwalia 48:28

Okay, like the Urban Company for the US.

K Ganesh 48:29

Urban company for the US. The idea was, if it’s going to be a platform where I connect consumers with various people, there’s no reason why I need to be in the US. Okay.

And we had a terrific entrepreneur, okay, right, was earlier entrepreneur now extremely senior person in Flipkart, ex-Flipkart, ex-entrepreneur. I don’t want to name him. Terrific entrepreneur who was there, who worked on growth story platform for this.

Okay, right. We tried, we tried, tried, just could not crack it. Multiple reasons.

I mean, sitting in India trying to do that stuff. Two, for Urban Clap equivalent, insurance becomes important. Okay, right.

When a carpenter comes, works on your home in the US, and suddenly the pipe bursts and leaks and the carpets get spoiled, and you are liable for $200,000. Okay, right. There you have to be, you have to get each other.

Who is going to pay? Okay, right. What is he going to pay?

All that. So multiple, how are you going to acquire the customer? How do you kickstart the platform?

Okay, one of the challenges of platform is while we talk about flywheel effect and, you know, self-sustaining, how do you kickstart? How do you get enough people? All that we tried, just could not crack it.

Now, with a better promoter than me, with some more funding might be required. So like this, we can spend entire next one hour about the failures of this, but just happened, did not really work out. Homelane is not a platform really, but we do have elements of platform principles.

The designers are independent contractors, they work, they work there. Okay, right. They work with Homelane.

So we have design studios, we have partners, we work with design partners. So there are a lot of platform elements that we bring in. But you’re right in saying there are no pure marketplace business.

Qtro perhaps was the closest to that.

Siddhartha Ahluwalia 50:19

And which are the other business models that you think that, you know, if you had more time, or more, you know, maybe capital or anything else, you would have loved to dive in, like, for example, SaaS or FinTech?

K Ganesh 50:32

Yeah, so I mean, would love, all of them are, you know, potential business model. It’s a question of, you know, time and the bandwidth to be able to do it. And also opportunity and finding the right funders to build.

I have invested in Oto Capital, which is a FinTech company.

Siddhartha Ahluwalia 50:47

But in personal capacity.

K Ganesh 50:48

Yeah, personal capacity. Yeah. It’s not a growth story company, I did not promote it.

Pure, pure, pure, pure agility to spend. SaaS is again, one area which potentially is good. We never delved into it, even though Verloop.io is a SaaS company, but that pivoted from being a chatbot or a chat company over years into a into into a pure, pure, pure SaaS company, using using GenAI. But I think each of these sectors are big. FinTech is really potentially big, would love to, would love to explore how to bring in. But today, it has to be done with a GenAI element, core GenAI, it has to be done in a reverse manner, where we start with utilizing generative AI and machine learning to build grounds up companies in that space.

Siddhartha Ahluwalia 51:37

One more very interesting example, you took was Doubtnut. Would love that story, you know, as you tell it in your book that huge distribution, but monetization was not clear. And ultimately, the acquisition was not.

K Ganesh 51:51

Yeah, DoubtNut is close to my heart because it’s in a tech, a tech space, great founders, very passionate founders and full marks and respects to them for what they did. They came from education, education background. If you look at and because of TutorVista, we understand tuition, almost 70% of the tuition time, personal tuition time that you send your kids to is for clearing doubts.

Therefore, it makes sense that if you are able to take that and get it answered, you can build a large business because in India, propensity of the parent to spend money on kids education is humongous. When we started TutorVista back in those days, we did a research, small research. In India, next to grocery, I mean, house expense is not considered assuming you’re living in house.

Next to grocery, education is where the parents have the maximum propensity to spend their discretionary money on. Second, same thing in US, it is seventh propensity to spend. Sixth is on DVDs.

So that is the level of it. So it’s a great opportunity for DoubtNut which they identified. They already were in teaching business.

So before they started because of digital and internet, they started DoubtNut, can we do? Hire best people and do that stuff. That they did exceedingly well, grew substantially.

Huge usage because it was free, but huge usage free. Then they did one more very good step of trying to automate the answers because again, you can apply the 80-20 principle. We had also done that in TutorVista earlier because 80% of the questions are the same.

No kid is going to ask unique Einstein type questions. Every topic you can take and you can break it up into what are the top 20, 30, 40 questions on that topic that will come. If that is a question, the answer can be pre-recorded, answer can be kept, answer can be spent, which also they did pretty well in the voiceover with all of that stuff.

Here is where the challenge came in. How do you monetize? And this is a question I have for you as a content creator and for entire creator economy.

How do they monetize? So monetization is a question. They grew phenomenally because it was free, which is fine.

And it is okay not to monetize initially. But somewhere the switch has to take place. It has to take place in monetization.

And this is a challenge with many, many edtech. I know a company, it is called Reforge in the US. It is a edtech company funded by Andreessen Horowitz.

Great founder, expert, great founder. Challenge is monetization. Again, going through struggles and pivots and all that stuff now.

But fundamentally very strong company. Monetization was a challenge without doubt. They were not able to monetize.

Now the question came, when you have 10 million, 20 million, 30 million users, which is what they were targeting, those kind of numbers, how do you monetize even a small portion? Then they said they can launch courses. Now, if you are going to launch course on your own, it is a completely different business.

Getting to solve doubts is different than launching your own courses. Highly competitive market. There are other people.

If you are planning to go for a course, would you rather go for Alan or Akash or are you going to this one? Answering a doubt for free is different. So this is where the challenge came.

And obviously, you have heard all the stories about how they were offered 150 million by users and acquisitions. Finally, they got sold for 10 million and all the stuff. But full marks, respect and regard for the founders for all that they have done.

But this shows an example of where, how do you navigate exits? A 150 million exit, provided it was not all in stock but had a lot of cash, would have been a great. That is another thing that people keep asking me.

What is the right time to exit? Should you exit the business? How do you build a business?

When do you start looking at exit? When you start, do you start with exit in mind or you build passionately a business, good business and after that, Inshallah, exit will happen. So these are big dilemmas that come up.

White Hat Journey is other example where they were exited at the right time. So I mean, both kinds of stories. This perhaps in hindsight is the exit that happened when the thing was hot, especially because the monetization part of the model is not proven.

Again, going back to my story, being a bald old man, going after core sectors, big pain problem where monetization is clear, is a lot more easier. But this is, hats off, this is a very bold way to be able to build a business.

Siddhartha Ahluwalia 56:43

We haven’t tried it at NEON because we believe, you know, our content at NEON builds a brand for the fund. But we are open to it. I am not saying no, never.

K Ganesh 56:54

But you have cracked it, you have scaled very well and you have got the numbers that are going. And as long as you are not, you know, drinking your own Kool-Aid and genuinely, objectively speaking, the fund benefits from this, it is perfectly fine. Because it could be treated as a part of the marketing expense because all said and done, a B2B service will only give you so much of money.

The potential upside in one company from your fund, giving you mega returns will overcome all of this. In addition to all the challenges not being answerable to anybody else for doing it, all of it is there.

So I am sure, I am sure there is a logic that you are following.

Siddhartha Ahluwalia 57:33

Absolutely. But what I was coming to is, for example, in case of Doubtnut, and I think about it because I also knew the founder and many creator companies in India started micro monetization. For example, if you solve one single doubt using AI and that’s what we were using solving, a student can pay them, it’s not free, it’s 5 rupees or 10 rupees per solving doubt.

And when parents have already taken out a large amount of budget, you know, topping up the kid’s wallet for 100 rupees so that the kids can solve 20 doubts, right? It would take a genius for a kid to, you know, solve 20 doubts in one session using Doubtnut. But that 100 rupees would last the kid over a period of time.

And if they had, obviously, this is all hillside bias now, right? But the micro transactions could have, it could have been a different story.

K Ganesh 58:29

Yeah, no, so that’s a very interesting point. Because in TutorVista, when we were I’m talking about back in 2010, people were really keen on getting doubts answered for a fee. Okay, right.

Students in the US. Yes. Okay.

And they would pay $1, $2. Okay. Teachers in India working remotely from whom are very happy to do it at that price.

Okay, at half that price, we could have captured a half that margin. At that time, the challenge was payment.

Siddhartha Ahluwalia 58:58

Yeah.

K Ganesh 58:59

Okay, right. Because even in India, even with the Indian consumer and the Indian teacher, how do you pay a teacher? I’m talking about back in 15 years back, how do you pay a teacher?

25 rupees.

Siddhartha Ahluwalia 59:10

It was not possible.

K Ganesh 59:11

Not possible. You can’t, you can’t do a check. Courier the check is 50 rupees.

The check will clear after two weeks. The question needs to be answered now. Okay, right.

So, it is. So, digital payments, micro payment possibility has opened up a world of business opportunity, including the one for DoubtNut and to be set. But I’ll tell you where the problem is.

This is where the business model. See, the challenge here is consumer behavior.

Siddhartha Ahluwalia 59:39

Okay.

K Ganesh 59:39

Okay. Free is fine. If I want to collect even one rupee from you, the friction that one rupee introduces kills the model.

Siddhartha Ahluwalia 59:48

Okay.

K Ganesh 59:49

Okay. Just cannot do it. And this is important even in your SaaS businesses for pricing.

You price enterprise level, you do free and do some premium. But in between to collect that money is very difficult. If you charge more than 10 dollars a month, the friction becomes too high. Yeah.

Okay, right. So, this entire business of CAC versus LTV, customer acquisition cost versus lifetime value goes for a complete toss.

Okay, in the pricing. So, to short answer to your question, zero and one rupee are extremely different.

Okay, you just cannot do it. The effort involved in collecting one rupee, I would argue the same as effect involved in collecting 100 rupees. Okay.

Okay, right. That is very important thing that entrepreneurs forget. Do free, fine.

But one rupee to get out of it, even out of from me to get one rupee, so much of decision making goes through. It is not about small. You are logically right.

Such a small amount. If the kid wants to buy an ice cream for 40 rupees, I’ll give it. The kid wants 4 rupees for a question answered.

Is that really required? Can I answer the question? Can I do it myself?

Can’t Google answer it? And today what has also happened really, one of the reasons why I think DoubtNut was not able to raise money, they raised capital they would have done is because the entire ChatGPT business.

Siddhartha Ahluwalia 1:01:14

Yes.

K Ganesh 1:01:15

Why do you require the ChatGPT can answer doubts and all that. So, the investors willingness to back DoubtNut when ChatGPT is going. And after that, we have seen what has happened to Chegg, homework help company.

Okay, 90% and gone. Okay, down. I mean, Chegg was publicly listed company.

And it is an old company. It was there when TutorVista was there, we used to look at Chegg, and we used to wonder. And a great company, great service, homework help, used for all of it, that cracked it, market leader, all of that stuff.

ChatGPT came in and you see what has happened, almost like what happened to Barnes & Noble with Amazon. So, I think the ChatGPT thing this, so you cannot be left to this one rupee, five rupee and make money on that. That’s very, very, very difficult.

Siddhartha Ahluwalia 1:02:03

So, do you think that because obviously, Facebook, Snapchat, they’re all free models, and then they later on, you know, became the giants because of advertising. But in India, then freemium doesn’t exist at all, or free doesn’t exist at all for any service.

K Ganesh 1:02:18

No, so things like Paytm and PhonePay, for example.

Siddhartha Ahluwalia 1:02:21

They are taking little transactions.

K Ganesh 1:02:23

So, digital payment, but very small, or a lot of it at the lower end is free also. It’s possible. So, to answer your question, it is possible.

But the asking rate or the bar is very high, you need to have hundreds of millions of free users. Because what is a typical thing, while it depends on the product, or the service and the value you provide, typically less than 5% of the freemium users actually monetize. So you need to have really large numbers to be able to do it.

So, are you providing something for free that you’ll get 100 million users plus? Okay, that becomes important. The advertising, unfortunately, you know this very well.

Siddhartha Ahluwalia 1:03:05

It doesn’t work in India.

K Ganesh 1:03:07

CPM rates are very low. It doesn’t work in India. You can’t make money out of it.

Abroad also is challenging. And the third challenge is people like Google and Meta and all this, they are changing the algorithms every point of time, squeezing the last. Why are they so profitable?

Why are they so valuable? Because they squeeze the last juice out of it. Leaving nothing for you.

You see keywords, they’ll make you bid up the keywords. Organic reach, they’ll control how much your organic reach is reaching, so that you are forced to spend more. Very difficult for the entrepreneur to be able to build.

All of this makes it challenging.

Siddhartha Ahluwalia 1:03:42

But I have never seen a freemium company that could become profitable in India. I don’t have an example yet.

K Ganesh 1:03:48

Not yet. CRED is doing apparently very well. Not profitable, but it’s doing well.

They are at the higher end really. They’re targeting the higher end market. Would love to see it working free.

How to monetize free?

Siddhartha Ahluwalia 1:04:03

Here in India, I don’t know whether even the richest person gives tip, you know, on a daily basis. In US, you are getting frowned upon. If on every service that you use, you’re not giving 20% tip.

K Ganesh 1:04:16

Yeah, no, no, don’t get me started. There the tip is mandatory. In the bill, they will say that, you know, recommended tip, they’ll start with 18%, 20%, 22%.

Some places start with 20%, go up to 25, 30%.

Siddhartha Ahluwalia 1:04:29

If you click on 18%, then the waiter will frown upon you.

K Ganesh 1:04:32

Yeah, the waiter will frown upon you. So, all that has happened. First time when I learned this, he actually asked me, was there something wrong with the service?

I said, no, why do you say that? That’s when I learned, don’t go for the lowest there, because you’ll get glaring, you’ll get glaring stars. But there, I mean, the counter argument there they say is the employees and the waiters are paid accordingly lower because they expect this, whatever, for whatever reason.

But the fact is, you’re right, we come from a country where it has been challenging, starved economy, dynamic economy, what I call as middle class mentality, which also I have, where we check every penny that we spend, it is not normal. Okay, right. So, it is there.

So, when they’re used to free, we’ll try to do that for free. There, I guess the behavior is different. Also, they value time.

They would rather trade money for time. Here, we’ll trade time for money.

Siddhartha Ahluwalia 1:05:23

There’s a last point that I want to touch upon is, did you imagine QCommerce will grow this large?

K Ganesh 1:05:29

No, no, absolutely, absolutely, absolutely, absolutely not. Okay, right. And both personally, as a professional or as a management thinker, and as part of Big Basket shareholder, this has caught us by complete surprise.

Okay, right. I cannot imagine what was the need. Now, I can imagine because everything is quick commerce.

What was the need for people to have an oil in 10 minutes or 15 minutes? There is nothing that’s happening. And I understand an ambulance being required, emergency being required.

Nobody ever does it. Rarely, once in a while, it happens that your run out of your, your milk has got spoiled. You need to have coffee or you’ve got guests, or suddenly five guests come in, that also nobody comes in suddenly.

This is an urgency I never understood. Okay, right. One.

Two, even when it was large, I thought this will apply for some few items. Okay, now, the way the consumers have taken to QCommerce has been stunning. Right?

I mean, now they’re saying if I can get it in 10 minutes, why not? What is the glory of waiting for two hours if I can get it in 10 minutes? And why not?

A lot of it driven by discount, but that will, that has been keeping on will reduce. But this is a change in consumer behavior phenomena, which has been, which has caught a lot of us by surprise. But now it’s here to stay.

There is no, no, this one, no, no, no question, no question about it. Even I want everything in 10 minutes.

Siddhartha Ahluwalia 1:07:03

And why do you think such a counterintuitive approach now has become a habit for consumers?

K Ganesh 1:07:09

No, I just think they’re spoiled for choice. Now, if you can get something in 10 minutes, why wait for 20 minutes? If you can get in 20 minutes, why wait for two hours?

Instant gratification. We are living in that kind of a world that has been there. And like, like you mentioned about standing in a queue for a railway ticket or standing in a queue for a, for withdrawing cash from a bank.

I mean, that ship has sailed. Now people are used to this. They want this, they think about iPhone, they want iPhone in 10 minutes.

Now, iPhone gets launched once in two years or three years. And what was the need to, what is the need to have that particular model in 10 minutes? But that’s what they want.

They’ve seen, they’ve seen the ad, they’ve seen the features, they’ve already decided what color they want. They can go online and check. After they have done that 10 minutes, they would like to get it.

It’s, it’s really insane. But the good part is there are multiple options for you to be able to get it at that time. So it’s a great time for consumers.

Right? That is convenience to the highest possible degree that you think about it, it will come. In fact, where I stay, I get it faster than I can actually walk out and get it.

It’s as if somebody’s waiting and I obviously I do my shopping in BB Now, Big Basket, Quick Commerce, less than 10 minutes. Okay, right? It’ll come.

Siddhartha Ahluwalia 1:08:34

I think most of the business models that we discussed about, some have high entry barrier because of capital, or because of expertise. And some have become very low entry barrier, for example, content or D2C that we discussed about, but something like, like vertical software, like which I’m really passionate about. And we have a lot of portfolio, let’s say, for construction tech companies in the US, for pharmaceutical companies in the US.

They’re very tough things to do, because to get started in these models. First, you need a founder who has deep expertise and experience in this area. Then you need how to crack enterprises, because enterprises are a beast that don’t like changes, right?

As they were just 180 degree opposite to consumers. In enterprises, people like to stick to one thing and they’ll not kick you out. Unless until, you know, you have done something wrong, or the world around them has flipped like generative AI.

Right? And we have seen a few success case studies like Zenoti that you mentioned, out of India, but not as large as many that, you know, you and I would have liked to see.

K Ganesh 1:09:47

Yeah, so after you take away the horizontal software, SaaS software, vertical software is the next big opportunity, you’re absolutely right, that one, it’s a smaller market, it’s a defined niche market, two requires deep domain expertise, unless you’re able to do that. The good part of it is that the profit margins will be a lot more. And once you have cracked it, you can, like earlier we’re talking about, you can be a dominant player.

Horizontal is difficult to be a dominant player. In a vertical niche, you can be a dominant player. If 70% of the salons or 50% of the salons, 40% of the salons use your product, you have tremendous advantage.

Pricing may be one, but more importantly, you can cross sell and upsell. You have to keep on doing it because the market is not large, you will not be able to get billions of customers because how many salons or how many barbershops are there in New York City or in US, that will determine how much software will a barbershop or a saloon buy. Okay, that is limited and fixed.

But the number of things you can sell to the barbershop, one is the software, payments, booking, or even creating, renting out their facility for other purposes, planning their scheduling and management, all of those things can come in, including supplies for the barbershop, backward integration to a supply. So all of that is possible in vertical because you understand the domain exceedingly well, they also start relying on you. And there the stickiness also will be high.

If you already have captured for me to come and do it, like you mentioned, it is very, very, very, very difficult because the owner, which is a semi owner, does not want his botheration to try out another software. He has got all other problems in life than to try it, if it is a smaller enterprise. Big enterprise, if you are talking about vertical and big enterprise like caterpillar construction and all the stuff, again the same thing applies that the process is so large and if they have chosen a vendor, they just do not want to change.

And one of the popular saying is nobody got fired for choosing for buying IBM, purchasing IBM. So they do not want to change, they do not want to do that. And touch points are so high and we see that in Hungerbox, which is a digital cafeteria, it is the largest market share in India.

I mean, TCS has implemented across the board, across various sites. Now, why the hell will they change a digital cafeteria software? They have got so many other priorities.

They will negotiate hard, they will tender, they will do that stuff, they will expect the world out of you, all that they will do, like a typical enterprise customer, but they are not going to change. So I think vertical software is a big opportunity. I think because of generative AI, incorporating generative AI, building that software for vertical is I think another great opportunity because the workflows will change because of generative AI.

And it is a level playing field starting at zero. If Indian software and SaaS entrepreneurs can capture that, that I think is going to be the next wave. You will see a lot of AI agents, agentic solutions coming up and that is the next I think big opportunity for us to be able to address to the world.

Siddhartha Ahluwalia 1:13:12

Another thing to add to it is companies like Palantir, right, which know how to sell defense tech software to governments like the US government, they are almost irreplaceable for decades because it is the data is so proprietary, you do not know exactly what they do, what workflows are they building for the government in defense tech.

K Ganesh 1:13:33

Wherever you have a strong lock-in either by IP or by process because and especially in sensitive areas, there is a very strong lock-in. Or you need to have a very strong network effect already in play, then you are irreplaceable. Facebook, WhatsApp, very difficult.

You have heard this people moving to Signal from WhatsApp and then they come back. You cannot be the same. And you were mentioning about Twitter and Koo.

That is an example. Koo is a great product, great founders. I would have loved to see them succeed.

But there is no Twitter of India. Twitter of India is Twitter. Same thing with Facebook.

So wherever network effects are crucial, it is a winner-take-all. A guy who is already there will capture the market. He will get strong.

Day by day, he will get stronger and stronger, just like WhatsApp. As we speak, more people are joining. As more people join, it is adding more value to you and me.

Therefore, the chances that they will get out of it is just almost impossible to think of.

Siddhartha Ahluwalia 1:14:35

That is why for me personally, I think Peter Thiel is one of the greatest investors of our time. Because not only he was able to spot a consumer trend in Facebook, he was able to spot a B2B trend in Palantir.

K Ganesh 1:14:50

Absolutely. He is legendary. We have legendary people like that in the US.

Siddhartha Ahluwalia 1:14:57

Thank you so much, Ganesh. I love this conversation and looking forward to do a part two of it sometime in the future. But love conversing.

I almost felt like I was conversing and debating with a friend.

K Ganesh 1:15:07

Okay. Thank you. Thank you very much.

Really appreciate having a conversation, talking about the book.

Siddhartha Ahluwalia 1:15:13

And I would urge my listeners to go out and read the book. Phenomenal book, very easy to understand and almost I read it in one sitting like a novel.

K Ganesh 1:15:21

Thank you. I don’t know if you can call it novel, but it really meant for any person who is interested in what’s happening in the world with the new age business models. Why is Platon? Why is Zomato being valued so much? What’s happening with Paytm? It’s of interest to a wide variety of audience, right from a student to a manager to a professional to a startup entrepreneur to anybody who is interested in knowing about it.

So we kept it light and very readable.

Siddhartha Ahluwalia 1:15:47

Thank you, Ganesh.

K Ganesh 1:15:48

Thank you.