Indian Grocery

Why has someone not disrupted the Indian Grocery store in the US

There are over 4 million Indians in the United States and this includes those who are on business, work and other visas, besides American citizens of Indian origin.

Over 50% of Indians in the US are in the top 5 states: California, New York, Texas, New Jersey, and Washington.

There are over 750 Indian grocery stores in the US as well.

The typical Indian grocery store is about 700 Sq. Ft, located in the suburb (not the major cities) and tends to operate on 21% net margins, with some items (biscuits, Indian vegetables) topping over 50%.

It is not unusual to see 100% markup on items such as masalas, basmati rice etc.

The stores are small, cramped, usually not in the best shape, in highly trafficked neighborhoods, and offer pretty poor customer services.

They all thrive though. The average ethnic grocer will experience a 29% closing ratio in the first 18 months, whereas Indian grocers experience < 10%.

The average Indian grocery store also makes about $350K to $1 Million (Sunnyvale, Santa Clara) in profits.

Most of the produce and the packaged food is rather old, some way past their sell by date and many products are rarely replenished quickly enough to categorize them “fresh”.

Indian Grocery Store

Indian Grocery Store

They all make money though, and are pretty profitable.

So why have they not been disrupted?

There are some attempts: Increasingly Wal Mart and Costco are offering Rice, some Dal and some packaged foods such as Ready to eat meals (MTR, Gits). The “Asian Foods” aisle at your local Safeway and QFC is also a good source of some spices and masalas.

There has been no large scale attempt to cut out the expensive Indian Grocery store. I can easily imagine the 100% monthly subscription model online store doing well, but of course, I am neither a supply chain expert, nor an expert in Groceries.

I am curious though, to learn why none of the ethnic stores have been replaced or are being threatened by Internet distribution and discovery.

Android ecosystem vs. the Windows ecosystem

Android as an operating system for mobile can be likened to the Windows operating system for PC’s. There are so many differences and similarities that it is worth comparing and contrasting them instead of comparing PC’s to smartphones.

While we cant call the smartphone market at its “peak” yet, there are over a billion Android users right now. If you look at the PC market, there are a billion PC users as well.

At its peak, there were 195 Windows PC manufacturers and 1400+ models of PCs.

There are 400 manufacturers (known) and 4000 models of phones and over 500 carriers in the Android ecosystem.

What’s different in the PC world vs. the phone world is the carrier.

Few of them (primarily in the US) subsidize the phone with an ongoing payment for usage of the network.

The carriers ensure that you will continue to use the phone and pay a “subscription” fee monthly for usage. In the PC world, without the “Internet” the system was pretty useful.

Without the carrier the phone is pretty much useless. You can possibly use it as a MP3 player or a screen, but trying being productive without a mobile plan.

While there were other operating systems (MacOS and linux) in the PC world, (iOS and Windows) in the phone world, the similarity is that the “winner” has a dominant market share or profit share, rarely both. Similar to Google in search, they dominated the market share and profit share for the PC OS.

Another key is is profit share.

In the PC world, the closed Windows operating system made the majority of profits, and in the mobile OS world, as well, the closed iOS operating system has made the majority of the profits.

The difference is the the “open” operating system in the PC world – Unix did not fare as well as the “open” one in the mobile world – Android.

Which leads us to some questions – What matters for the health of the ecosystem? What matters for the health of an individual company? If you were to project what happens in the Internet of Things world – which “OS” might win?

For a healthy ecosystem, I think both open and “closed” systems matter. The closed system tends to make most of the profits. The open one, either gets no traction at all, or tends to dominate marketshare but not margin share.

For the health of an individual company, being there first to get developer traction matters most. Developers go where the consumers spend good money, not where they use the product as a utility.

Finally in the IoT world the “operating system” will likely be the cloud. The likelihood of a dominant operating system taking both marketshare and profit share seems very high.

So I were a betting person, I would go long on AWS (Amazon Web Services) and Microsoft Azure. If there were to be a dominant system, it is likely they would be the contenders.

Most “Internet of Things” are focused right now on the Things,not on the Internet. That will change, resulting in more data driven models for IoT than device models.

What do you think?

Discovery Distribution and Engagement

Standing on the shoulder of giants – how startups get distribution done faster

The whale shark is an unusual fish. It travels an incredible 5000 miles off the cost of Caribbean each year. It does though help a lot more fish when it makes this journey. Many small fish and other sea animals live on its back and travel with it.

Intellectual pursuits have been similar. Issac Newton is quoted saying:

If I have seen further than others, it is by standing upon the shoulders of giants.

That’s one of the key items I have learned about distribution and growth hacking over the years. If there is a large “installed based” of practically any product, it is possible to jumpstart your new startup idea on its back.

Startups cannot help other startups. Except for giving advice, which is practical and practitioner-led, there’s not much a small startup can do to help other smaller startups.

The new “large” installed based in technology lead themselves to help new startups more than previous ones. While SDKs (Software Development Kit) and API’s have existed for a long time, the new age companies are helping bring their installed based to new innovations lot quicker by exposing their customers to new technologies via 3rd party solutions built on their solution. Some of them are doing so with the intent of being a “platform”, but many dont have a choice but to grow and build relationships via API’s.

I was talking to an entrepreneur yesterday about how they can improve discovery and distribution for their SaaS application.

The first part of the problem is just discovery – people getting to know about their product.

The second part of the problem is distribution – people trying their product.

The last and most challenging part of the problem is engagement – people using their product frequently.

Discovery Distribution and Engagement

Discovery Distribution and Engagement

The 3 problems are distinct enough to have different people responsible for them at your startup. Typically, the discovery is a “marketing” effort, distribution is a “sales” effort and engagement is a “product” effort.

New startups, especially consumer (eCommerce) are finding that being on the app store alone is only solving the distribution effort, not the discovery or the engagement problems.

SaaS companies are finding that discovery can be solved by SEO and SEM, and distribution with “freemium” pricing, but engagement is their toughest challenge.

Finally games have always found that engagement is their biggest challenge.

Depending on your company, and the market, there are some criteria to keep in mind when you are trying to decided where to “spend” your time and energy. Then using a large company in the space to solve that problem is the best way to grow fast.

So, if discovery is a problem, then I’d suggest listing on multiple marketplaces and directories and getting the word out via customers. If there is a large company in the space and they have an API or marketplace, list your product on both. The rising tide of customers will lift your boat as well.

If distribution, however is the problem, then ensuring easy “provisioning” on the larger company’s platform will help the most.

Finally, to solve the engagement issues, making API tie-ins to a larger company’s product – e.g. using Line’s API for new stickers or in app purchases will help.

If you have examples of how you have leveraged a larger company to make it easier to discover, distribute or get user engagement, I’d love to hear from you.

Ventures Logo

Goodbye Microsoft Ventures, 3 years of fun comes to an end

3 years ago to the month, I was at the crossroads. Having moved back to India and grown, then sold BuzzGain, I had founded my next startup and found a way to grow a new business.

I was spending more time helping entrepreneurs and was interested in starting a new company, but I realized that having a bigger impact is what I was seeking.

I met with Amaresh, at an event called Think Next in May and he was a very nice, humble and wicked smart guy was my impression. When he started talking to me about the Microsoft Accelerator program, I was keen to help. He then offered to get me on board full time and I was (as was everyone else) very surprised. I agreed because I thought the money and resources that Microsoft had, directed at the right places to help the startup ecosystem would go a long way to help India.

At about the same time, Rahul, Neda and David started the Bing Fund, with similar interests – to help entrepreneurs by investing in startups. Similar initiatives were started by others in other locations. A small, but passionate crew at Microsoft were keen to engage the startup community and help entrepreneurs.

Microsoft Ventures was formed in March 2015, when we brought all the startup resources into one single organization. We announced it in June 2013. It was going to comprise of an ecosystem program – BizSpark, accelerators to help startups grow and a fund to help startups scale.

From 2012 to 2014, I was in India, and built some great relationships there with investors and entrepreneurs. Microsoft Ventures was name the #1 accelerator in India by Economic times.

Microsoft Ventures and American Family Insurance presented 10 inMicrosoft Ventures and American Family Insurance presented 10 in

Microsoft Ventures and our demo day

Late last year, I decided to move to Seattle to take on a bigger responsibility, but also to bring the startup culture to the large corporate Microsoft entity. After Satya became the CEO, it was more acceptable than before to be entrepreneurial at Microsoft.

Microsoft is big, large and great at many things, and is learning to be nimble and move quick, is my sense, after being here for a year in Seattle.There are many folks who have been here for over 15-20 years who are resistant to change and many folks who are very open to change as well.

Nonetheless, I had a lot fun, I think we had some impact and we certainly made a lot of friends. We helped many entrepreneurs and not a day goes by when I dont get an email from someone who wants to work for Ventures or be funded by the organization.

I think I will miss the entrepreneurs I interact with daily, the most, as part of Ventures, but I suspect I will continue to work with startups. Mostly I will miss working with an entrepreneurial team of folks who care deeply about startups.

The Modern App

The modern app developer

Two interesting things came to my attention yesterday. The rise of coding schools (NYTimes piece) and the most popular languages used at hackathons.

As I had written before, coding schools are graduating close to 20K students in the US – almost 1/3rd of the # of graduates from all computer science programs. Most of these students are from fields outside of programming, computer science or engineering. Many studied political science, history or literature and were pizza delivery folks, baristas and even Uber drivers.

While many of their starting salaries are about $60K, even 6 figures are not unheard of salaries for “data scientists”.

Over the last 6 months, I have noticed that these students make up nearly 10% of startup development teams. Many are hoping to get 1-2 years of experience to either a) go independent or b) get a much better paying job (read $150K) at a hot startup with stock options.

The modern apps have 3 characteristics that is changing the way apps are developed.

1. First, since there is a rise of Dev Ops and No Ops, many more developers are developing apps purely on Javascript and some Swift, with Python, Java and C++ taking the back seat. With the simultaneous rise of Javascript libraries and frameworks, it wont be too long before we see more Javascript only developers who focus on building interfaces quickly with little backend code.

2. The rise of composers instead of coders. Many app developers focus a lot of effort on coding skills and writing monolithic applications that are self contained. The future of apps and hence app developers is microservices which use many 3rd party API’s. This will result in coders and developers becoming more composers who snag code snippets from other places and spend more time building an experience end-to-end and less time on systems programming.

3. Finally given the rise of consumer apps and their influence on enterprise apps, many app developers will start to incorporate images, video, and other media elements (voice) into their apps and have “voice enabled” assistants in their apps to replace the standard productivity and ERP / CRM apps that are developed for the enterprise. Many enterprise apps are expected to have a “longer” life cycle than games and consumer apps, which are constantly in fashion and out, but the shelf-life of enterprise apps will reduce thanks to consumerization of work-apps.

The Modern App

The Modern App

Increasingly the skill that is needed more than architecture and coding is identification of key API’s, rapid prototyping and experimentation and very few people who are going to help “scale and grow” the apps.

I wonder if you are seeing the same?

Startup Ecosystem Ranking 2015

Global Startup Ecosystem Ranking, 2015 #Seattle and #Bangalore

The global startup ecosystem rankings at out. Since we had a chance to partner with the team putting together this research I had a chance to learn the methodology a lot more this time. There are three observations I have regarding he overall report and a follow up to an early comparison of the 2 startup ecosystems I have the most experience with – Seattle and Bangalore.

First, the two ecosystems are not that different in many aspects – the criteria used by compass were:

1. Performance (exits, valuations, etc).

2. Funding access

3. Market reach

4. Talent

5. Startup experience

and finally Growth index.

1. Growth: Bangalore is growing dramatically, at 2.5 times Tel Aviv’s growth and more than 3 times Seattle. It will be a matter of time before the total number of startups from Bangalore will be more than that of Tel Aviv or Seattle combined. Likely in 2018.

2. Spread: Seattle’s ecosystem of startups is more broad based – a few eCommerce (Zulilly, Expedia and Amazon), some cloud and a few SaaS companies. Bangalore’s ecosystem of startups is fairly shallow – eCommerce rules, followed by a few in Ad tech and B2B.

3. China: I am shocked that Beijing and China were out of the top 10, much less not even on this report. My first hand knowledge of Seattle and Bangalore and secondary knowledge of China, indicates that they will be #2 even higher than where LA is.

I would agree that market access / reach and startup experience,  expertise will put Bangalore slightly behind Seattle, but that’s more than made up for with Bangalore’s better funding availability and overall acquisition track record.

Here is my unofficial top ecosystems ranking, which I believe will reflect a more accurate ranking of the top ecosystems for startups.

1. Silicon Valley (Separate the valley and SF and you will have the #1 and #2 positions)

2. Beijing

3. New York

4. Los Angeles

5. Boston

6. Tel Aviv

7. Seoul

8. Chicago

9. Seattle

10. Bangalore

11. London

12. Austin

13 Sydney

14. Moscow

15. Toronto

The rest of the ecosystems dont matter. Either market access, funding or performance in terms of acquisitions.

The other parts of the ecosystem that should be measured include news and media involvement, hackathons, events, training and education – early indicators of where the ecosystem is headed and I think those will show a few other cities – Tokyo and a few middle eastern countries as well.

Startup Ecosystem Ranking 2015

Startup Ecosystem Ranking 2015

Being Capital Efficient

How your investor “Story” differs from your customer “story?

I dont subscribe to the meme that says you have only one “story” as a startup. I think you need different stories based on your audience. I want to talk about one particular case based on a real world example and share how the stories might differ, the messages might change, and the positioning might be different as well.

I had a friend who is building a hardware company. Or, so he thought. The hardware unit would sit in a car and monitor driving behavior. Since it was focused on a niche (but large) use case, he was able to confidently show a large market (over $1 B) in a bottoms up market research study.

He had also done some initial customer development and spoken to over 50 of his target customers who were all willing to buy and pay for the solution, talked to 5 potential distributors who were willing to stock and sell the product and also had talked to manufacturers who could build at scale. Armed with this information, he felt he could raise a $500K round, since he had a strong team of 3 folks with him.

Being Capital Efficient

Being Capital Efficient

To build the hardware he estimated 3 resources for 6 months, so he felt $500K would give him enough cushion to tide a few mistakes.

After 3 months of trying to raise money and talking to over 12 potential targeted investors in his list, he found out that the appetite for  hardware was just not there.

Well, there was appetite for a hardware company, but only at “scale”. Not in the initial phases, meaning the target investors,  who were “early, seed and angel investors” wanted to see upwards of 500 to in one case, over 5000 units, before they were willing to to give the angel terms – $500K at $2M valuation. My friend felt he was being low-balled, but he had no other options.

Most investors he approached were unwilling to fund his hardware company.

This is not about hardware though, the same “investors unwilling to fund” anything outside known or proven models exist in other areas as well. Markets get in and out of favor. The flavors of the month are big data, anything marketplace (consumer) and most all things SaaS, etc. and cloud (B2B).

So, when he reached out to me, my initial reaction was the same as other investors. Having burned my hand in hardware companies, I was unwilling to fund anything close to hardware. Over the last 9 months we have funded 10 hardware companies and 30+ software. Except for one hardware company, the rest still have not shipped product (nearly 3-12 months after they promised to do so) and most have been unable to raise a follow on round of funding.

On the other hand, 50% the software companies have been able to secure follow on funding. I understand funding is no measure of success, but it is a key milestone.

Instead I asked him to position his product as a “Insurance and driver data as a service” – DIDDaaS (forgive me) platform and get the version 1 out with software alone, instead of hardware. Turns out that worked. After 3 weeks of meeting the same investors he did before, with a software only, asset light play he was able to get $250K committed to start.

Trends point to the fact that even software companies are forgoing being capital efficient, but if your story depends on raising a lot of capital to be competitive, I’d say change the story to appeal to the capital efficient investor, EVEN if you end up raising a lot of capital.