The goodness from the eCommerce bubble in India

Over the next few weeks and over the last few months, many naysayers have been & will be talking about “why the eCommerce bubble is going to  (or has) burst”.

Its true but misses the point.

Yes, over 21 companies that raised over $500K in funding have “merged” or have “been acquired” for paltry sums.

Yes, the model was unsustainable with discounts ranging from 30-70% off list price.

Yes, end consumers made hay while many institutional investors funded their “free shipping”, “COD” and “no questions asked returns policies”.

I am undoubtedly an optimist, so I see many wonderful first generation entrepreneurs that came out of the ordeal alive.

That can only mean one thing – serial entrepreneurs are for the taking.

Assuming some / most of them start companies again.

Some of them have talked to me about how they learned from the experience and how it will shape their new venture. Others are venturing into investing in startups.

The BEST thing that’s happened to Indian startups in the last 5 years is the rise and fall of eCommerce.

Of the 450+ eCommerce companies (of which 75+ raise some money either from VC or seed investors), a full 63% were first time entrepreneurs. (source: Microsoft India startup research).

That’s amazing. Really awesome.

They will live to tell the tale and venture again.

I have one request though:

The next time you meet an entrepreneur who had started an eCommerce venture and moved on, thank them for taking the risk. They did something so its easier for you to convince your family and relatives that starting a company is glorious. Even if it is not a runaway success it teaches you about taking risks, venturing on your own and going down a not-so-well-trodden path.

Side note: The hare and tortoise story though still has a lot of merit.

I personally know 5 companies in eCommerce, growing at 30-50% annually (not monthly as the VC’s wanted 2 years ago) and breaking even. A few companies chose to not raise capital (or truthfully no one would give them capital when they tried to raise it) were forced to focus on profit and sustaining pricing models. They are stronger and better after their experiences.

18 thoughts on “The goodness from the eCommerce bubble in India”

      1. Maybe you need to visit the dictionary as see what the word “entrepreneur” really mean, Mukund. Every Tom, Dick and Harry I have met in the past 12/24 mnths in conferences, social media meets, come up with obscure ideas and say, “we are looking for funding. i am an entrepreneur and have plans for a company”. They have no clue of what a business model is, what a revenue stream will look like, what P&L means, what a CPA stands for, what a basket size means and so on. What do you call these people – Entrepreneurs? I believe its time for you to take a look at what the word really means.

      2. Entrepreneurs? Mukund, maybe its time for you to visit the Oxford Dictionary, and find out what the term stands for. In case, you mean “people who launch companies to sell lingerie and cat food online, by burning crores per month on customer acquisition, such that the CPAs are more than the basket size, and then going bust once the money runs out”; then I think you’re spot on. I don’t call such fools “entrepreneurs”. Maybe something else. But definitely not entrepreneurs.

      3. “
        There’s nothing in the dictionary about CPA, revenue, etc. Dont be bitter about your experiences with eCommerce companies. Anyone that starts a company with the intent to bring new products or services is an entrepreneur.”

        yep… not surprising why half of the guys whom i met with grand plans of minting money by setting up an eCommerce company didn’t come back when I asked 50 odd questions on P&L. thats the reason why – when most of the so-called Entrepreneurs – you meet them – you speak about Steve Jobs and Jack Welch… and half of them stare at you and say – we thought we will launch a company and make millions. Recently was advising one DailyDeals company which had target projection of 1 Crore in gross revenues in 3 months; and could manage 10,000/- so far; and Rs. 26,000/- so far. as Mukund rightly mentioned – the CEO had no idea of the term CPA… I nearly died laughing at the review meeting. Hats-off to the Entrepreneurs of India.

  1. Sahil, they will burn (other people’s money) and (hopefully) learn. Should they even be told? Aren’t they the ones who claim they offer mentorship to portfolio co.s besides the $$? Agree totally with Mukund, isn’t every new sector on the horizon supposed to be witnessing a Cambrian period? Let’s take the +ves and move on.

  2. This post is re-assuring, especially for friends who continue to have faith in the e-commerce biz. Personally know of, possibly India’s best online bookstore, after Flipkart? Self-funded since the past two years and despite the competition for discounts and free shipping, they just broke even in December 2012. Continues to show quarterly growth of about 30-40%.

  3. Mukund – usually your posts are exciting reads – but this one is absolute crap. Just an excuse for a post. I worked for some so called eCommerce companies in India that had raised and burnt millions of dollars in just a few months – without any clear understanding of the market and the VCs were completely clueless – even worse – had no real conviction in the management decisions. Result – after burning millions of dollars from VCs – the companies went bust. So is the state for rest of the 54 companies that has raised $700 million in past 3 years. The VCs are the biggest fools – I personally believe – cause without any realistic market expectations – they funded these mushroom-me-too startups. Result – as per Alegro report – 80% are on life support. You call this a good thing? Useless I call it.

    1. And here’s my take on the eCommerce bubble burst in India. I currently consult with around 5 eCommerce portals in India and advise most of them to stay LEAN. Which of course, they have problems doing. Its tough when you have million dollars lying in your bank account to spend, and especially of someone else. 🙂

      Post: Indian eCommerce Bust – Why has it come so SOON?

  4. Interesting… as an individual who has backed a couple of lesser known “category” e-commerce play, I continue to believe in the growth story (esp aspirational demand from Tier x).
    These are cash-flow neutral, focused on their USP AND continue to grow at great rates !
    IMHO – just as fashions come & go, so do these flares ? I can personally name companies that made a killing in the services sector (a decade ago) when valuation was equated to headcount ?
    Does not make sense to write off an industry ?

  5. Hey Mukund, Perhaps a Nice article, The best part is you just said it, and more straight to face. At least it would a lesson for many people who wants to do e-commerce startup.

  6. I am hoping one of them goes IPO or becomes big. Currently entrepreneurs have very few local success stories to celebrate. It would be a shame to see a bust cycle without a fabulous win for at least a few people. Right now, we’re at count=0.

  7. Doesn’t everything interesting become a bubble at some point. Its in the human psyche, to become practically over-enthusiastic if good things start happening. The hyped interest gets converted into a bubble. Perhaps our actions to tickle the natural pace of growth gives rise to bubbles. I guess expect lot more bubbles in future.

  8. Awesome Post !
    Now comes a question, if its not sustainable in india, how come Amazon can do it ? What are the difference that amazon does to run the show as a super hit. Can you pls elaborate. That could be a separate post altogether. you can do that as well.

    Advance Thanks

  9. Mukund,
    Trust you to come up with a way to see the good even in this much-lamented aspect of “e-com excess”!
    And much as I would like your thesis to bear out, I am skeptical about your conclusion about how this will create a deep cohort of serial entrepreneurs.
    One parallel that you can compare this against is the dot-com boom and bust a decade and a bit ago in the US – when money was easy, thousands of people jumped into entrepreneurship but while the bubble burst, only a few were left standing – Darwinian aspects apart, this underscored the fact that many people started up simply because of the lure of making a fast buck and on taking a shot on someone else’s dime. I wouldn’t be surprised if a number of folks who have started ecom ventures in India and haven’t lived to tell the tale fall in the same category.

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