At Lightbox we’ve always looked to the internet's new business models to build consumer technology companies. Businesses that understand what people want just as well as they understand household budgets. We held our annual investor day at a modern art gallery in Mumbai, with our CEOs as well as a few founders from our network to lead the discussion.
To set the stage, Sandeep Murthy ran through our view on the market, highlighting our view that ‘supermodels’ are at the crux of what we’re investing in. With a cost structure advantage in the bank, companies centre their energy on what really matters to customers. It also proves how fast an industry can be reshaped when consumers are in charge.
So where does cost structure advantage come from?
Ditch the street, play online
Good real estate in Indian metros is absurdly expensively, wreaking havoc on unit economics. No surprise then that traditional F&B companies like Dominos are facing the heat. As Jaydeep Barman from Rebel Foods pointed out, “65% of restaurants shut in a year; 85% in five years. By launching multiple brands from a single, high-spec kitchen – Faasos, Behrouz, Oven Story, etc – Rebel Foods grew its business 3x in 2 years." And designed a low-burn business model that offers customers both quality and variety. Ajith Karimpana talked about how Furlenco took a poor offline customer experience –– paying three months’ salary to furnish a bedroom with low quality furniture –– and made it affordable via a monthly subscription. Sandeep Aggarwal of Droom showed how by automating the car loan process and eliminating the long queues and unnecessary paperwork, “credit to consumers is on more favourable terms with higher acceptance rates.”
Break the code, with product design
The trick isn’t just in having an online advantage, but using it to reinvest in customer experience. Sid Talwar, representing Saroja Yeramilli, showed how her exclusively-online, zero-inventory business Melorra brings fine jewellery design to every zipcode in the country. Fresh designs coupled with a buying experience that beats old-fashioned, pushy retail formats proves how with minimal working capital, a nationwide brand can be built in as quick as two years. And “with design at the centre, you can rethink industry economics.” Arunprasad Durairaj talked about how Flinto has built India’s first and only R&D centre dedicated to early learning to “co-create products with children, parents and educators”. And Akshay Nerverkar showed how a mass-customisation model contemporising design and fabrics, Bombay Shirt Company has grown from a corner store in Mumbai’s Kala Godha neighbourhood to a global brand in 10 cities across the world.
Stop selling, start a relationship
A third of the founders present play in India’s fast-growing subscription economy. While solid unit economics and high customer retention bring subscription companies a natural structural advantage, it’s rethinking the business around customer loyalty that makes the math work. At the heart of subscription, as Ajith Karimpana put it, “is the freedom to unsubscribe, giving customers all the power." Ravi Ramachandran showed how by “listening to what customers want and creating meaningful content around it”, Nua quickly built a DTC business where 50% revenue comes from repeat customers, demonstrating how a brand can use content and community to “transcend transactional relationships”. These examples prove how customers are demanding more in exchange for loyalty – the ultimate cost structure advantage that doesn't have a line item on the income statement. A cadre of evangelists and influencers is what makes new age brands not only scale rapidly, but also makes them special. Prashant Mehta talked about how the most important relationships are the ones companies have with employees. Jaydeep talked about his kitchens' Chief Delight Officers as the "real CEOs of the business. We lost just one of 190 last year. That’s the level of attachment we have in our company.”
Not just the data, but the difference
Companies that use data to understand where and how to differentiate create cost structure advantages in every aspect of their business, from product to content. Dhru Karwa from Haikujam is building an emotion engine that’s unearthing millennial behavior. In a recent study on car ownership, he saw that millenials are less intent on buying a new car and more concerned about the pollution in our cities. He explained how that’s “an opportunity for mobility and transportation companies to rethink their products and services as well as media messaging and positioning.”
Sandeep Aggarwal talked about how a “fully automated data science product” allows the business to effortlessly launch a fintech feature – Droom Credit – a “strategic advantage in making credit decisions based on algorithms that pure finance companies can’t match.” Personalization creates enormous cost structure advantage as a business scales. For example, Embibe’s data engine creates an unmatched feedback loop in a student’s test prep behaviour that drives repeat usage. And we saw repeatedly how consumer brands like Melorra and Nua use machine learning to tie digital efforts back to the real world.
What came across most strongly through every speaker was the conviction in doing things differently. And a deep belief that embedding technology into every aspect of the business creates powerful possibilites and disproportionate value .