Part#2: Monsoon or Moonshot? 🌦️🚀

Hey there!

My history teacher kept telling me back in the days that if you want a better today, learn from yesterday. Never really realized how profound that small piece of advise was until today. You’ll know why I say that as you read thorugh this post.

I am super excited to present you with part#2 of Monsoon or Moonshot series 🌦️🚀 where we compare the dot com bubble and today’s startup ecosystem in India.

By the way if you can just reply with 👍️ on this email, that would mean a lot to me. Everyone needs a little enouragement!

💀 Past failure is the best teacher for future success

Failure is the best teacher but charges the highest fee. And I am all about saving costs - so let’s learn from others’ failures! Dot-com failures tell us warning signs to scout for when investing in high-growth companies.

Pets .com 🐶

An online pet supply store that went public in 2000 but filed for bankruptcy the same year.

  1. Flawed Business Model: The business relied on selling pet supplies at a discount, which led to low-profit margins.

  2. Operational Cost: Heavy investment in advertising and high shipping costs for bulky, low-priced items resulted in unsustainable financial losses.

  3. Lack of Value proposition: Customers preferred walking to the nearest store over long wait times for delivery. It had the same products as a local store (unlike today’s Amazon), marginally low price, and long delivery time.

Kozmo .com 🚚

An online delivery service founded in 1998, offering free one-hour delivery of small consumer goods.

  1. Flawed Business Model: No delivery fee meant no scope for earning profit. The business was inherently operating on tiny profit margins.

  2. Rapid Expansion: Rapid expansion into new cities without solidifying their presence in existing markets. This translated into high spending across many markets without establishing what works in one.

Boo .com 🧚‍♀️

An online fashion retailer launched in 1999 that filed for bankruptcy in 2000.

  1. Over-ambitious global launch: They launched across multiple markets, spreading themselves too thin. Rather than being great at one market, they offered generic products across all. This is similar to the rapid expansion problem.

  2. Bad UX: UX is still neglected by many companies today. This is one example where bad UX directly translated to low conversation rates and the failure of the business.

  3.  High operational and marketing cost: Surprise! Surprise! Well, not really; you can’t buy your way out of subpar products.

Webvan 🛒

An online grocery delivery service founded in 1996 that went public in 1999 but declared bankruptcy in 2001.

aggressive expansion, a high-cost infrastructure, and the inability to generate sufficient revenue to cover operational costs.

  1. Wrong Target Audience Segmentation And Pricing: They sold to a mass-market audience segment that was price sensitive. This led to extremely high expansion costs with extremely low profits.

  2. High-Infrastructure cost: Their business model involved building expensive, high-tech distribution centers

  3. Rapid Expansion: The pressure to grow big fast is a common cause of failure. Rapid expansion can mean more places to earn money. But an imperfect business and operating model, like in the case of WebVan, means more places to burn cash.

Look at AmazonFresh in contrast - they took 5 years to go from Seattle to LA, finding and fixing logistical hurdles along the way.

- Sparsh

India’s grocery delivery services are facing similar problems to Webvan & Kozmo. They should have read RusticFlute! Don’t let this happen to you!

🏆 Success Stories from Dot-Com Era?

I will keep this section brief because, fundamentally, each of the successful companies of the dot-com era creatively circumvented the pitfalls that the failed companies did not.

Amazon

  1. Survived the Dot Com Bubble by diversifying its product offerings, focusing on customer experience, and continuously investing in technology and infrastructure.

  2. The company's adaptable business model allowed it to scale operations, reduce costs, and offer a wide variety of products, positioning it for long-term success.

eBay

  1. Survived the Dot Com Bubble with a business model that provided a unique platform for buyers and sellers to trade goods, generating revenue through transaction fees.

  2. eBay's ability to maintain a lean operation and adapt to market changes (e.g., by acquiring companies like PayPal) helped secure its place in the market.

Priceline (Now Booking)

  1. Survived the Dot Com Bubble by adapting its business model and focusing on the hotel booking market.

  2. The company transitioned from a bidding-based model to a more traditional booking model, allowing it to capture a larger share of the market and expand globally.

😡 C’mon! Come to the point!

Based on the analysis of companies that succeeded or failed during the Dot Com Bubble, we can identify several key factors that contributed to their respective outcomes:

  1. Sustainable Business Model: Successful firms had consistent revenue streams and profitability, while failed ones had flawed, low-margin models with high costs and unrealistic growth expectations.

  2. Core Competencies: Success came from focusing on core skills, delivering value, and gaining a competitive edge, while failure stemmed from rapid expansion and diluted focus.

  3. Adaptability: Successful companies were agile, adjusting strategies as needed, while rigid, unadaptable companies failed.

  4. Capital Efficiency: Successful firms wisely invest in long-term value, while failed ones misallocate funds to marketing or high-cost infrastructure.

  5. Customer Focus: Successful companies emphasized customer satisfaction and user experience, while failed ones neglected customer engagement.

  6. Financial Management: Success required disciplined financial control, while failure resulted from high burn rates, inadequate reserves, and insufficient revenue.

A few days back, as I was surfing across the waves of internet craziness, one realization completely blew my mind. Before I share what it was, let’s look at these amusing examples of a sharp entrepreneurial mindset.

Vignesh Sundaresan | Solo crypto billionaire from India

  • Grew up in a lower-income South Indian family.

  • Discovered coding using a friend’s borrowed laptop.

  • Found Bitcoin in 2012 while trying to find ways to automate bank transfers.

  • Learned everything he could about the space and invested heavily.

  • Ended up being a Bitcoin Billionaire!

Learn more about his journey:

  1. NasDaily’s Interview of Vignesh aka MetaKovan (Famous YouTuber)

  2. Reuters News: MetaKovan’s Purchase of multimillion-dollar digital art

While it’s hard to comment on whether Vignesh’s path is reproducible, the key takeway here is that he discovered and acted on cryptocurrency space in 2012 when most part of the world was blind to it.

Amit Agarwal | $20m/year solo building Google plugins

  • Started as a tech blogger in 2004, writing about Gmail plugins.

  • Built a Gmail Plugin in 2005 allowing you to send mail merges with attachments

  • Now bringing in $20m/year as a solopreneur

Learn more about him on one of my favorite podcasts:

There’s a pattern similar to Vignesh. Amit discovered an opportunity that enables him to serve the world while being in India. And, he did it as a solo entrepreneur who had a keen sight for opportunities beyond his physical confines.

So what’s this profound realization I mentioned earlier?

Entrepreneurs in India are getting ready to build for the world and sell to the world, using global technology while conveniently being present in India. Silicon Valley will have to fight harder for $$$ in the next decade.

  • Indian entrepreneurs have their eyes wide open for opportunities around the world, while the world is mostly blind to opportunities in India.

  • The biggest disadvantage for entrepreneurs in India of not being physically present in the US/Silicon Valley is slowly turning into a non-issue.

  • With no shortage of young, ambitious brains ready to build things, we are looking at products selling at global prices but being built at Indian costs. Aka $$$$.

Expert Dream Team

I am building an expert dream team to bring you the best information out there and have amazing people on speed dial for when we make an investment decision. Today I want to introduce you to Micro Digest.

Southeast Asian tech is on the rise, and as they say in hockey - don’t follow the puck, go where it will go. So, tap into the fast-growing emerging markets and be ahead of everyone else by subscribing to Micro Digest.

Been a pleasure learning with you! Will see you again next week. Until then,

Stay motivated! Stay strong! Cheers!

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