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Indian consumer tech startups search for a sustainable revenue model

Written by Moulishree Srivastava Published on   5 mins read

A slew of consumer-facing startups are tinkering with subscription-based revenue model in addition to their current model.

In the last two quarters, thousands of Indian startups struggled to survive the pandemic and the economic slump that followed soon after. When COVID-19 cases began shooting up and the nation went into lockdown in late March, Indian entrepreneurs and the venture capital (VC) community came together to figure out ways to ensure the cash runway for at least a few quarters.

“When the lockdown was announced, the situation was highly uncertain. So, most startups prepared for two scenarios. One, that revenues may decline. And two, that capital would not be available for some time,” Pranav Pai, founding partner at 3One4 told KrASIA.

Due to the lockdown, most of the startups—except a few in grocery, medicine, and food delivery segment—were going through zero revenue period. To survive through the tough period, many of them took extreme cost-cutting measures.

“Many companies cut down on fixed costs including rent, travel, wage hikes, and bonuses,” Pai said.

While these measures did help the startups to whether the storm, they knew they had to make long term survival plans. The conversation in the startup ecosystem is thus now shifting toward creating more sustainable revenue models. This essentially means that a lot of companies are looking to make sure their revenues don’t plummet if a crisis were to strike again.

“Many entrepreneurs who now have time to think and reflect upon, they are saying, can we pivot our revenue model into something which can take care of such black swan events and make it more resilient,” Pratip Mazumdar, co-founder and partner, Inflexor Ventures, told KrASIA. “That thinking really is disseminating both within the founders and VC community.”

The rise of subscription models

A slew of consumer-facing startups are tinkering with a subscription-based revenue model in addition to their current model. Companies like ride-sharing startup Bounce, wealth management firm Cube Wealth, professional services provider TapChief among many others have started offering subscriptions to their customers to ensure they have a steady and recurring source of revenue.

Till around seven years ago, before the launch of online video streaming platforms such as Netflix, Amazon Prime, and Hotstar, not many people were willing to subscribe to digital services. But as users have warmed up to the idea of subscribing to a service or product they know they are going to use often, many Indian startups like Bigbasket have tried pushing their subscription, or loyalty plans.


However, these services picked up only when the healthcare pandemic pushed users into making more online purchases.

“Since there has been an increase in the frequency of online purchases, some of the companies think that it is the right time to launch a consumer subscription product,” said Pai.

Inflexor’s Mazumdar said during the pandemic, people stayed home and ordered things online repeatedly from their selected e-commerce platforms, which gave these firms a better insight into their customers’ buying patterns.

“Some of these smart companies are now tapping those buying patterns to push users some sort of packet subscriptions (subscription boxes) for things like stationery, food products, beauty products, and toiletries,” he said. “But, it is just the early days.”

According to Vinod Keni, growth partner, Artha Venture Fund (AVF), “The COVID-19 crisis has made many companies question the way they were operating and forced them to look at their own go to market and commercialization strategy.” He said a lot of companies have had to go back and revisit their entire business model.

These startups are primarily consumer-facing that were hit harder than B2B startups, which survived due to their annual contacts. B2C companies are now trying to see how quickly they can start generating revenues, maximize revenue growth, and sustain the income streams.

Earlier this May, Mumbai-based wealth tech startup Cube Wealth, a marketplace of various investment instruments, rolled out the beta version of the subscription plan for users who wanted to have a portfolio manager.

Satyen Kothari, the company co-founder, told KrASIA, the company is targeting people who are used to the Cube Wealth platform and require expert advice for better returns on their investment. “During the pandemic, people have had time to get their finances in order, and they realized the importance of quality advice.”

Similarly, in July, New Delhi-based health tech startup BeatO that provides an app to manage long-term health conditions like diabetes started subscription plans for its existing users. These subscription plans comprise services like diagnostics, physical examinations, medicines, insurance coverage, monitoring, consultation, and other health management solutions.

“Many startups have pivoted or added features to build a sustainable business and sustainable revenue streams. Subscription model has taken off nicely for healthcare startups including ours,” said Gautam Chopra, co-founder and CEO of BeatO.

He added that BeatO sells hundreds of subscription packages every day. “The pandemic has given us an opportunity to shift the user behavior from a la carte model to subscription-based model,” he said.

Anil Joshi, managing partner at Unicorn India Ventures, believes the struggle to survive the pandemic has led to better capital efficiency in many startups and that their growth metrics have started to look good.

Keeping eggs in different baskets

Then there are another bunch of startups that are diversifying their business offering to ensure they don’t depend on a single revenue stream.

“Some startups have started realizing they may have to expand their market or offering itself,” Keni of AVF said. He believes these companies would look for collaborations and partnerships to extend the product.

“They will also probably start integrating new features or services to their existing products to enter new market segments,” he said. “For instance, those providing premium services may start looking at a mass-market premium, which is one step lower.”

He believes that many startups may begin offering complementary offerings, just like how food delivery startup Swiggy has gotten into groceries and hyperlocal deliveries last year. One such startup is Bengaluru-based shared mobility service Yulu, which was hit hard when the lockdown was announced.

Startups need to have diversified revenue streams “in order for you to not go down to zero revenue and risk being shut down,” Amit Gupta, co-founder and CEO at Yulu told KrASIA. “All of us have learned our lessons.”

The Bengaluru-based mobility startup has come up with special packages for delivery executives who want to rent bikes. The company has also developed relationships with over 20 delivery companies including Dunzo, Swiggy, and Zomato to generate additional revenues.

“If things are not going well with our B2C services, we can fall back on our B2B business which is more resilient,” he said.

Gupta said at present about 10% of the company’s 18,000 bikes are used for delivery purposes, and that he wants it to keep it that way. Yulu has started a long term rentals service as well.

“We are also thinking about monetizing our hardware and software platform that makes our bikes smart and connected,” he said. “We want to start offering that to other vehicle companies.”

“These are our complementary revenue streams, which we can dial up, dial down, based on our business goals,” he added. “But ultimately, we are in the business of moving people.”

Having a revenue model that is robust–recurring, predictable, and forward-looking–is an upside for startups, Unicorn India’s Joshi said.

“The companies that have recurring and predictable income are more valued than companies without this kind of income,” he said. “For instance, we usually back startups that leverage digitization and eases the way business is being done, because income is more predictable in these cases.”


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