At The Smart CEO, we’ve interviewed senior leaders from Snapdeal several times since their founding. The first time we interviewed Kunal Bahl, the brand ‘Snapdeal’ wasn’t even born. He used a run a mobile-based discount coupons business and had plans to transition it to a group buying venture, modelled on the lines of Groupon.
The second time we interviewed him was sometime in 2011, when we worked on an article series titled ‘Plan A to Plan B and beyond…”. This story focused on the concept of ‘pivots’ and we narrated the stories of how seven companies made the transition from one business model to another. Snapdeal’s transition from being a discount coupon business to a group buying site and eventually an e-commerce marketplace was captured.
The next time we featured the company, it was a big story, which we published sometime in November 2014 on the cover. We narrated the key decisions Bahl and his co-founder, Rohit Bansal, made when they were sitting on the last US $100,000 in the bank in January 2013. At the time, the company had burnt US $57 million it had raised between September 2009 and January 2013.
By November 2014, things had turned around. Snapdeal counted Ratan Tata as an investor and had raised US $865 million and had signed up 50,000 merchants. If not for anything else, Bahl and Bansal are nimble-footed, fast and rarely hesitated to make difficult decisions.
They probably made one of their toughest decisions this February. They let go of a large number of people, over 600 of them according to Economic Times’ reporting. An article in moneycontrol.com reported that the company had its last US $100 million in the bank and it was taking steps to cut its burn to US $10 million a month from US $30 million a month.
Can Bahl and Bansal bounce back, just like they did in January 2013? In pure financial terms, the stakes are much bigger for Snapdeal today. A 10-month runway, when your burn is in double-digit millions is certainly a challenge. But Bahl and Bansal have bounced back several times in the past.
It’ll certainly be interesting to watch Snapdeal over the next 10 months. I am particularly intrigued by what the company will do to its mobile wallet arm, Freecharge. It could hive it off to bring in some much-needed cash or, maybe, it could pivot its business model into becoming closer to Paytm rather than compete with Amazon and Flipkart.
Bringing things back to this note, I wanted to write about one aspect our unicorns could have done differently. And, of course, I am saying this with the benefit of hindsight.
I believe companies that rely on a large number of external partners (online sellers at Snapdeal, drivers at Uber, etc.), must revisit their communication strategy around fundraising information. Going by conversations I have had with several online sellers, there is a big disadvantage around announcing massive funding rounds. It makes the partners feel that they are not making enough money (while the startup is raking in cash in billions, although only in funding) and it becomes a standard expectation to receive discounts, incentives and bonuses on an ongoing basis.
Maybe, well capitalised companies would do well to share their customer acquisition strategies with the partners, letting them know that these incentives are only short-term. Marketplace driven companies must certainly look at setting the right expectations to their partners.
Hindsight vision is always 20 20, nevertheless, it’s a crucial lesson for our future B2C unicorns to consider.
I hope you enjoy reading this edition of The Smart CEO. In spite of all the gloom in the startup ecosystem, we bring to you a collection of some wonderful stories, in the hope that they bring back some of the faith and a lot more of the enthusiasm.