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oneassist_logo timthumbLightspeed India MD Bejul Somaia was interviewed by Paramita Chatterjee of the Economic Times newspaper about Lightspeed India’s experience with incubating both OneAssist and LimeRoad.  Here’s the link to the article.

We are actively looking to incubate companies in these spaces, as well as back established companies and startups in these areas.

Our experience has been very positive:

“We were involved in incubating two companies in the last 12 months – OneAssist and LimeRoad – and have been very pleased with the results so far. Being able to work closely with teams during the incubation period really helps set the right foundation and strategy for the business. The incubation approach is very time-intensive, with no certainty of a successful outcome. But we will build on our positive experience by catalysing new companies in an organised manner.”

What sectors are Lightspeed looking to invest in?

“Education technology, financial technology, healthcare services, internet, mobile, software and software-as-a-service.”

 

(Source: kenteegardin)

We have been thinking through how to start and build large mobile B2C businesses, with an eye toward the megatrend of mobile that is slowly building here in India.   Megatrend-wise, the number of mobile internet users in India has grown rapidly (60-100M mobile web users depending on who you believe in) and that trend is likely to continue.

While this megatrend is creating an opportunity to build mobile-first B2C businesses, the lack of monetization methods is a big problem. Stumbling blocks include lack of depth in micro-payment platforms (outside of telcos) and a rather small mobile advertising market.

I believe that mobile-first startups need to keep gross burn low while iterating fast toward product-market fit –  there are two key metrics which I feel need to be optimized early-on and are lead indicators of the value that a business in this space can create:

  1. Customer acquisition cost (CAC) associated with a fast growing user base
  2. Engagement within the acquired user base

How to drive lower customer acquisition cost:

Low B2C CAC for a quickly scaling user base can mean one or more of the following:

  • You have hit a need gap that might have a large market.
  • Your product cuts through the clutter and provides an offering much better than competition / substitutes.
  • Strong virality or word of mouth referrals which come from a wow consumer experience and/or a well designed social product.

Typically, cost of acquisition needs to be compared against the revenue or lifetime value of a user, but given monetization will take longer in India, absolute low customer acquisition costs are important for the business to grow and sustain. Dhingana, a Lightspeed-backed music streaming service on web and mobile, for instance has spent a minimal amount on above-the-line marketing and has reached several million monthly active users.

What if your customer acquisition costs are not low?

  • Initial customer acquisition costs for new products are typically high. As you refine the product, channels and communication costs should improve.  So have a plan for driving down blended (over non-paid and paid channels) CAC.
  • Explore acquisition channels that are opening up now: A key driver of TripAdvisor’s success was its understanding of Google SEO much ahead of competition. Social and mobile channels are opening up now and some aspects aren’t yet saturated or very well understood. Take advantage of such channels. For example, Facebook recently launched its in-stream advertising and provides an opportunity because it isn’t very popular yet.
  • Think about alternate channels for customer acquisition (E.g. offline retailers for local oriented apps, banks for financial services, publishers for media content, etc.). However, ownership of the customer is always an issue with such channels.
  • Figure out monetization sooner, rather than purely growing the user base: Easier said than done, but you might want to identify market segments where there are customers that have a higher willingness-to-pay.

In essence, low customer acquisition cost is a key indicator of a large future user base.

How to drive higher engagement and retention:

After user base growth, engagement and retention are the key indicators of a business’ sustainability.

Poor retention is like a leaky bucket. There is no way you can create or hold value if your service is unable to retain customers. Retention (% of users that continue to use your service) after three months of activation is a widely accepted engagement metric. Flurry recently reported an average retention of 35% after three months of registration across a large base of apps. If you don’t know which side of this average your retention is, you are blind to one of the most important aspects of building a mobile business. A few points to keep in mind when using the above average as a benchmark:

  • The nature of your business impacts retention. Flurry’s own data shows the extremes, such as finance apps which average retention of 10%, while news/sports could be as high as 50% after three months. This does not mean you should change your business, but have the perspective when you are benchmarking your business.
  • If your user base includes a large mix of older platforms like Symbian (especially in India), then expect your average to be lower than the global average, which has a large mix of iOS that is likely to have better experience and thus retention.
  • Finally, this retention number is from developers who cared to install such a measurement tool. Many developers who didn’t would likely be at a lower retention for their applications.

More frequent use of your service makes it more valuable. Flurry reports average usage frequency of ~4 times per week within its sample. The use of game mechanics and notifications are approaches to building engagement. Foursquare is perhaps one of the leading examples in driving engagement through gamification. Tools such as Urban Airship, Badgeville, Bigdoor and Xtify could be useful to use here.

Start tracking engagement metrics as soon as you launch your service. Use tools such as MixPanel, Flurry, Apsalar, Kissmetrics to measure funnels and cohorts. Define core, casual and inactive users, and measure movement between these categories against weekly and monthly targets.

Delivering on these metrics will lead to monetization and sustainability over time:

Drive high engagement today to create valuable users for future: Eventually, a portion of users who you engage could pay for the service. If the service is providing enough value, people in India jump through quite a few hoops to find a way to pay. IRCTC (~20M monthly transactions) and online tax filing (15 M in 2010-11) are great examples of at scale online transactions.

Focus on building engaged user base for better ad-monetization: Overall, there is far more mobile ad inventory in India than there is demand from advertisers. Thus, a business that stands out in terms of user engagement and has an identity within its user base will attract ad budgets. For instance a strong sports-oriented platform could find youth-oriented brands as its takers. iPad has a strong identity and engagement within its user base and ads on iPad in India go at ~Rs 1000 CPM and there is always demand for more. On the contrary, if you are one more provider of mobile inventory, then you are likely to be used for performance campaigns with poor fill-rates and low CPMs.

Good performance is self-sustaining: Your performance on app stores as well as likelihood of getting featured on one improve if you have organic traction (low CAC) and have high engagement. Android for instance optimizes search results based on retention metrics of apps.

More monetization options are becoming available, albeit slowly:

Existing VAS business models are being challenged: While the above two metrics don’t apply as sharply to existing mobile VAS businesses that are monetizing through operator relationships, the wind  is certainly blowing in the direction that they would need to start thinking about these metrics as well (TRAI’s regulations and TDSAT’s recent ruling in TRAI’s favour).

Payments through telcos is a matter of time (could be long though): Given the circumstances, telcos are opening up to being a payment channel (and getting paid like one) where the mobile business is responsible for customer acquisition. Vodafone is already selectively allowing B2C businesses to keep 60-70% of the revenue that is being collected by Vodafone from users that were acquired directly by the B2C business. More on this in Dev’s post.

More payment options are opening up: There are more efforts underway at app-stores (Rupee payments at Google Play and iOS App Store, OVI/Blackberry integrating with Airtel/Vodafone billing gateways). There are also other ongoing efforts like mobile/online wallets and integration of telcos under a single payment solution which will all lead to a much more favorable payments ecosystem for mobile B2C businesses as they come into market.

Mobile advertising is getting organized: The mobile advertising ecosystem in India is firming up with multiple players from ad-networks (InMobi, Komli, Vserv) to media-buyers (Ad2C, Madhouse) setting up dedicated teams for the Indian market. Brands are already experimenting with mobile even though the budgets are small today. It is still a long way to go, but if smartphone penetration continues to grow, then mobile could very well be the largest targeted digital rich media platform available to a brand manager.

These are still early days and it is a long haul, but if you are building a mobile-first B2C business and focusing on the metrics above, there is a path to meaningful value creation.

69821764_66cff01bbb(Source: Tiarescott)

[Published on NextBigWhat]

Your board should be an asset to your company, providing guidance and advice at critical strategic junctures, as well as functionally helping with executive recruitement, M&A and other liquidity options, and key strategic outreach into regulators, distribution partners, suppliers and customers.

In my opinion, the smaller the board, the better. When you start out with your company, perhaps there are one or two founders and an independent on the board, for a total of three.  I have seen most boards at about five and some at seven to nine members. Six or above, in my opinion is too big and unwieldy to make fast and correct decisions.

In all the hubbub of starting and growing a company, it’s easy to overlook the creation of  a strong and value-added board. Most times, the board consists of management (initially founders) and investors and remains that way for quite a while.  But it can be even better.

I’ve seen independent board members help out a fair amount.  So whether it is an empty seat set aside for an independent or no seat at all, I would recommend getting somebody onto the board soon. And constituting an ‘advisory board’ doesn’t achieve this purpose.

Some of the roles I’ve seen independent board members play are:

  • helping resolve complex and difficult situations or stand-offs between the CEO and investors.
  • providing a balanced perspective when management and investors may have drifted into extreme positions
  • working closely with the CEO outside of board meetings to provide specific deliverables back to the board (eg compensation proposals)
  • provide a sense of real perspective from a long and successful career in their industry
  • serving as a mentor and guide for the CEO to enable the CEO to learn and grow in his or her role as a leader and manager

So, who should your independent board member be?

  • Should have strong rapport with the CEO and not be just a ‘yes man.’
  • Should ideally have a point of view/relationships/experience in an area that is currently under-represented in the senior team
  • Should have a financial interest in the success of the company. Ideally would have invested their own capital into the company
  • Has time to spend for board meetings and outside of board meetings with the CEO
  • Is genuinely interested in seeing the CEO and by extension the company succeed

Some good posts & examples:

Have seen you seen independent board members play other constructive roles? Please let me know in the comments section.

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