Abhishek Patil

PhonePe isn't the first UPI app 💸
Maruti 800 wasn't the first family car 🚙
Why first mover advantage is broken? ⬇️

Some context 🗓
While first mover advantage works in the western countries, it has almost never worked in the Indian market. Take PhonePe's example, it was 5 years behind Paytm to launch payments & is a UPI market leader (46% share).

Enter, the second mover advantage 🏃🏻
More importantly - why it works in India?

1/ India has ultra low trust levels 🇮🇳
With the amount of scams and pyramid schemes Indians have seen in the last few decades, they don't trust the “new shiny thing“. Although PayTm launched early, building trust with users & merchants took over a decade.

2/ Internet is still very new for most Indians 📱
While PayTM had to educate every merchant on why digital payments is the future, PhonePe had to undercut on pricing/ benefits. The market was ready to adopt by then.

3/ Wallet share is extremely limited 💳
With $2250 of per capita income, Indians need extremely high value creation/ cash incentives to get them to try anything new. Remember the Uber/ swiggy days of crazy discounting? Gaining wallet share = cash dumping.

4/ Jugaad beats western solutions ⚒
Paying for Music (Spotify) is unheard of for most Indians still today. No wonder YouTube (with ads) is the most popular form of music consumption.

5/ Scarcity of relevant builder talent 🥺
Imagine hiring a payments engineer back in 2016 for PayTM - extremely hard to find that talent in Indian. I'm sure PhonePe could poach these engineers from PayTm and build stuff much faster from ground up.

6/ Unable to raise quick VC money 🕹
Until your product category has a huge competition within indian or an example to understand the business model from the western markets - it's really hard to raise money & convince VCs on depth of market.

So what should startup builders keep in mind? 🧠

First Vs Second isn't a battle. But, if you are a first mover in a new category do few things that will increase your odds of winning the growth game.

First, raise more funding than you need - you will have to spend higher on customer education & won't be able to charge from Day 1.

Second, pick a go to market that solves a real problem - create enough value for the end user & value capture will follow.

Third, keep solving for trust across every kind of user story. Build it with your customers, vendors, investors & even the government for regulated category.

That's all for now 💙
If you are building a product that has the first mover “disadvantage“, follow my weekly newsletter and build the muscle to solve specific problems that you will face on this journey.

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Adobe acquired Figma for $20 Billion 🔥
This is one of the 25 acquisitions by Adobe so far 🤯
Here's what's next for Figma <> Adobe users ⬇️

Quick context 🗓
Last night in a surprising move, the IPO bound, Figma was acquired in half cash & rest in stock deal by Adobe. In turn, wiping out Adobe's biggest competition in collaborative category of design. Interestingly, Adobe has a similar product to Figma called “Adobe XD“.

Why the acquisition now? ✈️
Figma is on $81 million revenue run rate. It would be fair to say this category is “owned“ by adobe & it's adobe suite. Figma was eating a small pie in Adobe's $4.43 billion revenue. But, the pie was increasing. Figma grew from $50 million revenue to 60% year on year. That's crazy if you think about it for such a scaled company.

But there's more to this deal 🤭
Adobe has offered figma an insane revenue multiple valuation. The deal is almost 2.1X of Figma's last valuation of $9.1 Billion. Now, if you look at public markets for internet companies IPO'ing, the story hasn't been great. The Figma board & founders saw this & could not resist but take this deal. Nothing wrong in it.

What was Figma's win? ⬇️

First, Collaborative design 🤝
Creative process is collaboration first and that's what Figma focused on day 1. Sketch (from apple) / Adobe XD has so many problems with this collaboration (public vs private pages).

Second, the platform 🖥
Figma focused on web apps as much as it focused on the desktop client app. This is a major insight founders had so early on. Most low capacity macs/windows laptops can not run heavy Adobe suite.

Third, low friction to adopt ✨
My dad could potentially use figma with an hour of YouTube lessons. That's how easy it is. I feel figma took a lesson from Canva's learning book.

Fourth, the price point 💰
Again, it read the lesson out of Tally's book. Give your software for free for personal use and don't go hard on number of guests per workspace on figma. You have millions of users signing up, get addicted to figma and when they go & work in a team, they will have to signup for the team plan. (They'll happily get their employers pay for it).

So what's next for Figma? 🎯
Most of the designer community is worried about the free to paid plans. I don't think Adobe is penny wise & pound foolish. It'll make Figma scale to market ceiling & then force employers pay for it, making billion dollar revenues every quarter.

But, it will go beyond 🚀
If you read the fine print of what Figma founder said in the PR release, it says “we will have the opportunity to reimagine what the best creative tools could look like within the Figma technology stack“. So, Adobe suite integration inside figma is possible with cross selling now.

That's all for now ✨
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2022: bigbasket.com posted ₹812Cr loss 💵
2016: PepperTap failed in less than 2 years 📉
Here's why Grocery business keeps failing ⬇️

Before we begin, I just hope it's 2030 & we have a profitable grocery company in India 🤲🏻

Let's begin ✈️
Every year new grocery startups raise, build sleek product, hyper-grow & go bust. Whatever the reasons, they never turn a profit.

So what's behind every grocery business's failure? 🤔
This question has haunted everyone who has ever worked on building a grocery business in the last 30 years. The answer lies in the nature of any grocery business. The four players - manufacturer, the distributor, the retailer, the last mile logistics play the game of bringing profits.

The manufacturer 🏭
They never lose money & turn a good profit. These are the OG brands who are the nouns for grocery items in their loyal customer base - Aashirwaad for Atta, Parle/Britania for biscuits, Fourtune for sunflower oil & the list goes on. Typical margins 15 to 30%.

The distributor 🚚
This player doesn't make huge profits but never makes a loss. If you are a grocery player and you rely on distributors - it's really hard to make any margins on most products. Typical margins 10 to 15%.

The retailer 🏬
They have to setup a store, get right branding, do marketing, solve for increasing time spent per customer in the store & 100s of other things. Typical margins 7 to 15%.

This is where it get's interesting ✨
Most grocery startups have typically focused on two things.

First, eat into the distributor margins and buy in bulk from manufactures. Cutting the middle man. This has worked for few brands to reduce losses but no one, I repeat no one has turned operational profit, yet.

That brings us to the second point. Promote a whitelabeled product (Dunzo's own rice, Zepto's own oil, Dmart's own sugar & so on) to improve the 7% retailer margin to ~30% = {manufacturer + distributor + retailer}

But, it missed the important point 🧠
Will you use a different toothpaste than Colgate & the next 2 brands? Will you change your choice of rice / daal. Maybe Sugar could be something you have flexibility of choice. But, that too if the non-branded sugar is cheaper. Changing a user behaviour to switch brands is huge & a retailer (let's say they even cut the distributor) can never compete with other brands to influence the end users.

My honest admission 💙
This post was triggered when I visited a local Dmart type of store and when I saw the shopping cart at the billing counter. See the percentage of white-labled product in the cart. It's mere ~15% of the bill amount.

Now you know why grocery is hard 💡
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