The choices that scaled our startup to ~$180 mil GMV exit run/ year
Back in mid-2016, at WeddingZ, we were preparing for the Series A round. Things were on the right track - we had captured key markets, earned a decent reputation, were growing at a steady pace, had launched strategic initiatives including wedding loans & insurances, gift registry, and a few more categories.
Given our growth, huge market opportunity, we believed that it should easy for us to raise Series A until we faced 'realities'.
Realities - we continued to ignore until it had hit us. Thanks to the investors that chose not to invest as this had pushed us to find sustainability within the venture.
The business had 3-4 steps before we even pass on the 1st information to the customers, makes it OPS heavy & unscalable,
Our receivables are due only once the customer has consumed i.e. ~ 8 months post booking (Remember Working capital requirements?) and our burn was high,
Our DPDs (post those 8 months) were 3-4 months & huge write-offs. It is tough to collect your money especially in an unorganized sector (did I also say that collections are tough in organized sectors as well?); We were struggling to collect,
We were not growing as fast as we used to; the business was people dependent (Call Cent & FoS) and rarely had any tech. I ran the entire OPS (from the first contact to collections - ~12 months cycle) on XLs for the first 2.5 years!.
Our choices - While staying in Mumbai, I liked an open bar in Juhu. This bar gave me a lot of me-time (& beers). Here are some of the choices & decisions taken while sitting there that I'm most proud of and these scaled the venture as well.
FCR: Adopted 'First attempt solution' for all the customer-related activities and remained FCR obsessed - this had improved our business by 20-30% MoM immediately,
Full inventory without any commitments (SM model): Started owning the entire inventory (365 Days X all slots/ day) WITHOUT any rental or business commitments BUT take our business interest from the entire business booked (irrespective of the source of the customer). This still is 'The Model' at which we delivered ~$180 Mil/ GMV annual run (last CY), ~6K functions/ month, 2.5K employees, 1.5K venues in 45 cities,
Venue Manager: Placed our asset (a VM) at the venue to sell. Collect the booking amount (enough to cover our business interest) from the customer, keep our business interest, and pass-on the rest to the owner. This gave us interest-free money (the customer consumes only after ~6 to 8 months post-booking), hardly any collection issue (these issues diminished till our acquisition), and almost nil working capital requirements (if one collects successfully).
By the way, did we raise our Series A? No. We raised a couple of pre-series A, scaled the venture, found sustainability from within the OPS, got acquired by Oyo, and scaled further to the current levels. So, what're the learnings (apart from sipping beers)?
FCR: touch hands only once - pick up a problem --> solve and automate, Get the info that the customer seeks in the 1st attempt,
Full inventory model: If & when possible, manage the whole asset (without owning it). Don't commit rentals/ don't give MGs (WeWork and Oyo will have outstanding payables even if there is no business like today's world). We wouldn't have to worry about rental or MG business payables in a downturn,
Collections: Collect as early as possible and pay as late as possible (but pay on the time and as committed). Your business ideally should have minimal WCR. Focus on collections from day 0! Profits & sustainability are within the venture.
Unit-level economics: Before you scale, be very clear (& persistent) about unit economics. You must always be contribution margins positive while scaling up. As a business, we struggle here the most, to date. Remember year 5!
What are the secrets that helped you scale your venture?