Indian Startups - The Juice & The Squeeze

-Anishok Mishra & Anirudha Satapathy

Startups have been conditionally defined by the government of India as an entity younger than 5
years or having a turnover less than 25 crores in the last 5 financial years or as an entity working
towards innovation, development, deployment, and commercialization of new products,
processes, or services driven by technology or intellectual property.
However, our opinion differs from that of the esteemed government. Personally speaking, we
believe a startup is any entity that capitalizes on the basic human necessity of ease of life by
providing shorter and simpler method to perform the same tasks that we usually do. In our
preparations for this article, we had the opportunity of going through the agendas and ideas on
which many of todays emerging startups are hoping to deliver. These ideas vary from the
simplest idea of a mobile charger attached to a bike to financial services and consulting for
investments. In hindsight, one cannot help but wonder what these products and services actually
deliver to us; the general populace. We, therefore, at the risk of being called cynical, attempt to
take a more critical look at the startup scenario in our country and the repercussions of the same
in the long run.
As the scenario stands presently, about 9 out of every 10 startups fail within 5 years of inception.
The timelines vary but the primary reasons can be improper funding, a casual approach, failure
to adapt to the changing needs of consumers, and losing current consumers in search of higher
profits. Not to mention, those that launch a product or service without consideration for its
current demand in the market end up staring down the barrel of an angry investor. A majority of
the entrepreneurs in our country have learnt it the hard way that entrepreneurship is much more
than a fancy word and the toll it takes on their lives is extreme. What the young aspiring
entrepreneurs of our country fail to realize is that not everyone is built to be an entrepreneur. So
the obvious question that arises out of this deliberation is: What does it take for a startup to
succeed?
In our feeble attempt to answer this very question, we quote to you an example that has redefined
budget accommodation in our cities; OYO Rooms.
OYO Rooms did not start as it is at present. The founder and CEO of OYO Rooms, Mr. Ritesh
Agarwal, initially launched a startup named Oravel Stays Pvt. Ltd. which was also a platform for
booking budget accommodations. Mr. Agarwal could have developed a laid back and relaxed
attitude at this point; but he, unlike most budding entrepreneurs, sensed the immensely dormant
market of budget accommodations and thus sought to exploit this market. Thus, Oravel Stays
changed to OYO Rooms. The takeaway from this move would be the proactive approach of the
founder and the ability to adapt and grow the startup as a whole.
Furthermore, this step taken by OYO Rooms catapulted their business into the limelight and
made OYO Rooms one of the most preferred choices in the budget accommodation market. No
expense was spared in ensuring that OYO Rooms were listed on every major hotel and travel
website which allowed prospective customers, even us, to watch in awe as they offered the same
rooms in the same hotels at unbelievably cheap rates. This move pushed OYO Rooms from the
preferred choice to the most sought after. The founders strategy of playing at an Indian
customers psyche and our countrys obsession with getting more value for money helped OYO
Rooms cement its position at the top of the budget accommodation providers. Although several
players came into the scenario with similar propagandas and offerings, none could compete with
OYO Rooms for long. One can realize the importance of being the first to offer from this
scenario and the importance of identifying the demand for a particular product or service in the
market.
While OYO Rooms was performing in the market, its founder worked hard behind the scenes to
make sure that the funding for the venture never ceased during its growth. After its first round of
funding from Venture Nursery in 2012, OYO Rooms continued a stable rise in its funding from
Thiel fellowship, Lightspeed & DSG Consumer Partners and SoftBank over 2014-15 allowing it
to grow and expand without having to worry about a drying source of funds. This too serves as a
learning curve for the young entrepreneurs; to keep their sourcing in line with their expansion
plans so that the startup does not crash.
Despite its growth and expansion into the higher end of hotel accommodations, OYO Rooms has
not forgotten its primary customer base of budget travelers. This has allowed them to maintain a
steady turnover throughout their growth phase and also helped them to inculcate their image as a
consistent performer in the market. It has one of the most traditional approaches to market its
brand as one that imbibes trust in its customers and assures them of the best service at affordable
prices. Young entrepreneurs must remember that they should never aim to sacrifice their user
base in search of greater profits.
We cannot help but emphasize the importance of these factors in the success of a startup. But ne
must also realize that there are no safeguards against ineptitude and bad luck.
The most recent development in their expansion plans is the fact that OYO Rooms have
expanded to open their first property in Malaysia; thus taking their brand into the international
platform. We cannot help but admire the farsighted approach that allowed the founder to grow a
simple idea that started with Oravel Stays Pvt. Ltd. to the OYO Rooms we know today.
The question that now arises is: What next?
In our humble opinion, OYO Rooms must understand that the global market scenario is
substantially different from the Indian sub-continent. They cannot relax and fall back to their
time tested marketing and business strategy. They must aim to develop newer ways to attract the
customers in the new markets that they are aiming to penetrate.
Pricing has always been OYO Rooms differentiating factor when compared to its competitors.
They must retain this strategy in the new market and ensure that they continue to price their
services at par or below the average market price whilst guaranteeing that they break even on
their operating costs.
They must also implement better promotional strategies to educate their prospective consumers
regarding the key benefits that OYO Rooms provides its customers with. This will allow them to
create inroads within the market and thus capture a portion of the market share to begin with.
Clean sheets, complimentary breakfast and free Wi-Fi may have been enough to capture the
imagination of the Indian consumer but the same is standard fare in the international arena. They
must look to implement loyalty programs and payback schemes which will incentivize the
consumers to return to OYO Rooms for subsequent stays.
OYO Rooms must ensure that they conform to the international standards of the hotels abroad
thus classifying them as a brand apart in the affordable class of hotels while keeping their
original business model intact.
To conclude, we would like to emphasize the fact that any young entrepreneur may want to look
at successful startups like OYO Rooms to take inspiration, not in terms of the business idea or
model but in terms of the business strategy that was implemented by the founder and his team to
get OYO Rooms to the positions it holds today.
Any young entrepreneur must ensure that their ideas do not become rigid, that they cater to a
need of the consumers in the market that they must keep their funding continuous and lastly, they
must never look to sacrifice their existing customers in search of greater profit opportunities.
We hope you, the readers may have found this of use in your plans for the future.