Inconsistency can mislead the mission and vision of the startup.
To succeed in the startup there can be ’n’ factors that should fall in place precisely if the startup resulted as failure due to ’n’ factors where some major and fundamental factors impact the startup’s future.
In this What Went Wrong series, On Day 2 let’s unpack the story of Tapzo and what went wrong in that startup with raw insights.
A company that has successfully operated with 14k clients and valued at 100 million Dollars in 2017–18 which ended by being acquired by 40% of its valuation.
Problem-solving can be gained from a practical approach. However, Identification of the problem is the core skill that is a must quality for a founder. Ankur Singla, a lawyer by profession and been doing good in his space. However, his interest in entrepreneurship has been his passion. In 2009, Ankur launched Akosha which serves as a platform for consumer complaints. Online shopping is slowly picking up in metro cities with gradual growth.
This pain point not only addresses consumer complaints to the company but also monetizes complaints as a feedback source for multiple brands. Once brand awareness spread to online customers Akosha experienced getting revenue from brands where they served more than 3 million customer complaints with 200+ brands. It raised capital of 5.2 million Dollars from Venture capital, Sequoia Capital which opened the window for them to scale and widen their pie.
Ankur aimed to represent Akosha not only with consumer complaints but even more than act as the agent to customers. In 2015 they had pivoted from Akosha to a virtual assistant to customers with rechristened as HelpChat.
A startup journey doesn’t validate if we solve the known problems instead dealing with unexpected scenarios and problems. Connecting brands and understanding customer pain points become volatile to streamline the process. Ankur collaborated with Vishal Pal as CTO of the company and tried implementing automation, and machine learning to provide customer experience for their concerns, But miserably failed to achieve desired results.
Within a short turnaround time, they realized HelpChat was not gonna be profitable or scalable. To penetrate the mobile market, In 2016 they pivoted again into a new space leaving their ground as an aggregator application for services such as Tapzo. It serves customers as a super app where multiple apps are integrated into a single app without installing each app where storage and accessibility play the forefront in this innovation. Primary services such as food orders, online shopping, booking, recharge, and entertainment.
Having a strong customer base from HelpChat, helps Tapzo cater to a large audience in a fleeting moment. They raised 34 million dollars from big VCs RB Venture, American Express, and many others. Tapzo considered as first India Super app. Market appreciated by comparing with WeChat, Gojek, and Grab from China, and Southeast Asia. Which were the biggest conglomerates.
Tapzo captured the market in large volume where they were holding 40 services with a 5 million customer base which is responsible for 25 million transactions. In business it’s not always volume that indicates the profitability of the company, Value plays a key role in validating the company’s profitable and operational value. Tapzo’s fiscal reports and balance sheet were identified with negative cash flow. This hits the investors that Tapzo is a super app that can’t be profitable. Founders pitched to new investors but none of them were ready to invest more in a negative cash flow company.
Amazon, which is one of the biggest online e-marketplaces plans to initiate a fintech platform for Amazon consumers, whereas Google introduced Tez now Google Pay in 2017 which leverages to create a customer database. Where Amazon made a smart move that identified Tapzo as a data house serving 140k app users daily, and 55k transactions with an Annual Run Rate of 30 million (210 Crores). Big conglomerates have the power to imitate the idea or kill the competitor in the mask of acquisition.
In 2018, amazon acquired Tapzo with 40% of its valuation which is 40 million dollars in a cash deal to improve Amazon pay functionality. The founders and employees were shifted to the Amazon office in Bengaluru to work for Amazon Pay. Later, they shelved Tapzo by utilizing the data house of customers with the statement ‘We didn’t see a future in Tapzo’. On Oct 31st, 2018, Tapzo mailed customers and vendors as Tapzo is shutting down its operations.
What Went Wrong
· Steadfast commitment to the startup’s vision is crucial.
They have pivoted twice from Akosha to Tapzo by entering a new market or space. If customers have concerns about the product then founder should figure out issue instead of pivot.
· Frequent pivots can lead to escalating costs and diminished agility.
The cost of dynamism includes multiple costs as operational costs, management costs, fixed costs, training costs, and marketing costs. Each pivot needs to handle all costs.
· Sustained negative cash flow burdens the operating company.
The balance sheet of the company resulted in negative cash flow where investors didn’t see the future of the company.
· Over-reliance on financial backers and investors for continuous capital infusions.
Risk management identifies the capital required for future operations and founders concentrated on improving applications and providing discounts instead of understanding customer issues.
· Forced into a fire sale, the company faces an untimely demise.
Investing earlier by collaborating with large investors could’ve increased opportunity to avoid negative cash flow. But, the founders gave up with minimal buyout from amazon
