Starting up is certainly not an easy mountain to climb. Founders throughout their daily routine and run, deal with functions across product, iterations, user growth, sales, marketing, budgeting, fundraising among many other things.
In this process, it is natural to believe that a certain tough time is possibly the toughest time ever in their startup journeys. Besides, with the number of stakeholders involved, founders often hear plenty of jargon around product-market fit, distribution, funding, growth hacking.
However, more often than not, a lot of this jargon does not apply to every other startup. Rather, it need not.
Pravin Jadhav, who was the MD and CEO of Paytm Money, goes on to say that many startups do not need a product-market fit, and sometimes not even a product.
“Everyone believes they have reached a product-market fit. Everyone believes they are on the right track. Every founder assumes that they are now ready for the next stage of growth and scale, or for a fund-raise.”
Are you really innovating?
When it comes to arriving at a common middle ground between real innovation and product-market fit, there are four buckets within which the products are segregated into.
The product strategy should match with everything that is being offered in the market, and the primary focus should be towards distribution more than anything else.
For example, Acko General Insurance, being a low frequency product, will not attract its users with high daily active users (DAUs) but only once a year. With existing products in the market already, a startup like Acko can only lean on aggressive distribution to gain its advantages over the competitors.
If you are a founder under the Distribution bucket, all you need to do is build a Me-Too product, inspired from an existing product stack in the market, and keep distribution the top priority. There isn’t a real necessity to build a fresh product from scratch, but just to get the distribution right.
Product ++ This area is where there is plenty of competition in the market for your product, with many players trying to capture it. For a founder building a fresh product here, the idea is to build a superior product than the existing ones. In addition to that, it is also important to match with the distribution segment in the existing market.
New ways of doing things There is an absolute need to achieve a product-market fit if your startup falls under this bucket. Initially, it is ideal to build your product in a small set of audience and users, and gradually expand your user base through referral networks. The best way to build a business in this bucket is by making the existing users grow more branching users for your product.
Moonshots Self-explanatory as the name suggests, one can immediately make out this is something that comes under the category of Air Taxis, Hyperloop or Space Travel. Big tech companies like SpaceX, Tesla or Amazon are the ones that try to disrupt the categories in this bucket.
Building a great Distribution-first product
Pravin recommends a simple framework to go about building a better distribution-first product, to see if it is wiser to match with an existing product or build a better product.
Here is an analysis of two insurance products available on Google Play Store. The one on the left is one of the country’s largest insurance companies, and the one on the right is one of the largest insurance broking startups.
The private insurance company on the left has 25 percent of its users complaining that the app is buggy, and 10 percent of the users complain that they are not able to link their own policies. Considering the basicness of these complaints, it goes to explain that the bar to build a good insurance product is very low. So if you are a founder building something in this space, it is imperative to match with this existing product and build additional functionalities on top of it. But to win this market, the startup would have to get its distribution right.
On the right, for this insurance broking startup, the first three rows signify the top three problems with the product that was built, that are - A lot of spam calling, bad experience and bad after-sales. If there is a new product built out there that works just fine and doesn’t call people that often, users would be really happy to buy it and discontinue their existing subscription.
1M users in 120 days: How Paytm Money scaled
Paytm Money was launched in September 2018. Within only 4 months, the team was able to scale the product’s reach to over a million users. The growth was fueled only and only by the product, and without any incentives like cashbacks and rewards.
A lot had to be done on understanding the users’ needs, what they are complaining about, and what the competitors had not been able to provide to them.
The graphics above represent one of the largest mutual funds distributors in the country, that has been around for the last 15 years.
Pravin’s team went through the investment journey through the several layers like login/KYC Confirmation, investment research, transactions and trading, staying invested, and the post-transaction experience.
Similar roadmapping was carried out for all the other 25 apps, in order to identify all the things users did not like about their products.
After this stage, Pravin and team went back to the drawing board to see how they could build a better product and a better distribution mechanism than all the other apps.
This included figuring out how to build better layers for user transactions, confirmations, retention and customer success.
“One important part most startups tend to overlook is Operations. You can’t just build a product with better UI, ship it to the market, and expect users to use it. It doesn’t work that way. You have to automate most of your operations especially if it is a tech product in the present day.”
The Paytm money team did not hire a single person from the mutual fund industry, but just a few from the compliance industry since the business was regulated.
After drawing the board, taking cues from the 25 investment and mutual fund platforms, the team built a ‘Wall of Experiences’, which still exists at the Paytm Money office.
This wall has more than 250 screens comprising onboarding, investment research, experience, searching for mutual funds, finding the ratings.
Packaging all of this together, building a team, getting office space, regulatory approvals, and automating the operations processes, it took the team 180 days to push out the first version of the product.
On the Day Zero of launching the product, Paytm Money was offering products from 25 different AMCs, 2000 different schemes, with capabilities around real-time portfolio updates, real-time statements, smart SIPs, transaction monitoring.
It was the lightest app in the country, sizing about 7.5 MB, enabling users to get started after downloading it within a minute.
Upon taking advice from industry experts on the scale for which the product had to be built and optimised for, it was identified that the largest players onboard roughly 200 users per day. Paytm Money aimed at 400 users per day upon launch.
But in reality, the app saw more than 2000 users applying for investment on Paytm Money within the first app itself.
Within 2 weeks, there were one lakh pending applications to complete their KYC verification.
120 days after the launch, there were one million users registered on the Paytm Money platform, all driven by a product-led growth approach.
After automating all the processes in Operations, the team was operating leanly with just 5 members, and zero spends on marketing and promotions.
Further optimisation led to building capacity for handling 10,000 KYC requests in a single day, 90 percent approvals happen on Paytm Money within the first 30 minutes.
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Freecharge: A new way of doing things
Before Kunal Shah started Freecharge in 2010, mobile recharges were done at a Tapri stall or a small street shop. The idea of facilitating a mobile recharge online was very alien at the time, and the users never heard of going online for it.
At the end of its first 5 years, Freecharge grew to 1 million transactions per day. However, it was anything but a linear standard framework towards scaling. The growth hacking approaches and strategies that worked at early stages might not and need not work at a growth stage, and vice versa..
0-100 Very popular in IIT Bombay during this early stage, the first 100 users had to log on to freecharge.in and do their mobile recharge which would send the coupons physically to their address. The partners that came along were Cafe Coffee Day, Baskin Robbins, PVR Cinemas and McDonald’s. The first growth of 100 users took only 30 days, largely fueled by word of mouth publicity.
100-1000 There was much fascination around physical coupons users would get, and Freecharge took this trend over to other IIT and IIM campuses. It was as easy as watching a movie for free with the coupon they received after the recharge. Soon enough, Freecharge had 1000 users using the product.
1000-10000 The startup was doing sponsorship campaigns to garner more users in this stage. It was only bootstrapped during the early 2010s, so Freecharge could manage to distribute free coupons so the users would come back to the site and recharge more. Besides, the startup used its Facebook page to encourage people to upload pictures of their coupons and that compelled them to engage more with the product. At the end of this phase, the startup had 10,000 users onboarded.
10000-100000 Around 2014, Freecharge launched its first mobile application. The team did plenty of ASO optimisation, online marketing, app-store marketing, partnered with a couple of banks. Since the transactions were all online, the most logical thing to do at the point was to partner with banks.
100000-1M The team went into the mass market of the country, where a formal growth team was set up, a referral product was set up, and a holistic growth framework to follow up on. Being absolutely sure of the retention numbers, the startup went on to advertise on Television with its campaigns.