How do I analyze the competition?

Starting up a business is hard, really, really hard. Your chances of failure are high. You like it to lose both your sleep and your hair. But luckily for you, you're not alone. Welcome to E.T. Startup School, your step-by-step guide to starting, building and consolidating your startup business idea. Your teachers at the E.T. Startup School will be some of India's best known entrepreneurs, VCs and domain experts. So grab a notebook, take close attention. School is about to start. Today's class at E.T. Startup School is called, how do I analyze the competition? Your teacher is Rohan Bhargav, the co-founder of Cash Carro, one of India's fastest growing cashback and coupons companies. Co-founded by Rohan and his wife Swati Bhargav in 2013, the journey of Cash Carro was driven by the couple's desire to participate in the booming Indian e-commerce economy and the success of Cashback's sides globally and Cash Carro found success in an increasingly competitive space. And so, who better than Rohan Bhargav to teachers about pricing, network effects, tracking competitors and more? Alright Rohan Bhargav, teacher for this class at E.T. Startup School. Today's class is all about how do I analyze the competition? Rohan for this class, let's assume the following things. I haven't decent started by there. Every sum sort of seed money and I've convinced a few people somehow to join me for level money. Now, what's the first thing I need to know about the market that I'm going to target? That's a very interesting question to ask. In getting started, I think there are four key steps. I think the first is understanding what is the problem. What are you trying to solve? And does somebody really want that? So, for example, when we started off, our mission was, our belief was that retailers want marketing as a problem to be solved. The problem we're trying to solve is that how do you bring ROI into marketing or return an investment into marketing? The next step is that who else is solving the problem? So, for example, when we think about marketing as a broader landscape, Google's doing it, Facebook's doing it, there's obviously traditional channels of pre-intradio TV. What is the problem? Who else is sort of solving it? And then the key question that comes down to is that how are you going to solve this better? So, you're coming into a market that could be incumbent, so it could be a new market, but how are you doing this better than others? Now, when we look back at our journey, the core realization that we had and we spoke to our retail partners, etc. The message from them was that, look, currently, the model is a cost per click model. So, Google says that if you click on my ad, I will charge you money. But, honestly, nobody's making money from clicks about from Google. So, change that model and flip it around and say, hey, we will charge you on a cost per sale model. And that is what we were saying. We're going to do this differently. We're solving the same problem that Google is solving, but we're going to do it differently. And the last step I believe is to validate this problem. I feel that a lot of people that are about to start a business often overthink the problem. So, they have like this business plan and they have a lot of things in place, but they're constantly sort of overthinking it. And I think until you don't jump into it, you're not going to see what the real world looks like. So, yeah, I think those would be my sort of four steps. Rohan, I often hear VCs say that we want to back a billion dollar idea. That's fine and dandy for a VC to say as an entrepreneur, how do you figure out the potential size of a market? What metrics did you use, for instance, to estimate how big your market could be? You know, it's a very, very common feedback that we've done a couple of rounds. We know that, even from a series A stage, it was like how big is this going to be? Now, when we started, we started almost nine and a half years back in India. We were coming into a virgin market. There was no cash back in India. Obviously, we couldn't have used India as a benchmark, but luckily, we had a lot of global counterparts. So, we had seen this model evolve in the US market, in the UK market. And what we realized was that at a mature scale, affiliate businesses or performance marketing businesses are able to contribute between 15 to 20 percent off e-commerce at scale. And that was the benchmark. Now, from there, we kind of projected, looked at, you know, research that was coming out from various bodies, whether it was Google, whether it was anyone else talking about the scale it which e-commerce is going to grow in India. The number of people that are going to be coming into the online space, and that was our benchmark, to figure out, what is the target market that we're trying to build? I think with every business that seems sort of common sense will apply. So, in the sense that if you're trying to build a let's say a restaurant business, right? Now, obviously, the scalability of restaurant business is a little different, but then you're trying to capture what is the footfall coming in. So, let's say, you know, if you're trying to open up something in cyber city, you have a sense of what is the footfall that is coming in, right? So, that becomes your target market within that, you know, depending on the nature of the restaurant, right? So, is it a premium luxury sort of restaurant, or is it, you know, more fast food type? You start to get a sense, right? And that's how you start to estimate. Do you read a lot of market research reports and are they open source and in the free domain, or do you have to subscribe to say, Gartner, or forestry, any of these market research firms that routinely analyze market sizes? You know, honestly, I think a lot of information is available publicly, right? The beauty of media in the last sort of 10, 5, 10 years in India has been that information is easily available. In fact, a lot of harder to get research papers are also available, right? People have sourced it and there are these amazing startup groups on WhatsApp, etc. where you can actually get access. So, I think getting access to information, not a challenge, I think it's about being a little enterprising in trying to, you know, ask the question. You said when you entered India nine years ago with this proposition, you were in a virgin market. If I must start to print on to print on Rohan, should I enter a market with lots of players or look for a completely unexplored white space kind of market? You know, honestly, it's not a straightforward answer. You know, I think coming into a virgin market is great. The advantages are that, you know, you get the early adopters, you kind of are setting the price. Profit margins are going to be great. You know, you can run that way for a while, right? But you see, the reality is that very, very few businesses get to scale and not face competition, right? So, you know, whether you are the first entrance, as you scale competition will come, you know, on the other hand, you know, if you are entering into a market, whether it's already a lot of competition, I think you really need to be honest and look at what is it that you're able to solve for it. So, for example, you know, let's say, if you want to build a new bank, very, very hard problem, right? There's a regulatory aspect to it, investment aspect to it, you know, which makes, hinting into that market very hard while there are a lot of inefficiencies that I think anyone can point out to. But, you know, if you're trying to enter, let's say into the fashion space, right? I think there are new fashion boutique brands that are coming up left-rightened center. There are new restaurants coming up, right? I think we've all seen new chains, come up, you know, every month, every quarter. It depends on how fragmented that market is in what are the barriers to entry. So, I think it's really about understanding your market extremely well, being honest. And then really knowing what is my USB, right? You know, if you look at a business like Zepto, you know, if somebody, you know, went back two years and say, you know, we need to disrupt online grocery space. You know, it's so crowded, right? I mean, there is a big basket of grofers, Amazon's getting into a Amazon freshers there. But, you know, they've come in and they said that look, we will fundamentally challenge how fast we can deliver the product. So, they're not playing on price. They just playing on service, right? And I think, you know, they're winning that game. So, I think it's, it's therefore, it really comes down to how are you approaching the problem versus incumbent lots of competition, etc. Rohan, there's one school of thought that says, first move or advantage, you should blitzkale, you should grab as much of the market as you can. You get the earlier adopters. On the other hand, this Google, which was the 14th, 15th or 21st player in the search market, as an entrepreneur, this can be confusing. Should I enter a market if they're like 13 players, they're already? You know, it's a really, really good question. And I think it comes down to, again, what is the USB, right? How are you solving for this differently? If you look at Google's story, right? You know, when they started off, they were essentially academics, right? And, you know, they build this most amazing, useful search algorithm, right? You're so proud of it. And, you know, they went out to Microsoft and they went out to Yahoo and they, you know, these were giants, right? And they said, look, we've solved search as a problem. Can you buy this from us? And the answer was, look, search is not the problem we're trying to solve. And, you know, out of desperation, they said, look, we'll set up Google. And I think the fact that they were true to saying that, look, there is a problem to be solved. We're solving that problem. It's really the answer, right? So, are you solving this better than anyone else out there, right? And you could then be entering a market with 10, 20, 100 people. If you're doing it better, you're going to win the game. Ron, when you launched Cash Carrow, you said you entered a virgin market, but were there any key competitors? What was your sense of the competitive landscape, at least of the share of wallet that you were aiming for? You know, when we started, right, we were taking the concept that we knew was proven in the West. Ebates had done extremely well. Whitco was doing fabulous work in the UK market. And in India, there was no competition. You know, I think that gave us a lot of comfort, a lot of luxury to kind of set up, innovate, grab the earlier sort of advantage. But you know, competition has come, right? So, you know, as we fast forward nine years, there is more competition. And, you know, at every stage, one has to keep innovating, right? So, you know, we initially had our core businesses cash grow. Now, what we realized was that, look, there is also a whole world of resellers and influencers and, you know, that entire ecosystem. And that led us to launch on-corro. Now, that has given us another lever or a way for us to create an edge over our competition, right? Now, we have some of our competition, now creating model that are similar to on-corro. The next stage is, hey, what do I now build, right? So, at every stage, competition will come, right? And I think that is just low of nature. I don't think there's any industry where you create a business model, you're starting to make money and, you know, people just leave you. People will come after you and you just have to keep being creative. It's just, it's the low of nature, right? It's evolution. Now, when you launch a company like cash grow that are incumbent players, let's say a bank, for instance, or let's say another financial player, for instance. So, somebody else, do you work with incumbent players? Do you compete with them? And what happens if you start working with an incumbent player, but half way through, they develop the potential in-house and ditch you. I know I'm asking you many questions simultaneously. So, you know, we do work with incumbents, right? And I think something that we've realized is that it is very, very important to partner because not everyone will be able to build everything. Very early in our cycle, we realize that banks, telcos have a lot of customers. Once you have access to customers, there's a lot of products you can sell. But telco today is doing telco, but, you know, honestly, an etel is today also doing advertising, right? Which is now entering into a space that was more Google in these books, right? But, you know, can Google is significantly invested in etel and geo, right? So, it's everyone sort of trying to be with everybody. And I think our realization is that it's very, very important to find more and more synergies. We do the offers, offer aggregation extremely well, right? That's our USB. And when we go out to people who are saying that, look, we will continue to do this better than anyone else. The cost effectiveness of you trying to build and replicate everything that I've done is just not efficient. Let me offer it to you at a price that you just can't refuse. So, you know, today we, you know, we actually run products for ICSIA Bank. We run products from MasterCard. There are a bunch of other little sites that we run. And it's our way of re-empting somebody may be coming into our space, right? So, today, banks do offers, but a lot of those offers are powered by us. You know, this is something that we started doing about six years back because we sort of, you know, had a foresight that they could come into our world. Might as well get them as our partners. In terms of, you know, how do you ensure that they stay with you? You just have to keep adding value. Tomorrow, if, you know, let's say a competitor of mine is able to give the same banks that I work with a larger bouquet of brands, I have a problem. Or if the rates that they're offering are better than mine. - More competitive than yours. So, I think it's constantly or how do you, how do you keep adding value? You know, for many of, you know, you might be listening to this who are thinking of partnering with people like banks, etc. The one insight that I have is that with large entities, once you get in, it's very hard, like they don't give you up easily, right? Because there's so much integration and other things that happen. So, it actually is a great place to be, but you have to, again, you have to keep doing your, just your due value, right, to keep, keep this going. - Rohan, what happens if a player in a adjacent market suddenly develops a same service or pivot to the same model? The example I think was WhatsApp was a messaging service. And one day we all woke up to see a call button on the WhatsApp screen. And now that threatens a telco's model, right? We were using WhatsApp to call and the telco potentially uses revenue. They were your partners, but suddenly you're competing with them. Then if an adjacent player develops an ability that's same or similar to yours. - That's just how life is, right? And, you know, anyone who's building a business, right? I think the first thing one should understand and expect is that competition is gonna happen. And it's gonna come in the most unexpected ways. You know, if you look at businesses like Nokia or Kodak, you know, they were common in industry changing businesses that don't exist, right? I think my niece who is today 11 years, 12 years will probably not have any understanding of context of what Kodak, Nokia or, you know, honestly, if somebody were to give one of those big telephone directories, right? Somebody would look at and say, what is this? And I just think that's the, that's how things are, right? I think the only way to stay ahead and the only way to continue to survive is thinking about how you continue to add value. You know, I think if you are leading a market, you will have opportunity to realize where competition is coming from and how to pivot. You may buy a company, you may change your model, right? And I think if you look at the history of businesses that have stood the test of time who are, let's say, 100 years old, 200 years old, have been doing that. You know, today one of the more existential threats that I see is towards, let's say, oil and gas companies. We are all now big believers in the EV market. And if you see a lot of these companies are now going out and buying the EV companies, they're buying battery manufacturers, right? So it's about how do you stay ahead of competition? How do you just figure out what is coming at you? And it doesn't just happen, you know, the flash of a button, right? I think telcos could have seen this happen, right? Voice over internet started happening 20 years back. Skype calling was happening. Wave of WhatsApp added this, right? Back in the day, I see Q who's there and you know, that replaced chat as a service. And so many other things, right? The question is, why would a telco not have foresight and have invested or bought WhatsApp? The way Facebook did, right? I think Facebook, I think that is a masterstroke from them. So I think it really is about continuing to stay nimble. Complicency is probably the biggest threat. That companies have large and small. I think the answer lies in being true to your mission statement. And I think as long as you're strengthening that mission statement, you have a benchmark to keep doing better and better. You know, if I think about, you know, what we're trying to do at cash grow, our objective is how do I make marketing more efficient? If I have that mission statement, I never get to a place of complacency because as long as I'm improving that, whether I am fifth, tenth or number one, I'm constantly trying to better myself from the previous place, right? I think what you're trying to avoid is a sense of stagnancy. You know, in our world, we sort of, we had cash grow, we then said, look, how do I do this better? We then uncurro, we then created an offline business because we realized that, you know, why India is serve, Bharat is not serve. I think that's the only way forward, right? You have a clear mission statement and can you keep beating that? Because you know, I think the problem you're all you do into is that there is no benchmark, right? You're not trying to do 10% better than my closest competition, right? You're just standing alone. Okay, so Rohan, that explains how you understand, say, for instance, an adjacent competitor. Now, sometime ago, Syria, exec at Mercedes said that people investing in SIPs or systematic investment plans into mutual funds are actually competing with their ability to buy luxury cars. Now, what happens if a completely unrelated player starts competing with you? For instance, once upon a time, I guess, companies like Minolta and Canon and all of them were competing with each other in the camera market and suddenly comes Nokia, which becomes the world's largest camera seller. Or, for instance, if you're on an airline and you're competing with other modes of transport, Cisco's telepresence allows people to travel virtually. Now, an airline is competing with a router, for instance, or a networking company. How do you plan for this kind of competition? I think you should keep every one to know overnight, right? I think one has to keep looking at what's happening, what are the new trends. So, for example, I am subscribed to almost every startup report that comes out there. I'm just looking at these companies, right? What do they do? In some cases, trying to figure out what are the synergies. So, for example, we work with all sort of e-commerce companies, right? So, now, anyone who raises money should be a partner of ours, right? So, that is one aspect of soon. But equally, I'm following what else is happening, right? What are the disruptions that are happening? And constantly sort of thinking that, "Hey, is this good for me or bad for me? "Right? "Is there something that can change?" I think you then also need to have a strong team of leaders who can also help you think in that problem. You know, I think with all the examples that you put it right, whether it's Canon or it was not, the world does not change overnight. The change happens very slowly, right? And sometimes it is so slow that you don't even notice the change happen until it suddenly pivots on you. And I think that's where every CEO, business owner, entrepreneur should be allowed a certain amount of mind space to be obsessing over that. I think that is really the job of somebody heading a company at CEO level or a co-founder level. OK, another word that we hear a lot of entrepreneurs and VCs use is the word "mode." There are two questions for you. exactly is a moat and how do you go about building one and sustaining out? So you know the moat is your USB right? The moat is what will allow you to survive competition which could come you know as you you know as we discussed right from any possible direction it would be you know your immediate industry folks it could be somebody that never thought would come into your industry etc and I think it's the moat that sort of keeps you abreast right it keeps you above others now if I talk about let's say what was our moat is he when we started off we were entering into a we're building a market there was no competition coming in and at that point the first moat that we ended up creating was going to our retailers and saying that hey we're moving the model in which you're gonna pay us you're not gonna pay us per click but you're not gonna pay us per sale so we we took that model then we said that look from the money that we're getting we're gonna pass some money back to users as a cashback now for the first time users were getting cashback for their online shopping right so users say hey this is really really good as more users started to come into that model I was able to drive more sales to my partners as I drove more sales to my partners I went back to them said hey you know what I think I should get paid a little bit more now as that flywheel started to turn we were able to go out and raise some capital right so we did a series eight and a B then a C now as we get more money I get more users I bargain better I get more retailers now that automatically starts to build a moat for me because I start with a higher rate right so for example it's if today somebody is coming into the cashback industry they can build everything that I have right at a technology level but they fundamentally don't have users to begin with right so when they're starting off they're probably starting off at base level right where I'm today sitting at let's say base plus 20% and that creates my moat right that creates my comparative edge to keep managing that right my moat is also constantly thinking about how do I add more value it's a constantly sitting with my partners say hey what else do you want equally listening to my customers and saying hey what do they want what is what are they liking or not liking what my product and can I keep fixing those problems because you know honestly with all the reviews that come you can analyze any app you can know that where is this app doing really well and where is it feeling a lot of that information is publicly there it's kind of creating that right so I think therefore having enough levels of moat right and that moat could then be you know over a period of time your team becomes your moat because you know I think as Jim Collins said in his great book good to great that having the right people on the buses probably 90% of the battle right so you know as you get enough capital you just have better talent that better talent will solve the common industry challenges better hopefully and I think I think that's really what you know what why why the importance and you know why I think every VC probably starts that conversation saying hey what's your moat Rohan do you use your competitors products and services personally I do I do and I think it's I think it's very very important I think it's important to know how they're solving the problem what is the experience of their building I think you know with every product there is there are certain challenges or experiences right so you know somebody sitting at flip card should probably see how is Amazon doing this how fast do they deliver you know in my case we have competitors and you know I want to see how how is their experience how are they communicating how does that flow or the experience work what happens on that app are they able to you know how quickly am I able to log in how quickly do they track a transaction how quickly am I are they paying me what are the different modes that they're paying me in right so I think it's I think for anyone who is not looking at their competition and honestly I think you need to know your competition's business as well as you know your own and therefore and the only way of doing it is to actually be using your competition's product often enough to get get that flavor of what's happening. Rohan one of the words that you've repeated multiple times in this interview and quite frankly many other entrepreneurs in this series have used is the word honest or honestly you'll be honest with yourself or some variant of that statement I have two questions for you one as an entrepreneur why is it so hard to be honest with yourself is it because this is your baby and you created it from nothing and therefore you're in love with it and it's hard to be objective and the second follow follow up question is how do you assemble a team of people who are able to tell you what you need to hear but maybe you as an entrepreneur you don't want to hear okay that's a great question I'll tell you the conundrum on the honesty part you know when you start a business so for example if the opportunity was already solved it wouldn't be an opportunity so a lot of times when you're starting a business you're sort of going against the title right you're trying to build something that is usually hard or you know not you know so for example when Google was doing what they were doing you know I'm sure there were a lot of naysayers coming and saying hey you're gonna go against Yahoo you're gonna go against a well and all of these giants right how will you do it you know when we started off you know honestly my parents were like look you know you and Sathi are you know at these wonderful high-paying jobs in London are you sure you want to leave this and you know have no income no stability and the honesty part comes in in that you need to believe in that right and you need to and because it's a conviction right in some sense fighting the odds you need to have continue to have that belief you know I think through so many journeys right whether you look at the uber journey or the Google journey or you have to some extent our journey things don't just work out the way you think they were right you know you may have beginners luck that's just a reality but then you know things start getting hard and that's where you know you have to keep being honest on do you still genuinely believe that you can solve this you know the minute things start getting hard all your well-wishers right and look honestly it's your friends and your family right who will probably be the first one to say that look are you sure this is the right thing for you to do many of us have left good jobs to do this right and I think that's where the you know there is this balance between having great conviction versus knowing that look I think it's time to accept right and the other part I think that's really really important right is that you know the there is no and they should not be any stigma for feeling you know honestly if you look at giants like Amazon they probably have close to 100 to 100 ideas that are feeling every year and they are failed experiments right not failed businesses right they're learning outcomes the other part right that I think is really really important is looking at looking at numbers right because that's the only fact right so for example you know in cash for one of the things that we're absolutely and is anyone saying words like we're doing well it was a good quarter there's no quality right you have to put a number to it right you know so if you say that look it was a good quarter what does that mean right you set a target that let's say the target was a 20% growth did you get 20 21 25 or 5 right and it just takes away any sense of objectivity to it right or subjectivity to it right it is a very defined number and I think data is your best friend because you know the data will again help you determine at what point are you just being unduly optimistic and at what point do you keep fighting the battle so I think I think data is really the answer all right that completes the serious part of the interview let me ask you some personal questions now what is your favorite brand war is it Pepsi versus Coke is it it's you versus PNG you know it's Apple versus PC and you know it's a battle that I fight at home so I think it's a die-hard Apple person I am PC person have always been Rohan your wife is your co-founder do you compete with your wife like I wouldn't go into a battle that I know I can't win you know my belief is that with co-founders and you know whether it's husband wife or just co-founders I think you need to compete but also not compete right in the sense that I think the job of co-founders and the leaders in an organization right is to create an environment where we're sort of competing to get the best of each other and and that competition comes in very very subtle ways right you know it could be competing on you know somebody knows something more and there is a desire to learn look we should also have that extra desire to learn or you know somebody having certain skillsets and you know learning from each other those skillsets and I think that done in in the in the right way I think competition is probably the biggest lever for change you know while a lot of what we've been talking about so far has been you know probably the slightly negative connotation to competition positive side that's the only way change happens right okay that's good advice both for startup founders and for husbands in general I'm guessing Rohan Bhargava of cashcorro.com thank you very much for being part of ET startup school thank you so much for having me so that brings us to almost the end of today's class at ET startup school if you'd like to be a good student check out and do the homework assignment in the show notes if you like the podcast share it with family friends even your friend means ET startup school is produced by animation thus with inputs from Anupriya Nair, Erika DeZooza Arijit Berman, Shilpa Sharma, Harish Shavla, Govind Munra and Vishal Bandari. 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