5 trending early stage startup areas that are attracting investor interestJubin Mehta
Technology startup investments seem to follow a wave, especially when you look at it according to sectors. Be it Silicon Valley or any part of the globe, there is a pattern that is followed.
There might be a lot of startups in one space, but when one investor decides to make a move, the others also move in quick succession. In India, we’ve seen this with e-commerce, cab aggregators and food delivery startups. There have been many more such pockets as well, and in this post, we look at five interesting areas in the consumer space that seem to be garnering a lot of interest right now.
Self-drive car rentals
These startups provide cars for rent; and users need to drive on their own. This service is typically used when people are going out on weekend getaways or day trips requiring a lot of travel. It also caters to the segment of people who don’t own a car but enjoy the experience of having one; and this is a big value proposition in India. Companies like Zoomcar, JustRide, Revv, Voler Cars and Myles from Carzonrent are the names that have emerged till now. The concept of self-drive car rentals is already very popular in countries like the US and China where fairly large companies like Hertz, Zipcar, eHi, etc., have been created.
Tarun Davda, Director at Matrix Partners says, “Local transport is a very large market and is dominated by on-demand cab companies like Ola and Uber because of the ease of booking, affordable pricing and the hassle-free experience they offer.” He also points out the challenges that exist because of an asset-heavy model:
a) Ensuring utilization of the fleet during weekdays, not just weekends, which will result in better unit economics.
b) Maintaining the quality of the fleet over time.
Weekend trips seem to be the dominant use-case for self-drive rentals right now, and some of these companies see greater than 90 per cent utilization on weekends. For typical weekday use-cases like commute to the office, going to the cinema, a visit to the mall, business meetings, etc., Indian consumers still show a preference for cabs. This is because they don't want to deal with parking issues, or finding directions, etc., which are still huge pain-points. Also, given the relatively lower labour costs in India, booking a cab isn’t much more expensive than booking a self-drive car.
On the whole, the self-drive car rental category is large and interesting, and has a lot of potential in India.
After the mighty success of cab aggregators like Uber and Ola, we have bus aggregators. These are service companies that are trying to bring all the intracity buses on to a single platform, and users can book via the website or an app. In India, we have players like Shuttl, ZipGo, rBus and Cityflo. All these companies have raised a seed round and follow the footsteps of companies like Bridj, Chariot, Leap, etc. “Bus aggregation is a very large opportunity with a potential market of 5-10 thousand daily bus trips in each of the larger cities in India,” says Tarun. The key use-case that most startups are catering to today is around office commute. However, as these companies scale, they will be able to cater to several of the daily use-cases. Tarun also points out the numerous challenges that exist for these companies:
a) Availability of quality supply at scale – this doesn't exist today and will need to be created; just like Ola and Uber did for cabs.
b) Route planning - unlike cab companies, startups in this space will need to decide which routes to pick, how many buses to run on each route and at what time, etc.
c) Utilization and profitability of each bus trip – how many passengers are needed to breakeven on a particular trip? How do you ensure predictability of demand?
d) Competition with cab-aggregators like Ola which already have the user base and are planning to offer bus rides as an additional category.
e) Regulatory concerns on running a private bus-service.
Siddharth Talwar, VC at Lightbox Ventures, raises similar concerns. “I don’t see why a cab aggregator wouldn’t enter this space. It is an interesting space, though it requires a lot of capital to build such a business at scale.” However, many of the startups are beginning on this road with a vision of simplifying the commute for the urban Indian.
Wellness and beauty marketplaces
Marketplaces hold the promise of the online world - the perfect bridge to the offline world. There are a lot of startups building supply and demand for a particular segment and the model has become almost an obsession. Wellness and beauty is one such area. VanityCube, Belita, Vyomo, Hyve, Getlook, Bulbul, BigStylist, Stylish, Styl, MyGlamm etc., are all startups in the metros of India that are trying to make it easy for users to discover spas and salons around them.A 2012 Price Waterhouse Coopers/FICCI report said the beauty care market is worth between Rs 230 and Rs 245 billion and is growing at 20 to 25 percent annually (source). This is the market that all these startups are chasing. Think of them as a Zomato for the beauty and wellness industry. There are various models involved: tying up with big well known brands like L’Oreal or having independent stylists on board or having a trained team and creating a brand. Hybrids of these are, of course, possible and the vertical also has scope for extension into other areas. Globally, Rocket Internet backed Vaniday recently raised a $15 million round.
On-demand logistics services
If you’ve travelled on Indian roads and highways, you know how many trucks there are on the road. Thinking of getting cabs and buses on a platform is a problem one can think of solving but managing trucks is audacious. “This is a very large and extremely fragmented market. It takes a lot to start figuring out and rationalizing this space and I’m glad there are entrepreneurs who are already on to the problem. I am very excited to see how things progress here,” says Sid Talwar.Meet Shippr, Blowhorn, The Porter, The Karrier, GoGo Trucks, Trukky, Moovo and ReturnTrucks. These companies are aggregating intra city trucks to help consumers with intra city logistics. Be it relocating, supplying construction material, event management material or anything else, users or businesses can book and track mini trucks available around them. Then there are the likes of TruckSuvidha and TruckMandi which operate more in the B2B space. This domestic market is pegged to be at INR 6 lakh crore; and technology has just scratched the surface when it comes to bringing about a disruption in the space.
On-demand physical storage
Think of Dropbox for physical spaces. Tackling a major problem of urban places, on-demand physical storage service provides let users store their stuff in a warehouse. Professionally managed with a monthly subscription fee, users can rent out physical spaces owned by the companies where their stuff can be kept. The company has a fleet which will retrieve the things when needed.
In India, Boxmyspace and StoreMore are two companies starting out from Mumbai and NCR respectively. “This is a huge pain point in the cities. The industry has a few obstacles in terms of getting a customer comfortable with the idea of having a remote space on rent but the solution certainly has potential,” says Siddharth.
Most of these 5 sectors are still in very early stages in terms of technology coming in to change the way things function. Some are large enough markets to sustain many companies in the space while some are small and will see consolidation down the road. What are your thoughts on these sectors?