Focus on unit economics before going for scale: K Ganesh

K Ganesh, serial entrepreneur and partner, GrowthStory

Claim to fame

Started ventures like Customer Asset and TutorVista, before selling them, giving him an aggregated exit valuation of roughly $300 million, according to one estimate

The lesson

My first entrepreneurial venture was IT&T, a third party maintenance and systems integration company headquartered in Delhi. We used to closely follow Microland as it was closest in business model being a systems integrator. With IT hardware rapidly changing in terms of technology obsolescence, Microland was consistently ahead of the curve, both when entering a new business vertical and also exiting it at the right time. We started computer/ IT distribution and reselling, networking, IT education looking at their initiatives and then as the businesses became commoditised and they started exiting those to move to fresher pastures , we followed suit after doing our homework. How to stay flexible and adapt to a very changing Indian IT industry's opportunities and challenges is something we learnt from Microland.

When we started Freshmenu - when the food-tech industry was "flavor of the day" and everyone with a Power-Point was getting funded - there was lot of pressure on looking at companies that were getting funding and scaling by focusing on the mass market segment. It was too tempting to see rival companies clocking up orders and, since the price point was `100-150, potential market size was huge.

But deeper analysis showed us that this was an inherently flawed business model and would never make money. It was a tough lesson but we persevered with a slower growth rate but with a more solid business model with strong unit economics and repeat rates. That stood us in good stead and we were able to raise $5 million from a marquee investor like Lightspeed even though it took time while others who raised seed money earlier and quicker are now struggling to survive and raise full series A.

Biggest learning here: don't go after scale but focus on unit economics first; scaling without unit economics is like giving the microphone to a poor singer so that lot more people can hear - it only exacerbates the problem and does not solve anything.

(As told to Rajiv Singh)