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Start-ups embrace Web model to boost business

Start-ups embrace Web model to boost business
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First Published: Thu, Oct 06 2011. 11 46 PM IST
Updated: Thu, Oct 06 2011. 11 46 PM IST
Mumbai: Four years after being an online health consultancy for diabetes and weight management, LifeMojo Health Solutions Pvt. Ltd is now an e-commerce firm for wellness products.
The start-up decided to make the shift four months ago, looking to cater to its customers’ need for products and increase revenue.
“Our customers pushed us to do this,” said Namit Nangia, chief executive of Bangalore-based LifeMojo. “Also, we saw traction in e-commerce. The new strategy business is in line with the requirements of our customers.”
While changing business models is not unusual for start-ups, a growing number of them are adopting online models. More than a dozen e-commerce/online deals start-ups have been funded in the past year. Investors are bullish on online models because of increased Internet usage, customers’ growing comfort with online transactions, and facilities such as cash on delivery.
The Indian e-commerce market is growing at 30% annually and could be a $1 billlion (Rs 4,920 crore) business by 2013, eBay Inc.’s president and chief executive John Donahoe said in an interview earlier.
This year, investors Draper Fisher Jurvetson (DFJ), Matrix Partners and NEA-Indo US Ventures backed six-year-old DVD rental firm Seventymm Services Pvt. Ltd turn into an e-commerce portal offering Bollywood-inspired merchandising such as apparel, electronics, and accessories.
The company’s core business faced problems in the form of logistical costs and delivery mechanisms. DVDs, in any case, are not a high revenue-generating item, said Mohanjit Jolly, managing director, DFJ India. Piracy added to the firm’s woes.
“We realized the business was not working as well as was expected,” Jolly said. “We decided to adopt a clean slate approach and narrowed it to various online verticals.”
E-commerce was an obvious choice as Seventymm’s management team had some experience in it. Chief executive Mudit Khosla and chief operating officer Bhawna Agarwal were members of the founding team of travel portal Yatra.com and had also worked at Indiatimes.com.
Another company from the DFJ portfolio, Gingersoft Media Pvt. Ltd, started off as an opt-in permission-based mobile marketing platform and is now offering deals on branded products as well.
“One of the learnings that we had with our targeted advertisements on mobile phones business was that a model should be able to scale with limited capital and not be tied with human resources,” said Chaitanya Nallan, co-founder and chief executive officer of Gingersoft Media.
“The fact that customers are doing transactions online had a lot do with the change in strategy in Seventymm’s case,” DFJ’s Jolly said. “In Gingersoft Media’s case also, it was a factor.”
The changes in business strategy are paying off. LifeMojo’s revenue is now increasing 40% month-on-month compared with 15-20% earlier. Gingersoft Media’s revenue has grown eight times in the last eight months compared with a year earlier. The company hopes to increase it 14 times in the coming months. And more than half of Seventymm’s revenue is now coming from e-commerce.
Not all investors are bullish on changing business strategy.
Sandeep Singhal, co-founder of Nexus Venture Partners, said it should not be done unless there is a compelling reason. “We would like to know why the initial business didn’t work out. We want the entrepreneurs to have the girth to do what they promised. It is tough to move a company into a new business,” he said.
deepti.c@livemint.com
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First Published: Thu, Oct 06 2011. 11 46 PM IST
More Topics: Online | E-commerce | Web | Net | Investors |