Microblog site Koo’s shutdown has a message for B2C startups

Startups must view the digital market as a common pie that needs to be expanded collectively.
Startups must view the digital market as a common pie that needs to be expanded collectively.


  • Adapting old ideas with superficial differentiation won’t cut it. Startups need to generate intellectual property and deploy true innovation that can serve actual user needs everywhere in the world. What succeeds here can succeed globally.

India’s homegrown social media service, Koo, ceased operations last week. Launched with the ambition of providing a multi-language social media service to compete with X (formerly Twitter), Koo failed to carve out a niche in the digital market. Its shutdown sheds light on challenges that must be tackled to build a digital economy that creates local value.

First, Koo’s journey underscores the importance of achieving a product-market fit and a revenue roadmap; entrepreneurs must identify and cater to specific market needs effectively. With relatively easy availability of capital, startup founders often overlook this crucial aspect, making applications with limited use cases, focusing instead on funding rounds. 

Koo’s emphasis on multi-language support as a unique feature was misplaced, as it did not differentiate the platform meaningfully from competitors. Trying to build a brand on this premise was perhaps not a sound strategy.

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A reliance on copycat models without added innovations is another issue in the Indian business-to-consumer (B2C) app space. Copying successful models can prove a winning formula. Before Facebook, there were apps like Myspace and Friendster. But a derivative app still requires adding an innovation of significant value to succeed. 

Zomato is an example of this approach. Initially similar to Yelp, with features such as menu browsing and reviews, Zomato added food delivery as a major add-on feature two whole years after starting up.

Moreover, B2C startups often fail to develop unique technology, resulting in a lack of intellectual property (IP) that can serve as a valuable asset or defence moat for the business. For instance, Snap built upon its social-media service by pioneering new augmented reality and camera innovations, providing residual value even if the company faces future challenges and revenue stream questions. 

The company has over 3,000 patents globally and is a fine example of innovation-centricity in a near-saturated social media market. Conversely, Koo did not create proprietary technology, leaving it without assets as it closed down.

Inadequate collective action and thought leadership on public policy is an additional challenge that Indian startups must overcome. Founders are mostly busy running their business. But adverse events can strike unexpectedly, as seen with Paytm when the Reserve Bank of India (RBI) cracked its whip. 

In March 2022, RBI barred Paytm Payments Bank from onboarding new customers and asked for a comprehensive audit. This decision was driven by concerns over data storage, non-compliance with know-your-customer norms and issues related to digital infrastructure and management.

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Policy engagement shouldn’t be an afterthought. Many other fintech startups are finding this out the hard way as they face a slew of stringent regulations on user security, data and quality of service. Entrepreneurs must begin to speak up on policy matters that require systemic reforms. 

For instance, liberalization of foreign exchange management is essential for cross-border fintech, while we need to also enable micropayments for monetizing small-value transactions common to India.

Startups must view the digital market as a common pie that needs to be expanded collectively. Industry groups in the past have often lobbied against one another on tactical grounds, driven by a fear of missing out on regulatory advantages. 

For instance, when the Niti Aayog drafted guiding principles for the regulation of online fantasy sports platforms in India in 2020, industry associations representing other gaming segments vociferously opposed the draft. They argued that it favoured fantasy sports with special treatment.

Thinking of a consumer market as a common pie is hard in the case of apps, but an analogy from the hardware market may help. Electric vehicle (EV) adoption requires common charging infrastructure, interoperable software, standardized batteries, loan availability and recycling facilities. It makes sense for industry stakeholders to advocate an ‘ecosystem’ approach. 

Similarly, B2C startups should serve policymakers inputs on interrelated app economy issues for everyone’s benefit. These can include critical themes such as the future of network infrastructure, consumer protection, product and service liabilities and environmental protection.

Finally, many B2C startups neglect global markets, unlike their B2B counterparts. Companies in the Software as a Service (SaaS) space have aimed for foreign markets from the outset, helping make India the world’s second-largest SaaS hub, with our share expected to reach 8% by 2028. 

Firms like Zoho and Freshworks built products keeping the global market in mind and dominate specialized segments. Indian B2C businesses must also leverage the global internet and diversify revenue streams.

Also read: Not competing with Twitter or Threads, focusing on regional audiences: Koo Co-founder

India, as the world’s largest test bed for B2C apps outside of an insular China, provides a special opportunity to local entrepreneurs. They have the chance to design apps for a diverse local market and also address a vast global e-commerce market where there are few distortionary tariffs, unlike in merchandise trade.

With this opportunity comes a responsibility to solve real problems that consumers face by innovating to offer new products (and build IP assets). If all this falls in place, commercial sustainability will follow.

These are the authors’ personal views.

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