Do Swiggy, OYO, and Paytm lack Silicon Valley’s planning and conviction?

• Established Indian startups are looking at ways to expand their boundaries and are thus encroaching each other’s territories.
  
• Investors too have been backing up these expansion plans.
  
• So, it brings up the near possibility of a consolidated market in India.

India has grown to be the world’s third largest startup ecosystem, with over 20 unicorns some of which have already established a global foothold.

But as India’s number of startups keeps growing, there’s also another unique problem that exists - established startups are looking at ways to expand their boundaries and are thus encroaching each other’s territories.

Most recently, Swiggy made news for venturing into grocery delivery, a segment that has been dominated by startups like BigBasket and Grofers or even the delivery services startup Dunzo. Oyo is reportedly looking at entering the foodtech sector by acquisition of Freshmenu to offer more services to its customers.

Paytm which has managed to stay in the news throughout last year for good and bad news, has already been experimenting by venturing into several different verticals like e-commerce (Paytm Mall), ticketing (giving competition to the likes of BookMyShow and MakeMyTrip), and of course, how can one ignore its big entry into the world of banks with the payments bank.

So what’s making these startups force an entry into another’s territory?

Vivek Durai, founder of paper.vc, a data platform for business intelligence and innovation, told Business Insider that one of the reasons could be simply laziness.

“It means they did not have a well-thought out plan to achieve brand and product superiority in their growth vertical. It means that their financing rounds have involved significant amounts of introspection about their ability to sustain in a lead purely on the basis of their existing value proposition,” said Durai.

But there’s a silver lining. Investors too have been backing up these expansion plans of startups, proving that these startups are showing space for growth beyond their current segment.

And Durai says this is the other reason - an organic one. “The territories they enter are 'features' in a product roadmap and are logical next steps to deliver better value to customers which signals alignment,” he said.

While startups might not be consciously encroaching into each other’s segments for growth, what it essentially boils down to is how they are planning their growth. Neha Singh, co-founder and CEO of data analytics platform Tracxn believes that it’s a product-oriented approach – whether these companies are focusing on a single offering or multiple.

“In the US, companies are typically focussed on one particular product while Chinese companies have a different approach where they diversify much earlier. Which one is a better strategy is still an open debate especially when India has seen both sides of the coin,” said Singh.

The choice between single strategy or multi-strategy approach has been seen in various Indian companies.

“When you initially start with one product and then diversify, companies realise it’s difficult to handle and obviously, their burn increases. So while companies can meet with success on the multi-strategy approach, they might sometimes go through a heartbreak too,” said Singh.

For example, a BookMyShow has essentially stuck to its basic offering of booking tickets, while a Paytm has diversified into multiple different segments. And there’s one lesson to learn – Paytm has the backing to burn cash.

It remains to be seen what works out in the Indian market but with acquisitions and mergers heating up the Indian startup space, there strikes the pertinent question – is the Indian startup world headed towards consolidation?

“Eventually, yes. But given that the market itself is evolving, growing slowly – the middle class is still too small compared to China. The need of the hour is to kickstart a production-based economy where Indians are able to spend more money simply because the Indian economy is benefiting from export income,” said Durai.

See Also:
Paytm is competing with almost everyone in Indian e-commerce
Oyo wants a bite of foodtech, may acquire Freshmenu: Report
Online grocers are back in business in India with billions more to burn – and that may be good for consumers