The closure of microblogging site Koo sends a message to B2C startups

First, Khoo’s journey highlights the importance of achieving product-market fit and a revenue roadmap. Entrepreneurs need to effectively identify and serve a specific market need. With capital relatively easily available, startup founders often overlook this key aspect, creating applications with limited use cases and focusing on fundraising rounds instead.

Koo’s emphasis on multilingual support as a unique feature was a mistake that did not meaningfully differentiate the platform from its competitors, and trying to build a brand on this premise was probably not a sound strategy.

Another problem in the Indian B2C (business-to-consumer) app space is reliance on copycat models without innovating. Copying a successful model can be a winning formula. Before Facebook, there were apps like Myspace and Friendster. But the offshoots still need to add significant, valuable innovation to be successful.

Zomato is one example of this approach: While initially similar to Yelp, with features like menu browsing and reviews, Zomato added food delivery as a major add-on feature two years after its founding.

Additionally, B2C startups are often unable to develop their own technology, resulting in a lack of intellectual property (IP) that can act as a valuable asset or defensive moat for the business. For example, Snap built its social media service by pioneering new augmented reality and camera innovations, providing residual value in the face of future challenges and revenue stream issues.

The company holds more than 3,000 patents worldwide, making it a good example of innovation-centricity in the near-saturated social media market. Conversely, because Koo did not develop his own technology, he was left with no assets when he closed down.

Lack of collective action and thought leadership on public policies is an additional challenge that Indian startups have to overcome. Most of the founders are busy running their businesses. But sometimes unexpected adverse events can strike, as seen in the case of Paytm, where the Reserve Bank of India (RBI) took strict action.

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

Policy engagement should not be an afterthought. Many other fintech startups are learning this the hard way as they face a stringent set of regulations around user security, data, and quality of service. Entrepreneurs must start speaking up on policy issues that require systemic reform.

For example, liberalizing foreign exchange controls is essential for cross-border fintech, but it is also necessary to enable micropayments to monetize the small-value transactions common in India.

Startups need to see the digital market as a common pie that they need to collectively expand. Until now, industry groups have often lobbied each other for tactical reasons, out of fear of missing out on regulatory advantages.

For example, when Niti Aayog drafted guidelines for regulating online fantasy sports platforms in India in 2020, industry associations representing other gaming sectors vocally opposed the draft, arguing that it gave special treatment to fantasy sports.

For apps, it’s hard to think of the consumer market as a common pie, but an analogy from the hardware market might be useful. Electric vehicle (EV) adoption requires a common charging infrastructure, interoperable software, standardized batteries, loan availability, and recycling facilities. It makes sense for industry stakeholders to advocate for an “ecosystem” approach.

Similarly, B2C startups need to provide policymakers with input on interconnected app economy issues for the benefit of all, including important topics such as the future of network infrastructure, consumer protection, product and service responsibility, and environmental protection.

Finally, many B2C startups, unlike their B2B counterparts, ignore the global market. Companies in the Software-as-a-Service (SaaS) space have been targeting overseas markets since their inception, helping make India the second-largest SaaS hub in the world, with a share expected to reach 8% by 2028.

Companies like Zoho and Freshworks have built their products with the global market in mind and excel in their areas of expertise. Indian B2C companies too need to take advantage of the global internet and diversify their revenue streams.

As the world’s largest B2C app testbed outside of the island nation of China, India offers unique opportunities for local entrepreneurs: the chance to design apps for a diverse local market, and also to cater to the vast global e-commerce market, which, unlike commodity trade, is largely free of distorting tariffs.

With this opportunity comes the responsibility to innovate to deliver new products (and build IP assets) to solve real problems faced by consumers – all while achieving commercial sustainability if done well.

These are the personal views of the author.