What I wish I had known about tech startups when I was still a teenager (Part 3 of 3) - Navigators and Life Hackers

There are different types of games and hence, different playbooks in the internet economy, and each requires different strategies and types of players to succeed

This is the last part of my three part essay where I try to distil my learnings and provide simple heuristics and thumb rules to help today's university students and potential entrants in the internet economy job market understand what it takes to build different types of internet companies. Part 1 and Part 2 are here.

Before I proceed, let me revisit the two concepts - Value at Risk (VAR) and Time to Realize Value (TRV)- that I introduced in Part 2.

• VAR, in the internet economy perspective, is the share of your wallet that each digital transaction takes. Buying a life insurance policy online is a high VAR activity, buying a t-shirt on Amazon is a low VAR one. As VAR increases, the risk of regulation for a business increases
• TRV measures how long it takes for the transacting customer to realize the value in your service. Investment advice online is a high TRV business, Quick commerce is a low TRV one. As TRV increases, the importance of building a user community and subject matter expertise increases.

In this part, I will talk about the Low TRV games, and how changes in VAR change the game that you are playing.

Navigator Businesses: Low Time to Realize Value (TRV), High Value at Risk (VAR)

Representative Businesses: Digital Lending, Competitive Exam Prep, TeleHealth, Property/Car marketplaces

Nature: Like Navigators carrying precious cargo, these businesses help take larger value transactions online. Internet businesses in this quadrant are the riskiest, with a higher likelihood of coming under the media/public scanner and face the government's ire.

Things you need to especially emphasize in this game:

• Build expertise. Your customers offer you a large share of their wallet per transaction and they aren’t willing to wait for results to show up. Your job is to deliver excellent value time after time. If you are in edtech - invest in teachers; in TeleHealth - invest in doctors/pharmacists; in digital lending - hire more bankers.
• Standardize customer experience. For high VAR items (education, borrowing, medical advice), there is a high probability that even highly digitally savvy customers prefer to do stuff offline -it's just inertia. They were probably doing these transactions offline simply because they didn't trust a disembodied internet with a reliable customer experience. You need to over-index on removing any frictions in taking these transactions offline
• Invest in Public Relations. In this business, it is not regulation, but more often the policymakers’ and public perception of your company’s offering that kills you. Be proactive in managing your company’s brand. Be known as a good faith actor to all who matter

Traits essential for key management: The Navigators

• Subject Matter Experts. They know all the edge cases and ways in which things go ugly. They can value and judge expertise in other stakeholders -risk assessors, educators, doctors- very quickly as well.  
• They think about Murphy’s Law more than you or me. They are the people who think of the least likely ways in which their company can go extinct and then build backwards prevent it from happening
• Strong non-monetary drivers. A sense of mission. A loan forwarded to someone who cannot pay it back has more risk of harm than a package ordered online. Being in it just for monopoly and scale cannot motivate. It has to come with a sense of appreciation for the enormity their internet business is bringing to the lives of their customers.

The Life Hacker's Empire: Low Value at Risk (VAR), Low Time to Realize Value (TRV) games

Representative Businesses: E-Commerce, Q-Commerce, Online Food Delivery, Online Travel Aggregators

Nature: Businesses in this quadrant are the orthodoxy of the internet economy. They are the success stories we know the best. Everyone started here on low margins per product and has won by steadily increasing the throughput through their platforms via relentless execution. Operating profit margins here are thin and difficult to defend. Hence, the winning strategy is to be like Coca Cola - where you touch as many different customer segments without diluting your brand perception or value; nobody sees Coke/Amazon differently regardless of whether it services you or the most powerful leaders on the planet

Things you need to especially emphasize on in this game:

• Go as Horizontal as you can. Maximize your touchpoints with the customer. Create a walled garden where they find everything they need in one place.    
• Top of the Mind Recall: Lean heavily on things that allow you to get a top-of-the-mind recall. Even if it means aggressive discounts/ bargain sales campaigns on the new business verticals. 
• Solve for latency. Purchase decisions in this space happen in seconds. Any lag in your tech can push out the customer. Low VAR decreases their stickiness. 

Traits essential for key management: Life Hackers

• Worldly Wise. They haven’t read literature, but they know of the purchase behavior of you, your cousin and his neighbor. They are the people that never stop asking practical “hows”.   
• Obsessed with hacks. They know all there is to know about the easiest way to get something done. From booking the cheapest flight to finding the right time and place to buy an AC
• Process infatuated. Details never bore them. They aren’t afraid to rip things apart and set something up for even a fractionally better operating profit margin

All of this is just the beginning. What I have laid out here is to the internet economy what Newtonian Mechanics is to a student taking a college level course in physics.

But one can’t understand Einstein and Maxwell’s arguments before appreciating Newton’s mathematics and arguments. In this domain too, we need to move ahead and understand the nuances between different internet businesses so that we don’t repeat our mistake of valuing and running a Byju’s like an E-Commerce company.

Finally, a request.

I don't know how LinkedIn will evolve. But I suspect that deeper, original writing is more likely to get lost in the mass produced content from creators on this platform too.

I have a day job, which pays me good enough. And a work life balance that gives me time to reflect. My motivation to write is to become a better thinker. If you like these pieces, consider subscribing to my Substack here.