here’s another good read on groupon’s economics

our little goddess

living. some of my closer confidantes know that aarti and i had a beautiful baby daughter in september of 2010. we named her zara. she’s also been the primary inspiration for some very big life decisions that we’ve made, as explained in previous posts.

i want to take this opportunity to bring my rapidly declining reader base up to speed on what’s been going on with me. aarti and i started lilluxe.com in june of 2010, which was essentially a fashionandyou.com for children in the united states. we quickly raised an angel round of about 1mm usd, and got an amazing team of buyers, production and staging resources, and customer service people together to round out our team. we got very lucky on finding some great, cheap office space in beautiful san francisco, and before you know, we were up and running.

but [startup] life is never without it’s twists and turns. soon after we launched, our number one competitor in the market raised a significant series a, mostly on the backs of their seasoned executive e-commerce team. almost instantly, they began and sustained aggressive paid customer acquisition campaigns; essentially, they dominated search and display, driving up the cost of acquisition for the little guys (a la, us).

separately, we introspected on something that every startup should pause and do every few weeks; how were we really different than our competitors? what did we do so much better that would make a customer choose us over them? in fact, how were our competitors differentiating? the answer was that neither they nor us were doing a single thing to differentiate ourselves in the customer’s eyes. first mover advantage and a large war chest can carry you a long, long way; sometimes, all the way to the bank (Groupon is a great example of this). the flash sales ecosystem in the us was, and still is suffering from a complete lack of differentiation. what wins the game is who can build the biggest list the fastest. who’s got the biggest balance sheet? it wasn’t us. we weren’t even close.

so we began to think about differentiation. what could we do to convince customers we were not one of the run-of-the-mill flash sales sites? we decided to do two things:

1. change our sales mechanic – we moved from a strategy of trying to offer as many sales events per day to focusing on one amazing vendor every day. we were inspired by woot.com, and we found this model to be much more vendor-friendly. vendors love the spotlight, love that an entire story is weaved just for their product. we also get better pricing than anyone else in the market because of this.

2. establish procurement criteria – our product procurement philosophy is now driven by 7 explicit product standards. our buyers must be convinced that a certain combination of the criteria is being met before we agree to host the vendor’s products on our platform. this helps moms understand what we’re about; in our case, simple, timeless and classic children’s products.

3. rebranded – we had a rebirth. so we needed a new name. hopscout.

i feel at peace about making this transformation (the valley is calling it a pivot these days, but truthfully, pivot = fancy word for “d’oh, that didn’t work.”). it puts us a in a more challenging position to raise our next round, since we’re essentially restarting. we’re very fortunate to have an understanding and supportive investor base and board; but they also need to see a more diversified investor base for the next round to limit their risk. the hopscout team is more emotionally invested than i’ve ever seen them before; we all actually believe in our new positioning. time will tell if the market will give us an opportunity to (once again) try to prove ourselves.

onwards and upwards…

interestingly, i did not feel as emotional about my impending detachment as i had assumed i would. looking back, because of how ridiculous certain things had gotten, i believe i almost desensitized myself to a point where i didn’t care anymore. i cared about my people more than anything. i wanted to ensure each and every person i had the pleasure of calling my colleague had total and complete job security. as long as i had those assurances, i gave up giving a shit about everything else.

word about my departure got around faster than deepika padukone. i was totally humbled when people started lobbing opportunities my way, all of which were pretty fantastic and exciting in their own right. here’s a list of a few:

1. google – john hanke is a vp of product and has oversight over local, maps, sketchup, and earth globally. he’s also a friend. he got in touch asking me to consider working with google to help them crack local in india. i was interested, interviewed in their bangalore office, but had to cut it short for reasons that will be explained ahead…

2. fashionandyou.com – oliver jung is a prolific serial entrepreneur and angel investor in the eu as well as other ‘bric’ economies. he was currently undergoing a global flash sales greenfielding operation, and india was on his map. upon doing a founding ceo search, i was invited to speak with him and harish bahl, was eventually offered an amazing opportunity to lead fashionandyou.com with oliver and harish as founding ceo, but turned the offer down, again for reasons that will be explained ahead…

3. makemytrip – deep k. has done amazing things over at mmt, and i was totally honored to spend some time with him and consider an opportunity to run a company that was going to be funded by mmt. i won’t disclose what the company was going to be doing out of respect for deep and his team, assuming that they’re still going after the idea, but it has tremendous potential…

there were a few others that were not as notable, ranging from consulting vc’s on their portfolio companies to becoming an eir for a fund in mumbai. ultimately, i didn’t take any of these opportunities for reasons both personal and professional. more on that next time…

signing off, onwards and upwards.

on the personal front, my wife and i made some music together, the result of which was precious little zara, who is sleeping in my sling as i script this post (dad 2.0). our knowledge of zara’s arrival forced us to weigh all the choices we had in how and where we wanted to raise her.

the ride at burrp was wilder than driving drunk while getting a bj, the end result of which was settling for an arranged marriage with a not-so-pretty infomedia. she definitely had potential, which is what attracted us the most to her. her main asset was her voluptuous local listings database. it wasn’t until after things got going that we found out she was wearing a push-up bra. there was something there, but it wasn’t as attractive as it first appeared.

well this was ok. we at burrp had done an amazingly efficient job curating arguably the most enviable local listings db in the country. we really felt this was an opportunity for us to emerge as leaders within infomedia, the next generation of tech savvy brats that were going to elevate the company out of the dusty doldrums of soon-to-be-extinct print driven revenues; but the wheels turned slow, and understandably, there were thickets of politics, bureaucracy and red tape to hack through in order to get anything accomplished. like a black hole, it became something that could potentially trap all the enthusiasm, vigor and light of a young, creative, entrepreneurial team. in the beginning, it seemed achievable to fight the good fight. towards the end, i had given up.

one of the main cues for my exit was when we began hiring buffoons at relatively senior levels. even crazier, we as a company started listening to them and acting on their so-called expertise. that was a pill i just couldn’t swallow. anand and i had built an organization with our blood and sweat, and one of the things we never compromised with each other on was the quality of our hires. now, i had to watch that pool of perfection get tainted with the most absurd stupidity that i’ve had the misfortune of sitting through.

at the end, things were clearly changing, whether i liked it or not. and although i was given a synthetic and superficial title which cried seniority, it ultimately meant nothing to those that could actually affect change. instead, a new breed of ‘experienced leaders’ were heralded as the new saviors of a slowly sinking ship.

my departure catalyzed a deluge of departures from infomedia (including the supremely talented avlesh singh), but i still have a few friends there, including anand, who will always be my first startup partner. for their sake, i do hope that infomedia realizes its potential and ultimately finds its way.

about two months ago, i was asked to be the founding ceo of one of these companies when it became apparent to the community that i was leaving infomedia. i ultimately turned the offer down after doing some intense number crunching – i mean i really whipped out the pe skills from way back when, and got to work.

i’ve been sharing my analysis with some vcs, but why not share with you all? the numbers tell the story of why i think group buying in india is far, far away. if you’re interested in getting a copy of my analysis, just follow me on twitter (@deapubhi) and get at me.

Hey Team,

As some of you may already know, this is my last week at burrp! While the moment is perhaps one of the most bittersweet I’ve had the chance to experience, when I look back at our collective accomplishments, I could not be prouder of what we have all built together. Our blood and our sweat have concocted one of the most recognizable and enviable Internet brands ever created in India, and that is quite a feat.

I will cherish many moments I have shared with you all. For some of the burrp! veterans on the team, I played an active role in recruiting you and ultimately helping you see why burrp! was such a great place to cultivate your career, gain valuable knowledge, and most importantly, make lifelong friends. I consider myself a very fortunate soul for having taken advantage of the latter, having forged some truly special friendships with each and every one of you.
Our smiles, our tears, battles won and lost together will keep us bonded for a very long time, and that is a comforting thought. I will always be here for each and every one of you, through your challenges and your accolades. I would be honored to continue to share those moments with you, regardless of where we are in our respective lives.

And now it is time for me to thank each and every one of you from the bottom of my heart. You have always supported me and the decisions I have made in helping shape this company. You challenged me when you thought a better end could be achieved through a different approach. You taught me things and made me a smarter person. You were my family when I needed one. I will never harbor the fear that I will be forgotten, because it matters not who gets the credit for what. What matters is that we took this journey together. Thank you.

It is no secret that change is upon us, but it is not to be feared. Change yields opportunity, and you all have been amazing about seizing opportunities. Continue to challenge your peers and your leaders, but most importantly, continue to challenge yourselves. Complacency will always be your worst enemy, yet it is easily defeated with the will to learn more.

Lastly, I wanted to apologize for not being too physically present in the office this past week, but as you can imagine, it’s no easy task moving life after 4 years of being settled in Mumbai. I will see you all this week in the office so we have a chance to hang out before I take off.

I have put my personal email address and my twitter account below, and I do hope you all stay in touch. Also, please do not reply to all this email; though a personal response is perfectly fine.

Always,

-d-

take me for instance. i use tweetdeck to both consume and post my status updates, but i use my twitter account as the originating status update provider. it automagically posts my updates on my twitter account, my facebook account, and my buzz account. the paradox here is that users like me need one tool to help us now navigate and organize through these endless streams of status updates; and open apis are getting us there; at least it gets everything into one tool (a la tweetdeck); but if i put myself in the shoes of one of the platform’s stewards, i would tend to feel that my product is being diluted if i’m not either the originating status update posting tool or status update consuming tool.

is this a one ring to rule them all scenario, and if so, do we necessarily need more tools to help us post and consume status updates? the critical need of the hour is a tool to help us organize, dissect, intelligently categorize, filter, and clean up our status updates. it’s seriously not easy to do today. my tweetdeck looks like a mess on most days.

what do ya’ll think?