Lessons for Marketplace startups from Uber Episode

First, it pains to read about the unfortunate incident involving Uber in New Delhi.  As a citizen of this country, I hope and demand the law of the land puts its best foot forward to bring justice to the victim and culprits to the book. 

The unfortunate incident also raises some important questions about emulating successful business ideas from west in India.  It takes little effort to find a list of   ‘market place’ startups trying to organize the unorganized sector in India.   Be it providing domestic services or household goods.  

Relatively,  it costs little and technically easier to bring up a site to match services and consumers.  The challenge however is if the business has to endorse the behaviors of vendor and the consumer, one to the other.  That is beyond the need to have a sight on the quality of the service/product being transacted.

Imagine if the business has to send a plumber to a household.  The business has to endorse not just the quality of the service but also the behavior of the plumber at the household.

Similarly, if the business has to send a female maid to a household, business has to endorse the behavior of the customer towards the service provider.  

Verifying a service provider could be relatively easy but not cheap. 

  • The back ground checks needed
  • Strong lawyer to formulate disclaimers and contracts to share the risks
  • Operational model that defines strict processes and policies.  And adhering to those policies and procedures.

All the above are  going to cost a fortune for a business.   The startups typically do not think about or understand the costs involving these. 

Verifying the consumer may never be fully possible because its not practical to have a background check done on an entire population. 

These are some of the lessons we learned from our failed startup Makemydabba.com.    We enabled  home made food delivered to  needy end customers at work and home.  In no time we realized that we are enduring a sizeable risk of making unknown people meet at places we have no control on through our portal.   This is beyond the quality risk of the food being served.

We thought about models to mitigate those risks, but all of them cost a lot more money involving lawyers, our own delivery models and more.   That’s where the big funds needed to keep the business afloat.  A lot of people continue to ask us why a successful startup like Makemydabba had to close down for lack of funds.  Above is probably the primary reason why more funds were needed.

Coming back to the incident involving Uber, they cannot claim to be a startup.  They must have learned their lessons at the places where they are successful.  How they failed to bring them into India is something we should wait and see as the investigation process takes its course.

In addition however, we must acknowledge that India is relatively a low trust society.  We cannot trust a certificate, license, permit to be genuine on its own merit.  Even the most trivial of the information like an ‘address’ cannot be trusted without a ‘proof’ or someone certifying it via a background check. 

Even Indian regulations prefer to be stay gray for a business to know if it is doing right or wrong.  For example, we ran from pillar to post to understand if  Makemydabba  requires a food license or not.   We still do not know the answer.  We consulted numerous lawyers, CAs,  experienced food business houses and of course the kind mentors in Hyderabad.  No government office / official will say with authority how you should register your company and how you can be fully legal.  But all of them will come after you the day something goes wrong.

Its extremely important for startups in this space to take this incident as an eye opener and be cognizant  about the risks involved.   Simply put, if your business is enabling two unkown people to meet, the business has to put in place systems to take the risk completely out.   That is, risk to consumer, vendor and you the business! 

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3 Responses to Lessons for Marketplace startups from Uber Episode

  1. Y says:

    Thank you Akki, very useful.

  2. “All the above are going to cost a fortune for a business” but they should consider it not as a cost but an investment.

    Wonder why Uber did n’t do what they were practicing back in USA, the driver’s back ground check goes back to almost 7 years from what I gather in the media.

    The pity is the so called ‘protectors’ in Hyd refused to take up the background check ups.
    So if one is to go the third party “private” agencies, then your question of trust “cannot trust a certificate, license, permit to be genuine on its own merit.”

    Ideally it should begin somewhere. Frankly speaking, I did wonder about “Makemydabba” and how it is going make them the “owners of curry points” be part of your vision.

    They should invest and should not look at it as an other cost. You are not in business to invest a second ago and make profits in this second.

    Thanks for your inputs.

  3. Anupama says:

    very precisely you have discussed the issue. In US, background checks are not your responsiblity, its automatically provided by the system. But in India, whose responsibility is that, system has to provide that. Indian society has a lot of room for error.

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