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Herd Mentality of Indian startups - continued…

February 12, 2007 · Posted in Entrepreneurship 

I knew from the onset that my earlier post on Herd mentality of Indian startups would generate controversy. And as promised, this is a follow up post elaborating further on the topic.

First & foremost, several of you misinterpreted the post as a personal attack on the startups and their respective founders. Let me be clear that I have no such intentions. I have great respect for anyone who has the balls to get out of the mundane,9-5 mold and take the next step.

With that said, I elaborate further.

When it comes to tech startups, the first player has several distinct advantages. If there’s a valid market and the concept is executed well, the first mover can attain significant traction & build a strong user community. Often times, the novelty of the concept stirs the public curiosity and in turn driving some of these first movers to literal stardom (example: Digg, YouTube). So, right from the beginning, any other entrants into the same segment have hurdles in store for them - Compete with the leader and attempt to swing the momentum in itheir own favor.

So, does this mean things are doomed for the ‘me-too’ startups ? Of course not. There are several scenarios in which the me-too startup can thrive and in fact outsize the first mover:

1) Lame execution by the first mover in the market or alternatively, you can say, better execution by the me-too startup.

The best example that comes to mind is of Friendster. Friendster pioneered the social networking phenomena and even holds several related patents. Myspace, the me-too startup in this case, came later - but thanks to some wrong moves (weak infrastructure, bad technical decisions) by FriendSter, MySpace just swooped in and soon had poached a major chunk of FriendSter’s user base. And the rest is history

2) Outwitting the first mover in terms of implementation - be it technology / UI / biz model.

If you are a me-too startup, you gotta do something better than the first mover. It may be in terms of the core technology or user interface or business model - you have to step up the game somewhere & provide incentive for users to use your service over the first mover.
Yahoo ruled the search engine space and also the online photo sharing segment a while back. Google came way later, but they had a potent weapon — their PageRank algorithm which gave them technical superiority over Yahoo. Flickr was not only technologically superior, but also provided a great end user experience.

3) The market size is big enough to accommodate several players.

Often, the points (1) and (2) may not necessarily apply for a me-too startup to be successful. The pot of gold is big enough for several players to dip into. In this scenario, me-too may / may not become the leader in the segment — but can very easily coexist and also thrive along with the first mover.
For example, the US travel market has lots of players - Expedia, Orbitz, Hotwire, Travelocity etc. They all have coexisted and thrived well all this time.

Me-too startups also have one another advantage - most often, they validate the presence of a market. This validation can also trigger M&A activity in that segment of the market.

Why did I use the term herd mentality ?

Wikipedia defines herd mentality as a ‘phenomena such as crazes where large numbers of people act in the same way at the same time‘ (emphasis on the words in bold). The same can literally be said about Indian startups I listed in my earlier post. One online travel company gets VC funding and suddenly, online travel sites are proliferating faster than mushrooms after the monsoon. Picsquare makes strides in the digital photo printing market for NRI’s and suddenly there’s a pleothra of others following suit. Its like a category / market is waiting to be defined. As soon as there’s one entrant, at least 2-3 more are guaranteed within the next 2-3 weeks.

So, why does the herd mentality bother me ?

My biggest gripe is that the me-too attitude stifles innovation. If you want to join the me-too bandwagon, do a kick-ass job at it. Stand apart from the crowd. Me-too-done-better works. Me-too by itself doesnt fit with me. If you are just fueled by market dynamics (market is hot or not), I dont think you’d survive long. Take a look at some of the startups I’ve listed earlier. I wont name names, but clearly, several of them have gotten into business just because the market is hot. With a website that appears to be put together within a week by someone hired from Rent-A-Coder, they fail to impress. Several others have opted for a commodity script that anyone can purchase for $400 off the Internet.

The Indian startup scene has gone 0 to 60 in like 3 seconds. While I talk about me-too startups there are plenty others that are innovative in their own right and seem to be very promising. I know that Indian startup scene will become even more vibrant and innovative in the coming months.


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4 Responses to “Herd Mentality of Indian startups - continued…”

  1. Rohan Pinto on February 15th, 2007 5:06 pm

    very well explained pranav. very well explained.

    the “me-too attitude stifles innovation” -> SO DAMN TRUE…

    there’s one thing i have been getting accustomed to. when it comes to video sharing sites… there are 2 categories of users…

    1. the content producers, which unfortunately are a very few… Now, what i mean by very few, is that there are very few content producers who have good content…

    2. the viewers… ok, millions, gazillions of them… and most of them can only demand better service etc… with not much content contribution from their end….. @ the same time, it’s these gazillions who just cant be ignored… if they demand better service, weve got no choice but give it to them… if they demand better videos, again, we gotto give it to them.. But when they demand obscene vidos, I simply tell them to take a hike… it’s a hard call. but then (with my site) i am not gonna fall for it… I tell myself. cant we have 1 decent site on the net without any porn / we sure can….. and I an trying my best to make that happen…

    BTW: I wanna change the name of the site from KONKAN TV to something else… the sites deviating from it’s original intent and am now trying to make it the content provider for south asian video content… any suggetions ? (your readers could chime in too, it would be nice to seee the name suggestions they come up with)

  2. Startup Dunia - Indian startups and Entrepreneurship » Blog Archive » iTasveer’s great attempts to break away from the herd on March 1st, 2007 1:34 am

    [...] In a previous post, I mentioned how various players need to innovate and set themselves apart from the pack - and after reviewing these two features from iTasveer, I think they not only set themselves apart from the pack, but they just set a whole new ball game for the online photo printing segment. [...]

  3. Yeragaselvan on September 11th, 2007 1:44 pm

    Thats a very good article .. Is there any way i could reach you ..

  4. Swamyraj on October 16th, 2007 2:43 am

    Nice article and review.

    However just to share my thoughts on this. Now its too hard to believe that there is just one person who has thought about it say seventymm or bigadda. And such initiatives generally start in a stealth mode so more than who thought of it first its who brought it out first matters. So i am sure that 3-4 players must have started at round about same time and once 1st one comes out rest simply follow it since the have already invested time, money and efforts into it. So then begins the cat and mouse game and smartest and innovative ones survive in coming years.

    I was recently listening to one of the podcast and you would be surprised to know that.. there were approximately 40 odd initiative were taken along with FaceBook… but for some reasons.. FaceBook stole the show..

    So good idea is just a begining… what is crucial is how idea is supported with good business plan, strategy and equally important how idea is finally implemented.

    cheers