Full-Stack Models Are Difficult To Scale, But Have Strong Unit Economics: MyGate’s Vijay Arisetty

After a couple of years of dominance of managed marketplaces, full-stack startups are gradually cropping up in the Indian market to provide the end customer with complete products or services. While startups across categories are trying to build full-stack marketplaces to offer end-to-end services, the model may prove to be very difficult to be scaled at a rapid pace.

The managed marketplace is a term loosely used for online platforms that serve buyers and sellers by connecting them together, and help both the parties throughout the transactions. On the other hand, the term full-stack marketplace is widely used for online platforms that provide end-to-end customer service.

Speaking at The Makers Summit 2022, Vijay Arisetty, founder and CEO of community management and security startup MyGate, said that India is seeing an evolution from managed marketplaces to full-stack services.

“What happens with managed marketplaces is although it is a marketplace, there is still a lot of idiocentric behaviour of experts which you are not able to control, and ultimately the experience that you would probably want to offer to the end consumer. Hence, we are gradually gravitating to full-stack where the entire consumer experience of the terms of business economics can be controlled,” Arisetty said.

He also said that a full-stack marketplace in any category tends to be very complex, while it lacks the network effects of a managed marketplace. On managed marketplaces, there are more experts or more vendors or consumers, unlike in full-stack.

Hence, the model becomes very difficult to scale, he added, while the unit economics are much stronger for full-stack.

As Arisetty put it, services marketplace can not be built overnight, the model needs to be built over the years. Moreover, selecting categories which are not disrupted yet is also another important aspect for building such marketplaces. Most importantly, taking control of the supply side is also a very important factor for building a full-stack service.

“If you are able to get the blueprint, in terms of how do you rinse, repeat or copy-paste the model that you’ve developed in one pin code, how can that be replicated in other PIN codes, and in past manners, that’s where you get the skill of it,” he said. 

Arisetty set up myGate in 2016 along with Abhishek Kand Shreyans Daga as a security and community management app. While MyGate’s core proposition is acquiring gated communities and keeping them engaged, it is also working on building a full stack of home services.

The startup has created a different team for creating the full-stack marketplace. He said that the people who have matured in the organisation and are looking for more challenging roles have been completely moved into the new team to solve the problems for full-stack services.