I once pitched my unique startup idea to an investor and he told me, “I see at least 10 startups with the same idea every month”. But still we don’t see anyone solve the nightlife or local outing problem. Most young people want to go out almost every weekend and they face this problem “What to do or where to go out?”
There are already dozens of listing websites and countless blogs, but isn’t a person overwhelmed with too much information already?
We decided to solve it by building personalised recommendation products. After trying multiple unique products and two years of bootstrapping, we have shut down StrollUp.
Here are the primary reasons why:
Low Consumer Need And High Existing Competition
The value created by such apps on top of existing solutions such as Zomato, BMS etc. is very little. Not many consumers are searching for activities or events in the city. Going to an event is a very social activity, and people are finding events via Facebook. You have to compete with Facebook events. Soon Google Allo will be there in the list. And then you have to compete with dozens of apps providing deals and discounts. In all this mess, having a good experience can certainly not be a differentiator or something Indian consumer values today. It’s either that they don’t care much about where they would go, or they want super cheap deals.
There are not many interesting things happening in a city. It’s not like Coldplay is coming to play tonight. DJ Bobby Deol is playing tonight, he would be playing next week and the next to next week too. There is not much of a hook for the user to go out or rather search currently.
Indian users would finally have to choose between Movie, Eat out, or Drinks. This is changing as many new activities are opening up such as Escape rooms, Air Safaris, Indoor Skiing etc, but would at least take two-three years to reach a significant level.
Related Article: This Delhi Based Startup Helps You Decide Where To Hangout Today!
(Courtesy: All India Bakchod)
Partnerships (Chicken-Egg Problem)
To partner with any restaurant, you need to have users. And to make bookings for the users, you need partnerships. This is the classic chicken-egg problem most startups face.
We hacked this by doing bookings on behalf of users without any partnership with any place. Once we start getting a decent number of bookings for a place, we went for partnerships.
Another way to go was to partner with an existing table booking platform. But the amount of revenue they are ready to share is laughable. You could make 8-10 times the money if you go for partnership on your own. So we never went for partnerships and decided to take the operational load (which obviously is still a challenge). You need to convince each and every place and make sure that they honour the number of bookings you send at the end of the month to get paid.
Revenue Generation And Unit Economics
It’s not an unknown fact that it’s tough to get money from restaurants. Most companies work with a commission-based model, you send customers to the place and get paid per person. Nightclubs would be willing to pay around INR 150 per person for couple and INR 300 for a stag. Restaurants and other places would pay INR 75-INR 100 per person, and paintball/go karting places would pay you around INR 50-INR 100 per person.
We used to have an average group size of four people, and average commissions turned out to be INR 100. We could potentially be earning INR 400 per booking.
But there are cancellations. These bookings are just a click of a button without any payment. So we used to have 50% cancellations. We didn’t have enough bookings to have a commission-based partnership with every location, and were able to partner with around 10-15 places. So with a booking conversion of 6%, we could just make INR 2.4 per user. Try getting a user for INR 2 today, when companies are giving INR 250 off to book via them.
Even if we helped the user choose the best place, sometimes they used to ask why should I book via StrollUp? “Coz you can just click and get it booked, you loser, instead of calling them and wasting another 5 mins!” Wish I could say that to them instead of a polite answer. Anyways, it is still a great business model at scale. At around 7,000 bookings a month, we could have achieved efficiencies which would help us earn 10 times the current margins.
Please note that these are purely my personal views based on experience of running a startup in this industry. I mean no disrespect for the other startups in this industry. Also, I haven’t talked about other challenges such as tech adoption among places, difficulty to scale up as you require a lot of data for each city, keeping the data current etc.
Another way to tackle this problem could be to go the B2B route and sell PoS, table booking and other related software to restaurants first. So you are into their system and would always have updated data, and restaurant can push deals to your users.
It also ensures your bookings and commissions could also be set relatively easily. But this is also easier said than done. There are at least 20 companies selling PoS systems to restaurants these days.
Even if you solve the partnership and revenue sharing problem with this, the low-supply side and consumer need would take at least two-three years more. So these are the primary reasons, we have decided to shutdown StrollUp.
I acknowledge that most entrepreneurs would have to face such challenges and someone would one day solve these better than us. I admit that we couldn’t do it, we failed. I wish someone succeeds. I would also like to thank everyone who worked with us or helped us in this journey. Thanks to you all (you know who you are).