Is it possible to scale hyperlocal startups without burning much?

Yes. There is a little known bangalore based startup called DailyNinja that has done this to at a reasonable scale and still growing. Before you read ahead, quick disclaimer, I have invested in them.  
DailyNinja’s model is simple. Make the consumer’s communication with the milkman digital and empower the milkman to do more than just milk delivery, while driving marketing campaigns for local businesses and FMCG companies.

Here is how it works:

Users:A typical household in metro cities like Bangalore has a milkman who gives prepaid paper vouchers. You leave the paper voucher in a bag outside your house at night, the milkman comes in wee hours, counts the number of vouchers and drops milk packets accordingly.
DailyNinja has taken this interaction digital. The user now maintains an e-wallet with DailyNinja, places the order by midnight, the same milk vendor gets an actionable list of deliveries to make.
While the user is on the app, he can place orders for grocery, fresh meat, fresh flowers for puja or even breakfast from partners like chai-point. All this delivered by our product partners to our delivery partner, the Milkman, during the wee hours so that the last meter deliveries can be made together.
The user gets a single point of support, and single person for delivery of all needs.
MilkMan:Imagine a person who comes to your house everyday and still makes only Rs.45–60 a month from you. Compare this to a Swiggy’s delivery boy or an Ola driver. Milkmen also have the same potential and resources so why can’t they make it big?
DailyNinja lets the milk man tap into other product vendors who sell on the same platform and need help with deliveries. Thereby making their income grow 2–3X with lesser effort.
Lesser effort because an avg. milkman spends 2–3hrs going door to door to make all the deliveries, he has more products now, and another 4hrs/day going door to door to collect money. Another 1hr standing in bank queue to deposit that money and placing order with the milk company. By making the money collection digital DailyNinja has reduced his field time to half. Additionally, he now has an active bank account, an accounting system and a demand prediction system that helps him save on wastage of perishable milk. Financial inclusion for the bottom of the pyramid anyone?
The consumer is happy because he gets deliveries before waking up. And it helps save on carbon footprint because everything moves faster at mid night hours.
Product/Service Vendors:DailyNinja is a low cost distribution channel that reaches your potential audience everyday, digitally before sleeping and physically before waking up. Read that again, it will take a moment to sink in.
DailyNinja is doing regular household needs and breakfast for now. The true value unlock will happen when they start tapping regular logistics and marketing outreach also.
There are 3 ways to engage with product vendors in this business: Only lead gen.(restaurant food, local services), Only Delivery (think ecommerce parcels), Lead gen. & Delivery (grocery etc.). We have only covered half of this now. More as we scale.
How much money are we talking about? Well a milkman in Bangalore transacts about 5X more money than an avg. Uber driver. And there are more households in India that need fresh milk than individuals who need Uber.
Why milkmen? Because no one knows the neighbourhood better than the milkman. The delivery efficiency matters.
This acquisition and monetisation model for me was like the Freecharge of 2010. And then it took the founders a 10mins call to get Kunal Shah, founder of freecharge to invest in the latest round. Some more angels like Anupam Mittal of, Venk, Subramanya, Ravi, Traxn Labs also joined.
What excites me about this startup is how the initial belief in partners is still strong and the model still stands strong at 11K deliveries per day in its 18th month. It has made all this possible with very little money. When I had mentioned this to a VC friend, I remember he asked back, “Rs. Lakhs or $ Million?”, rightly so because such low cost are unheard of in the industry.
I keep going back to this “10 Commandments of Marketplaces” from Bill Gurley, investor in Ebay, Uber, OpenTable, GrubHub, Zillow etc. while looking at startup models. I like to call it Commandements, read it and you will know why. Read it anyways if you have anything to do with internet startups.
Let’s see if DailyNinja stands this test and more.

  1. Highly dense demand aggregation. Growing 1 apartment at a time.
  2. Highly sticky acquisition channel. Indian households can’t survive without fresh milk. We have near zero dropouts.
  3. Entrepreneur network for deliveries, not employees. Milkman are entrepreneurs not just delivery boys.
  4. Add value. DailyNinja does not force itself in the money chain for the sake of making a cut. It makes money out of the value chain that it has broadened.
  5. Control the money flow.
  6. Network effect. We see more product vendors would mean more chances of milkman to make money, more milkman means bigger distribution channel for product vendors and more product vendors mean more value to users.
  7. Highly fragmented supply. Both, delivery partners and products/service providers.
  8. High frequency. Daily.

In days when hyperlocal companies are finding it difficult to survive it’s interesting to see how this model has scaled to 11K daily deliveries with so little money spent. Hoping the founders will stick to their believes and grow this to a pan India network. And hopefully this will inspire more startups to think of indigenous models.

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