This article has been in draft since 2014. After reading Naman’s piece (Is it possible to scale hyperlocal startups without burning much?), thought I will go ahead and share some perspective.
2014-16 saw massive funding in hyperlocal startups. Close to 55+ hyperlocal start-ups have raised $400+ million, with most of it going down the drain.
Hyperlocal isn’t about creating a new demand. There is already a huge demand of hyperlocal services.
It’s largely about playing the matchmaker (i.e. marketplace) – efficiently.
But for most of the hyperlocal startups who shut down, they couldn’t manage to generate enough demand – the customer acquisition cost was damn high. And since they had no deeper connects in the domain, they couldn’t really take the scale to any level.
The flow was : Spend marketing $$ -> Get customer to install the app (remember, 14-16 was a sudden awakening of mobeel-only world). -> Spend more marketing $$$ (discounts) for customer to use the service -> Absorb the service cost (pay 1.5X to the vendor) ->repeat the loop.
There was no stickiness of these services. For these startups, they had to start from scratch – from a new customer every damn time.
But then, two companies had better inroads and they could have done something bigger and better.
Commonfloor, ApartmentAdda and the App Store that never was.
Both these competing products are used by a lot of gated societies for several apartment related activities – right from very active discussion (groups) to maintenance payment to buying/selling things (classifieds).
There is a good amount of daily activity on their platforms – i.e. DAU is quite higher. In fact, on a daily basis, there are N number of questions around ‘can somobody recommend me a <provider> in this area?’
Now, imagine a Commonfloor / ApartmentAdda app store which could have been the meta player among all these companies. Think of it as a play store for hyperlocal services – a different game at a very different scale.
Both these companies had good enough demand (and a very active one) to start with and could have built on those, unlike several other startups.
It’s not that demand for hyperlocal services are gone, it’s just that consumers couldn’t figure out how many apps would they need to change a light bulb.
Both Commonfloor and ApartmentAdda, probably got busy in their transactional game*(Commonfloor : selling real estate. ApartmentAdda: selling the app to communities) – lost the sight of the BIG BIG hyperlocal market and in the end, Justdial wins it all (?).
What’s your take? Wasn’t hyperlocal a big enough market opportunity for these companies? Can they still do it?
*They tried – but not whole heartedly. There were very small experiments.