The speed of scaling up is one among the myriad challenges startups face today. Every now and then they are posed with the question of whether to launch in multiple cities at high speed to attain market leadership or to take a slow and steady pace of city-by-city launch to establish a strong base and replicate.
While the likes of Zomato, TinyOwl and PepperTap have had to scale down their operations over the past one year, a few companies like NearU and SparesHub believe that with the right strategy, speed scaling through multiple city launches could be the way to go.
“Everyone told us launching in multiple cities in a short span of time would be a bad idea,” said Hemanth Meka Rao, Founder of deal discovery app NearU. “When we’re a startup, how can we function like a big company and be present in multiple cities right away?” Founded in June 2015, the Mumbai headquartered startup is present in 30 cities with offices in eight of them. It plans to expand the presence to 10 more cities from early next year. “We are doing this by keeping our costs and the team size low,” Rao said.
Ecommerce platform for automobile parts and services SparesHub has tried a slightly different approach to expand its presence in multiple cities. Currently present in Pune, Mumbai and Bengaluru, the company plans to expand to four more cities in the next six months.
“Our expansion was slower during initial stages to understand the hiccups, and now that those are ironed out, we are looking at expanding at a much faster pace,” said paresHub Founder Tapas Gupta. “However, competitive scenario is also important. If the city already has similar companies, then it might not be a good idea to target that particular city,” he added.
The allure of market leadership is one of the reasons for startups to opt for a speedy expansion, said Harshvardhan Mandad, Co-Founder of food-ordering startup TinyOwl, which was acquired by hyperlocal delivery startup RoadRunnr earlier this year and rebranded as Runnr. TinyOwl had to scale down operations from multiple cities and lay off several employees to battle a cash crunch.
“Ideally we should’ve won Mumbai first, and after fixing the financial model, we could’ve scaled geography by geography,” said Mandad.
Experts said the pace of scaling up depends on various factors with cash topping the list. Other aspects include team size, nature of business and entry barriers. “The tried and proven rule is to establish and deliver a quality experience in one city and then use the learning to make progressively quicker launches in other cities. If the entry barrier to the business is low, they will need to evaluate an accelerated expansion, assuming funding permits,” said investor and startup mentor Rajeev Menon of Anthill Ventures.
Source: Economic Times