Also in this letter:
■ Startup employees bear the brunt of funding winter
■ Experts alarmed by surge in fake ChatGPT domains, extensions
■ OCI’s Chris Chelliah on AI push, cloud consumption and more
Inside Meesho’s reset: to cut cash burn, brace for slower growth
Hi, Digbijay here in Bengaluru. Today, my colleague Pranav Balakrishnan and I take a deeper look at what’s happening at ecommerce upstart Meesho, which rose to prominence amid the Covid years.
We got our hands on the company’s internal sales figures and spoke to several people to make sense of these numbers. Here’s what we found..
Growth vs burn: The SoftBank-backed ecommerce challenger which first started to control its cash burn sometime last year has accelerated the efforts amid clear signs of a prolonged funding winter.
Vidit Aatrey, cofounder & CEO of Meesho, spoke to us and said he aims to reduce the burn to zero by September. Now that’s ambitious but Atrey told us the firm has already trimmed its monthly burn to about $5 million from a peak of $40 million right before the IPL last year.
In numbers: The company is currently operating at an annualised gross merchandise value (GMV) run-rate of $4.7 billion, but about 40% of this GMV is going back as returns, internal financials of Meesho reviewed by us showed. This means, its net merchandise value or NMV is around $3 billion. Meesho has also increased its focus on revenue and is expecting to end the year at $750 million.
Majority of revenue is from offering fulfilment services to its sellers but Aatrey wants to increase ad revenue because of its higher gross margins. These estimates are based on monthly financials of Meesho from July-December 2022 and its February numbers and include RTO (return to origin), cancellations and returns.
Aatrey said the company doesn’t bear any cost for the RTOs and also that industry rivals have similar or even higher gap between their GMV and NMV.
Yes, but: We spoke to ecommerce analysts who said the consensus among them was that sellers will find it irksome to pay for higher returns–regardless of the channel through which it happens. Over the past many months, sellers have told us that high order cancellations and returns have become an irritant for them.
Quote unquote: “Meesho’s customers are in the low and middle income bracket. Their spending growth will be slow. They will need time and they can’t shop 36 times a year,” said senior ecommerce analyst Satish Meena. He also said the limitation of segments such as fashion and home decor is why Meesho is looking to scale up its grocery business.
In the aftermath of the collapse of Silicon Valley Bank (SVB), banking units at International Financial Services Centre (IFSC) in Gujarat’s Gift City emerged as one of the several options for startups and tech companies, which had their funds temporarily frozen at the beleaguered financial services provider.
US banks to the rescue: Apart from Gift City, startups have also moved their funds to banks in the US, in India and with overseas locations of Indian lenders on the basis of their customer and supplier presence, several executives in the startup and banking ecosystem said.
Also read | Silicon Valley Bank collapse and how it impacted Indian startups: all the top stories
Primarily, tech startups with little client or supplier presence in the US have been moving their money out of the US to Indian bank accounts via transfer pricing. However, those who need USD bank accounts to make or collect payments are the ones that have opted for accounts in either US banks or Gift City accounts.
Quote unquote: “We have had over 40 companies open and send funds to Gift City accounts. We know of around $30 to $40 million that startups have transferred,” said Harshil Mathur, chief executive officer of fintech company Razorpay.
Catch up quick: A parliamentary panel has called top officials from the finance ministry and the Reserve Bank of India (RBI) on April 3 to discuss the impact on the Indian startup ecosystem.
We had reported earlier that RBL Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank and HSBC were working with startups and investors to open accounts in Gujarat’s Gift City.
As funding dries up and job losses pile up, employees at troubled startups are starting to crack under the pressure. Amid unachievable targets, increasingly toxic work environments and the constant fear of job cuts hanging over their heads, the startup stardust has long worn off, leaving many desperately searching for a way out.
‘Funding winter impact’: Employees across several startups that are now facing the heat of a funding winter and pressure from investors to rein in costs, have seen colleagues being shown the door; some have been let go themselves or are on the verge of burnout.
Some say their families can’t deal with their work hours—things are rocky both at home and work. Several are now publicly sporting #opentowork on their LinkedIn profiles, even though they are yet to quit.
Mounting pressure: An employee working in sales at another edtech unicorn, which has also seen layoffs, said there is huge pressure on targets. He works crazy hours every single day and colleagues are constantly pitted against each other.
“I’m on the verge of a breakdown but I am the only breadwinner. I tell myself ‘I have to get through this until something better comes’,” he said.
Another employee at a mobility company with a notoriously toxic culture, said that people are expected to attend meetings sometimes at 1-2 am.
Expert speak: “Most startups are going through a churn right now, as the ecosystem grapples with a slowdown in funding. Sectors like crypto and edtech have been struggling for a while. Over the next six months, we envisage things only getting worse before they get better, exacerbated by the Silicon Valley Bank turmoil and the continued global recession,” said Anshuman Das, managing partner, Longhouse Consulting.
A new study has warned against the proliferation of fake ChatGPT domains and extensions, which, it said, are being used to either steal personal information or compromise user devices.
Details: A few weeks after ChatGPT was launched, the company identified a domain named ‘Chat GpT for Windows’, asking users to download an executable file. This was malware, designed to steal data from Windows devices.
It also came across another Google Chrome extension, which once installed, worked like a browser data stealer, said Nandakishore Harikumar, CEO, Technisanct.
This means it could steal information like login credentials, along with other data, he said.
‘ChatGPT’s popularity being exploited’: Last week, security firm CloudSEK said at least 13 Facebook accounts with more than 500,000 followers were compromised and were being used to disseminate the malware via Facebook ads making it look like it was a link to an Open AI page.
Generative AI push: Companies are developing their own tools to harness its power for greater efficiency and make the user experience seamless.
Tata-owned Air India wants to deploy generative AI for more effective operations. The airline is looking to use generative AI to summarize briefings, extract and point out the most important elements to pilots before long haul flights. Pocket FM is also building generative AI tools for real value creation, said co-founder Rohan Nayak. Read more here
Also read | ETtech Opinion: the real significance of ChatGPT
Tweet of the day
Oracle Cloud Infrastructure (OCI) business saw a 125% growth in the India market during the first half of 2022-23 compared to a year ago, said Chris Chelliah, senior vice president, technology & customer strategy, Japan & Asia Pacific. The company also saw a rapid growth across the government sector with adoption by the likes of NITI Aayog, PM Gati Shakti and ONDC programmes, he told us.
Quote unquote: “We see demand and growth in consumption across industries driven by a need for personalised services,” said Chelliah.
He said the cloud and software firm sees strong demand for AI-based solutions within its offerings, especially on the supply chain solutions.
Cloud consumption surge: OCI saw up to 125% growth year-on-year in cloud consumption solutions during the first half of 2022-23, he said.
“We have seen significant growth opportunities from the Indian SMB market from digital natives (startups) and mid-tier companies, including edtechs, fintechs, cooperative banks,” Chelliah added.
Avanti bags $24 million from Rabobank Arm, others | Avanti Finance, a tech-enabled non-banking finance company, on Monday said it has raised $24 million from Rabo Partnerships and IDH Farmfit Fund, among others. While Rabo Partnerships, a wholly-owned subsidiary of the Dutch bank Rabobank Group, is focused on financial inclusion and rural development, IDH Farmfit Fund, an impact fund focussed for smallholder farmers.
Elon Musk calls San Francisco a town of the ‘Walking Dead’ | Twitter chief executive Elon Musk said the deserted look in San Francisco, considered the heart of Silicon Valley, bears such a look that one could “literally film a Walking Dead episode unedited in downtown SF”.
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