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B2C is Valuation, B2B is Profit

A lot of VC funds who operate in India have raised money for investing in the B2C space. B2C companies are the ones, which are valued in figures that we often forget how many zeros placed and how many more to be placed. Unicorns are built by the over enthusiastic investors, who love the zeros and help B2C companies to engage with customers over and over again. India is a ripe market due to 1.25 Billion breathing on small land mass.

Before we understand the nomenclature of some of the US based Unicorns, who really possess the next level of technology and are able to build an industry on their own. Let’s look at the Indian Unicorns. Some of them are indeed a masterpiece inspite of having shoddy pieces of technology, they are unicorns.

Flipkart
Paytm
Ola Cabs
Hike
ShopClues
Zomato
InMobi
Quikr
Oyo Rooms
MakemyTrip

Few seated on the borderline or waiting in line:
BigBasket
Byju’s
Swiggy
Practo
Delhivery
Rivigo
Blackbuck
Freshworks
Nysaa
UrbanLadder
Pepperfry
Lenskart
Redbus

There are few like Freshworks, InMobi or logistics companies who operate in B2B space but delivery companies business models hinges on E-Comm and Other Companies.

How many companies are making money (in terms of profits)? Probably None. InMobi may be making profits. But have these companies changed the lifestyle of an average Indian (especially in metros)? Most definitely so, I cannot gauge how much is the variance, but it is tremendous. That is the reason why they are valued with so many zeros. We have a lot of companies at the same time, who failed doing the same thing. But these came out on the top, before they added billions and billions to their name.

If we look at the US companies, post dot-com bust, who have changed the world and shifted the axis of the whole tech world. To compare them to Indian Unicorns is an insult to the great giants. Microsoft was the axis on which the tech world revolved. Google became the axis post 2005. Then came a point when we believed everything will be social media, except it was not to be but Facebook stood at the top of that revolution. Apple in the middle shows how to be successful hardware company but then their selling point is customer experience in terms of purchase and the product offering. Now everything is Amazon and with the way they are talking about innovations in how and what of everything from shopping to delivery is out of Sci-Fi Hollywood movie. Somewhere in the middle are super successful companies like Netflix, Uber, Airbnb, Spotify, which are changing the world in their own manner or some of the companies already gobbled up by Google and Facebook.

Out of all the great companies, Microsoft and Apple have been making the profits from the beginning as they are software/hardware sellers with monopolistic business proposition or superior product, which makes them great at outperforming their previous products every time. Consistently growing profits for decades without fail and without cycles.

Google is ubiquitous part of every human being’s life on the planet. There must be few 100 million, who do not know about google. I have people in my family, living in small towns, who have no utility of Google. They do order products online on Flipkart by giving relatives/friends address for delivery in city but do not know Google. Is Google a B2B or B2C Company? Google Search – the main product, which made it invincible is B2C. AdWords relies on Google Search is B2B product and earns all the money for Google.

Similar is the case with Facebook, FB is B2C product and FB Ads is B2B, which makes money for them. 

Amazon is the Company from which Indian Unicorns can learn the most as to how to be profitable. Amazon had posted losses for first 20 years of its existence and it changed the way the world shopped. With $250 Bn in turnover, which is half of Walmart, nobody knows in how many months, Amazon will surpass that. Amazon made 1% profit in retail business, miniscule for the gargantuan Company built and operated by thousands of engineers and workers. Amazon completely changed the way, the world read books, as Amazon was a tech company and never a shopping portal, their founder saw the future and said there has to be simpler way to deliver books to people and Kindle was born and the rest is history. Amazon started on a sideways note to develop infrastructure for Cloud Computing, when the world was discussing, this was happening, it is coming up. Now Amazon controls 47% of the Cloud market globally and makes the same profit as it does from its online store with tiny change as turnover in clouds business compared to www.amazon.com. Of course Amazon will be delivering profits in production and video business. But again the strength remains the same, B2C for numbers and B2B for profits.

B2C is the market which results in valuations and gargantuan numbers. B2B is the way to make profitability. B2C helps in capturing the data, which is insightful in minting money from B2B players. As it is said, “DATA IS THE NEW OIL”. B2B is the essence of B2C business, which the Indian entrepreneurs and more the VCs are not able to understand or adhere to make the profitable enterprises from the tech companies operating in B2C.

Not a single unicorn in India is profitable (except for InMobi), but then inMobi is B2B and it took its time to reach the unicorn and staying steady at the range valuation. Not a single one, appears to be going green in the coming year, which tells us that we are speeding the car in the wrong direction. Going forward, we would try to look how some of the startups can turn profitable and yet increase their market reach.
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