Approaching the iceberg

Of course, none of this is new. Six months back, we’d pointed out that despite its tall claims, Tapzo was in danger of running out of money. For FY17, it reported a loss of nearly Rs 100 crore ($13.7 million) and had only Rs 30 crore ($4.1 million) left in the bank. For the last six months or so, the company seems to have geared itself up for an inevitable demise. The last tweet from the company’s official Twitter handle was way back in March. Perhaps fittingly, the subject of that tweet was a discount/cashback. Start with discounts, end with discounts.

As an outsider, it is perhaps trivial, inconsiderate even, to point out what is seemingly obvious— Tapzo didn’t really have a “good thing” going, and an inglorious end was merely a matter of time. Surely, Singla and the Tapzo management would have seen this coming much earlier. The real question, though, is what options did Singla has at that point in time.

Are there any other choices?

One would think that there were only two choices: Raise more capital and attempt another pivot, or cut costs and get to a point where the company is profitable. Having already raised a down funding round in late 2016 at half the valuation of the previous round, perhaps Singla believed that getting to profitability was the only viable option left. Maybe this is why he framed the goal of turning profitable by March 2018.

While it isn’t known whether Tapzo reached this goal, the irony of Singla’s situation was that it didn’t actually matter whether the company got to profitability or not.

Why so?

Simply because Tapzo was not just another startup. It was a startup that had raised hundreds of crores in funding and was, at one point in time, valued at nearly Rs 600 crores ($82.5 million). For a company of this nature, getting to ramen-profitability is irrelevant.

As far as VC investing goes, startups are not the same as real businesses. Real businesses make products that have a market and sell them for profit. They focus on customers, revenue and profitability. But startups, especially mega-funded startups, focus on only one thing—the next fundable milestone. In this VC worldview, profitability rarely figures. The only thing that matters is growth. Unfortunately for Tapzo, in the absence of a meaningful value proposition, the only way it could grow was by continuing to offer discounts—something that it could no longer do given the lack of funding ballast in the tank.

A Faustian bargain

The saddest aspect of Tapzo is that it was a company that initially had a promising solution back when it was still called Akosha. The consumer-facing portal was a platform where users voiced their grievances with various products. This was complemented with a customer-support helpdesk for enterprises looking to engage with their customers. The beauty of this model was that it was a unique two-sided B2B marketplace.

Unlike, say, a Freshdesk, which offers enterprise clients a helpdesk platform for engaging with customers who might be vocal with criticism or ask for support on social media channels such as Twitter or Facebook, Akosha could have been different.

It could have offered this entire experience as an integrated one, where customer voices could be captured on its own platform and funneled to enterprises. This would allow it far greater control over the full support chain. Brands would have conceivably paid a premium for this completely in-line support process where they would have the opportunity to control the narrative.

So why did Akosha/Tapzo not go down this path? Singla might know the actual answer, but to a casual observer, the temptation to take increasingly large dollops of VC capital to chase what looked like a bigger market seems to have played a role.

But VC funding is often a Faustian bargain. It could help a startup break out and reach the next orbit or it could push what could have been a successful, albeit smaller, business to pivot or over-expand and ultimately fail. It is often tempting to see VCs as omniscient beings who hold the keys to startup success, but the fact of the matter is that even at the best of times, VC investing is a mimetic game where lazy pattern-matching substitutes for truly informed insights.