A billion people are not a billion paying customers

Restored from Instagram posts · 20 May 2022

i talked with all my friends who received funding from VCs. they have been asked to do the following

1. cut the burn, make sure you've funds for 18 months minimum. so expect a lot of firings.

2. cut on the salaries, and the excessive perks - some expect the markets to go back to normal engineering salaries during and post the downturn.

3. do another raise by opening the prev. round at the prev. valuation or raise a downround to ensure you've cash. the private equity market is a blood bath now.

so, if you are a salaried employee at a startup, save min. 50% of your monthly salary and expect that you'd get fired anytime. almost all IT service companies have an attrition rate b/w 18 to 40% so, people would rush to take back jobs there. polish your CV if required.

fin-tech is bloated now. the no. of companies that the fintechs can actually service is too low for too many companies to exist in that valuation.

fin-tech is bloated because the Total addressable market is very small. it's a normal flaw for anyone to calculate TAM in India based on population and the no. of internet users and the NBU (next billion internet users)

just 25% power users contribute to 50% of all UPI transaction value. not calculating the unique user here. I have 5 UPI IDs. many would do so. that would bring it to much lower numbers.

let me drop more numbers for context. nikhil kamath from zerodha puts it out beautifully.

3 cr is just around 2% of total India's pop. most startups in India put their valuation based on how much DAU (daily active users) they can get on a future probability based on their Month over month growth.

India doesn't actually have that much people who can afford to spend and the reason why their calculation is wrong - thus wrong valuation - thus heavy slashing.

most of the top 3% who actually invests have an average per capita income of around 50k INR per month.

that money is barely enough for their own necessities.

you can't buy anything with that. people can't afford priced products here. the only way you can make people to spend more is to make them good money first.

we only have 25 million people (2.5 crores) - which can be the TAM of any fintech company.

[a qualification: a single headcount cannot be the addressable market for every fintech product. the segment, price, ability to pay and revenue model need to be defined separately; the figures and downturn predictions here belong to the period when this was written.]

everyone made fun of Kunal Shah stating that Cred doesn't have a business model. Nope. it only targetted the top 1% or the top layer who can afford to pay. It targetted the best of the credit card users and now it can sell more to them. Cred has a much better B-model than anyone in the fintech industry.

next 18 months, i see a lot of them (fintech startups) rolling under. especially the BNPL (buy now pay later) startups.