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Author: Kae Team

Unravelling the Portfolio: TranZact

Posted on by Kae Team

Brief about TranZact:

TranZact is a freemium digitisation software for 14MN+ SMEs Manufacturers & Traders, empowering them by digitising business workflow right from sales to dispatch.
With scalable distribution and engaging software, they are capturing real transaction data, which becomes the foundation to build a transaction-backed marketplace at scale.

Vision and Mission:

Empowering SMEs owners to grow their business through digitisation.
Building a digitisation platform for 14MN+ SMEs to convert their business data into actionable insights.

Genesis:

TranZact started with the idea of creating digital technologies for 14MN+ SMEs, which are still struggling with very old digital technologies. They felt that in today’s era of digitisation, even though the SME space is often ignored, it remains a very large sector, and if there is specific technology built for this space, the impact will be much larger and deeper.

Market Opportunity:

14MN+ Indian manufacturers and traders

5-year Plan:

Going to build a transaction-backed market network platform with over $500MN in revenue coming from multiple revenue streams like software and transactions.

Wysa secures $20mn to address global mental health demand with AI digital Therapeutics

Posted on by Kae Team

 

  • HealthQuad and British International Investment (BII) join earlier investors W Health Ventures, Kae Capital, pi Ventures, and Google Assistant Investments.
  • Funds will enable access to clinically evidenced digital therapeutics (DTx) in the US, UK, India and other global markets.
  • Will enable further reach through multi-lingual support and access via alternative technologies.
  • Follows FDA Breakthrough Device Designation and clinical evidence of a Therapeutic Alliance.

Wysa, the leading AI digital platform for mental health, today announces it has secured $20M in financing. Wysa will use this capital to further expand into the US, UK, India and other global markets across enterprises, payors, and providers as well as improve wider usability through multi-lingual support and easier access via WhatsApp. The round is led by HealthQuad, who along with British International Investment (BII), the UK’s development finance institution, joins earlier investors W Health Ventures, Kae Capital, Google Assistant Investments, and pi Ventures amongst others.

Globally, there is a huge demand-supply gap in the mental health space. One in eight people in the world lives with a mental disorder, according to the World Health Organisation. With high treatment costs and limited access to qualified therapists, employers, healthcare providers and insurers are seeking ways to help people manage their mental health and well-being through clinically proven, cost-effective and scalable solutions.

Wysa uses AI (Artificial Intelligence) to triage users according to their personal needs, guiding them through appropriate, evidence-based CBT (Cognitive Behavioural Therapy) exercises within the app, towards other mental health services or crisis support. Wysa’s platform provides employers and health services insights into usage rates of Wysa and digital well-being tools while maintaining user privacy.

Wysa has achieved FDA Breakthrough Device Designation for its AI-based digital mental health conversational agent for adults with a diagnosis of chronic musculoskeletal pain and associated depression and anxiety. Additionally, clinical trials have validated Wysa’s efficacy and published peer-reviewed results show that therapeutic emotional bonds formed by Wysa are equivalent to human therapist relationships. The company has, to date, achieved a revenue-generating user base of over 4.5 million people across 65 countries. Clients include Accenture, Colgate-Palmolive, Aetna International, Swiss Re, the National Health Service (NHS) in the UK, and the Ministry of Health in Singapore.

Charles Antoine-Janssen, Chief Investment Officer, HealthQuad said: “We are thrilled to be part of the Wysa team. Wysa is developed in India and is marketed globally. The needs for Wysa are present all across, from high-income to low-income countries. Mental health triaging of patients using AI which is fast, effective and non-stigmatising for patients living in unaccepting societies answers a huge need in India, the rest of low-income Asia, Africa as well as the wealthiest countries of the world.”

“Wysa provides help across the care continuum – from the first point of access to digital therapeutics and companion alongside a clinician to ongoing monitoring & routine management thereby democratising access to mental health. FDA Breakthrough Device Designation status, user privacy further validated by Mozilla and real-time AI-CBT support makes Wysa one of the few clinically validated, privacy-focused and personalised solutions built for a global scale” added Ajay Mahipal, Director, HealthQuad.

Srini Nagarajan, Managing Director and Head of Asia at British International Investment added: “Good mental health is a crucial pillar for sound physical health which in turn promotes social and economic development. Through our investment in Wysa, BII is taking a holistic approach to supporting long-term productive economic prosperity by backing an innovative tech-enabled company that is increasing access to mental health services for low-income and rural individuals. We are excited to continue working with Wysa’s team to grow their offering and help improve health outcomes and quality of life for people.”

Ramakant Vempati, Co-founder, Wysa, said: “Wysa has not only been extremely successful as a consumer well-being platform but has also developed into a clinically validated, powerful tool to proactively manage mental health and well-being. Wysa meets people where they are, whether that means a little help with occasional workplace stress, right up to coping with debilitating pain, depression and anxiety. With this funding, we look forward to scaling up further and helping millions of more people.”

Dynamic NFT Enablers

Posted on by Kae Team

The last few months have seen a rapid rise in all things metaverse and blockchain gaming across the globe. It may be tempting to brush this aside as a fad, but the adoption numbers tell an interesting story – the number of Daily Unique Wallets interacting with Gaming Smart Contracts has grown from 28k in 2020 to 1.3 Mn in 2021.

According to reports, even monetization trends have been strong ~ Blockchain Gaming Quarterly Revenue for Q3 FY22 alone was $ 2.32 Bn vs $ 320 Mn in the whole year of 2020 – which is an 8x growth. At the heart of it, metaverses are interactive ecosystems which use game-level graphics (can also use AR/VR elements) and game engine interactions to solve for user engagement through the game. These ecosystems use a blockchain ledger to build out X2E economies (X – can be “Play”, “Learn”, “Contribute”, etc.) – where a supply of tokens (which run the economy) is released into the ecosystem as more and more users come in. P2E economies have become the most prominent paradigm in blockchain gaming – usual suspects include games like Axie.

Dynamic NFTs (NFTs whose metadata can be updated) form a core piece of the Web3 metaverse and gaming economies. To understand the complexity of such ecosystems – imagine a Pokemon game (read: an Axie-like game) where you start off with 3 pokemon -> A, B, C. Assuming there are approximately 200 players who will want to start with A, 300 with B and 400 with C – we effectively have 900 NFTs (each NFT will have a unique address and unique metadata values at a particular “state” – the metadata here can be experience points or XP/levels, movesets, graphics, etc.). The updated rules can be coded into the smart contract, i.e. if my Pokemon crosses 100 XP (note: here the parameter XP is predefined in the NFT), it will evolve or if the NFT interacts with an external signal – like a sports news feed – it can trigger the update of the NFT, or if you enter a certain zone in the Metaverse, etc.

As the games scale up, i.e. go from sub 500 DAUs, to 10,000 DAUs, there are different elements of the backend which will need to be productized in order to enable deployment of dynamic NFTs at scale across different NFT use cases like upgrading, minting, renting, leasing, fractionalizing, etc.

We have seen challenges with the synchronization of on-chain and off-chain databases – Games/Metaverse often work with both on-chain and off-chain databases. On-chain databases will be used to store the addresses/ownership data. For example, if there’s a fighting game where one can pick up different weapons/items, if one picks up a knife NFT, the ownership vector will now point to that person. Similarly, for the off-chain data, a character’s graphics will get stored on a centralized/off-chain database. As games/metaverses scale, there is a potential to provide a platform for the synchronization, batching of blockchain update requests and updating of various data points in the ecosystem – which games currently build in-house using ineffective alternatives like cron jobs. Companies like Chainlink have been working on this problem.

Currently, no dashboards exist to see the status of active NFTs, and no good tools exist to edit smart contract updating rules. At any given point in time, game developers do not have visibility of the game rules and conditions in one place – for example, if one has 400 unique pokemon – each corresponds to a unique smart contract which determines the rules of NFT updates. With newer games and mechanisms – the NFT ecosystem becomes more complex, for example, of the 400 NFTs, you have 200 NFTs which need to further interact with external stimuli to trigger a smart contract auto-updating/metadata updating. The vision can be to build a no-code dashboard to drag and drop game functionality/game economy functionality – where one can drag a box which changes the game economy rules (eg. changing the prize for a pokemon battle from 1 point to 2 points, etc.)

We have also come across challenges with serum-based NFT updating mechanisms (however, they don’t allow for the preservation of the previously held NFTs). We believe that the TAM will become large enough in the coming few years as Web3 metaverse and gaming companies might share $0.5-$1 per user (approximately $15-20 ARPU), making this an interesting but nascent space to look at.

The NFT ecosystem is rapidly evolving with many exciting new opportunities and challenges – we feel we have just scratched the surface, and there is a lot more yet to come.

Unravelling the Portfolio: Traya Health

Posted on by Kae Team

Brief about Traya
A one-product approach never works on hair loss or any other chronic condition. Traya combines the best of Ayurveda, Allopathy and Nutrition containing proven results to identify the type of hair loss, stage and the root cause behind it. Based on this, each person gets a doctor-prescribed treatment plan and a hair coach who guides the customer and tracks their progress.

Vision and Mission
Traya was started with just one goal in mind- to deliver visible hair growth results. We did everything from product and process to tech, keeping in mind the efficacy of the treatment. Back in 2019, Traya was sold to the first 55 customers through a basic landing page and they took the proprietary formulations (all-natural herbs + dermatologist prescribed + diet). They were closely observed for 4 months and a good 90% of them started seeing visible results. That is when we decided to launch a brand and seek investment. We knew we had hit a gold mine.

Genesis
Traya is an outcome of the cofounders’ personal journey as a couple. About 3 years ago, co-founder Altaf struggled with a number of health issues including uncontrollable thyroid levels accompanied by accelerated hair loss (he faces genetic male pattern hair loss) and weight gain, which was compounded by his hectic lifestyle. He went from doctor to doctor and couldn’t do much about his situation. We researched more and explored ayurveda and naturopathy diets. The three together changed our lives. Altaf’s hair regrew and his thyroid came under control. Even his endocrinologist was surprised. Even then the cofounders had no intention of starting a company. Almost a year later, by helping a lot of friends and family with chronic health issues including hair loss, they decided to take this space seriously. They realised that both of them were extremely passionate about solving chronic health issues that a millennial faces. On further research, hair loss was chosen as a disease line to begin. It was the most crowded but also the most corrupt. As they researched more on the diseases, its types, they realised nothing out in the market can ever work. The issue is considered cosmetic but it is internal. Thus, they took up the challenge to change the way the hair loss industry works.

Market Opportunity

The current hair fall market in India is broken. Many have a product-centric approach which is clearly not effective in delivering the results. Hair fall is a problem that needs to be addressed holistically and requires customization as per every individual’s root cause of hair fall. Out of the entire serviceable market, 125 million adults in India directly benefit from Traya’s offering and have the ability to afford it. The $12.5 Billion hair loss solutions market is up for grabs and Traya is aggressively growing to capture the entirety of the market while also changing the way a hair fall solution is approached and the results speak for themselves. In addition to the direct solutions to hair fall, Traya is also targeting the next line of products including anti-dandruff and cuticle damage.

5-year plan

We want to be synonymous with the terms hair fall and hair health and be known for our efficacy and honesty. On the product side, we are in research for no side effects and high-efficacy solutions for other hair concerns.

Portfolio Fundraise Update: Foxtale raises $4M in a pre-series A round

Posted on by Kae Team


Indian D2C skincare brand, Foxtale, has raised $4M in its pre-Series A funding round led by Matrix Partners India with participation from existing investor Kae Capital and some notable angel investors.

The Mumbai-based startup raised its seed round in August last year. The startup launched in December 2021, and found an early product-market fit and a repeat rate of more than 50%, which led to a quick pre-Series A round.

This round of funding will be used in expanding the product range, hiring senior vertical heads and in scaling the business across multiple touch points.

The culture of self-care is still very nascent in India. While skincare brands have existed for a long time, they either fall in the category of herbal and ayurvedic, ineffective yet massy or luxury and expensive. Foxtale wants to bridge this gap between efficacy and affordability, making skincare, and by extension, self-care, accessible to all. To understand what the modern Indian woman is looking for in skincare, the Founder and CEO, Romita Mazumdar conducted interviews with more than 3000 women. From all those insights and the expertise of a team of brilliant chemists and formulators, Foxtale was born.

The brand’s decision to launch with 4 basic products, a cleanser, vitamin C serum, moisturizer and sunscreen, was a bold move, as most other brands rely on starting with a wide range of SKUs. However, Foxtale’s approach to skincare is guided by what its consumers need. It’s these 4 product categories that people use the most and need better formulations for. After perfecting this 4-step routine, Foxtale is now ready to launch more targeted solutions to the users’ skincare issues.

Efficacy is one of the biggest selling points of Foxtale. This is ensured by their formulation team, headed by one of the most lauded names in Indian cosmetics and personal care products, Dr. Ramesh Surianarayanan. He has pioneered many acclaimed products in his previous stints at Himalaya and Unilever and he now extends his expertise to Foxtale. The product development engine at Foxtale keeps its user community at the centre. From identifying which products they should launch, testing them, and finalising the packaging, Foxtale tries to include feedback from their users every step of the way and they only launch products in the market once 97% of their community approves of their efficacy.

Speaking of the funding, Romita Mazumdar, Founder & CEO, Foxtale, said, “A big issue in the Indian skincare industry has been the low customer repeat rates. It was clear that efficacy was a big problem for skincare enthusiasts in India and we had to solve it. Our focus on understanding our customer’s needs & product innovation has enabled us to establish a strong early product-market fit and drive industry-leading repeat rates and customer NPS scores; however, there is still a long way to go. I am very excited to find partners like Matrix and Kae in this journey and looking forward to building Foxtale with them.”

“The beauty and personal care market in India is growing fast and is expected to reach $28B by 2025. We are privileged to partner with Romita and the Foxtale team as they aim to disrupt this market through innovative products and differentiated go-to-market strategies. At Matrix, we continue to be excited about backing new-age consumer brands and Foxtale is our tenth investment in the sector.” commented Rajat Agarwal, Managing Director, Matrix India.

“Foxtale is different from other skincare brands. Its focus on high efficacy and the vigorous testing they conduct before launching a product is unlike any other. Foxtale sources 80% of its ingredients from premiere labs across the globe. We are excited to continue to partner with Foxtale as they build out India’s foremost skincare DTC brand.” commented Sunitha Viswanathan, Partner, Kae Capital.

On the road ahead, Romita said, “Our vision is one – to build a consumer-first brand where growth and product have equal importance. I want to change the perception that self-care should be a luxury restricted to women who have the privilege of time and money while proving that a profitable business can be built with consumers at the centre of the story.”

Unravelling the Portfolio: Hatica

Posted on by Kae Team

Brief about Hatica
Hatica is a Software Engineering Analytics platform that helps managers and leaders build productive and happy engineering teams.

Vision and Mission
The severe lack of visibility for Engineering managers in a world of distributed teams working across dozens of tools has made the job of engineering management harder than ever before. This naturally results in declining developer productivity and experience.

Hatica’s mission is to equip managers with a comprehensive Engineering management platform to provide them the much-needed visibility and insights into development work activity, processes, and quality to help them drive team productivity while ensuring well-being.

 

Genesis
The idea came from the founders’ experience of having worked remotely even before the pandemic and having worked through developer productivity challenges before. Followed by countless zoom interviews with engineering leaders, managers, and developers across regions and industries, Naomi and Haritabh completed and launched the first version of Hatica in early to mid-2021.


Market Opportunity
The trend of SaaS sprawl, combined with remote work becoming mainstream, has made engineering management even harder and the problem of developer productivity ubiquitous. This coupled with every organization requiring to be technology-first, driving demand for engineers, has provided us a tremendous pull from the customers with a sizable TAM.

5-year Plan
Go from a sharp Engineering analytics tool to an Engineering Management Platform, empowering every engineering manager and leader out there to drive engineering excellence and wellbeing.

Unravelling the Portfolio: Foxtale

Posted on by Kae Team

Brief about Foxtale
Foxtale is a community-first skincare brand. Foxtale is building a D2C Brand focused on creating scientifically backed skin care products for women. Foxtale aspires to give a product which is reasonably and affordably priced, while solving for efficacy of the product.

Vision and Mission

The vision is to create a range of products for Indian women of all skin types, belonging to places with diverse climatic conditions, and ensuring that it remains their partner at every stage of life. The mission is to create an INR 1000cr brand that solves skin problems in a scientific manner.

Genesis

After spending years in the Venture capital and finance spaces, I realised that there is a big gap in the skincare market in India. It is heavily dominated by traditional players such as Fair and Lovely, Ponds, etc. and the new-age players have been unable to grab a market share, due to a lack of consistent results. Another problem with skin care for women in India is the changing needs of women every week, based on their biological cycle, their area of residence and the climatic conditions of that specific time. Hence, there was a strong need to have products which can solve for the varying needs of women and at the same time, provide long-lasting results consistently.

Market Opportunity

The total market size of skincare products in India in 2020 – $2 Bn and is projected to reach ~ $3 Bn by 2025. In India, there is a need for players who can deliver consistent results at affordable prices.

5-year plan

The 5-year plan for the company is to expand distribution across India and to command a high repeat rate of 70%-80%. We are building a company that accelerates every year to a revenue of 1000cr in the next 5 years. The company prides itself in understanding women and while our core expertise is skincare, we hope to be every Indian woman’s companion through her self-care journey.

Multi-chain, Cross-chain Interoperability and Composability Explained

Posted on by Kae Team
Interoperability implies the seamless transfer of assets (fungible or non-fungible) and messages, while composability essentially implies shared infrastructure/effective cloning of dApps.

The Web3 ecosystem has taken off over the last two years. What started off as a whitepaper by the pseudonymous Satoshi Nakamoto back in 2008 has evolved from the first L1 – BTC (a prototype of sorts), to the arrival of the now dominant ETH (Ethereum), which drew the imagination of developers from across the globe with its smart contract functionality.

Now with other L1s like Solana and Avalanche, L2s like Arbitrum and Optimism, and even multi-chain ecosystems like Polkadot, the Web3 space has become massive.

The top 15 blockchains store  $10 billion  in value each, with ETH and BTC together contributing almost $2 trillion.

But these ecosystems are growing in silos –

Ethereum, the largest ecosystem, has the best developer pools. Most programmers are comfortable with ETH UX/UI, languages, and smart contracts but with the current PoW (Proof of Work: requires miners to solve a cryptographic equation by trial and error) mechanism, the chain is suffering from poor scalability due to gas fees.

This is despite having the best security. It is said that ETH 2 with PoS (Proof of Stake: requires miners to stake all or a portion of their coins in order to validate transactions) will be much faster and cheaper.

Solana, which is currently the most prominent Proof of History based (sequence of computations that can provide a way to cryptographically verify the passage of time between two events), non-sharded chain, has high transactions per second (TPS). However, developers are still getting used to Rust, and with the core use cases being built around gaming, it’s becoming another siloed ecosystem

Terra, which aims to become “DeFi Central”, and seems to be doubling down on DeFi use cases with its array of stablecoins and innovative DeFi protocols, is also becoming another fascinating silo.

blockchain

What encompasses interoperability and composability

Interoperability implies the seamless transfer of assets (fungible or non-fungible) and messages, while composability essentially implies shared infrastructure/effective cloning of dApps, meaning one should be able to deploy any dApp on any chain with minimum friction and time.

Each ecosystem has its core strength, core use cases, core set of developer pools and liquidity pools. Just like economies benefit from trade – blockchains benefit from trading functionality, assets, liquidity pools, etc.

The vision is to enable developers to deploy dApps from any chain, onto any other chain in an almost no code format at scale.

This entails the seamless sharing of ecosystem strengths through smart contract calls or even on tools abstracted one layer above the smart contracts themselves.

For example –

  • Computation (think logic and calculations, like those required in gaming) on SOL/AVAX smart contracts (depending on the kind of use cases)
  • Transactions (meaning buying or selling, but not settlement) happening on SOL
  • Finally, settlement occurring on ETH (eg. when someone pays using VISA or Mastercard – that is not a settlement. Settlement comes weeks after that.)

However, interoperability and composability today are broken. The future is not cross-chain vs multi-chain, but cross-chain AND multi-chain, we will need both –

The mode of connecting ecosystems today is cross-chain bridges. This is where we enter murky waters – i.e. the cross-chain vs multi-chain debate, which is at the heart of it all.

With bridge security mechanisms becoming a core piece of debate (bridge hacks leading to stolen tokens – like the Wormhole hack), a large chunk of the population believes cross-chain is not the future. Ethereum founder Vitalik has explained (here) why it is always possible to override consensus on bridges, making them a losing proposition.

This leads us to multichain ecosystems, with the core idea being shared security. For example,  the Polkadot ecosystem is an “internet of blockchains” with shared security, shared virtual machines (think computations, logic) with the concept of creating new chains called parachains.

So not only can the chains communicate with each other seamlessly and transfer assets, the security risk is much lower.

However, even with two  “Internet of Blockchain” ecosystems coming up with their individual shared securities,  they will still need to communicate with each other! Hence, bridges cannot be taken out of the picture altogether unless there is a completely new mechanism to substitute them.

Overall, we want to make bets on infrastructure plays, which will enable a multichain interoperable, composable future. This can include Tooling/Infra or Ether plays on Polkadot (think governance, no code plays, etc.).

This also brings in Protocol based interoperability standards (think cross-chain smart contract enablers, messaging layers, function call layers, interoperability standards, etc.), also containing DAO tooling which allows for multi-chain functioning, etc.

Hitting the Right Metrics is the Bedrock of Building a Sustainable Startup: Summarizing the Playbook

Posted on by Kae Team
  • Solve for the right market
  • Find your customer
  • Hit product and channel market fit
  • Hit monthly and quarterly growth milestones

Strong metrics underlie the whole journey.

Strong leading metrics are a must-have, and startups are setting themselves up for failure if they don’t hit those benchmarks

Revenue numbers lag strong leading indicators. If there is a PMF, leading indicators will inflect first and become critical to track (not more than 3) to gauge product love.

Our goal through this post is to set good benchmarks for consumer startups based on learnings from our portfolio.

Genesis of metrics – and identifying healthy startup growth

The success of young consumer startups hinges on LifeTime Value (LTV) and acquisition costs.

LTV is the total value derived from a customer through their engagement with your product/solution. Growth is driven by new revenue (acquiring new customers and making them spend) and repeat revenue (repeat purchases made by previously acquired customers). High LTVs are driven by healthy repeat behaviour. Hubspot forms a great case study of how they  used LTV (with CAC) to diagnose unprofitable growth and double down on better channels (1)

Is there a case for high ticket size, low-frequency markets? There is, if such markets (wedding services, home design marketplaces etc.) drive enough value from that single transaction that justifies the customer acquisition costs. Further, they are more outliers than the norm. Most businesses need to drive repeat behavior to become sustainable.

With the overall theme being set, let us dive straight into some of the relevant models –

Consumer Tech

Most consumer tech plays are apps that involve people performing some action on the app – browsing, playing, placing orders, messaging, etc. which translates into having them spend time on the app.

High engagement/time spent leads to better monetization through in-app purchases, payment renewals, etc. which leads to higher LTVs – you don’t have to keep acquiring new users to fuel growth.

DAU/MAU* OR WAU(Weekly)/MAU become critical metrics to gauge product performance – and it is generally one of the most preferred measures to understand how well the product is solving for the demand.

DAU/MAU gives the % of monthly users who use the app daily. (Similarly for WAU/DAU)

Are your users finding a need to open the app frequently? Think of the number of times you open WhatsApp or Chrome in a day. This makes it critical to monitor DAU/MAU (or WAU/MAU) religiously.

On average, DAU/MAU should range between 10-20% depending on the natural frequency of use as per Sequoia’s ‘14 benchmarks, with truly engaging apps posting a 20%+ DAU/MAU.

The benchmarks below are global, and we use them depending on the category.

Twitter – 30%

Facebook – 50%

WhatsApp – 70%

Gaming apps would typically trend over 30-40%.

Over the last few years, more social/community-driven apps have entered the market and enjoy higher engagement values.

Referring to a16z’s social app benchmarks – the social consumer tech categories like social shopping, discovery platforms and communities on an average rank between 30-50%, read here (2)

D2C/Internet first Brands:

Internet brands tap into fast-growing high-frequency categories through online discovery and purchase.

Transaction Models

We want to tap categories with high LTVs – built through strong repeats. Repeats are the best indications of PMF for brands – measured as the % of monthly customers who buy again. The timeline of the repeat purchase depends on the category, but we feel the following benchmarks will be healthy bets to indicate strong product love.

Our experience from our D2C portfolio indicates that good repeats range anywhere between 40-60% with all of our most successful brands tracking in those ranges and some shooting over 70% too.

Categories falling into high-frequency consumption – ideal repeat % should be between 50-60% – these include products like skin care, hair care, sanitary pads, cosmetics, casual clothing, etc.

If we are looking at lower frequency purchases like ethnic Indian clothing, we should aim for 40%-50%.

Subscription Models

Subscription brands also track retention, measured for a cohort.

Brands who have hit PMF would track at 3-month retention upwards of 50-60%.

We have seen 90-day retention exceeding 80% within our Portfolio, exceeding the global gold standard of consumer subscription businesses, Dollar Shave Club, which claims to have a 60% 3-month retention. (3)

Conclusion

LTV is at the heart of profitable growth –

  • For D2C brands, high LTVs are a result of strong repeats and a healthy repeat % will be between 40-60%
  • For consumer subscriptions – strong LTVs are driven by strong retention -50-60% 90-day retention indicates strong retention
  • For DAU/MAU – strong app engagement measured by DAU (or WAU)/MAU drive good LTVs and in our opinion, strong consumer apps should try and exceed 25%

Usage/Engagement and Repeats drive sustainable venture growth and will continue to do so in any variation of the digital economy.

If you feel you are hitting such numbers – please write in at – sunitha@kae-capital.com and sarthak@kae-capital.com . We would love to hear from you!

 

Embedded Ecosystems Built on Motherships Using API Networks/Gateways

Posted on by Kae Team

Understanding History – Digitization Waves and How They Took Place

The Indian digitization story has been a unique one – the Jio rollout and low smartphone prices led to an unprecedented digital inflection point, which in turn led to rapid adoption in new technology paradigms like mobile first and on-demand (eg. Uber, Swiggy). Large consumer tech companies in Edtech like Byju’s, in E-commerce like Flipkart, heralded the first wave; the emergence of social commerce companies like Meesho and a new wave of SMB SaaS players like Khatabook, Dukaan heralded the second wave.

As a result, various technologies – which include new-age startups/platforms, legacy on-prem and cloud softwares have penetrated different markets creating distinct layers over the years.

If we look at the current landscape, very broadly – there would be three markets categorized by different levels of technology penetration –

  • New age consumer and business technology plays which have been created in the last 5-7 years – think Flipkart, Byju’s, Swiggy as consumer plays; Shopify as business plays
  • Legacy technology products being used primarily by businesses – think Tally, miscellaneous legacy AutoCAD technologies being used by architects
  • Semi-offline markets where smartphone and WhatsApp penetration is high – think Kirana stores and small retail businesses. These are semi-offline because they have reasonable WhatsApp and phone penetration and have recently seen Khatabook, Dukaan adoption.

Each market has seen the emergence of what we may think of as Motherships

Our objective is to identify these Motherships where embedded ecosystems can be built. The future of venture backable businesses will be embedded growth – built on the back of Motherships whose core functionality is limited to one or two use cases. The goal is to significantly expand their use cases and subsequently expand their TAM – by solving for the end-user through functionalities which are difficult to build and scale.

Creation of Embedded Ecosystems on Platforms Solving for Single/Limited Use Cases

We want to make platforms into Ecosystems which give users more reasons to use the platform and drive greater network effects. Potential motherships have 1 or a maximum of 2 use cases – for example, Tally’s main use case is data entry for accounts, Swiggy solves primarily for food delivery and restaurant discovery, or a Khatabook solves primarily for accounting/maintaining ledgers, but each of these platforms is used by a large chunk of the population.

To summarize – A few common traits of motherships

  • They are technologies (software/hardware) which have a reasonable presence/penetration in core industry categories
  • They have 1 or maybe 2 core use cases – and their bandwidth is restricted to these specific use cases
  • There is a potential for new functionality which is not their core competency

Motherships can be single platforms OR multiple distributed touchpoints:

  • Shopify – Single Platform
  • Credit Cards – Distributed across several users

Mapping out possible motherships (this list is not exhaustive, would love your thoughts on this, do write in – sarthak@kae@capital.com)

Building for the B2B2C/B2B2B Users, Where Platforms Face Significant Challenges in Developing New Capabilities/Functionalities

We will notice most platforms have a dominant position in their respective markets, so what is to stop them from developing the functionality in-house?

The counter to the above argument is to tap into those APIs/functionalities which need high bandwidth to develop and maintain. These will be easier to “outsource”/ “unbundle” – and solving for this seamlessly is needed to be done.

Additionally, new functionalities may add a structurally different revenue stream, significantly driving up TAM – Embedded marketplaces, Embedded NFT gateways are strong examples of such functionalities.

The possibility to charge per API call opens up potentially massive markets with highly scalable models.

The new functionalities can include (and are not limited to) –

  • Embedded product marketplaces for procurement – imagine excel sheets/Tally with an embedded marketplace, where building supply is a challenge
  • Embedded service marketplaces
  • NFT/Blockchain functionality which requires high processing power/costs
  • Deep learning which requires high processing power/time, very deep expertise
  • Cybersecurity
  • Reverse Fintech – Fintech players/Fin. Institutions being used to distribute other products/services

Embedded Marketplaces, Deep Learning, Blockchain – and then some more!

These are some of the plays which we are exploring, and we would love to hear from you if you are building something out in this space.

We are particularly interested in discovering –

  • Embedded Tools (for Eg. NFT API Tools, Cybersecurity API Tools, Deep Learning API Tools) being built on B2B Marketplaces

AND

  • Embedded B2B Marketplaces on commonly used SaaS/Software tools like Excel, Tally (including platforms like Khatabook maybe!)

Similarly, Embedded tools built on Consumer/Prosumer Platforms/Marketplaces are of interest as well.

If you feel you are working on something of this sort, or know someone – we would love to speak to you!

Do write to sarthak@kae-capital.com