RIP Tapzo: Will the Ouroboros rest in pieces?

The Ouroboros is dead.

The Ouroboros is an ancient mythical symbol of a snake eating its own tail. It’s often taken to symbolise the eternal cycle, especially in the sense of something constantly destroying and re-creating itself. It also represents the infinite cycle of nature’s endless creation and destruction; life and death.

As we had written earlier, Tapzo, self-billed as “India’s first all in one app”, is the one Indian startup that epitomises the Ouroboros—displaying a constant, incessant urge to reinvent itself, pivoting from one avatar to another inconditely. The head eating the tail.

However, unlike the mythical creature that could reinvent itself infinitely, Tapzo’s days of reinventing itself are seemingly over. In an email to its users, the Sequoia-backed company announced that it would cease operations by the end of October this year. “Tapzo app will be shutting down from 31 October 2018. Starting 1 September 2018, we will be switching off all the transactional categories,” read the email. It also detailed how users can close their accounts and redeem any unused balance left in their wallets and accounts.

The email goes on to say, “Since we launched the app 3 years ago, we’ve been fortunate to serve over 5 million customers. Your feedback and reviews (200,000+ on PlayStore alone) and the 4.5 rating kept us motivated and always learning. It’s been a pleasure listening to you all and continuously shipping an app update every few weeks consistently. But all good things must come to an end.”

All good things must come to an end? I suppose this is true in a broad philosophical sense. But if you are an eight-year-old startup that has raised more than $30 million in VC funding and believe that you have a “good thing” going, you don’t come to an end by way of a summary email to your customers. You don’t shut down your service overnight and move on.

So, did Tapzo really have a good thing?

A flawed value proposition

Tapzo’s all-in-one app premise was that mobile users in India need not download multiple apps for cabs, food-ordering and other services. Instead, Tapzo provided access to all these services within a single app. The value proposition was that users could save space on their phones. In addition, they would be able to compare services to choose the cheapest/best offering at any point in time.

Ankur Singla, the company’s CEO and founder, had claimed in November 2016 that “close to 140,000 users use our app daily and we do close to 55,000 transactions a day with an annual run rate (ARR) of Rs 210 crore (~$30 million) in GMV/bookings. And we plan on growing 2X in the next six months.” The company also claimed to have more than five million app downloads—a metric that was touted in the farewell email as well. Singla had also stated that Tapzo was going to break-even in March 2018.

Vanity metrics

Even in its email announcing the imminent shutdown, Tapzo bragged about having 5 million PlayStore downloads and a 4.5 rating. These don’t see to have counted for much.

And yet, here we are today with the platform shutting down. For a company that claims millions of downloads, the announcement of the service shutdown met with sepulchral silence on social media—there was hardly any reaction from its ostensible user base; no one expressed love or regret that Tapzo was shutting down. No one seemed to care. A telling sign that vanity metrics such as downloads and user reviews are not necessarily indicative of a loyal customer base, much less of having achieved product-market-fit of any kind.

As we have pointed out before, the basic flaw in Tapzo’s value proposition was that in trying to become all things to all people, it ran the risk of not representing anything to anyone. An all-in-one kind of super app might seem like a seductive value proposition, most of all to VCs with Chinese Renminbi signs in their eyes. But for such an offering to gain traction it needs to have two aspects nailed down. First, there needs to be a strong core use case that can serve as an anchor for other services, and secondly, the portfolio of offerings should have some adjacencies so that one service seamlessly blends into the other as an in-line user experience.

Tapzo had neither. There was no clearly articulated core use case. Instead, the company depended on discounts to paper over this gap. Additionally, the set of bundled services was a thin WebView layer on top of the browser versions of the original apps. This design allowed for a smaller mobile footprint, but at the cost of being able to offer a deep, immersive user experience across individual apps.

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 have at that point in time.

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 for 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 funnelled 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.  

In trying to become all things to all people, it ran the risk of not representing anything to anyone.

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.

So, what happens to Tapzo now? RIP?

Breaking bad

In what represents a belated admission of the lost Akosha opportunity, the company is being divided into two entities. In addition to the original firm Coraza Technologies, a new corporate entity called ODCEM Technologies has been incorporated. The Tapzo part of the business, for what it’s worth, will remain with Coraza. The B2B helpdesk segment, however, will be housed with ODCEM. While all existing shareholders have been issued equity in ODCEM to match their original holdings in Coraza, the fact that there is no consumer-facing part for registering grievances makes the company far less potent than what it could have been. According to sources, the B2B segment is close to reaching an ARR (annual revenue runrate) of $2 million.

As for Coraza, while certain sections of the press have already gone to town proclaiming that it has been acquired by Amazon for a sum of $40-45 million and will be part of Amazon’s payments play, this is not quite the case. According to sources, this deal represents an acquihire at best, with Singla and part of the team moving to Amazon while the Tapzo service itself will be shut down. No technology or data will change hands. Contrary to the claims made so far, the acquisition figure is far lower than $40 million, and a major part of it is in the form of future payouts for the team.

Interestingly, Sequoia Capital, Tapzo’s largest investor, has also been reaching out to SaaS companies, exploring the possibility of selling ODCEM. Clearly, the VC firm has no intention of looking at this arrangement as a fresh start and is looking for a complete exit. It is just a matter of time for a deal of some sort to come through. Singla was the one who incorporated ODCEM, but he resigned from the Board of Directors in August.

Tapzo’s story is over. ODCEM’s is likely to end soon.

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