Why OLX’s Investment in FCG Spells Trouble for PakWheels

Olx group is investing $89M in Frontier Car Group (FCG), the parent company behind CarFirst. From TechJuice:

OLX Group announced $89 million global investment in the series C funding round of online car marketplace, Frontier Car Group, the parent company of CarFirst. Headquartered in Berlin, the startup is currently operating in six countries.

A joint press conference took place yesterday where OLX announced this investment in the parent company of Pakistan’s first online used car selling platform — CarFirst. This record investment aims to deliver the most comprehensive experience to auto buyers and sellers in the country.

FCG has operations in at least five other markets so not all of the money is going into CarFirst—a significant portion will though. But before we discuss CarFirst I would like to mention how smart this move from OLX is. Facebook and Google are accumulating most of the online ad revenues leaving very little on the edges. Although you can still run a decent business purely on ads, opportunities for long-term growth are always going to be limited. As soon as you start to get meatier you are going to hit the gravity center. And that means colliding with either Facebook or Google.

The antidote is to stay away from the gravity centre as much as possible. And that often means building a differentiated product. Or in this particular case investing in one. The investment makes more sense if you consider the fact that OLX was already in ad business. Which means 1) they were not in the best position to build a vertical integrated product themselves and 2) a company like CarFirst can benefit a lot from their audience. More exciting part of the news, however, is what CarFirst is trying to build. I wrote about the company in passing, when it launched while writing about PakWheels last year. From the article:

Kudos for trying something different but there are more questions than answers here. First, it’s not clear who the strategic partners are and how they are incentivized to stay with CarFirst. Second, this requires a lot of capital and even if you have enough to start things off it’s questionable how long you can sustain it. Cars are expensive. Also, I don’t understand why you want to limit yourself to your partners when you have already done the heavy lifting i.e. buying the car outright. And perhaps most importantly I am yet to understand the business model.

I am less skeptical now than I was a year ago. For one those $89M solve the second problem I sighted. Second, they have matured in their positioning and are not relying on their “strategic partners” narrative as much. That’s probably because they are more sure about what they are doing now than they were a year ago. The business model question is also clear to me now. Although there is no information on their website on what they do with the cars they buy. But it’s clear that provided the operational scale, which seems like they have or going to have sooner, they can buy a used car, fix/renovate it and sell it at a higher price.

It’s an audacious business model with a very high-risk profile. But the upside is equally big. I concluded my article on PakWheels:

So how you compete with PakWheels? You don’t. I mean you can but you will fail if you start from the obvious i.e. a car listing website. You can however if you start with things that are not obvious. Like studying a typical PakWheels’ user. Finding the pain points they have? And figuring out a couple of problems they face while using PakWheels. Every horizontal business model creates an opportunity for a vertical one and vice versa. The way to compete with PakWheels is thus by targeting a niche and owning that particular mindset. Not by creating another listing website.

Two types of people visit PakWheels. People who need to buy a car and people who need to sell one. The vulnerable of the two is the seller. Any buyer has a lot of options to chose from. The seller, however, is stuck with whatever she has. It was always going to be hard for CarFirst to convince buyers to go through them. Because, well why should they? They have lots of other options to shop around. Money is liquid in a way that a car is not. It’s only right that CarFirst is targeting the seller. And provided you create enough happy seller stories, buyers are going to flock in too. At some point in time shopping gets exhaustive.

The very idea behind PakWheels’ existence is predicated on the fragmentation of the market. There was no reliable way to sell your used car online. While PakWheels connects buyers with sellers, the business model relies on for both parties to keep looking. And not necessarily on getting a car sold. Or finding the perfect car. PakWheels was easing out your search. CarFirst is solving your entire problem. The latter is always more lucrative provided you get it right.

Fabricare is not Uber for Laundry, and that’s a good thing

From Pro Pakistani:

FabriCare, an app which aims to revolutionize the laundry industry to make it more convenient, affordable and efficient, has raised $100,000 in a seed investment round against a 16% equity stake.

The investment was shared among all three judges of the show, Idea Croron Ka.

Their pitch from the show suggests that they are Uber for laundry. I don’t think they are. Describing a typical lifecycle of their customer Fahad, the CEO, said (paraphrased): when a customer needs laundry she can request it via their app. Someone from Fabricare picks up the clothes, gets them cleaned and ironed and returns them back within 24 hours. This is not an Uber model. Uber does not cover the last mile itself. They let the drivers do that. For Fabricare to be Uber for laundry, the laundrymen, which Fahad referred to as partners, will have to pick the laundry themselves.

While this might seem trivial, it’s an important difference.

Uber, or any company calling themselves Uber for X, is a two-sided marketplace. They connect drivers with riders. They own the customer relationship but not necessarily the parties involved on either side of the relationship. They let the market forces i.e. their rating system govern the business. As an extension, their business model is to take a cut on the transaction. The major chunk of the transaction still goes to the driver. Fabricare, on the other hand, is owning the supply side. They are not exposing their “partners” to the customers. Which means they are a service provider and not necessarily a two-sided marketplace.

Both, providing a service and being a two-sided marketplace, have pluses and minuses. But you have to know where you are to exploit the inherent advantages. As an example, both Uber and Lyft have been trying to make subscription model work. The problem is subscription means a guaranteed availability of the service, something that requires a one-one relationship between the customer and service provider. A two-sided marketplace like Uber thrives on breaking that relationship let alone enabling it. A customer using Uber does not have a one-one relationship with one particular driver.

If I call Uber, drop it and then immediately call again the chances are I am going to get two different drivers. While that’s fine when I am traveling on my own schedule. It’s not ideal for my bound needs e.g. school pick and drop for my kid. For one, I, as a customer, would be freaking out on the prospect of having to deal with a new driver on daily basis. Second, the incentives don’t match up for the individual driver. Why would she go to pick a customer who has already paid a fixed amount of the trip, the incurring cost of which is unknown? This is especially true in peak hours. The same peak hours when the guaranteed service inherited in the subscription model is required the most.

On the other hand, a rental car service provider, by virtue of owning the supply side, can offer a subscription service with ease. They can easily allocate a driver to pick and drop someone from location A to B on daily basis. The customer would be happy too because she knows what to expect? Fabricare is more of a rental car service than Uber. While that’s not sexy it’s by no means any less of a business model. Maybe they can just call themselves Stripe for laundry or something.

Joke aside, it’s important to understand these intricate details of your business. The number one problem with laundry is that it requires a certain level of trust and care. You want your clothes to be treated in a certain way. And you don’t want to tell this to every new person that comes at your door. Second, laundry is a recurring predictable task. The Job-to-be-Done here is less about the task itself but rather in the satisfaction that it will be taken care of. Both are perfectly suited for a subscription service. Fabricare is getting the first part right. But conflating themselves with Uber is resulting in them having a blind spot about the second. And that’s limiting their actual potential.

Demystifying Growth

I didn’t have much to talk about this week. Or the last week. Which is a nice little excuse, to write about a topic that’s at best fascinating and at worst scary.

I came across this tweet storm from Andrew Chen this week. It encapsulates everything that’s wrong about growth hacking. Or the perceived notion of it.

Do read the thread. In short SEO, Newsletters, Facebook Ads etc are not growth hacking. They are well known and established online marketing channels. Growth Hacking is exactly opposite to what’s already established.

The promise of growth hacking is that you figure out a way to grow your business from an unexpected place. It’s about cracking a new distribution channel. The whole idea is predicated on novelty. If you already know something it’s probably not growth hacking. Some examples of growth hacking include Instagram using Facebook sign in, Airbnb hacking Craigslist API to put their home listings and Trump using blunt tweets to become free world’s most powerful man. The last one is a jab but not totally. It’s a still a hack. A hack no one saw coming.

The whole process is also product dependent. Twitter or Google sign-in was probably not a good fit for Instagram. Facebook might not have been the perfect platform to think of if you want to organically find people looking to rent an apartment. And Trump posting nasty images on Instagram were less likely to work. Sure Instagram might have used Twitter for something later on. Airbnb definitely uses Facebook Ads. And Trump might have an Instagram account. But that’s not how they hacked their growth. If it has already been worked out it’s no longer a hack. What Sean Ellis and Andrew Chen prophesied was a mindset. And not a proven set of tips and tricks.

I am not saying you should not look what has already been done. Just don’t try to copy it. For the most part, it won’t work. And that’s where most of the frustrations with online marketing aka content marketing are coming from.

Growth > Growth Hacking

Good news is growth hacking is not the only way. Actually, it’s not even a good long-term strategy. It’s a great way to gain initial traction. But that traction needs to be captured and sustained. And then built upon. For that, you need to focus on growth and not necessarily growth hacking. And growth, as Andrew Chen argues in the tweet storm, is more of a system then a hack. It involves teams from every part of the company rather than a couple of growth hackers sitting in a corner. And thinking of next magic trick.

In simple terms, growth means increasing your customers or revenue per customer. But it’s not so easy. Especially for startups who are in “growth” phase and not necessarily making any money. What that often means is that they are increasing the pool of potential customers before experimenting with any monetization strategy. This is especially true for advertising businesses. Advertising works best at scale, hence the Google/Facebook duopoly. Things are a bit simpler when you have customers paying you directly. In that case, it’s mostly about how many customers you have multiplied by the lifetime value of your average customer.

Growth used to be a product distribution challenge. More efficient your distribution the more opportunities for growth you had. For most online businesses, though, product distribution is a solved problem. By virtue of being on the Internet, you are everywhere. This does not make any easy to grow your business. The leverage you have because of the Internet is also available to your competitors. Hence the most challenging aspect of an online business is not to start one but growing one. This is after once 1) you have something valuable to offer and 2) you know there is a market for what you are offering.

There is a quote in traditional marketing i.e. half of your marketing efforts always fail. The problem is to figure out which half. Radio, newspapers, and TV offered no quantifiable ways to judge your marketing efforts. Most of your work was to be effective at guessing. Things are slightly different on the Internet. You can have a better idea of what’s not working. The problem however remains is to figure out why they are not working. Was it the wrong platform? Wrong target audience? Or is it something wrong with the product itself. This last one is a particularly brutal discovery to come to. It takes you back to the drawing board and is normally a reset button.

You can’t separate growth from your product. It has to be a part of the product development process. Focusing on the design and engineering is easy in the sense that things are in your control albeit hardware products. But unless market analysis and how your product will reach the people its supposed to reach is not part of the discussion, you are not exactly building a product. The good news is marketing online is not a Wild West as it once was. This essay from Andrew Chen will give you a useful framework to wrap your head around it.

Walmart-Flipkart revisited, Alibaba buys Daraz

Walmart-Flipkart revisited

Ben Thompson while writing about Walmart-Flipkart deal (paywall):

The problem with Walmart investing, though, is that I struggle to see what exactly the company can add: there was basically zero discussion of how Walmart will make it more likely Flipkart will succeed in its battle with Amazon. Walmart’s executives tried to argue that the benefit would go the other way — Walmart would learn from Flipkart — but wasn’t that the point of acquiring Jet.com?

This is what happens when your writing is focused on nuanced markets like India and Pakistan. The deal is a great news for Indian tech ecosystem in general and Flipkart’s team in particular. So I got caught in the moment which resulted in my analysis containing a massive oversight. Ben’s piece made me realize what I missed. And I think he is right. The deal is problematic in the sense that there is nothing about Walmart, and its massive retail chest, that can help Flipkart in the long run.

Indian government does not allow companies with major foreign company shares to open multi-branded retail stores in the country. Though you can open single branded e.g. Ikea. And the rumored Apple’s. Both Amazon (because of its US origin) and Flipkart (because of major outside shareholders) can’t open retail stories. They get around to that problem by investing in their suppliers and by opening companies under different corporate structures. But Indian government recently cracked down on it and no individual supplier can fulfill more than 25% of orders from the website. Which means both Amazon and Flipkart are and will remain, pure Internet companies with no physical foothold. And that’s something Walmart is yet to figure out for itself let alone helping someone else.

As for as offline retail goes, Walmart can’t open a retail store in India because of same regulation that prevents Amazon and Flipkart. And they won’t be able to serve more than 25% of Flipkart orders because of the aforementioned crackdown. Which makes their wholesale operations of little to no value for Flipkart. One gets the feeling that an investment from a local company might have served Flipkart better. At least that would have allowed Flipkart to open retail stores. And offline retail is where the meat of Indian commerce is right now. To conclude the deal does not harm Amazon as much as you might think. The lever to Amazon’s success is Amazon Prime. And that remains the same regardless of the operating country.

The deal is especially problematic for Walmart. Ben Thompson concludes his update:

Indeed, as far as I can tell, the only potential benefit to Walmart and its investors is that Walmart’s backing potentially makes Amazon’s fight for India more expensive. Even that, though, is likely to prove to Amazon’s benefit in the long run: Jeff Bezos’ company will almost certainly have a longer leash with investors than will Walmart; if the company wants to truly concern itself with Amazon the money would have been far better spent at home.

Despite the longterm threat Amazon poses for Walmart. As of now it only has a single digit market share of US retail (offline + online combined).

Alibaba Acquires Daraz

From Pro Pakistani:

Daraz Group, a leading e-commerce company in Pakistan, Bangladesh, Sri Lanka, Myanmar and Nepal today announced that the company was fully acquired by Alibaba to become a member of Alibaba Group.

With the acquisition, Daraz will be able to leverage Alibaba’s leadership and experience in technology, online commerce, mobile payment and logistics to drive further growth in the five South Asian markets that have a combined population of over 460 million, 60% of which are under the age of 35.

I pretty much stand by my analysis from last month. Except the fact that I now think Alibaba is not rushing into this. They are probably going to take some time before dipping their toes fully. By that, I mean integrating an online payment to the tunes of AliPay. Their major stakes in Tameer Bank, the bank behind Easypaisa, are going to be handy. I can’t wait for Telenor to start touting about it as their innovative new product for Alibaba.

#PITBLeaks and Our Tech Oblivion

Both TechJuice and Pro Pakistani reported a PITB data breach. I urge you to read both stories especially the one on TechJuice. It’s comprehensive and very well written. And pretty damning too. There is a lot to unpack. I will do it quote by quote. From TechJuice:

Sensitive information of millions of Pakistani citizens may have been compromised in what can be dubbed as the biggest data breach of Pakistan.

In August last year, ProPakistani reported that Punjab Information Technology Board (PITB) has exposed sensitive data of thousands of individuals that comprised of CNICs and scanned copies of personal documents. According to PITB, a bug that attributed to this exposition was taken care of, however, no comments were made on the possession of leaked data.

Nine months later, PITB is yet again in deep waters after it was revealed that sensitive information acquired through various PITB portals is now being sold publicly. This information comprises of personal and family data held by NADRA, criminal records tracked by the Police and call data recorded by telecom companies.

First, a little context. I sometimes feel everything that happens in Silicon Valley starts to happen elsewhere as well. It probably has to do with the similarities between how software systems are built and, pertinently here, potential security loopholes inside them. But past couple of years have been tough for companies operating on massive amounts of data. Even Silicon Valley (the show) threw a jab on them in its latest episode. So it’s natural that data breaches and misconducts have started to happen elsewhere as well.

How did this happen?

From TechJuice again:

The breach traces back to when PITB gained access to NADRA’s server after it was allowed to digitize the data of citizens by linking CNIC numbers to various public departments. This data could only be accessed through authorized users, however, it is now being alleged that these officials shared their credentials which were used for extraction and trading of sensitive information of Pakistani citizens.

More specifically it was AgriLoan, an application built by PITB, that’s to blame. From the article again:

PITB has developed various portals for digitizing diverse sectors. One such portal is AgriLoan that was developed to boost the agriculture sector of Pakistan. The portal service provides loans to small farmers through a convenient process in which all of the data is automated and can be accessed easily just by entering the CNIC of a registered farmer. PITB’s website states that all “stakeholders can access the database of over 350,000 registered farmers”. However, with reports of the recent data breach, it is evident that various unauthorized personnel also gained access to this database.

Upon research, TechJuice discovered that login credentials for Lahore and Sargodha districts were publicly shared for free. The username and password for the authorized access also appeared to be identical, indicating a huge security lapse. They also posted a step by step guide to help other users extract information from the portal.

The AgriLoan login panel was accessible till yesterday, however, the link is not working today. A tutorial on YouTube also explains how to extract CNIC data from the AgriLoan portal. The tutorial uses the same credentials for the Lahore district as revealed by the Facebook user above.

Leave the above Silicon Valley context aside. Because this is not a breach or an attack. It’s gross incompetence. Perhaps the most sensitive information in the country is protected by “lahore_district” and “lahore_district” username/password. NADRA pinned the blame on PITB. Because why not. And oh, they did one more thing. They gave PITB a timeline to fix this. Yes, a timeline. They didn’t revoke the access immediately. They gave a timeline.

Response from PITB

Perhaps the most perplexing thing, at least to me, in all this was the response from PITB. To be specific from Umar Saif. First, he told Pro Pakistani (via TechJuice):

The same media outlet also reached out to Dr. Umar Saif, who said that they are actively revoking the access of their portals and applications, while also launching inquiries and action against alleged personnel. He said that all instances have been resolved and they are actively blocking any breach of authorization. However, he did not comment on the absence of security protocols that were not deployed by PITB in the apps and portals under question.

Seems like a statement that I would expect from him. Fixing what he realized is broken and silent about things he is not completely sure of. You can’t blame him if someone from his large team chooses a stupid username/password like that. So what you do? You don’t say anything but you understand what you need to do. It’s not my fault but I share the responsibility. All good. But then he started tweeting. First these two:

For one these are not the statements of a person who knows what he is doing. And second, when you are being accused of something you don’t respond with a threat. At least not until you have clarified what has happened (from what’s on TechJuice you can’t assume nothing has happened), how are you planning to deal with it and finally distinguish the smoke from the fire. And let the public be the judge of the whole situation.

He ended with this.

Much calmer, but it’s still a statement of denial. Let’s assume it was just smoke. Wouldn’t be wise to address the smoke rather than denying it? But there is no explanation which creates more room for “fake news”. Instead, the message is toned towards media reporters. Which the man of his stature should not be worrying about. Especially when nothing has happened—according to him. But I might just happen to have an explanation for this.

Tech Oblivion

Years ago I wrote a critical piece on a startup at an early growth stage. The founder, who is now an acquittance, sent me an angry email. Not because what I said was wrong (in hindsight the article was a bit off). But questioning my right to say it. In his mind, he was changing Pakistan. And my article hurt his and company’s reputation. In my mind, I was trying to do my job and possibly helping him. It just happened that I disagreed on some of the product decisions he was making. And wrote about them on a publication meant for such articles. You would think we have come a long way.

Unfortunately, the situation hasn’t changed much. Most founders still focus too much on themselves. And not so much on the product, the business model or the customer experience. The people in the ecosystem are not helping because they are treating the founders like angels. You are not supposed to speak against them. Yes, what they are doing probably does not make sense, and sometimes even gross, but it’s alright because they are being bold. And courageous, something news reporters and writers are not—for some reason.

It’s a mentality that has taken us nowhere. And we are still wondering if there ever going to be a unicorn? And will we ever be able to break through? On the same grounds digitizing government is a great step forward. But it’s just that. A great step forward. Or maybe a GREAT step forward. But it’s not noble in entirety. There are always going to be consequences. Naturally, some of them are going to be bad. And it’s under-appreciation of those that lead to tweets like these. Yes, I am more concerned about the tweets than the data breach. Because I am certain Umar Saif and his team can, if not already, fix the latter.

Wallmart to Buy Flipkart, Ola Invests in Vogo

Wallmart to Buy Flipkart

Wallmart is in talks to be the largest shareholder in Flipkart. From ET Tech:

The world’s biggest retailer is nearing a deal to buy a majority stake in India’s top online retailer for at least $12 billion, people familiar with the matter said. Flipkart’s major investors, including SoftBank Group, are on board with Walmart purchasing as much as 80% of the company, the people said, and they may complete the agreement in the coming weeks.

Wallmart is increasingly losing feet because of its customers gravitating towards eCommerce. In the US the biggest threat is of course Amazon. Especially after the latter’s purchase of Whole Foods last year. The purchase allowed Amazon to solve one problem it hasn’t been able to till then i.e. groceries. Because of limited shelf life, most grocery items run the risk of being rotten if they come from far parts of the country. So a traditional local storage and delivery model is a must-have. The very nature of groceries made it a hard problem for Amazon who thrives on centralized storage and operational excellence. With Whole Foods now part of America’s most admired company the need for Wallmart to address the Internet in general and Amazon, in particular, is not just necessary. It’s a matter for survival.

One way to do that is to look outside the US. The US is a stronghold for Amazon. The only two economies that can match the US in terms of spending are China and India. Because of their massive population sizes, they are an eye candy for every eCommerce player. Wallmart’s online foray into China has the same US problem named Alibaba. The online retailer sells anything and everything. And has massive distribution network apart from the formidable online presence. Wallmart entered by buying a couple of younger players. While the efforts have resulted in Wallmart gaining higher single-digit market share, it’s definitely not what they hope it could be. As such India represents a massive opportunity for Wallmart. Here the largest online retailer is not a conglomerate but rather a rookie upstart named Flipkart.

I wrote about Flipkart and India’s local eCommerce players last year:

I am clubbing them together because they are competing in same eCommerce space. Flipkart is the poster child of India’s tech ecosystem. Founded by two brothers in 2007, it’s the highest valued startup in the country. And the idea is clearly inspired by Amazon. Actually, the founders worked there before coming back to find their own. They are the largest player in the category with every third Internet user in India being a user of either their website or app. Earlier this year eBay invested in Flipkart and as part of the deal, Flipkart now owns eBay India too (though the later operates separately).

Together, as of now, Flipkart, Snapdeal, and Amazon own 75% of the market share. But it’s Snapdeal that seems in hot waters moving forward. From Tech in Asia:

Amazon’s commitment of US$5 billion to the relatively open Indian market, after finding the going tough in China, transformed the market dynamics. Flipkart and Snapdeal, which were in a race to grab market share with discounts, suddenly had the rug pulled from under their feet.

Amazon could offer better prices as well as selection and back it up with world-class services like Amazon Prime Video. The biggest loser was Snapdeal, which saw its market share dwindle. Flipkart managed to stay the course and inspired sufficient confidence for Tencent, eBay, and Microsoft to infuse it with fresh funds.

This leaves three big players in the market – Paytm ecommerce backed by the cash-rich Alibaba, the rejuvenated Flipkart, which could achieve a bigger market share through the acquisition of a marked-down Snapdeal, and Amazon.

Personally, I believe the news is troublesome for Flipkart too. Recent rejuvenation aside it’s dangerous to play in the same field as Amazon and Alibaba. Both can go on and on without making a dime. The longer it goes more trouble it spells for Flipkart.

Sorry for the long excerpt. But it nails down what brings Flipkart to the table. The deal presents a rather unique opportunity for both companies. For Flipkart, it solves the spending problem. They can compete with Amazon head-on using the money from Wallmart. And that is no less than $12B. And for Wallmart, it’s an opportunity to be the market leader ahead of Amazon, for once.

Ola Invests as Lead in Vogo

From ET Tech:

Vogo, a three-year-old startup, operates a scooter-sharing network which allows users to pick up the vehicle from designated pickup points throughout the city and drop them at any other designated point at the end of the ride.

Vogo’s funding comes as another startup, Metrobikes, is in advanced talks to raise $10 million from top-tier venture capital firms Accel and Sequoia, as ET reported in February.

“Ola’s investment in Vogo is important. India has the largest two-wheeler market in the world. It does make sense for the company to ensure they can capture that market in the long run,” said an analyst, speaking anonymously to ET.

It makes sense for Ola too. It’s perfectly in line with what I said when Ola acquired Ridlr. Acquire as much as transportation lifecycle of rather heterogeneous Indian consumer as possible. To curry up Softbank for an Uber exit.

Patari’s Inflection Point

Khalid Bajwa was involved in sexual harassment cases brought public by a couple of women via Twitter last week. I wrote how I felt personally about the issue on Thursday. A few of you replied back and suggested that his actions are best classified as flirting. And not necessarily harassing. And that WhatsApp screenshots, which can be cropped to make your case better, does not prove anything. While that’s definitely true. I don’t think what he was trying to do was flirting. Flirting does not make the other person uncomfortable even if he/she started it. Clearly, that wasn’t the case here. Women involved were uncomfortable. They were trying to avoid the discussion Bajwa was forcing them into.

I didn’t say anything about what this means for Patari. For one I was already done writing for the week. And I was late so didn’t want to delay any further. Plus, the news was fresh. I normally take some time to form my opinions. And perhaps most importantly I was angry. Not a good emotion to have when you are trying to write something. Patari is probably the best thing to come out of Pakistan’s tech ecosystem in recent years. They built a great product and there is a vibe to its existence that made me optimistic about its long-term future. And no matter what you think of Bajwa after these cases, whatever Patari is today, it’s a representation of him in many ways. That’s not to defend him. Rather point out how insincere and dreadful his actions were.

When you had created something so amazing, you owe a certain responsibility to it. A responsibility not to mess it up unintentionally. And Bajwa showed utter carelessness to the trust that people bestowed upon him by helping Patari become what it is today. That includes Patari’s user base, artists and most importantly people working inside the company. I wrote in Patari’s bull case why I am optimistic about company’s long-term future:

Last week’s update made me think about Patari’s long-term future. I was bullish on their success last year when I wrote Tabeer, Fanoos and Patari’s Opportunity. But after understanding the challenges they are up against I started to question my assumptions. If record labels are so well positioned than how they are going to make it? I think I will stick to my guns for now. I believe Patari can change the incentives game around. There are a few things, albeit abstract, that are in their favor especially on a 2-3 year time horizon:

1. They have solid traction and are connected to their community (artists + listeners) in a way that most startups from our country are not.

2. They don’t have serious competition in sight. I don’t know of any music streaming service that is challenging them in a meaningful way. Though there are no substantial early mover advantages in music streaming business. The window they have right now is nothing but gold to build a great customer experience and create some kind of lock-in.

3. If anything Internet is going to be more pervasive in coming years. And Patari is all record labels have to reach this new target audience. A scary proposition for any content producer. Despite the incentives being hugely in their favor right now, record labels are too dumb to understand this. And too lazy to build or help build an alternate.

What Patari has is nothing substantial as of now. At least not in financial terms. What it had was the trust. A belief that it’s doing something amazing. And in the process is helping revive the music industry of Pakistan. Nothing hurt that trust more than reports from last week. You lost your community’s sentiments. And in a way that’s all you had. With that said I don’t think all is lost. Kudos to the board and rest of the team for stepping in quickly. As you probably know Bajwa is out. And Ahmed Naqvi is now the interim CEO. They did the right thing. But a lot more needs to be done. Those twitter jokes will be weird for now. And it will be a hard time for the team to change and instill new spirit into the company’s culture.

But it might just be what the young startup needs right now.