Earlier this month, a much-hyped San Francisco startup, Juicero, announced that it will suspend sales and offer refunds to customers who had already bought their products. In other words, they were shutting shop. Juicero had the classic Gillette razor and shaving blades business model. You buy a Juicero machine for some $500. Then you pay around five to seven dollars for juice packets, each of which gives you a glass of vegetable or fruit juice when squeezed by the five-hundred-dollar machine.
It is a logically and economically sound business model, but there was a catch. Why would anyone want to pay so much money for a glass of juice? So, Juicero did two things. One, it added a bunch of features to their juicer machine to justify the cost — connected to the cloud, keeping track of your usage, and so on. They also made it seem that the only way to get juice out of the Juicero packets was to use this expensive machine. Two, they used the oldest marketing trick in the book — made it sound cool, fashionable, and something that no in-the-know hipster could avoid owning. Juicero packets always came in the most fashionable flavours.
Investors bought into this. Big time. They had over $120 million in funding. Lots of people bought in too, but not enough eventually.
Especially after it became obvious that you did not even need the Juicero machine to squeeze juice out of their packets, and you could do it just as well with your bare hands. And this startup, whose entire premise was to make money out of people by exploiting their gullibility or naivete, flourished for nearly three years.
All this is perfectly legal, of course. Just wrong. Juicero is not the first startup to have done something like this. And nor is this phenomenon restricted to USA. If anything, this is a bigger problem in India. We are a country where sustained marketing over the years has seen branding become very successful in what are essentially commodities. Salt, sugar, rice, atta. This is true of the sector my startup operates in too — many brands of cement and steel claim a premium price just because they are better-known brands, and there is a greater demand for them despite being essentially the same composition as a lesser-known brand. We are also a country, where with the appeal to the right authority, mortal or spiritual, people can command the resources — time and money — of millions. This is the reason why some of India’s most successful entrepreneurs are also godmen. Or celebrities.
Given these two factors, India has had its share of ethically disingenuous startups too. The most egregious example was during the previous startup boom that happened at the turn of the century. HomeTrade.com had outlandish marketing, clogging up airwaves during every cricket match, with the likes of Sachin Tendulkar, Hrithik Roshan, and Shah Rukh Khan mouthing their ‘Life Means More’ tagline again and again. No one was quite sure what their product or service was, but it was clear to everyone who saw the ad, they were something new and revolutionary in the world of financial services. In the end, it turned out that they were just a take-the-money-and-run scam. Our own Juicero moment way back in 2002 itself.
There will be more HomeTrade.coms, there will be more Juiceros. All the startup ecosystem can do is try and bubble them up for what they are, before they do too much damage.
In this weekly column, we discuss the startup workplace. Thejaswi Udupa heads product and technology for an online building materials marketplace