Manish Rathi | Crain's Philadelphia

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Manish Rathi

Background:  

JoyRun is a food delivery app that lets users see if someone is already picking up food at a restaurant they're interested in and add on an order. The person making the delivery gets compensated if they choose to accept it. The app recently launched nationwide on all college campuses.

The Mistake

My last business was a tech-based consumer business called Retrevo. And when you build that kind of consumer business your initial thinking is that you have to be for everyone and everything. But if you try to build for everybody you end up building a baseline product that's nothing for anybody in particular.

For us it was a shopping destination for gadgets, and we were doing phenomenal in terms of getting user acquisition, but we couldn't figure out which of those users would come back. It was all web traffic, lots of search engine optimization Google traffic coming in, and we were like, “Wow, this is growing every day."

It seemed great, but there was no connection to the engagement of that user over time. You kind of plateau out when you approach a business like that. So then we stepped back and said, “OK, well what do you have to do from that?” We mapped out the use-case that worked for us. It turned out it was how to make the right recommendations on how much they should pay for cameras and TVs and all that. For us it was the post-purchase market and recommendations.

During the financial turmoil of 2008 we had to shrink our team. We were venture funded and suddenly the funds had to last a lot longer as revenue from ad sales started to go down significantly. So we stepped back and said, “Wait a minute, this is not just about page views and ad revenue. What are we going to do to make this a better business?” So it was market forces that forced us to build a sustainable business.

We hunkered down. The hardest part about shrinking the team is when you know there are capable people on the team and the reason that you are shrinking the team is not because of performance but because the market dynamics changed. The financial crisis was a hard one to predict, but that's something I take to heart—can I look forward enough to see the team that I'm growing, I can support them? That means being honest about one's business and having a clear sense of the value chain.

We found that we were doing something unique that differentiated us within the industry. So the initial mistake was to focus too much on the page views and user growth. Then we learned about really, how do you keep customer retention going?

Have a very maniacal focus on who your customer is and why they should care.

The Lesson:

You have to know what's unique about your business. Have a very maniacal focus on who your customer is and why they should care. It's easy to think in a consumer business that everyone is your customer, but focus on where is a value add.

You also need a solid understanding of the value chain in which you play. Understand how the dollars move so that you know where the available dollars are when you're trying to build a business.

Most startups bring founders from one or the other background—they are very tech focused or very sales focused. Don't forget the market focus. What more people need to do is to step back and say, “This is my core competency,” but then tie it into the market. In tech that's typically something you don't start with, it's something you learn.

Follow JoyRun on Twitter at @joyrunapp.

Photo courtesy of Manish Rathi.