How Unicorns can get it right in 2020s

A widely quoted McKinsey study in 2007 said India will go on to have a 583-million-strong middle class. It also said that the spending power, adjusted to rupee dollar parity, will be similar to the middle class in any developed country.
Pitch decks thus loaded brought a lot of money into consumer businesses in India, to replicate online consumer models successful in US and China, starting with Lee Fixel’s investment in Flipkart in 2010. Since then, venture capitalists have grudgingly accepted that the middle is actually the upper class, and we need new solutions for the mass middle.
Why did the IT-BPO boom not result in a huge ‘real middle class’?
The poor love their English medium education, with 52 million students in just Catholic educational institutions. So, while we have a huge pool to take up low-level white collar jobs, we might have seen the last generation of domestic workers. Fascinating market forces have ensured that Big IT entry-level salaries have gone up barely 2 times in the last 20 years, while those of drivers or delivery boys are up 6 times to Rs 20,000 per month.
In 2010, one of the first food tech companies estimated delivery boy salary at Rs 6,000 per month and forecast it to increase in line with inflation. It is ironical that this gross underestimation of income increase has actually not worked in favour of startups. We have one parity with developed countries: blue collar jobs in cities are paying more than entry level white collar jobs.
This workforce will take very long to move up in living standards. The three systemic taxes on these young people are high education fees, high interest rates and usurious real estate. It will be a while before this segment stops voting for low onion prices. The one tax that does not matter for them is income tax. Supply side interventions like income share agreements will lead to education overhaul and re-skill the workforce, and hopefully, help incomes to rise.
In the United States, first there was the middle class, then the brands came, and then internet and e-commerce happened, each taking a few decades. In India, investors invested in an e-commerce land grab frenzy first, in anticipation of the middle class and the internet, and now startups are building for the middle class that formed differently. Aping the US in aggregation of existing brands hasn’t worked for malls either. India has barely 40 thriving malls today, with most cities having only one or two thriving.
Maids will become unaffordable and food is a great opportunity, but the delivery boy earns more than the white-collar worker the food apps target. Stop the subsidies and the business shifts to the local eatery.
A decade of ‘market creation’ by consumer startups hasn’t been enough; growth has plateaued, but discounts continue. These companies rode a tiger as investors sought growth at any cost, but now investors are prioritising unit economics in a post-WeWork world. VCs in India will now have to match the global mood to local reality.
Lenskart will certainly outlast its demand aggregation peers, while players in lingerie and furniture that targeted the top are lagging. Oyo started as an Airbnb clone but shifted to a full-stack approach that involved creating supply. It's valued higher than MakeMyTrip, the largest aggregator.
Will student housing and co-living and co-working spaces create larger market caps than online brokerages? Will full stack financial services businesses create more value than aggregators? Are there consumer businesses beyond ‘Software eating the world’, because ‘real world’ has low margins. 
Companies like Byju's, Dream 11 and others have shown that there are large markets for high gross margin businesses in India in the virtual world.
The unicorns of the next decade will look beyond land grab and create their own fertile lands.

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