Business of HOPE
I am Aarihant Aaryan! Welcome to the Iron sharpen Iron newsletter,
Every week I share my homework from my startup journey, learning about human behavior, and sometimes decoding industries and business models for fun.
I can’t control my curiosity :) )
Ps: We crossed 1,000 subscribers for the newsletter last week, It’s been a great journey so far - Absolutely grateful that Y’all trusted me to learn something new every week.
I always believe in India using tech you can build businesses and make money only in these sectors:
Adtech
Fintech
Saas (you should know how to make it work)
Hopium (Hope)
Hope is a wonderful subject, you will not have the right perspective about it unless you understand human behaviour absolutely well.
Most of the times, People hope for 3 things in life: Money, social status and mating success. These are also the core motivations of humans.
Eternal Optimism drives Hopium:
Irrespective of the situation of a person, they always expect good and glorious things to happen -they keep dreaming
Fun exercise: Ask few people what will they be doing 5 years later, most of thm will state things that are 5 times above them
Example of Businesses based on Hope:
Dream11:
In FY 21 Dream 11 revenue was 2,544 crore and its profits rose to 327 crores.
Dream 11 has 12 crore users on its platform and close to 5M daily active users on its platform. 12 crore users are close to 20% of the active internet population in India.
Fun fact: Dream 11 isn't listed on the play store, people download it from their website.
Dream 11 is not a fantasy gaming platform, it is a hope tech platform.
In India, if you make more than 25,000 per month, you are earning more than 90% of India.
That's why you see many instead of building themselves, they build teams on dream11.
It gives people the hope of making a minimum of 2x of what they invest. The probability of getting 2x of what they invested is 50% on its platform.
MPL:
MPL has a revenue of $100M+ and $1.1 Billion to $1.4 Billion in GMV - 70% to 80% of the contribution to their revenue and GMV comes from enabling games like Pooker and rummy on their platform.
They have set of users from Tier-1 cities that spend in lakhs everyweek.
Education / Enabling people to write exams:
More than 7 crore people write exams in India, they pay more than $100M dollars together in “exam fees” - since it promises a secure future, irrespective of your performance.
Education courses like MBA, test prep companies are also hope based businesses.
7 reasons Why hopium (hope) business are amazing?
In Hopium business the user is ready to lose. He's ready to go all in and take a "significant amount of risk" because they are projected a beautiful ending picture.
Hopium businesses have unlimited Intent from users:
If you are banned from any app store or region, people will find a way to download the product.
They will spend hours figuring out the VPN and downloading that.
Because there is a HOPE that it can make them money.
Hopium businesses have a massive bragworthy proposition:
Hopium businesses have a high net promoter score and build a massive valuable network effect.
People turn from users to evangelists when they are benefited highly and if they are highly benefited materially - they will keep talking about you to everyone they meet. On a platform like dream 11, more than 50% of people make money.
Hopium businesses X low input :
Hopium businesses that become massively successful faster are the ones that have low input value from users in terms of money, usage/effort, and time
Output is left to the consequences of the game - which is true for many hopium businesses.
Low input = Low barriers to being part of the game.This is the reason it will take Unacademy or any "hopium" ed-tech platform to become big, currently, there is so much High input from users in terms of money, time, and effort.
Hopium businesses users are everyone:
We might assume most of the users of DREAM 11 will be from lower-tier cities, but that is not true. You will see significant users from big cities.
We might assume Hopium works only for 3rd world countries, but this is not true. Hopium works for everyone.
Recently in America, People bought $300Million worth of lottery tickets that too in midst of a "technical recession"HOPIUM businesses have a High Gross Margin:
All businesses that are based on hopium have high gross margins. Education, exams, lottery, dating apps, marriage apps, advertisements, and gaming are good examples and have a High gross margin.
Hope is a escape product:
All humans want to escape their present and jump into their future.
Most of the times humans want to skip their present life because of finances, realtionships ( that involves physically and mental investment)
Guess what products can help people skip their financial and relationship present?
Lending and dating, both are good examples again.
Products that will help humans to escape their present situation, will thrive irrespective of the place they operate in.
Final thoughts: Success of a business is directly proportional to the money the consumers have, when your consumer has less money, you need to capitalise on their emotions and make them spend, Leveraging hope is the only way to capitalise.
Two things that fascinates me this week:
People think Slice and Onecard are same companies i.e prepaid card co’s - truth is they do lending but both are massively different.
Most interesting data:
If you have any thoughts share them in the comments :)
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Insightful 💫
I have been trying to figure out the difference between onecard and slice's business model. The credit amount in case of slice is extended by it's own parent company I guess. Is that not the case with onecard? Has federal Bank agreed to extend the credit line?