Bad idea: Not having a clear business model from the start

This is the second article from the “Mistakes made, lessons learnt” series. Check out all the articles here.

Company & founder: Homespace.sg, Vinod Nair

Biggest mistake made: Not having a clear business model right from the start

Most memorable setback: Having to shut down the service totally after a year’s work.

Before PropertyGuru and iProperty dominated online property search in Singapore, there was Homespace.sg, a portal which connected property buyers with sellers (see articles on the website here and here). Although packed with an impressive suite of features, they eventually failed to live up to expectations. We met with co-founder Vinod to glean from his experiences.

“Mistakes made, Lessons learnt”:

No paying customers? That’s bad for business

When asked what were the mistakes made in the past, Vinod calmly replied without hesitation – “not having a business model from the start”. He states that the real test of having a classic product/market fit is when your users are willing to pay. Only then would a startup be said to have customers. Due to the lack of a clear business model, they were unable to generate revenue, and prior funding obtained soon ran out after operating for a few months.

To provide some context, Homespace was started in 2007, when competitors such as PropertyGuru were not yet a top contender. At that point in time, the website already had some decent features. Apart from developing the platform, Vinod and his team were already in discussions to secure partnerships that will drive up user traffic.

Upon probing him deeper, Vinod revealed that one event caused things to go South.

The downside of government grants

Fresh out of college, Vinod and his team lacked funding to run their daily operations and scale up Homespace. As such, they turned to smaller government grants for assistance. While the grants were started with good intentions, they were hampered by inexperienced players in the e-commerce space.

Homespace was started with a simple business model – charging listing and subscription fees. Their mentors rejected the initial business model and told the team to find a more innovative one. However, while it was true that their initial model was already commonly used, the officers failed to appreciate that an old business model could thrive in new markets.

Within the next two months, they modified their revenue model into a more complicated one with hidden revenue channels, where the website’s main income would come from transaction fees charged to every property sale.

The final say: Vinod’s personal advice

Being inexperienced, they took the advice of mentors assigned to Homespace. Vinod and team gave themselves nine months to test the idea. If it fails, they would all move on to find full-time jobs in the corporate world. Homespace was finally shut down when it became apparent they were not generating enough revenue.

By then, PropertyGuru was already gaining momentum, so they felt there was no point carrying on.

On hindsight, he understood that his mentors’ expertise in the software industry may not apply to the web industry. Founders must practice discretion with the advice given by others.

After the failure of Homespace, Vinod became more comfortable to take matters into his own hands. In the end, he did not seek a full time job after finding that there was a need for homeseekers to find an easier way of comparing home loans. To fill that gap, Smartloans was birthed forth.

Since the new business was once again rejected for government grants due to the same reason, Vinod has to resort to bootstrapping. Today, Smartloans is doing better than Homespace ever did.

Vinod is now currently running Smartloans, and has recently restarted a web-based SMS service, Textuate.  Photo published with his permission.

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