This episode explores the strategies and challenges of investing in distressed e-commerce businesses. Against the backdrop of Mehtab Bhogal's experience at Karta Ventures, the discussion centers on identifying and acquiring businesses with eight-figure revenues but operational issues. More significantly, the conversation delves into the process of evaluating distressed companies, focusing on a bottom-up assessment of assets and potential for turnaround. For instance, Mehtab details how they analyze a company's components—inventory, customer database, brand, and team—to determine its true value. As the discussion pivoted to operational strategies, Mehtab shared anecdotes illustrating the rapid cost-cutting measures they implement, often within a week, by identifying areas of inefficiency in marketing, supply chain, and personnel. In contrast to the common assumption of economies of scale, Mehtab highlights instances where reverse economies of scale occur due to increasing customer acquisition costs as companies expand beyond their core audience. Ultimately, this episode offers valuable insights into the unique opportunities and risks involved in investing in and revitalizing struggling e-commerce ventures.
