Day 98:) Asset Light Model

Ever heard of any such business model? Most of the application that we use in our day to day life is based on this concept.

The model means that the company doesn’t own most of the capital equipment, required in the day to day business transaction. Think for a second if you know any such startup. Hint, the world’s largest taxi service company. Yeah you got it right, Uber. It doesn’t own the taxis. They are own by the drivers. If Uber were to own its taxi, it would have taken it a century to have its product all round the globe.

In simpler words, a business model where a business own relatively fewer asset than its operation.

Let’s explore some more examples.

JioMart – The newest entrant to India’s growing e-commerce. It is connecting the pop and mop stores (Kirana) on its platform. Secondly it is also leveraging its existing Reliance Retail business to deliver the products at doorsteps. It doesn’t need to invest heavily and at the same the revenue will be more as it is likely to sell more.

Google – Yeah, the trillion-dollar company, it organizes most of the information available over internet to make the search easier. It doesn’t need to own those own websites or the content in the them. Same goes for Youtube, Facebook, Instagram and WhatsApp.

Airbnb – The startup doesn’t own the space it provides us. It shows us the rooms available in the designated location. It saves on the capital required to acquire buy out those space.

There are many more such startups and companies which have asset light business model. Venture Capitalists like to invest in such models as it is easier to scale up and doesn’t require much investment. Moreover, it saves the fixed cost required for maintaining the cars, rooms or machines. The return on investment is high as less investment is used.