Profit pools are not deep enough in Tier-2 non-English speaking tech product sales (exception - Real money gaming, softcore content). I am sure you would have seen it twice already - Sharechat and Apna. It is hard to build companies on the hope of perennial investor money.
The premise on trust is not completely correct. The problem with the Indian market is - India is a low trust society. It takes time and money to build trust. Once trust is built, it is hard to move consumers to another brand with the premise of say a better product. Incumbents continue to thrive even with inferior products (but superior trust).
This means - Startups (or upstarts) need a lot more capital (and time) to break into the trust barrier. The shallowness of revenue (and profit) pools in the Indian market do not justify any meaningful return on VC money with these dynamics. A good read would be - Diamonds in the Dust by Saurabh Mukherjea from Marcellus.
I would be surprised if a startup is able to eat into Dainik Bhaskar's market share. If revenue shifts online, it will mostly be the digital versions of the incumbents.
"Profit pools are not deep enough in Tier-2 non-English speaking tech product sales (exception - Real money gaming, softcore content)" If there are already two exceptions looking backwards, how many more can we project looking forward?
I think this is a shallow/lazy narrative. Both ShareChat and Apna have their challenges, which arise from building for an audience which is not internet native - and hence it will take time, money, patience to really test the hypothesis of profit pools.
On trust - the anecdotes I presented show a certain way of looking at things. It's clear to me that the low-trust narrative is superficial. There are exceptionally deep trust networks already built in India - on which businesses are already running. So yes, it does take time and money if you're starting from scratch, but the other opportunity is riding on the current built trust. Meesho's reseller model is an example - using the trust inherent in women networks to sell unbranded products which would have otherwise been difficult to sell.
Agree with startups needing more time, and maybe capital, but mostly just a different way of looking at product.
"I think this is a shallow/lazy narrative. Both ShareChat and Apna have their challenges, which arise from building for an audience which is not internet native - and hence it will take time, money, patience to really test the hypothesis of profit pools."
Hard to argue with this, but with the kind of capital that has been invested and time (in the case of Sharechat), it begs for answers. It is generally hard to accept the reality - most people in India do not have high disposable income and are extremely frugal and discretionary about what they spend on. Interestingly, buying content online is not high on their list of where they would spend (exc - RMG, softcore).
"On trust - the anecdotes I presented show a certain way of looking at things. It's clear to me that the low-trust narrative is superficial. There are exceptionally deep trust networks already built in India - on which businesses are already running. "
Yes, the anecdotes are correct. But it would be good to connect the complete story --> how do you go from building offline trust networks to building a scalable tech first company.
"So yes, it does take time and money if you're starting from scratch, but the other opportunity is riding on the current built trust. Meesho's reseller model is an example - using the trust inherent in women networks to sell unbranded products which would have otherwise been difficult to sell."
Interesting point. Meesho's reseller model is a very small portion of their revenue now. They pivoted to E-commerce for Bharat (Flipkart for unbranded products, largely focussing on Tier-2 and Tier-3) long time back. Should probably deep dive on the scalability challenges with the trust networks that Meesho was trying to capitalize on.
"Interestingly, buying content online is not high on their list of where they would spend (exc - RMG, softcore)." yup not high on their list, but Kuku FM seems to be doing ok on revenue at current scale - that's a pure content play? Open question on whether the valuation is justified (and hence how large the business can be)
But then again that is a question that you can ask about every single venture funded company today, whether building for a Tier 1 audience or not. But that's how these things work? Venture is about risk capital, and there will be cycles of overvaluation and exuberance, but that doesn't mean large businesses cannot be built on the premise.
On Meesho, yes they pivoted, and it makes sense. They reached the ceiling they could with the reseller model and figured out how to extend their product. This does not negate that their GTM was based on existing trust networks, and that they were able to grow fast, raise money, and challenge established e-commerce incumbents. If they had stuck with 'low-trust' as a broad narrative, none of this would have happened.
How to go from trust networks to scalable tech company - Meesho is a great example? And the absence of more of these examples today does not negate the fact that there are existing trust networks. So either these can be used to sell tech products or they can't. I don't think there is enough evidence either way (and canonically the answer at some nuance will always be yes, these networks can be leveraged).
Separately on ShareChat - The company has been around ~6 years. That's not a long time. Roblox was released in 2006! and took the better part of a decade to take off!
1. Kuku FM --> Revenue is decent. Exploring global markets to increase the revenue. The kind of money that goes into building that kind of scale in India is hard to justify. No comments on the valuation.
2. Meesho --> Going away from reseller model. It is not cheap to scale it and it hits the ceiling very quickly. The same is true for leveraging offline trust networks in other industries in India. Again, a good GTM for times with exuberant VC money. Sadly, those times will not return soon.
3. Sharechat - 9 years. Roblox is not the right example.
4. Lokal --> I see this article is about Lokal. Just call Vipul and Jani and take their inputs on the points I have raised and what do they feel about LTV/CAC :). An honest view and not a VC pitch.
"1. Kuku FM --> Revenue is decent. Exploring global markets to increase the revenue. The kind of money that goes into building that kind of scale in India is hard to justify. No comments on the valuation." I think it's not hard to justify - Fact that India 2 has a much higher repeat rate (Ref: https://www.linkedin.com/posts/abhishpatil_meeshos-average-order-value-is-500-activity-7103311189983576064-SInX?utm_source=share&utm_medium=member_desktop) , one of the factors of scalability would be easier. Operational challenges remains being a good cost, but your CAC is drastically reduced and LTV increases. You might find repeat as the biggest problem for India 1 as the users are open to explore different brands - Most D2C brands right now are suffering with this despite of building trust. While operational challenges are extremely less and efficiency would be better, these startups are mostly going stagnant for not solving repeat Eg Myntra, UrbanCompany - questions the growth and scalability. Additionally, to reduce operational costs, India 2 is not a strong believer of quick commerce & faster deliveries. Logistics plays a crucial role in operational costs, and with India 2 you can massively reduce it which is again a challenge in India 1.
"2. Meesho --> Going away from reseller model. It is not cheap to scale it and it hits the ceiling very quickly. The same is true for leveraging offline trust networks in other industries in India. Again, a good GTM for times with exuberant VC money. Sadly, those times will not return soon." Exuberant VC money times are gone and hence it's not just difficult for India 2 startups but also for India 1 to survive. India 1 has challenges in form of solving for Growth and entering profitability. While India 1 have the leverage to reduce costs, one of the core metric of profitability will be increasing revenue at the same time, which is a bigger challenge and will require much capital again.
Very valid points raised Dinesh ... Where are the profit pools in the Tier 2 & 3 markets is still not clear ... Khatabook with all its PMF was not able to monetise , is still something which is not clear to me .. It is definitely a very frugal society and I think only those models will work which will help save money (Eg: Vmart) or promise/create FOMO of enormous value (Eg: Byjus)
"India is low trust society" is the kind of trope that people buy when they hear VCs and star founders talk on podcasts, and people buy it because it is easy to digest, doesn't require exercising your mind. India is not a low trust society, India is a low "I am willing to spend time to understand" society. Actually let me correct myself. BLR is that society, not India at large. And I say this while being a part & parcel of this ecosystem.
People who argue large India 2 businesses cannot be done in venture timeframes need to look at Zudio. What is not evident in numbers but can be seen in stores that each store has some portion of the assortment unique to it. This is in line with your assertion that a degree of shift needs to happen everytime you move between the 100 Indias.
Profit pools are not deep enough in Tier-2 non-English speaking tech product sales (exception - Real money gaming, softcore content). I am sure you would have seen it twice already - Sharechat and Apna. It is hard to build companies on the hope of perennial investor money.
The premise on trust is not completely correct. The problem with the Indian market is - India is a low trust society. It takes time and money to build trust. Once trust is built, it is hard to move consumers to another brand with the premise of say a better product. Incumbents continue to thrive even with inferior products (but superior trust).
This means - Startups (or upstarts) need a lot more capital (and time) to break into the trust barrier. The shallowness of revenue (and profit) pools in the Indian market do not justify any meaningful return on VC money with these dynamics. A good read would be - Diamonds in the Dust by Saurabh Mukherjea from Marcellus.
I would be surprised if a startup is able to eat into Dainik Bhaskar's market share. If revenue shifts online, it will mostly be the digital versions of the incumbents.
"Profit pools are not deep enough in Tier-2 non-English speaking tech product sales (exception - Real money gaming, softcore content)" If there are already two exceptions looking backwards, how many more can we project looking forward?
I think this is a shallow/lazy narrative. Both ShareChat and Apna have their challenges, which arise from building for an audience which is not internet native - and hence it will take time, money, patience to really test the hypothesis of profit pools.
On trust - the anecdotes I presented show a certain way of looking at things. It's clear to me that the low-trust narrative is superficial. There are exceptionally deep trust networks already built in India - on which businesses are already running. So yes, it does take time and money if you're starting from scratch, but the other opportunity is riding on the current built trust. Meesho's reseller model is an example - using the trust inherent in women networks to sell unbranded products which would have otherwise been difficult to sell.
Agree with startups needing more time, and maybe capital, but mostly just a different way of looking at product.
"I think this is a shallow/lazy narrative. Both ShareChat and Apna have their challenges, which arise from building for an audience which is not internet native - and hence it will take time, money, patience to really test the hypothesis of profit pools."
Hard to argue with this, but with the kind of capital that has been invested and time (in the case of Sharechat), it begs for answers. It is generally hard to accept the reality - most people in India do not have high disposable income and are extremely frugal and discretionary about what they spend on. Interestingly, buying content online is not high on their list of where they would spend (exc - RMG, softcore).
"On trust - the anecdotes I presented show a certain way of looking at things. It's clear to me that the low-trust narrative is superficial. There are exceptionally deep trust networks already built in India - on which businesses are already running. "
Yes, the anecdotes are correct. But it would be good to connect the complete story --> how do you go from building offline trust networks to building a scalable tech first company.
"So yes, it does take time and money if you're starting from scratch, but the other opportunity is riding on the current built trust. Meesho's reseller model is an example - using the trust inherent in women networks to sell unbranded products which would have otherwise been difficult to sell."
Interesting point. Meesho's reseller model is a very small portion of their revenue now. They pivoted to E-commerce for Bharat (Flipkart for unbranded products, largely focussing on Tier-2 and Tier-3) long time back. Should probably deep dive on the scalability challenges with the trust networks that Meesho was trying to capitalize on.
"Interestingly, buying content online is not high on their list of where they would spend (exc - RMG, softcore)." yup not high on their list, but Kuku FM seems to be doing ok on revenue at current scale - that's a pure content play? Open question on whether the valuation is justified (and hence how large the business can be)
But then again that is a question that you can ask about every single venture funded company today, whether building for a Tier 1 audience or not. But that's how these things work? Venture is about risk capital, and there will be cycles of overvaluation and exuberance, but that doesn't mean large businesses cannot be built on the premise.
On Meesho, yes they pivoted, and it makes sense. They reached the ceiling they could with the reseller model and figured out how to extend their product. This does not negate that their GTM was based on existing trust networks, and that they were able to grow fast, raise money, and challenge established e-commerce incumbents. If they had stuck with 'low-trust' as a broad narrative, none of this would have happened.
How to go from trust networks to scalable tech company - Meesho is a great example? And the absence of more of these examples today does not negate the fact that there are existing trust networks. So either these can be used to sell tech products or they can't. I don't think there is enough evidence either way (and canonically the answer at some nuance will always be yes, these networks can be leveraged).
Separately on ShareChat - The company has been around ~6 years. That's not a long time. Roblox was released in 2006! and took the better part of a decade to take off!
Last response
1. Kuku FM --> Revenue is decent. Exploring global markets to increase the revenue. The kind of money that goes into building that kind of scale in India is hard to justify. No comments on the valuation.
2. Meesho --> Going away from reseller model. It is not cheap to scale it and it hits the ceiling very quickly. The same is true for leveraging offline trust networks in other industries in India. Again, a good GTM for times with exuberant VC money. Sadly, those times will not return soon.
3. Sharechat - 9 years. Roblox is not the right example.
4. Lokal --> I see this article is about Lokal. Just call Vipul and Jani and take their inputs on the points I have raised and what do they feel about LTV/CAC :). An honest view and not a VC pitch.
"1. Kuku FM --> Revenue is decent. Exploring global markets to increase the revenue. The kind of money that goes into building that kind of scale in India is hard to justify. No comments on the valuation." I think it's not hard to justify - Fact that India 2 has a much higher repeat rate (Ref: https://www.linkedin.com/posts/abhishpatil_meeshos-average-order-value-is-500-activity-7103311189983576064-SInX?utm_source=share&utm_medium=member_desktop) , one of the factors of scalability would be easier. Operational challenges remains being a good cost, but your CAC is drastically reduced and LTV increases. You might find repeat as the biggest problem for India 1 as the users are open to explore different brands - Most D2C brands right now are suffering with this despite of building trust. While operational challenges are extremely less and efficiency would be better, these startups are mostly going stagnant for not solving repeat Eg Myntra, UrbanCompany - questions the growth and scalability. Additionally, to reduce operational costs, India 2 is not a strong believer of quick commerce & faster deliveries. Logistics plays a crucial role in operational costs, and with India 2 you can massively reduce it which is again a challenge in India 1.
"2. Meesho --> Going away from reseller model. It is not cheap to scale it and it hits the ceiling very quickly. The same is true for leveraging offline trust networks in other industries in India. Again, a good GTM for times with exuberant VC money. Sadly, those times will not return soon." Exuberant VC money times are gone and hence it's not just difficult for India 2 startups but also for India 1 to survive. India 1 has challenges in form of solving for Growth and entering profitability. While India 1 have the leverage to reduce costs, one of the core metric of profitability will be increasing revenue at the same time, which is a bigger challenge and will require much capital again.
Interesting thoughts! Thanks for sharing!
Very valid points raised Dinesh ... Where are the profit pools in the Tier 2 & 3 markets is still not clear ... Khatabook with all its PMF was not able to monetise , is still something which is not clear to me .. It is definitely a very frugal society and I think only those models will work which will help save money (Eg: Vmart) or promise/create FOMO of enormous value (Eg: Byjus)
Nicely put. I can relate a lot, I am building in Agritech and came across the trust factor point you mentioned.
I think startups needs to think how they can leverage the existing infra and enabling it through tech.
Glad you found some value! Thanks for reading :)
"India is low trust society" is the kind of trope that people buy when they hear VCs and star founders talk on podcasts, and people buy it because it is easy to digest, doesn't require exercising your mind. India is not a low trust society, India is a low "I am willing to spend time to understand" society. Actually let me correct myself. BLR is that society, not India at large. And I say this while being a part & parcel of this ecosystem.
People who argue large India 2 businesses cannot be done in venture timeframes need to look at Zudio. What is not evident in numbers but can be seen in stores that each store has some portion of the assortment unique to it. This is in line with your assertion that a degree of shift needs to happen everytime you move between the 100 Indias.
The Zudio example is interesting! Thanks for sharing!
Well said.
Nicely written, I enjoyed reading.
Thanks for the feedback!