HindsightCall — India’s Unicorns

2015, India is interesting. Infact, the last 3 years have been interesting if you are a nerd and enjoy startups and venture. Consumer Internet has been on a roll. Unicorns have galored. Before 2013, Info Edge (a classified potpourri led by Naukri, a jobs portal), the largest consumer internet company in India, had not touched a billion dollars. As of mid 2015 Flipkart, Snapdeal, Ola, PayTM, Quikr and Zomato have been declared Unicorns (not counting inMobi and muSigma which are not B2C) with Flipkart valued at close to USD 15 bn.

Three theories have stood out in the uptake of consumer internet. First, Diffusion of Innovation, which describes uptake of a new product in 5 stages starting with Innovators and Early Adopters. Geoffrey Moore’s, Crossing the Chasm, hypothesizes that there is a chasm between Early Adopters and Early Majority, and a product which crosses it attains mass adoption. And then there is Product/Market Fit, advocated by Marc Andreessen and Steve Blank.

Marc Andreessen in “The Only Thing That Matters”, says,

In a great market — a market with lots of real potential customers — the market pulls product out of the startup. The market needs to be fulfilled and the market will be fulfilled, by the first viable product that comes along.
The product doesn’t need to be great; it just has to basically work. And, the market doesn’t care how good the team is, as long as the team can produce that viable product. In short, customers are knocking down your door to get the product; the main goal is to actually answer the phone and respond to all the emails from people who want to buy.

In the same blogpost, Marc Andressen continues,

The only thing that matters is getting to product/market Fit. Product/market Fit means being in a good market with a product that can satisfy that market.
You can always feel when product/market Fit isn’t happening. The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of “blah”.
And you can always feel product/market Fit when it’s happening. The customers are buying the product just as fast as you can make it. Money from customers is piling up. You’re hiring sales and customer support staff as fast as you can. Reporters are calling. You start getting entrepreneur of the year awards. Investment bankers are staking out your house.

The Indian unicorns can be classified as — Amazon/Alibaba of India ( Flipkart, Snapdeal, PayTM), Uber of India (Ola), Ebay of India (Quikr) and Yelp of India (Zomato). All these models have shown Product/Market fit in USA and developed markets and also Crossed the Chasm to gain mass adoption. Product/market fit is largely global phenomena where a new product once it attains product/market fit is one market is likely to attain it in more markets (there are exceptions like sharing). Also, India in late 2012 onwards has shown a tremendous growth in smartphones with smartphone sales growing from 16 mn in 2012 to 44 mn in 2013 to 77 mn in 2014.

Five years ago seminars on ‘Bridging the Digital Divide’ were ubiquitous. And then they disappeared. Sometime in late 2012 India crossed the chasm, the digital chasm, and as Geoffrey Moore had predicted an explosion followed. It wasn’t for a product, but a country had taken to consumer internet. And as the smoke settled, the unicorns were sighted.