Thin firms will leverage investments already made and make pioneers pay the price

The Indian consumer is getting used to digital modes of action and is increasingly expecting more from their smartphones

Indian companies seem to require a lot more people and capital than what global peers do. An oft quoted example is that Uber launched with a skeleton staff in India and even now has just over 1,000 employees compared to Ola’s 7,000+. Flipkart has raised more equity just to build its Indian business than what Amazon has done to build its much larger global business. Historically, this has been justified by the need to drive habit change — buy online, book a cab, pay using your phone, and to overcome inherent friction.

However, we believe that the time has now come to back technology and product first companies in India which rely less on building a physical footprint. We call these “thin” startups. The Indian consumer is getting used to digital modes of action and is increasingly expecting more from their smartphone. While we believe in building for ‘Bharat’ and ‘vernacular’ trends as much as any other fund, we also believe that there is a large opportunity to further serve the first 50–100 million digizens who are ready to do a lot more online. These constitute a large market (Top 5 globally by number) and coupled with their purchasing power/propensity to pay will be very attractive to serve. We also believe that a lot of rails (logistics, payments, trust) are already in place for this segment so attaining scale will be easier for these “thin” startups.

While this trend is still early (we are an early stage fund after all!), we believe that it has the potential to result in newer, more efficient companies in several sectors. We see opportunities in e-commerce (driven by social), real estate (incumbents are really old), financial services, education (student pull rather than parent push) and consumer services to name a few segments.

Today’s leaders may not be eventual winners. Just like Facebook did to Orkut, Google to Yahoo Search, Alibaba to eBay in China, Amazon to Snapdeal, ShopClues and maybe even Flipkart, “thin” companies will leverage investments already made and make pioneers pay the price.

Note: This was first published in the “Reverse Pitch” section of The Mint on 05 Sep 2018 https://www.livemint.com/Companies/VxPVHhCArFqSleqeWBbIBI/Thin-firms-will-leverage-investments-already-made-and-make-p.html