Technology Companies in India

In April 2014 I had the good fortune to travel with Warburg Pincus through three cities in India. We had the opportunity to meet with a dozen different up-and-coming India technology companies to talk about their products, their marketing and their business plans. My purpose there was to help with their various marketing challenges, but I am pretty sure I learned as much as I shared. Here is a summarize of some of my my key take-aways from the conversations.

1. Don’t undervalue the ecosystem

I don’t think we realize the huge advantages companies have here in America. To best demonstrate this let’s compare Fandango to BookMyShow. Both were founded in the late 90s to do the same thing: Bring movie ticket sales online. Today Fandango dominates that market across the country. BookMyShow dominates the same way in India, but the path there was a lot harder.

BookMyShow had to install their own printing kiosks (since the theatres didn’t have them). They sometimes even had to provide security so the kiosks were not destroyed and wireless so that they worked. With that expertise they tried to offer full events – like LiveNation. But to do that they needed turnstiles. There was no easy way to rent them, so they ended up owning hundreds of turnstiles – and a fleet of trucks to transport them to events across the country. And obviously they issued the tickets for the events. So today they are the Fandango-LiveNation-Ticketmaster of India. But because the market is so immature, they are nowhere near the size of even one of those companies in the US. Which leads to the second insight…


2. Being too early doesn’t mean you fail, but it means you need a lot of patience

BookMyShow has been waiting more than 15 years for the movie-ticket business to really take off in India. They have managed to stay in business during that time and now they are well positioned to take advantage of it. In fact it would be very difficult for anyone to come in and try to compete with them in the space they have carved out.

This ‘in early and wait’ is even more true in used car sales. In the US about 50% of car sales are new and 50% used. In India 90% are new – the growth in the market means there just aren’t enough cars out there to meet the growing demand. That will obviously change when the market matures, but that is still years away.

In mature markets there is almost always a winner-take-all company that acts as the ‘market maker’ for used cars (for a lot of reasons it makes sense to have all the listing in one place). In the US that is Autotrader. In established markets there is no single dominate player in new cars. In fact ‘portals’ for new cars tend not to make much money at all.

But in India the used car market isn’t big enough to support a company like Autotrader – yet. But it is very obvious it will be sometime in the future. You might think that means the smart money is on waiting until the market gets bigger and then launching a Autotrader-like copycat. But if you did that you would lose.

There are at least three strong car portals players in India right now. All of them are trying to position themselves to be the Autotrader when India is ready for Autotrader, but they need to keep their lights on in the meantime – which means spending some time (if not most time) on building a great new car portal.

It’s a waiting game. It’s likely only one of the three will ‘win’, but it’s pretty clear one of them will – it won’t be someone who jumps in when the timing is right.

3. It’s not all about copying – Local market conditions matter

These car portals are doing all sorts of things that US companies don’t need to. In at least one case, when a new car is listed, the company sends an inspector out to determine if the car is a quality used car. If it is they put their stamp of approval on it and offer discounted (or free) warrantees.

Even more extreme is OlaCabs – the India version of Uber. Which is a funny statement in itself since Uber has already launched in India in a few cities. But these guys are in over a dozen markets and growing much faster than the American ex-pats. They have also adjusted the model to local conditions.

Uber’s model in India is basically the same as the US.

OlaCabs does things differently:

  • 95% of people pay cash, not credit card
  • The drivers are required to ‘deposit’ the 20% revenue share in advance before they are given any fares. When they have earned the 80% of what they deposited, they need to head back to the office to make a new deposit
  • 90% of fares are booked in advance (rather than in for immediate pick-up)
  • A significant share of fares are booked over the phone instead of via the smartphone app

“Wait a minute!” you might say, “Phoning in to book a car in advance and then paying cash? Isn’t that less Uber and more just ‘Taxi’?” It’s true. The basic taxi system in most Indian cities is so poor, the “Uber of India” is disrupting the Taxi business and the pre-taxi business (rickshaws, limos, private drivers) at the same time.


4. You can break all the rules

It was easy to see parallels across the companies I met: They all had to build infrastructure around their businesses – which tended to get them involved with auxiliary businesses and horizontal expansion; They all tended to be entering markets far earlier than the market existed; They all had to figure out an “India” way of doing things.

And then there was Zomato.

Most Americans I’ve spoken to have never heard of Zomato, but I bet they will. Zomato could be described as the “Yelp of India”. Like a lot of the other tech companies trying to make things work there, they were forced to come up with an India way of doing things. Rather than just relying on consumer reviews, they created city teams that visited every restaurant in a city and took pictures. Most importantly they took pictures of the menus and transcribed the results – so they have a searchable menu database of every major market in the country. If you want Chicken Parmesan in Mumbai, they can tell you where you can get it.

After being successful in this space their next step was clear: No Indian consumer internet company has ever been successful outside of India, but it should be child’s play for them to expand horizontally and become the OpenTable and GrubHub of India.

They decided not to. They went international.

And it worked.

They are now in 13 countries and on track to be profitable in all of them. They are taking on Yelp (and some would say winning) in London and Germany. They are coming to Canada soon to see if they can take on Yelp closer to home.

Did I mention they generate more revenue per pageview than Yelp does. A lot more.

Which shows you that as soon as you develop ‘rules’ by generalizing across a bunch of companies, along comes a company that breaks all those rules. Turns out there aren’t rules at all – just examples that predict the past pretty well, but don’t work so well in predicting the future.

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