Efficient Growth in India
or how to create a long-dated, in-the-money call option on India for less than $1 million
This is the first of a series of essays to help Founders and Product & Growth Leaders of US venture-backed companies think about international growth, specifically in India. I think they will be most helpful to companies that (i) consider the US as their home markets, and (ii) have achieved product-market fit. To keep up with these essays and more subscribe to my newsletter, Half-Cooked below:
I believe that practically every consumer and passion-economy focused internet company today should consciously ask itself the following questions:
Should I start investing in growth in India?
If the answer to 1 is "Yes", the next question should be "How?"
If the answer to 1 is "No" or "Not Yet", then the next question should be "What decisions can I make today to simulate the purchase a low-priced, long-dated call option on India, one of the most important internet markets in the world?"
I was the first non-US team member at Quora, and for a large part of my time there, the only person whose core focus was on India, one of the company's top markets.
In 24 months, usage in India doubled to more than 70 million monthly unique visitors,
In 18 months, the product went from being available in 0 to 8 Indian languages, and
In 12 months, India became a meaningful part of the company's top line, leading to the decision to open the first-ever international sales office.
All this was accomplished while the company continued to iterate on the core product and launched important new features, like Quora Spaces. Most importantly, this was done in an extremely capital-efficient manner.
My objective here is not to talk about how fantastic the Quora team is (they are!), or how impactful my contributions were (I'd like to think so!). It goes without saying that these were important to the company's growth.
Rather, I am writing this to call out that I believe an unrecognized (or ignored!) structural opportunity exists for many companies.
With the right "founder-mentality" individuals, and the willingness to commit less than $1-2 million (a typical seed round today) companies can easily define a strategy, tweak their learnings and capabilities to rapidly expand outside their home markets to India (or markets like India), effectively creating an in-the-money", long-dated call option on India.
I believe that many US-based venture-backed companies don't see opportunity. Of the few that do, I’ve noticed that it’s common to overestimate the costs of doing this or underestimate the costs of losing long-term optionality, growth, and market share to local competitors or copycats of being "too late" to India.
India has 500 million Internet users and the lowest cost of data in the world. Indian users are hungry for products and services that they can consume digitally. I'll dive into how I segment the demographics in a future post.
In 2012-13-14, it took the capital and capabilities of Rocket Internet to clone products, businesses, and models. Today, that is no longer the case; it is substantially easier for companies and products to get up and running and get traction - and as a result, business model and product cloning is cheap and easy. It helps that the audience in India is hungry. In 2 days; TikTok clone, Roposo, gained 22 million users after TikTok was banned by the Indian Government.
If you think India will be relevant for you, you should start to figure out how to make inroads into the market today. If you don’t, there will likely be a local competitor chipping away at you before you've even gotten started, and in today's products, where bottoms up growth and network effects matter, product superiority becomes relevant only if you have a network to begin with!
Why aren't more companies doing this?
Skeptics may ask, "why aren't more companies doing this?". Here are some theories that could explain why companies ignore or underprice this "call option":
First, I believe that there is a gap in media coverage (in India and in the US). Most of what I read in the tech press about India is through the following lenses:
Indian companies building for India (Unacademy, Byjus, Khatabook, Meesho, etc)
Indian companies building for the US (Fresh, Zoho, BrowserStack, etc, or in other words, many of the companies in Accel's and Nexus Venture Partners portfolio)
Major US tech companies with "unlimited" amounts of capital investing heavily in India (Google, Uber, Facebook)
Second, I believe that as a result of this coverage, company and product leaders think that they either need copious amounts of capital, a full-blown international or India team and that they need to make deep and substantial changes to their product to succeed. While this may be necessary or even desirable in some cases, it really depends on what the company's goals are for India (more on this in a future essay). There are more frugal and iterative ways of litmus-testing growth in India, as evidenced by my time at Quora.
Third, I believe that companies approach the "should we invest in India" question with a prioritization framework that is too weighted to the short term, the corollary being an assumption that "long term = lots of capital/focus". I think of this differently. I believe there are ways to break this problem down into activities that "raise the floor" / maintain competitiveness, relevance, and defensibility in India (i.e. doing just enough to prevent new competitors from gaining network efforts or becoming relevant), vs activities that "raise the ceiling" and get one ready to dominate or become #1 in the market.
What to expect
Over the next few weeks, I will be writing a series of essays that will aim to:
help leaders at companies explore India through a different lens, i.e. how to think about the Indian market, and help highlight the opportunity and structural competitive advantage that US-ecosystem based start-ups are ignoring, despite in some cases being better positioned to compete by taking a longer-term view of India than local competitors can afford to
help leaders think about how to execute and capture the value these opportunities provide with the capital efficiency that most Seed, Series A, B+ companies need, given that they are likely not yet cash-flow positive and are razor-focused on hyper-scaling in their "home" markets.
I will liberally use examples of companies and products that I think have potential in India and explore the choices they have made (or could make) to position themselves for long term success in India. Through this effort, I will try to be pragmatic, helpful, and most of all, think about the tradeoffs between growth and capital efficiency. In general, I will look at companies and products that can:
Create a competitive advantage in India because of the scale of reusable capabilities they have built. This is because the cost and complexity of building these capabilities are very high, and for companies tackling global markets, they're able to (a) subsidize lower ARPU markets like India, and (b) amortize the cost of their R&D over more users
Examples: Companies where the marginal cost to serve every additional customer is very low (e.g. Reddit)
Create a competitive advantage in India because the market alone is too small to result in a meaningful venture-backed outcome and “bolt-on” India to their global businesses
Examples: Any of the businesses that Sajith Pai says targets India 1A
Use India as a center to drive product and business model innovation and export that innovation to other markets like India (i.e. amortize India investments across multiple markets)
Examples: LinkedIn, Twitter tried this with their Zipdial acquisition
Have strong brands, and some cross-locale network effects to bootstrap India until local network effects kick in
Examples: Passion Economy companies (Substack), Community businesses like On Deck
Use India as a base for gaining operational leverage, and use that operational leverage to understand the market before making a decision to invest in customer-facing activities in the country
Examples: B2B SaaS Product + Service companies (e.g. Bench, Pilot, Electric.ai) etc,
Note: These aren't mutually exclusive categories
I have no affiliation with any of these companies and all information is and will be based on my opinions and publicly available information only - therefore all my thoughts will be "half-cooked" (see what I did there?). For obvious reasons, Quora will not be one of the companies I deeply analyze.
That's it for post 1! I'm looking forward to diving in. My next post will be a "presentable" version of an email I usually send to founders & product leaders who reach out to me, explaining to them how to think about India when they're ready to explore the market from afar.
Big thank you to Sajith Pai, Miten Sampat, Harshita Arora, Sarup Banskota and Ankit Pansari for your feedback on early drafts of this! I am always open to feedback, comments, and thoughts below!
Excited for this !
This looks very interesting Gautam I'm the cofounder of Equilibrium.World - we provide Smart Sustainability Solutions to a wide range of customers, helping them automate their sustainability workflows. I am also the co-founder and partner of SparkLabs Cultiv8 Ventures. We have 27 investments across sustainability, climate, food and agriculture sectors. We are looking at opportunities in the India market in these areas.
I am especially interested in seeing how India can be a centre of product and business model innovation for our companies - especially Equilibrium which is expanding now into India. I always think that if you can make your business grow and be profitable in India, you can do it anywhere. I like the way you have categorized the different opportunities for companies above and look forward to the next post!