Building Facebook for India is a Waste of Time

by Pankaj Jain on June 7, 2013

Photo by Pankaj Jain. All Rights Reserved.This post originally appeared on CitizenTekk.

In a country of almost 1.3 billion people, mid-20th century infrastructure, rampant corruption, over 400 million people below the international poverty line, roughly another 400 million people that are considered middle class and one of the youngest populations on the planet building the next Facebook isn’t exciting. What is exciting? Solving problems for over 800 million people who don’t have access to smartphones, tablets or computers. The real opportunities for smart, savvy entrepreneurs is to solve the problems plaguing them on a daily basis. There really is no shortage or problems, big or small.

A SMS based service that brings “mandi” (market) prices directly to a farmer allows the the farmer to know exactly how much his produce will get him at a market in Mumbai, Delhi, Indore, Kolkata, etc. In 2009, Thompson Reuters was making over a million dollars a year by providing the service to farmers in only three states in India. In many cases, information about current market prices has made farmers better able to negotiate fair prices with middlemen, sometimes tripling the amount of money that goes to the farmer.

Every hear of “star dialing”? Chances are that if you live in the US, you haven’t. In India, on my mobile phone, I can dial *123# and I will get my current balance pop up on an iPhone just as easily as a Nokia 1100 feature phone. The best part is that “star dialing” doesn’t cost the caller anything. No call ever gets terminated. Well, can you imagine building a banking solution on top of this for people who don’t have access to a bank? Eko Financial, based in New Delhi, has done exactly that. For millions of people that don’t have access to a bank or millions who need to send money back home to their family in a small village can do so quickly and easily by going to a local bodega (we call them “kirana” stores in India) and give cash to the store owner who enters a sequence of numbers to authenticate with the service and transmit the cash to the destination account. All of this is done in minutes and payments can be tiny or relatively large.

Imagine you lived in a rural area with no terrestrial Internet connection, no 3G, no 2G, nothing. You had a mobile phone to communicate with the world via voice and SMS. Now imagine you could search the web simply by sending an SMS to 55444 or you can find the Rotten Tomatoes ratings for a movie playing over the air. You can join IRC style chat rooms simply by using SMS. Innoz let’s you do all of these things and a whole lot more. It’s bringing the power of the Web and applications to people who would never have access to them. The reality is people living in remote, rural parts of India can now connect with people in cities over IRC style chat rooms, find out the seven day forecast, and even get the best price for a TV from EBay simply by sending a text message.

These are just a few examples of mobile applications that people have built in India over SMS. Add in smartphone apps that alert civic authorities to sewage problems, garbage piled up on the side of the road, illegal construction, unsafe working conditions, etc. and you have a tech savvy urban population that can use technology to improve their quality of life. The opportunity in India isn’t in building another social network or e-commerce site that sells printed kurtis online. The poor across India are hard-pressed to get access to basic resources. The middle class is very aspirational and though price sensitive, the household savings rate as a percentage of GDP fell to 7.8%, the lowest in 20 years, according to a report in Times of India. This means middle class Indians are spending and it’s been increasing.

Today, it’s possible to get a basic smartphone in India for INR 4,500 or less than USD 85. The Aakash tablet, was an ambitious project to produce a basic Internet device that can be used anywhere a mobile phone can at USD 50 subsidized to USD 35. A good deal of controversy surrounded the Aakash tablet. However, the push from the Indian government as well as manufacturers towards more affordable smartphones and tablets will create massive opportunities for entrepreneurs to provide solutions to every day problems along with education, entertainment, sports, content, and other utilities. All going after hundreds of millions of people that are getting access to technology for the first time.

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Gateway of IndiaThis post originally appeared on the 500 Startups blog

Geeks on a Plane is a 10-12 day trip to various parts of the world with 20-25 “Geeks” (entrepreneurs, techies, designers, angels, VCs, mentors). The trips are planned and run by 500 Startups and have been going on for a few years now. The first Geeks on a Plan (GOAP) to India was in December 2011. That’s when I first met Dave, Paul, Christen, George, Anu, Samir, and a bunch of other really awesome geeks. Fast forward 14 months and I got a chance to be a “geek” on the February 2013 GOAP India trip.

GOAP India 2013 also had some really awesome people on the trip as well as hosts across India. Here are some of the things that I learned from these people during our visit to Bangalore, Mumbai and Delhi with Geeks on a Plane.

India: A Land of Contradictions

The poor are all over India. It’s still one of the poorest countries in the world. However, the rich are obscenely rich. Driving a $200,000 car is no big deal in a city like Mumbai. On your way to a swanky hotel where you’ll pay $900 for a single malt, you may drive by open sewage, dirt piled up on the side of the road for impending construction, barking stray dogs in packs, etc. However, you will also pass by massive skyscrapers, gorgeous temples, educational institutes galore, and many people hustling to make a buck. You can feel the buzz in the air and the excitement of young people who see multiple opportunities all around them.

I didn’t witness these contradictions being any more pronounced than they have in the past. Instead, I saw young people that are hopeful and welcoming of bright future for their country, their families, and themselves. As risk averse as their parents are, more and more people are willing to take significant risks to enact change and get rich while trying. For example, at Startup Weekend Bangalore, we saw many ideas pitched, of which, two of which stood out in my mind.

  • Ghati, to enable safe and clear passage of ambulances.
  • Garbage-busters, which uses mobile phones to alert civil authorities of garbage that hasn’t been cleared.

Two years ago, very few people would have considered quitting their jobs to pursue ideas that will make life better for people while at the same time, having a real chance at making money. Instead, most of them wanted to build the “Twitter of India” or the “Facebook of India”. More and more Indians are cognizant of the problems surrounding them in their daily lives and they are taking the first steps at solving them.

Great Raw Entrepreneurial and Tech Talent

Flipkart
There’s no question that India is full of geeks with great raw entrepreneurial and tech talent. Look at the number of Indian engineers in the Valley, doctors and Wall Street quants that flourished in the US. In India, having their chidren go into the “IT” industry has been the hope of many middle class Indian parents since the 90′s. That usually meant working at Infosys, Wipro, TCS, HCL, etc. Then came along PWC, E&Y, Accenture, Goldman Sachs, JP Morgan, Dell, Microsoft, Google, etc. Today we have Facebook and LinkedIn as well as hundreds of other great US tech product companies. Most tech entrepreneurs in India prior to 2005 built their fabulous businesses selling services to companies big and small around the world. These successful tech entrepreneurs built businesses to be envied and made India the outsourcing capital of the world.

What they didn’t do was build an ecosystem that fostered entrepreneurship or creative thinking.

ZipDial

All that started changing sometime in 2010. Some amazing companies have been built in the last few years by incredible people (some of the companies go back to 2006/2007) – Druvaa, Slideshare, FusionCharts, InterviewStreet, ZipDial, Flipkart, SnapDeal, InMobi, Innoz, ZoHo, Freshdesk, Wigify and Komli Media.

Some of these companies have exited. Some are incredibly cash rich. Some are growing like a weed and continue to raise larger amounts of growth capital.

Beyond some of the marquee names above, quite a few amazing founders are building great companies. A few are InVenture, WebEngage, UberLabs (gazeMetrix), Ketto, InstaMojo, ChargeBee, and Practo.

Founders’ Communication & Confidence Need to Improve

Rajat, Kavin, Aloke at 91 Springboard
Most first time founders in India still lack confidence and it shows in their pitch and their communication style. Paul has mentioned this before in his Observations on India and he also talks about gaining confidence. I continue to see this being a problem and a tremendous opportunity for founders. The founders that can communicate the most effectively, will have a much better chance at selling to their customers, their investors, and prospective co-founders, employees, mentors/advisors and importantly, in India, to their families. The good news is that in the last 7 years I’ve been here, I’ve seen pitches and communication styles get better. Although the ecosystem is still nascent, it’s maturing and giving young entrepreneurs the shot in the arm they need.

Investors are Optimistic

The Bombay Stock Exchange (BSE)
Investors across India that I met during GOAP continue to remain bullish on the long-term opportunity. Ecommerce, education, travel, personal finance, Universal ID (UID), family tech, rural tech and, of course, tech built in India for a global market are some of the broader themes that investors expressed significant interest in. Sorry folks, “social media” just wasn’t at the top of anyone’s list.

However, as bullish as investors are, most of them still aren’t very founder friendly. Some of the deal terms being offered are still quite onerous. Doing an investment in tranches is another favorite past time of Indian investors. Most founders still complain of angels behaving like series A VCs and VCs behaving more like private equity shops.

The bright side is that a few founders I met with and spoke with during GOAP, mentioned two VCs by name who work more like startup founders than VCs. They make decisions quickly. They present terms that are fair. They tell founders when and how much they should raise to minimize dilution. They make themselves available by not hanging out in their ivory towers. You might say that two VC firms in a country of 1.2+ billion people is statistically insignificant. However, if you said that, you would be wrong. It’s quite significant. VCs running their funds like real startup founders is a massive mindshift and their success will only inspire more to do the same (or lose deal flow).

Investors are also Cautious

Geeks on a Plane at the BSE
During some of the investor events at GOAP, I spoke to investors about things that concerned them. Investors are a little bearish about the short-term. Macro-economic conditions, the lack of exits, corruption in the government, the bureaucracy, rising costs all play an important part in dampening the spirits of investors. However, these also present considerable opportunities for daring entrepreneurs. Investors realize this and continue to hunt for deal where they can deploy funds in India.

The Indian Government is Finally Waking Up

During our trip, the Indian Government announced its budget. Though, not a big deal in most western countries, in India, the budget makes or breaks economic sentiment for the year. No one was terribly excited or distraught over this year’s budget. However, there were a few things added that raised the hopes of startups and early stage investors.

  • Preferential tax treatment for angels when investing together or “pooling” their capital and registering with the government.
  • Corporations are required to spend 2% of their income on CSR (Corporate Social Responsibility) investments or donations. Incubators at government or recognized universities qualify for claiming the 2% spend.
  • Startups can potentially find some liquidity by listing on the SME exchange. The BSE (Bombay Stock Exchange) runs one and had 11 companies listed as of December 2012.

A much more detailed analysis of the budget and some opinions can be found on VCCircle.

For more information on Geeks on a Plane and when they are heading to your region, check out the website and also some of the videos from GOAP South America Summer 2011, GOAP Asia 2011 and GOAP India 2011.


Geeks on a Plane India 2013

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#500StrongGood morning Founders!

You might have heard that 500 Startups recently announced a public application process. This is the first time we’re accepting applications for all companies that want to join our accelerator. In the last batch of the 500 Startups Accelerator, we had four great companies from India. The highest number from any country outside of the US. I’m hoping India can be represented just as well in the upcoming batch which starts in April 2013.

If you’re doing something exciting in education, jobs/employment, travel and you’re looking at markets in India or globally then you may want to put in your application soon. We will consider all applications, however, companies with traction, strong teams, past successes, and even a few referrals from 500 mentors and/or other 500 founders will go a long way.

Schedule

You can download the iCal file here.
  • Education Put in your application by 13th of February 2013
  • Jobs/employment by 14th of February 2013
  • Travel by 15th of February 2013
  • Others by 16th February 2013

By the 20th of February, I will start emailing interesting startups with dates and times to meet Dave and I in Bangalore, Mumbai and Delhi/NCR. If you have been thinking about how you can be a part of the 500 Startups family, this is your chance.

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