“The Web’s Third coming is near”, say’s Capital18’s Sarbvir Singh

For those of us who remember the year 2001. Two things come to mind, the 9/11 bombings and the dotcom bubble in the USA and the world over. Since then India has emerged as something of a slow learner in the web space, but there are those who are bold enough to say that the web’s potential in India will only grow. It sounds like a cliché, ‘but it is actually not’, says Sarbvir Singh, CEO of Capital18- the VC arm of Network18, which holds interests in media and publishing. Excerpts from the interview where he discusses his views on the web in India:

Qns: What is happening to the internet, how can one present a business case for it?

Ans: The number of users of the net has really not gone up significantly from the 45-50 million    number that has been thrown around for the last 2-3 years. But what we have seen is sharp growth in the number of folks who use it daily and the time that they are spending on the web. That means a whole host of services such as entertainment, gaming and e-commerce are potential businesses. Payment options remain a challenge to make the latter happen. Payment providers are going to be key business drivers on the net. I feel that if entrepreneurs  get the proposition right then the internet era could finally be upon us in India.

Qns: What do you mean when you say payment providers and the services that they can offer?

Ans: I mean payment providers like Pay Pal. In almost every large country, there is a different payment service which is dominant – Paypal in the US, Alipay in China, mobile solutions in parts of Africa. Perhaps, this is driven by the varying regulatory environments and the need for a customized solution.  In India too, the RBI has very clear ideas on what they will allow and not allow.  I believe that the space exists for a customized solution in India which can take mobile/internet payments beyond the narrow sliver of folks who use it today. However, creativity is needed in ensuring that this meets regulatory requirements yet is easy to use and secure.

Qns: Now what else will trigger this internet opportunity?

Ans:I feel that the 50 million internet users should become 100 million users in the next 2-3 years. It is likely that the devices these people use to access the web will go beyond PC’s. The mobile space will be large and is throwing up several opportunities. With Reliance entering broadband, it is only a matter of time that this market will get a major boost. 100m users will create scalable opportunities that entrepreneurs can capture and for funds such as us to invest in.

Qns:What is happening to the world of print, will content online draw more revenues?

Ans:It is a tough call. The coming decade print will be challenged as digital platforms gain wider usage. On the other hand literacy is still growing in India and print could remain the first port of call for new readers. The immediacy of news will drive consumers online and there has to be some differentiation if you have to draw customers to print. A minimalist copy and paste job will not get you anywhere. One of the reasons Network18 is consolidating its digital businesses is to put more focus on them and invest behind the coming opportunity. We see the need for differentiated content and the need to give users a reason to be online. Perhaps, after a few false starts, the internet market in India is finally getting ready to take off!


Is Group Buying the catalyst for E Commerce – The Editor

There is a sudden mushrooming of so many group-buying and discounted deals website start-ups that we at Viedea have decided to go shopping. Lucky for us, we run a mandate for one of the leaders in this space in India. What I think of group buying is that it will give an opportunity to all the, marketing gung-ho starved, kiranas or retailers to build their brand and accumulate a larger customer base. Importantly they will be leveraging their presence on the net for the first time. It will be a great medium for hospitality services and restaurants to fill in tables and rooms at a faster rate than waiting for customers to walk in.

What is group-buying? It is like buying apples in bulk, which is cheaper, as compared to buying one single one. It works like this: The group-buying website will be an online platform for the service provider and it promises him a certain number of customers only if the service provider agrees to halve his service cost. The service provider will agree only if the website guarantees a minimum number of customers to avail the service. If the website is not able to find a minimum number of buyers for the service, then the deal is off. If the website is able to do so, then the website gives all its customers an e-voucher, which they can redeem at the service provider’s premises for half the original cost. The payments will be transferred to the service provider- by the website- in a week’s time after keeping a margin of 20-25 percent. It is a great business isn’t it? However I feel it involves more logistic and number crunching jugglery than what the business is currently doing. What is the outcome of this business? Is it to be used as a brand building exercise that can create viral through social media?

Before I answer the question I see an enormous level of localized buying behavior. These websites offer superb specific deals and everyone has to register addresses. Eventually there will be so much data that it can be used to target customers on an individual basis. Companies that want this data can suddenly arm their marketing teams to the teeth and modernize their distribution systems. The money is in the monetization of data and that is the objective. However it is left to be seen whether these websites can work with electronics and food retailers. This mass business will be difficult to handle in electronics because manufacturers will never undercut on their margins, an electronics retailer better figure out what percentage of his stock can be discounted or bundled to use this medium. Eventually the data will become large if these websites manage the food and electronics business.

For now these group-buying companies have stayed away from this business model. They are happy to service small restaurants, saloons and spas, which will never really bring in the margins. So I see consolidation in a year’s time. But there is always this hope- for a group buying entrepreneur- that e-commerce usage will double from the current 8 million users in two years to grow his valuation. Even then scaling will require funding and one has to bring in discounts that people will buy on a day to day basis. So would you like to shop with us, what do you think of this industry?

What’s in a Name? – Deepak Srinath

A couple of days ago, I called the office of a well known VC fund and asked to be connected to one of the partners, who I know extremely well.  The receptionist asked me my name and where I was calling from and I told her.  We spent the next  five minutes or so going through  iterations of “sorry please repeat, which company, what,  please spell the name for me, Bidya?, etc”, before I gave up and mustering up my most imperious tone muttered, “ Please tell him my name, he knows me well”…….and she reluctantly agreed to put me through to my contact. This is not an isolated incident; this happens almost every time I call an office or person for the first time and have to explain which company I’m calling from.

Branding and identity for any firm begins with the name.  When we named our firm Viedea, a word play on Vie(compete) and Idea, little did we realize the intricacies of branding and identity.  How does one create a brand (and associated values) that go beyond Uday or Deepak when the name of your firm is mispronounced more often than not?  Not a single client, investor, partner or business associate knows how to pronounce our name correctly. We get called Vidya, Veda, Weed-aya, Video…..and several other gems.  Worse still, because they are unsure of how Viedea is pronounced, our friends and contacts may not use the name of our firm at all in conversations. They simply refer to one of our names while discussing us with peers.

So what are the options before us? – Communicate our correct pronunciation more effectively?  Change our identity to something that is more catchy, easy to recall and pronounceable? Or just let it be because anyway i- banking is all about personal relationships and our clients will come to us no matter what we are called?  I for one believe that creating a strong brand is vital for long term success.  As a friend of mine recently preached after a few G&T’s, “You can choose to be an entrepreneur and create long lasting value or you can choose to be a businessman focused on short term profit”.  Well, we certainly want to be entrepreneurs and we will figure out the best option for us in the next few weeks and months.

I would love to hear from all of you- our friends, clients, partners and well wishers- on whether we should remain a chrysanthemum or become a rose. And just for the record, the correct pronunciation is ‘Y-DEE-YA’

Find us an Indian McDonald’s – Uday Disley

I still remember, a decade ago, an English friend told me that he fell over laughing when he read an Indian newspaper carrying an article about a McDonald’s outlet opening up in India. He told me, sarcastically, ‘And that’s what makes news in your country’. This alien food concept (the humble burger) reached Indian shores 14 years ago and in a matter of a decade our equally humble Indian middle class is thronging to the nearest McDonald’s outlet. They did get something right? What is it that Indian restaurants are struggling with when they want to go national or even global?

Recently I was with a VC and we spoke about opportunities for investing in ‘Quick service restaurants’; he pointed out to me that the McDonald’s, outside Andheri station in Mumbai drew a large crowd. The same can be said about most outlets, of McDonald’s, in the country today. The company claims that it serves about 3-4 lakh customers a day, it currently has about 160 outlets and employs about 6500 people. That’s a remarkable achievement, given that bulk of the scaling up has happened over the last two years.

Yes we have seen many regional successes, but I fail to even find a pan India name that caters to India as a whole- not like a Saravana Bhavan or Kailash Parbat- which are very ethnic. It intrigues me that Indian start-ups are not able to figure out what formats work, what food has mass appeal, what price point they should sell at or is it the supply chain or the backend which they cannot replicate nationally. The consumer interest has been established, all consumer reports would tell you that we Indians have been spending more and consuming more (fast food included). The problem doesn’t seem to be with the investors, as there is plenty of interest (at my firm Viedea we are asked all the time). I believe the problem lies somewhere in between judging what appeals to the Indian consumer (pan India), the time to scale and the amount of investment required. Our analysis has been that it takes a good 4-5 years to know if a concept is worth scaling to 100 plus outlets (assuming that one has the right team, good backend and some investor has agreed to stick around for that long).

If I take the average investment per outlet to be Rs 2 Crore (ignoring the low cost models for this) and if a concept incubation period of 10 outlets takes over 3-4 years, you are talking of Rs 20 crore. Going beyond the proof of concept, to establish serious scale can take 8-10 years if not more. Afterall, McDonalds with its deep, deep pockets took 14 years to reach the scale they have today. The “waiting period”- which means most VCs need to pay back the people that back them in 5-7 years- falls outside the window that they can afford in one investment cycle.  Therefore any serious VC looking at this sector is more attracted towards proven concepts and late stage opportunities (which are not many in any case). To find investors who are willing to fund the next Indian ‘McDonald’s’ success story needs a champion as mad as “Lawrence of Arabia”, but like Lawrence found out everything in the Asian world is very regional. I certainly want to debate that and hope there is someone who can prove Mr Lawrence wrong.

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