A perfect example of innovation from India – By Alap Bharadwaj

Recently, in a meeting with a VC from a tier 1 global fund, the conversation turned to India’s tech companies and the ideas that these companies are built on. The VC made an all encompassing statement to the effect that every single venture funded Indian tech startup recently has ‘absorbed’ its basic idea from a similar company in the US. The statement was loaded but one that could not, for the most part, be countered. It made me feel disappointed and put a serious question mark on the creativity of nouveau Indian entrepreneurs. I have blogged about this before, and to be perfectly honest – the apparent “apathy” tech entrepreneurs are showing towards actually building out a unique idea SUCKS. Has an Indian company come up in the recent past with an idea before its western counterpart? I am sure many have, but have they been able to drive scale using technology before the western equivalent? I am thrilled to report; the answer came to me on a recent trip to Hyderabad.

Travelling from my house to the Bangalore airport, and then to various meetings in Hyderabad and back was all enabled by one phenomenal Indian company – Meru Cabs. Meru, since 2007 has leveraged GPS to the maximum, efficiently allowing cabs to service customers closest to them, provide great service, reduce a ton of consumer frustration and make entrepreneurs of over 5000 drivers in India. I know what you’re thinking right now – so which western equivalent did they beat out to the implementation of this idea? That would be San Francisco based Uber – a company that has been getting rave reviews from the TechCrunch faithful for months now.

An analysis of the two companies will reveal differences in their business models. While Meru is more of a supply player (the company owns every single one of their 5000+ cabs) Uber is an intermediary that consolidates demand via a mobile app. The secret sauce of both companies is the same though – the ability to track, in real time, a cab’s location and then push relevant demand of transportation services to these cabs. Isn’t Uber better in terms of payment you ask? Uber allows users to pay using the credit card that is on file with the app, while Meru allows their customers to pay via a swipe of their credit card right in the cab as well.

The best part about Meru though is the “Indian-ness” of their model, in allowing so many cab drivers to make a better living by allowing them to offer a better service backed by robust technology. To say I’m impressed with Meru is an understatement, but I’d like to end by stressing that I am not in any way shape or form running down Uber. They are a fantastic American startup with a truly disruptive idea, backed by an amazing set of early investors in First Round, Lowercase Capital and a host of angels. I am just ecstatic, as an Indian, to have such a compelling business model be executed so well in India before it was done out of the Valley!

Do let me know the other Indian companies who, in your opinion, have implemented a disruptive idea before Silicon Valley has.

The Cloud – why is this space interesting? – Uday Disley

Few things have happened in the last few weeks and days which pretty much sums up the excitement that may be in store in the cloud computing space. While the buzz might have been around for a while in the enterprise computing space, but with Amazon launching their cloud music service and Apple launching iCloud, and the impending launch of the Chorme OS the cloud seems to have become very relevant for the regular consumer on the street (or the internet). This clearly indicates few points (not in any particular order)

  • Increase in the consumption of digital content (worldwide digital music revenues were pegged at $ 67.6 Billion constituting approximately 20%-25% of the market)
  • The increase in usage of multiple devices (PC, tablets, mobile phones) for consuming the same digital content
  • Applications which enable access to ‘paid content’, having to converge on these devices
  • Wide spread penetration and usage of broadband internet (again through multiple networks), be it 3G, WiMax, wireless and wired broadband
  • At least three of The Gang of Four (Google, Apple and Amazon) are betting big on this space for enabling true mobility and making substantial revenues on the side

So how does this play out; let’s say you bought some songs on Amazon and downloaded it to your PC, but then you realized that you had a blackberry and an iPad, which you would like to interchange for listening to music at your will. In the old times you would have to wade through various compatibility issues, spend considerable time on syncing, moving it from one device to another and backing up somewhere in case you fancied buying the latest version of the iPhone. If you are looking at a market worth upwards of $150 Billion for digital content consumed by people like you and me (music, games, movies, newspapers and magazines), then having products/services to address the issue of convergence starts making a lot of sense.

While all the three players have their own take on the opportunity, Apple having launched iCloud, wants to bet on the ‘have any Apple product and have everything seamlessly synced’ theme, Amazon has its device agnostic service with ‘cloud player’ and ‘cloud drive’ and Google has its lose your device, but not your data theme with Chrome OS. But essentially the cloud is the common thread that runs across these services and a lot is riding on these products becoming popular (and making money on the side to hold everyone’s interest).

It would be interesting to see how these products/ services will take off in India, given the fact that consumption of ‘paid digital content’ is negligible and penetration of multiple devices even more so. But going by the availability of Bollywood songs (in plenty) on Amazon and apparent (large) plans of Netflix to enter India, there seem to be more people excited by the prospects than just me.

Investment opportunities in Digital Entertainment – Alap Bharadwaj

A quick analysis of the entertainment sector that is served via technology in the US reveals three main areas of interest – Music, Gaming & Video.  Music & Video can be further divided into purchased and radio/streaming and Gaming into console and handheld, all of which are doing fairly well in the west. Given India’s status as a late adopter, the question remains – Will the country’s entertainment focused technology companies see the same success that their American counterparts have?

The answer varies for all three subsections and in my opinion hinges on a critical difference in the engagement propensity of users when interacting with these different mediums. Beginning with music, I don’t believe tech companies focused on this space, be it pay and download or radio, will have much of a future. The average internet consumer in our country has gotten used to downloading music in ‘lossy’ (mp3, etc) compressed formats and widespread piracy of the latest music both in Hindi and English hardly provides much incentive to switch to paying. Hard evidence exists in the form of Apple’s continued reluctance to open their blockbuster iTunes music buying service to the Indian public.

Additionally the problem with offering a radio service in India is plagued with its own issues. The ability to listen to internet radio at work would be disabled for the majority of India’s working public (due to strict work policies against such actions) and the poor quality plus high cost of India’s 3G networks make streaming of radio and on demand music a distant dream. While a case for exception can be made for technology companies focused on providing cloud services for people’s personal music collections, these too would suffer from the access problems mentioned earlier. Above all music as an entertainment medium might have many consumers but suffers from the critical flaw I mentioned earlier – the users are not engaged, thus reducing inclination to pay for such content.

Gaming and Video however do not suffer from this flaw. Both sections boast scores of engaged users with the inclination to pay. The gaming market has largely been tapped and conquered by the Xbox360, Playstation 3 and the Nintendo Wii, but what off the online video market? This is the area I believe with the largest chance for growth. Indian GEC and Bollywood content has virtually no presence online and any exceptions are pirated content that regularly get booted off websites like YouTube. Indian content is crying out for a desi version of NetFlix or Hulu backed by demand across India and more importantly abroad. Investors would queue up for companies that would be able to offer a high quality offering in this space as the model has both a proven growth strategy and significant exit potential due to the availability of appetite from retail investors for public equity of this nature as well as global acquirers.

I strongly believe that video will be the space to watch in the coming years on a variety of fronts. Content aggregators (a la Netflix) as well as companies focused on enhancing the viewing experience and constructing analytics and software for the unique conditions in India will flourish in the coming years. Investors have already backed certain players – Althea Systems, that makes a social video browser called Shufflr, raised US$ 3 MM from Intel Capital in November 2010 and Apalya Technologies, that specializes in Mobile video streaming, has raised three rounds of funding, the latest in January of this year. Given that the video focused technology space has seen investment, we now expect to see significant investor appetite for players in the content aggregation and video destination space.

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