Web & Mobile Markets INDIA India Startup Report

A 15-min guide by World Startup Report Updated: Mar 19, 2013

Authors Bowei Gai Benjamin Joffe Aka. Mr. • Silicon Valley serial entrepreneur Asia • Founder, World Startup Report • Founder, Plus 8 Star • Founder, CardMunch (acquired by • Angel investor (Cmune, Gengo, etc.) LinkedIn) • Startup Mentor (500 Startups) • Bowei@worldstartupreport.com • benjamin@plus8star.com • @Bowei • @BenjaminJoffe Contributors Left to right: Giggleloop, 500Startups, Oodio, Yourstory, 91Springboard, India Internet Group, Startup KindnessJoin us: @WorldStartupRpt © 2013 All Rights Reserved

Our Mission Document Document our world‟s startup ecosystems through a series of reports detailing the local culture, trends, key players and challenges. Share these reports for free to benefit everyone in the global startup community. Connect Identify and empower local startup activists to become the ambassadors of each ecosystem. Leverage this network of ambassadors to help connect people to each other and to the global startup community.Join us: @WorldStartupRpt © 2013 All Rights Reserved

Why India? In a country that houses 1/6 of the world‟s population, what will be its future? “India is not simply emerging, it has emerged” By year 2025, India will overtake China to be the most populous @BarackObama country in the world. Here are a few things you should know.Join us: @WorldStartupRpt © 2013 All Rights Reserved

India at a Glance INDIA CHINA US Population 1.2B 1.3B 0.3B GDP $1.8T $7.3T $15T Growth since ‟85 x7.8 x31 x3.6 Millionaires in „10 190,000 1,110,000 5,220,200 Billionaires 52 66 422 Population < $2/day 68.7% („10) 29.8% („08) --- Population < 30 years old 63% 38% ~42% All $ amounts in USDJoin us: @WorldStartupRpt © 2013 All Rights Reserved

Web & Mobile Markets INDIA CHINA US Population 1.2B 1.3B 0.3B Internet Users 125m 516m 243m Internet Penetration 10% 38% 78% Online ad market ~ $0.52B ~ $12B ~ $37B Mobile Subscriptions 893m 986m 332m Mobile Penetration 72% 73% 106% (mostly prepaid) (mostly prepaid) (mostly subscription) Smartphone Users 35m 246m 230m Smartphone penetration 3% 19% 76% Mobile Operator ARPU $2.5 $10.7 $46.5 ARPU x Mobile Users $2.2B $9B $15.5B E-commerce Market Size $1.6B $170B $215B All $ amounts in USDJoin us: @WorldStartupRpt © 2013 All Rights Reserved

India vs China India today is like China in… 1990 2000 2006 2005 - 2013 Infrastructure IPO exits Internet Mobile India‟s roads, electricity India has one tech India has roughly India has roughly equal % of & water leaves much to IPO to date and a 10% internet mobile subscriber as present be desired. It lags couple more IPOs on penetration, mainly day China. However India has behind China‟s the horizon. (not focused in big cities. much less smartphone users infrastructure by counting the Like 2006 China. than in China. multiple decades. outsourcing firms). *Important Note: India will follow a very different growth path from China. In some areas, India may never catch up. In others, it could leapfrog China‟s growth (e.g. in smartphone & tablet usage).Join us: @WorldStartupRpt © 2013 All Rights Reserved

Key Players Recent Rising Stars SuccessesE-commerce megastore (2007) Mobile Ads (2007) E-commerce (2010) E-Commerce/fashion (2007) $800M valuation $1B valuation $200M valuation $100M valuation Past Successes Search engine (1996) Matrimony (1997) Travel (2000) $720M valuation $250M valuation $688M valuation The full list of top Indian startups and contacts is available on: India Startup WikiJoin us: @WorldStartupRpt © 2013 All Rights Reserved

Angels, Incubators, VCs Popular Angels Incubators/Accelerators Angel groups / VCs Rajan Anandan AngelPrime 500 Startups Praveen Chakravarty GSF Accelerator Blume Ventures Vishal Gondal iAccelerator India Quotient Sunil Kalra Microsoft Accelerator IAN Ranjan Kapur The Hatch Kae Capital Rehan Yar Khan Startup Village Mumbai Angels Anand Ladsariya The Morpheus One97 Mobility Fund The Mirchandanis The Startup Centre SeedFund Mukund Mohan Tlabs Sequoia Capital Rajesh Sawhney Venture Nursery Nexus The full list of top angels/incubators/V Cs is available at: India Startup WikiJoin us: @WorldStartupRpt © 2013 All Rights Reserved

Media, Conf, Events Tech Media Conferences Meetups Events YourStory.in TechSparks Open Coffee Club StartupWeekend VCCircle Nasscom Product Conclave TiE In50hours NextBigWhat Nasscom EmergeOut NEN iWeekend StartupDigest Microsoft/Morpheus/ Tlabs community Startup Leadership GSF Demos Days events Program TiECon Nurture Talent Startup Saturday Unpluggd VC/Angel group meet Microsoft Accelerator & greet Events The list of events and conferences will be on: India Startup WikiJoin us: @WorldStartupRpt © 2013 All Rights Reserved

Internet Culture • India missed the PC Revolution - Personal computer was and still is too expensive for the general population. For many, their first exposure to internet is through mobile phones and tablets in the future. • Indians are using the internet without realizing it - Here are examples of some Indian startup that provides human interfaces to the internet: - People can search the web via a phone call (JustDial, $720M valuation), - Travel agent who is simply typing customer queries into websites to facilitate ticket purchasing (Makemytrip, $688M valuation, Redbus, $200M valuation) • The missing internet cafes & gaming culture - One would expect India to be filled with internet cafes like other developing countries, but you rarely see them in the big cities due to regulations. - Perhaps due to the lack of consistent internet connections, there isn‟t a strong gaming culture in India either. That should change as India‟s internet connectivity improves. “I believe there is room for one or two billion dollar online gaming companies in India ” @benjaminjoffeJoin us: @WorldStartupRpt © 2013 All Rights Reserved

Competition • Fast-growing market with limited competition - India is a young ecosystem with a relatively small number startup companies at the moment. - The risk-averse culture leads to less competition than in the US and China. - Currently, the only real competition is in the e-commerce sector, many other fields are wide open. - Angels/VCs rarely compete for deals, which leads to lower valuations among Indian startups than what is seen in the Valley. Important note: The lack of overall competition is hurting India‟s startups as it leads to poorer quality, lower valuations and slower market-building.Join us: @WorldStartupRpt © 2013 All Rights Reserved

Startup Surprises “If you want to get married, don’t do a startup.” – Delhi startup event audience • Many Internet companies are solving big infrastructure problems - Flipkart is building their own shipment and cash-on-delivery workforce to solve India‟s poor logistics and payment infrastructures. - Companies like Redbus provide software/devices to bus companies, to build India‟s missing ticketing infrastructure. - Quick Note: Trust in online stores is still an issue, so all e-commerce companies are effectively participating in market-building. • Startups have high social risk for founders - Startup founders might have trouble getting married! It‟s a bad point on the matchmaking check- list, like being a struggling artist (without the glamour). - Thus, to convince someone to join your startup, you‟ll likely end up needing to convince their entire family! • Lots of traditional entrepreneurs - India has millions of entrepreneurs. They are mostly small business owners and fairly risk-averse so they stick to traditional cash-flow businesses and family run businesses. - Due to people‟s traditional cash-flow mindset, in the tech space, startups that can monetize quickly are favored by both entrepreneurs and investors (e.g. E-commerce).Join us: @WorldStartupRpt © 2013 All Rights Reserved

India Surprises • India is “Made in China” - India import an incredible amount of good from China, despite its ultra-low wage. Nearly all products sold are manufactured in China and later shipped to India. Why? Efficiency, infrastructure and short term vision by the manufacturers. Indians in general prefer to be “traders” than to be “makers”. • Unusually high interest rate - India‟s nominal interest rate is ~10%. Why risk it at a startup? - Real-estate, gold investments and traditional cash-flow businesses are much more appealing to most investors. • Few returnees - India has a lower returnee rate in comparison to China. This could be because the living condition is not yet good enough to attract the top talents back to India. 1.65M outJoin us: @WorldStartupRpt © 2013 All Rights Reserved

India Surprises cont. • India time - Due to culture & poor traffic, it‟s expected that people will be late to meetings/events. 15min-1hr delay is common, but sometimes it can be as long as 2 hrs. • Decision by committee - India is also slow because of the decision by committee mentality. Everything is slower in India by a factor of 2-10x in comparison to Silicon Valley. • Despite difficult conditions, people seem content - People‟s expectations are focused on lower tiers of Maslow‟s hierarchy of needs (feeding their family). Among the general population, there‟s little drive to change things for the better. - People are accustomed to living under difficult conditions. They seem happy with the country‟s recent progress and are optimistic for the future.Join us: @WorldStartupRpt © 2013 All Rights Reserved

India Infrastructure Everything is possible, nothing is easy. Lots of “friction”. Roads – Poorly planned Logistics – Inefficient Internet – Slow & unreliable Water– Numerous Outages Electricity – Frequent power cuts Important note: According to many, infrastructures are much better from where they were just a few years ago.Join us: @WorldStartupRpt © 2013 All Rights Reserved

Talents “Too many Indians, not enough chiefs” - @benjaminjoffe Talent Costs Entry level Good experienced hire Industry salary (yearly) $10k $20k - $30k Startups salary (yearly) $6k-$8k $18k-$24k + equity • Plenty of engineers, few specialized experts - India graduates over 1M engineers every year, many of which join big IT firms. - Good engineers do not stay in engineering, they seek management for a better paycheck. - As a result, senior developers, designers, marketers, product managers are hard to find. Experts in specific technologies (e.g. Node.js, Hadoop) are virtually nonexistent. • IIT rules India. But you can hire from other schools - Indian Institute of Technology is the MIT of India, but their engineers are easily the best but are the most expensive. For startups, look beyond IIT for schools with good internship programs like like Birla Institute of Technology & Science. • Avoid job sites - You‟ll be bombarded with tons of doctored resumes. Stick with recruiters and your network.Join us: @WorldStartupRpt © 2013 All Rights Reserved

Policies • Strict rules against foreign multi-brand retailers - India is extremely protective of its retail sector and forbids major foreign investments in multi- brand retailers (Walmart/Bestbuy). These laws are evolving and startups have found ways to get around this rule, so expect to see major changes in India‟s retail sector soon. • Incorporate base on potential capital source - Startups seeking only Indian capital tend to incorporate in India. - Startups seeking foreign capital tend to incorporate in Delaware or Singapore. • The new startup tax is more annoyance than deterrence - India proposed a new startup tax to battle money laundering schemes. India angel investments are now taxed at 30%, for any amounts that exceeds accounting laws of a fair market valuation. - This law will not be stop the angel investments in India, but it will generate unnecessary costs and annoyances to the startups.Join us: @WorldStartupRpt © 2013 All Rights Reserved

Community Outlook ** Startup Pillars Rating Notes Good to see some early success like Entrepreneur-led Good Munkund Mohan starting to take charge. Long term vision Indian startup community leaders have a Great (20+ years) long term vision, even beyond 20 years. Many entry-level ones, fewer events for Events for all skill levels Could be better semi-experienced entrepreneurs Incredibly warm community, but Inclusive of others Great entrepreneurs could use more peer support when startups fail. ** Based off of Brad Feld‟s Boulder Thesis on startup communitiesJoin us: @WorldStartupRpt © 2013 All Rights Reserved

Unique Local Innovations Find anything and everything with a phone call. Like Google w/a giant call center for people without access to internet. Offline marketing, community building & analytics using free miscalls as call to action Cash-on-delivery. Created a national-wide team to solve India‟s payments and logistics challenges. Other interesting models: Olacab, Redbus, Zivame. These models are likely to work other emerging marketsJoin us: @WorldStartupRpt © 2013 All Rights Reserved

India Opportunities • India missed the PC revolution, but will it catch up in the phone and tablet revolution? • Organized retail is responsible for only 7-8% of the total retail market. The question is not “if”, but rather “how and when” the retail market will change and who will change it. • The country‟s infrastructure needs a lot of help. Fortunately, India is open to privatizing some of these infrastructures. Can startup leverage technology take a piece of this big pie? • 70% of the country lives under $2 a day and is neglected by the first world. Can innovations touch these 840M people?Join us: @WorldStartupRpt © 2013 All Rights Reserved

India Commodity Innovation Map Saturated Mature Semi-mature A map of India’s current market leaders in 25 commodity internet business models Infancy Non-Existent Dating Search Travel Blogging Communication OKCupid Google Kayak Tumblr Whatsapp Shaadi/Stepout Google/JustDial Makemytrip Tumblr Whatsapp Ticketing Events Transportation Social discovery Listing Stubhub Eventbrite UBER Pinterest Craigslist BookMyShow MeraEvents Olacab Pinterest Quikr/OLX Payment Online retail Deals Gaming Music Paypal Amazon Groupon Zynga Pandora CCAvenue/EBS Flipkart Snapdeal Sourcebits Saavn/Gaana Dining Auto Subscription Rtl Finance Local Discovery OpenTable Carmax Birchbox Mint Yelp PoshVine CarWale FashionandYou FutureWise Zomato Social news Real estate Rental Education Microwork Reddit Trulia Airbnb Coursera Taskrabbit Reddit CommonFloor Airbnb ??? ???Join us: @WorldStartupRpt © 2013 All Rights Reserved

Ecosystem Ratings India MARKET China 4 US 3 REGULATIONS 2 CAPITAL 1 0 INFRA PEOPLE CULTURE Ratings * Criteria based on Benjamin‟s Joffe‟s Ecosystem 101 explanation: India Startup WikiJoin us: @WorldStartupRpt © 2013 All Rights Reserved

Culture Ratings India MONEY China 3 US 2 APPEARANCE FAMLY 1 0 SPIRITUALITY SOCIAL LINK CULTURE Ratings * Criteria based on Benjamin‟s Joffe‟s Ecosystem 101 explanation: India Startup WikiJoin us: @WorldStartupRpt © 2013 All Rights Reserved

Advice for Local Entrepreneurs • Stay in India, there are lots of unfilled opportunities waiting to be tackled, you don‟t need to reinvent the wheel. Just “skate to where the puck is right now” and focus on execution. • Try to get into an incubator/accelerator to avoid a lot of the early mistakes that people make. You‟ll also have an easier time finding mentors and funding in the future. • If you must come to the US, remember many US startups have Indian co- founders (rumored to be up to 62%). Reach out to them for help and they‟ll likely give you a hand.Join us: @WorldStartupRpt © 2013 All Rights Reserved

Advice for Foreign Entrepreneurs • In correlation to China‟s internet history, many Indian startup wins will come in the next few years from returnees/foreigners. Unfortunately, that opportunity won‟t last, so if you want to come then come soon. • You will be highly regarded, so use it to your advantage. Be bold, tackle the big opportunities that scare away most of the local entrepreneurs. But also be humble, go find yourself an Indian co-founder who can navigate the complicated and often convoluted social & business pathways.Join us: @WorldStartupRpt © 2013 All Rights Reserved

Advice for Foreign Angels • Yes, it is safe to invest for exploratory purposes. • Have realistic expectation for your investment. IPOs are virtually nonexistent in India. Most local angels aim for series B exits or small acquisitions. • Definitely co-invest with reputable organizations. Let the local investment groups complete your due diligence (e.g.Mumbai angels, GSF, Seedfund, 500Startups, IAN, Blume, Kae Capital, etc.).Join us: @WorldStartupRpt © 2013 All Rights Reserved

Advice for Foreign Companies • India is an easier market to break into than China. Talent is cheap and regulations are good. Online companies can easily win in India, Google, Facebook, Twitter and LinkedIn are doing amazingly well. On the other hand, companies relying on offline infrastructures like Ebay and Amazon are getting killed by the local competitors. Know thyself and you can win in India. • Be PATIENT! Business progresses slower than usual in India because of the poor infrastructures, slower pace of life and people‟s general lack of motivation. This is unavoidable. India has a ton of potential, but it is a LONG market. You will win eventually, but don‟t be discouraged by the initial results.Join us: @WorldStartupRpt © 2013 All Rights Reserved

Conclusion There‟s no doubt India will grow, the only question is how fast? India is a place that can be whatever you want it to be. It can be ideal for a small cash flow business or a billion dollar empire. It‟s true, building a company in India is full of friction, but less friction usually means 10x the competition. Pick your battles.Join us: @WorldStartupRpt © 2013 All Rights Reserved

India Startup Wiki For the latest updates on the Indian Startup Ecosystem and our full India Startup Report, please visit: http://wiki.worldstartupreport.com Want to help write YOUR country‟s startup report? Let us know!Join us: @WorldStartupRpt © 2013 All Rights Reserved

India Ambassadors Want to learn more or visit in person? These Ambassadors have graciously volunteered to educate and welcome our readers to the Indian startup ecosystem. Feel free to reach out. Lead Ambassador Mohit Bijlani Aditya Rao Parul Raj Lodha Founder, GiggleLoop Founder, Oodio Curator, StartupDige Mumbai Studio st Bangalore Bangalore Anirudh Suri Varsha Adusumilli Yatin Thakur Partner, India AVP, YourStory.in Founder, Moonlightin Internet Bangalore g Group, Mumbai New Delhi Deven Shah Chandan Raj Varun Chawla Founder, StartupKindnes VP, YourStory.in Partner, 91springboard s Bangalore New Delhi Mumbai Want to be an ambassador for your country?Join us: @WorldStartupRpt © 2013 All Rights Reserved Let us know!

Need More Help? Get expert advice from our team of industry thought leaders. We offer: • Global research and connections • International best practices • Worldwide go-to-market strategies Email us at: consulting@worldstartupreport.comJoin us: @WorldStartupRpt © 2013 All Rights Reserved

Resources • https://www.cia.gov/library/publications/the-world-factbook/ • http://www.slideshare.net/QuantMarkets/online-market-in-india • http://www.gapminder.org • http://www.rediff.com/business/slide-show/slide-show-1-countries-with-the-most- millionaires/20110603.htm?print=true • http://statspotting.com/2011/03/india-mobile-statistics-monthly-average-revenue-per-user-2-46-usd/ • http://www.totaltele.com/view.aspx?ID=472089 • http://www.convergedigest.com/2012/10/china-mobile-nears-700-million-users.html • http://www.emarketer.com/newsroom/index.php/digital-ad-spending-top-37-billion-2012-market- consolidates • http://www.iamwire.com/2012/04/india-to-be-the-fastest-growing-e-commerce-market-in-asia-pacific- market-set-to-grow-to-8-8-billion-by-2016/ • http://www.factbrowser.com/facts/5037/ • http://nationalatlas.gov/articles/people/a_age2000.html • http://www.vijayanand.name/2012/10/comparing-accelerators-in-india-side-by-side-part-1/ • http://techcircle.vccircle.com/2011/12/01/meet-india%E2%80%99s-hottest-angel-investors/ • http://techcurry.co/some-bizarre-numbers-on-smartphones-in-india/ • http://blog.flurry.com/bid/94352/China-Knocks-Off-U-S-to-Become-Top-Smartphone-Tablet-Market • http://www.slideshare.net/mukundmohan/startup-application-trends-spring-2013 • http://www.firstpost.com/economy/budget-2012-threat-to-enterprise-mentoring-angel-investors-worried- 248363.html • http://www.globaljurix.com/fdi-in-multi-brand-retail-sector-india.php • http://www.pwc.com/gx/en/technology/moneytree/private-equity-vc-investing-in-india.jhtmlJoin us: @WorldStartupRpt © 2013 All Rights Reserved