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"What does the rest of the world not get about India?"
I asked @kunalb11 this question last week. Kunal founded @CRED_club - a leading Indian fintech valued at $6.4B.
This list is a must read if you're interested in Indian startups.
Here were my favorite insights he shared:
I asked @kunalb11 this question last week. Kunal founded @CRED_club - a leading Indian fintech valued at $6.4B.
This list is a must read if you're interested in Indian startups.
Here were my favorite insights he shared:
1. India is not a big consumer nation.
All of the ARPU is concentrated in what consumers perceive as "long term assets."
This list is tiny: (1) education, (2) health, (3) real estate & (4) gold.
Believe it or not, 18% of the world's gold is held by Indian retail consumers 🤯
All of the ARPU is concentrated in what consumers perceive as "long term assets."
This list is tiny: (1) education, (2) health, (3) real estate & (4) gold.
Believe it or not, 18% of the world's gold is held by Indian retail consumers 🤯
2. Indian consumers are primarily men.
Less than 7% of the urban female population has independent final income.
This is staggeringly low - for reference, this number is 90%+ in China.
All financial products, credit cards, home loans, investments, etc. are bought by men.
Less than 7% of the urban female population has independent final income.
This is staggeringly low - for reference, this number is 90%+ in China.
All financial products, credit cards, home loans, investments, etc. are bought by men.
Even 50% of shopping on female fashion portals in India have men shopping for their significant others!
India is probably one of the only countries in the world where the fashion spend of men is more than women; in other markets women's fashion spend is 5-7x that of men's.
India is probably one of the only countries in the world where the fashion spend of men is more than women; in other markets women's fashion spend is 5-7x that of men's.
3. India is a low trust society - the implication is trust is bifurcated and concentrated.
Trust is hyper local OR hyper national.
Hyper local - you trust your family, extended family and community.
Hyper national - you trust mega brands and conglomerates.
Trust is hyper local OR hyper national.
Hyper local - you trust your family, extended family and community.
Hyper national - you trust mega brands and conglomerates.
Conglomerates like Tata and Reliance are able to launch products in 25+ verticals *precisely* because people trust them.
This is also why superapps have a higher probability of working in places like India and China vs. in the West.
In low trust societies, trust concentrates.
This is also why superapps have a higher probability of working in places like India and China vs. in the West.
In low trust societies, trust concentrates.
4. Focus is a curse word in Indian startups.
India is a big market when you think of the headline numbers, but it's tiny on a per capita consumption basis.
Startups can't become big by focusing on one product or service; the consumer class doesn't have enough monetary depth.
India is a big market when you think of the headline numbers, but it's tiny on a per capita consumption basis.
Startups can't become big by focusing on one product or service; the consumer class doesn't have enough monetary depth.
To win in India (as a consumer company), first become a trusted brand:
❌"Focus --> Go Deep to Monetize"
✅"Trust --> Go Wide to Monetize"
After you are trusted, you can enter any market you want and more importantly, you can monetize.
❌"Focus --> Go Deep to Monetize"
✅"Trust --> Go Wide to Monetize"
After you are trusted, you can enter any market you want and more importantly, you can monetize.
5. In India, averages hide how acutely concentrated things really are.
Per capita income is $2,000. Remove the top 30 million people (out of 1.5B) and per capita income drops to ~$700.
70-80% of all discretionary spend in India is done by 2% of the population.
Per capita income is $2,000. Remove the top 30 million people (out of 1.5B) and per capita income drops to ~$700.
70-80% of all discretionary spend in India is done by 2% of the population.
Many Indian startups become "DAU/MAU" factories, but are monetization holes.
Western investors salivate at growth numbers in Indian startups.
This often misses the point - the real question to underwrite is whether user numbers have a chance at converting to ARPU.
Western investors salivate at growth numbers in Indian startups.
This often misses the point - the real question to underwrite is whether user numbers have a chance at converting to ARPU.
6. Indian consumers are more like CFOs than CMOs.
CFOs are prudent, calculated and constantly trying to save money.
CMOs are dreamers, storytellers and brand conscious.
In India, the CFO function dominates virtually every consumer category. Except...
CFOs are prudent, calculated and constantly trying to save money.
CMOs are dreamers, storytellers and brand conscious.
In India, the CFO function dominates virtually every consumer category. Except...
Education, Healthcare and Weddings!
When the Indian CMO takes over, it's with a knockout punch.
The Indian consumer will spend (in many cases) 10-20x their annual income on weddings (!)
Relative gross margins are also higher for "CMO products" vs. "CFO products".
When the Indian CMO takes over, it's with a knockout punch.
The Indian consumer will spend (in many cases) 10-20x their annual income on weddings (!)
Relative gross margins are also higher for "CMO products" vs. "CFO products".
7. Gross margins are disproportionally higher for "collective" products vs. "individual" products.
The Indian consumer spends more on products in their living room vs. their bedroom.
This is rooted in the culture of the country - it's communal vs. individualistic.
The Indian consumer spends more on products in their living room vs. their bedroom.
This is rooted in the culture of the country - it's communal vs. individualistic.
8. The most successful consumer products are no longer "X for Y" projects; they tap into the Indian use case.
The majority of suitcases in India (80%) are not sold for travel; they are bought for Indian weddings to help transport a bride's items when she moves into her new home.
The majority of suitcases in India (80%) are not sold for travel; they are bought for Indian weddings to help transport a bride's items when she moves into her new home.
9. Credit cards are going to set off an explosion of new financial products in India.
Historically credit cards were given to consumers who could demonstrate stable income on record (a very small fraction of consumers given India is largely an informal economy).
Historically credit cards were given to consumers who could demonstrate stable income on record (a very small fraction of consumers given India is largely an informal economy).
The India stack has changed this.
- Aadhar made identity easy
- UPI made digital payments seamless
Now there's an at scale account aggregator framework to gather bank data, tax data, etc. frictionlessly with an API call.
There's a fundamentally new data set to underwrite on.
- Aadhar made identity easy
- UPI made digital payments seamless
Now there's an at scale account aggregator framework to gather bank data, tax data, etc. frictionlessly with an API call.
There's a fundamentally new data set to underwrite on.
10. This will be India's decade.
Capital availability. Digital Stacks. Talent pool. Support from regulators and government. Stability in the economy. Consumer readiness for tech. UPI. Smartphones. 5G.
The next 10 years will be the best years to build tech startups in India.
Capital availability. Digital Stacks. Talent pool. Support from regulators and government. Stability in the economy. Consumer readiness for tech. UPI. Smartphones. 5G.
The next 10 years will be the best years to build tech startups in India.
If interested in the full conversation, check it out here:
open.spotify.com/episode/4HkucuNI1NOUIWAxNLzx8L?si=5D8QIEKXRG-dfF1K6mDKrA
open.spotify.com/episode/4HkucuNI1NOUIWAxNLzx8L?si=5D8QIEKXRG-dfF1K6mDKrA
And thanks to @fatehsmann from team @joincolossus for putting together some great research to help make the conversation deep and substantive.
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steve hsu @hsu_steve
·
Jan 20, 2023
Great thread on India. "Per capita income $2,000. Remove top 30 million people (out of 1.5B): drops to ~$700" Indian physicists I know estimate effective base population (ie good educations, produce STEM human capital): ~100M But most of these end up in West so optics skewed!
