Sramana Mitra: It sounds like the original business model probably had a low TAM. Turning it into a financial institution opens up a much bigger TAM, right?
Anirudh Suri: The initial focus in the Indian market is on affordable housing institutions and micro-financing institutions. Very quickly, they realized that just providing them credit scores was not going to be very profitable in the long run.
Sramana Mitra: You want to talk about any other company in your portfolio?
Anirudh Suri: Another company that is very interesting is a company called Tookitaki. They have pivoted over time. They initially started off as an advertising technology company. The problem they were trying to solve was that today if you’re advertising online, you either advertise on Facebook or Google. Those are the two big platforms where most online advertisers are spending their ad dollars.
The problem that existed was that when advertisers advertise on Facebook, they could only primarily target using data available on Facebook, which was primarily social data. If they’re advertising on Google, then they are targeting people using data available to Google. What this company tried to do was to combine the two.
They basically built a layer on top that would combine data available about consumers on both platforms. You’d combine browsing information and search information plus social activity. That’s how they started off. That grew pretty rapidly. The company now has evolved to become a Big Data analytics firm.
Sramana Mitra: The business model and the go-to market strategy is not an ad network. It’s an analytics company.
Anirudh Suri: That’s right. They’ve now evolved to become a Big Data analytics company working with banking institutions and insurance companies. The entrepreneurs in this case had Big Data background. They came to it from a perspective that they were going to mine Big Data with just ad tech.
They realized that they could target a bigger market by applying the same Big Data tools that they were using in the ad tech context. We’ve seen these patterns, especially in the successful startups – companies and entrepreneurs evolve to find different markets. That’s partly the reason why these companies have been more successful with others.
Sramana Mitra: The stage at which you invest is pretty early. Things are not as clear as they are later on. This is the point where people are experimenting. If you’re willing to go in early with the understanding that there will be changes, that’s a very interesting point to get involved in the company.
Anirudh Suri: That’s partly what’s so exciting about investing in the early stage as well. You often end up as partners to your portfolio companies because you’re basically investing when the idea is still in its infancy. Given that we have this bird’s eye view on what is going on, our role is to help our companies find and continuously explore how they can evolve.
Sramana Mitra: What trends do you see in your current deal flow? This is a question that I always ask investors just to gauge what kinds of trends are bubbling up. How do you synthesize what you’re seeing right now?
Anirudh Suri: The Indian technology startup space is at a very interesting point right now. Over the last five to seven years, the Indian market has figured out how to replicate from the models that has existed in the US and, more recently, in China. These are fundamental basic ideas on how to exist in an online commerce world.
Sramana Mitra: Concept arbitrage. The ecosystem developed well on the wings of these concept arbitrage deals.
Anirudh Suri: Correct. In that sense, the Indian startup scene’s trajectory is fairly familiar with what we might have seen in the US. The second stage is where your idea is a lot more distinct and India-specific instead of being just a replica. India is entering an interesting phase now. This jives with the question you’ve asked.
What we’re finding is entrepreneurs have to think much hard about what their startup is going to be about. It’s no longer enough to replicate something because a lot of those ideas have been taken care of. What’s interesting now is that entrepreneurs are finding niches. Entrepreneurs are finding underlying gaps or problems in the market. They’re starting to think about problems using the bottoms-up approach while it was very top-down in the past.
It’s starting to be bottoms-up thinking where people are seeing specific problems and saying, “How do I address this problem?”