Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Rehan Yar Khan was recorded in September 2016.
Rehan Yar Khan is General Partner at Orios Venture Partners, and an early investor in the Indian startup scene. Rehan’s core focus is on the Indian consumer opportunity, and that is what we focus on in this discussion.
Sramana Mitra: Let’s start by telling our audience a bit about your fund and your investments in recent years.
Rehan Yar Khan: We are an India-centric venture capital fund. I’ve been an investor for the last 10 years. I set up the fund around three years ago along with two other colleagues of mine. We have three partners in the fund. We have been investors largely in India’s consumer sector, primarily in online consumer businesses. We do a few offline consumer businesses as well because India is a pretty exciting market for innovations.
Underdeveloped countries have fewer brands than developed markets do. We invest primarily in consumer. We do software product investments once in a while, but increasingly, we’ve doubled-down on consumer. We find that we’re able to add value to consumer businesses. I’ll start with some of our older companies.
There’s a company called Druva, which is our first investment. It’s a company in the software backup space. The founders relocated to Silicon Valley and have done fairly well. I think it’s a half a billion dollar company now. For three years now, they’ve been ranked world number one by Gartner. NASA is one of their marquee customers.
We have another company called Jigsee, which was acquired by Vuclip. Vuclip is a Silicon Valley-based company. The company has gone on to become the largest streaming mobile channel in China. It delivers streaming video in 2G and 2.5G networks. It has done extremely well in that regard.
We also have an affordable fashionable lingerie brand called PrettySecrets. Then, we have Zooty, which is like Uber for salons. Using your smartphone, you can find your salon or stylist, check the slot and book. We have other marquee companies like PharmEasy which delivers medicine at home.
Today, you’re getting low cost smartphones and low cost data in India. Lower sections of society are coming online. They, too, want better quality plans for them. We have another innovative company which is building a low-cost hotel chain by aggregating one-star and two-star hotels. It’s a novel idea. It organizes an unorganized sector which are mom-and-pop hotels.
These are not necessarily only online but they have a massive offline presence and off-line distribution. The key is they are asset-light. They’re almost always consumer. They have a lot of headroom to grow.
Sramana Mitra: Based on what you are doing and stuff that you have invested in already and what you see, what are some of the salient trends that you see in consumer businesses that are coming on and that are scaling in the Indian market?
Rehan Yar Khan: There’s just a lot that is scaling in India. India is an underdeveloped country. There’s a white space in almost everything. It’s a lot simpler over here because we’re an underdeveloped country. There’s opportunity in many verticals in India. I wouldn’t do justice if I just named some.
India is extremely under-banked. There are only 35 million people in India that have the equivalent of the FICO score. There are only five million active credit cards in India. Hardly anyone has taken a loan from the 1.3 billion population. Very few people have bank accounts. If I go to media consumption, only 2% of people in India have access to Bollywood. The rest of the people don’t even watch movies. They have no access. The Indian movie industry produces more movies a year than Hollywood and yet only 2% of the population watches movies. Media is another tremendous area. You can name any sector.
Sramana Mitra: In the context of this grand underdeveloped opportunity portfolio that India presents, help us understand how you view that from a venture investment standpoint. Underdeveloped also presents slow growth markets. Venture typically demands extraordinarily high-growth. How do you reconcile these two phenomena.
Rehan Yar Khan: It has to be asset-light. The key in venture is not tech. Just having a LAMP stack doesn’t make you tech. The key is it needs to be asset-light. That’s what gives you scale. If I’m going to open shops and those kinds of things, that will slow me down. If I’m going to leverage a chain that’s already out there and distribute my product via that, then that doesn’t slow me down.
There are limited opportunities of venture-quality investments in the offline world in the US simply because it’s highly developed. Opportunities are limited in there. In US and Europe, most of the venture-investing has concentrated on distribution via smartphones. In India, that is not the case. Because it’s so underdeveloped, you can produce brands that are offline or online, and they have both have similar characteristics of non-linear or extremely rapid growth.