While most people are focused on China’s internet economy and the real and massive growth there, India has quietly gone through a similar revolution of its own.
Here’s why it’s worth paying attention to:
First, it’s one of the largest digital economies in the world. The launch of Jio, a low-cost 4G network, in 2016 was a huge inflection point. It brought hundreds of millions of people in India online for the first time. Last year, it reached a critical mass, with over 400 million internet users and it’s projected to double in the next few years.
Second, there are strong underlying forces that will propel continued growth:
- Access is becoming ubiquitous with cheap 4G and cheap smartphones — data rates are now near the lowest in the world at 20 cents per GB. For the first time last year, India surpassed the U.S. in smartphone app downloads.
- India’s public digital infrastructure (also called “India Stack”) has dramatically dropped the cost of operating digital businesses — one billion people now have biometric identities through Aadhaar. eKYC, universal electronic payments, digitally certified documents and much more have become widely available.
- Recent tax reform (officially called Goods and Services Tax or GST) has led to a unified national market across all 29 states (like the European Union), dropping the cost of physical commerce and driving digitization across SMBs and large enterprises.
Third, many of the above forces are a few years old and are intersecting in new and interesting ways, creating fresh whitespaces for founders to pursue. The next billion consumers in India are coming online and have IRL (in real life) problems that digital businesses can help solve, such as a severe shortage of credit, limited access to healthcare, and limited access to financial services. Simultaneously, they’re encountering scarcity of local language content (more on that below).
Another whitespace is India’s 50 million small businesses, the largest base of small businesses in the world. They’re essentially just coming online, never having used technology before and the smartphone is their first business computer.
These whitespaces remind us of the mid-to-late 1990s in the U.S. digital economy and the late 2000s in China. As happened then, there is a land grab in India for access and distribution to these new audiences. Here’s our investment thesis in this environment:
- Partner with founders who have non-conventional insights on this new audience’s problems, derived from observing user behavior at the grassroots level (not top-down analysis). It’s important they are also product-driven and will iterate continuously.
- Hook use cases that demonstrate strong product-market fit in terms of daily engagement and long-term retention and enable the audience to grow in a very low friction, primarily non-paid digital manner.
- Find models which disrupt traditional Indian business models, such as using feet-on-the-street salesforces exclusively rather than digital means to access and sell to businesses.
One such company that fits this thesis is ShareChat. While still under the radar, ShareChat is India’s largest local social network. Preceding Jio and then supercharged after the Jio launch, ShareChat has successfully been able to capture the zeitgeist of people from the smaller towns and villages of India as well as many that have migrated to the large metropolitan cities over the past decades of industrialization.
These “next billion” users in India speak 22 different major languages and are spread out over an area the size of Europe. The culture and language dialect changes every hundred miles. And so people have very diverse behaviors and needs. Additionally, 95% of media consumption in India (whether TV, radio or newspapers) is in local languages, whereas 90% of web content in India is in English.
ShareChat’s founders Ankush, Bhanu and Farid know this diverse population innately and blew us away with their insights. Their first brush with this user base came in 2015 when they noticed that sharing of photos, videos, poetry, jokes and even good morning messages was at epidemic levels on WhatsApp and the content was mainly in India’s many local languages, not in English. Yet there was no easy one-stop shop for finding this local language content.
ShareChat was born to solve this problem. As they developed the idea, the founders saw that this audience hungered for connection and content about their cities and villages of origin. They noticed emergent behavior around users wanting to “look cool” to their friends by finding the best content, solving for loneliness by finding friends in their own language, and even wanting to drive fame and celebrity in their own states.
ShareChat launched in October 2015 and Lightspeed initially invested and led the Series A in November 2016. At that time, the product had one million monthly active users (MAUs). Today, it has 25 million MAUs. The core focus on product to drive deep engagement is something we believe is critical in this sort of model. The metrics on daily engagement, virality and long-term retention are reminiscent of Snapchat, Twitter and Pinterest at this stage of scale.
Congratulations to Ankush, Bhanu and Farid for recognizing and strategically going after this new whitespace in India.
Today, we’re excited to announce that Lightspeed is deepening our partnership with ShareChat through a $20 million participation in a $100 million Series C financing. We are also proud to be co-investors with India Quotient, Jesmond Holdings, Morningside, SAIF Partners, Shunwei Ventures, Venture Highway and Xiaomi.
ShareChat’s rapid and massive growth is unlike anything we’ve seen before in India and they’re only just getting started.
— Ravi Mhatre & Dev Khare
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