Having thrived at home for nearly a decade, India’s startup scene went global in 2018.
Ola, the country’s largest homegrown ride-hailing firm, set the ball rolling in January when it drove into Perth, Australia. Soon, hotels chain OYO followed in a big way. The country’s newest unicorn, Byju’s, has also announced its international plans for early 2019.
“We, at OYO, have developed our business grounds up in a market like India, which we firmly believe is one of the toughest to crack given the emphasis on high quality at low price and the nuances that vary from city to city,” Maninder Gulati, chief strategy officer at OYO, told Quartz. “Once you invest in building competencies, it is much easier to go to new markets.”
Perhaps with the same thinking, several other young tech companies in India are all set to take on the world:
With 1.3 billion people, India holds massive potential.
The number of internet and smartphone users in the country is growing rapidly, and the purchasing power of individuals is climbing up. Together, this has been an attractive cocktail for several foreign internet firms seeking growth on Indian shores. These include e-commerce major Amazon, ride-hailing firm Uber, and dating apps like Tinder and Bumble.
However, this trend has increased competition for Indian companies—think Ola versus Uber, Flipkart versus Amazon, and so on—and perhaps nudged them to take the fight abroad.
Having already penetrated most of the internet-savvy metros at home, some of these young Indian internet firms also face market saturation in the country. Others eye higher revenue by entering markets with more purchasing power.
“The life cycle of business ideas is much shorter and the windows for capturing the market are much shorter,” said Harish HV, an independent consultant who tracks Indian startups. “There is no ability to build in one market and grow there till saturation and then look elsewhere.”
Besides, there’s increasing pressure from investors now seeking returns on their investments. “These companies have raised massive amounts of money at sky-high valuations and they need to grow at a fast clip to justify those valuations,” said Kartik Hosanagar, professor of technology and digital business at University of Pennsylvania’s Wharton School.
However, blindly pursuing overseas growth may not be beneficial. Experts believe it is key for a young company to choose the right markets to expand into.
“Global markets come with larger ticket sizes and greater absolute margins on a unit economics basis…If they were only chasing large populations, then Pakistan, Bangladesh, Ethiopia, Nigeria etc. would be the pecking order,” said Ankur Nigam, a former partner at consulting firm KPMG. “Everyone’s looking for mature markets where service quality and customer experience are the differentiators.”
Once a startup finds the right market to expand into, an Indian team is well equipped to establish itself, analysts said.
Given its diversity, India is often referred to as many countries in one. This means a company that has built a successful product for India, is better equipped to handle diverse markets at once, experts say.
“It is my firm belief that any startup that can successfully scale to multiple states within India has developed the ethos and model that can be exported to most countries,” said Anirudh Damani, managing partner at Artha Venture Fund.
Ola, for instance, is in 110 Indian cities. To help drivers from various regions, its app for drivers is available in over 12 different languages already. So, it may not be too hard for the company to include foreign languages.
Besides, expanding abroad also lets the founders collaborate with new talent to develop a truly global product.
Byju’s is among those taking this route. The K-12 learning app, which raised $540 million from South Africa’s Naspers and Canada Pension Plan Investment Board earlier this week, is building a product for international markets.
“We are getting some of the most popular YouTube teachers, who are experts in their own domains, to India to record and help us with product development,” Mrinal Mohit, chief operating officer at Byju’s, said. “To begin with, our target markets are English-speaking and commonwealth countries.”
Needless to say, there are serious risks to such global expansion dream.
“Strategies and products that have worked well in India may not work in all international markets,” said Wharton’s Hosanagar.
Restaurants-listing and food-delivery platform Zomato is one of the biggest examples of the too-big-too-soon phenomenon. It launched in Dubai way back in 2012. The next few years were spent quickly expanding and making a string of acquisitions. Shortly thereafter, the expansion began to weigh heavily on the company’s finances.
“Internet is the foundation of their business, but they are as offline as any other business. Some have to form alliances with drivers, some with local sellers, some with educational institutes, restaurants, etc,” said Yugal Joshi, vice-president at Texas-based consulting firm Everest Group. “Though they can port their technology platform to these markets, they cannot create these alliances overnight. They aren’t Netflix which just has to stream existing content and can do easily in newer markets. These firms need a robust offline operating model to work.”
The one big benefit Indian startups have is that their investors are often foreign entities who can help navigate international expansions.
For instance, China Lodging Group was instrumental in OYO’s meteoric growth in China. Both Ola and OYO are backed by Japanese investing giant Softbank’s Vision Fund. Byju’s counts the Chan-Zuckerberg initiative and the World Bank’s investment arm, International Finance Corporation, among its investors.
“(The involvement of) international investors means Indian companies are able to better navigate compliance and regulatory affairs in foreign markets,” said Sanchit Vir Gogia, chief analyst at Greyhound Research. “On the more tactical level, they offer operational access to office space, talent and other support that is required to get the setup running.”
Besides investors, local talent is also a key piece of the puzzle—after all, the on-ground teams need to understand the nuances of a market.
“The default is to choose a high performer here and export that performer to the new country,” said KPMG’s Nigam. “Not so easy. It takes a lot of local flavor, touch and feel, cultural appreciation, and rapport with stakeholders (customers, vendors, banks, employees etc.). So the choice of the leader and the management can really script the success or the failure.”