S2 Bonus Episode: Jixun Foo of GGV: Why We Invested in Telio

For this bonus episode, we have Jixun Foo, managing partner of GGV Capital. Jixun recently led GGV’s investment in Telio’s Series A.

Jixun shared with us why he chose to invest in the B2B eCommerce model vs B2C, his advice for founders who are solving the fragmentation of supply chain in different markets, the metrics he tracks for startups in that space and his outlook for Vietnam as a startup ecosystem.

Telio is essentially solving the fragmentation and inefficiency in Vietnam’s retail economy. The same problem was solved by Alibaba in a slightly different way. The end customers of Telio are small retailers, the mom and pop shops. Why did you choose this model over the other b2c ecommerce startups in Vietnam?

One significant difference Southeast Asia market, in comparison to China, is the fragmentation of the market with 10 different countries. Another factor is the infrastructure readiness, the logistic infrastructure, the roads are not as developed as China. The whole payment infrastructure, how merchants get paid is also not as developed. 80% of the eCommerce in Southeast Asia is still cash on delivery. That in itself is a problem because when the infrastructure is not ready, last mile delivery is very expensive, so is the cost of delivery and returns.

For China’s eCommerce, there’s a 10 to 20% return rate. And that requires infrastructure to support the returns of goods. For mom and pops shops, the so-called provision shops, small retailers in the market, they serve the purpose beyond selling things. They serve a community, and therein lies a trust element, a credit element. We believe that powering the mom and pop shops is a very good way of solving their supply chain problems. Through the mom and pop shops to better serve the end consumers, because the community trust and the community effect is already available.

The narrative feels similar to our other portfolio Udaan, which is an Indian company that’s solving the same problem. Yet if you look at the size of the economy for Vietnam and India, Vietnam is actually significantly smaller. Can you share what gives you the confidence to go in investing in the equivalent of that for the lack of a better words for Vietnam?

The Vietnam market is the size of one province in China, Henan Province, with close to 100 million people. It’s not a small market. It’s sizable enough. It’s small relative to China and India. But that means Telio could go deep.

Telio is solving the B2B supply chain problem for the small retailers. They could also help to transform these small retailers and businesses to do more stuff over time, including powering their front to acquire users, and later on potentially even providing them with the right form of financing. When the market is smaller, what makes sense is to go deeper and try to provide more value to the whole ecosystem, the retail ecosystem in Vietnam. One thing India and Vietnam have in common is that the cost of delivery and the cost of last mile is still very high. And as a result, your cost of last mile delivery as a ratio to the average order value may not make much sense. So, going through these mom and pop shops and small retailers and not having to pay for the last mile to us makes a lot of sense. It will help generate better value and create better unit economies for the platforms.

The valuation of the B2B eCommerce companies can be quite high given the potential providing financial services to the small business owners. And as an investor, you must have heard the pitch over and over again. How do you know that a startup has what it takes to realize that potential versus they’re just telling a story to the investors?

I think the potential is always there. To execute on that potential, however, takes the right talent, the right people, the right sort of licenses depending on the jurisdiction you are in. FinTech is not a given, just a potential. Whether you can realize that potential lies in your ability to serve the small retailers. You need to serve them well and capture as much wallet share as possible, which is the percentage of purchases of their supplies done through the platform versus their traditional sources. If you can support them to build up their business and help them grow their business and become more profitable, they will stick with you over time. What you capture in the process is data. Only when you understand their business well enough, how they have done in their business, you will be able to assess that credit worthiness far better than many other independent financial services or institution.

The idea of having data as the backend and output of this service will help translate into credit understanding, and then the potential for providing financial services. That’s a step by step process. The first order is you can serve these retailers well, and they are willing to run their business on your platform. That’s the first thing. And if you cannot serve them well, and they don’t run their business on a continuous basis on your platform, then it’s very hard for you to capture the right amount of data, it’s very hard for you to fully assess their credit worthiness, that’s the prerequisite to financial services.

For founders who are trying to collapse the supply chain in other industries, how would you suggest them to go about one acquiring new users, two building a network of suppliers?

These users are essentially merchants. There are two different types of user acquisition approaches. We invested in Udaan, Khatabook and now Telio. All three of them follow a common thesis, which is to power the small retailers. Having said that, Udaan and Khatabook are different. Udaan is a B2B marketplace model, similar to Telio. Khatabook is a light bookkeeping application for the small retailers. For light product like Khatabook, the user acquisition is more driven by online and through referral. The marketing approach or the user acquisition approach is largely through referral incentives in online channels. So that’s the for light product.

For the Udaan and Telio model, given the complexity of the product, the conversion you need to get them to use your product, or be on your marketplace, you probably need ground troops in the forms of salesforce and business development to go acquire these users.

Similarly, for supply chain you will need a separate team to cover that. This essentially is a fairly labor-intensive model, as we have seen that movie in Meicai and Full Truck Alliance. What you really want to do is to drive the adoption and retention as high as possible with the sales force. And over time, they go on a more maintenance mode. This is going to be labor intensive model initially. Fortunately, the cost of labor is still low in Southeast Asia and India.

You just mentioned the last mile cost of fulfillment is still very high for markets like Vietnam and India. Can you name a few other metrics you look at when you know talking to companies similar to Telio or Udaan?

When I say the last mile delivery cost is high. It is relative to the average order value. If you look at this is from a macro level, China’s logistics as a component of a GDP is about 15%; the US is less than 10%; Indonesia is around 25%. I don’t have the number for Vietnam. But the point here is the cost is relative to your spending power or average order value. When the relative cost is high, you end up squeezing out the margin.

So other metrics that I look at are user acquisition costs and lifetime value of your users. In that sense, I look at the unit economics of your business, how much does it take to acquire one customer or one user. And you have to factor in all costs, including marketing, salesforce, and add that to your user acquisition cost at a per unit level, meaning per merchant, or per user. On the other end of the equation is the lifetime value, how much value would this merchant or this user create for you in terms of gross profit over time. There are users who come one time and gone. So, there’s a retention factor. When customers continue to use your product and generate profit for you, the cumulative of that number is what we call lifetime value. The lifetime value should be higher than your user acquisition costs. If that equation is positive, that’s a good business. If that equation is negative, that’s a bad business. So that’s how I would simply look at it.

Now obviously, there are cases where the equation is negative initially, but it turns positive over time, or the trend lines towards positive so that’s a bet, right. So, we do look at these numbers and we look at the trend behind Those numbers as well.

Telio is GGV’s first investment in Vietnam. Are you looking to do more in this market? What about the market that excites you? And what are your concerns?

Yeah, we are excited about it. We have this big thesis around the next billion users. We have seen that movie in China and the US, similar transformation will happen because mobile internet is transforming the way people consume content, merchandise and even pay for services. So that’s a huge migration that we are seeing. Southeast Asia and India have a combined population of 2 billion. Big part of that population is going to convert into internet users. So that’s the exciting part.

Now obviously these markets have its own challenges. There are various frictions with fragmentation of the markets, the logistic infrastructure which I talked about earlier, all these are frictions in the market. Payment infrastructure is still underdeveloped. These are going to limit the speed of adoption. This is where we watch for at a macro level, how governments are shaping the infrastructure and minimizing the friction over time. If they do more of that, we will be even more excited.

Overall, we probably need more engineer talent in Southeast Asia, but Vietnam has a great engineering talent base. There’s no lack of entrepreneurial talent here. And that gets us excited to spend more time and interest in Vietnam.


S2 Episode 9: SyPhong and My Linh of Telio: Becoming a Unicorn of Impact by Serving Mom and Pop Shops in Vietnam

This episode is co-hosted by my colleague Dimitra Taslim. Dimi is on the investment team at GGV Capital. 

Today on the show, we have SyPhong Bui and My Linh from Telio. Founded in 2018, Telio is already Vietnam’s largest b2b eCommerce platform. It connects small traditional retailers with brands and wholesalers on a centralized platform using technology and data. Telio is a GGV portfolio.

On the show, we discussed how SyPhong got his idea for Telio because of Jack Ma from Alibaba, the lessons he learned from 2 previous failed startup he founded, the challenges facing mom and pop shops in Vietnam and how the tech ecosystem in the market has evolved in the market.

SyPhong, the founder of Telio has 10 years of experience across telecoms and banks in both France and Vietnam. SyPhong drew inspiration for Telio after being selected for the Alibaba leadership program in 2018, learning a lot about the advanced b2b landscape in China and India. He founded two other companies in Vietnam before Telio. He has a bachelor’s degree in Computer Science from Pierre and Marie Curie University and a Master of Computer Science in Paris. My Linh, the head of strategy of Telio, has a bachelor’s degree in economics from the University of Birmingham in the UK. She spent four years working for different startups in Vietnam and has joined SyPhong in his previous company before Telio.

Hans: Tell us the story behind how you come up with the idea for Telio during the Alibaba Leadership Program.

SyPhong Bui:

Before running Telio, I built two other companies, one for online car rental and another one for cashless payment. During the previous company for cashless payment, I was selected as one of the eFounders for Alibaba’s eFounders program and we were in Hangzhou on Alibaba campus for 10 days. The objective of those 10 days is to understand e-commerce logistic, payment and then also travel industry and how the golden triangle of e-commerce, logistics and payment help Alibaba to grow. We learned from Alibaba the importance of being inclusive in your business. Inclusive meaning that everybody can use your product and your product can help other people’s businesses to grow.

It’s a very fundamental idea, and we heard that straight from Jack. It touched me very deeply. And I think about how we can help the household businesses in the country. And indeed, after our research again and again about the daily lives of small business owners, we found out that they have a lot of pain points. And from there, we decided to create Telio.

Hans: Yeah, Jack has always been about helping the little guys from day one. Alibaba is the ultimate SMB tech or b2b2c company.

SyPhong Bui:

During that period of time, we also learned how he sees small businesses as the backbone of the economy for every country. According to him, helping these businesses will have a big impact on society.


Right, and I think one reason why Alibaba grew so much over the last two decades was they empower the little guys to make money, to better themselves, to be more efficient.

SyPhong Bui:

Correct. So this is something different from the two businesses that I have built before Telio. The first idea came from us looking at the big sector of the economy (transportation), where we do online car rental from individual to individual. The second sector that we look at is cashless payment. And we wanted to build a big company and then after that layer other services on top of that, but we have been doing businesses from our perspective. After the trip to Hangzhou and meeting with Jack and seeing the ecosystem, it changed our mindset. I was back in Vietnam and tell my team, “Hey guys, we need to do the business that our customer wanted us to do.” So that is how we decided to work closely with the household businesses or small retailers across the country.

Dimi: Can you tell us what kind of problems do these small mom and pop shops in Vietnam face? How many are there , and why are they so important to the local communities in Vietnam?

My Linh:

For the previous payment startup, we have a lot of mom and pop stores as our acceptance points. We found out that cashless payment isn’t one of the main pain points of the mom and pop stores. However, we find out that fulfilling their stores is a pain point where we can help.  

Basically, a mom and pop store has an average size of 20 to 30 square meters and sells about 500 to 600 SKU. With that, they have to contact around 50 to 80 contact points to fulfill their store suppliers. The reason is a typical supplier in Vietnam doesn’t sell multiple brands or multiple verticals.

The second problem is that the pricing is not very transparent in the FMCG wholesale market. It’s often difficult for a store to find which is the best supplier in town for a particular type of goods, who have the best price as well as other supporting policies. These stores often only find out the price after they have received the goods. It’s very hard to ask for the price with typical suppliers. They tend to only give pricing for the first few items and get reluctant to give more.

The next pain point is delivery. Suppliers tend to have free delivery only if retailers meet a certain MOQ (minimum order quantity). Anything below that, they won’t give free delivery at all. It gets worse for smaller mom and pop stores. Sometimes they get delivery but it’s not on time, or it’s scheduled delivery within a certain day in a week. That means without predicting their stock really well, they will have some out of stock timeframe for their stores. That’s how we come up with Telio, where they can easily find sources for their goods all in one place with flexible delivery and transparent pricing. So instead of managing multiple contact points, multiple deliveries within a day, or different days in a week, they can now order from Telio and have delivery in one shot.

SyPhong Bui:

We started with a specific set of retailers who sell fast moving consumer goods, FMCG. There are more than 300,000 of them across the country, and then they are selling 85% of the whole country’s FMCG volume. This channel is responsible for about 17 billion USD FMCG sales every year. Our vision is to expand to retailers selling other types of goods as well. And there are more than two million small retailers across the country. This is a very big population that we would love to empower them to do better business every day.

Hans: Right. At GGV, we have spent a lot of time looking at this category. We invested in companies that are empowering and enabling mom and pop stores in Latin America, Indonesia, India and now Vietnam.

Dimi: SyPhong, you mentioned that 85% of all FMCG sales flow through these mom and pop shops, which is quite similar to India’s number. Udaan became the fastest unicorn ever in the history of India. Should we expect the same from Telio?

SyPhong Bui:

That a very good and tough question. We are working on a big and important category because it is all fast-moving consumer goods, the essential goods for people’s daily lives. If a company like ourselves capturing this opportunity as a whole, I definitely believe that we can become a unicorn in the country.

I recently always tell my team that the definition of a unicorn is valuation of more than 1 billion USD. We would love to become a unicorn of impact first, which means every single action we deliver can make our customers happy. We want to deliver billions of billions of impacts to our customer, a good delivery on time making our customers happy or a better pricing for them, creating jobs for unemployed people, especially for the middle class and lower-class people. Those are the impact that we really would love to create and being the impact lead that makers a unicorn of impact.


Right, those are good answers. And GGV will also don’t believe in a rush to grow your size. If you deliver value and you make a positive impact on society, good things will come over time.

Dimi: Could you tell the audience about the key drivers and metrics for a company like this operating in Vietnam?

My Linh:

As an early stage startup in Vietnam, we track a couple of metrics. The first one is the retention rate. Not only on the retention rate as the percentage of customers coming back over time but also their activities with us. Do they become more engaged, sourcing more percentage of their store through us?

The second metrics is the conversion rate. So how many retailers can we acquire per month, and to get that number of customers, how many have we approached? For those that we didn’t get, Why? We can then continuously improve our products so that it become fitter for the market and meet the expectations of our retailers. Those are the two metrics. GMV will come if we have more customers stay with us over time, more engaged with us over time.

Besides the growth metrics, we also care a lot about our financials metrics, the unit economics, average order size, the variable costs that we take up to generate those GMV, the percentage that go into costs and so on.

We also care a lot about our suppliers. We have a pool of suppliers that are divided into the brands, wholesalers the distributors. Our target is to connect with as many brands as possible, instead of retailers or distributors. We also track how many brands we can acquire over time, the GMV going through each of them, and the retention rate of the brands with us.

SyPhong Bui:

I would add a little bit more about how we track a retailer. We love to see the frequency of buying from our retailers keep increasing, also the amount of each transaction. The retailer wallet share. We track the number of SKUs that we can sell to our retailers. When we first started, we only sell 30 to 50 SKUs, but we keep increasing our SKUs. Besides sourcing, we also care about other aspects of store operations, like store management, working capital, etc. So we are always looking for opportunities to serve them better.

Hans: Could you talk a little bit about the tech ecosystem in Vietnam. How has that changed in the last few years?

SyPhong Bui:

Okay, so that is a big question. I’ll try to address that.

I have the luck to start my first company back in 2014, the early days of the startup in Vietnam. Five years back, we are at a very initial state.

I would say a good startup scene is made of good founders, good talent and good resources for building the company like IT talent and access to capital. You also need good mentors and support from the government. Back in 2014, we were at a very initial stage. Today we are in a more advanced state where the government is supportive and open for investments. I was lucky to be working on the cashless payments, so I have the opportunity to deal with regulators. I know that they are more open minded right now.

As for the talent, we not only have a lot of talent in the country but also oversea talent coming back to the country in this new era of development. We are in a good place on that. The world is also paying more attention to developing countries like ours. We are not a big country, but still have good traction with close to 100 million people population. Our GDP has been growing 6% to 7% year on year for more than 10 years. And then we are expecting to hit around 9% this year. We have an open economy with export and import, which creates a good landscape for investment to flow in. I would say that we are in a much better state right now. We still have a lot of things to do compared to a country like Indonesia or Singapore.

Another key factor for startup investors is the quality of the founding team. Everybody has the market data in order to know whether there are opportunities for investment. But the second question is whether the team is capable of doing so. This is another key thing that Vietnam needs to develop in the next few years in order to gain more traction for investment.

Dimi: What has been the most surprising thing about your entrepreneurial journey so far?

SyPhong Bui:

The most surprising thing is that I didn’t expect it to be this hard. I came from a corporate environment. I first started in Paris and worked to serve telecom companies in Europe and then worked in the financial sector for a long while before doing my own startup.

For us who had a good career path in corporate life, we didn’t know how hard startups can be. I keep calling “we” because it’s one of my friends from a reputable consulting firm. We co-founded the first company. We thought it would be easy and we’re going to build a very successful and big company. But things turned out very south for us. We failed and had to close the company after 8 months. Another very tough experience was that the second company that I grew from only myself to close to 160 people.  Then we cannot take it off and have to swallow the pain of letting people go. It’s very difficult. The lesson is to seriously consider the product market fit and putting customers instead of ourselves in the first place. This is a very surprising experience. But I think a good experience as it trains myself and then also the core team a lot on how to be, how to assess the business opportunity and how to run a business properly.


SyPhong and My Linh, as you know, Vietnam is growing very quickly and people are getting richer and richer every year, GDP per capita is growing very fast. For the convenience store segment, both the international and local competitors, big conglomerates like Vingroup, international players like Korea’s Lotte group is going into Vietnam and they’re setting up a lot of these convenience stores. They are air conditioned, a bit more comfortable than a mom and pop shop that you target. For both of you, how can you help your customer base to stay relevant for the Vietnamese consumers?

SyPhong :

Besides selling the daily essentials for people, mom and pop shops are also community points for people in the neighborhood. They are important for people and difficult to replace.

The trade-off with a new model is that you have to have prime locations and a large range of SKU covering from perishable, instant food like fried chicken, for example. The management become more complex, so is the cost of selling.

Based on our research right now, the pricing on the convenience store is often 10% more expensive than a mom and pop shop. Mom and pop shops remain convenient in a way that you can take a bike, drop by the shop and then take the good and go back. The pricing is much more affordable. A lot of these stores also offer credit for the end consumers. My father, for example, has some money in the pocket but very often he buys the good and pays at the end of the week or even at the end of the month.

This combination will give a lot of opportunities for mom and pop shop to sustain and grow, especially with the owners who know how to better manage the store with centralized procurement, store management and better financing of opportunity to grow. One of the key things we saw in China is that the digitalization of the mom and pop stores could be considered, especially in Vietnam, as a new retail opportunity for us. This is one of the key things that we think about and then that will bring a much more competitive force against chains and convenience stores.

S2 Episode 8: Ankiti from Zilingo: Building an Operating System for Fashion Merchants in Asia and beyond

On the show today, we have Ankiti Bose, the founder and CEO of Zilingo, one of the largest fashion & lifestyle marketplaces in Southeast Asia. According to Bloomberg, the latest financing valued Zilingo is at $970 million. Ankiti is among the youngest female chief executives to lead a multi-million-dollar startup in Asia.

Ankiti reveals how she thinks about the nature of Zilingo’s business, the growth drivers of a 12x track in a short span of 4 years, being a first-time entrepreneur at 23, building localized teams in different countries and the staples in her wardrobe.

Prior to launching Zilingo, Ankiti worked at McKinsey as a management consultant and Sequoia as an investment analyst. She holds a bachelor’s degree in mathematics and economics from St. Xavier’s College in Mumbai.


First of all, help us understand how Zilingo works. Who are your main customers? And how do you work with them? What value do you provide for them?


So fashion apparel is a 4% of the global GDP. It’s a huge industry, almost a $3 trillion industry. And the way the industry works is that we are all wearing clothes in this room, it is very likely that you’re short cross borders to get to you. So the fabric probably came from China or India, if it’s cotton, if it’s polyester, viscose, probably China. Then it went over the trims came from, let’s say, India, I went to a factory in Vietnam, and it got woven a stitch there. And it went to the brand that you sold from Italy, and then maybe you bought it in New York, but it’s very likely that many of these steps actually the place. So it’s a large industry. It’s a very fundamentally cross border industry. Despite that, there is no Foxconn in it. There’s nobody setting the standards of manufacturing in this industry. And there’s also no SAP or Oracle, which is setting across the supply chain. So suddenly, what you have is you have one of the largest industries in the world. It’s fundamentally cross border. But it is filled with middlemen and intermediaries and people who are taking away more value than they’re adding across the supply chain. So what do you have is a large supply chain rot with a lot of middlemen. What Zilingo does is we’re an end to end cloud platform that connects right from the guy that makes the yarn, the fabric guy, the manufacturer to the brand, enabling them to do commerce with each other better, allowing them a tech platform, which also sort of provides analytics and financial services on top of that to efficiently take care of all of their business.


If I am a designer or apparel merchant in the Southeast Asia and I wanted to sell my clothes, how can Zilingo help me?


Let’s say you’re a merchant in Southeast Asia, let’s say you’re a merchant anywhere. Your problems are, of course, your problems are how do I sell more? But more importantly, it’s, you know, how do I source better? How do I get financing for that sourcing? How do I make sure that I get the best pricing on that sourcing? How do I get the best cost of logistics for shipping my goods? How do I get the best payment processing costs? Because as a small merchant, or even as a medium sized merchant, maybe you sell hundred products, maybe you sell thousand products, maybe you sell 10,000 products. But are you as big as Zara, are you as big as H&M, there is no way that just by yourself your economics would be competitive or even it can be compared to a large conglomerate? That’s where Zilingo comes in. Zilingo says Hey, little merchants, brand SME, whoever you are, you are the center of creative thought. You are the one who’s deciding what you want to make. Let us take care of everything. Let us come in and connect you with the guys that will manufacture your product, best to the capabilities that you require. Let us finance your working capital needs for it, let us give you logistics at the rates that large conglomerates would have. Let us give you payment processing options that you as a small brand can never have. And the reasons Zilingo is able to provide these at very competitive rates to a small merchant is because we are aggregating this across hundreds of thousands of merchants. So suddenly, each merchant has a very competitive economics as competitive or at least comparable to the large conglomerates, because the power of unifying them and aggregating them is being brought to them by single.


You’re saying if there’s five different small merchants who wants to sell and source and then you can help them achieve that scale effect and negotiate better deals, but what if their styles aren’t the same? I mean, isn’t that the nature of smaller brand?


Absolutely, the styles don’t have to be the same. The way of fashion works is that usually when you’re talking about sourcing from factories, there are a few different types of products that are other than knits or wovens, maybe there are denims, there are polyester, there are cotton, and so on and so forth. What we do is we tie up with over 4000 factories that are on our platform, many of them are our cloud factories, similar concept to cloud kitchen where we have leased facilities where we bring in our technology hardware and software and increase the capacity utilization. And then as long as it’s within some boundaries of these are units are these are wovens, or these are denims. We can negotiate with the suppliers on behalf of multiple manufacturers and we sometimes given mentary guarantees, sometimes it’s on demand, but essentially the rates are net net significantly better at least 30 to 40% better than what they would do if they were small brands that were trying to negotiate directly with factories themselves.

So you were investment analyst at Sequio, you start off in India and then went to Singapore. It’s a great job that many people will want. Why do this? And how did you come up with the idea to do this?

That is true. I think working at Sequoia Capital and working with venture capital was a dream. There was a, I think the best job that I could have ever asked for.

Also working at GGV, of course.

Yes, yes, I’m sure. Absolutely. And I think had I not started out on my own, that would have been, that would have been the job that I would have loved to continue to do, if they would have had if they would have me. But when I was as I was spending a lot of time working for Sequoia and working in Southeast Asia and in India, this was in 2014. So Southeast Asia didn’t yet have any unicorns. And a lot of though there are so many now but they were all babies. Then what does this insane potential? And, you know, you could feel that crazy things were about to happen in Southeast Asia. I had seen that happen in India, of course in India, we had gone through a little bit of ups and downs, and then some serious downs and some insane ups. So I was mentally prepared for that. But it seemed like Southeast Asia was such a great opportunity. The end of 2014, I was on holiday in Thailand, with a few of my friends who were ex-colleagues from McKinsey. And we were this market called Chatuchak. This was while I was working at Sequoia Capital, so Chatuchak market has over 25,000 merchants, and about 8000 of them are broadly in the fashion space of fashion accessories bags like that. And people were crazy about it, right. So it’s a weekend market. It’s not even there every day, people would fly down from Singapore from Hong Kong every region just shop in Bangkok and go back. And these merchants were really good at what they did. But they had zero sense of how to digitize their business. So while you know back then there was of course, there was a Lazada and a few other marketplaces were coming up. These guys didn’t have any tools to actually do anything besides list on online b2c marketplaces. And fundamentals of the economics were such that no matter what you do, unless you made the margins better for this guy, there was no way you could make money in e-commerce, right? Because the margins are already so thin. Exactly. So we said here’s something else is going on. Right? So some somewhere the margins are getting, you know, squeezed out before the product even gets on the marketplaces. So something else is going on, especially in categories like fashion where people perceive it to be a high margin category. How can you still burn money on b2c commerce even in categories where there’s so much margins, so that’s when we started looking back and looking more and more upstream and trying to understand where the merchants are resourcing from why they were not going directly to factories, you know why their quantities were not, you know, their minimum quantities were so small factories, were not doing it. So then there were agents and distributors, and we said, okay, this whole thing is so old school that should fix this. And that sort of led to the inception of everything else that we built in the future.


You have a choice to do this in Singapore or Bangalore. Why did you choose Singapore? You have option of Singapore, Bangalore and Jakarta. I guess.


That’s right. Going back to what I said before, fashion is very across borders. So we knew that we needed a company that would be able to scale Asia, if not globally, back then maybe we were thinking by Asia. Now we’re thinking of course, including the US, where now so many of our customers are and Singapore made a lot of strategic sense. It’s a great country, very supportive regulations and and so on and so forth. And both from an investment standpoint as well as partnerships, as well as everything else, it makes sense to have the parent company headquartered in Singapore. And then having entities in countries like Thailand and Indonesia and Bangladesh where sourcing can happen. Having entities in countries like India and Vietnam, where the back could be based. Having entity in Hong Kong so that, you know, supply gaps from China can be filled. So we thought of all of that, yes, we didn’t know exactly how it would come out, but it made sense that the parent would be in Singapore, and then all of these baby companies would serve different purposes.

You have quite a global customer base with local tastes and have a variety of strong local competitors as well. How do you go about localizing the business and talent while building something that applies to other geographies?  


That’s a very, very true statement that people say the phrase Southeast Asia or people say South Asia, like it means something. And I really think it is western construct because within Southeast Asia, if you think about Indonesia, and Thailand and Philippines and Singapore, they really don’t have so much in common with one another. The language, the culture, the food, the currency, everything is different. They are not trading with one another or even inside their countries in English or in Chinese. So they’re fundamentally independent cultures and economies. Again, if you look at South Asia, you look at India, Bangladesh, Sri Lanka, you know, maybe language barriers are a little fewer, but they’re completely different from one another like federal government regulation standpoint and everything. So, painting these regions with one brush, and you know, bucketing them into one phrases is a very western construct. And what that implies, like you said is that the product, the business, the trade, the culture and offices is super, super different, right? So from a product standpoint, and from a business standpoint, We make sure is that each large country, each large team is led by a local leader who was sort of a local founder, who has completely decentralized decision making powers to run that country. So we have strong leaders in each of these countries who understand the product and the team and the culture over there. Because you know, we have 15 nationalities in Zilingo for our team and, you know, customers in eight countries, but we’re 15 nationalities. So everybody is very different from one another. We are 50% female team, but even within that there’s so much diversity. You know, there are white women, they’re Muslim women, they’re Indian women, they’re all sorts of different ethnicities, religions, cultures and the only way the best way to make it work is to have these subcultures be independent, and then tie them together with common values. So I think it’s a very interesting and very challenging thing, but we try to address it by letting everybody Independence remain and let everybody’s individuality remain.


How did you assemble those local teams in the first place?


It was fun. It’s great fun, I think Indonesia, which is our largest office, the team that started Indonesia, there was sort of like a bridge team, the bridge between India, Singapore and Indonesia. And then they hired the local, you know, co-founders of Zilingo Indonesia, who then build up their team, and then they hire more people, and so on and so forth. So it was a very localized approach to team building, it wasn’t that what we have come from India or the Delhi or Singapore. Now, these are the rules and we will tell you how to run this. We were like you know Indonesia the best. So, these are the things these are the guiding principles. These are the goals and these are the values but let’s make it applicable to Indonesia. And I think that’s why it worked, and I’ve seen many companies were not doing that and not respecting the variety of a culture has actually led to failure. We really appreciate that all of these cultures are super different. And we need local strong founders and each of these.


What is that mentality comes from? Because I would imagine for many other founders, they would like to have a sense of control across different regions. Why do you have that?


I think I don’t feel us lack of control. From this, in fact, if anything, I feel like having, I think most people at Zilingo, irrespective of which country in which team they work at, have a strong sense of belonging to their workplace. So it’s like, you know, they’re working 18 hours a day. It’s like, it’s majority of their life. It’s not a part of their life. There’s no work life balance, it’s like, you know.

It’s at least 996 and, and therefore, it’s, it’s a big part of their life. So they have to have a strong sense of belonging to where they are and that gives a lot of sort of sense of unity and loyalty to the common vision and common purpose. And that actually makes me feel like we’re much more in control because people are happy and people want to do this. And that comes from respecting their individuality. So if this was much more top down in terms of governance, I feel like there would be more discontent because people are so different like, we have a team in New York and we have a team in Jakarta, in Bangkok. And we have a team in Bangalore. Outside of Zilingo there’s not a lot in common. So you have to let that individuality flourish and give them like local leaders they can look up to and relate to, and then sort of tie in together with common goals, KPI or OKR values, rather than sort of force it top down. But I think it also helps that, you know, our leadership is 50% female. So it’s very, it’s like non-threatening in a way. That’s how people that’s how we’re all human brains of bias. There’s some good things about it. There’s some bad things that come out of biases, but I think people relate to a diverse both from a gender and ethnicity standpoint to diverse leadership. people relate to it more easily. So it’s not like there’s a foreign construct of rules and KPIs, and we have to somehow follow it. It’s not like that at all.

How does you recruit local leaders?


I think in most of the countries, we call them founders. They were all found by us, like we call call them, email them message them, they were all like a different company. He’s at like Lazada. And they didn’t come through recruiters or you know, investors or any of that. Not that we didn’t try those other methods. But I think all the guys who finally are in the top team now were all people that either we knew, or we just sort of hounded and cold call. We spent a lot of time with, I think of like this, I think this way about hiring senior team about investing, getting investors on board, as I always say, to others that date, date, date before you marry. So we’ve spent a lot of time. Whoever it is, if you’re going to be, you know, related to one another with equity and with your time and with your life, then be sure of it. Spend time trying to getting to know each other, and you’re working styles, and so on and so forth. So we’ve done that with all of these people before we made, took the plunge. And it worked out. 

When you look at your business, do you think of in terms of b2b and b2c? How do you think about sort of where you expand to and what value you provide?


Yeah, we’re definitely a b2b company in the sense that our purpose is to solve the merchant. And in some cases, the merchant is the yarn guy. In some cases, the merchant is a fabric guy, sometimes it’s a factory, but we are an end to end platform that serves use cases around merchant. So we are to be platform when we say think of the customer, we’re thinking about merchant, we do have to see marketplace business in Southeast Asia. It’s a very small part of our business. It’s an additional distribution channel in markets where our merchants don’t have adequate distribution channels to distribute fashion. But you know, for example, our to see marketplaces, not something that we operate in the US or in India or any of these spaces, but our merchants do distribute their products in those markets using our software, but on other marketplaces.

So when you were first building your business, did you come in thinking that it’s going to be more b2b focused, or it kind of tried the bit of different things and realized that this is where the most value is being generated?


I think we tried a bunch of different things. And, you know, I don’t like the word pivot. I like to say, evolution, evolve, so what we as we were spending more and more time with merchants, we realize that number of problems that you can solve for them and you know even make money out of solving those problems versus using all of your VC capital to chase the 2c customer and inundate them with discounts which already so many other people are doing. We took a sort of hard look at ourselves and we said, you know what, let’s do the it’s a slightly tougher problem. But the 2B problem seems to be the one where there is a lot of value to be created and not a lot of capitalist chasing it. I’m really glad that now I feel like people have woken up to the 2B opportunit. But two years ago, it was a little bit of a, you know, why you doing that? It’s not sexy, and so on and so forth. But I think we did the right thing and when I feel like we generate a lot of value for the merchants  and our business as well.


As you know, successful examples from US and then China were mostly 2C. So it’s easy to replicate a model to other places. But given where especially India is with the GDP per capita? B2b makes so much more sense so much value to provide us so many more merchants. The market is so fragmented that it is we’re seeing a pattern emerging.


Yes, I’m so I actually wanted to ask you about this particular b2c versus b2b because in China the problem I would say like 20 years ago, it’s pretty similar. There’s like small merchant doing their own thing. So there is in fact a b2b that Alibaba solve. But it was too early. There’s not enough transaction services possible and not enough people were online so it was to be back then was just more about ads listing kind of business. These days you start to see more b2b e commerce emerging but 2C was so strong, that many of them whose integrate upwards. India is different. So building b2b now makes perfect sense for India and Southeast Asia.

I see. So Ankiti, growing up India you actually moved around quite a bit, does that even affect you how you run your business today?


For sure. So, I was born in Mumbai. Then I grew up in very remote part of Northeast India called Tripura which is very close to Bangladesh. Then I moved to the home which is in the north of India, again very small city, move back to Mumbai, my parents were in New Delhi, I continue to study in Mumbai. Then once I started working, and then, you know, move from McKinsey then to Sequoia and then Zilingo the last five years I’ve stayed in Bombay, Bangalore, Jakarta, Bangkok and Singapore. And I’m spending a lot of time in New York. So I think somewhere even as a child, getting uprooted and get going to a new environment. I’m trying to be sort of not just fascinated, but looking at the opportunities and new environments was became normal at age of six months old. And then by age 3, it happened again, right seven again, it didn’t happen. So I think it was normalized as a child, and I also am somebody who does get bored and saturated quite quickly so I need to move around a little bit and find new things and opportunity to chas which is exciting and which helps me at work coming back to what you said either because I’m paranoid that you know I was 23 minutes when I started Ziliongo. I get paranoid that there’s another 23 year old who’s gonna probably figure out how to better than us and you know, do it so much better than us. So I’m constantly trying to be that 23 year old and look at opportunities from different business lens and geography balances and so on.


This is your first startup. And it has grown 12 times since its founding. It’s a pretty impressive track record. Can you share with us like what are some of the key drivers of this growth?


I think the first sort of inception of the idea came from the fact that businesses in Southeast Asia and Asia in general, can’t be painted with one brush. Unlike India or China, the rest of Asia is actually super fragmented. So at first, the first spot of growth started when we started addressing and treating each market and each product and each business like its own being. Then the second spot of growth happened when we took a hard look at ourselves and said, let’s focus on the 2B opportunity. Let’s focus on the merchant instead of spending money on subsidies to onboard more customers because everybody’s already doing that. And more merchants are selling online. But let’s help them sell online better with technology with data science with financial services and sourcing. Let’s just focus on providing these four services to them. And then the next and I think the biggest sort of the steepest growth have happened in our lives about two years ago when we realized that providing free technology and providing procurement is all great and people wanted providing data science in terms of what they should source etc is great. But what is the main missing link and sort of the enabler to all of this is financial services. So we said we need to learn how to be a good FinTech company, right, if we want to be a good fashion company. And that’s because most of these merchants in most of these countries were in the, you know, some of them could be laymen, but many of them could be great businesses, but there was no credit score, there was no history, there was no tracking of who they were sourcing from who they were selling to. So let’s say a bank wants to fund them, but they can’t. So we realize that as the platform that could see who was buying what from whom, and then selling it forward to who, even though the guy doesn’t know like a yarn guy doesn’t know that his yarn finally became the shirt that you’re wearing. But if you bought it from a credible brand, then the yarn guy should be able to get financial services because he’s a good yarn guy, but even he doesn’t know if he’s a good enough yarn guy and definitely the banks don’t know it. Yes. So we said this is obviously the not just the biggest enabler and biggest lubricant of growth, this is also the big mode of our business. So let’s focus on this and then when we did that, and we learned how to be a good financial services enabler, that’s when the crazy 12 x growth happen that you that you’re talking about. And I think the reason all of this has happened is because I always say mission, vision, etc, keeps on changing. Values can also evolve over time. We should all take ourselves less seriously and look at what’s happening in the market and evolve with it. Otherwise, somebody else some 23 year old is going to be. So let’s like always have an open mind in terms of what we do. And of course, I receive a lot of flack for it as well. People question it all the time and be encouraged that dissent like why did you choose this? You said we will do this last year. Why are you changing? And now the answer is to be competitive and to be a valuable company, we have to change our outlook. And that’s okay.


As you grow so fast, who do you try to learn from or look up to? Or how do you find source of inspiration to guide you to make decisions?

I think obviously, it sounds cliche to name, both Alibaba and Amazon. But I’ll be more specific as to why I would again say that those two companies are quite critical in our story as well. Alibaba, like you said 2B and then monetize with marketing services in a much less mature to be e-commerce market when they did it. But they brought things like marketing as a service as monetization tool for the first time in the world. So that is very exciting to us, because it tells us that creating an ecosystem of services on top of a platform is a serious monetization strategy. It can even be the only one. It worked for them. The other thing and the thing we learn from Amazon and from AWS and from the plethora of things that Amazon does is how to really be a multipronged company that does so many things that creates so much dependence across the whole platform and ecosystem, that you become a company that is incredibly hard to kill. How do you attack Amazon? It’s it’s impossible. It’s very difficult.

But it’s like, what you do with AWS and the kind of dependence it creates? Or what would you do with different aspects of different retail businesses that they own both offline now and online? It’s incredible to think that big and as a platform and think of, the core commerce business, as serving only one part of the mission and having other businesses create dependence across customers and businesses. So it’s an incredible learning experience for us to see how Amazon and Alibaba evolved over time talked about financial services, talked about software as a service over time, and how that is actually solved the core purpose? And we love to look at that and learn from it.


So how is Zilingo organized today?


There’s obviously the core commerce business, which connects businesses, the fabric guy, the yarn

guy, the factories and the brands, and allows them to trade with one another. Then there are the services which are which uses the data and the invoices from the transaction business, to use that to deploy financial services, marketing services, packaging services, we do 36 of those. So you name it, like you maybe you’re a factory and you don’t have any catalog, we could do something like that. So maybe you’re a factory and you want, you will be to lend to you. So even that would be enabled with the data. And then of course, there are higher value added services like data analytics, for example, what should I source? How do I manage my inventory? Watch theri stock? So does the entire services business of which financial services the one that requires a separate structure of its own because it is both originating loans and advances for financial institutions as well as giving out credit on its own from Zilingo. So that’s how the businesses geographically of course, there’s Asia and now this, the US Zilingo in.


How standardize or productize all these 36 services you have?


They’re pretty standardized across the board because they need to be deployed to thousands of businesses simultaneously. However, for a lot of our big customers, you know, we recently started working with Disney across Disney, Disney live action, Marvel Star Wars etc. They’re wonderful brands, and they’re very different from a typical merchant. Zilingo was much smaller, but for them for example, we will do bespoke services and bespoke procurement, etc. So we do make exceptions for really large brands that we work with but most of the services are quite standardized because a guy that’s making hundred units and maybe 100 units at a time $100,000 in a whole year is also capable of using the lingo. Yeah. So we will not do bespoke for them. But it would be a very standardized.


But you have merchant from so many different countries. You localize in for every single country for forensic services. 


Definitely. So already six services not available everywhere, but the language currency and the cross-border nature and forex settlement payments, logistics, etc, requires deep localization. And that is localized for every country. For example, if you talk about logistics, because we do everything through third party API’s, we essentially let b2b services integrate on top of our b2b platform. So it let’s say a product is moving from Thailand to Indonesia. Likely three or four logistics companies are involved with that and payments companies are involved. But let’s say something like one of our most coveted services or factories is ERP like resource planning and production planning. And there, what we do is we invite b2b SaaS companies that are otherwise too expensive for these businesses to use to build apps on top of our b2b platform and deploy ERP across our factories.

I mean, it’s not possible 20 years ago, when Alibaba.com started, there’s no open API. There’s no SaaS, there’s no cloud. You can do other stuff. You are what Alibaba.com should have been could have been if they stay in the business and become more international and recruit people from different parts of the world, not just from China to build it, but now you’re doing it.

Anything you want to say about you being one of the youngest female entrepreneur from India?


This matters to me, it’s important. I think representation is an important thing. When I always say this, that all my role models and mentors have been men. And I think that’s great because men make wonderful allies and what I hope we achieve in another generation is that just we have more representation, more people of color, more women in tech and so forth. So that more people can relate to the leaders and feel like they can do it too. And I think it’s happening, but it’s going to take some time and some doing.


Yeah, we make a conscious effort if we can, where we can have more women guests on the show. It’s just nice to be done. So you have team from so many different countries emerging from different countries. How do you organize either team building activities, or merchant sharing activities in order to get people to share best practices and learn from one another and and build a more cohesive community?


I think it within each other level of country. There’s a lot of strong sense of community whether it’s the team or the merchants, etc. And across country we do we make sure that every quarter people share both stories as well as success stories and stories of failure with one another what they learned what they could have done better and seek help actively. I think we really try to encourage both failure as well as seeking help. Because our industry is changing so fast, there are very few comparables that we have, really. So we have to really learn from our mistakes fast. So we encourage failure. And then we say, hey, share your failure with everybody else in all the other countries and teams. So they know that and then they hopefully make their own mistakes and not repeat yours. And it’s a very supportive community. We tried to build that I think we should do. I always feel like you can always do more of us. So we’re trying to figure that out. We recently engaged in coaches and mentors for the top hundred leaders. We have 600 people in the company. So for the top hundred across geographies. We’re investing in coaches because a lot of the young leaders who are breaking things are in their late 20s early 30s. Many of them are first or second times managers, but they are great. So I feel like it’s my job to make sure they have their best equipped to do their job. So we’re doing a bunch of things like that to make all of this, facilitate all of this.


Do you have a coach yourself?  




With your coach, what were the most useful advice that you have received?


I think most of the time, he helps me take a step back and detach from the situation. And what I’ve learned, I think it’s both the most useful advice and the most insightful thing have learned when you’re detached from the situation you likely solve it better, you’re less emotional. And as a founder, and as a young founder, you’re always very involved and very, very emotional about the outcome, which also is a good thing because you care about it so much. But every now and then taking that step back and having some having a professional help you take a step back and rationalize all of the things that are happening is actually immensely helpful. It prevents taking any radical decisions acting out. I think a lot of founders are very stressed. We’re are all very stressed all the time. I think it helps to have somebody ground you and make mature decisions in all times. So I think it’s very useful to have a health coach.


Do you have a favorite failure, so to speak?


Yes, I do. I do. It’s a bit of a long story, but I’ll keep it brief. A few years ago, we realized that we should, because we’re doing end to end supply chain, we should also have our own private labels. And we fail at it so hard. We learned all of the challenges that other brands go through because of it like sourcing and this and that. You really can’t solve problems that you can’t feel. So we failed it. But we failed again, and we failed again, and then we failed again. And then finally, you know, we realized that me, my co-founder, my founding team, the DNA was super tech and it was not fashion. And we realized that was the mistake that we were not thinking about fashion as as much and we needed to change the DNA of the team itself. So we went hardcore and got guys that understood tech packs and manufacturing and fashion and design and teach us that and just build that out completely. And then that sort of thought as a very important lesson. I think the takeaway from that is that if you see an opportunity and you failed at it, you shouldn’t give up you should think about why you’re failing. Maybe you’re not the right person to do it. But it’s still an opportunity you want to change then you should get the right people and help you exactly. Get help.


Let’s jump into the last part of the podcast, which is the round of quickfire questions. Just say the thing that comes to your mind first.

First question is, what are the staples in your wardrobe?
Pair of jeans, ripped jeans, black T-shirt, and heels and white shirt.

Do you spend a lot of time thinking about what you wear every day?

Maybe 10 minutes?

What’s something that you read recently that you would recommend?

I’m reading becoming by Michelle Obama. It’s super, like fascinating and fun.

How so?

So I thought that, like most books about your own life and experience, they tend to be a little boring, but slightly pedantic in the set, or this happened and this happened, this is what I learned. But I’m just like, I haven’t finished it. But we know her life story, but it is so interesting. It’s not a boring story at all. I think her challenges and I can really relate to it.

What’s the habit that you have had you think that have changed your life?

I think just persistence. If I believe in it, I go for it and keep going for it and very stubborn about it. And the other one is, it’s gonna sound funny, but I have a very thick skin, right? Like as a young woman in text. It’s very important. You gotta be affected by people dissing at us. So I think that might have been the most important.

What do you do when you’re stressed?

So I watch a lot of Netflix. Sort of helps me. The bad thing is that it’s significantly reduced reading time and sleeping time because I’m just doing that. But it really helps to take the edge off.

What are your top three shows?

Black Mirror. Narcos, and Fargo. I don’t know if you saw it so super, super scary. And I really like Patriot Act with Hasan Minhaj. And not on Netflix, but I love John Oliver, Trevor Noah that entire bunch. It really takes the edge off.

All right. Thank you so much for being on the show.

Thank you for having me. Thank you. This is great fun. Thank you.

S2 Episode 7: Jenny, Jixun, and Hans on Southeast Asia: Big Opportunities, Aggressive Giants, Advice for founders, and more

This episode is co-hosted by my colleague Dimitra Taslim. Dimi is on the investment team at GGV Capital. 

In today’s episode for Southeast Asia, we have GGV’s managing partners Jenny Lee and Jixun Foo. They shared one thing that excites them as investors about the region, what we learned from being an early investor of Grab, the role of China’s tech giants for this fast-growing market, and the implications it has for local founders. We’ve been getting a lot of questions about Southeast Asia. While we believe the talent to build great companies can come from anywhere, this episode is about Southeast Asia, home to 360 million internet users. 

Much has been written on the growth potential of the region. If you don’t have the time to dig deeper, here’re some quick facts. A third of the population is under 30. 90% of the internet users are primarily on mobile. They are young, connected, and madly in love with social media. The average users in China and the US spend 6.5 hours online per day. The average Indonesian and Filipinos are online for 9 hours per day. 

Some say if you missed the China train ten years ago, you could not miss this one. Others are more skeptical given the different stages of socio-economic development among various countries in the region.

As a firm, we have done ten deals in the region. More than half of that comes in the last 2.5 years. We are an early investor of Southeast’s leading Super App Grab. We reopened our Singapore office early this year and started spending more time on the ground. My colleague Dimi, who’s also the co-host for this episode, is from Indonesia and looks at investments in Southeast Asia. 


Hans: Hey, Jixun and Jenny, welcome to the show. Both of you are from Singapore. Yet over time, you choose to spend more time in China and the US. How are you thinking about Southeast Asia now versus where it has been before?

Jixun: I did spend a good part of my life growing up in Singapore. I was educated here, went to the National University of Singapore. I started my career at Hewlett-Packard, spent some time in the US, and later joined the Singapore Government for a couple of years before getting into the venture capital business.

Southeast Asia has benefited for the first 30 or 40 years. Singapore, in particular, with manufacturing and FDIs became one of the four dragons and five tigers in the rising Asian economies. But having said that, I always thought that looking beyond the MNC approach to growth, many of the Asian economies will have to figure out their innovation paths going forward. And the internet brought about a new paradigm. So that was when I first set foot into China. The internet was at the beginning of its penetration in 2000.

I joined DFJ and my first investment in China was Baidu. At that time though, the entire internet ad spend in China was only about $30 million. And back in 2001, post-internet bubble crash, the combined market cap of Soho, Neteast, and Sina, the major portals of China at that time, was probably less than $200 million. Today is an entirely different market. And you’ve seen how the giants have grown, the first generation portals have risen. I had the benefit of being part of the Baidu and witness part of the Baidu transformation and growth. GGV also had the privilege of invest in Alibaba at an early stage. So we have seen how innovation evolved from PC internet to mobile internet for China. A new generation of tech giants emerge, unicorns emerge. You have the TMD, the Toutiao, the Meituan, and Didi. If you look at Southeast Asia, what’s interesting is that the mobile internet is now starting to evolve in this market. And as Hans, Jenny, and I look around this market for this next billion mobile users, and having seen how mobile internet and later mobile internet transformed China, we think the same phenomenon could happen in these markets, Southeast Asian and India. So looking forward, I think we’re going to see a lot more transformation.

Back in 2013, Hans has just joined us. We were at a Starbucks in Singapore, meeting Anthony from Grab. Anthony came in and pitched his story. He was still in KL. The first version of Grab was called Mytaxi is called Mytaxi in Malaysia before it became GrabTaxi and then became Grab. Now it’s more encompassing and not just for ride-hailing. So that was the first instance where we start to see a lot of the things that we saw in China are now being replicated or adapted into the market here, and mobile internet made it possible. Mobile internet penetration makes ride-hailing to happen. We made our first bet in Grab at a reasonably early stage. Now Grab is a $12 billion company. So I think we have seen how the transformation happen. And we are seeing more and more of these opportunities in Vietnam from Indonesia and the likes.  

Jenny: The common thread that brought all three of us to China was growth, market, and innovation. I still remember at the time, I was thinking should I be in Singapore? Having graduated, worked in back in Singapore. That’s the universe we know. Southeast Asia is the universe we know. But when you look across a global basis, the one thing that I always thought represents GGV is our partners have a constant hunger to find the next big exciting market, whether it’s Hans in Southeast Asia, Taiwan, US, looking at China. Jixun, looking at China’s investment from Singapore or myself, coming from a tech background, trying to decide if I should break my scholarship bond. I think the one thing that drove us was China back then was growth, market and  the innovation. And I think in the last 19 to 20 years, we have been fortunate to be part of China’s growth, fortunate to be able to invest in the likes of Alibaba, DiDi, and Bytedance. The fact that we are sitting here now in Singapore, on a not a balmy Sunday, but a polluted Sunday. The pollution has followed South, so has innovation, so has the talent, so has the growth. So as we look at Southeast Asia, we’re very excited. I think it’s an up and coming market for us. 

We see similar budding talent entrepreneurs here who are now more diversified. 10 or 20 years ago, they may be all local guys. But today, the startups that we meet and see they have a mix of talent from different countries and backgrounds. That’s one. Two, I think the business models that we have seen are exciting. I spend a bit more time on the Fintech side, in terms of companies that are trying to change or update the payment infrastructure on the back end for financial services. Also, look at companies in the tech or smart city areas. The rest of Asia is similar and different to China. It’s an ancient region. A lot of the countries have old infrastructures that are prime for the next update. Governments, enterprises are also looking at Smart City solutions, and how technology can now bring us to a different Asia. I think that’s also where we see US and Chinese business models and technology have a chance to penetrate the Southeast Asian market. That’s another reason we feel that the learnings we have from you know, around the US and China markets, can put GGV in a good position to find that next unicorn with this next billion users’ growth as well. 

Dimi: Jixun, being an early investor of Grab, what have you learned about the region from Grab’s growth story? 

Jixun: The one challenge Southeast Asia has is the fragmentation of the market. It is multicultural. There are many borders in that sense. One of the challenges is how you scale business across different markets, from Malaysia to Indonesia, to Thailand, to the Philippines, etc. One question I tried to understand when talking to Anthony, is how does he do that? With his family background and Harvard education, he was able to assemble a multicultural team. They have team members who are Vietnamese, Filipinos, and Indonesians to be on the ground and help operationalize business. As Grab scale up his business, another challenge we face is engineering. It was hard to find engineering talent in this region. It was okay for us to go from 20 to 40 to 100. But it was tough to get from 100 to 400 to 1000. So Anthony went on to build centers outside of Southeast Asia. So he had centers in Beijing, India, and Seattle. So to assemble talent, so I think entrepreneurs here have to be able to figure out ways to address these. I mean, yes, they are obstacles, but if you can do it, then that’s the entry barrier in itself. To be able to assemble teams from different backgrounds to be ready to gather resources in different regions to help build business.

Dimi: So, Jenny, you are very early in China, you saw that China took the world’s factory approach to economic development. And we’ve seen that India has taken the world’s back-office approach to economic growth. In both these approaches, we see technology diffusion and productivity gains. But in Southeast Asia, for example, in Indonesia, is neither the world’s back office nada was factory. With a country like Indonesia and the rest of Southeast Asia, what alternative paths to economic development are there?

Jenny:Well, I think that’s a question for the Indonesian government. I do know that a common mistake that investors or even entrepreneurs in Southeast Asia make is that they look at this as one region, and it’s not one region. Unlike China or India, which is homogeneous to a certain extent. In terms of government policies and culture, We called it Southeast Asia, but it’s not one country. It’s multiple countries, different regulations, cultures, and backgrounds, not to mention different GDPs and spending power. So I do not think that Southeast Asia will emerge as the backwater, or we are the outsourcing capital in the next five to 10 years. 

What gets investors and entrepreneurs excited is that we see this region has a consumer consumption-driven market. These countries have a big population. People are young, in the early late in the teens to 20s. When they first get their first mobile phone, what do they do? It is likely to be games and start playing. And then once they get used to in entertainment, online consumption of content online, the next thing to do is to shop online. So we’ve also seen in the last five to 10 years, the rise of e-commerce, maybe in different forms, whether it’s in physical goods, and then in the case of services will be in the form of investments or at least trying to do financing for the smartphone that they just bought. 

The first wave of companies that will benefit will be those that built the infrastructure and the platform to enable and facilitate and lower the barriers to allowing more of this consumption, whether it’s physical goods or services as well. So I was asked how Southeast Asia will look like compared to the US and China. I do not think that Southeast Asia is like China 10 years ago. Southeast Asia is like China in the services o2o (online to offline) boom 5 years ago. The first wave of platform companies will be service companies. As Grab goes from ride-hailing to food delivery and financial services. They have a chance. I think there is the opportunity for that first few giants to emerge. And then after that, I think the market will be a bit more fragmented. 

Different countries will see their own education companies, Fintech companies, and various tech-enabled businesses. There are a lot of opportunities on the enterprise side in a very localized manner because each country has its regulatory framework.  

Hans: In these last few trips we made in Southeast Asia, investors tend to feel that you should invest in e-commerce first and then other sectors because that’s the experience of both the US and China. What’s different is e-commerce happened before the mobile internet came about in both the US and China. In China, e-commerce happened during the PC desktop internet period. 

In Southeast Asia, what Jenny was referring to as O2O services, Like Grab going into GrabFood and all sorts of other services, all happen at the same time eCommerce was taking off. It also means on a B2B side given that as mobile internet penetration happening, it is now much more likely to collapse the supply chain and make the digital channel more efficient with the rise of mobile internet. 

And that’s an area that Jixun, myself, Dimi and Madhu, spending time looking at both in Southeast Asia and India, looking at how the efficiencies that can be part of on the B2B side can make an impact on something like Kirana stores in India, and Indonesia and so forth. A lot of mom pops shops are likely to get benefit from the rise of mobile internet and efficiencies that apps and SaaS products can come about. And that’s quite exciting. You don’t see it in China as much until recently. You don’t see that in the US at all, except in the form of SMB tech. So I think that makes it quite interesting for founders and VCs to invest in these B2B areas in a region.

Jixun: When looking at Southeast Asia, we have to look at the market in itself. What is the existing infrastructure? What are the existing pain points? What are the current frictions of the market? For example, there’s one company Jenny can talk about, Thunes. Southeast Asia has a lot of people who work outside of their own countries and need to send money back and forth between home and where they work. Thunes is solving this kind of money flow problem, money transfer, and remittance. 

To Hans’s point around the Kirana stores and the Warungs, the so-called mom and pop shop owners. They are more than just a retailer; they are community centers, they know each other so well that’s a social credit that is very hard for any big data to address. They live on social credit. So someone can walk into the shop because they know the owner, they can walk out without having to have any credit rated by any platform. The credit system is very different. So we have to recognize Southeast Asia for the market as who they are, and not try to say, overlay a US model or China model on top of it because that’s not their model. So we have to understand their way of life, work style, and provide a solution that solves pain points in those markets. That’s kind of entrepreneurs we hope to identify.

Dimi: What are your views on the role Chinese internet giants are playing here?

Jixun: I think many of the major giants are trying to replicate or extend some of their services beyond China itself. So we saw Bytedance entering the markets with Tiktok in various countries. In fact, in India, they have multiple products to address their demands. Ant Financial of Alibaba have made strategic investments, acquisitions, to build their touchpoints with local consumers. They are leveraging on is the experience and supply chain they have had in China. Increasingly we might see more investments and acquisitions from them as they build up their portfolios beyond China. For many companies in Southeast Asia, entrepreneurs and investors have to think IPO versus M&A as exits. I think of M&A as a way of exit. So when you build your company to a certain scale, you reached a certain size, you may get consolidated by a major player, such as Alibaba and Tencent. That’s not a bad thing. They are complementary to the ecosystem, and we should welcome them as part of the ecosystem.

Jenny: The giants are to be respected but not to be feared. The giants from China come with capital strength, experience strength, and in many cases, they are highly aggressive. But when you think about what they have in Southeast Asia. They haven’t had a head start. They have not amassed huge numbers of paying users to say like WeChat or Alipay or merchants. They haven’t had installed base of massive eCommerce traffic or social network.

While the advantage is huge in China, some of that translated but not enough to make them become giants in this region. Understanding local dynamics, local cultures, local user behavior, regulatory frameworks are all critical factors that the giants have to navigate. 

I think when you enter a new market, especially a new region has diverse as challenging as Southeast Asia, the local founders have an advantage. When we talk to entrepreneurs or regulators here, the giants are in the known. In Chinese, we say 他们在明. So we know everything about the strength of these giants in China. If I open up my financial regulatory framework, issues licenses too fast to international players, am I going to be depriving my local founders of a chance to grow to a local champion? The awareness is very high as we talked to different countries, especially on the financial system side. That will be the natural barrier. If you’re an entrepreneur, as you grow, there’s a right time to get strategic money, there’s a right time to align yourself with the giants to gain that knowledge. But I think that’s the still natural advantage for local entrepreneurs to focus on the real value or the real pain point that you’re trying to solve.

Hans: When companies go global, there are limitations to what each could do. US companies can do better in North America, Australia, Europe, parts of Latin America, and throughout Asia. China has been hard for US companies to penetrate as Jenny was alluding to. For the older generation of Chinese Giants, Alibaba and Tencent are trying to expand beyond China. For the most part, they have gone through the route of either acquisition or more commonly strategic investments. More and more of them realize that how they become successful within China with local knowledge and local understanding. And the team that can deliver in China may not be ready to be able to gain that knowledge outside of China as quickly. So partnering with local startups seems to be the way to go there. 

Of course, there are exceptions in the case of Xiaomi or Bytedance. Bytedance seems to do well with Tiktok in almost every market they entered. Xiaomi has done well in different parts of Southeast Asia and India. But having said that, we see that the younger Chinese companies are more willing to learn and adapt, even co-found companies with Southeast Asian co-founders or Indian co-founders. So we’re seeing a mosaic of startups with founders coming from different backgrounds in Asia. And that’s extremely encouraging because that’s how you can build a regional global player. 

I encourage all the founders out there, when assembling your team, don’t just have people from your neighborhood even though they are essential for you to get started. Over time, think of how to build a team that’s more regional, if not global, that will help you to enter and win in multiple geographies. And that’s the exciting future we would love to be a part of.

Dimi: What is the one opportunity in the region that you’re excited about from an investor investing thesis perspective, to solidify what we have been discussing? 

Jenny: In the next six months to a year, where I’m focusing on is on the financial systems. So the infrastructure and the back end infrastructure that can support better money transfer, better capital flow or payment flow. A lot that can be done there, including leveraging artificial intelligence machine learning to assure that data that’s collected in a more structured way, and therefore providing more insights to all the participants who’s trying to deliver goods and services to the end customer.

Jixun: I don’t have a particular sort of vertical or sector, but I’m excited about Indonesia and the Vietnam market. You can build something similar to the Grab model, where you can have a collection of services that transcend across multiple markets. But there are services you can go deep into one market where the market is big enough. So that selected services, for example, in real estate services, in B2B, in logistics, in warehousing, these are areas where you can go deep into one market and do it well. And that may be a way to differentiate your business because you have to leverage local knowledge and advantage to play that game. 

Hans: I’m very bullish on what’s happening in India and Indonesia, especially on the B2B side, spending time with Jixun, Dimi, and Madhu, looking at roles in Indonesia and Kirana stores in India. So, we led our first investment in India by the name of Udaan, ex-Flipkart team. We invested in a second company in India known as Khatabook. And so we are going to do more in these regions that can benefit from the efficiency that we generate a mobile internet app as well as SaaS products. 

The B2B2C model is quite interesting because they both can aggregate demand from the consumer side and, more importantly, improve efficiency on the supplier side to bring a lot more benefits to the participants. 

One thing that we learn from investing in China is for companies to grow and generate value, they have to be in some form of nation-building. They have to figure out ways to improve efficiency. So the new economy, growth in these markets can sustain and make a huge impact on society.

When we started investing in Alibaba in 2003, China’s economic growth rate was roughly about 12-13%. It has gone down every year since that time. Now it’s about 5-6%. From the outside, if you look at a market that’s growing, less with growth, declining growth rate, it seems to be alarming. Yet if you plot out the growth of China into two buckets, old economy versus new economy. The old economy growth has stalled and declined. The new economy continues to grow at a rapid rate. Meituan-Dianping becomes profitable this quarter. Alibaba and Tencent have grown at 40, 50% year each quarter. So the kind of growth rate possible for the new economy is tremendous because the adoption and diffusion of technologies are changing the ways that suppliers and consumers behave. That kind of efficiency released can generate empowered new economic growth. And we hope to see the same in Southeast Asia in different parts of Asia as was India.

S2 Episode 6: William and Patrick of Tokopedia: from Selling T-Shirts to Driving 1.5% of Indonesia’s GDP

This episode is co-hosted by my colleague Dimitra Taslim. Dimi is on the investment team at GGV Capital. 

In this episode, we have William Tanuwijaya and Patrick Cao from Tokopedia. Tokopedia is an Indonesian technology company with the largest online marketplace business and its mission is to democratize commerce through technology. The name ‘Tokopedia’ is a combination of Toko (shop) and encyclopedia. 

It was founded in 2009 by William Tanuwijaya and his best friend Leontinus Alpha Edison. According to the company, the firm’s annual run-rate GMV has reached 222 trillion IDR  (15.8 billion in USD), which would be equivalent to 1.5% of Indonesia’s GDP. It has significantly impacted the fate of many small-scale entrepreneurs since its launch 10 years ago. 89% of sellers on Tokopedia do not own a physical store and 86% of merchants are first-time entrepreneurs.

In this hour-long conversation, we covered William’s founding journey from working in the internet cafe to meeting Daniel Zhang and Joe Tsai from Alibaba, how to get a great executive team as an Indonesian company, Tokopedia’s ambition for the next 10 years, and what it means to achieve work-life harmony while running a big company.  

William Tanuwijaya is the founder and CEO of Tokopedia. He was born and raised in Pematangsiantar, North Sumatera. William has a bachelor’s degree in Information Technology from Bina Nusantara University, during which period he worked as an internet café keeper and saw the potential of technology.

Patrick Cao is the President of Tokopedia, Indonesia’s largest online marketplace, a position he has held since October 2016. Previously, Patrick worked at Formation 8 in Singapore and UBS Investment Bank in Indonesia, specializing in M&A and capital markets advisory in the TMT, consumer and industrials sectors. He received a B.S. in Business Administration from Carnegie Mellon University and currently doing his MBA program at Tsinghua University.



Dimitra Taslim: Today on the show we have William Tanuwijaya and Patrick Cao from Tokopedia. Tokopedia is Indonesia’s largest online marketplace with a mission to democratize commerce through technology. It was founded in 2009 by William Tanuwijaya and his best friend, Leontinus Alpha Edison. The company recorded a GMV, gross merchandise value, of $1.3 billion in May, 2019 and drove more than one percent of the Indonesian economy. The site has significantly impacted the fate of many small-scale entrepreneurs since its launch 10 years ago. Eighty-nine percent of Tokopedia sellers do not own a physical store and 86% of merchants are first-time entrepreneurs. The name Tokopedia is a combination of Toko, which means shop in Bahasa Indonesia and encyclopedia.

Hans Tung: William’s the founder and CEO. He was born and raised in North Sumatra. William has a bachelor’s degree in information technology from Bina Nusantara University, during which period he worked as an internet café keeper and saw the potential of impact of technology. Patrick is the President of Tokopedia, a position he has held since October 2016. Previously, Patrick worked at Formation 8 in Singapore and UBS Investment Bank in Indonesia. He specialized in M&A and capital markets advisory business in the TMT, consumer and industrial groups. He received a BS in Business Administration from CMU, Carnegie Mellon, and currently doing his MBA at Tsinghua University in Beijing. Welcome to the show, gentlemen.

William Tanuwijaya: Thank you for having us, Hans.

Patrick Cao: Thank you, Hans. Great to be here.

Hans Tung: I’ll start with William. How did you get the idea and the courage to start Tokopedia back when entrepreneurship or startups in Indonesia was not a phenomenon like it is now?

William Tanuwijaya: As the largest archipelago country in the world, Indonesia with 17,000 islands, it’s almost impossible for Indonesia government to be equal in infrastructure across the country.  Both me and Leon, when we started Tokopedia, we realized that where we come from, a small city outside of Java, there’s a lot of inequality issues. From where we come from, there’s a fairly limited selection for goods and when even we have that selection of goods, usually we need to pay a higher price compared to a price in a big city like Jakarta. Both of our parents saved for their whole life so they can send us to Java Island to have a better education for a better opportunity, but when we find jobs in Jakarta, we don’t want to come back to our hometown, so we start to see these vicious cycle of urbanization. And if you see Jakarta, for example, Jakarta is sinking 20 to 25 centimeters, and there’s a recent report in by 2040 Java Island will run out of clean water. This is because of the overpopulation issues and we start to see that technology should be this infrastructure that help us leapfrog and can provide equal opportunity across the island. We imagined a situation where no matter where you come from in Indonesia, you can find any product and services that you want and have a transparent price and can enjoy the same services like if you live in a big city like Jakarta. We imagine a situation where if you start a small business anywhere in Indonesia, you can grow to become a nationwide business owner. Ten years ago, we start the whole idea with that mission, to democratize commerce through technology.

Dimitra Taslim: Will, tell us a bit more about the first item that’s ever sold on Tokopedia and how do you get the seller to sell the item on the platform?

William Tanuwijaya: It’s a t-shirt with a text label of “We Are Not Afraid”. That time in 2009 when we launched the whole idea, Indonesia just got bombed by terrorism attack in two hotels in Jakarta. Internet users started to rally this movement called Indonesia Unite. The rallies are very simple, just encourage people to wear a t-shirt with a label “Kami Tidak Takut”, means we are not afraid. That time we have about 70 merchant that are listing in our platform and we think that it’s about time to launch the platform together with that movement, so we launched the platform actually on Indonesia Independence Day, 17 August 2009, and we have about 10 merchants selling this kind of t-shirt. We launched at midnight and then 12 minutes after we launched, the first item sold is that t-shirt.

Hans Tung: For you to start Tokopedia as both someone who came from a small island to go to Java to go to Jakarta to do this was not easy. At the same time, to do this as an Indonesian of Chinese descent to do this in Jakarta also is not as easy. What kind of internal growth did you have to go through in order to build this business? I remember the first time my friend from Softbank when she first met you, your English was limited. Now you speak English fluently. You came over even a third hurdle to get to where you are. Can you share more about your growth to get to where you are?

William Tanuwijaya: I’m grateful for this opportunity starting Tokopedia. Through Tokopedia, I found the purpose of my life and that’s because of a lot of failure during the time when we were about to start Tokopedia. I always considered myself as an entrepreneur by necessity and I really learned about both perseverance and serendipity through the journey as we developed the idea. The earliest failure of us starting Tokopedia is actually about trust. At that time there’s no physical community, there’s no investors community, and when we want to start Tokopedia, originally the concept is like we want to help create a platform where everyone can start a business, but when I want to start Tokopedia, this is my first business. I was starting to realize that I cannot find anyone that trusts me. At that time, the struggle was to raise capital and to ask tourists to raise our first capital. At the time, the reasons why people are not providing a capital, they would ask me about five questions. Two questions about the industry. They will ask, is there anyone that’s been successful at starting a technology company in Indonesia, and we didn’t have a role model before. The second question is like they say that Indonesia is a big market, even though all the global giants will enter the market, and how can you compete with them? They will have a capital, they will have a know-how, they will already have a lot of customers, so this is more rhetorical questions. They will also ask about my personal character. They’ll ask me which family did I come from. I come from a very humble family. My late father during that time was very sick. My mom was a stay at home mom, so if I fail, no one pick me up. They will ask me which university that you come from, and during that time I started computer science, but on my second year, because of my late father falling sick, then I needed to find a job to stay in Jakarta. My first job is to become internet café operator. They will also ask me what is my entrepreneurial background, and I never started a business before, so the industry doesn’t have a track record. My personal journey doesn’t have a track record. It was very difficult to find that trust, but then I realized that everyone is asking about my past, no one is asking about the vision, and I believe that possibly something that you cannot change, but you should be able to save your own destiny. That actually was the struggle that we faced in the early days, but looking backwards, we are very grateful that we can win that trust, so today we are not only internet changed my life, but internet changed millions of people’s lives in Indonesia. We have 6.4 million merchants now where 86% are first time entrepreneurs.

Dimitra Taslim: And William, tell us about how your story led up to the week of three proposals.

William Tanuwijaya: Another part of Tokopedia is also I learned about serendipity. There’s a saying about luck is when a person meets with opportunity. In 2014, by the end of September, I got a call from Softbank. They asked if I meet with Martha on the second of October in Tokyo. The problem is where I come from, Indonesia, you cannot just fly to Tokyo. You need a visa and a visa needs maybe five days, working days, to apply for that. The time when the call comes, we don’t have these five working days. I’m very lucky that I already got a Japan visa in my passport. The reason being is like I already booked a ticket to Osaka for the first of October with the plan to propose to my, by that time, girlfriend. The day before I go to Osaka, on the morning I got a call from our early investor. He said that the managing partner of Sequoia Capital is in Jakarta, can you meet with him for one hour? I met with Shailendra at 2:00 PM and a one-hour meeting became a two-hour meeting. By the evening when I go to the airport, I got a call from Sequoia again. They asked me if I can meet with them again on the first of October. I said that I’m on the way to the airport and I need to fly to Osaka. When I landed in Osaka on the first of October morning, it was very surprising to me to see Sequoia Capital friends and partners already waiting for me in Osaka. We had a conversation, a long conversation, by 5:00 PM I needed to dismiss the meeting. I said that I’m here to propose to a girl. I tried to find a flower shop. By 7:00 PM, I’m on my knees proposing to my wife. Luckily, she said yes, but after that I said that now I need to fly to Tokyo. I flew to Tokyo and then met with Martha on the second of October and that week is really a life-changing week for me. It’s a week of three proposals. To think about it, actually that time, Tokopedia will have a runway only by November 2014, so we have one month left and it’s just like amazing to see how it’s turn out to be, with a one month runway left, it turns out we can close $100 million.  That is really life-changing for an Indonesian internet company at that time.

Dimitra Taslim: So, hence, luck is about hard work meeting opportunity.

William Tanuwijaya: There’s a lot of preparation meets the opportunity, serendipity moment.

Hans Tung: I think luck favors the prepared, so you were definitely prepared to be able to benefit from the right breaks in life. As you scale your business in Indonesia, which hasn’t been that easy, I think that you mentioned international investors then tell you that, hey, once this works in Indonesia, that ecommerce can take off, then global competition will come to Indonesia. Alibaba invested in you and financially invested in Bukalapak, that SEA launched the Shopee in Indonesia, JD came as well. What has it been like to deal with foreign competition in Indonesia and then secondly, how has the partnership or relationship or collaboration with Alibaba group made any impact on you guys?

William Tanuwijaya: We believe that competition is the greatest gift ever for us in Indonesia and for us in Tokopedia. Not only these are all great companies that we already mentioned, only six months, when we launched Tokopedia, we already need to compete with eBay. eBay at that time is still the largest marketplace in the world. They are partnered with the local telecom company, so they already have a large distribution and good technology from the US. One year after that we need to compete with Rakuten and other companies and continuously it goes. When we first raised $100,000 we find to fight eBay and Rakuten. When we finally raised one million dollars, we need to fight with SK Planet Eleven Street. They are putting 33 million in Indonesian market. When we first raised 100 million, then eventually Alibaba acquired Lazada, which at that time is the leading platform in Indonesia. Then, when we raised a billion dollars, we need to prepare ourselves to compete with Amazon, which is close to a one trillion dollar company. We realized that capital is never about how you compete with the competition, but how you continuously have this underdog mentality. It’s not about resources that you have, it’s about how to manage the resources, the limited resources that you have. Through all of that experience, we actually learned about until your idols become your rival, there’s not secret that Tokopedia business model is really inspired by what Alibaba did in China market and how they helped small businesses to empower small businesses and become big brands. That is our mission as well, to democratize commerce to technology. Through that opportunity, we are not only until your idols become your rivals, we have opportunity too until your idols become your partners. In 2017, Alibaba eventually became our partners. They became the minority stakeholder in Tokopedia, and we can send our leadership teams to learn from China. While in the early days, people were saying that China technology company is copying US technology company, but from our personal experience, in Indonesia when we started Tokopedia, it’s this really that time machine effect. You can learn from US market, China market, India market, and there’s a time gap, so you can really benefit by copy and localize the services to Indonesia market, but even until we really learned that, China market is really a leapfrog. Now, the whole innovation has really come from China, this whole new retail model, there’s a new B2B model happening in China that is not happening anywhere else in the rest of the world. Having this ability to learn form China so closely and having Alibaba as our minority stakeholder, really is a big advantage for us in Tokopedia. We can see while Tokopedia continuously grows, but the past two years we are growing faster than before, and that is basically because of Alibaba is one of our closest partners.

Dimitra Taslim: Patrick, we actually met when you just joined, and I think that was just before you raised the really big round, and so what made you join William and his crazy journey on Tokopedia?

Patrick Cao: I think my journey into Tokopedia is a story of serendipity as well. When I was in banking in Indonesia, then that was when Tokopedia, Gojek, Grab, Traveloka were first starting to scale and become more noticeable in the Indonesian and international market. We would go to our, I guess, I’d see every month and I’d say, I’d love to bank these companies, and continuously we’d get feedback, oh, these companies are too small. I had the opportunity to join Formation in Singapore to look after that market, and even at Formation we had the opportunity to invest early into Gojek, but it took us at least a year, year and a half in order to get the IC to be comfortable investing in a country like Indonesia. There was no context. At that time, China and India were very hot, but Indonesia wasn’t on the map yet. In 2015, I got to invest into Gojek and that was a great deal for us. Then, I tried to meet with Will to invest in Tokopedia, but of course, he had great investors at that time from Softbank and Sequoia. We were not very well-known as a fund in the region and it just so happened that Will and I have a bunch of mutual friends, the founders of Midtrans, the guys from Gojek. We also have a lot of mutual mentors, and so we had a dinner and at that time, this is six months before I joined, I asked him, okay, I’d love to be able to work with you. You won’t take my money, but can I be your advisor? And Will says to me, I don’t have time for advisors, so think about it and come back in a few months. Him and I kicked this around. The investors at Sequoia shared that he had been looking for a CFO for the last seven years and then after meeting him for a long period of time, really talking to our friends, getting to know each other and getting the sign-off from my wife, then I told Will, if you’re not going to take my money, take my life, my partnership, and my time. That was three years ago.

Hans Tung: When we see Joe Tsai joining Alibaba early, and more recently see Ming Maa left Softbank to join Grab, Jean Liu to leave Goldman to join Didi, and you joining William at Tokopedia. What has it been like to see the two of you, from a personality standpoint, from a scale sensing point, from an experience standpoint, complement each other and work with each other well?

Patrick Cao: That’s a good question. I think all those folks that you mentioned are definitely role models, and I think when I was investing, I think one of the things that I realized is number one, founders have a very big burden and they can be very lonely sometimes, and so being able to have good partners that, as you mentioned Hans, can complement them, is very important. I think the second thing is that sometimes you can’t go as deep as you’d like on the investment side, and I really wanted to pick up that operating experience, and this is something that my mentors had shared with me at the time. This opportunity gave me the ability to really work with a great founder and friend that I respect a lot, but also to be able to pick up that operating experience.  I think if you look at the combination between Will, myself, and our other partner Melissa, and our co-founder Leon, we’re all very, very different, but for Will and I in particular, when I first joined, he was quite soft-spoken, very, very humble, and then if you look at, back then, ex-banker, ex-investor, I was a little bit more brash, a little bit more loud-spoken as you remember when we met in Boston.

Hans Tung: Yeah, I do remember.

Patrick Cao: My wife describes as this merge of individuals, so now Will has become a little bit more aggressive, a little bit more loud-spoken, and my wife thankfully says that I’m a lot more empathetic and a lot more humble, so I think we get that perfect combination. Then, sometimes in Tokopedia people joke that, oh, I’m his work wife, right? But I get it because the first few years, we spent, what, 80 hours per week together on planes, in meetings, trying to close the Alibaba deal. I think you get that melding of personality, but from a skill set perspective, I’ve learned a lot from Will about operations, about having really empathy in terms of leadership and people management, and I think vice versa from me we got our first financial model, we got our first business plan. We know how to negotiate shareholders agreements in a somewhat more sophisticated way, so I think it’s highly synergistic.

Hans Tung: William, what’s your perspective as a founder and what would be your advice to other founders for thinking of similar partnerships, to get someone from the investment or capital markets world to come in to be co-pilot or a President.

William Tanuwijaya:  It’s not that I was not looking at the time, so it took me seven years and this type of partnership, you need to find someone that you can trust and sometimes it’s not easy. Early stage, my struggle on raising, Tokopedia has been raising money every single year since the early days, so I personally raised money, maybe six round or seven rounds before Patrick joining me. I never went to the business school and so on and I really hate the fundraising process, but I really love the learning opportunity of it.  

Hans Tung: Well put.

William Tanuwijaya: It was always maybe all these MBA analysts and all of that and they will ask me very good questions that I didn’t know yet.

Hans Tung: As a free MBA.

William Tanuwijaya: As a free MBA, right? I just fake it until we make it. I would just right it down, for example, the first time people ask me my GMV, I didn’t know what is GMV. When the people first asked me about what is your cohort, I don’t know what cohort means, and I always said that I will come back to you later sometimes to dig more about the data and then thanks to Google now, you actually can learn about everything. Then, generally they’ll find the CFO. I always ask my board members, actually for the first five years, not only for the CFO, I also ask for the CEO. For the first five years every board meeting I always have this one slide about Eric Schmidt’s face, and I put  a text “find me this guy for Tokopedia”, because I learned how Google founders actually learned from Eric Schmidt to become better leaders and so on. You don’t know what you don’t know and until one point, one of my earliest shareholders said to me that, Will, you need to embrace this opportunity. We think that you are doing well, so unlike a US market where the industry is small, we’ll see if we can find professional leaders, but if like you see in the east side of the world, Alibaba is still run by the founders by that time, Rakuten run by the founders, Softbank run by the founders, so we think that you are just doing fine as a founder CEO. But because of that conversation I started to realize what east can learn from the west. I started to realize that a lot of companies, actually with like a Kingdom, where they really rely on the team or the queen or the founders, but if you see on the west side of the world, they are really with the company like a university.

The company is well-known because of the impact with the society like the university by the graduation. You can see that people graduate from the firm and they are continuously part of the firm and actually start another company. This kind of university concept is something that inspires me to bring in the Tokopedia. We took our time, but something from that point, I started to embrace the opportunity. I started to really look inside and continuously grew. For example, today our CEO is internal group. Melissa started as a accountant and now she’s our COO. But for the CFO I actually continuously fly around the world and I try to find someone with like Joe Tsai background because I’m also really inspired by how Jack Ma and Joe Tsai are combination. Eventually I found that person in Patrick. Early days, when Sequoia started to invest, Shailendra actually gave me good feedback that he started to realize that the Tokopedia hiring process has always tried to find someone that personally is similar with the founder. Melissa, for example, is also very similar with my personality, but then he said to me that, William, if you’re proud about your culture, it should be an open door where you can accept people with a very different background and different personality and then you start to influence each other. I started to think about it and it’s very good feedback and I start looking for a talent that is a complete opposite of my personality. At first it’s very uncomfortable, but eventually you complement each other, and I think that the Patrick combination is not only a complement skill set of what we need, it’s also really bringing a lot to the company. Since he joined we already raised maybe about $2 billion to the company.

Dimitra Taslim: I think the point on the university is so spot on. When you guys met me in Boston, you told me that there are really only a number of companies in the world where people say I’m ex-whatever, I’m ex-Google, and your vision is to say when people leave this place, I’m ex-Toko. I think that’s a great vision for a lot of people like me and many other Indonesians who are maybe educated overseas and are coming back and looking to join a company like this. My next question is on the Alibaba fundraising, and I think when we initially met, you guys told me, and we also had some feedback from the guys at Alibaba, that they felt like they were looking in the mirror when they met you and Will, Patrick. Tell us a bit more about the experience meeting the Alibaba people and what it felt like. Did it feel like you guys were meant to be tied at the hips together?

Patrick Cao: Yeah, if you think about the core fundamentals of our company and their company, you look at, for example, culture. They’ve also built a very university partnership-like model. You look at their values and I think they use different words, but the values really mirror each other. I think it was June or July of 2017 that Will and I first flew to Hangzhou to meet with Daniel, the current CEO and Chairman. We were sitting in his office and you could see Will on one side, Daniel on the other side, and they really were like mirror images of each other. As we walked out of the office I was like, man, this is really, really scary because in terms of temperament, in terms of style, even in terms of the nuances of the way they speak, and their body language was very similar. Of course, right after that, we also flew to Hong Kong in the middle of a typhoon, and then Joe invited us to his house in Hong Kong. Then we got the opportunity to spend time with him and I saw what I believe is one of my role models. And so, when you think about it from that perspective, in terms of characters and personalities, and as well as the similarities in companies, then I think that was a great match and I think to echo what Will said earlier, fight until your idols become your rivals, but if they can become your partners and your teachers as well, then I think that’s hugely valuable and it’s been a great honor and opportunity to be able to work with them and to learn from them to get to where we are today.

Hans Tung: One comment I will make is that we’ve seen that whether it’s Didi becoming partner with Uber in China or Grab becoming partner with Uber in southeast Asia, local players have to show international players that you’re strong enough to win in whole market to get the respect from the international players to realize that, hey, I cannot beat this guy, I should join him or her because then I can focus my energy elsewhere and help them to win. In your mind, to get to a partnership with Alibaba, what did you have to go through in order to achieve this optimal result?

Patrick Cao: What was interesting about that time was we had actually been talking to a number of international strategics as well as a few larger financial institutions. You’re right, Hans, we had very, very lengthy but important discussions about who that right partner would be. The way Will and I think about fundraising is it’s always about finding the next partner. It’s actually less about the capital or trying to optimize valuation. Going back to what I mentioned earlier, when you think about very core principles or the foundation of the things that you need to be successful, it’s always going to be in finding your partner or the one that is very aligned with you, that has the same culture and values, that has the same long-term perspective in terms of building businesses and growing teams. And so, when we looked at the landscape of partners that we could have, and again, we’ve already learned so much from Alibaba in terms of what Will calls the crystal ball or time machine effect, then we made the decision together as a partnership to go ahead and work with them, and I think it’s the best decision we ever made.

Hans Tung: As a follow up, many in western media tend to like to portray the reason that international players don’t win in local markets, especially in Asia, is because government support for local players, unfair competition or business practices that favor local players. In your experience in Indonesia, how have you been able to do well against foreign competition?

William Tanuwijaya: A lot is actually a local innovation, so if you think of all these global companies, when they go public they do pretty much two things. One is globalization and one is evolution. You see a margin on Alibaba today is very different with the margin of Alibaba three years ago, Alibaba five years ago, because they continuously aim for it every single year. On another side you see their globalization effort, their entrance in a different market and so on. The globalization effort, the key success is actually how well their localization have worked on that particular market. As a local player, that’s what we do well, on the localization on the learning experience that we learn from so many markets. For example, I think a lot of innovation happens for the first time uniquely in Indonesia because of the time machine effect. We realized that the time when we need to fight both Alibaba and JD, we will not have a time like in China when they get to be in front of us, like Cainiao in Alibaba or like JD to put their largest thing on full of human services and we realized that eventually our margin will end plus the market as well. With that limited capital, on a hundred million from Sequoia and Softbank, we thought the capability to beat our own logistic and fulfillment and know that one day that will be the key as a customer will expect. Then we go back to the blank canvas, we are asking ourselves one question. What do we have now that China didn’t have 5 years ago or 10 years ago? Then we realized that we have the right heading services now that competes very fierce in the market. We have Gojek, we have Grab, and we have Uber at a better time and Gojek, at that time, is discussed with Sequoia on a potential investment and we already did by Sequoia and we reached for the founders and I think about the importance of partners here. We realized that as mobility services, they also have a full creation of orders. In the morning, the drivers will have a high occupancy rate, bring people from home to work or school, and the last time bringing food to the people and so on. In the meantime, in that gap time between morning to lunchtime, lunchtime to the evening, there will be not that much occupancy for the driver. We are thinking if they can be our logistic partner, then this will become a win-win. We are at the first step along that kind of model. Ecommerce company, the right heading company, as to provide logistic services to the customer. But what happens with that today at Tokopedia, it’s 97% industry in Indonesia, and surprisingly 65% of all this made in Tokopedia will be there within the next 24 hours. This is because Tokopedia pioneering this concept and continuously improving our system. This doesn’t happen in China because Didi’s are not, Alibaba or JD, partners on the logistic front, but this can happen in Indonesia with Tokopedia because of uniquely this time was in half and time was in gap. We also, this is our evolution that we do on the payment as well. We started to see that all these southeast Asian companies tried to replicate the China playbook. Okay, ecommerce will take off and then payment will take off and all of that, but they forget that China has maybe two decades to beat all of that. In southeast Asia now, everyone raised capital at the same time, and everyone does this race at the same time. If everyone brings their own payment, then there will be no Alipay or there will be no Mastercard or Visa because there’s so many different currencies that are only in your closed ecosystem. Then, we are thinking about we should actually take a different approach, so we are actually taking ecosystem approach. We are actually knocking on doors to the partners who are willing to do the partnership model, which today we are actually working with Grab and having a payment product named OVO in the market.

Patrick Cao: I think, Hans, you also mentioned about regulatory or I guess politics. I think what’s interesting is I think in Indonesia both the government and the regulator have been very supportive of local champions like us and local entrepreneurs, but I think at the same time they’re very, very progressive from an FDI and foreign investment perspective. I think I would echo what Will said, which is that one of the other advantages is that we have that local context advantage. We have the benefit of being very, very focused and obsessed with only one set of customers, whereas some of the international players need to take a business or technology from Singapore, from the US, from China, and then try to translate and localize it for Indonesia. For us at Tokopedia, we have one app, one set of customers, and one language. We don’t even have an English version of our app, so I think that kind of focus and localization has been a big advantage for us as well.

William Tanuwijaya: We understand the government concern because this, a big opportunity, comes with a big responsibility as well. Today, this year, Tokopedia will contribute up to 1.5% of Indonesia economy as a whole, Indonesia GDP, and this number will continuously grow. Of course, as the government, they will be concerned about what if this one to two percent of economy is actually falling to the company that they cannot have a conversation with? This is actually one of the privilege to be local as well.

Dimitra Taslim: Yup. Got it. On the point of ecommerce, ecommerce as we know is such a competitive battleground. There’s so many people now raising a lot of money. I think it’s so interesting because you have you guys, obviously, support from Softbank, you have the likes of Shopee who has a lot of cash from the gaming business to fund the ecommerce business, and Lazada and etc., etc., Bukalapak as well. And so, for people who are looking at the ecommerce market, a critic might say that you guys have a reached a ceiling, and so give us a view into your future. How do you break through this ceiling? What other products, services, markets are you looking into to further increase the value that you’re adding to the ecosystem that you’re in?

William Tanuwijaya: The ceiling, we finally hit $1 billion GMB per month and starting that, we start a thing about we need to be as fast as possible. This is a matter of shifting gears that we made and if everything goes well in the next couple of months, we’ll start to hit pretty even. In 2020, this will be the year where we are pretty even, and this means that the company will no longer require external funding to continuously grow because it’s a sustainable business.  And then, since then we also stopped to play the GMB games. We have started thinking about it’s all about the impact. The internal measurement is how big in this economy will be contributed by Tokopedia. We no longer fight about how big ecommerce market sale will be in Indonesia, and how we’ll be our market sell on the ecommerce pie. We have started thinking today, Indonesia, ecommerce is only four to five percent. The big economies happen outside of the ecommerce, on the off-land space, so then we start to bridge into that. We are thinking about this pillar of evolution in the company. The first pillar is online, it’s what we did in the past 10 years. Then now, we evolve into infrastructure outside services as a logistic and a fulfillment of services, payment and financial services as services, and it is what we did with using OVO. We are starting to influence in the different logistic assets to bring a tiny of Indonesia, but combine with fulfilled by an Amazon model by providing a smart warehouse using an AI, so it can with a pretty decent for your merchants. These are all merchant services as insofar as services, but the most importantly is we start breaching to the offline space, because quite simple, in the past couple of years, I tried to comfort my uncle in my hometown to sell products online. He’s just running a small offline grocery store, so we see a lot of farmers and fishermen and so on. They will never be ecommerce players. If we want to have that, we need to have them to become a technology company. What we start to do, if you see a recent company that we acquired this year, BrideStory and Parent Story, this is because we want to reach to the offline jobs and offline profession. If you’re having a wedding in a certain city, you need all local services from that city. You need florists, make-up artists, photographer, catering venue, all from that city. The wedding is a very local services business, so that’s the reasons why we acquired BrideStory and the ParentStory. We are seeing the next 10 years will be very different with the first 10 years. The first 10 years we are not an ecommerce company, we are a technology company that help other people to become ecommerce company. The next 10 years we will have any profits in Indonesia, especially offline profession to become a technology company.

Patrick Cao: Maybe to add to that, if you think about the numbers, Will mentioned that ecommerce penetration is 4% to 5%, but you extend that to all the other pieces of our infrastructure. Digital payments is 2.2%. In terms of financial services and financial inclusion, I think it ranges between something like 30% to 40% for the bankable, not the banked. If you look at the addressable market for logistics, especially at technology-enabled logistics, that is very, very early days. Honestly for us, we honestly think we’re just getting started. Each part of our business or phases of evolution is hundreds of billions of dollars of ten and if you’re talking about single digit penetration, then we have a long, long way to go, which is why I think Will is right. We’re thinking about how we contribute to Indonesian GDP and I think each of the companies in our market are really, really also just getting started.

William Tanuwijaya: Today, Indonesia is a one trillion dollar economy and we contribute 1% to 1.5% of Indonesia economy. In the next 10 years, Indonesia will become a $5 billion economy and if by that time Tokopedia contributes 5% of Indonesian economy.

Hans Tung: Ambitious.

William Tanuwijaya: Meaning that there will be a $250 billion run rate transition happens in Tokopedia. If you use a multiplier of maybe 0.4 or 0.3 it would be already a very sensible business only focusing on the Indonesian market.

Hans Tung: In emerging market, there are so many opportunities and pain points that could be solved. The challenge is always on power organization and focus. You look at Alibaba, they spend the first five years doing Alibaba.com, helping Chinese manufacturers to advertise and attract foreign customers. Then, they spent four years building Tmall, the sea to sea platform, before launching Tmall, and they did Tmall for five, six years before they launched AliCloud. In today’s world, the time for a company expanding new business lines has shortened and gone faster and faster. We talk about SuperApp as a concept a lot, or content, both in what we put in PowerPoint online as well as in podcasts. The Chinese company are good at coming up with the SuperApp that bundles minute services within one, leveraging the high frequency of the first service to the people to try other services of less frequency. In Indonesia, you see Gojek and Traveloka and Grab becoming more of a super app approach. How do you guys think about that and does it make sense for you to continue to focus on ecommerce and focus on Indonesia to get to profitability first?

William Tanuwijaya: When we think about SuperApp, we think about our service in a more super ecosystem. The fundamental of Tokopedia is like we believe we are trying to be the most beautiful business model in the world where we can only be successful by having others to become successes too. For example, these logistic and fulfillment services, these payment and financial services, we are not trying to win by our own. We are trying to find the best partners that can compete against others. We believe that 50% if something big is more important than having 100% of something small. To your point that Indonesia unfortunately we do not have decades of time like in China to go through this five year cycle on building a new business model. Everyone raising capital at the same time and everyone trying to acquire customers at the same time, but it shouldn’t be a monopoly game. It shouldn’t be one company can profit, all of this is by themselves. We are thinking more on the partnership approach and on the super ecosystem rather than SuperApp approach.

Dimitra Taslim: Great. Thanks, Will. Another question for the both of you, Patrick and Will, how has your view on monetization and profitability evolved over the past few years and how is this linked to, if you look at this part of the world, grow factoring has become a religion and there’s not a lot of focus on profitability and even product design and product thinking. How do you balance this in such a big company, going fast versus having a really good product and focusing on the unit economics and the profitability?

Patrick Cao: That’s a good question. I think we as a commerce company know how to make money. There are many global comps out there, whether it’s Alibaba, Amazon, Rakuten, eBay, etc. That has always been in our sights and so when you think about the way that we’ve planned out business in especially the last three years, then first we were gunning for that magic billion dollar run rate, and then we’ve been lucky enough now to hit $1 billion plus per month. In terms of scale, that’s already very, very significant. I think in the next evolution of our company, it’s to basically get to $1 billion run rate in revenue and then eventually that will be the new normal. That’s how we think about it in terms of monetization or profitability, and again, the drivers are there. You can charge commissions, add services, value-added services from payments, financial services, logistics, fulfillment, cloud, customer service as a service, content engagement, etc., so we have many drivers and those are things that we use our revenue and the capital that we’ve been lucky enough to raise to be able to continuously invest. And I think as Will mentioned, we know how to get there, we know what the drivers are, which is why we’ve been able to grow our revenue this year even faster than our GMV. That will allow us to get to break even. Then, after break even, we’ll have enough cash flow to reinvest into the business the way some of our peers have done and continue to grow that pie and all those different parts of infrastructure in Indonesia.

Hans Tung: To get to a good new economics, obviously LTV versus CAC, you want that number to be as high as possible. When there’s competition, there’s funding coming to competitors in the market, the CAC inevitably rises. One way one of getting to a good new economics is making sure the user can come back more frequently and shop more frequently. For an ecommerce company, Amazon can do about once or twice a month, sometimes even more frequently. Taobao and TMALL can do once a week for consumers, but when it comes to something like Meituan, ELEME, or Uber Eats, the frequency of transaction could increase too on a daily basis, at least a few times a week. As you guys built out product and services for Tokopedia, how do you think about the importance, or not, of frequency of your usage?

William Tanuwijaya: It’s very important, so that’s why internally when we do the product development, there’s one question that we ask ourselves, how can Tokopedia be relevant for every Indonesian customer from the moment that they wake up in the morning until they sleep again at night, from the moment that baby born until they grow up, and how Tokopedia will be a part of their life. That’s why you start to see why we acquired BrideStory. There is the wedding moment in ParentStory that is a baby born until you raise your kids and so on. You see Tokopedia product development, how we’re actually going into vertical innovation. We recently launched an AI-powered typing program, so basically you can sell your used phone in Tokopedia using your current phone and then buying a new phone, but Tokopedia will do real-time fill yours in of your phone today as a direct discount to the new phones that you want to purchase. We are actually the largest digital good services in the country and because of us being run by homegrown entrepreneur, then the government partnership is very strong. For example, in west Java, we are the largest tax collection for the government online and recently the Minister of Finance actually integrate their system to our platform, so 900 government services, tax and non-tax, can be connected to Tokopedia, so very simple in Tokopedia. Then you can extend your passport and pay the fee through the Tokopedia platform. That kind of thing is very, very deep, so we are going local, we are going very deep into Indonesia, digitizing government services and so on and that’s because we think that not only the frequency of the customer can find a solution in Tokopedia is important, but because of these cross-usages, then we have a better understanding about our customer so we can proffer the better personalization and a better credit scoring model, so we can provide additional features like buy now, pay later, and so on and so on.

Patrick Cao: From the physical goods side, Hans, that’s already a weekly use case because they come three to four times a week just on the physical side. You combine that with the digital goods that Will mentioned, phone recharge, paying any of the utility bills, paying for your tax and other government services, that is at least a weekly use case. Then, if you add local services to that, then you’re starting to get to the kind of frequency that you mentioned from the more on-demand players, but for us it’s highly integrated into the physical goods commerce experience, which is why you’re able to drive frequency and push your LTV. But even on the CAC side, as Will mentioned earlier, we’ve never had the most capital, and so for us it’s not about a capital burn game, it’s about the cross-selling and use case perspective, it’s about product innovation, but also as the local champion, we are the ones that are going the deepest and broadest in the market. Will mentioned that we have 97% coverage of the Indonesian market. That is by far the largest of any peer or competitor, so we’re able to drive not just use cases, but very, very deep local penetration. I think those combinations of things with, I would say, very efficient and very innovative ways of doing marketing and promotion has allowed us to not only have the best LTV, but also the lowest CAC. I’d say in terms of quality to economics, Sequoia and Softbank and Ali continuously tell us that we are the highest quality in the country, and I think we’ll be able to continue to optimize for that.

Dimitra Taslim: Now, back on the principles for running the business, I just have a question for Will. What are some of the principal philosophies that you have in place for making decisions as a team at Tokopedia?

William Tanuwijaya: Making wrong decisions is better than making no decision at all, so that’s for one. I always believe in that university concept, so our philosophy is everyone in the company needs to have a sincerity, but at the same time have humility and a curiosity to learn like a student. Tokopedia has a preference now to hire very smart people from around the world, but when I deal with very smart people I also realize that it’s important to have humility to unlearn. Sometimes you learn certain things from a study case, an MBA or in a previous company, a certain way of work has really become a solution, but in an internet world, everything you need to be able to challenge yourself. You need to be able to unlearn before you learn something new. As a leader, a leader’s role is only one, which is creating better leaders than themselves. How do you create better leaders than yourself? You basically need to give two things, which is opportunity and trust. Sometimes you only give opportunity, but you don’t trust your leaders. Sometimes you trust your leaders, but you don’t give them big opportunity. You need to give them both opportunity and trust and let them fail. Only by failure will they grow to become better leaders. That is pretty much a couple of our philosophies that we do, but most importantly, we always believe that we can only be successful by helping others to become successful. For example, Tokopedia will never enter a 1P model, because 1P model, you will start to cannibalize your merchant, so we will continuously be the 3P model, but we believe that the market and opportunity is very, very big by continuously providing merchant services, infrastructure, and so on. You can grow to become a very successful company.

Patrick Cao: I think on the last part, in creating win-win’s and doing and building a business through partnership, not only are you sometimes taking market share from an existing TAM, but you can grow the TAM as well. As Will mentioned, 86.5% of our merchants are new entrepreneurs. That’s definitely growing the pie. And if you take that across, again, logistics and fulfillment, payments, Fintech, etc., then we can grow and build the pie together there as well with our partners to create the same win-wins that I mentioned.

William Tanuwijaya: We didn’t like the world of disruption. A lot of founders and entrepreneurs say that technology, they are trying to build this technology company, trying to disrupt certain things. Technology is just a tool. As a tool, you can think about either disruption or empowerment. In Tokopedia, we are constantly thinking about the empowerment, how we can use this technology to empower instead using this technology to disrupt.

Dimitra Taslim: Great. What would be advice for founders who operate in markets where there’s less capital access?

William Tanuwijaya: If you see all the great companies in the world, they all start as an underdog. They are not having big capitals since day one, you just need to start, and you just need to, what I initially said, dream with your eyes open, meaning what you dream, what you think, what you say, and what you do need to be consistent. What you dream, what you think, what you say, what you do need to be consistent. It sounds easy, but if you really do those four things consistently, it’s actually very, very difficult to do.

Patrick Cao: Maybe putting my investor hat on, capital is also a tool, but I think for any new founder thinking to start a business, I’d say 9 times out of 10 local champions win because the advantage that they have is really localization and really being obsessed over their customer, which means that every dollar that they raise, even it’s less, is more productive and has higher yield.

Hans Tung: If I push that point a little but further, when I look at across the board, the emerging internet companies have done quite well in Europe, in Canada, Australia, and places like that. Whereas in China or southeast Asia, it has been harder. India, it’s a draw. At least Amazon is doing relatively well in India and Walmart bought Flipkart. One could argue, besides localization, there’s some correlation between how well internet companies do and how much work/life balance there is in some of the regions where they have success or not. William, you’ve been doing this for 10 years. What is your work schedule these days?

William Tanuwijaya: This was actually our long discussion during the dinner when Patrick decided to join the company. We discussed about work/life balance and we think that there’s no such thing as a work/life balance because if you want to have a work/life balance, you need to remove something from the scale. That’s what balance means, right? You need to remove something from the scale. What we aim for is a work/life harmony and I really learned that from when I started to have my own family. There’s a quote, “Life is a constant game where you are juggling five balls at the same time,” and these five balls are work, family, friends, integrity, and health. Unfortunately, four out of the five balls are made by glass, only one ball made by rubber. If you are not careful to juggle this ball and that ball falls, if it’s a glass ball it will break apart. Only work is actually made by rubber because you can fail on your work, but if you fail in your family, maybe you can find another family, but it will not be the same. Friends, if you’re having a case that your closest friends help integrity, this is all the glass ball. When you see Steve Jobs, for example, it’s the case of a very successful entrepreneur, but arguably maybe failed on the family and failed on the health ball, because it’s a glass ball. If you’re really with a big, big company, your rubber ball actually consists of millions of glass balls. Today at Tokopedia, 5,000 employees, we are having 6.4 million merchants moving 1.5% Indonesia economy, so we cannot take that work ball easily. This is no longer a rubber ball. This rubber ball consists of millions of glass balls. If it breaks apart, 5,000 people will lose jobs, millions of merchants will lose their bread and butter, and so on. This is a big responsibility, so that’s why we are very appreciative to learn from a big company and good founders like Alibaba. Alibaba recently changed their culture, work happily, and live seriously. We find that it’s very beautiful, it’s a really work/life harmony, it’s not a work/life balance. How you can work happily but you live seriously, meaning that you really juggle these five balls equally and treat all as a glass ball. And how to do that, actually, you just need to be transparent and not take your relationship for granted. Both me, Mel, Pat, we have very supporting partners and spouses, but we are trying to involve them into our struggle. We said our struggle, we said our win, so they celebrate that win, they are involved in that struggle, and we realized that it’s not about quantity anymore, it’s about quality time. From time to time we encourage our partners to take quality time to take a leave with their partners. Happily, it’s our Tokopedia partners today, Patrick, myself, and Melissa all had kids this year and a baby.

Hans Tung: Congratulations.

William Tanuwijaya: We are really learning how to juggle this new ball again, but we are actually supporting each other on a day to day basis.

Dimitra Taslim: That‘s a beautiful adaptation of famous quote on work-life balance by Brian Dyson, right? The Ex-CEO of Coca Cola. Let’s just finish with some quick-fire questions very quickly. First one is for Will. Will, what’s the most important book you’ve ever read?

William Tanuwijaya: Unfortunately, I no longer read books. A recent movie, documentary that I found very helpful is Inside Bill Gate’s Mind.

Dimitra Taslim: I love that one too. Patrick, what is the most regularly purchased item in your life?

Patrick Cao: Wine.

Dimitra Taslim: Okay, and Will, if you could spend a day in someone else’s shoes, who would it be and why?

William Tanuwijaya: Tough question. Maybe Masa-San. I really want to see what is inside his mind.

Dimitra Taslim: Great. And for Patrick, what does success mean to you?

Patrick Cao: Living up to your fullest potential.

Dimitra Taslim: Great. This is very, very concise.

Hans Tung: Thank you very much, guys.

Patrick Cao: Thanks, Hans.

William Tanuwijaya Thanks for having us.

S2 Episode 5: Ming Maa of Grab: How We Grow a Super App in a Highly Diverse and Competitive Region

On this episode, we have Ming Maa, President of Grab, Southeast Asia’s leading super app, providing the everyday services that matter most to consumers. The conversation covered a wide range of topics; how Grab thinks about expansion (markets vs verticals), the tension between product development and scaling, what are the right kinds of high frequency use cases for a Super App, the Uber deal, best piece of advice he’s ever been given and what it is like to work with Masayoshi Son from Softbank. 

This episode also features a bonus interview with GGV Managing Partner, Jixun Foo, who led GGV’s investment into Grab in 2014. Jixun shared how he met Grab’s founder Anthony, the reason behind the different growing paths of Didi and Grab, and what he looks for in mobility startups. 

Grab offers transport, food and package delivery, mobile payments and financial services to over 36 million users across eight countries in the region. Launched in 2011, it is now reportedly valued at $14 billion, making it Singapore’s first “decacorn”, and a GGV portfolio company.

Ming has over 12 years of finance and investment experience across the U.S. and Asia.  He joins Grab from SoftBank, one of Grab’s key strategic investors, where he played a key role in overseeing SoftBank’s investments in SoftBank’s Series D and F investment in Grab. Ming received his Bachelor of Science and Master of Science degrees from the Massachusetts Institute of Technology.


Hans Tung : Today on the show, we have Ming Maa, president of Grab. Grab is Southeast Asia‘s leading super app, providing the everyday services that matter most to mass market consumers.

Grab offers, transport, food, package delivery, mobile payment, and financial services to over 36 million users across eight countries in the region. Launching in 2011, it is now reportedly batting at over $14 billion, making it Singapore’s first Decacorn. And it is also a GGV portfolio company.

Rita Yang : Ming has over 12 years of finance and investment experience across the US and Asia. He joins Grab from the SoftBank Group, one of Grab’s strategic investors, where he was based in Tokyo and played a key role in overseeing SoftBank’s series D and F investments in Grab. Ming received his Bachelor of Science and Master of Science degree from the Massachusetts Institute of Technology. Welcome to the show, Ming.

Ming Maa: Hey, guys, thanks for having me.

Hans Tung : We’re very fortunate to have you on the show. We know you’re super busy, always flying and doing a great job of managing Grab. You joined Grab in 2016 from the buy side with over 12 years of experience on the financial side of the equation. What attracted you about Grab to leave that to work for a startup?

Yeah, I mean, for me it was a no-brainer. I think being on the investment side, you get to see a lot of different companies and different business models and you see a lot of muscle memory about what works and what doesn’t work. But at Softbank, I was really in charge of all of the investments in ridesharing companies, whether it was Kuaidi, which ultimately became Didi, Grab. And then looking at other countries and territories across the world. One of the things that just really struck me was, when you really think about the opportunity in Southeast Asia, there’s just a lot of elbow space. When you’re in China Didi comes up against Meituan, against a number of different companies and payments. There’s a handful of companies. There’s just great competitors, great companies in each and every segment in Internet technology within China, the US, India. And when you look at Southeast Asia, on the other hand, and you look around at what’s available at the time that I joined, what you really notice was there was very little companies at scale operating in the region. And so, I looked at the opportunity. I thought, wow, this creates a whole bunch of white space, which maybe something interesting can come out of it.

Hans Tung : You’re very modest, because back in 2016, it was not an easy year for Grab. There was a huge battle going against Go-Jek. And then Uber struck a deal with Didi in China, thus freeing up a lot of resources, both in terms of people and money to go after Southeast Asia to wipe out the two local competitors. How did you navigate during that year to make both your personal transition as well as operations work to now, you guys are number one in the region.

Ming Maa: Well, I have to tell you, the first six years of the company was really, really hard. And you’re right, I think there was nothing more privileged than having an opportunity to compete with some of the world’s best companies from Silicon Valley. It was always a very daunting task that we had at hand. And when you think about what we had to overcome, it was competing against a company with much better technology experience, working at scale. I think many people would have put the cards against us when you thought about the opportunities in Southeast Asia. But when you step back, the core theme that we always had in Grab was to be hyper-local in every single thing that we do, and I think understanding the customers better than your next competitor is always the key to winning customers’ heart and mindshare. I can think of many different examples that came up over the last six or seven years.

One of the things that struck me the most was, Uber during the hot summer months had a program to deliver ice cream to a lot of the passengers in their cars. We were thinking about that and thinking, well, Singapore is a very hot place, obviously. But the problem is ice cream melts, and so that just creates a big, big headache for everyone. So we thought, well, what can we do that was different? And the thing that we came upon was durian. Durian is the king of fruits in Southeast Asia. It’s that fruit that everybody loves, loves eating. And so we decided rather than doing ice cream, why don’t we deliver durian to our customers, to our passengers across the region? And that mindset, understanding the local flavor, the local preferences, and really understanding at a hyper-local scale, I think ultimately that’s the key to helping us win customer mindshare, customer love, and really out serving our customers compared to international companies.

Rita Yang : So let’s talk about expansion for a little bit. Because as a startup, there’s two ways you can expand. One is to go into other markets, in this case, other countries in Southeast Asia. Another is to provide more services in one market. Can you tell us how Grab thinks about expansion? I know you guys ventured into many different places and services almost at the same time.

Ming Maa: Yes, and it’s very challenging, particularly in a region as diverse and heterogeneous as Southeast Asia, where everything is different not just from country to country, but even within certain countries. I think in that context, one of the core things that we had when we started was to be a regional company from day one. What I meant was, our first city of operations was in Kuala Lumpur, Malaysia. And typically speaking, the second city that a company would open would be another city within Malaysia. We took a very different tactic. Our second city was in Manila, in the Philippines. And then our third city, fourth city was then back in Malaysia, and then we’ve slowly expanded across the region.

But I think having that mindset of being regional from day one creates a lot of different behaviors and different ways of thinking about how to scale a business, how to have a core common technology platform that can scale while allowing each country to be very differentiated in their products and their services. And I think that mindset, we don’t see quite often in Southeast Asia. What you do see is, you see tons of companies who start in a single country, scale to a certain size, and then start expanding beyond their borders. But I think part of the challenge with Southeast Asia is just given the fragmented nature of each market, every individual market by itself is relatively small. And so to really grow to scale, you really need to have a regional first mindset from day one.

Rita Yang : Hans, I would ask your opinion as well on the same question, because we’re seeing a lot of companies trying to become the super app, particularly in Southeast Asia. What do you have to say about companies who are thinking about scaling?

Hans Tung : I think, as Ming said, it’s super difficult to try to do both at the same time, to go to different markets and expand different businesses. I think that the Grab team has done a remarkable job being able to do both and to fight against competitors. And it’s not easy, obviously not perfect. There’s always room for improvement, but it seems like, based on our experience, in order to win and to do well in a super competitive market, unfortunately, only the stronger survive. And this is all about how fast you learn. Nobody comes into the situation having all the answers. How you can make mistakes quickly and not have any mistakes hurt you fundamentally and grow from that, and be able to learn to fly and execute, it’s not an easy task. That’s why there are not many super apps that are successful and can get to the Decacorn kind of stage. The ones that can do it obviously will benefit a lot from just be able having to the upside potential of the market.

Rita Yang : Ming, you actually joined Grab the same year it launched the mobile payment GrabPay. Is that a coincidence, or actually it had been planned in parallel?

Ming Maa: No, that was a pure coincidence.

Rita Yang : Can you tell us about the role that GrabPay plays in the Grab ecosystem?

Ming Maa: It certainly wasn’t an obvious decision at the time. I think at the time we were so laser-focused around how do we better serve our customers in ridesharing, to divert engineering resources from, let’s say, launching another feature for ridesharing, versus diverting engineering resources for payments or financial services was not, I think, a simple decision that was easy to make. And it’s really quite interesting because I still remember at the time our board director, Jixun, would come to our board meetings every quarter. And every quarter he would remind us that payments creates a real competitive advantage in terms of customer loyalty, in terms of improved customer spend. And so really the right way to think about payments wasn’t as a separate independent business line, but really as something that makes the core business stronger and better.

And so I think after about four or five board meetings where Jixun kept on repeating the same thing, I think we finally figured out he was absolutely dead on, and we launched in 2016.

Hans Tung : GGV has the fortune of going through the Alibaba journey, and seeing Alibaba do financial. So, yes, Jixun was spot-on for recommending that. But again, it’s always easier to have the idea but much harder to have execution. So Jixun would be the first to say that you guys have done an incredible job. Again, not easy to get to where you are right now. Truthfully, in 2016, most people around the world thought, oh, my God. Grab and Go-Jek are in trouble. Uber’s coming in with all the ammunition, and they don’t have chance to win anymore. So I think for you to have to go through that, it’s a huge boost for a lot of local champions in differing emerging markets that if you can localize and learn quickly, stay humble and focus on execution, good things could happen.

Ming Maa: Yes, absolutely. The irony behind this is in some ways, Grab was really founded as partially solving a payment problem for ridesharing. If you remember back five, six years ago, ridesharing companies, the real value proposition was you can get into a car and get out without having to pull out your wallet. The payment process was integrated throughout the entire booking flow. And one of the very interesting things that we saw was when Uber expanded into Southeast Asia, they of course replicated that seamless payment journey within Southeast Asia. Now, the challenge that we saw was, part of the biggest problem in the region is very, very few people have credit cards. Frankly, very few people have bank accounts.

So the approach that Uber took, while it made sense for Uber as a global company, didn’t quite make sense in the context of Southeast Asia because you immediately alienate or take away a very large population set that could not otherwise use your services without credit cards or banking. So when we launched, we actually launched a cash prepaid card system that allowed drivers to purchase prepaid cards that then automatically drew down whenever a ride happened. That was the key innovation that allowed us to solve the working capital issue that was associated with cash payments for ridesharing. So in many ways, the first hook that we had was around, how do we sole cash payments in ridesharing? Then fast forward six years later, once we had built enough scale, built enough customer base, then we realized, well, why don’t we solve the cash and the cashless problem directly by launching payments as an alternative to credit cards? And that’s how we ultimately came up with GrabPay.

Hans Tung : It is not easy to design a super app. When we look at the Grab app now, you have five buttons down below a home activity payment inbox of account. And each one of them is pretty self-explanatory for what it does. Of course, there’s always room for improvement, but when we have friends coming from overseas, they can quickly figure out what they’re supposed to do. And this app is a lot more “complicated” by Western standards compared to Uber app, because at home you can transport the foods, delivery, subscription, e-scooter, trip planner, hotels, and a lot more. Based on the user surveys you get, do consumers in Southeast Asia get it as quickly as the Chinese consumers have, regarding super apps in China? Or is that an education process that you have to really spend time and effort to get the consumers in various Southeast Asian countries of different economic development stages to understand this?

Ming Maa: I think that’s a great question. Perhaps the right way to think about it first is, really what is the notion behind a super app, and why are there super apps in places like China and Southeast Asia, but not in mature markets like the US? The way that we thought about the super app is really as a platform that really enables an entire ecosystem or economy of digital services. And why it really works very well in Southeast Asia is because Southeast Asia as a region has always lacked a lot of the digital infrastructure that’s required for great vertical-focus companies to succeed.

So whether it’s payments, whether it’s last mile, whether it’s anti-fraud technologies, many of these basic things that we all take for granted as entrepreneurs in the US are missing in Southeast Asia. And so for companies and startups to scale from 0 to 100, what they end up having to do is either focus on a very narrow set of customers who have access to those services, or they have to recreate all of the services from the ground up. That creates tremendous burden and overhead for a company who’s scaling from zero. So we realized was, well, hey, we’ve actually built all these services for our own business. So why don’t we provide all of these services as EPIs to other startups and other technology companies, and enable them to thrive on top of the infrastructure rails that we’ve built? That was really the genesis for thinking about the super app.

One of the things that we always believe in is, it’s always better to partner with great companies. In fact, we always believe that it’s better to stand on the shoulders of giants than having to create things ourselves. And that has led us down the path of partnering with world-class companies like Bookings with Microsoft, with many others to provide specific services for our super app, whether it’s travel, whether it’s hotel bookings, and many, many more that will come.

But I think to your direct question around, does the consumer get it? Or is education required? I think there’s always an inherent amount of education that is required to drive new services. But one of the great things about Southeast Asia is it is predominantly a very young, affluent/middle-class population. You have a lot of folks in their 20s, in their 30s, who are mobile-first, mobile-native. And once they open an app, they start playing around and then they very quickly learn and get up the learning curve. So it’s a combination of both. But the key is provide the services and then let the market decide what makes sense.

Hans Tung : I’m just casually playing with the app and looking under home and under tripliner. You have buses, you have MRT lines, and which ones in Singapore are being affected by the F1 racing. It’s just very difficult for a foreign company coming into the region to know this much about what’s going on day-to-day and come in with those kinds of adjustments.

Ming Maa: Exactly. It really is all-around being as local as possible, and deeply understanding what really matters in every city, in every neighborhood.

Rita Yang : So Grab launched its food delivery services back in 2016, and also acquired UberEats from the Uber acquisition. Is food delivery the first non-transportation Grab ventured into, and why is food delivery the first one?

Ming Maa: Yeah, I think looking back, food delivery was the first non-transport business that we launched almost immediately after our merger with Uber. If you really think about the dynamics of that marketplace, it’s a natural adjacency to go into. Why? Because we have a massive transportation fleet of, whether it’s four wheels, it’s two wheels, we have three-wheel tuk tuks in certain markets. I always joke if there’s a five-wheel vehicle out there, it’ll be on our platform. What we realized is, the more opportunities that you provide drivers with ways to earn income, the more efficient the overall network becomes, and then the lower the cost of deliveries for our consumers.

So having a driver be able to deliver people during rush hour periods, deliver food during lunch times and meal times, and then delivering e-commerce packages in between, really provides the highest efficiency use of a supply network of transport drivers anywhere in the world. And I do think one of the unique aspects of Southeast Asia is a very open regulatory framework that allows our drivers to do all three services in one, unencumbered by restrictions that you see in China, where motorcycles cannot legally transport people, and other markets like the US, where perhaps motorcycles may be a little bit too short distance to cover suburban areas. So it’s a very good, sweet spot, where you can really take your transportation network, leverage it across a variety of different services, and then increase the efficiency across the entire network.

Hans Tung : Speaking of UberEats, let’s chat about the Uber deal, which happened only two years after the Didi deal between Didi and Uber in China. You guys had a tough 2016, Anthony wrote a letter to everyone and had a town hall meeting to rally the troops to fight back. Walk us through how you get from that point to getting actually the deal done in 2018.

Ming Maa: I think first of all, when I first joined, that was probably one of my first OKRs to finish. If you really thought about the market environment at the time, we had a company that was really firing on all cylinders in Uber. They were aggressively expanding into multiple geographies, multiple cities. They had launched a great product. And so in the face of that, there was a question around how do we sustainably compete and how do we sustainably provide services to our customers? Now, I think fast forward one or two years, I think we shouldn’t overemphasize — or underemphasize, rather — a lot of the events that have happened around Travis. I think Travis leaving the company was really one of the first trigger points that enabled a thoughtful conversation between the two companies around coming together and working together.

I think the second real trigger was having the great support of Chung Wei at Didi. And I think when Chung Wei invested into Grab, that was really the final nail in the coffin in the sense that we now had not only SoftBank, a great partner in its own right from Japan, but also the leading ridesharing company in China supporting us with technology, knowhow, and support. I think at that point, then there was a realization that, let’s find a better way to service our customers rather than beating each other up in the market.

Hans Tung : Ever since 2015, I’ve gotten to know the chairman and the founder of Uber Garrett Camp a bit. I’ve encouraged him on a couple occasions that Didi and Grab are not your enemies. It’s potentially down the road Amazon. So I think expanding into UberEats and taking resources out of Asia. Or does India, China, or Southeast Asia have to focus on UberEats at home and in Europe and other places are a much more productive use of capital [?] But like you said, when Travis was the CEO, that’s not how he rolls. I get that; he got the company to where it was and he’s going to run it his way. Who am I to make a suggestion? But it is in hindsight, a much better use of Uber’s cash on UberEats, and that’s a key driver of why he was able to go public.

Ming Maa: Yeah, I think it certainly extends beyond just the financial considerations as well. I think whenever a company expands to a new geography, by definition, their product development will slow down. And I think you saw that in companies like Uber. This isn’t just restricted to Uber, but you see this in many different companies in technology where I think the eye candy at the end of the day of being a global company tempts many founders to expand very rapidly.

But what you find very quickly is the incremental tax on product development, on engineering, on really understanding your customers at a very deep local level, becomes very high very, very quick. And so we look at great companies like Amazon, who operates only in a handful of companies, as an example of what to follow. Rather than going into every single country at once, focus on countries where you have a core competitive advantage, and then just stay very laser-focused on that.

Hans Tung : I think in the older days, companies from Silicon Valley try to do one thing really well and be very focused on a single purpose, and try to expand to as many countries possible. Those days, in my opinion, are probably over. You have local champions now growing up in different key emerging markets. Each one of them is becoming more of a super app and do a number of things well in order to retain customer loyalty. So companies in America also need to be more thoughtful about where to expand to, and what kind of totality of offering they want to provide to the consumers in the markets. I think that makes the world better for everyone involved.

Rita Yang : So one of the questions I raised from my mind during your conversation is, when a super app emerges, there are multiple ways. There is Meituan, who went from food delivery and then expanded into ridesharing and other services. And there’s also Grab, who started from ridesharing and ventured into other on-demand services. So those two paths, can you guys help us compare and contrast?

Ming Maa: Yeah, I think there’s no one-size-fits-all formula for what is the right way to start along the super app journey. I think for us the key observation was simply, when you look at the basic necessities and the basic problems that are addressing the vast majority of people in Southeast Asia, the first thing that comes to mind is transportation. Southeast Asia is a region where there is just terrible crippling traffic in many of the top cities that we live in. It’s a region where urbanization is much, much more quickly occurring than the ability for governments to keep up with infrastructure investments to support this growing population. And it’s a region where you have massive cities, massive infrastructure, opportunities to solve transportation.

So when you think about deep problems to solve, I think transportation was first and foremost what we identified as a problem that affects really literally everybody in Southeast Asia. And when you think about then, what does it take to become a super app? One of the key things is really frequency of usage and frequency of adoption. It’s about how engaged are your customers on your platform? Did they use you once a month? Twice a month, a la e-commerce? Or do they use you multiple times every single day? And what we noticed was in Southeast Asia, our customers, particularly our top cohorts, were using us multiple times a day. And I think that frequency of usage creates habituation. It drives behavior and creates the foundation for them providing other services on top, which then leads to the opportunity for a super app.

Hans Tung : Yeah, a lot of companies tend to focus either on gross GMV growth or unit economics, which is already improvement, but not as many are focusing on becoming more frequently used by consumers. It’s a very under-discussed point. So take us through when you guys were designing the super app — how do you increase the frequency of users, and what tradeoff decisions do you have to make? You want to sacrifice something else to make sure that the users transact through your platform, your app more frequently in order to create a stickiness for later users.

Ming Maa: Yeah, that’s a great question. At Grab, we have a saying that high frequency will always kill low frequency, and being very deliberate about the types of high frequency services that you provide is very core to how we think about designing the super app, and then the specific portfolio of services in each and every country. I think when you go through the list of potential services that you can offer, the expected frequency rates for each one, I think anyone in any venture firm can come up with a scatter plot of frequency versus transaction, and then you very quickly can identify the few transactions that really make sense.

But I think for us, it goes beyond just looking at scatter plots. You have to really think about the contribution of that service or that high-frequency usage to the overall platform. Now, what do I mean? A lot of payment companies will take a very quick shortcut to get to high frequency. The way that they’ll do that is by enabling P2P payments, where you send payments to your friends very quick. It creates a lot of behavior. It creates a lot of frequency. But fundamentally, it doesn’t create a customer base that is ultimately monetizable over time. And so you have to be very thoughtful about developing high frequency use cases that A) creates the right behavior on the platform; B) creates a value, so that we can then charge for the service, and then ultimately leverage is the overall platform, whether it’s our transportation network, whether it’s our payment rails. But thinking about the whole is always top of mind rather than thinking about very specific services by themselves.

Hans Tung : So when you look at your user behavior, what are the top or most popular usage cases that also has high frequency of usage?

Yeah. It’s really across the entire set of services that we offer. What you see — and it certainly depends by country — in Singapore, we see very high frequency usage behavior on ridesharing, on food delivery. In some more developing markets, we see very high usage behavior on SIM top-ups, on utility payments, because the availability of alternatives is much poorer than what’s available. So the key is, we give each of our country heads the ability to mix and match and to optimize the portfolio to make sense for their customer. And it’s only by experimenting country by country, and in some cases city by city, that you get the right portfolio of services for our customer set.

Hans Tung : Very curious to see how your CTO, how do they think about all of these trade-off decisions? Because they will roll out services or technology and realize that it doesn’t get the same scale that they hope for, and each country is all different.

Ming Maa: I agree. I think that the key to managing that is, as you mentioned earlier, just rapid experimentation and testing. I think we’re very clear on what we do and where we will partner with others. I think for hotel bookings, where there’s a massive offline presence required, boots on the street, where there are clear leaders in this space, then obviously it makes much more sense to partner with companies like Bookings. When it comes to very specialized products like micro-insurance, then it obviously makes sense to partner with companies like ZhongAn to create products for our marketplace. But what’s key is providing and creating that infrastructure layer in the APIs so that you allow third parties to rapidly experiment on the Grab platform and scale in a way that is sustainable, rather than having to do every single vertical by ourselves.

Hans Tung : Right. For a lot of American companies, there’s a lot of talk about having process and careful planning before doing something. And once the agreement is reached, people can focus on execution and get to drive for excellence.

But it seems like in emerging markets, with one example being Southeast Asia, the region is such a diverse place with different users in different geographies, different cities, different countries all have different needs. It seems like being fast and speedy is valued, even if they don’t only answers, wrote something out first. I mean, a user will tell you what works and what doesn’t work, is maybe potentially a better approach. How do you guys balance planning and fast iteration in order to achieve your optimal results?

Ming Maa: Well, I think the first thing to admit is, we are not the best at balancing that today. And I think the reality is, we are a company that evolves just like every other company. And during certain times, it makes sense to be very process-driven. In other times, it makes sense to be very focused on agility and speed to market, and the ability to change direction on a dime. I think part of this depends around the market nature in place during wartime versus during peace time. I think there are very different weightings around what’s the best effective way to drive decision-making. But I think at the core of it, we do have a set of processes around product development, around understanding the ROI for every product, every feature, understanding the tradeoffs between feature X versus product Y. Then it’s really a matter of degree of how deeply do we follow the process versus really understanding the advantages of agility in certain situations. So I think it’s always constantly evolving, we don’t get it right. And I would be very skeptical if anybody says they do get it right.

Rita Yang : So you just mentioned Grab has set its mind on becoming super-local since day one. Can you share with us, how is that philosophy reflected in your day-to-day job managing such a super app with so many different markets to overlook?

Ming Maa: I always remind folks that I joined the company. Southeast Asia is really one of the most diverse regions in the world. You have crazy rich Asians on one end of the spectrum, and you have Slumdog Millionaire, as you know, on the other, and everything in between. Now, I think what we try and do is, we really want to make sure that we have our ears and our eyes on the ground as closely as possible. What does that mean? It means that every year, all of our senior managers sit with drivers for half a day or a full day. It means that every year, all of our senior leaders sit in our call center and take customer complaints from either passengers or drivers.

And I have to tell you, there is nothing, nothing more humbling than getting a call from a customer in Singapore who perhaps was overcharged for a toll fee of 50 cents. That 50 cents may seem very small to you, but to that customer, it’s critically, critically important. On the other extreme, I’ve had investors who have just literally bought a brand new iPhone. They left it in the car and they subsequently lost their phone, and you spend days and days really trying to solve the problem. It really demonstrates how non-black and white running a company in a hyper-local scene can be.

But I think the key to remaining humble, remaining hyper-local and close your customers, is spending as much time as possible with our drivers, with our passengers, with our merchants, with our restaurants, and just understanding exactly what their problems are. And not dismissing the problems, but then really understanding what’s behind that and then finding a way to solve it.

Hans Tung : Right. We look at markets around the world and companies engaging in ridesharing and/or food delivery. Most of them are in the red because everybody’s rapidly expanding and also fighting off competitors with subsidies and so forth. Yet, Meituan-Dianping came out with a second quarter result that shows a positive net income partially driven by advertising revenue. It does send a positive message or signal that in a hyper-competitive market like China against the Ele.Me, Meituan-Dianping could still be a profitable quarter. What is your takeaway from that and what does that mean for Grab, if anything?

Ming Maa: I always say I think the public markets are a great forcing function for profitability. One of the best things to happen to the O2O industry is having great companies like Meituan, Lyft, Uber go public, because I think that sets the tone for many of the companies that remain private in understanding what is that path to profitability. What do investors expect over time, and how do you sustainably grow companies so that we can continue serving our customers for many, many decades to come?

I think for us, it is not about chasing after GMV. I think a lot of companies get trapped in this cycle of constant fundraising where they have to show persistent growth better than their peers. And what you end up with are companies that chase after any GMV, regardless of the quality, regardless of ultimately whether that GMV will become profitable. And one of the disciplines that we have really put into the entire company is really focusing on the GMV that matters. The GMV where we know we are serving our customers properly, we’re serving our customers, and therefore in return, these customers will become loyal and ultimately become profitable customers for us. And it’s by just constantly going after it and creating a larger and larger network each and every day that allows us to reduce incentives, provide better service to our customers, and create greater loyalty. And I think if there is one theme that we’ve seen in 2019, it’s just the volatility of public markets, the volatility of the investor markets. And that focus on being sustainable in the way that you grow business is a good thing for everyone in the industry.

Hans Tung : One of the key factors for growth would be recruitment and retainment and training of talent. Take engineering as an example. China has over 4 million STEM graduates a year. India has over 2 million, but everywhere else is somewhere between 100,000 to 600,000, the US included. As you build and scale in the region, you have built up R&D centers in Seattle, in Beijing, and also in Bangalore. How do you think about recruiting and retaining and training talent, and how do you leverage the competitive advantage of different places in order for you to keep up your requirements for scaling, and at the same time developing homegrown talent as well?

Ming Maa: I think there is certainly a need to expand globally from an engineering talent perspective, just given the lack of locally-grown talent over the last 5, 10 years. That situation will change over time as local graduates really see the opportunity in the Internet economy, and then increasingly are more open to taking risks and joining startups when they graduate from college. But at least in the last 5, 10 years, what I would say is the lack of talent has really forced us to go offshore in many different countries to identify the best and brightest in each niche geo. In Beijing, for example, we have wonderful, just fantastic geomapping talent in China that we can bring to bear in Southeast Asia to create the best mapping technologies in the region. And this is critically important, as you can imagine, because many of the roads in Southeast Asia are really not roads, but they are little alleys. The ability to map those alleys has been something that many of the international companies have been unable to do for quite the longest time.

In Seattle, we have some of the best user trust or anti-fraud teams in the world. Fraud is one of those items that very few people talk about, but it is one of the biggest issues facing developing markets where again, the quickest shortcut to taking growing a business is to go after a fraudulent business or business that ultimately is not a real customer. And I think within Grab, we have a firm belief that we go after real customers. We provide the best services, and we eliminate fraud as much as possible off of our platform. And Seattle is a place where we have most of our anti-fraud features or team developing the services. It’s gotten to a point now where we believe we have the industry’s best anti-fraud platforms in Southeast Asia, and we’re making it completely open to any other third party company, including our competitors who want to use our anti-fraud because we think it’s right for the industry. It grows you over on the street and we do it in a better way.

One of the benefits I think to being at Grab is, inherently, engineers are attracted to tough problems. And I think some of the problems that we’re tackling are some of the toughest in the world. I think when we look at the caliber of individuals that we’ve been able to attract from, whether it’s China, whether it’s the US, really speaks to the opportunity and the problems that we’re solving in the region.

Rita Yang : So looking back at your personal journey since joining Grab as its president, what are the most surprising learnings you have gotten or what are the most unexpected changes on your side?

Ming Maa: Yeah, I can speak hours and hours on this, because everything that I thought I knew we could throw away out the door and change. I think one of the biggest things I’ve learned is, it’s always better to make a decision even if it’s wrong, rather than wait for perfect data and not make a decision. And that’s very counterintuitive for most investors who want a lot of high fidelity data in order to support decision-making, whether it’s product, whether it’s market, whether it’s really everything under the sun. But one of the things that we’ve learned and I personally have learned is, keeping or having a company at standstill waiting for a decision can be one of the worst things to do for an organization. It’s always better to move and act and then pivot a little bit later if we decide the direction is wrong, rather than keeping the organization at a standstill.

Hans Tung : I think from my own experience as a failed founder, it seems like anyone needs to make a number of mistakes. You look at the right answers, you don’t try to experiment. You can’t just think there in a vacuum and come up with a perfect solution. So the faster you can make those mistakes without hurting yourself, the sooner you get to know what to do. Most investors like the demand precision. But it doesn’t exist on the front line, on the bottom line.

Ming Maa: Yeah, absolutely.

Hans Tung : What advice would you give to other young founders to thrive and be able to do well in Southeast Asia? If you have to tell them, here are the three or four things you absolutely have to watch out for and use them to guide your actions. What would those three or four principles or lessons be?

Ming Maa: Gosh, I think we would be the last people to ask for advice on this within Southeast Asia. But I think the first and foremost is, just really understanding the customer in a very deep, deep way. I think Jeff Bezos is famous for talking about customer centricity and avoiding a focus around competition. And one of the things that we’ve learned is, it is extremely easy to say. It’s extremely easy to put that on the poster, but it is really, really hard to ignore the noise and focus on really what matters. We’re all bombarded with just tremendous media in today’s age. And I think tuning out what really matters from, or rather tuning out what doesn’t matter from what does matter, is one of the most important things to lasting.

Rita Yang : Let’s wrap up this episode with a round of quickfire questions. Whatever answer comes to your mind, you can just say it. What’s the best piece of advice you have ever been given?

Ming Maa: The single best advice I’ve gotten is, always have a mentor, regardless of where you are, what your position is in a company. Always have that sounding board because we always get a little bit myopic at times, and having somebody out there to keep us grounded is so important to us.

Rita Yang : Last question. What is the best non-financial investment you have made in the past year?

Ming Maa: Non-financial investment? Gosh, I gotta say it’s probably my ping-pong table. I’m not particularly good at ping-pong, but what I would say is it’s a great way to spend time with my kids. I have three kids now. My oldest is getting into his teenage years when they stop talking to you. But when you’re playing ping pong, that’s when they really open up.

Hans Tung : That’s very, very good advice. I’m going to cheat a little and add one last question that I think a lot of people will want us to ask, but I’m saving it for last, which is, what’s it like working for Masa?

Ming Maa: Masa is one of the most amazing people I’ve had an opportunity to work with. And there’s no one way to describe it except two words that I would use. One is he is extremely non-linear in his thinking. Many people are quite smart. They have very fast CPU cycles in their head, but Masa understands the non-linearity in this world. The second is, he really understands the effect of compounding over time.

Hans Tung : Alibaba is a very good example. Yes.

Ming Maa: Exactly. If you take just the compounded growth rate of Internet data, stretch that out for 15, 20 years, you lead to some pretty non-obvious answers and results.

Hans Tung : Well said. Thank you so much, Ming. This has been a very fascinating podcast.

Ming Maa: Thanks for having me. Thank you.

Rita Yang : Thank you. For this episode on Grab, we also talked with our own Jixun Foo, a managing partner at GGV Capital. Jixun led GGV’s investment in Grab’s series B funding early on in 2014, and has served as a board member since then. Welcome to the show, Jixun.

Jixun Foo: Thank you.

Rita Yang : First of all, tell us how you met Anthony, the founder of Grab.

Jixun Foo: Well, I met Anthony back in, I recall, through an introduction of the earlier investor Vertex. I first met Anthony in a Starbucks in Singapore, in a place called Plaza Singapura, which is a shopping mall. I still remember I had Jenny and Hans with me at that time, and so we had a coffee with him. That was really my first meeting with him. Obviously he came and talked a little bit about his background and returning from Harvard, working for his family. And he had won this competition with his business plan for what at that time was called Grab Taxi. That was really the first contact point. And then soon after, obviously the team, Jenny, Hans, and I had a good impression. Then we had a follow-up session with him I subsequently had in Kuala Lumpur, because Grab literally started out in Kuala Lumpur in Malaysia in the early part of 2013. And so the next visit I had was in KL. Anthony came to the airport to receive me. It was a day trip for me. I went to his office, spent time with his team. Relatively small place, small team. I had met his mother as well at that time. So that was really my second touchpoint before we went in to do due diligence, and then later did the round of financing.

Rita Yang : You once said that what intrigued you about Anthony is actually his motivation in starting Grab versus inheriting his own family business. Can you tell us more about that?

Jixun Foo: Anthony is the youngest among the three sons in the family. And so he has a lot to show. He has a lot to prove, and you can sense his inner ambition when he talks. And the story I really remember is he talks about his grandfather, and the name goes by Tan Chong, and the grandfather started off as a cab driver. And how things evolve and change. He comes back to the point where he wants to make life better for a lot of the drivers, the people that, the community that makes the experience more convenient for passengers and makes life better for the drivers. So it goes back to when he talks about his grandfather, it’s really the underlying roots of why he wants to do it and making things better. And very importantly, there’s that underlying sense of drive and trying to prove beyond that he’s not just because of his inheritance, but his own capability that he can make a difference.

Rita Yang : Now, take us back to 2014, the year you decided to be the lead investor in Grab’s series B. What were some of the noises from the right-hailing markets you needed to ignore, as well as some signals that you think have helped inform that decision?

Jixun Foo: There’s a lot more noise in China, in the US. In the US you have Uber and Lyft, and in China you have Didi and Kuaidi. And you’ve seen how fast they grow and you’ve seen how much capital they have raised and how much burden they are sustaining. And it’s kind of scary, the amount of capital you need to build those businesses. The fact remains that Southeast Asia is still a smaller economy compared to — a much smaller economy compared to the US or to China. You have 10 countries, but you have fragmented city-states and countries by culture, by religion, by language, etc. It’s a very complex market, a smaller market, a complex market. So why bother, right?

So I think that what I really look beyond, number one, I think because of the complexity, therein lies the opportunity. And I think in many ways, Anthony is different because he’s got his family relationships and connections that give him an edge and leverage, number one. Number two, I think his training in the US gives him a network of friends that could join him and work with him with different — he has classmates from Harvard from the Philippines, from Vietnam, from Indonesia, etc. And so he can connect through this network and assemble the talent necessary to address that fragmentation in the market.

So I think it’s very important where we look at the noises, it poses certain challenges. But at the same time, the question is, would the entrepreneur have what it takes to address those noises? And if they do, then it’s an opportunity.

Rita Yang : And in the same year of 2014, you actually also led GGV’s investment into Didi, series D. What can these two deals tell us about your investment thesis for that year, or even until now?

Jixun Foo: We have always liked Didi and I’ve always liked Chung Wei, and then we got to know Wang Gang really well. Over the years, we became really good friends. Fundamentally I think for GGV, we are very thesis-driven investors, meaning while we identify with the thesis, we understand the fundamentals of the thesis, and we will pull capital, invest in the capital. And the fact is that we are multi-stage, we are stage-agnostic. We could be only series A, we can be series B, series C, series D, and we have the capital base, because our fund is $1.9 billion, $1.88 billion to be exact.

We have the capital base to go multi-stage. So that makes us unique and our thesis approach makes us unique. So on that same note, we can invest. I think the underlying thesis is, as long as we identify with the right entrepreneur, we’ll go all in. So where does Didi, Grab follow by? They fall into that same line of thesis. If you look at Qunar, Airbnb, and Tujia, they fall into the same line of thesis, meaning they are all belonging to that one area where we say ok, shared economy, how is that going to work? How does that unique economy work? If it does work, how big can it go? So if we get conviction around it and get conviction on our entrepreneur, we can invest across stages, and we think we can make money across stages.

Rita Yang : Did you have any role in getting Didi to invest in Grab? Is that something you intentionally pushed for?

Jixun Foo: Not exactly. To be fair, I think that a lot of the integration credit goes to Masayoshi Son, the Vision Fund. They had invested in their big investor after ours and after GGV and Tiger, Vision Fund’s Masayoshi has become a big investor in Grab. They’ve also been a big investor in Didi, and instrumental in the so-called Didi-Kuaidi merger, and subsequently instrumental in Didi’s investment in Grab, and also Grab’s merger with Uber Southeast Asia respectively. So I think I would give more credit to Masa for consolidating the market and giving them the ammunition to consolidate the market. And we’ve been playing a supportive role in that sense, supporting that integration.

Rita Yang : Ming actually mentioned in the episode you were quite persistent in the board meetings to push Grab into going into payment. Can you tell us what was your thinking behind that, and what were some of the concerns about going into payment from Grab’s perspective back then?

Jixun Foo: What’s interesting is, if you look at Grab’s business — Grab, among all the various so-called unicorns in Southeast Asia, is probably the only one that has the most diverse touchpoint. They were able to address and scale across 240 cities in Southeast Asia, across multiple countries, multiple markets, and that’s really impressive. The reason why I want to paint that as a backdrop is because it is that reason that gives Grab a very unique touchpoint with consumers across the region. And the fact that the ridesharing business, in my view, would have a ceiling at some point, even though they continue to grow. After seeing the movie I’ve seen in China, when you see Ali going into Ant Financial and WeChat going to WePay, you start to say, hey, who is going to be the so-called Alipay or WePay in the region? And what are the prerequisites for that?

You have to have flow in your transaction. You have to have transactional flow in your services, Grab has that. They have transactional connection among their consumers. And very importantly, how do we make the service and experience better for the consumers in Southeast Asia? Because if you have to call a cab through an app and you have to pay in cash, there’s still friction. There’s still friction to your experience, meaning you still have to dig out your wallet and pay the driver. So the point I’m really trying to push for is multifold. One is you have the touchpoint, two is you deliver a better experience by doing GrabPay, because that will literally help to smooth out the experience for your consumers. And three is, you raise the ceiling of your potential by moving into a new service, which is payment.

So Ali is powerful. Alibaba is powerful, not just by way of Taobao, but it has a seamless experience with Ant Financial and Alipay. And I think that analogy is very similar for Grab, if you want to deliver a seamless experience and you also can grow bigger with your payment services. And I’ve been pounding that for years, like at the board meetings and saying we should do this, we should do this. Now, having said that, it’s not easy because you need talent. You need people. You need understanding. And so given the talent that we have in Grab, you need to also find relevant talent. So to find those relevant talent in Southeast Asia is not that easy. So we’ve been on the talent hunt for a while before we identify Jason Thompson to help come lead the effort at Grab.

Rita Yang : You just mentioned the variety of services Grab has. If we look at Grab and Didi, they started with similar models and went through a very distinct growth path. Didi focuses more on different modes of transportation, while Grab gradually evolves into a super app model. Can you help us understand the reason behind that?

Jixun Foo: Well, I think it’s again, it’s really because of the state of the market. Didi emerged with Alibaba, Tencent, Baidu, JD, and Meituan, and it’s a multifaceted market with lots of competition. You have to look at — they emerged and they are playing in the land where there are already giants, tech giants. So you have to therefore find space and gaps and see where can you compete better and where can you excel better. So naturally, I think Didi is more focused on transportation going on multiple transportation products, services, and they tried many things up and down their value chain. That’s number one.

Number two, the China market is big. Even as a transportation fabric or transportation network, it’s big enough to sustain a fairly big unicorn in China. Southeast Asia is a bit different. Like I said, some of their issues are fragmentation, the scale and size of the market is different. Their GDP per capita is lower, the population size smaller. So you are playing a different field, and you’re also playing in a different landscape. You have less giants, so to speak. I mean, Grab is the giant, so to speak, and so therefore it’s natural for Grab to go horizontal and into more services because you want to have more consumers on your platform. You want to become the local services platform beyond ridesharing into food takeout, delivery services, etc., and eventually into payment and financial services. So that’s the environment, the market, the landscape allows you to do that. The scale and the size of the market requires you to do that.

Rita Yang : Jixun, you have always had a thing for mobility as an investor. Your portfolios include Didi Chuxing, Xpeng, Hellobike, and Grab. A bit curious, where does your fascination for transportation come from?

Jixun Foo: Well, I don’t know. Maybe sometimes when your foot is in one, you start to step foot in another and just keep moving along. And I think that’s part of how we approach the market as partners of GGV, not just for myself, but Jenny and Hans and Eric. Jenny is very focused on education and she’s invested in Liulishuo, she’s invested in Zuoyebang, she has invested in Huohua Siwei, and many more. So the whole idea is, as you step foot, you understand the landscape. You continue to stay on top. If you can continue to stay ahead of the curve and the innovation curve, you can stay ahead of the game. That’s what made GGV unique. And maybe because I like cars, I like travel, too. So it’s part of my passion.

Rita Yang : Last question. When looking at mobility companies, what do you actually look for, or say if there are companies who are thinking about doing a startup or want to pitch their business idea to you, what should they be telling you?

Jixun Foo: Yeah, I’ve seen a lot of mobility businesses. Mobility in China, mobility in Southeast Asia. Recently we spent quite a bit of time in India. We met quite a few of the mobility companies, the Bounce, the Yulu. I might not be able to remember one or two names, but the point here is that the underlying business is actually quite straightforward because it’s about an asset. You want to share the asset. The economics of that sharing has to make sense, meaning having that assets and drive, having a shared economy concept on top of that, is that you drive utilization of the asset up. But having said that, your cost of maintenance, cost of operation, cost of usage, etc., and effective utilization at the end of the day has to also make sense.

So this unit economics equation, if you will. If it makes sense, if you can work out the economics on — and bear in mind that a lot of times when you look at these numbers, you have to look at a mature state or a steady state, maybe that’s a better word. At a steady state, where you have enough cars or you have enough bikes on the street. You cannot look at it with a small number because the saturation curve will drive utilization down. And at the steady state, you have to make the economics work. That is the underlying thing for me.

So when we chose to invest in Hello, when we chose to invest in Grab and these auto companies, it all comes down to these very basic equations. It’s quite easy to understand but it’s very hard to do and to do it right. Some people ask me, hey, is Hellobike really a technology company? I say, yeah, absolutely. There’s so much technology embedded into locating the bike, geofencing, into creating a system to have a very high operating efficiency. So a lot of technology is being applied. Let’s just say, from a consumer perspective, you don’t see it, you don’t see it.

Rita Yang : This is great. Thank you so much, Jixun.

Jixun Foo: Thank you. Thank you, Rita.

S2 Episode 4: Live in Bangalore: Fireside Chat with VG from Udaan, Manu from Xiaomi and Hans from GGV

This episode is a recording of the fireside chat we hosted in Bangalore on September 19th. In the chat moderated by Madhu Yalamarthi, a member of GGV’s investment team, we talked about what does evolving for the next billion means for each of the panelists, the evolution of India’s startup ecosystems and what keeps the panelists going.

We were overwhelmed by the enthusiasm and brilliance of the audience that night and everyone we met during this India trip. We want to express our gratitude towards everyone who showed up that night despite Bangalore traffic. Thank you!

S2 Episode 3: Manu of Xiaomi: The Making of India’s Favorite Smartphone Brand

On this episode, we have Manu Kumar Jain, the global vice president at Xiaomi and the managing director of Xiaomi India. Xiaomi is currently the world’s fourth-largest smartphone brand. Besides smartphones, the company also makes other smart devices connected to its IoT platform. It is the youngest company on the Fortune Global 500 List for 2019.

In the wide-ranging conversation, we discussed the biggest success factor of Xiaomiin India, how he goes about hiring, working with Xiaomi’s founder Lei Jun, and his advice for foreign brands who want to make inroads into India.

Manu joined Xiaomi in 2014 as the first employee and managing director of XiaomiIndia, where he has grown Xiaomi to India’s NO.1 smartphone brand for 6th consecutive quarter. Before joining Xiaomi, Manu co-founded the fashion eCommerce company Jabong and worked as a consultant at McKinsey. He holds a bachelor’s degree in mechanical engineering from Indian Institute of Technology in Delhi and a post-graduate diploma in management from Indian Institute of Management, Calcutta.


Hans Tung: Today on the show we have Manu Kumar Jain, the Global Vice President of Xiaomi and the Managing Director of Xiaomi India. Xiaomi is currently the world’s fourth largest smartphone brand and besides smartphones, they’ve come now to make other smart devices connected through its IoT platform. It is the youngest company on the Fortune Global 500 list for 2019.

Rita Yang: Manu joined Xiaomi in 2014 as the first employee and Managing Director of Xiaomi India where he has grown Xiaomi to India’s number one smartphone brand for six consecutive quarters. Before joining Xiaomi, Manu co-founded the fashion e-commerce company, Jabong, and worked as a consultant at McKinsey. He holds a bachelor’s degree in mechanic engineering from Indian Institute of Technology in Delhi and a post-graduate diploma in management from Indian Institute of Management, Calcutta. Welcome to the show, Manu.

Manu Kumar Jain: Thank you so much. Thanks for inviting me.

Rita Yang: Manu, what about Xiaomi that made you join the firm in the first place? India had a lot of fast-growing startups back when you started at Xiaomi, and why Xiaomi?

Manu Kumar Jain: Okay, it’s an interesting story. This goes back to 2011 and ’12. We were about to start my previous company, which is Jabong.com, and at that point in time I thought it was a horrible idea because we were supposed to sell clothes online and I thought, I spoke to my co-founders, why are we setting up this business? Nobody would ever come and buy shoes and clothes online. They said, no, it’s a great idea. We will figure this out. A few months down the line, we were doing tens of thousands of transactions every single day, but that was not surprising for me. The most surprising thing was majority of people, more than 60% of them, were coming and buying using a mobile phone and mobile phone they were using was small, two-inch, three-inch, which we call widget phones. That got me excited about mobile phones and I started searching and I read a blog from one of the US bloggers that said the company to watch out for in the mobile handheld space is Xiaomi. It’s a company, they’re disrupting the space, it’s a small startup from China, nobody heard of it. That got me excited and I got introduced to Xiaomi founders through some common friends. We were in touch for more than a year, through the time I was running Jabong, and when I exited Jabong, Ben, who was one of the co-founders and president of the company, he approached me. He said, “Hey, do you want to do something in mobile? We want to start a Xiaomi business. Would you like to start it for us?”. I thought it was an incredible opportunity, so that’s how this whole journey started.

Rita Yang: Hans, you’re an early investor in Xiaomi. How does that fit into your side of the story with Xiaomi, with them coming into India?

Hans Tung: I knew that- I’d run a model on Xiaomi back in 2010, even before I had the phone, and did a forecast on how this could be as big outcome as they wanted it to be. Through that calculation, it’s very obvious that if Xiaomi stayed as a China-only business, you’ll never reach the lofty goal that Lei Jun had for Xiaomi, so you had to be a global player. They’d look around the world, where the next billion users are going to come from, India is definitely on the top of that list. Based on that, it has to work, but in reality, no Chinese brand had ever done well in India, so thus it appeared as a mission impossible. When Manu was hired, I was very thrilled to see how it was going to turn out. I don’t think anybody back in 2014 had ever imagined that Xiaomi would be number one in India today and the number of phones being sold in India is comparable to China, so kudos goes to Manu and his team.

Manu Kumar Jain: Thank you.

Rita Yang: Manu, for people who are not aware of just how successful Xiaomi is in India, can you give us a few descriptions on how would an Indian consumer, how crazy they are about the Xiaomi phones?

Manu Kumar Jain: Sure. I would say today Xiaomi’s probably the most loved technology brand in the country.

Rita Yang: Wow.

Manu Kumar Jain: Why do I say this? In just three years, from 2014, May to 2017, May, we became the largest brand in the country, smartphone brand, and since then, for the last eight quarters, last two years, we’ve been the number one smartphone brand. We introduced many more categories. We introduced smart TV’s last year. Soon we became the number one smart TV brand. Now, we have been the large smart TV brand for five consecutive quarters. We are also the number one wearable brand, fitness wearable brand, with more than 40% market share. We are the number one power bank brand in the country with more than 35% market share. We are just building many more IoT products and categories and consumers, even though we don’t do any advertisement, consumers just love it and they continue to buy multiple Xiaomi devices.

Rita Yang: How do they get to know the brand in the first place?

Manu Kumar Jain: It’s a tough question because most of the users can’t even pronounce the name. They can’t pronounce Xiaomi. If you ask many users, they will call it as Zyo-mi, Zio-mi, Gio-mi, Gao-mi, but all of them know one thing, which is Mi. That’s what they recognize as us. That’s our brand identity. Most of the people come to know us from three different sources. The first and the biggest one is word of mouth. People who buy our devices, they become big fans and they told other friends and family, this is the product that you should buy. Second is PR articles and a lot of videos that people do on Xiaomi products. Third is just social media. We actively put everything on social media. All our employees encourage everybody to do it. People just see good reviews, good comments on social media and hence decide to buy Xiaomi products.

Hans Tung: When I open my LinkedIn app, the first thing is the post from Manu, and you come with it. It’s impressive how active Manu and his team are on social media.

Manu Kumar Jain: Thank you.

Hans Tung: Yeah. It’s an amazing job.

Rita Yang: I just have to ask this, is this something Lei Jun told you to do? He himself has enjoyed a huge success on the Chinese Weibo. He’s a big influencer there. Is this something he specifically said to you, “Manu, you should be very active on social.”?

Manu Kumar Jain: Definitely yes.

Rita Yang: Okay.

Manu Kumar Jain: I remember when I first met Lei Jun during my interview process. He asked me how much money we were spending on marketing at my previous company, Jabong. I gave him the number, whatever that number was, as a percentage of revenue. Then, he asked me guess how much money we are spending at Xiaomi. My guess was five percent. He said, “No, no, no, think again.” I said maybe three percent. He said, “No, think again.” I said maybe one percent. Then he stood up, he went to the board, and then he drew a big zero.

Hans Tung: A big, fat zero.

Manu Kumar Jain: And he said, “That’s what we spend because we use social media.”

Hans Tung: Yes.

Manu Kumar Jain: Then he actively encouraged me from day one to use social media.

Rita Yang: Interesting.

Hans Tung: Yeah. I remember the test he did to the head of marketing in China back in 2011. It was also a big, fat zero. The first campaign that Xiaomi ran was Shoujikong or a campaign about people who love phones, who are phone freaks, who are just very ardent users to talk about their experience with phones in their history of life. Lei Jun had pictures of the 50 phones he ever owned. He posted on Weibo on the website of Xiaomi to talk about the phones that he had, why he liked them, why he did not like them. Within the first week, 460,000 people shared the phones that they had and why they didn’t like it in anticipation of what the Xiaomi first phone would look like. By going through that campaign, he made it a lot easier to sell phones later. About 2,000 people showed up and about 340,000 phones were purchased after the launch. Without going to the heart of the users and the most active user, get them to share your thoughts, there’s no way Xiaomi can to that kind of social following by spending such little money.

Manu Kumar Jain: In fact, in the beginning of this year, a particular team within Harvard Business Uni, Harvard Business School, they approached us and they asked me to come down to US to give a lecture only on this topic, how we became the largest brand in the country without spending a single marketing dollar.

Rita Yang: Wow.

Hans Tung: I remember when Lei Jun talked to me in 2010, he said he has so many ideas on how to improve smartphones, but no matter how many emails he sends to iPhone or Nokia, no one’s going to respond, so he said you want to build a company where the most active users have a voice.

Manu Kumar Jain: Yes.

Rita Yang: If you were to rank the three success of Xiaomi phones, the price point, the distribution channel, and the fan-based community you just described, how would you rank it? Which factor would be the number one reason?

Manu Kumar Jain: In India?

Rita Yang: Mm-hmm.

Manu Kumar Jain: Okay. I would say the first one is definitely product. If the product is not great, we cannot succeed no matter what we do. Second…

Hans Tung: What makes Xiaomi product so attractive in the eyes of Indian consumers?

Manu Kumar Jain: Every time we launch a product, there are three key things that we keep in mind. It needs to have the latest and the best specs of innovation. Second, it needs to have the highest possible quality standards. Third, of course from a pricing perspective it has to be probably one of the-

Hans Tung: Extremely affordable, Yeah.

Manu Kumar Jain: We coined a term called honest price, which means it may not be the lowest price, but we’ll keep less than five percent profit margin for ourselves. We cut down on the cost and then keep very little margin and then pass it on to user, and that’s what we call this honest price. If you look at many of the historic brands, they were great at innovation and great at quality, but extremely bad on pricing.

Hans Tung: Yes.

Manu Kumar Jain: Some of the brands which came about six, seven, eight years ago, they had good price, good specs, but horrible quality. I believe today we are the only brand across different product categories which can take the box on all three: product, quality and price. That’s what makes our value offering so unique. I would say that’s the first thing. If you don’t have a great product with great quality and pricing, you cannot win. That’s a given, and there are products centered company. I would say second thing which makes us very different is our people. Look at Xiaomi India. It is the place you know majority of people do not come from smartphone background. They come from internet background. They come from companies such as Google, Facebook, eBay, Flipkart’s, Snapdeal, from Flipkart, from e-commerce background, from internet background. Many of them, because they have never done anything like this before, they are willing to take risk. They’re willing to try out new things that have never been tried before. For example, we just launched a new IoT device, a smart water purifier, in India two days ago. The guy who’s leading it and who’s built it, he does not come from water purifying history, he comes from e-commerce background.

Hans Tung: Yeah.

Manu Kumar Jain: He just brings a very different thought process from what a traditional water purifier person would bring on the table. That’s second. The average age of the company’s around 30. Most of the leaders are in early 30’s. I’m one of the oldies in the company.

Hans Tung: You’re doing well. 

Manu Kumar Jain: That’s the second one. Third, I would say the reason why we’re successful is because we haven’t done anything similar to what other companies did. You spoke about distribution. Five years ago, 94% of the market was offline. Only six percent was online. When we were launching, I went to large number of tech CEO’s, my mentors, people who had run mobile companies before, tech companies before. They said, “Manu, this is the wrong strategy.”

Hans Tung: Right.

Manu Kumar Jain: “You are going after a small six percent market. Ninety-four percent market is offline. The way to sell a smartphone is spend a lot of money on marketing and sell offline. You are doing none”.

Hans Tung: Right.

Manu Kumar Jain: I was worried. I said maybe we were doing something wrong, but we have never done what others did. When at the time the market was going offline, we went online. We now have close to 50% market share within the online segment. We grew that. When everybody was going after feature TV’s, we went after smart TV’s. Almost an entire growth of smart TV’s, we have captured 85% of that growth. A lot of things that we have done differently, but it is our channel, whether it is distribution or it is marketing using social media, and that has helped us to differentiate from any other brand which has been traditionally here in India.

Hans Tung: I remember with the product design, Lei Jun specifically wanted to make sure that if he doesn’t spend money on marketing, which for Apple is about 20% of the sales, he doesn’t spend money on distribution to sell in offline stores, not initially anyway, and not go through the carrier offline stores. He said no 100%. This is why the phone’s going to be a lot more affordable, because he doesn’t have these costs, and that’s why he can keep the operating expense at only five percent of the sales. One or two percent on R&D, three percent on operations, that’s it, so extremely lean and almost didn’t even pass through the hand of the consumer, yet can still be a profitable business.

Rita Yang: Xiaomi is probably one of the first direct to consumer brand out there.

Hans Tung: Right. This happened after Google failed with the initial launch of Nexus to sell phones online and this happened right when Motorola was acquired by Google, so nobody believed that Xiaomi could’ve worked.

Manu Kumar Jain: In fact, to point on direct selling, we have our own e-commerce platform, Mi.com, M-I .com.  You’d be surprised to know it has become the third largest e-commerce platform in the country when it comes to electronic and smartphone sales.

Rita Yang: Wow.

Manu Kumar Jain: After Flipkart and Amazon.

Hans Tung: Right. Because people come, they share comments on how the phones could be better, give advice and so forth, and I’ll share tips, and I’m supposed to buy products.

Manu Kumar Jain: Yes.

Hans Tung: Yeah.

Rita Yang: Can you tell us what is the whole market strategy Xiaomi has for India? That’s a term that has come up again and again for the Indians as a market. Can you share with us on that?

Manu Kumar Jain: We at Xiaomi believe that India is almost like a second home for us. Everything that we do in China, we are replicating here. We are designing phones, we have R&D, we have product team. We have manufacturing. We have end to end all operations that we do in China, we are doing it in India. A lot of products we are designing for India in India. I’ll give two examples. One is some of the phones are completely redesigned for India. For example, in China we launched a phone called Redmi Note 7, but we launch a different one in India, which was meant for Indian consumers with a much higher pixels and a different camera, different specifications as Redmi Note 7 Pro. This year we launched something called a beard trimmer, which was a product which does not exist anywhere else in the world within the Xiaomi ecosystem and that’s because a lot of people are clean-shaven when it comes to the rest of the world and China, but in India, thanks to the latest fashion of some of the cricketers having beard, life and one of youth have beards, so we designed and launch a beard trimmer in India for India. The product that I was speaking about, water purifier, we have something in China, but it’s very different because in China there’s no power because of Watercart. We had to re-develop the entire product in India for India because in India there are a lot of power shortage and water shortage, so you need a big tank to hold the water in this power kind. A lot of these products are being completely redesigned for Indian market, and that’s why we think this is a second home for us.

Hans Tung: Right.

Rita Yang: For the beard trimmer you just mentioned, I think it’s absolutely fascinating. Does Xiaomi in India also goes the same way how it builds different products in China by investing in them instead of doing everything themselves?

Manu Kumar Jain: True. When you buy products that we design ourselves, which are phones, TV’s, laptops, routers, and OS.

Rita Yang: Okay.

Manu Kumar Jain: Everything else is designed by one of our ecosystem companies. The way that we did Mi Beard Trimmer, we enter our product specification in India, then we found the right ecosystem company. We have 200 such companies where Xiaomi is invested in, more than 200. We found the right partner who could then work our product design into a reality and then we work with them to launch this product in India.

Hans Tung: What are these other products you guys were thinking of that will be launched soon or that you think are quite unique to India as well?

Manu Kumar Jain: Some of the products which we did in China do not make sense for India. For example, we have drone. Now, drone is not illegal in India. Or you have 9 bots scooters, the self-driving scooters. Indian road conditions would not allow that. I’ve tried it myself. There is nowhere you can drive it on Bangalore roads. I would say there are three broad categories of products. One, which are there in China, and we can just launch them in India by small modification.

Hans Tung: Some examples include?

Manu Kumar Jain: Such as TV. On hardware, we had to make some modifications. For example, add more number of connecting points, sockets, because Indians have far more things. They have cable TV, they have dish TV, and many other things.

Hans Tung: Sure.

Manu Kumar Jain:  We do change brightness and sound level because watch TV during daytime unlike China where most of the people watch TV in nighttime.

Hans Tung: At night.

Manu Kumar Jain: The brightness levels have to be different.

Hans Tung: Sure.

Manu Kumar Jain: We can broadly use the same product 80%, 90%, but it’s a small change-

Hans Tung: One piece.

Manu Kumar Jain: and then launch it in India.

Hans Tung: Yeah.

Manu Kumar Jain: The second category which is there in China but does not make any sense in India, which is the example that I gave, drone or standing scooter or, say, rice cooker. It’s a small rice cooker and people in China love it. Most Indians really don’t care for it. There’s a third category, which has to be completely redesigned or developed only for India. The two example that I gave.

Hans Tung: Water purifier.

Manu Kumar Jain: Water purifier and the beard trimmers are the ones which are completely designed for India. We are working on many more such things, for example laptops. Laptop exist in China, but the average price point of laptop in China is 5,000 RMB, which is too high for Indian market. We are thinking of doing laptops in India, but whatever we do it has to be completely redesigned for India, as for user needs and/or Indian price points.

Hans Tung: Right. How much of those products you guys sell in India that’s manufactured locally versus imported from China?

Manu Kumar Jain: We started by importing five years ago and then we slowly started assembling in India, and then we started manufacturing a large number of components locally. If you look at our phones, which is our biggest business in India, almost 100% of our phones that we sell in India are made in India. Not just that, a large number of components, including PCP, camera module, battery pack, touch panel-

Hans Tung: Are local now.

Manu Kumar Jain: Are either localized, being sourced from local vendors, or are being manufactured here locally from our international partners with company here. Our smart TV’s, 80% are all made in India, 20% are still imported. Power banks are 100% manufactured in India. They will be imported sometime, only if there’s a big sale. Other categories are still imported, but slowly we are trying to figure out a way to start locally manufacturing each one of them.

Hans Tung: Right. Has your popularity here made it easier for the Taiwanese and Chinese hardware partners to expand to here as well?

Manu Kumar Jain: Yes. Five years ago, there was always a problem because when you would you go to partners, manufacturing partners, to set up a shop here in India, they were not comfortable because there was no big anchor point, plus there were no competent suppliers. When you would go to competent suppliers, there were no manufacturers. It was all the chicken and egg problem.

Hans Tung: Correct.

Manu Kumar Jain: Four years ago, we convinced Foxconn to set up a first plant in India and that really helped because we started growing our volume and all of them were made by Foxconn at that point of time. Now we work with Flextronics, we work with many other partners, because of which there was a huge incentive for competent suppliers to start coming here. Plus, they had big clients such as Foxconn in this, and Foxconn only felt comfortable because they had a big anchor client such as us.

Hans Tung: Yes.

Manu Kumar Jain: I believe because of which, in last four years in that ecosystem of electronics manufacturing has developed significantly as compared to where it was, but we still have a long way to go.

Hans Tung: Sure.

Rita Yang: What about the software side of things Xiaomi’s doing in India or content, for example?

Manu Kumar Jain: That’s an interesting question because that’s our core business. Most of the people just talk about smart phone and the way Lei Jun explains it is of course we’re a smart phone company, but we are much more than a smart phone company. We are an IoT company, we are an internet company. On the internet side, we have been building a large number of internet products for India in India. For example, we have Mi Music, Mi Video, Mi Pay, Mi Browser, many more internet services.

Rita Yang: And they came with the phone, I would imagine.

Manu Kumar Jain: Yes. Of course, phone has to distribute these services.

Hans Tung: Sure.

Manu Kumar Jain: It’s a very easy distribution. Mi Music comes with a very large library of music content and it’s free for users, and that has been done in India. Mi Video comes with more than 700,000 hours of content, which we showcase both on our Mi TV’s as well as on Mi phones. Again, that has been completely done in India because we take content from, 12, 15 different content providers and then show it in one seamless line. A lot of these internet products we are now beginning to design in India for India. We have our team here working on this.

Rita Yang: Now, let’s come to you working in a company that has its heritage in China. What does that feel- From a day to day perspective, how much time do you need to spend with the China team or the headquarters, quote/unquote? How does that reflect in the whole market strategy?

Manu Kumar Jain: Before I joined Xiaomi, a lot of people told me never to join a Chinese company.

Hans Tung: Just like a lot of Chinese people told that never join an Indian company.  

Manu Kumar Jain: True. People were way off. Some people heard horror stories saying how a company beginning in China will never empower you, will never give you decision-making power. For everything you’ll have to go back to headquarters and check with them. Lucky for me, I’ve never personally faced any of these issues. I’m extremely happy with the way things have progressed over last five years. I talk to Lei Jun almost on a daily basis through chat.

Rita Yang: WeChat or WhatsApp?

Manu Kumar Jain: No, we have a Mi Chat.

Rita Yang: Oh.

Manu Kumar Jain: MiTalk.

Hans Tung: Yup, MiTalk. I still have it.

Manu Kumar Jain: Lei Jun and I talk almost on a daily basis on MiTalk and we discuss about anything and everything, about what is happening with Xiaomi globally, what is happening in India, the political situation in India.

Hans Tung: You type in English and he types in Chinese?

Manu Kumar Jain: No, I also type in Chinese. I have a team member who will do translation for me. I don’t miss any places. I send it to the team and then they will translate into Chinese and then I will send it to Lei Jun and vice versa. Lei Jun can read and understand English.

Hans Tung: He’ll read English no problem.

Manu Kumar Jain: Sometimes if I’m sending something urgent, I will just send him in English, and he will read it and he will reply in Chinese and I will use Google Translate to quickly translate it back.

Hans Tung: Right.

Manu Kumar Jain: It’s very seamless. We have never faced a problem. Because Lei Jun and I speak so frequently and then I present our business case, quarterly business plan to our board and to Lei Jun every quarter, so we align on milestones on a yearly basis and on a quarterly basis, mainly on our business plan. As far as we are not significantly changing the strategy or not changing our business plans drastically, it’s openly fine for us to take decisions locally here. I’ve never seen him come or interfere, or anybody else to interfere, so that way I would say the involvement is extremely high.

Hans Tung: It’s unusual.

Manu Kumar Jain: I don’t know, actually, whether it is unusual or not because it’s what I’ve heard, but I’ve never experienced this myself.

Hans Tung: Sure, yeah. It’s very impressive that both of you guys can do that.

Rita Yang: You actually have said in an interview back in 2014 that Lei Jun was the most visionary guy you have ever met, and four years, actually five years after that, what are some of the unexpected things you have learned by working with him?

Manu Kumar Jain: I would say two things. One, almost all the leaders that I have worked with, they would either know product very well or business very well. For example, operations. How to run business, e-commerce, customer care, etc., a lot of these things. That’s what it is I know. I’m not saying he’s the only one. I’m sure there are other people, but among the people that I have worked with, I can’t think of anybody else who’s a great tech and product guy who’s also a great business and operations guy.

Hans Tung: Right.

Manu Kumar Jain: It’s amazing at how he could have a conversation about building business, building operations, building billions of dollars of business at one hand, and other hand he can go very microscopic, talking about the camera features of a popular phone and just go in depth and spend next few hours discussing that and everything.

Hans Tung: Amazing.

Manu Kumar Jain: Yup. His ability to discuss both product and business is incredible, and he spends equal amount of time on both of them. I’m yet to meet anybody else who can do this as efficiently as Lei Jun. Second, I would say, is the ability to connect with a large number of people despite him not being very comfortable speaking English. When it comes to him, he makes it a point to meet all the key leaders, team members in India, one on one. He will spend a lot of time with me, sometimes our one on ones would last six, eight hours.

Hans Tung: Right. He can talk.

Manu Kumar Jain: He can talk, he can discuss, he can debate, and it’s not easy to convince him. Sometimes our debates have lasted four hours and then one of us had to convince other person for our debate on one single topic. The thing that he really connects well with everybody and he’s very responsive. He won’t miss any messages, maybe one o’clock at our time, which is 3:30 in the morning his time.

Hans Tung: No problem.

Manu Kumar Jain: I will get a response immediately.

Rita Yang: Hans, he is like you in that sense.

Hans Tung: Even more so than I do.  Yeah.

Manu Kumar Jain: He’s amazing.

Hans Tung: He’s amazing.

Manu Kumar Jain: Yeah.

Rita Yang:  What is one of the things you guys disagree about or debate about?

Manu Kumar Jain: Anything to everything. The first thing that we ever disagreed about, the first big debate that we had almost five years ago was where should we have headquarters in India. He said it should be in Delhi, I said it should be in Bangalore.

Hans Tung: Thank God.

Manu Kumar Jain: We debated for weeks and weeks and maybe months. Somehow I convinced him to say that it should be Bangalore because-

Hans Tung: His experience is with Beijing, it’s the capital. He has to deal with the government, so he’s not there, you cannot just go past the government policy changes and influence of them.

Manu Kumar Jain: Yeah. But Bangalore is a tech capital and all the partners, Flipkart, Amazon, everybody’s here. It’s easy to hire tech talent. We were thinking of hiring and building a R&D center, so it made sense. We debate a lot about product, product strategy, what is right for India versus China because not everything that gets launched in China is launched in India. About nomenclature. This year, in the middle of this, he came to India only once this year in May, and we had a debate for almost four hours on the naming, the marketing name of a particular product.

Hans Tung: You’re kidding.

Manu Kumar Jain: Four hours we debated just the two of us.

Rita Yang: That’s why you don’t spend money on marketing.

Manu Kumar Jain: Finally, he convinced me. Then, there was a recent product that we launched a few months ago where again we debated for weeks and finally I was able to convince him. I think we have this great relationship where we respect each other’s point of view and we know if you are disagreeing with each other and we’re debating, that’s not because we don’t value each other’s point of view, but because we have the best interest of the company in our mind. He respects that and that’s why he’s willing to debate and discuss with me at length. Either he convinces me, or he gets convinced.

Hans Tung: Right.

Rita Yang: Amazing. What are the challenging part of running Xiaomi India? We’ve talked about all the good things and amazing things.

Manu Kumar Jain: A lot of them. I think the first challenging part five years ago was that nobody knew Xiaomi.

Hans Tung: Right.

Manu Kumar Jain: At first the office was a small café and every time I would go to a partner and say, hey, we should be doing something together, people would ask me how big is our team. I would say one person. I am the head, I am everybody in the team. We didn’t even have an official office. It was just a coffee shop. People would think that I was a fraud. I would just take their money or do a business contract and I would run away because it was unimaginable for them that we would talk about these, at that point millions of dollars, $10 million, $15 million dollars. There’s no office, there’s no team, there’s no legal entities for our business. Hiring was very tough, extremely tough in the beginning because nobody knew Xiaomi and a lot of people who would agree to run Xiaomi would, on the last day, on the day they would join, they would not turn up, but they would say their family’s not in India, their family’s in this company. Are you joining? What is Xiaomi? They have never heard of them. Why would you even risk it? Building up our business was really challenging because traditionally online is what our strength is and two years ago we started bringing it offline. We struggled a lot in the beginning, for almost a year, going through the process of going offline brand, and it’s taken largest offline brand in the country. Online we are number one, offline we are number two. Some of the products haven’t done well. Let me be honest. I would say 80%, 90% of the products have done exceedingly well, but there are also then 20% products which have not done well. How do you course correct? How do you solve the inventory problem? In our business, inventory is something which can really take down the company, so how do you immediately solve for it and course correct and move forward? From the time we have faced a large number of problems. Of course, from outside it looks like everything is hunky-dory, everything is going right.

Hans Tung: Everything, from outside, that’s exactly how we feel.

Manu Kumar Jain: Internally, a lot of problems that we have faced, but I would say two things: One, we have been able to course correct quickly and move forward. Second, there’s a confidence that our board has shown in me and the one that I would like to show in our team, that it’s okay to make mistakes as long as you don’t repeat mistakes.

Hans Tung: Right.

Manu Kumar Jain: We learn from them and never, ever repeat the same mistake again. Just make a new mistake.

Hans Tung: What other new apps do you think that you need to launch in India to leverage the distribution channel you have in India, but yet the app itself has to be appealing to end user, to want to spend a lot of time in engagement with your app?

Manu Kumar Jain: One of the ones that we are piloting right now is our lending platform. We believe lending app is a huge opportunity in India, just like anywhere else in the world, especially mostly in India because a large number of Indian users do not have access to organized lending or credit cards or any kind of-

Hans Tung: It’s hard to have credit.

Manu Kumar Jain: So, we believe that there’s a huge opportunity which is laying over there. There are many startups which are doing bits and pieces of this, but there could be many forms in which doing consumer lending, product lending, supply chain lending, many, many different forms of lending. We believe we are in a very good position where we can do lending across all different areas. It’s something that we’re still working on a beta phase, so it’s open to a very select number of users for testing, but if everything goes right, maybe next 6 to 12 months we should be able to launch it in a much bigger way.

Hans Tung: And then users’ behavior and what they do on the phone will help them to earn credit and build up credit over time?

Manu Kumar Jain: Yes, if they opt in.

Hans Tung: Right. Very often. That’s right. Yeah. I can see that could be a huge game-changer for this market for sure.

Manu Kumar Jain: Yes.

Hans Tung: In China you have Alipay, WeChat Pay, it’s much harder to build a new business against that, but here it’s wide open.

Manu Kumar Jain: Exactly.

Hans Tung: Yeah. Very smart.

Rita Yang: So, you have built an e-commerce fashion company before. How has that experience helped you in building Xiaomi in India?

Manu Kumar Jain: To be honest, I was very nervous in the beginning because I didn’t come from any smart phone background. I also asked Lei Jun, hey, why do you want to even hire me? I come from an internet background, not from a smart phone background. His answer was, I’m not even looking for a new smart phone guy, because we are not a smart phone company. In fact, if you look at most of the people that I said that we have hired, that I have hired at Xiaomi, are also from all internet background. Now, the reason, the way it helped me, it helped me really understand the whole e-commerce landscape because for the first years we were only selling through e-commerce in India. It helped me understand the importance of e-commerce and how we can really scale up our operations using the internet as a platform. If you look at Indian users, a large number of Indian users still do not have access to physical shops because they’re living in small towns and villages, and there’s no branded shops in their town or village, so they will have to travel three hours, four hours. For example, my aunt lives in a city called Salanpur, which is a small town, and she’ll have to travel to Delhi for four hours to buy any kind of product. Through e-commerce, we can deliver it to her home without her necessarily traveling to Delhi. I liked the importance and we were able to move very fast on e-commerce for the first few years and build a big business over there.  And because I don’t come from smart phone background, maybe we haven’t done what others have done.

Rita Yang: What are some common pitfalls for foreign brands that are trying to make inroads into the Indian market?

Manu Kumar Jain: I would say two things. One, when people come here, foreign brands, it’s very difficult to identify talent. Most of the time people go for long experience, relevant experience rather than being more experimentative. If a FMCG company is coming, they will try and hire the person with 20 years of FMCG experience, saying he or she is the right person to bring to business. Point number one. Point number two, a lot of brands don’t realize that India is not one country. India is a combination of 30 countries in a way, because we have 30 provinces or states. Every state, every province has a different language, different core, different religion, different food, different clothes, different language, everything different. When you’re building product, when you’re building your business, you have to keep in mind that it’s almost like building a business for Africa or for Europe, which has so many different countries, so many different culture.

Hans Tung: Right.

Manu Kumar Jain: You have to keep that in mind and if you cannot build it the way you would build it for US or even for China, because it’s not one homogenous thing. When you start building phones, from the day one we had it always available in 12 different languages. Now we cover almost all key Indian languages. People will want to consume content in their local, native language. My solution to anybody who comes is thinking about this very up front on how will you hire people, what kind of people will you hire, and how will you build products which can last for 30 different markets and not just one market.

Hans Tung: When you’re comparing notes with other friends who are at Google and Facebook or other big Silicon Valley firms in India, how is their relationship with their quote/unquote headquarter the same or different than how you work with Lei Jun?

Manu Kumar Jain: Very different. A lot of companies that you mentioned, their India head, or even the APAC head, would very rarely talk to the formal CEO or Chairman on a daily basis. They will typically meet once in a year for an annual review.

Hans Tung: Right.

Manu Kumar Jain: They will not have the direct access to the entire board in case of any problem or issue. In my case, I talk, as I mentioned earlier, I talk to Lei Jun almost on a daily basis. Every time I go, I meet many of our board members and even co-founders and we in depth discuss about how or what are we doing in India, how do we build up even a much more robust business.

Hans Tung: Right.

Manu Kumar Jain: Second way it is different is because many other multi-national companies, India is part of APAC, which has been part of some other organization, and then which is then part of [crosstalk].

Hans Tung: Layer by layer.

Manu Kumar Jain: Since four or five years ago, the way Xiaomi structured is horizontally. It’s China and the rest of the world. Probably the only multi-national company that I know of where there is China and the rest of the world. This also was important in getting that ecosystem, because of which the dynamics are very different. Unlike many other not just Silicon Valley company, but many other multi-national companies, where India is just a recipient. Whatever products are built for other countries. We just bring it to India and just figure out a way to sell it. Here, we’re bringing products for India, in India, and that is a huge, huge difference.

Hans Tung: How many product design folks and Indian folks do you have on your team here in India?

Manu Kumar Jain: We have four different product teams. Phones, TV’s, IoT, and OS. Each of the things will have anywhere between 10, 15 to 40, 50 people working in India right now.

Hans Tung: Okay, got it.

Rita Yang: I wanted to ask, the access you have, either to daily conversations with Lei Jun or your board, does that come after you have shown really positive results?

Manu Kumar Jain: I would say this started in the first year. Lei Jun and I, we of course interacted, but not so frequently. I would meet him similarly, maybe on a quarterly review meeting. This was in maybe May of 2015, our third quarter of 2015 when Lei Jun called me for a meeting to China and then he started discussing and I was ordered dinner, I remember, in some hotel or restaurant which I don’t remember. I don’t remember the name of the place, but I remember it was a dinner. We ended up discussing for many, many hours on Indian market, problems that we were facing in India, issues in India, and how they were very different from China. I believe that was one of the first few turning points when he realized that Indian market is, even though there are a lot of similarities between India and China, but they’re also very different. Then he realized that he should probably spend a lot more time on India to understand India. That was a moment when we somehow made it a pact that we will a lot more frequently so that he gets live a bit on what’s happening in India, what is going on so that he can also give live feedback, which is very important, I believe. It has played a big role in our success because anytime I wanted to change our plans or change a product, I had access to the entire team, and they were running behind me in making this happen. 

Hans Tung: Right.

Rita Yang: How did you solve the hiring problem? When Xiaomi first started nobody has heard about the company and the families who would be like, why don’t you join Google or Flipkart or Amazon? Why this company? We can’t even pronounce the name.

Manu Kumar Jain: Yes. It was very tough. It took me almost three months to hire the first person.

Rita Yang: Three months?

Hans Tung: Wow.

Manu Kumar Jain: Three months. We had a small office with six seats, maybe a 10 feet by 6 feet kind of office, the first official office. I used to serve the coffee myself, I used to open the door myself, I used to do everything myself.

Rita Yang: You were the janitor and the managing director.  

Manu Kumar Jain: Everything was like one single bad thing. I still remember the day when the person joined. I was very happy, not because somebody joined, but because I had somebody to speak to. Those first three months were so lonely. Every time I had to speak to, I could only pick up the phone and talk to either Hugo or Ben. I used to sometimes just feel I had this huge urge to talk to somebody to say, am I doing the right thing? I don’t know. I’m here for the first time. Maybe I did something wrong. I just want to bounce my ideas on somebody. The person joined, he was my junior at McKinsey, he joined, and I was so happy. Then, we slowly hired one person who was a HR member, our first HR member. Then, we hired the head- There used to be a Mi fan club in India, even before Xiaomi was there.

Rita Yang: There are fans of Xiaomi before?

Manu Kumar Jain: Thousands of fans of Xiaomi even before Xiaomi existed.

Hans Tung: That’s right.

Manu Kumar Jain: There was a person who started this Mi fan club in India, and he was the President and the Founder of the Mi fan club. We hired him, so he was employee number four.

Rita Yang: Wow.

Manu Kumar Jain: And then we slowly, gradually started building team. In the first six months we had doubled the team. First three months, we doubled the team from one to two, and another two months from double two to four, and then next six months we doubled from four to eight. The first few months were very slow. Until the time we reached about 30, 40 people it was a rule that everybody who has been interviewed had to be interviewed by everybody else. Sometimes it was tough because you had to be interviewed by 15, 20 people. Everybody interviewed everybody. Then, we relaxed this condition and for the longest period of time I was the person interviewing every single person, including an intern who wants to join Xiaomi.

Hans Tung: I see.

Manu Kumar Jain: Until the time we were about 200 people, 300 people. Then, I relaxed that rule because I said it’s humanly not possible for me to interview every single person. Initially, hiring was tough, but as our  business started getting built, we started getting a lot of reputation in India. I would say first one and a half years, two years, were extremely tough. Last years have been very easy. Today, we are hiring large amount of people, including managing directors of some of the largest internet companies in India, directors from different e-commerce companies and others. They’re willing to come, even on a lower cash salary, but of course we give them stock options, because they just believe in the whole vision of Xiaomi and what Xiaomi’s been able to achieve.

Hans Tung: Right.

Rita Yang: What are some of the principles you have in hiring?

Manu Kumar Jain: I look for two things when I look to hire a person. One, I always look for passion and intelligence over experience. A large number of leaders who are very intelligent, very passionate, and have zero relevant experience, and that does not matter. In fact, I strongly recommend people to move different roles within the company and move roles radically. For example, the person who is sitting on Mi Finance business, he was a business analyst and was leading our Mi.com business, and now he’s leading our Mi Finance business and he has never built financial products. The person who was still recently leading our brand marketing, he joined us as an executive for, which is the junior-most post, for events team, and then within two years he became the head of events and then two years after that we made him head of brand marketing. He just moved from being the junior-most person to head of brand marketing in four years. So a lot of people, they are encouraged to make very different trajectory because we believe if the person is intelligent, relevant experience does not matter.

Hans Tung: Right.

Manu Kumar Jain: That’s one. Second, personally, for people that work with me and people that I interview, the second thing that I look for is will I admire this person, and do I think he has a quality of being my boss? If I respect that person, if I think I admire that person, I believe he or she’s a good person to hire.

Rita Yang: Now, let’s go to the final part of the podcast, which is a round of quick-fire questions. Just say whatever comes to your mind.

Manu Kumar Jain: Sure.

Rita Yang: What is one thing about you that is surprising to people who don’t know you very well?

Manu Kumar Jain: That I used to run a comic strip before Xiaomi and before Jabong about relationships, about husband and wife and how they tend to fight each other on everything they think.

Rita Yang: Wow. Okay.

Hans Tung: That helps you develop a strong team. I like that.

Rita Yang: What are some routines in your life that keep you grounded?

Manu Kumar Jain: I would say my wife. She’s my biggest supporter and biggest critic. Whenever she sees me doing something wrong, she’s the first one to bring me down and say, hey, you’re doing something wrong.

Rita Yang: Do you have enough time for her?

Manu Kumar Jain: I try to very consciously. I stay three minutes from office so that I cut down on commute time and then I try and spend at least an hour in the morning and an hour in the evening with my family, which is my wife and my kid.

Rita Yang: If you could have dinner with anyone in the world, live or dead, who would it be?

Manu Kumar Jain: Elon Musk. I would die to have a dinner with him.

Rita Yang: Why?

Manu Kumar Jain: The kind of thing that he is doing is amazing. Unbelievable. He’s thinking of going to Mars. He’s thinking of changing the world. Amazing. Huge respect for him.

Rita Yang: What was one thing that you used to be skeptical of and then changed your mind later?

Manu Kumar Jain: I used to be very skeptical of just Xiaomi success in the beginning because I met so many tech CEO’s who said, Manu, I am telling you, Xiaomi can never succeed in India. Manu, this is the biggest mistake that you are making in your life by joining Xiaomi. You will regret this. Since the first time you have joined, you have not announced publicly that you have joined. It’s my turn to lead. Yeah.

Hans Tung: I’ve heard that when I made my first, second, and third investment in Xiaomi, so I really appreciate that.

Rita Yang: Oh, that was before Xiaomi go public. Right. Last question. What does success mean to you?

Manu Kumar Jain: For me, all the measurable terms, such as market share, profit, or the wealth or the money that I make, these are all things important, but more than that I’m extremely proud of the team that we have built and the respect that we have earned here in India. A lot of people, they walk up to us and they tell us how their lives have completely changed thanks to Xiaomi. That is something which can never be quantified. For example, I was traveling from Delhi to Bangalore two weeks ago and met a security lady who will do frisking and who will check if everything is right at the airport. She recognized me and then she started talking about Xiaomi and then she told me she bought a Xiaomi phone, Redmi Note 4. Then, she convinced her husband, who’s a soldier in Kashmir Region, to buy a Redmi Note 7 Pro and her entire family is now on Xiaomi phones. For me, that is 100 times more valuable than anything else.

Hans Tung: Right.

Rita Yang: Thank you.

Hans Tung: Thank you.

Manu Kumar Jain: Thank you so much. Thank you for hosting me.

Rita Yang: Fantastic. Thank you.

Hans Tung: Love it.

S2 Episode 2: Kunal and Rohit of Snapdeal: from Surviving to Thriving in India’s eCommerce Battleground

On this episode, we have Kunal Bahl and Rohit Bansal, co-founders of Snapdeal. Snapdeal is India’s leading online marketplace. The company started out as a flash deal website in 2010, soon evolved into a leader of India’s e-Commerce sectors. In early 2017, it was on the verge of being merged to its biggest rival Flipkart, then upgraded itself to Snapdeal 2.0, with a focus on the value-conscious buyers in India. Over the last couple of years, with this focus, the company has seen a significant and positive transformation. As of July 2019, the month this interview is conducted, the company has increased its annual revenue by 70% and cut its loss by 70% comparing to last year.

The two co-founders of Snapdeal are high school friends bonded over food and math. Kunal graduated from the University of Pennsylvania with two bachelor’s degrees in Business and Engineering. While studying in the United States, he also started a detergent company and worked to sell his product at Walmart stores. Rohit graduated from the Indian Institute of Technology New Delhi with a bachelor and a master’s degree in computer science, India’s top engineering school.

On this episode, we covered the behind the scene story of their decision in saying No to Flipkart, focusing on the 400 million value-conscious buyers in India, navigating substantial change in high transaction velocity business, building a culture of acute intellectual honesty, and going through the best and worst of doing business alongside of your best friends in high school.


HANS:  Hi guys.  First of all, since I’ve known you guys for almost seven years now, since 2012, I’ve seen you guys go through quite a bit of up and down.  So, how is Snapdeal doing these days?

KUNAL:  Thanks Hans and obviously you’ve been a great partner for all these seven, eight years and have seen the company go through various twists and turns along the way.  You know, after going through a bit of a challenging phase a couple of years ago, I think our company found a great opportunity in refocusing ourselves and in a way going back to our roots of building a marketplace that serves the needs of the next 400 million e-commerce buyers in India.  Where what has changed structurally in India over the last three years is with the 4G revolution that Reliance Jio brought and other telcos followed suit.  The buyers and sellers of very value-focused goods have only come online significantly in the last three years.  So, we found ourselves to be in sort of the right place right time where we had a big brand because we had invested a lot in building it over the years.  We had a lot of traffic.  We had an existing technology platform.  We had all the supply chain built out and a very, very good team.  We said if we focus our energy on categories that are more suitable for this audience where they’re very aspirational but want affordable goods, I think that focus and discipline has really helped us as a company.  And as you said, over the last couple of years we’ve seen our order volumes grow almost three times.  Last June we actually became profitable at a company level and post, which we decided to reinvest all our margins back into growth.  And over the last one year we’ve been adding nearly a couple million new buyers every month now.

RITA:  So, Hans as you said, you have known Snapdeal for a really long time.  And can you help understand how throat-cutting the e-commerce business is India now and why is India such a competitive place for e-commerce giants to play?  Like Amazon or Flipkart who was bought by Walmart?

HANS:  I think a lot of people look at India e-commerce space as what a second version of what has happened in China e-commerce space.  So, back then in the 90s and then 2000s you have eBay buying EachNet in China and fighting against Alibaba launched Taobao.  And over the 10-year period you see Taobao, Tmall, JD, Pinduoduo, all grow up in China and valuation of Alibaba grew from, which did invested $180 million in 2003 to now $0.5 trillion plus $150 billion on Ant Financial.  So, a lot of people look at what happened in China as what could happen in India.  And therefore a lot of money got poured into India on e-commerce companies.  In Amazon in particular because kind of lost China to JD and Alibaba doubled down on not missing out on India.  Yet GDP per capita in India is a lot lower than China in 2000s so it ends up having a lot of subsidy, a lot of money poured in, and everybody focused on growing GMV at negative gross margins.  So, that made the battle over e-commerce in India extremely bloody.

RITA:  How does Snapdeal fit into the picture then, if Amazon and Flipkart is pouring so much resources and money into the market?

HANS:   I’ll let Kunal and Rohit answer that question.  I think that what they have done from when they were sort of an inspiration inspired by Groupon to what is now going through a Tmall and Taobao version of India, it’s very localized, is quite interesting.

ROHIT:  What we see happening in the market in India is that the businesses that are being built by other companies are very inspired by what happened in the U.S. or in the Western markets where the audience is much more homogenous, it’s much more richer, and as it is buys a certain type of product.  As Hans just mentioned that the GDP per capita in India is much lower.  And a large number of Indian users who are coming online now, they do not have that kind of income.  And they do not want, or they don’t find the platforms that exist very relatable for themselves because what they buy is not available online.  The pricing in which they buy things is very different from what is being sold.  And the overall experience that they expect is very different.  So, Snapdeal fills the gap for these consumers by bringing online what they buy otherwise offline, which is value for money, high-quality selection, not necessarily branded, and also delivered to them in a very engaging way because unlike the rest, again, a lot of Indian users are not trying to save time.  They’re trying to save money.  And as a result they are actually even willing to spend a little more time, enjoy spending more time on shopping apps if it helps them save a little more money.  And Snapdeal is a platform does things in which not only do we bring that selection, which is relevant for this audience, also in a manner which is very engaging, very seamless.  Even if you don’t know what you’re looking to buy you can just come to the app, start browsing, very seamlessly start showing you certain products.  While you’re at it you can play some games to win some coupons, which will help you save money and consumers are completely okay with that. 

RITA:  But you have made a conscious decision to not be merged with Flipkart.  Instead you actually launched Snapdeal 2.0 focusing on that particular group.  Can you walk us through how you make that decision? 

KUNAL:  Yeah, I think it was an interesting period for our company where we had many discordant– typically when there’s M&A there will always be voices that say it’s a good idea and then voices that say it’s a bad idea.  But you would think that there would be a resolution in the end.  I think in the end where we as entrepreneurs and as a team felt that given a resolution was not being reached, it was important for us to step up and take a decision about what should be the path forward for the company.  And we believe that given Indian e-commerce is still very early; in a country with over a billion people no more than 100 million people have bought a product online.  So, why fold our cards right now?  We require a little bit of refocusing the business but we saw back in 2017 what everyone probably is seeing now in 2019, that there was going to be a flood of new users, hundreds of millions of e-commerce buyers are coming online, and there is no platform that serves the needs that Rohit mentioned right now for them.  And it seemed like a dream then.  It seemed like something on paper and not many people believed it could be done given the irrational competition that we see in India.  But despite that I think we just worked with a lot of focus and discipline serving the needs of these particular customers with this type of selection, with the type of service and experience that they wanted.  And it seems to be showing quite promising results.

ROHIT:  I think the other thing that worked really well for us, which has made all this happen is to set up our entire organization with a clear focus of serving the needs of these consumers, which also means that we set up our supply chain fulfillment and logistics capabilities in a manner that we can sell products which are $5, $7, $10 and fulfill them while still making money at the time of selling these products.  Whereas all the other companies that have been set up in India, they’ve set up their logistics in a manner that they just can’t profitably sell a $7 item and as a result, as a consumer, even if I want to buy a $7 item, the only choice for a company to sell it is to make losses while doing that.  Whereas we as an organization, once we are very clear of who are target audiences and the kind of selection we want to sell, focused on making sure that we are profitably able to sell that selection and bring their selection on board. 

HANS:  As you tried different models from Groupon and to sort of a shopping mall, Tmall model, and then now more to a C2C marketplace, Taobao model, how do you decide which model to use over time?  And how do you think this compares to the Amazon, Flipkart B2C model?  And how do you think consumers decide where to go and shop what kind of goods?

KUNAL:  Yeah, it’s a good question.  I think I would give you credit for us moving from the Groupon model to the marketplace model because I think if our meeting in Beijing in December of 2011, we might still be running a Groupon business or not running a business at all.  So, I think credit goes to you for that answer as you know.  But I think over a period of time, at least one thing which is there, which is a good aspect of our company’s culture is we’re quite intellectually honest where if we see that something’s not working, we are open to changing.  But not like every day.  It’s not like we make changes on whims and fancies.  But after spending a decent amount of time and looking at a lot of data, if you think some aspect of our business, big or small, needs to change we change it.  You point it out to two big changes of Groupon to marketplace and then within marketplace from being focused on brands to the long tail.  But even within these changes there are a lot of smaller changes that probably are never known out a company.  But the big team is just constantly looking at what our customers are saying, what our seller partners are saying, what our team is saying, how the competitive landscape is evolving and whether we need to change something or not.  The key is we keep an open mind to change and we don’t become too stubborn about that it is our way or the highway.  I think that seems to be the theme in our culture from day one.

HANS:  You’re very kind.  I think that a lot of ECs like to think that their ideas matter a lot, but as we all know execution is much, much, much more important.  How did you guys figure out how to evolve the company and what are some of the lessons or takeaways that you can share with other founders and wannabe founders?  How to navigate a company through those kinds of dramatic changes?

KUNAL:  Yeah, I think navigating our type of high-transaction velocity, B2C, or consumer businesses, consumer Internet business is very challenging.  It’s like this bullet train that’s just going in a particular direction and how do you take a quick hard right or hard left?  It is very, very challenging and given we’ve done it a few times, I guess the main learning I would say there is around having very, very high amount of clarity on the goal and then making sure you communicate that very, very abundantly and repeatedly to the team.  So, like in our company if you are to wake up any of our team members at 3AM at night from their sleep and ask them, “What are the goals of Snapdeal?”  They wouldn’t even need to think for two seconds and they will tell you what are the top three goals of Snapdeal from quantitative goals.  And those cascade down from Rohit and me down to everyone in the company.  It’s the same sheet of goals for the most part.  So, I think clarity of goals, doing very few things, being very focused and disciplined on a few high -impact outcomes, and then constant communication with the team in different shapes and formats.  Communicating what is working, communicating what is not working in an acutely, intellectually honest manner.  Those are very critical.  But then all said and done there is a big element of luck also where fortunately for us that whenever we’ve had to take a hard left or a hard right the overall ecosystem in the market is also headed in that direction.  We just ended up taking a hard right or hard left in a direction that the market was anyways going to go.  I don’t want us to take all the credit for it.  I think luck also does a play a bit of a role.

RITA:  When you were rebooting Snapdeal by selling its logistic and payment arm of the company, what are some tradeoffs you guys have to make?

KUNAL:  You know the learning we have is that whenever you are in trouble, everyone will try and squeeze the last drop out of blood out of you, especially when you’re selling assets and people think that the overall company is in a bit of a distress situation.  I think the tradeoff we made in selling those assets was we couldn’t optimize for value.  But at that point in time it was more important to sell them and harvest them for cash then to optimize how much cash we could get into the company.  Those businesses were worth more than what we had to sell them for.  But in hindsight it was the right thing to do.  The certainty and speed of doing those transactions were more important than optimizing for the last dollar of value.  That said, in hindsight those are also good decisions to sell those businesses because we realize that our business, we as a company are far more successful at focusing on one deep problem and solving that, rather than trying to solve multiple deep problems of payments, logistics, which are in the end very different businesses.  Everything looks similar or everything is transactions and commerce, but each business has its own deep nuances and they can be very distracting away from your core business. And fortunately in India over the last few years, at least on the logistics side, there’s a very vibrant ecosystem of third parties, third-party logistics companies, which are run by entrepreneurs like us who are tech savvy and have built good technology, good processes.  So, we are now one of the largest customers, if not the largest customer, of most of the third-party logistics companies that serve e-commerce businesses because 100% of our volume goes to third parties.  We don’t do any captive logistics of our own.  Similarly on payments, there’s been an explosion of number of payment companies that have come into India.  All the global multinationals from Google and Facebook to Walmart, Amazon.  Everyone’s running payment companies in India.  So, it seems to be a business which nobody wants to make money in.  And everyone is willing to give away a lot of subsidies and coupons and cashbacks to consumers.  So, we are more than happy integrating all of them as long as they’re willing to give promotional dollars to our consumers and their expense.

ROHIT:  The other tradeoff which we had to make inside the organization, I would say, which again in hindsight was the right tradeoff to make was forcing ourselves to discipline and pick our priorities right.  I think the way the Indian startup industry grew up is that everyone started looking at China and the U.S. and started seeing that all the successful technology companies in these countries are in a lot of businesses.  What they didn’t see is that those companies became successful at one business first and then after starting to generate cash or money or profits in one business, they started reinvesting that to build other businesses.  In India I think there was a sense that if you’re at technology company you should start doing many, many things together and that’s how everyone in the organization also starts thinking, forcing ourselves to pick priorities and saying, “Hey we’re going to do only one thing.”  Or within that as well, just picking priorities, which are not more than two to three at any point of time, no matter how lucrative the other opportunities sound, was an important tradeoff for us to make and which we still make on an ongoing basis.  Which in hindsight is absolutely the right thing to do because as Kunal has well mentioned rightly, what seems like a great opportunity and should be doable, the moment you get into the details and stared doing that, to do it better than anybody else is incredibly harder than just doing it for the sake of doing.  And I think we learned that through experience as well that it’s very critical to force ourselves to pick two or three bets so that we can spend the time and energy and the cycles required to make those things work.

HANS:  You guys made the most dramatic improvements in the business when you guys were running out of cash.  Most funders tend to believe that in order to make dramatic changes they need capital to help to do that.  How are you able to achieve what you did specifically?  What are sort of the two or three things that happened that you did to make this transformation possible?

KUNAL:  Yeah, I think a few things we did.  One, we looked very dispassionately at our business and given we are essentially a marketplace that has thousands of categories and 200 million plus listings, we very dispassionately looked at the unit economics of each category, each product, each subcategory, and unit economics post-fulfillment, post-marketing like fully loaded costs of selling, servicing, and order.  And we tried to make an assessment that if something is negative unit economics, is it because we are inefficient or structurally those products or categories can’t be sold with positive unit economics at this point in the Indian market?  Could be for a variety of reasons.  So, if we felt something had the opportunity to be made more efficient, to more efficiency can be made positive unit economics, we did that.  And wherever we think that with all our energy, all our efforts, we can still not turn a category or a line of products into positive unit economics, we just cut them out.  And it seemed like a very unpopular decision back then that for instance, smartphones is the largest category by GMV in the Indian market.  Where for some platforms it may be 60%-70% of their GMV potentially in some months.  And we said, “Look there is no way to make money in this category post all fully loaded expenses of marketing, fulfillment, customer service, etc. Let’s get out of it.”  And we will come back into that category when the market cools down or there are some new brands that want to work with us on commercial terms that work for us.  So, I think it seemed unpopular then that, oh, like a lot of people said that then people will stop coming to you because you don’t have this head category.  Actually none of that happened.  What happened was consumers started building a much more sharper profile of what Snapdeal is and what Snapdeal is not.  Like consumers don’t look at Snapdeal as a place which will launch the latest, jazziest smartphone and give you cash backs if you buy it on the flash sale.  There’s nothing wrong w that.  It’s just that they don’t see Snapdeal as that.  They see Snapdeal as a place, it’s like a dollar store.  You come, you don’t know what you want to buy, we’ll help you discover some interesting products, and you’ll most likely check out with something in your hands.  And it takes a little bit of time for that positioning to sink into consumers but if you are sharply focused on what you will do and what you will not do, it does eventually solidify in the consumer’s mind.  So what that did, Hans to your question, is like in high-transaction velocity businesses, the most amount of money that companies lose is on unit economics because it compounds with your high velocity of orders.  So, the number one thing we focused on was just making sure at a company level, at a category level, at a product level, we are generating positive economics post all expenses.  The second thing we did was, as we discussed earlier, we sold off assets where we didn’t think we could ever make money and decided to work with third parties and build deep partnerships with third parties where maybe they’re able to manage their businesses, their logistics or payment business more efficiently than we could, or they don’t need to because they have a lot of capital to run those businesses.  Third thing we did was just made sure that we don’t bloat the team, that we work in a very, very lean structure.  Our whole company, for the scale of business we operate is very lean.  There’s 750 people in the whole company fully loaded, which is by Internet company standards very, very, very lean.  The whole company is on one and a half floors in one building and it’s quite incredible.  And we have not seen an increase in headcount over the last couple of years.  It’s stayed in the same zip code despite the fact that the orders have grown.  So, that operating leverage kicks in where your revenues keep going up, but your fixed operating costs don’t go up.  And as a result your bond goes down materially.  So, I think these are two, three things specifically that we would have done.  There are some others also.

HANS:  What are the others?

KUNAL:  I think there’s a lot of optimization that we would have done on things like what we pay for collecting payments as an example.  Our philosophy is that this type of business, you build by conquering one basis point at a time.  There are generally no broad brush strokes that will suddenly improve your unit economics, suddenly grow your business, suddenly make you profitable.  We are very, very focused on small basis point improvements also and I think those, over a period of time, compound into large numbers.

ROHIT:  I think also, some of the other things that we did was once we decided that this is the kind of business we want to be in, which is positive unit economics serving a certain type of consumers, serving a certain type of selection, then our business was not built this way for t he longest period of time.  Slowly and steadily we started moving everything in our entire business in that direction, which means that while we started focusing on selling value-for-money products, our apps still looked like it was built for selling branded products.  And then one piece at a time we started changing the navigation of our app whereas earlier there was a lot more focus on showing categories, brands, banners, merchandise, etc.  We wanted to focus incrementally towards showing a more continuous feed of products because this is what our consumers were telling us.  A lot more traffic and a lot more purchases were happening through Browse than through Search, which means that from a consumer behavior standpoint we were seeing that these are consumers who don’t necessarily have an exact idea of what they want to buy but they know they want to buy something and they want to browse around.  Which means that making the navigation easier for them to start seeing products, almost like a social platform, became very important.  The entire way we do fulfillment and logistics, we went through a complete change because earlier we used to obsess a lot more about speed of getting a product to a consumer, whether we can get it in one day or two days.  As you started conducting experiments, we realize that consumers are okay to wait for four days as long as the product is 50 rupees cheaper.  And in fact they would prefer that because they think, “I don’t need the product tomorrow, but I can definitely use the 50 rupees I saved by waiting for a day or two more.”   So, we changed our fulfillment mix in the way we get products to end consumers to make sure all of that saving we’re able to pass back to consumers and then help them buy more from our platform.  So, I think there’s, as Kunal mentioned, it’s not one thing, I think the major thing that we decided as a company is that, which we still very strongly believe, is that for commerce businesses the product market for definition is incomplete without economic fit.  We feel if the economics are not right then any product can be made to fit into any market.  The true test of the product market fit for a commerce business is when you’re a product market as well as economic fit, which means that while you’re selling products to consumers you are able to sell them in a way that you make money.  Unless you can do that, at least at a unit economics level, we just felt that there’s no point in being in that category or in that line of business.

HANS:  Great leaders can make decisive and efficient adjustments on a battlefield based on what’s happening.  So, based on the things that you guys have done in the last few years, what does that tell our listeners about the state of e-commerce market in India?  You guys started off doing the more branded goods, fast delivery, one-day, two-day guarantee, and a lot of Western companies going to India, they focus on the top of the pyramid that they think are the most valuable, maybe 50 million people or so.  Yet you, over time, choose to go after the more mass market and with unbranded goods.  That’s more like dollar shop, almost like Wish and Taobao model.  How big is that segment market in India and do you consciously decide to change based on what you see on the marketplace?

KUNAL:  Sure.  Actually you’re right Hans.  I think when folks who have more exposure to the developed world, which is far more homogenous or wealthier, they tend to believe that most of what is sold in every country is reflective of what they see in the developed world, which is mostly branded goods.  That branded goods, people would feel intuitively contribute to the largest part of the non-grocery retail buying in any country.  In India it’s exactly the opposite where out of about $220 billion of non-grocery food, FMCG-type categories, there’s about $220 billion of sales that happen every year in those categories in India, overall not just e-commerce, in offline, online.  Of that, no more than $5 billion is branded.  And about $160-, $170 billion is actually unbranded.  And a greater share of branded is already online, like for smartphones, most estimates would put it at almost 50% of all smartphones are sold online because it’s a highly price-elastic purchase.  So, if you get a discount, small discount, why would you not move your purchase online?  It’s the same product.  But for unbranded, this $160 billion market is barely online, maybe not even 1% is online.  And the reason for that is the buyers and sellers of that merchandise have only started coming online in the last couple of years after the JIA-led 4G revolution in India.  So, the market size we see as being theoretically infinite for now and this pie is getting bigger by the day, not smaller because the overall retail pie is growing because the overall GDP is growing in India right now.  So, we see tremendous headroom from here on and given, as Rohit mentioned, our platform, our brand, our positioning is set up to serve this type of selection and buyers of this type of selection, we feel pretty optimistic about the runway in terms of growth ahead of the business.

HANS:  People who look at India, it’s 1.3 billion people and GDP per capita is just under $2,000 per capita.  Yet you focus on the 400 million user base.  What is roughly the GDP per capita of your target audience?

KUNAL:  Yeah, I think 40% of our users are– 80% of our users would be below $15,000 and 40% of the users would be probably below $5,000-$6,0009 for a family, for a household, not at an individual level.  And so, that’s broadly the distribution we see.  But the average is generally not a great determinant for how the distribution actually works.  But anecdotally we see enough users who on our platform were making maybe as little as $200-$300 a month.  So, in the $3,000-$4,000 a year type of income bracket.  So, we feel that as the income levels go through the $3,000-$4,000 mark and as, Hans you’ve also said before, that the inflection point in most geographies happens at $4,000, we are quite optimistic that the next $1,000 that gets added to the $2,000 of GDP per capita is going to be spent on a lot more discretionary items rather than utility items.  I think that’s where we fit in nicely for this audience.

ROHIT:  And also one of the other things as you mentioned Hans, we believe that while working in a market which has low GDP per capita, it becomes extremely critical to build your model in a very low-cost manner because we can’t influence the income that people have today; that will take its own time for it to grow.  But what we can influence is what products are we selling to them and how are we able to get those products to the hands of end consumers.  And those will get determined by their income levels today and as a result, making the call that this is the income level of people, this is the price at which they like to buy products, and those are fixed data points for us.  It’s our job as a company to work backwards from there and figure out how do we profitably sell these products to these end consumers and get them into their hands, which is where we choose to spend most of our time and energy.

HANS:  I think sitting in Upper East Side in New York or Park Heights in San Francisco or in the bay area, when you design products it’s easy to design for people like yourself or your friends.  But time and time again, not to pick on those cities, those cities are all great, but time and time again it’s designing for the mass market on the global basis and in designing for even users that use “low-end” android phones, that has only 1GB in ram, that’s actually the much bigger market and that’s the market that’s readily available and underserved that allows you to build the multi-billion dollar outcomes.

RITA:  So, starting up a company is never easy, not to mention transforming one constantly.  What was the hardest thing along your journey?  Is it the pushing investors or is it the skeptical media or is it your staff, your team?  What was the hardest one?

KUNAL:  When you’re building a company, especially sort of a prominent consumer brand which touches lives of millions of people every day, every month about 75 million unique visitors on Snapdeal.  So, it’s a very large number.  So, almost everything you do, if you sneeze, people are watching.  And it does become challenging at times because you don’t want the constant external tracking to influence your day-to-day decisions and not allow you to do what you need to do, even if it is tough or unpopular.  I think for us, we’ve been running a business for long enough that we’ve known how to cope, we’ve learned how to cope with the external pressures and all the scrutiny that comes with running a prominent consumer brand in India, especially in the tech space.  That we have gotten better at I would say. I don’t think we are great, but we are a little more inert to it now.  I think the part, which is always hard when you’re going through a transformation is how do you instill the sense of belief in the team that you have but you also have at the same time a lot of insecurities of your own because we don’t know all the answers, it’s like we can’t look in a crystal ball.  We can have a hypothesis, but we know there’s a lot of– the Pacific Ocean can fit between the hypothesis and the actual result, there’s so much in the middle.  But to the team you have to instill the belief that we can actually make it happen if we are very focused.  And I think that can be a very grueling journey.  It can be a very demanding journey emotionally and physically because to each person who has a doubt on your team, you can’t make them feel that they are the hundredth person who has brought that doubt to you.  Like you can’t come across as being tired or fatigued or insecure in front of them because to them they are looking into your eyes and seeing, “Is my leader confident that we can pull it off or not.”  That’s all they want to see.  So, to them you have to come across as being confident, secure.  Not overconfident but also transparent that here are all the things we think we can do but here are the things we don’t know how we can do, but we’ll solve it together.  And I think that probably is the most challenging and also the most demanding part of going through a transformation.

RITA:  Does it help that both of you are high school friends?

ROHIT:  I was actually going to say that as you were asking the question, I was thinking about what my answer would be.  And one of the things of being co-founders for 12 years and spending 14 hours a day sitting like three feet from each other does to you is we can complete each other’s sentences.  I don’t think I would have given a different answer even by a word as compared to what Kunal said about what is the hardest thing to do.

KUNAL:  Even the easiest periods are hard without a co-founder.  So, you can imagine the hard periods are impossible to cope with if you don’t have a co-founder you trust, you believe in, you depend on.  Like I remember in 2017 there were days when I would be on the low and Rohit would step in and say, “Don’t worry.  We’ll make it through,” and maybe vice versa.  And I think sort of being there for each other is so critical especially in the tough phases, especially when everyone around the world, everyone outside of the company is out for your blood, you feel like that, and just sticking by each other and giving each other the support implicitly also, not just explicitly is super critical.

ROHIT:  I think it applies both and we’ve seen that as well between the two of us.  It’s incredibly helpful, both in the good times as well as the bad times, to have the support of co-founder along because, as Kunal mentioned in bad times as well, given the position you are in, you can never be seen as insecure.  And there are so few people in the world you can share your insecurity with because at the end of the day you have a plan and you have a certain hypothesis.  You have a strong belief it will work.  But only time will tell will it really work.  And there is always, always, always that doubt in your mind as well whether this will really work, what happens if it doesn’t, how should you make it work, etc.  And I think having a person to, without being judged, exchange those talks with and have an open conversation with is so incredibly helpful.  Even in good times because as we go through good times, it starts becoming easier to believe that everything we do will work out.  And having one person to just bounce those thoughts off where you know the person has no other agenda but the exact same agenda as mine is so enriching to a conversation and a decision-making process.  I think that just, it’s almost unimaginable how one would do without it.

RITA:  Many people say that one shouldn’t go into business with their friends, otherwise they wouldn’t be friends anymore.  And I bet you guys have differences, too.  But how do you resolve the differences between the two of you?

KUNAL:  Yeah.  I think if we didn’t have differences the company would need only one of us.  So, I don’t think the company should have two of us then.  I think both of us bring different perspectives.  Doesn’t matter what’s right, who’s right, who’s wrong.  Obviously, we have, I wouldn’t say differences but differences of opinion on particular topics.  But not as obviously holistically or comprehensively on the direction of the company.  But on particular topics we may have differences of opinion.  What we generally do is we’ll get in a room, in a meeting room, and discuss in great detail what our respective perspectives are.  But at the end of the meeting we would always have decided whether it is my perspective, Rohit’s perspective, or some hybrid of the two, then and when we leave the meeting room that is our collective perspective and it doesn’t matter whether we enter the meeting room whether it was mine or Rohit’s.  It doesn’t matter.  Then anyone else in the company, if they walk up to me or Rohit about that particular topic, they’ll hear exactly the same thing.  Sometimes you see people try. 

HANS:  Right, for sure people do try. 

KUNAL:  But I think over a period of time people work with us long enough and most of our team has, like the average tenure of a team member in Snapdeal is 4.5 years.  At some point people may have tried and they realize it doesn’t matter.  You can talk to whichever of them, they’re going to say the same thing.  They’re always fully aligned. 

ROHIT:  I think one of the other things that is so critical, and I think you learn the importance of it more and more over a period of time is just, having completely unshakeable trust in each other’s intent.  Our judgments may have errors.  We may have a certain point of view, Kunal may have a certain different point of view, and even our collective judgment tomorrow may turn out to be the wrong judgment, which happens all the time.  But just having incredible ability to trust each other’s intent and making sure that that is never questioned while you’re discussing sometimes very intense topics of very high importance as well is so critical.  And I think one of the other things that we’ve seen happen is because of the way we make decisions with this very high degree of trust and very consistent decisions after they’re taken, we’ve seen that there has started, over a period of time that has flown to our larger team as well.  I mean actually they see this as the right model to work, not only for two co-founders but also as a management team.  Where we’ve seen that within our management and leadership team as well, there is an incredible degree of trust in each other’s intent and while people respectively have different areas of responsibility, they’re core focus is on something else.  All of us by and large trust each other with doing their part of the job really well and doing something, which is great for the business.

HANS:  This amazing journey would not have happened if Kunal had stayed in the U.S. and worked for Microsoft and get the green card to be able to stay.  President Trump even used you as an example.  Yet you see so many incredible Indian executives do so well in the Bay Area in tech, and not only in tech and also in academia, in many other industries in the U.S. rising to the very top.  How do you see sort of the flow of talent from elsewhere back to India these days and how is that impacting development of internet sector in India?

KUNAL:  I think we obviously continue to see the inflow of talent.  The interesting thing is a lot of the entrepreneurs are turning, a lot of people are returning post either business school or having worked for a large company or a startup in the U.S. but most of them are coming back not to work at a company but to start a company in India.  And I think that trend is quite visible in recent times.  Rohit and I get pinged all the time by folks who are returning or planning to return to the U.S. through common connections, not with the intent of joining us or interviewing with us or getting a perspective on where to look for a job, which company to join, but a very, very focused approach to starting a company and, “Here is my idea,” or “Here are three ideas I’m assessing, what do you think?”  Which I think is a great trend because obviously folks who’ve spent time in the U.S. working with, especially with tech companies in the U.S. have very unique perspectives.  They’ve seen how methodically, sensibly companies are built at least in the Valley with deep focus on product.  And we are seeing that have a very positive impact on our overall ecosystem.  And I think that trend will continue.  As the Indian internet ecosystem becomes larger, more mature, more success stories come out, you’re going to see more and more people give up the opportunity cost of a great lifestyle with high income in the U.S. to come back to India, work for zero salary and start a company with the dream of building something big. 

HANS:  Rohit, do you see the same thing?

ROHIT:  Yep.  I think one of the other things that’s going to happen is that even till maybe a couple of years back the size of the Internet industry in India was relatively smaller because the number of Internet users online was smaller.  I think in the last two years we’ve seen a true explosion of Internet users in India.  And as a result, one of the other things we are seeing which is happening now is that companies that start, because they have access to a very large number of users have started scaling much faster than they used to scale as recently as five years back.  And as a result I think we’ve seen a lot more people getting excited about coming back to India.  I agree with Kunal that many of them choose– I think we still see a lot more people coming back to India right after they graduate versus working for a few years in the U.S. and then coming back.  I think as the industry matures and becomes bigger in size and more success stories happen, I think it’s going to become more and more lucrative for people who have even worked for a few years in the West to come back to India.

HANS:  We have a hypothesis that whether Chinese companies have grown up a lot over the last decade.  Some of them, like Xiaomior ByteDance are expanding beyond Chinese borders.  However if you look at something like Oyo out of India is expanding rapidly globally even when Indian Internet market is a lot smaller than China’s.  Given the language ability and more international exposure it seems like more Indian startups can expand beyond India sooner than Chinese companies do.  How do you guys think about that and feel about that hypothesis?

KUNAL:  Yeah, I think so.  We’ve started seeing two or three examples, you mentioned Oyo, I think Ola has done some international expansion.  UrbanClap has done some international expansion.  It is still early days and I think these companies and some others are obviously pioneering the international expansion.  What would really turbo charge the confidence in Indian entrepreneurs to globalize their businesses is as we see more incontrovertible or undeniable success stories of Indian companies, Indian startups that have gone global.  Like for instance I would say Amazon or eBay were the pioneers amongst the U.S. tech companies to go global and did it extremely successfully.  That then charted the course for so many companies like Uber and others to also do rapid global expansion.  I think we are in the early stages of that in India and depending on how well and I hope and wish all these companies, Indian companies that are trying to go global do extremely well.  I think as we see more successes, we will see more companies out of India do that.  We obviously are talking more about consumer companies, a trend that is already significantly underway is on the B2B SAS companies where the product is being built in India but being sold to a global market.  That ship sailed a while back and I think we are going to see a lot of fairly large B2B SAS companies get created, product companies get created out of India selling to a global audience.  In many cases we may not even know that they are an Indian company, just by virtue of the fact that most of their revenues come from global customers. 

HANS:  We’re much more globalist at heart than nationalist, so we love seeing companies that can spring up all over the world and build globalized businesses.  I think we would be honored to have the two of you as GGV scouts to help us to invest in those companies and groom the founders into leaders and build global business. 

KUNAL:  Absolutely.  Anything for you Hans. 

HANS:  Thanks.

RITA:  So, we’re going to go to the final round of quickfire questions.  Both of you just say the first thing came to your mind.  Who are your source of inspiration these days?

KUNAL:  So, it would be more traditional, traditional business entrepreneurs like Uday Kotak who runs Kotak Bank in India or Sunil Mittal who started and runs Airtel.  I think they would be my sources of inspiration today.

ROHIT:  For me I think it would be still a lot, thematically the Chinese e-commerce companies, which think very differently, and which build a lot more engaging experience for users as compared to what we see the Western e-commerce companies doing.

RITA:  What is a habit that you have that changed your life?

KUNAL:  I think maybe not the habit, but I would say having kids changed my life, for the better.  Definitely for the better.  I think especially when you go through a tough period in your professional life, being able to come home to a family and kids who are just so happy to see you and don’t really care about what’s going on in your work life, I think it’s so refreshing and it completely reenergizes you. 

ROHIT:  For me it’s actually I get up before 5:00AM and it’s that couple of hours in the morning when I’m up before anyone else and I spend time either reading or thinking.  I think that just centers me for the rest of the day and the week and that habit has been pretty good for me.

RITA:  What is the most frequent advice you have given to young entrepreneurs?

KUNAL:  Focus.

ROHIT:  I knew the answer was going to be the same before he answered it.  I think every single person we meet just tell that there are so many things that you can do, don’t get carried away by them.  Just pick one, do it really well.  If it doesn’t work out, leave it and pick another one.  But at any point of time just pick one.

RITA:  What do you do when you are stressed?

KUNAL:  I mean I don’t think there is anything specific one would do but yeah, maybe spend time with the kids or watch something on Netflix.  Usual stuff.  I mean there’s nothing–

RITA:  Spacing out.

KUNAL:  -nothing particularly different that I would do. 

ROHIT:  In my case well I either read books to my kids or I read books for myself. 

HANS:  I ask one more question.  What does 9 and 6 mean to you?

KUNAL:  Nonstop work. 

HANS:  What’s your schedule like?

KUNAL:  Look, most entrepreneurs are 24/7.  So, in respect of whether we are in the office or not or in traveling for work or not, we’re always on.  And we’re always on not because we need to but because we like to.  We like to stay connected to what’s going on in our business.  We like to stay connected what’s going on in the ecosystem.  It doesn’t fatigue us, it doesn’t tire us out, because we are mature enough now to know when to take downtime when we need to. But outside of that we’re sort of always on but mostly because we enjoy it.

ROHIT:  I think the definition of what are the working hours has also evolved.  All of us use media as well.  I think now is the time as Kunal mentioned, we are always on but at the same time it’s not like we have no downtime at all.  I think the downtime has also become similar to the uses of mobile Internet downtime snacks, rather than like two weeks of downtime when you’re completely disconnected.  I just think we’ve lost the ability to do that at all.  And we don’t feel stressed out because of that as well, because we just enjoy what we do.  We are not doing what we are doing because we have to, we are doing what we’re doing for the amount of time we are doing because we like to. 

HANS:  So, as you guys build a culture at work, how do you encourage employees or staff to feel the same way and not be “forced” to work 9:00-6:00?

KUNAL:  Yeah, I think our culture is absolutely not one of face time.  We have no prescribed working hours.  People get in, in and around the same time, they start leaving whenever they think their work is done.  We don’t prescribe any timings.  Our office is open five days a week, but I think our entire team is also always on, and again by choice, I would like to believe.

ROHIT:  I think also we’ve seen that companies and cultures can do lip service to flexible timings or they can truly embrace it. We like to believe that we truly embrace it.  And we’ve seen in our office as well, people just perform very differently at different times of day.  There are certain people in our company who are exceptional performers who like to come in quite late and they stay up till late.  There are other people who are equally well-performing who like to get started as early as 7:00AM.  So, I think just being comfortable with the fact that everyone is different in how they perform and being accommodating as a culture and trying to enable that culture within the organization is quite important.

KUNAL:  Rohit and I, also, by that example.  Rohit’s an early sleeper, early rise.  I’m a late sleeper, late riser.  And so, our team jokes that as a result they get emails from both of us 24 hours a day. 

ROHIT:  So, after Kunal goes to sleep my emails start coming in. 

KUNAL:  We make shifts so that we have the entire 24 hours covered.  Yeah, but jokes apart, I think given we ourselves, we are both similar in many ways but so different in so many ways and yet are sort of high-octane, high-performance professionals.  It’s no different.  We recognize and appreciate and empathize that similar differences would be exhibited across our team also and we leave the room for them to do that. 

HANS:  Right.  Well what you guys have is a very special and more rare than what has happened with Amazon and Microsoft and Facebook, Apple, is more in the norm.  What you have at Google is much harder to have co-founders who can stick together.  So, thank you for your time today.  It’s been a pleasure and honor to have known you guys for seven to eight years. 

KUNAL:  Thank you Hans.  Thank you so much for having us.  This was really fun.

ROHIT:  Yep.  Absolutely.   Thanks a lot for having us. 

HANS:  Thank you.

RITA:  Thank you. 

S2 Episode1: Vaibhav Gupta of Udaan: on Building India’s fastest Unicorn in B2B

For the first episode of the Evolving for the Next Billion podcast, we have Vaibhav Gupta, co-founder of Udaan, India’s top B2B eCommerce. The company connects manufacturers, wholesalers with retailers online, often referred to as India’s fastest unicorn, having achieved over $1 billion valuations in a short period of 26months. Udaanis a GGV portfolio.

Prior to starting Udaan, VG was the senior vice president in Business Finance and Analytics at Flipkart, one of the most successful e-commerce platforms out of India, sold to Walmart in a $16 billion deal last year. His other two co-founders for Udaan were the former president of operations and CTO at Flipkart. VG holds a bachelor’s degree in Computer Science and Engineer from the Indian Institute of Technology and an MBA from the University of Virginia. Welcome to the show, VG.

On the show, VG shared how his time at Flipkart, the eCommerce giant of India sold to Walmart in a 16-billion-dollar deal, helped him launching Udaan, why distribution is a much bigger business in India than retail, India’s second generation of founders, and the most frequent item he buys online.


HANS:  On the show today we have Vaibhav Gupta, or VG for short.  Co-founder of Udaan, which is India’s top B2B e-commerce company that connects manufacturers, wholesalers, with retailers and do in online.  The company is often referred to as India’s fastest unicorn having achieved over $1 billion valuation in a short period of only 26 months. Udaan is a GGV portfolio.

RITA:  Prior to starting Udaan, VG was the Senior Vice President in Business Finance and Analytics at Flipkart, one of the most successful e-commerce platforms out of India sold to Walmart in a $16 billion deal last year.  His other two co-founders for Udaan were the Former President of Operation and CTO at Flipkart. VG holds a bachelor’s degree in computer science and engineer from the Indian Institute of Technology and an MBA from the University of Virginia.  Welcome to the show VG.

VG:  Thanks guys.

HANS:  First of all, you have a successful run at Flipkart, so do your co-founders.  Can you tell us what were the lessons you learned from Flipkart and what gave you guys the idea to do Udaan?

VG:  Sure.  I think one of the big things we learned at Flipkart was how India was changing very, very fast.  Across the country you see mobile and Internet penetration in consumers and in businesses growing very fast.  People have started using mobile to not just buy and sell things but just to run their lives and run their businesses.  The second thing we saw that a lot of the India market, and we’ll probably talk more about it as we go, India market is very unique like China is very different than U.S., India is actually inherently very different than China and U.S.  Although the digitization is going very, very fast but the purchasing power of the consumers in the country is still actually very, very low.  Country is heavily unbranded.  A lot of old ways of trade and buying and selling still persist in the country.  We considered one of the big learnings we have had from Flipkart is that India has power, has an opportunity to build largescale platforms but they have to be thought natively.  Like people have to think about India as India’s problems and figure out solutions and products, actually, more than solutions, products which actually are targeted at Indian society, Indian economy, Indian ways of doing things, and then you can actually build a largescale sustainable platform. 

HANS:  Right.  And remember GGV is an earlier investor in Alibaba.  There were many other e-commerce companies that started before Alibaba in China, many of them try to copy either eBay or try to copy Amazon and neither model worked.  When Alibaba did Taobao it was uniquely solving problems the Chinese way.  So, can you explain in more detail why you choose to do Udaan?  What it is, what kind of problems Udaan’s trying to solve that’s uniquely Indian?

VG:  Sure.  I think when three of us started Udaan, one of the big things we were focusing on, finding big markets in India where mobile and Internet can create a huge disruption or a huge change, change the way of doing things.  If you look at how Indian economy is structured it’s still a very, very strong domestic trade economy.  Large part of economy in terms of value, as well as people involved in economy, like buyers and sellers or producers and manufacturers are small businesses.  And it’s a domestic trade economy.  You have 100 million plus manufacturers, farmers, producing things in the economy.  You have 25-30 million retailer endpoints consuming goods and then you have a million plus traders, channel players who are actually solving for the trade.  What we saw was that as we saw that mobile adoption was making all of them available online and for us, we saw that as an opportunity to actually think about a marketplace which can actually create value from bringing, solving for the fragmentation on supply and demand side.  It can create value from pricing.  It can create value from selection discovery, price discovery, quality discovery, and I think that’s one of the reasons we were attracted for the market because it was large, and the timing was right. 

HANS:  So, it sounds like there were many manufacturers and sellers on one end.  On the other side there are many, many small shops, the kirana stores, in the middle there are multiple layers of distribution and the wholesaler right in the middle make the most amount of money. 

VG:  Yes.  If you would look across the country, you’d be surprised that one of the most profitable businesses is distribution and wholesale.  Most of these guys will typically have 40%-50% return on their capital.

HANS:  Wow.  That is very high.

VG:  If you look at the most successfully-run U.S. distributors like, let’s say, Sysco Food, they would have a return on capital of like 40%-50%.  These guys are actually very, very subscale but still are able to generate that much money.  And the biggest reason is because they’re sitting in the middle and you have fragmentation on both end and you also have the problem of India.  One of the big problems within the trade is that the credit, which is renewed to run the trade, runs on informal credit histories.  Most small merchants don’t have formal credit histories and thus these distributors, wholesalers come in the middle and actually start providing, start solving for the credit problem, which manufacturers, who are again small, are willing to pay a lot of margin for because manufacturers cannot take the payment risk.  And thus it increases the margin for the channel and returns for them.  And thus it is one of the very profitable industry in the country unlike retail in India, which actually is a relatively low-margin industry.  Distribution tends to be a highly capital-efficient, highly profitable industry.

HANS:  So, what you’re saying is that on the both ends the massive amount of sellers and the massive amount of small stores can only do trades with a few partners because those are people they trust based on past history of credit?  That limits their amount of growth they can do because they don’t have enough credit with more people to do business with.

VG:  Exactly.  You’re right Hans.  And it’s just, trust is also part of the Indian society like as much as it is, I think, in China.  People don’t trust a new person easily.  And they tend to stick with the existing people and in the context of trade, credit is definitely one that’s also the trust with respect to quality of product, reliability of supply.  And it’s for these reasons people tend to just stay in their existing supplier relationships.  But one of the big things I remember when we were starting and almost everybody used to ask us that small businesses in the country have long-term supply relationships, they would not want to move away from that.  What pleasantly surprise was that every single person we went to was willing to try.  It’s not like they will say that I’m going to replace all of my suppliers tomorrow, but yeah, it is okay.  You give me the app; I’ll place two orders and I will see what happens.  And that willingness to try was something you could say was a bit surprising for us because we’re expecting people to come back and for us to do a lot of arguments in our sales to actually convince them to try.  But almost everybody was willing to try.  And we just had to make it super easy for them to try.  And that was one of the big learnings we had.  We made it super easy for people to try.  We gave them products, we delivered them on their shop, we gave them cash on delivery.  So, for them it was just an easy way to download app and start trying.  And the more people who tried, we saw the next power of this use case, which was that it’s inherently a repeat use case.  If the person buys today, he’ll get up tomorrow and will buy again.  It’s not like he’s not going to buy the same product later on.  So, what we saw was people tried, they got a good experience, they started buying regularly.  And that continues to be a huge value to our platform that even if you look at today, despite we are adding a lot of new buyers every month, 80%-90% of the business on the platform is repeat business.  And that continues to add the lots of sort of power to the platform as it scales because you have so much stickiness and repeat built into the system. 

HANS:  So, in your mind, when you started with doing Udaan, what is the biggest attraction that Udaan is offering to these sellers as well as the merchant buyers?

VG:  I think the biggest value for sellers was growth.  I think what we saw that when we started talking to some of these manufacturers, I remember talking to these typically will be a small-sized manufacturer, will have a factory unit, it will have probably about 50-100 employees.  When I started talking to them everybody was wanting to ask the question of how do I go on Internet?  What has happened was in India, Flipkart and Amazon had grown very well.  And almost every single manufacturer was thinking, how can I become Flipkart because they saw that Internet can scale so much and there’s so much people buying online, and I have products I want to sell.  And they were trying different ways.  They were hiring people to build apps for them.  They were hiring, going onto websites and signing for the listings, they were building their websites.  And the biggest underlying factor or intent was growth.  I think from Udaan’s point of view for sellers, I think that’s the biggest value that we create for our manufacturers and brand.  Udaan is one of the fastest growth channels now of trade in this country.  And for them that’s very, very meaningful.  I think for buyers, actually it is what you would see in an e-commerce platform like one of the things we saw that the small merchants in India actually behave very much like consumers when they think about buying products.  They want access to variety.  They want good pricing.  They want convenience.  They want reliable delivery.  They want an ability to order and forget about it and get it delivered and they want that habit of every time I order; this is the same experience I get.  That actually drives them.  One of the other things we didn’t talk about earlier is that we have built into platform early on the ability for buyers and sellers to negotiate with each other because that’s something which we were in going collective view of the world was that buyers tend to negotiate or buyers, sellers try to negotiate in trade.  As the platform started scaling, we quickly realized that small merchants don’t want to negotiate.  They just want to place the order and get done.  They don’t want to spend a lot of time on negotiating.  The bigger wholesalers negotiate.

HANS:  Because it makes a difference.

VG:  Bigger contractors, bigger distributors they negotiate but the smaller merchants don’t.  They’re just looking for selection.  Their job is, I am rotating my shop inventory once a week.  I just need to stuff it with one week worth of selection, get it sold, and make my fee.  I don’t want to negotiate that another 10% or 15%.  That was again was a learning from ground, that they want convenience.  They want just habit.  They want convenience.  They want selection pricing convenience and they don’t want anything to do after that.

HANS:  The sellers, you were saying earlier that they want to make sure they get paid. 

VG:  Yes.  I think one of the big things for India, as you can imagine with the fragmented channel and unorganized channel, payment reliability, like on-time in-full payments to seller is one of the biggest problems in the country.  Despite people having distributors and wholesalers, they don’t know when they will get their payments.  And typically they will have to keep working with their channel, keep collecting in small amounts over a period of time, which is generally a norm in the country now.  And it’s not like defaults happen in trade.  Default does not happen in the trade in India.  It is mostly delayed payments and uncertain timings of the payment.  And that’s what Udaan did for them.  Udaan created a very, very reliable on-time every single time payment system for them.  And our sellers loved us for that.  I remember one of our sellers telling us a story that every morning I go to temple at 8:30 and at 9:00 I get payment from Udaan and I know my day has started well.  This keeps happening every day, so I know that in the morning I get payment.  Everything is fine.  And that’s a habit now he has built in.  Like every morning he’ll get that payment at 9:00 and he knows that everything is well.  Like he’s now wired like that and I think that’s the implicit trust on Udaan.  And I think in early, first two or three years we have focused a lot on ensuring that people can trust Udaan to do their business.  Obviously, we’ll make mistakes and we’ve been open about going back to them and telling them about that, but they understand that we are working on fixing it and we are transparent, and we maintain that view with them.  So, I think that is another big value for sellers, which is sort of payment security, on-time, in-full payments.

RITA:  Can you share a bit more in terms of the operation that is needed to ensure that payment security that delivers the trust you have with your customers?

VG:  Yes.  The two types of payment today are available on Udaan.  One is cash payment and the second is credit payments.  Cash payments are typically done by a cash-on-delivery service.  India has actually seen over the last year good evolution of e-commerce cash-on-delivery services.  We have third-party providers who provide cash on delivery.  We have our own Udaan express service, which provides cash on delivery.  It obviously is a fairly disciplined tightly-run operation because what we have promised to the sellers is one of the fastest payment times in the industry.  Like no platform actually gives to the seller delivery plus two.  Everybody has sort of payment terms with sellers.  We don’t.  we want Udaan to be the fastest and cheapest way of doing trading in the country.  And on credit, I think it’s a completely different problem.  We’ve been working with the NBFcs, which are called as non-banking finance companies in the country who has an ability to create lending products for merchants and consumers.  So, we work with them.  We have our own NBFC and together we look at the transactional and the usage behavior of our merchants on the platform and we link them to their credit performance.  We have basically an algorithm, which is self-evolving and self-improving every time we do this.  We start by giving people very small credit lines and see their behavior, and over time just keep increasing the credit line based on the behavior displayed on the platform.  And what this ensures is that in absence of formal credit histories or formal credit scores, which typically would exist in, let’s say, a developed economy like U.S., they don’t exist in India.  Most of our merchants don’t have CIBIL scores.  And we have also seen from our data that credit performance does not correlate to the CIBIL score at all of the merchant in the country.  So, you actually have to look at the data of the trade to be able to estimate the economic strength of a business, both in terms of its ability as well as intent to pay.  And thus we are looking at uses data, transaction data of the buyer, as well as the repayment behavior to actually start giving them small credit lines and algorithm keeps increasing those credit lines slowly, slowly based on the behavior.  This ensures us an ability to actually keep payment security to our sellers while ensuring the credit needs of our buyers is sorted out. 

HANS:  In the Bay Area or China the full-stack companies tend to be either very product focused, or operational intensive, or they focus on business model innovations.  You’re building something that needs lots of expertise in logistics in credit management and also tech as well as a use acquisition.  How do you balance this mix at Udaan and be able to grow so fast, so quickly in the last few years? 

VG:  I think this is the one where you could say we benefit a lot from our Flipkart experience.  I think I can share that in Flipkart over the five years, there’ll be enough times we would have had discussion around are we a tech company or are we a retail company.  And like starts questioning and we have spent a lot of energies on that, we have done a lot of right things, good decisions, bad mistakes, but we spent a lot of that energy.  And I think e-commerce is fundamentally, and you know this Hans more than I do, it is actually a reasonably complex business.  It has a lot of elements into it.  Because we saw that at Flipkart and we saw pros and cons of that, what we’ve been able to do at Udaan is actually maintain a lot of focus on problem.  Then actually whether or not we’re a tech or a business, we’ve been more focused on what is the big problem we are solving for our buyers, what is a big problem we are solving for sellers, what does the big problem actually at a system level available.  And we bring all of the things together to that like be it technology, be it online, be it offline, be it delivery, be it operations, we look at for that problem, how do we create a solution.  And I think that has enabled us a lot better because I think it’s not just at a philosophy level.  Day-to-day when you are faced with such a problem, how do behaviors of the people sitting in that room when you’re talking what problem and like ensuring that the focus goes back to the problem instead of developing power centers in the company with respect to one single organization.  And I think that has helped us and I think you could say it’s more of the maturity we saw, we’ve gotten from the Flipkart, which has helped us maintain focus on problems rather than a particular type of the company we are. 

RITA:  I’m a bit curious about how the three co-founders of Udaan actually come together and have this idea of starting the company.

VG:  I think three of us spent enough time at Flipkart together.  Sujeet, I actually know Sujeet from also 20 years now.

HANS:  From your college days?

VG:  From my college days.  He was a year junior with me at college.  Actually I knew Sujeet as well, like Sujeet was also a junior of mine from the college.  So, Amod, spent enough time with him at Flipkart.  I think, when we guys were talking about it, I would say there are a few instinctive clarities.  Three of us have seen enough of each other in action and Flipkart was, as you can imagine Flipkart was not an easy time.  It was fairly stressful and was fairly spiky.  And when you see people in both good and bad times you are able to see the true fit or true character of the person.  And I think three of us have seen that.  Three of us have also backgrounds where, we were talking earlier, that we all grew up in small towns in the country, grew up in middle class, have those core Indian middle class value.  So, we saw that there is a chemistry, there is a value system match, and we had the ability to push each other.  But also know that we’ll always be, like as a relationship, we’ll always be tight.  So, I think we maintained, we had that ongoing strong trust with us.  We also did one thing.  Very quickly we started Udaan and we got about eight or 10 core people.  These were the people who are some of the best people in the country in the context of technology.  Like if we look at folks who joined us early, these are some of the best tech, consumer tech, Internet tech folks in the country.  Best operations people, best business and category management people.  And what that does, the whole team is now a team about 15-20 people who have a lot of trust with each other and who have the ability to ensure focus on the problems and answers and not worrying about each other at all.  And I think what that has done, that has taken that one of the things we saw in Flipkart was culture of how founders and how early teams operate is how the company starts behaving over time, like that starts setting the tone.  And I think that has helped us, like having a team which could trust each other.  Like people are not afraid about their weaknesses because everybody knows that, and they have sort of seen that.  So, it’s not people are trying to hide anything.  So, that early team of 15-20 people would focus on problems and solving them, and they were like right answer with the answer and everything else was not really relevant.  And the rest of the company developed that culture because they saw that.  And I think that has helped us at Udaan.  Most of the times it’s not like three of us do have the areas where we spend energies.  I spend a lot of energy on business growth.  I spend a lot of energy on category management.  I spend a lot of energy on finance side.  Sujeet, coming from his background, spends a lot of time on operations and Amod spends a lot of time on product and technology.  But three of us together spend a lot of energy crossed as well because we have that next layer of the team, which enables us to take our bandwidth away from and enable us to have cross focus.  We also get together every week, we talk about core decisions, we ensure that speed of decision making is not ever delayed.  And I think there’s a lot of ownership in the company, like people can go ahead and make their decisions and I think that’s beginning to work for us. 

HANS:  When I invest early from day one in Xiaomi, I see there’s a lot of ex Kingsoft people that know how to work with each other from before.  And when they go to Xiaomi they know how to get to work and make magic happen.  Hear you recounting how your Flipkart experience binds your team, so you guys know what to do with a new situation, new idea, is very, very similar.  That’s why we always encourage a lot of young entrepreneurs, don’t be a founder yourself.  You join a startup that’s fast-growing, so you see and hear and experience and learn all the things so by the time you want to do your startup you’re ready, you have a common set of experiences to draw from.

VG:  No, you’re absolutely right.  And I think what you are seeing right now in India is actually the second generation of startup ecosystem.

HANS:  That’s exactly right.

VG:   And what you see is that, and it’s actually I would say startup and VC ecosystem.  Everybody is now behaving more deeply. They’re more mature. They’re thinking more deeper. They’re more aggressive.  It’s not like they’re not aggressive or ambitious but-

HANS:  They’re more educated and more learned.

VG:  More learned.  Questions are more deeper.  Larger investments are being taken.  But I think startup ecosystem is also evolving.  It’s learning by itself and you’re absolutely right.  I think for us and for our team a large amount of learning came from Flipkart and I think that we are disproportionately advantaged to any other group of people who are starting because we just have so much of learning together in the team.

HANS:  And what people don’t realize is that in any innovation-type system is the iteration of generation of founders that learn from the previous ones that become better when they do other things.  India, I remember meeting the VCs and meeting the first-time founders in 2005, 2006, 2007. Some of them were still doing offline non-internet stuff.  Some of them was trying to do Internet stuff but it was still on PC desktop Internet.  And now you have, like you said, two generations of founders already. In China we see three or four or five generation founders, and the quality of founders inevitably get better in the next generation.  And this is why we’re hopeful on India producing very interesting companies now.  Can you explain how Jio, GST and UPI has made you guys building Udaan much easier than six, seven, years ago with Flipkart? 

VG:  Absolutely.  I think three of them were very big timing.  I think you could say that our timing couldn’t have been better.  We started in 2016 and right around that time, mid-2016 Reliance was aggressively pushing Jio adoption, Jio mobile, so we saw adoption.  And of our early users 8 out of 10 were Jio subscribers.  And Jio brought a lot of the Middle India onto the Internet and with almost high speed of adoption because the cost of data was so low.  And we didn’t ever have to solve, like we remember talking in 2000 early, before we started like how will we solve for people to get the smartphones?  And we never had to solve that now.  We never had to solve that problem of people not having smartphones.  There are certain categories we still do, but I think at a system level we didn’t have to solve that problem at all. 

HANS:  Do a lot of them use Redmi Xiaomi phones? 

VG:  I think people use a lot of Xiaomi phones. Like Xiaomi has grown quite a bit. 

HANS: Together with 4G.

VG:  The second thing was GST.  GST is basically good state tax. Goods and service tax.  India traditionally has had two hierarchy taxation system, government tax and estate tax. Basically at a summary level is, all of the supply chain in India were largely designed around taxation. 

HANS:  State focused.

VG:  The state focus.  So, if the goods have to move from one state to another state, they’ll be taxed.  So, manufacturers will ensure that they will create their distribution warehouses in two states, even though it doesn’t make sense in most cases. You would see that there is a state border between Karnataka and Tamil Nadu, the same company will have one warehouse on one side of the border, another warehouse on the other side of the border. 

HANS:  So it can trade within the warehouse.

VG:  So, the whole system wasn’t designed and also what we saw was most of the earlier wholesale and distribution structure was all city areas, as you would imagine.  Like if you go to Delhi, some of the older areas of the Delhi city is where you would see these big wholesale markets.  And these are narrow streets all aging go-downs.  If you go to a fresh wholesale market, there will be like fresh fruits and vegetables.  In underground go-downs, which are not hygienic to be stored for. So, you have this aging infrastructure and you have this GST now coming and then government actually came back with GST reform and abolished the state tax pretty much. 

HANS:  Right, one national market. 

VG:  One national market and goods can flow all over India without seeing interstate issues.  It did two things.  It obviously reduced the cost of the business so a lot of the supply, which was earlier north of India at cheaper prices was not meeting the demand of the south started meeting demand of the south.  So, you’re seeing that value.  And second is it reduced the time, it reduced the time and the cost of delivery.  Earlier a truck from Delhi to the south will take probably six to seven days because you have to stop at every state, go through the state process.  Now the trucks don’t stop, they just go.  So, it increased the speed of delivery, it reduced the cost of delivery, and reduced the cost of taxation.  So, basically at a system level, we have benefited a lot because we got a lot of supply nationally and goods were flowing fast and cost weren’t that high.  So, we got benefited from that and I think that’ll be a push for a long-term tailwind for us will continue to push our business forward.  And I think the third thing was demonetization.  India historically has had what you call as both a white economy and black economy.  Black economy is where people tend to evade taxes.  Now it’s reasonably prevalent in trade in India, depending upon categories.  And there was another thing at back of our mind as to how will an online platform, people will think about online platform because online platforms typically make trade transparent.  But we said that there is enough. When we did our research, what we figured out there’s about 60%-65% of the market was white.  So, we said there’s enough market which is white so let’s work with that.  What happened was Indian government came with demonetization, which was rightly aimed at actually black money in the country. Now what that did was, I would say, more than changing the structure of the cash was white, like that obviously has changed.  It changed the psyches of the people.  What most manufacturers and traders realized that a forward-looking viewpoint of black in the country started going down.  And people started finding ways of how we can actually convert or do a part of our business in white.  Or over time move large amount of our business on white and Udaan there was one of the best channels.  Most convenient, most easy, with high payment security to actually drive a lot of growth in the white business.  So, all three of them, Jio, GST, monetization, they came roughly at the same time when we were early seeding the platform and we got a lot of good tailwind.  And we also didn’t have to solve certain problems we would have earlier, otherwise would have had to solve.  So, I think these were very beneficial to Udaan. 

HANS:  How has UPI impact your business?  Unified payment interface?

VG:  I think it’s early days.  If you think about still a lot of the merchant sales are in cash.  It’s still not a move to electronic payments.

RITA:  What would be the percentage of that?

VG:  I would say for most merchants at least 90% is still cash.  It is moving but I think as of today, large amount of sales a merchant does is in cash and obviously they pay back in cash.  However, UPI is definitely, in terms of its adoption going fast.  I think what we also, forward-looking view for us is also that UPI is going to be a large part of the payment, so in the context of e-commerce.  So, we’re investing heavily with our merchants enabling them to pay via UPI directly and also enabling products for them to be able to collect payment from their consumers via UPI.  So, I think we are pushing alongside the trend.  However the current composition is still heavy cash.

RITA:  Hans I wanted to ask you, if you think about Alibaba back then, when they scaled, digital payment was a big player in their success.  Looking at those 90% of the trade is still on cash and it looks like Udaan is doing really well, can you explain that a little bit to us from your perspective as an investor?

HANS:  I think back when Taobao got started by Alibaba, GDP per capita in China was at around $3,000-$4,000 per person.  And in that range, it was easier to see consumer aspire, buy something, goods on Taobao from a manufacturer seller who’s far away.  When you’re dealing with two participants who are far away from a distance standpoint then cash is not going to be useful, will not be as good.  So, what Alibaba ended up doing was coming up with Alipay to get the seller and buyer to work with each other more efficiently.  So, if I’m a seller and VG is a buyer and I sell him something and I ship the goods to him, I need to be sure that he has money to pay for it.  So, if he leaves money in his Alipay account, Alipay let me know in my Alipay account that the money is already in Alipay and I feel secure to ship my goods to him.  And when he gets the goods, he wants to make sure that my goods to him is as good as advertised.  So, he’s not going to release money to me until he’s sure the thing is good.  So, in seven days he doesn’t complain, that’s how the money in his escrow account at Alipay will get released to my Alipay account.  This way Alipay becomes an escrow service to make sure the transaction is good.  And that’s how Alipay grew very quickly with the expansion and growth of Taobao.  And what VG was saying earlier is that GDP per capita in India is still low enough that B2C commerce takes so much time, C2C commerce takes so much time to grow the business over time that he’s better off focusing on B2B first.  And a lot of B2B business today are local so cash is still a big component.  But over time as B2C business, more of them move online, B2C commerce go online then I’m sure there will be more business done between buyer and seller across different regions.  And that’s when UPI mobile payment will become useful.

RITA:  This question has been on my mind from the beginning of this podcast. So what does Udaan mean from a language perspective?  How did you come up with that name?

VG:  Yeah.  So, Udaan is actually a Hindi word and in India, Udaan as a Hindi word is typically associated with somebody who is small who is actually achieving big things. 

HANS:  Perfect name.

VG:  Udaan has that connotation of hope, positive, achievement, ambition, for small guys.  Literal meaning of Udaan is taking flight.  Udaan means taking flight.  But typically associated with small guys.  When we were starting the platform, we had this thing in our head that we wanted our platform to be able to connect with our core market.  And we said, let’s have a word which is Hindi and let’s have a word which connects with them.  And we are actually lucky to find the domain name available because as like we purchased it.  But it is a reasonably popular word in the context of the country.

HANS:  Yeah.  Alibaba obviously got started because the fiction, the folklore around Alibaba and you open sesame.  And Jack wanted a term that a lot of people automatically can recall and remember.  And Rokurotan is a very Japanese term that also means hope, that tomorrow will be better, that Japan was modernizing so they use that to connote confidence of consumers into their platform as well.  Can you tell us a bit more about Udaan credit system and how that plays in your value add for the seller and buyer as well?

VG:  Yes.  I think the two points to the current system, which are important to understand the trade credit in India, which are important.  One is that most of the merchants in the country do not have, as we were talking earlier, do not have formal credit histories.  They don’t’ have a lot of recorded bank statements of their sales.  They don’t have a lot of strong set of financial documents for their business.  And they’re also small.  So, if you add all of these three, it’s typically very difficult for them to actually get a loan or a working capital line from a financial institution like a bank.  What that does is, suppliers or wholesalers or family and friends are the people who finance that person as they’re running their business.  And the second thing, which is interrelated is that because of this opaqueness in the credit system, suppliers have a huge advantage.  What they tend to do is they will tend to inflate the pricing at which they’re selling the products to the buyers because those buyers don’t have a lot of options of the people who are going to give them credit.  So, what credit does, it artificially increases the price consumers are buying, small merchants are buying for.  Now what Udaan does is actually trying to address both of these things together.  One is that we are coming onto the platform and making credit very transparent.  We are creating credit lines for our buyers based on their transaction and usage behavior on the platform.  We look at a buyer, they start buying on the platform, we start looking at them for a few weeks and see how frequently that person is buying, how many selection he is buying, how many different sellers he is buying from, what time of the day that person is browsing.  And we have started creating a correlation.  [inaudible 00:39:16] correlation with creating a model, which enables us to start seeing with a certain behavior on the platform.  If you give certain people smaller credit lines how do they behave?  And we start giving the very, very small credit lines like 5,000 rupees, 10,000 rupees and starting the repayment behavior.  And what that does is it enables us to create a credit product, which is based on economic data and which is transparent to buyers and sellers.  And the second thing is it also decouples the pricing of the product from the credit.  So the manufacturers are very, very competitive on pricing the products on the platform because the payment risk has been solved for them.  They get their payments on time, so they are very aggressive in competing on the platform because they want to grow their business on Udaan because their growth channel with high payment security.  So, what that does is it increases the demand on the platform, which helps us keep creating a better credit product because the more buyers are transacting on the platform, we get more data on which we can keep improving our credit model.  So, I think these two notion of decoupling credit from the pricing of the product and using the transactional and the real economic data to assess the credit capabilities of buyers and sellers enables us to really add the value in the system, both from a marketplace point of view as well as for us to create products, which are important.  The SME lending market in this country is actually one of the largest markets, about $400-, $500 billions of unmet credit demand in this market is there with high cost of credit.  If you can create lending products, which we are now, we’re creating lending products for our buyers, we’re creating lending products for our sellers, and we’ll continue to keep increasing that side of the business because by itself it helps a lot on the trade on the platform, and also by itself is a great business opportunity.

HANS:  So, over time you may create your own FICO score on your seller and buyer as well?

VG:  Yes. You would say that if you go at some of the ways the current trade does, they have their own proxies of that.  Like they have things like caution list, like there will be the names of the buyers, they will circulate them on WhatsApp groups between traders and saying like, “Block this guy if he’s in the market,” because nothing exists and now Udaan has an ability to create a transparent.  And we have seen that power.  There are manufacturers.  Let’s say a merchant goes to a manufacturer offline into a market.  That manufacturer asks him, “Okay do you have credit from Udaan?”

RITA:  Do people already asking that?

VG:  If they say no, then say, “Why should I give you a credit?  Udaan has not.”  So, what that does is like Udaan is becoming a system.  If you have not been vetted by Udaan, I’m not going to give you credit.  So, and I think we’re still early in the title but I think that’s where we’re taking, we want us to make it very transparent.

HANS:  We just had an investor in Square, my partner Glenn Solomon, our investor in Square in, obviously, post-IPO Square capital is probably the biggest reason why the stock price and value has gone up.  It’s so useful.  So, speaking of which, as you do more for your sellers and manufacturers, what other services beyond credit, beyond the marketplace that you would want to provide, whether it’s a POS solutions or recordkeeping, whatever it is.  What else are you thinking of?

VG:  Definitely.  I think there’s a bunch of them right because we envision Udaan as an SME platform, as an SME Internet platform. 

HANS:  What we call SMB tech in Silicon Valley. 

VG:  One area of services we have started focusing on products and services is, what you call as small business SAS, which will be services, products like invoicing, point of sale solutions, billing, accounting, inventory forecasting, demand planning, so that is one set of products, we have started work on that.  Second set of products is helping our manufacturers and brands with creating brand analytics.  Helping them provide analytics on their data, what kind of products, what kind of price point are selling in what parts of the country.  There are older research firms like Nielsen, which provide this data and Udaan is now a huge repository of data in terms of what products, what price points are going.  So, we are working on creating analytical products for our manufacturers and our brands.  We’ve also started work on helping our small merchants with local area marketing for them to be able to leverage, as most of their consumers are becoming digital, we have ability to actually have merchants market their product to consumers digitally, and we’re doing some pilot. I think the more if you see the future of the system or the commerce in the country, you will see these plays like B2B2C plays because now the merchant is digital, consumer is digital, product is available.  If you can market the product to the consumer at the right time, then the gratification can happen very, very quickly for the consumer at the right cost of delivery, which is supported by the system.  So, I think that’s another line, sort of area we’re going to experimenting in.  So, I think these are some of the ones which come to light.

HANS:  Have you ever heard of a company called Payfazz in Indonesia? 

VG:  I’ve not but would love to hear that.

HANS:  They’re providing payments, they’re providing inventory management, different kind of solutions to the convenience stores as well in Indonesia.  We’re seeing something similar in Columbia, Bogota, Columbia for Latin American market.  So, it is a common problem.  We have so many mom and pop conveniences that dominate local retail and it’s completely fragmented.  They all need similar solutions.

RITA:  So, let’s go into the last part of the podcast recording.  It’s going to be a quick round of five questions.  So, just say what’s first come to your mind.  Don’t think too much about it.  What are your most regular purchases online for yourself?

VG:  Shoes. 

HANS:  How many shoes do you buy?  How many shoes do you need?

VG:  I buy once every six months.  I’m not like—

HANS:  Oh okay. 

VG:  That’s the only thing I buy typically online.

HANS:  Interesting.  What kind of shoes?

VG:  Typically sports shoes.

HANS:  Sneakers?

VG:  Yeah sneakers or sometimes casual shoes. 

HANS:  Oh, okay.  Have you ever shopped on StockX or Goat before?

VG:  No, I haven’t.

RITA:  Who’s the entrepreneur you admire the most and why?

VG:  I think for me, I would say definitely I admire Jack Ma a lot.  I think what he has been able to do, at least my outside view of what he has been able to do with Alibaba and what Alibaba did to China, I think it’s a completely different thing about the country.  I think that’s somebody I admire most.

HANS:  And you probably want to do something similar in India as well. 

VG:  Yeah, I think India has potential.  It has that potential, where it is in its life cycle as a country.  I think it has potential for large, big transforming businesses for economy in society. 

HANS:  Yeah, that changes lives. 

RITA:  What’s something that you’ve read or heard recently that you would recommend to other people?

VG:  I’ve read, recently on LinkedIn, there are people who keep forwarding things.  There have been some of those clippings, which come by what Jeff Bezos has done with respect to his style of management and I think some of them are fairly neat.  The other one I tend to read a lot is there’s a guy named Ray Dalio for Bridgewater and I think his principles on managing and building a culture, I think they are very, very powerful.  A sort of group of people who are very ambitious, I think it’s very powerful. 

RITA:  What’s something on your desk that has been with you all of these years?  Or specifically when you were at Flipkart it’s there and now it’s on your desk at Udaan?

VG:  I think it’s my laptop bag.  I’ve had that laptop bag for a long time now. 

RITA:  Is that the one you carry today?

VG:  Yeah, I do.  I think that is something that has not changed for a while now. 

RITA:  What do you do when you’re really stressed?

VG:  Actually one of the things which I’ve realized is, we didn’t talk about it, I have two kids.  One is two-years-old, and one is six-years-old.  And I think it’s amazing to just spend time with your kids because no matter, you spend time with them and then you start feeling okay.  Everything is going to be fine. 

RITA:  It makes you optimistic. 

VG: Okay as long as both of them are fine.

HANS:  Life is okay.

VG:  Life is okay.  Everything else can be figured out.  All other problems can be solved.  So, I started thinking about that and I think that helps me go easy a bit.

HANS:  Great.  Thank you so much.

VG:  Thanks guys.  Appreciate.

HANS:  This will be a fantastic podcast.