S2 Episode 13: Eric Yuan of Zoom: How WebEx’s Unhappy Customers Inspired Zoom (rerun)

Today’s episode originally aired in July 2018. The guest is Eric Yuan, the founder and CEO of Zoom, known for its easy-to-use and reliable video conferencing product. Zoom became a listed company in April 2019 and soon became one of the largest public SaaS companies in the world.

The recent outbreak of the coronavirus has made remote working part of many people’s new realities. It also puts remote working tools like Zoom under a stress test with the surging needs, which Zoom did incredibly well. It always works. GGV has been a happy customer of Zoom for a really long time and we hope this conversation can give you a hint on how it became successful in the first place.

Zoom is used by a third of Fortune 500 companies and 90% of the top 200 universities in the US. Eric was recently named the Top CEO on Glassdoor, with an approval rating of 99%, and was the first person of color to win the award. Eric grew up and went to college in China, arrived in Silicon Valley in 1997 and joined WebEx when it was still a small company. In 2007 WebEx was acquired by Cisco and Eric became Cisco’s Corporate VP of engineering in charge of collaboration software. Eric spent 14 years in total at WebEx and grew its engineering team from 10 to 800, and increased its revenue from zero to over $800 million. Eric holds 11 patents, plus 20 pending patents in the pipeline.

In this episode, Eric shared his story of being rejected a US visa for 8 times while in China, getting its first paid customer, balancing the needs of SMB and enterprise, and what makes Zoom different from its competitors.


HANS TUNG: On the show today, we have Eric Yuan, the founder and CEO of Zoom, the leading videoconference solution for enterprise. Zoom is used by one-third of Fortune 500 companies and 90 percent of the top 200 universities in the U.S.. It is based in San Jose.

Eric grew up and went to college in China, but arrived in Silicon Valley in 1997 and joined WebEx when it was still a very small company. In 2007, WebEx was acquired by Cisco, and then Eric became Cisco’s corporate VP of engineering. He was in charge of collaboration software.

Eric spent 14 years in total at WebEx and grew his engineering team from only 10 to over 800 and increased his revenue from zero to over $800 million. Eric holds 11 patents, plus 20 pending patents in the pipeline.

ZARA ZHANG: We at GGV are also happy Zoom customers. There’s hardly a day when we are not using Zoom for some sort of investment meeting, because we’re such a global team and we invest in global entrepreneurs, so we literally cannot do our job without Zoom, so thanks Eric.

ERIC YUAN: Thank you for having me.

ZARA ZHANG: So you were recently named the top CEO on Glassdoor, with an approval rating of 99 percent. The average approval rate on Glassdoor is 69 percent. You were also the first person of color to lead that list.

I wonder, how do you think you did that, and how did you feel when this was announced? What tips do you have for other CEOs?

ERIC YUAN: I would say first of all, that’s not my award, actually. That is our team’s achievement, because it truly represents the culture that our team has built. A culture of reflecting our core principles of happiness and caring.

So essentially for me as a CEO, my number one priority is to make sure I have a good culture, really focus on employee happiness and really care about our employees. Ultimately, if our employees, if we are happy, our customers will be happy.

I think that if you want to say what kind of tips, I would say just one thing. On day one, focus on the culture and make sure that your employees are very happy. I think that’s pretty much what we are doing here.

HANS TUNG: A lot of people are trying to do that, but may not be as successful as you have been or your team have been in doing it. What are some concrete things you have done that you think is different or unique, that other companies could learn from?

ERIC YUAN: I think on day one, I think just for myself for the labs at Cisco, when I showed up in my small office back then, I already understood the importance of culture and values. That is why we already define it even on day one. I mean just to myself, our company culture is delivering happiness and our company’s value is care. It’s very easy, very catchy.

Care means you care about a community, you care about a customer, you care about a product, you care about teammates as well as care about yourself. So we have a very well-defined culture and values. So on day one, already have that.

And also, some other things along the way when we further grew the business, we really focused on hiring those employees who can fit very well into our culture. Normally we don’t only look at those employees with great experience, great education and background; we really focus on self-motivation and a self-learning mentality.

I think that’s really important. Quite often you want to hire maybe a head of a department, you want to hire some VP level from other companies, that is not our style. We want to hire those people who can grow themselves along with our company’s growth.

I think those two things are really helping us. And for sure, there are a lot of other things. Work hard, open communication, keep everything transparent, always share with the team.

Ultimately, number one, go here as a team. I mean, our executive team needs to build a trust between our employees and our executive team. If trust exists, I think everything else is sort of easier.

HANS TUNG: I see. So it sounds like when you first started, you had a group of cofounders?

ERIC YUAN: No just myself, I am a sole founder.

HANS TUNG: Then your initial team, were they all young people? Were they people who were ex-colleagues who shared your same cultural values, to start this with you?

ERIC YUAN: I would say that more of the young graduates. After I left Cisco, and one-and-a-half months later, all the engineers, they all worked with me for many years before.

HANS TUNG: Right, that is what I meant by cofounders.

ERIC YUAN: You are right. Founding engineer team.

HANS TUNG: Founding team is a better term.

ZARA ZHANG: Forty engineers from Cisco followed you.

ERIC YUAN: That’s right, yeah.

ZARA ZHANG: So you decided to come to the U.S. in the mid-1990s because of the Internet, which you knew was the future but hasn’t really taken off in China. Why were you so sure that you had to leave China and come to America to capture that wave?

ERIC YUAN: Actually, the first time I saw, I listened to Bill Gates’ speech in 1994, in Japan actually. I was traveling to Japan. The company I worked for, they sent me to Japan for four months. I lived there and it happened to be that Bill Gates also was there to give a speech.

HANS TUNG: It was around the information highway?

ERIC YUAN: Yes exactly, 1994 I think. And at that time, I really was, how do you say —

HANS TUNG: Inspired.

ERIC YUAN: I was inspired by this speech.

HANS TUNG: I remember that.

ERIC YUAN: And put it on the Netscape browser and said wow. Just with an app, an application browser, I can do so many things.

HANS TUNG: Yeah, a very different world.

ERIC YUAN: A very different world, that is so right. I imagined so many things could happen; especially I think wow, you can buy a book online. I have some background.

HANS TUNG: Yeah, Amazon started in 1994.

ERIC YUAN: Exactly. But how to do that? I have no idea how to charge the customers, how to deliver. There were a lot of questions. Back then in China in 1994, 1995 if you talk about the Internet, most people were “What are you talking about?” You show them your email address, they don’t understand that either.

However, Yahoo, Netscape, is so powerful and so popular here. Back then, I thought about coming here to take a look and then go back.

However, for whatever reason I did not get a visa in 1995 and I got rejected. However, back then, sort of looking back is to practice my perseverance, I think okay. If I did not get a visa, I will try again, try again.

HANS TUNG: How many times were you denied?

ERIC YUAN: I tried eight times.

HANS TUNG: Eight times.

ERIC YUAN: Failed, and the last attempt I was successful, but it took me more than one-and-a-half years. It is already 1997. When I came here and I realized, wow, this is the first wave of the Internet revolution. I don’t think I want to miss that. So that’s why I settled down here and I joined WebEx to start writing code. Because when I came here, I could not do anything else. WebEx was small, and I even did not speak the language, what should I do? I went back to writing code for several years.

ZARA ZHANG: I think a lot of people back then in China heard about the Internet revolution, but not everyone has to pack up and leave and join it. So it takes a lot of grit to do that.

ERIC YUAN: Actually, even if I came here, to be honest, at that time I thought about just to come here —

HANS TUNG: For a few years and then go back.

ERIC YUAN: For a few years and then go back. That is exactly my thought. However, when you start building up something from very small and a lot of emotional connection with the product, with WebEx, it was a great team, and along the way sort of the thought to go back is faded away, I think.

HANS TUNG: And I mean, there are many engineers from China that came here and have done pretty well in the Silicon Valley, but many of them don’t have the management experience or develop their leadership style. How did you do that while working as an engineer or engineering head at WebEx?

ERIC YUAN: I think one thing I like in Silicon Valley is the pretty open culture here and a lot of very successful people, they would like to help you. So in my career, I have so many mentors. Even many, many years ago I really wanted to learn. That’s why I also promoted self-learning here at Zoom as well, because I wanted to learn. Also that is why I have so many mentors. When I learn from each of them, I think they give me a lot of advice. What’s your career aspiration? What you should do next. I think I learned a lot from those very successful other entrepreneurs or leaders.

That’s why not only do I focus on the coding to become an engineer, but also I tried to practice some management skills. That’s why when I joined WebEx, I was one of the first of several founding engineers but I got promoted to engineer manager, senior engineer manager, director, senior director, all the way up to VP. After I joined Cisco, I also got promoted to corporate VP as well.

I think the number one reason was just self-motivation. I knew actually I wanted to do something, and that’s pretty much. The self-motivation I would say probably does play a big role here.

ZARA ZHANG: We sometimes hear of the term “bamboo ceiling” here in Silicon Valley, where it is hard for engineers from mainland China to move up the ranks at the tech companies, especially because of culture and language barriers. How did you overcome those?

ERIC YUAN: I do think the language barrier is a factor, seriously. I was born in Shandong province in China, and when I came here I even did not speak the language. I have a very heavy accent, as you know, right? So even if I speak in Mandarin I also have an accent. But actually, I really do not think that’s a reason.

The reason, a little bit the culture, you have got to learn a little bit. I will give one example. Quite often for many Chinese engineers, given their background and education, quite often you have a new project. They do not share with others, communicate with others.

They are driven by the mission, I just have this idea. I just started, I even did not finish. Why should I let my manager and let other people know that? This is sort of their understanding.

But here it is very different. You have got to make sure we have open, transparent communication. Even before you finish, you have got to communicate. I think you need to learn that. Those skills you can learn. But quite often they say. “Oh, there is a language barrier” so mainly I would say this is a bad excuse. I think you really need to think about why, figure out a root cause. I think Silicon Valley is a pretty open culture. If you work hard, you achieve a lot of things and then you communicate with others, you will be promoted.

HANS TUNG: Some people ask why, for example, the Indian engineers have risen faster in Silicon Valley, and many of the tech CEOs in Silicon Valley today are of India decent. They also speak with a heavy accent. But how come there are not as many Chinese engineers who have risen to that level the way you have?

ERIC YUAN: I think a commonality between Chinese-background engineers and engineers from India, they all work hard and also they all are very smart.


ERIC YUAN: The biggest difference is those engineers from India, they have good communication skills. They keep everything transparent. Before I do anything, I have a great say like a PowerPoint to share with you, why I wanted to do that. And you know, it is very open communication skills, and I think that plays a very big role.

ZARA ZHANG: So the idea for Zoom first came to you when you were a freshman in college in China, right? Could you tell us that story?

ERIC YUAN: Yeah, that is a long story, but anyways. I was a freshman, my girlfriend was a sophomore. That was 1987, I think. She lives in another city. I was born in Mount Tai in the Shangdong Province. Between the city where she lived and the city where I lived was very far away. Every time I wanted to visit her, it would take more than 10 hours.

HANS TUNG: More than 10 hours?

ERIC YUAN: More than 10 hours.

HANS TUNG: One is the eastern side, one is the western side of Shangdong.

ERIC YUAN: No direct train either. I forgot, so probably at that time, you took the train and then probably in the middle of the night, you needed to change to another train. It was a very long journey. And also, I can only see her maybe twice a year, on the winter break or summer vacation.

Someday, I remember that actually. Someday if I can have a smart device and with just one click I can talk with you, can see you, that was my daydream, right? And every day I thought about that. But when I started Zoom, I started to connect the dots. It’s like wow, I thought about that before but the technology was not ready, but the idea was there.

HANS TUNG: Makes sense.

ZARA ZHANG: So you were on the founding team of Cisco WebEx, and you were there for 14 years. What made you realize that it was the right time to leave and start your own company?

ERIC YUAN: Actually, I thought about leaving WebEx, or Cisco WebEx, several times, because I would say Silicon Valley is a startup valley, and you better join a startup company or do something. So many great leaders really inspired me.

However, every time when I thought about leaving WebEx, there were a lot of emotional connections because you have to grow that piece. You work together with so many other teammates, it is really hard to leave. Quite often I am just, “okay, let’s stay for another year, another two years.”

And only until 2010, and back then I thought about leaving, however, I was still not fully ready. But one thing I realized back then, every day, every morning when I woke up, I was not happy, because when I visited a WebEx customer, every time I personally felt very embarrassed, because I did not see a single happy WebEx customer.

HANS TUNG: Why is that?

ERIC YUAN: Because when we built WebEx, we only focused on one use case. That use case was to have you share the PowerPoint or share the desktop, but it can’t be you and I in an audio conference. But 13 or 14 years later, there are some brand-new problems. Like every business, they have got to use multiple solutions. They want to enable conference room. They want to have video conferencing and have one unified solution. They wanted to have a cloud-based conference room solution. You wanted to make sure no matter where that team is coming from, we also can guarantee good voice over IP quality and video quality. WebEx was not designed for that.

HANS TUNG: For Internet?

ERIC YUAN: Yeah, exactly. This is a collaboration architecture. You’ve got to rewrite that. At Cisco, Cisco wasn’t ready to change its collaboration strategy. I had no choice but to leave to fix all those WebEx problems. That is when finally, I decided I’m going to leave. I cannot suffer from that anymore. So that’s the number one reason.

HANS TUNG: And when the 40 engineers followed you, how does Cisco react?

ERIC YUAN: First of all, I managed more than 800 people, so those 40 people is just a very small fraction, not any impact whatsoever. However, Cisco probably also saw, I have no choice, meaning I have no way to build a better solution.

HANS TUNG: It’s already Cisco.

ERIC YUAN: Yeah, exactly. So even if he’s a leader here, I think this market is not, they do not think there is a future. Otherwise, they all probably would have allowed me —

HANS TUNG: Allowed you to do what you wanted to do.

ERIC YUAN: Exactly. For the first several years, nobody paid attention to what we were doing.

ZARA ZHANG: So when you started Zoom, the videoconferencing market was already pretty crowded. There were a lot of other solutions like Skype, Google Hangouts, WebEx, FaceTime, et cetera. What made you think that you could still carve out a market? I think you’ve said before that the biggest differentiation for Zoom from the other solutions is that it just works, which I agree. So why does it work?

ERIC YUAN: You’re right. We’ve got to look at it from a customer, from an end user perspective, because I talk with many customers. Literally, I did not see a single happy customer who would tell me, “Hey, we really enjoying your solution.” So meaning all the solutions back then, I would say were terrible, no matter which solution. Because most of them were built for other purposes. None of them were built to embrace cloud-based video collaboration. So that’s where I saw the opportunity.

Our philosophy was that if we can build something to let a customer enjoy using that, I would say there’s a chance. That’s the reason. Because quite often, if you think the market is too crowded, if you don’t really understand the customer experience, you think that game is over, you don’t jump on that, I will say you are going to miss a big opportunity.

HANS TUNG: I just find it so easy to use, that you don’t have to download the software and remember a login and you just click the link and it just works. That makes it so much easier on multiple levels, to start using your product.

ERIC YUAN: Usability is really important. I think I’ve got to make it easier, and also the quality is very important.

HANS TUNG: Yes, of course.

ERIC YUAN: You are essentially right. It has got to work.

ZARA ZHANG: It works even when the service is not great with the Internet.

ERIC YUAN: You are right, that is why we have a very big team, focusing on optimizing our technology in a very low and unreliable network.

ZARA ZHANG: And it works in China.

ERIC YUAN: Yes, it has got to work.

HANS TUNG: We also notice that FaceTime audio works quite well, but obviously FaceTime video does not. How do you balance making sure that both audio and video can work well?

ERIC YUAN: So first of all, between video and audio, audio is still more important than video. Even if I can see you, but if your audio is choppy, nobody is going to use that. So essentially, we prioritize audio traffic over video traffic. Even in a very, very unreliable, very low bandwidth environment, and we focus on the audio.

Essentially we have an average, even at a data loss rate of like a 45 or 55 percent, we still can recover, we still can make sure your audio stream works. So a lot of what I would say is the very hard work is there.

ZARA ZHANG: Who were your first few customers, and how do you go about onboarding them?

ERIC YUAN: Oh, we were very lucky. Our first paid customer was Stanford, the Continuing Studies Group. Our solution was not ready yet and at that time I remember, that was November or December 2012. They were looking for a solution for their online learning, online teaching platform and were still in the alpha phase, and they tested all the solutions, and they still found Zoom quality was better. And before our solution was fully ready, they already became our paid customer and really boosted our confidence. That was our first customer.

ZARA ZHANG: I remember you also did a program at Stanford?

ERIC YUAN: Yeah, that is more like, I would like to take a break because I worked very hard in 2006 for my EMBA program and lived at Stanford, the campus for the whole summer. Yeah, just a break. I did learn a lot of things.

HANS TUNG: 2012 was an important year, because that was when the MOOCs the massive online education programs are starting to get rolled out, so it seems like you captured the right segment, a new segment.

ERIC YUAN: You’re very right. Actually back then, we were lucky to get the first several customers, all of them were from the education sector, some colleges. For now, if you look at the top 200 nationwide universities, 94 percent or maybe 96 percent now already became our customer. There is another benefit by focusing on higher ed, guess what? Four years later they all join our workforce, and it had a huge influence.

HANS TUNG: That was a very strategic move, yeah.

ERIC YUAN: It was a very strategic move.

ZARA ZHANG: Why did you decide to focus on the enterprise market instead of consumers?

ERIC YUAN: The consumer market, that has very definitely been small. Quite often, you have to have a free product, your monetization strategy is probably based on ads. Real-time communication and collaboration is really hard, so for you and I have very important business meetings, I do not think it makes sense to put ads.

However, there is a real demand from knowledge workers from those business customers that are looking for new solutions. That’s why I think from a business model perspective, I think the business sector is much better.

HANS TUNG: Will you ever have a consumer version, so the younger version of you can talk to his girlfriend?

ERIC YUAN: Seriously I think yeah, we are thinking about that now. Because when I was young, I suffered from that. I do not want anyone else to suffer from that anymore. Yes, in the future we might. But for now, that’s not our top priority. We have so many SMB customers, big enterprise customers, huge market opportunity ahead of us, so we better focus on the business customers first.

HANS TUNG: Right. How do you balance the needs of SMBs versus the bigger enterprise? Because big enterprise, as you know, always ask for more security, more customization, and so forth. So how do you balance that?

ERIC YUAN: That’s a good question, because we know down the road we needed a balance between SMB and enterprise. That is why on day one, we undertook a different strategy. So meaning if first of all, SMB customers on day one, we did add a lot of enterprise features already.

I would say for now, there’s no need to balance because the solution is all ready. All the security features, all the enterprise elements, all of those features are already added in. Otherwise, after you got the SMB customers, you sort of transition from SMB folks into enterprise, you need to do it —

HANS TUNG: It was hard?

ERIC YUAN: Very hard, but we knew that. That’s why I say, you know –.

HANS TUNG: From day one you were gearing towards the more enterprise solution.

ERIC YUAN: Exactly, very true, yes.

ZARA ZHANG: From where you sit, how do you see the future of work will evolve? Do you think teams will become more and more distributed, and do you think people who are actually using videoconferencing will increasingly replace in-person interactions?

ERIC YUAN: Absolutely. If you look at the trend, so first of all I think almost every company, they have more and more workers working remotely, you essentially become a virtual workplace. This is the number one thing.

If you have a virtual team, you still need to collaborate to get the work done, so you have got to have good communication tools. When it comes to communication tools, I would say only four. One is email, another one is chat, a third one is a voice call, the fourth one is video.

The email and the chat, I would say email, I do not think I use that. It is not for real time. Chat is okay for the very short conversation. It is very hard to imagine like five people to talk about something for one hour via chat, it would not work. And then voice is real time, however with voice the problem is the participants are always multitasking, and it also doesn’t work. The communication tool is really important.

Another thing, another change is if you look at today’s workforce in the United States, over one-third of our workforce are millennials. They’ve grown up along with video, along with their phone. if you give a phone number that lets them dial into an audio conference, they do not like that. Nobody wants to use that. They all turn on the video. Video communication, I think it’s going to become more mainstream.

Another trend is, looking at today’s workplace, they will have more and more conf rooms, less offices. If you visit Facebook, a great company, even the CEO Mark Zuckerberg, he does not have an office. It is very open space, and you need more and more the conf rooms.

That’s why, when you have more and more conf rooms, you’ve got to have a solution. You got to have a cloud-enabled video collaboration solution. That’s why I think video is going to play a very role to enable the modern workplace.

HANS TUNG: In addition to video, as you know, messaging has also become quite popular in the workplace with Slack in the U.S. or with DingTalk from Alibaba in China or WeChat, you see more people using that. How do you see your solution work with the various messaging platforms over time?

ERIC YUAN: Yes, the messaging platform is also very important. I would call that async collaboration, and quite often the customer already probably sees Slack or maybe Microsoft Teams with interoperability is very well. However, those are more like for the group conversations, meaning you don’t need a real-time response.

You still need to have video collaboration, because you want to call a meeting, you want to make a decision and especially if you want to talk with customers and partners or demonstrate your software, you still need to have video collaboration tools like Zoom.

Obviously, the combination between those two tools can really make a huge difference for the modern workplace.

ZARA ZHANG: So how often do you go to China these days? And do you pay attention to the tech developments there?

ERIC YUAN: First of all, I only travel, I mean the business travel, I only travel at most twice a year, and I did that for four years already. If I travel very often, so that means our product doesn’t work. And yeah, I did not travel back to China for three years now. By August it will be three years.

I wanted to travel there, but however —

HANS TUNG: A lot has changed in the last three years.

ERIC YUAN: Yeah, because there are so many customers here and we visit, talking to the customers, a lot of projects here. However, we are using video conferencing in Zoom and I did not see a huge problem because every day we open up our video call and I still can talk with them.

HANS TUNG: What’s the rough percentage of revenues for you outside of the US?

ERIC YUAN: North America, probably around 90 percent. The rest of the 10 percent, most are from —

HANS TUNG: Europe?

ERIC YUAN: Yeah, from the UK and Australia.

HANS TUNG: UK and Australia, English-speaking countries.

ERIC YUAN: Engish-speaking countries, but this year we are going to double down on —

HANS TUNG: French or German?

ERIC YUAN: Yes, France, Germany and Japan as well.

HANS TUNG: Japanese makes sense.

ERIC YUAN: Yeah, those three markets are growing very well, and we see that there is huge growth.

HANS TUNG: Any growth coming from Southeast Asia much? Are they developing markets?

ERIC YUAN: No market at all, because Southeast Asia, I would say it is still like a consumer-driven economy and B2B, I do not think they are taking off yet, but we will. We just do not know when, so that is why we focus on North America and the English-speaking countries, and Europe and the Japanese market.

HANS TUNG: How about India, especially with all the cross-border?

ERIC YUAN: India, we have many, many users from India because we have so many customers here, almost every company, they have a product office or a something.

HANS TUNG: In India or Philippines.

ERIC YUAN: Yeah, exactly. We have so many users from India.

HANS TUNG: Got it, makes sense.

ZARA ZHANG: Your LinkedIn profile says delivering happiness to our users. Your happiness is my happiness. I think not all CEOs see delivering happiness as their mission, and a lot of people would associate Zoom with efficiency or convenience, not necessarily happiness. What made you realize that happiness is the key to your company’s success?

ERIC YUAN: That is a great question. It just sort of boils down to my personal story, because when I started the company, I was already 41 years old, not very young anymore, already very late.

But however, also I learned a hard lesson, because I really wanted to understand, what’s the purpose of life? When I was young, whenever I had that question, I just don’t have an answer. Seriously, I do not quite understand. But along the way, I really understand that the purpose of life is to pursue happiness. It is about happiness. That’s really the very important thing.

I also learned how to pursue happiness, especially how to pursue a sustainable happiness. I learned in the former is, you’ve got to make others happy. If you make others happy, your happiness will be sustainable. So for me to build the company, also to apply that philosophy to the company world, the business world, if we can make a customer happy, our company will be happy. That happiness is also sustainable. That’s why this is our company philosophy. We do all we can, always communicating with our employees, do all we can to make sure our customers are happy, and then we’ll be fine.

ZARA ZHANG: So we are going to move on to the last part of the interview which is a set of standard questions, rapid fire. The first one is who is the entrepreneur you admire the most and why?

ERIC YUAN: Entrepreneurs or leaders? So it is different. I think entrepreneur, I would say I really admire Mark Zuckerberg, and given he is very young and built a great business in Facebook and huge influence. Very positive, good influence to the world; and look at what he achieved, what he did.

HANS TUNG: And what more could be coming.

ERIC YUAN: Yeah, I think I really admire him.

HANS TUNG: How about leader?

ERIC YUAN: Leader I think, I really admire and I learn a lot from his leadership advice is the former CEO of Wal-Mart, H. Lee Scott Jr. I think his wisdom and advice truly shaped what I think about leadership, a lot of things.

I could give one example, like “whatever you said the first time will be misunderstood or ignored”. You know, a lot of things like that.

HANS TUNG: Words of wisdom.

ERIC YUAN: Ability to give constructive, honest feedback is a rare talent. So many leadership wisdom, I think that really shaped my leadership style. I think I really admire him.

ZARA ZHANG: What is something you read recently that touched you a lot or you recommend?

ERIC YUAN: I do like reading a book. We also have a book club here, by the way. Any employees, whenever they buy a book for myself or for their family member we always reimburse, because when you promote self-learning you’ve got to promote that as well. The book I’m reading recently and I have several books I read at the same time. One book, it took me for a while, I am still not finished.

Almost done, almost done, is Principles from Bridgewater Associates, the number one global asset management company. A wonderful leader, great entrepreneur. That book is also, but it took me a while. Almost done. The last several pages.

ZARA ZHANG: I think China is obsessed with that book now.

ERIC YUAN: It is a wonderful book. I highly recommend that.

HANS TUNG: What do you do for fun?

ERIC YUAN: I just enjoy spending all the time with the kids, and sometimes watching my son playing basketball, send my daughter to dance school. Every time when I spend time with the kids, I just enjoy it.

HANS TUNG: In the Valley, obviously work-life balance is very, very important but in China increasingly you see a lot of work-life integration. People try to simplify their whole life to fit into their work. Can someone truly be happy working like that, in your opinion?

ERIC YUAN: First of all, don’t think about or don’t try to pursue a formula to balance work life. As long as you go in that direction, you never can have an answer. Just think about, because if you have a passion, take Zoom for example. Every day, I just want to come to the office. I just wanted to work on something, because I think this is my life. I never think about, that is work. I enjoy doing that. If you always think of the balance between work and life, that means you still did not figure out a passion yet.

Answer to that question first. If you find the answer, I think that you never will go back to ask how to balance between work and life.

HANS TUNG: So it sounds like you like a work-life integration as well.

ERIC YUAN: Yes, as a true integration.

ZARA ZHANG: Thank you so much for your time.

ERIC YUAN: My pleasure. Thank you for having me.

HANS TUNG: Thank you, it was fun.

ERIC YUAN: I appreciate it.

S2 Episode 12:Vamsi Krishna of Vedantu: Scaling Personalized Live Tutoring in India

This episode is co-hosted by GGV’s investment colleague Madhu Yalarmathi

In this episode, we have Vamsi Krishna, CEO & Co-Founder of Vedantu. Vedantu is India’s leading online tutoring company that enables students to learn LIVE with some of India’s best-curated teachers. The name Vedantu is formed by two Sanskrit words Veda (Knowledge) + Tantu (Network), signifying a ‘Knowledge Network’ where any student can tap into and learn from a teacher, anytime-anywhere. Vedantu is a GGV portfolio. 

In our conversations, Vamsi shared his experience in moving into online after building a successful offline tutoring center, getting his early users and his definition of an “EdTech” company. Before starting Vedantu, he has been a teacher for 13 years and founded a test prep company Lakshya, which was sold to a listed education company in 2012. You can watch Vamsi’s TedTalk in which he made the argument against the standard curriculum. 


Hans: Today on the show we have Vamsi Krishna. Vamsi is the CEO & Co-Founder of Vedantu. Vedantu is India’s leading online tutoring company which enables students to learn LIVE with some of India’s best-curated teachers. It has some 500+ teachers who have taught more than 1 Million hours to 40,000+ students spread across 1000+ cities from 30+ countries around the world.

Madhu: Vedantu is founded by a team who have been teachers themselves with over 13 years of teaching experience and has taught over 10,000 students. The name Vedantu is formed by two Sanskrit words Veda (Knowledge) + Tantu (Network), signifying a ‘Knowledge Network’ where any student can tap into and learn from a teacher, anytime and anywhere. Before starting Vedantu, Vamsi has been a teacher for 13 years and founded a test prep company Lakshya, which was sold to a listed education company in 2012. Vamsi graduated from the Indian Institute of Technology in Bombay with a bachelor’s degree in Technology and Engineer. Welcome to the show. Vamsi.

Hans: Welcome to the show.

Vamsi: Thanks Hans, and thanks for the invitation for having me over.

Hans: So I’ll start first and ask the obvious question. You were trained as an engineer, how decide want to be a teacher?

Vamsi: Vamsi: That’s like, so we’re all trained to be engineers, but as in India, very few percentage of us actually go on and follow that profession. But anyways, that’s that’s a great question. So this was more serendipity is what I would say. Me and my founders, the fortunate part was,we knew each other even before college, few of us were childhood friends. So the idea was that we wanted to do something together. But this was 2005, 2006 in India, startups were not as glamorized as they were today. So the idea quickly got shattered, we joined some few jobs, and into the jobs, we decided to work on few ideas. And two of my friends were placed in a very small, remote tier three town, it was actually a very small town in northern India, Punjab. We ended up actually going there many times. And we were thinking of what to do, what idea to pursue. And this town had a big plant, chemical engineering plant where these guys were placed in and the kids of the factory workers out there, and few of the kids around, they needed some mentoring and coaching. So informally, we just started mentoring and teaching them and that experience was extremely satisfying. We saw there was a lot of issue around the awareness of the students itself. So we made them aware we took some sessions in the local schools. And, frankly speaking, that’s how the journey in mentoring and teaching really began, because that experience was simply very, very satisfying. So I would say that was the literal start of our entry into the the field of teaching.

Madhu: After operating the company for eight years, you gave a famous TED Talk, in which you argued that standard curriculums and standard delivery mechanisms won’t work. Share with us more on that argument.

Vamsi: Sure, Madhu. so quickly on a journey of Lakshya itself. We started that as a brick and mortar teaching setup. It was just us founders who started teaching and slowly eventually we had some of the like-minded individuals joining us. For first three years, it was just in one location where we taught and this was a tier four location in rural India, Punjab, and the very first year of 36 odd students who we taught first cohort, the, to our big surprise, 11 students out of 36 got into the top five IITs, in which actually the selection rates are less than 1% out of million plus students to give the exam. And this was from a very small, remote place in India, where there was no precedents of even once get selected. That actually, that that experience really influenced a lot and it shapes us what even today we do. The big insight there was, unfortunately, and I can speak this about India and many other parts of the world as well, that teachers become teachers more by chance than by choice. And unfortunately, in society, the best of the society do not come back into teaching.

And the big realization for us was that when people like us, you know, who are from good colleges and what you know, the better of the society can come back into teaching And, you know, if can give awareness and mentoring and with passion, notice the students. That data is very high. And that was a big inspiration. And to your question, and we did that for over seven, eight years, the results speak for itself, our average selection in this in the overall eight years was 17.8%, while all other selection totally was less than 1%. And so that was a big inspiration. And what we really realized was that the quality of teaching, one is really not there for the mark. And a lot of it has to do with, you know, the whole glamorization of the teaching itself, you know, in a third world country like India, and many other parts of the world as well.

And if you don’t have the best of the society coming back as teachers, it creates a lot of problems. Now, coming back to that TED talk the thing which the government schools is to standardize the curriculum in order to hide the quality of the teaching part itself. But that just doesn’t solve the problem. What we realized was that if you can actually have great teachers, teachers who are inspired, then you really need not go out there and standardize everything you can actually give them freedom, right? If the teacher is there, who is very passionate and who is inspired, the fact that that teacher is able to inspire and generate that interest in a child that itself starts the process of teaching and learning, right, and then the kid itself is so inspired, that learning becomes a consequence. And that was a very big insight. And that’s something we’re driven by even today, we give a lot of focus in generating that interest, creating that interest in a child. And what we have seen consistently is once that gets generated, learning just becomes a consequence.

Hans: For those of most of us who invest in U.S. and China is not as hard to believe that looking at the fast internet user growth, that investing in online education company makes sense. And China had two New Oriental and TAL, both started offline and moved online and did extremely well. When you were doing your second startup, back in early 2012. Internet users in India were growing but not as fast as was happening around the world. And that was way before JIO and 4G came out in India with the cheap data pack. So how did you gain confidence that in India, the right way to build your second startup and education should be online?

Vamsi: Oh, that’s a great question Hans. And that was a question we’ve been confronted and asked numerous amount of times when we were starting the second venture Vedantu.

I will tell you the background to this, I think the biggest contribution to that goes to Lakshya, the first offline venture we were doing. And we did that for eight, nine years. And what we realized there was that what gave us success was the whole orchestration of multiple attributes, like for example, teachers, great teachers, then training them on, you know, on good content, orchestrating that according to the level of the child, and then segmenting the children according to their own grasping levels in cohorts and batches, giving them content after the class, testing them, motivating them where they were trying. So all these things, you know, all of these things, which we call as service layer, is extremely critical and important to bring for learning superior learning outcomes, or results. So when we were actually thinking of Vedantu, the online venture, the whole thought process was that you know what, we got amazing success in terms of learning outcomes at Lakshya, how do we create an online version out of this?

At that time, this is 2013/2014 times in India I’m talking about. So at that time, as you said Hans, 4G was not there, in India, internet, no connections or access is patchy. So it was very tough to, you know, think about, you know, this whole construct of LIVE tutoring. And add on to that fact, there were a bunch of other companies who were doing asynchronous, you know, models, which is recorded video models. So at that time, it was obviously extremely tough for us to think about LIVE, but I think what convinced us was, at the end of the day, in the long term, what will give you success is the success of the child. And we were extremely convinced teachers and ourselves, having taught for, you know, so many years and having seen the success at Lakshya, that you have to have a full stack service model, in order to not just replace an offline experience, but actually bring about a learning outcomes, and the closest one we could think of, which could actually achieve that was a full stack solution, which is a LIVE tutoring model. So I think keeping the student at the center, and keeping the child’s learning outcomes and experience at the center, you know, really inspired us to go about doing that.

Now comes to execution part and which was extremely tough, I would say, because at that time, you know, 4G was not there. Nobody knew about LIVE tutoring. So the, the initial days were extremely tough. So the least, what we did was, we started with a one to one model in LIVE tutoring itself. So the one teacher teaching one student, and why we chose that because, you know, it was easier to execute. Right? And I know and definitely less complex as the group model, which we currently do. And we did that for almost one and a half years, right, for almost 2014 or 2015. Entirely we did that, and the idea was, first of all to see whether this works in a country like India, will a teacher be able to teach, the student will able to study? Will actually come back? Right? Because one year at least what it takes, you know, because in India and that’s one you know one thing I would like to tell the audience here that in India we follow an academy year cycle, like a, look unlike, unlike a semester cycles in other parts of the world. So one year was important for us to validate with the child comes back, he likes the teacher, and that once we started seeing that happening is when we shifted to the group model.

Madhu: I wish this existed when I was preparing for IIT. I went to the offline experience, which which was phenomenal just because of the teacher that I have, and not many people do get access to those teachers. So for our audience, help us explain how did you take the best parts of the offline experience and how did you layer online to bring the Vedantu experience?

Vamsi: Oh, yeah, so I think there were a lot of parts which are common, a lot of parts which needed to be rethought and reinvented from this medium perspective. So the good part was the teachers itself. So I think that thing as founders ourselves,  having been teachers and having trained and deployed more than like 500 teachers in our, the offline experience, that was pretty, you know, I would say natural and easy here in Vedantu.

We went through an almost a similar process in identifying teachers who are more, we use that word teachers by choice, then by chance. And that’s very important, because when a teacher is therefore by choice, you really see that passionate energy, you know, flowing in. So that was the easy part. And that’s, I would say, it’s pretty common. We had to improvise multiple model for online media, like for example, as teachers who were 15 years 20 years experience in offline, not all of them were comfortable teaching online, so there were definitely a few things which had to change with respect to our recruitment process itself, but that’s on the teachers, but the bigger challenge was on the interaction with itself, because in a good best offline experience, a good teacher interacts with the students on a real time basis. And in online the biggest issue, you know the perception issue when the parents and the student says, like, how can you interact, right, and that was a big challenge to solve. Otherwise, there is no difference between a LIVE class and a recorded video lecture. So this is where we invested a lot of, you know, content and pedagogy and technology product. And this is where we continue to invest even today. So, just to help you visualize, if you think of a LIVE interactive class, happening over a group of let’s say, 50 or hundred students, spread across, every few minutes, there will be some other interaction in the form of the teacher asking the children on a feedback and the child immediately showing some feedback by actually clicking on the content, or the teacher taking some form of a quiz, and where the children are able to attempt that quiz, or do some interactive exercises, and ask their doubts, and so on and so forth. So, in fact, the entire pedagogy is designed in such a way that every few minutes, there is some interaction, right? And that that is one big element, which makes a LIVE class so much more engaging, and so much more, you know, interactive, and if not better, it closest to the best of the offline experience.

Hans: So during the due diligence process, we play with your app and attend classes and see that they’re like you said there’s a lot of like quite a bit of interaction between the teacher and the students. It says it is one to many model, it is online. Can you sort of walk through what are the scalability aspect of the business model to make it easier for new students to get acclimated to this learning environment. And for the teachers to be able to share best practices and improve very quickly.

Vamsi: So first of all, there’s a lot of orchestration as we call it, which happens between the teacher content, right? So the advantage we have in online is every lecture is recorded. And we can actually go back and look at how it has happened and the data which we’re able to generate on top of that all it helps us in improvising.

So, first and foremost, how we designed this entire experience is break the class into parts, and ensure that every few minutes there is some interaction happening. This interaction is not just for the sake of interaction, but actually we are capturing data from these interactions and using that data to profile the students into clusters so that we are able to personalize the experience for the students both inside, and more importantly, after the class. So we follow what we typically call here as a two-teacher model, in which we have a main teacher, we call them as master teachers at Vedantu. The main teacher, who is the main lecturer who takes the class, and he supported by the secondary teachers, or you call him TS, right? who is also present inside the class. So think of like for every, say, approximately 50 students, there will be a secondary teacher. And let’s say if the entire classes of 200 students, there will be four secondary teachers and the one main teacher taking the class. So the main teacher’s role is to take an extremely engaging class. It’s full of energy, it’s very high quality content, interactive content, which is used, and there are a lot of interactions in terms of what we call as hotspots. I’ll talk about that later. And also quizzes and a lot of interactive content right? It’s very tough for me to, you know, help visualize, but you know, as you said, You already saw that, it’s, you need to really experience that. So, you know, for early grade students, they can actually do exercises like drag and drop, or fill in the blanks and bunch of stuff, right? Now, what we’re doing at the background is a capturing all this data, we know exactly how much time did the student take to attempt the question? Was that right? Was that wrong? You know, we do almost 76 parameters we capture. Now what we do is we have this data, so it helps us in three things. One, it helps us personalize content and interventions for the child. So now for example, let’s say there is a student who we see has done the first part of the lecture amazing. But the second part he had, he didn’t attempted or he attempted  fewer rounds. So the secondary teacher has this information. And the post class content for the child will be customized according to these data points. So he will probably have more questions on the second part, right? stuff like that. Other case example is let’s say he was not attentive during the second part, he was not looking at the screen itself. So the secondary teacher would probably call him up and would give him content specific to that and say that you know what, I could see that you will probably not you know that into or present, you can probably, you know, use this and bring up to the speed, and so on and so forth. Right. So that’s the second part. Because we have data of the engagement of the entire class on this content. It also helps us improve our content itself, and the teacher training. So for example. Let’s say at the third part of the lecture, we saw a lot of doubts coming up. Now we certainly know the content team knows that you know what this part has many doubts coming up. So probably there is some problem with the pedagogy itself. So we then improve on the pedagogy, or helps us on teacher training. Let’s say there are two teachers taking the same class and one teacher has a very high engagement score, the second teacher has relatively lower, so we can go out and train that second teacher on that. So in a sense, Hans, if you look at this, we certainly have made a product out of the, you know, our lesson itself. And we can actually do those AB experiments, improvised content, teacher training, and that helps us iterate so much faster than comparable offline, in our center. Right. And this is a huge advantage, which I believe online companies have.

Madhu: As someone said, you’re creating more of a painkiller, rather than a vitamin. By that in Indian cities. either you have to travel to three hours every day to go to these tuition center hubs. Or if you’re a middle class family from tier two or tier three cities, you move to your city and your family, middle class family has to sacrifice earnings or time rent to move there, right? So you fundamentally giving the best of the offline world to the online world, whereas the rest of the industry is more focused on adding supplemental education. This is a hardsell to users. It makes a lot of logical sense, but to have a leap of faith and move towards a fully online instituition to prepare for their most important moment in their life, an educational life. It’s hard so how did you get your early users and how are you going about it now?

Vamsi: It’s a very hard sell. I think the big inspiration was our first experience with Lakshya when people like us ourselves, none of us were from that city of, you know, northern India, Punjab. I was from Bangalore and my other friends are also from another top five, six cities. The fact that we could go there and we could teach there. And that actually helped get us this massive data in terms of selection rate was a big inspiration for us to see that you know that if people like us, we just like us can actually go into this tier three, tier four locations, there is a huge data.

Unfortunately, if you are in a big city, you might be lucky to get a good teacher. But if you are in a tier two, tier three city, even if you are willing to pay, the willingness to pay is very high for education in India, by the way, but even if you are willing to pay, you won’t get an access to a good teacher. And that was the fundamental problem we’re trying to solve through online at Vedantu. Now to your question, when we actually started Vedantu, we wanted to be the primary, we wanted to replicate and better the best of the offline experience. So all of our positioning was, if you are coming to Vedantu, you need not go to any offline center. So in a sense, we wanted to replace the offline centers. So we were not at all positioned in a supplementary thing. So yeah, it’s a very big sale because for parents they had studied in offline. So that’s the default which comes to their mind. And for us to be able to convince them to think about online as a serious medium was a tough task. Compared to the fact that in India, parents really think of online equaling games, and that obviously didn’t help us at all. So how we went about solving their problem was really vent and first started giving a lot of exposure to our online classes itself. Because no matter how much I say, it’s best for the parents and the students to actually come and attend. And that’s when we are they are able to appreciate and value the great teacher and you know, the whole interaction but which happens. So our strategy was twofold one was to give an exposure to as many parents and students as possible to our classes. So we designed what we call as modular, you know, courses and lectures. So these were think of them as 45 minutes to probably, you know, few hours worth of classes, free classes, which would help explain a very small topic to the child, but the topic is complicated in itself. And then we gave them a lot of, you know, free trials of these things. And that really helped us scale that because that actually gave them a glimpse of what’s possible online, the great teacher, and how also, you know, comfort with the medium, and then we used to convert them into paid subscribers. Now to a question of how do we recruit our first set of users in 2014 and 2015. It was, it was very tough. Nobody knew about this term called LIVE classes or LIVE tutoring. Vedantu was the first company to start LIVE tutoring in India. So literally we had to invent that category in that term as going forward. So what we did was just went about a few schools, and started doing few seminars or webinars, and they had some small exam or test coming up. So we launched a few courses around that. That’s one. Second, we also since we started with one on one, we attacked the tutor listing websites in India, which gave home tutoring. And home tutoring tis also a big market in India. So we attack that and we sort of like call us to literally call them and say that, you know what, you’re looking for a home tutor? Why don’t you just try Vedantu, if you’re not getting access to a home tutor. so that was literally those few initial hacks through which we, you know, got our first set of users.

Hans: As you have star teachers that emerged from different topics, like model mentioned, how do you keep them and incentivize them to stay on your platform?

Vamsi: Oh, that’s a good one Hans. What we learned from Lakshya, the offline experiences that it’s going to star teacher away is not the best way. Right? And we were cognizant of the challenges of that model. Because that is pretty common to offline as well as online. Right. So, so right from day one here at Vedantu, although we do have star teachers, right, and when I say star teachers, essentially like the teachers who are more, you know, popular and so on and so forth. But the thesis the philosophy has been to have reliance on system and process more than just the star teachers. Now, I’ll explain this in little bit detail. If tomorrow a parent or a student is coming to Vedantu just for a star teacher, then in my opinion, we have failed as a system. Because if it’s just if it’s just a teacher for which a parent or student is coming, then I think what we want to stands for, which is the full stack service solution, right? It’s not adding enough value to the parent. So that’s how I put pressure back on the team, that if the teacher, we change, or let’s say we don’t give a so called popular teacher, and because of that, if a parent and student is not joining or dropping off, then it means we need to further work on our, you know, service layer.

So in the long run, what I really want Vedantu to stand for is the full stack service solution in which teacher is just one part of it, rather than just talking about star teachers, and we do a lot of things around that. So for example, the first in the form is our as I said, our teacher training process itself. So we have identified various attributes and parameters, which actually make a high engaged class, and, you know, a popular teacher popular, and we have identified those and incorporated that into our teacher training program. So now we are confident that even if you are able to get a four to five year, and we have multiple parameters in which we check, you know, what we want, what contributes to a great charismatic teacher online, and we get them in, and we put them through a training process of two to three months. And, and we are almost I would say 90% certain that this teacher, if he takes a class will get a rating about, you know, the 95 percentile. So, this is the direction in which we are going at, so that the reliance on the system is more than just honor teacher. And that’s that’s the long term vision.

Madhu: And that explains why your score, your NPS Net Promoter Score is higher than that of a specific teacher in a class. One of the key questions EdTech companies are struggling is an education company or the tech company? Or can we do both. And eventually, they end up being one or the other. You’ve been able to take despite coming from a teaching style, you’ve been able to launch WAVE technology and a lot of other technical enhancements to the product. What do you look for your tech team? And how are you thinking about building that team?

Vamsi: Sure. You know, what, this is a singular, you know, question, you know, I get asked when probably I go to a few conferences and stuff like that in education technology, I think it’s a very important one to, you know, ponder on. Many technology companies commit this, you know, basic mistake that they think of technology first than education. And I think, you know, at least that’s my personal opinion, and I strongly believe around, you know, this factor that EdTech, you know, its first Ed and then Tech, right, so that sequence is there for, you know, a very specific reason. So how we think about this model, and it’s a very important one. So the framework I, we use at Vedantu, is you need to keep the students interested the center, it’s very easy for, you know, technocrats like us to get fascinated with the possibilities around technology. And we’re all and how walking we can apply it, and so on and so forth. And it’s easy to get carried away. What keeps us grounded is to have extreme strong metrics and parameters around students. And in that too, specifically, we look at two parameters, one is called student learning experience, and second is students learning outcome. So if you have learning experience and learning outcome at the center and the core, and then design, you know, educational pedagogy around it, and then think of how can technology help us help you in scaling it and making it better? That’s the framework views. So it’s very important to have education at the core, right and then think about technology and how can technology be able to help you, let’s say make the learning experience better, or personalize stuff for the child. So that is learning outcomes improve, how can it make you, you know, get access to great teachers, or help you scale faster, efficient, better, so on and so forth. That’s how technology pace the road. But you can’t flip this around, you can think about, oh, I have a great piece of technology here. Now let me apply this to education. That’s, that’s, that’s where, you know, you know, even we have committed a few mistakes, right? And we learn from that. So that’s on that, how do you think about education and technology, right and sequence to start. To your question on our, you know, our own roadmap and how we are built around it. So first and foremost, we were very, very fast in iterating what really works for the student and that’s the first few years of Vedantu from 2014 to almost 2016. We developed less, we actually use the third party. And we iterated and we learned what is the best for the student. And that’s when we started developing our own platforms, our own tools, with a singular objective of capturing more data. Because the more data we have on the child, we will be able to do better that much better for him. So, we have our own LIVE teaching learning platform, we call it WAVE that stands for whiteboard audio video environment. In fact, work has been going on on that for years now. And very proud to say that few of the stuff we have done is cutting edge. And we had applied for almost 20 odd claims, and we’ve been granted US patents on that as well. Right. So, so yeah, very proud of the team. We’re going to be working on some cutting edge stuff there. And that’s, so we have huge lot of you know, tech product team, which works on that, and there are other models as well.

Hans: It’s very impressive that you guys have both innovated very quickly, as well as look at other models around the world that’s interesting, and then figure out how they should be adapted for the business that you’re in as well. What are some other companies and business models that you have seen that’s interesting, that’s worth sharing with our audience.

Vamsi: So I’ve traveled to Southeast Asia quite a lot. And what I believe is in Southeast Asia because the educational culture, the context, very similar to India, I see a lot of companies especially in China, Beijing, one of the largest education companies in the world TAL is also investors in Vedantu, so it’s also great exposure.

For me personally and my team, whenever we visit their centers, we get to see you know, the few of the things which actually are working very well there. We get obviously inspired and we see that how can we actually adopt it to Indian use case and context. So, I think somewhere on the last year, one of the things which was very fascinating for us was that we used to think that batch size of hundred is very large. And, you know, that’s, that’s like, that’s, that’s insane. And that’s awesome. And we were very happy about pulling that out. And then we visited TAL. And there we saw some classes happening. And we asked the teacher that that okay, how many students are there in this class? And he said, 2500 and we were like “What”, then we again asked that, you know, one class we thought he just answered like, you know, in a week probably that’s what happening and we asked like no in just one class of students are there, he said, yeah. 2500. So that that was like a real eye opener. right for us. And, you know, it’s sometimes Like, you know, you are close to few things and when you actually see that some of that happening that really opens up to the possibility. And that Hans, I think is a big very big unlock because normally normally in a you know, people say that most of the companies the gross margins you know start with is the gross margins you you dive it is like a typical thing they say, but I think, you know, here with respect to probably, you know, us LIVE teaching, I think that completely got sidelined when we saw this, because the margins you can have when you are teaching hundred students versus thousand students, this is completely different. And that was a very big exposure, I would say not just for us for the entire team, which made us believe that thinking of hundred is just our constraint, we should actually push, and now very proud to say that Vedantu, just one year, we also have, in our free classes, at least, almost 2000 students attending one single LIVE class. We have done that. And in paid students, we probably have gone up to even 600 students as we speak. So yeah, I think they were definitely a few exposures which have a profound impact on you. This was one of that.

Madhu: And from an impact standpoint of view it’s phenomenal. Because when I was doing my coaching classes, the maximum that a teacher who’s really good at that topic can have is 100 people. And they’re enterprising and hardworking teachers do three or four classes and say the same thing, but that still caps at 400 people, having the best teacher for that best topic, they being able to teach 2000 people irrespective of your learning, irrespective of your willingness to pay or ability to pay or your location, being able to access that wealth of knowledge is truly impactful.

Vamsi: And to add to that point Madhu, for a country like India, it’s even more impactful because the pain propensity obviously here is much lesser as compared to China. Here, when we are able to scale the students in one class from, let’s say, hundred to let’s even say 500, the price reduction per student per, you know, per class or per hour, which we’re able to do, and because of that disrupting the price points of the existing offline players, right, and employing that price point to tier three, tier four locations really unlocks massive potential, because now, at half the price that the student sitting in a tier three, tier four location has access to probably the best, you know, teacher he can ever think of, you know, getting an interaction with right. So that’s, that’s a massive unlock, especially for a country like India. And that really gets us excited.

Hans: Yeah. Right. And you mentioned you mentioned earlier in the online model you have before for group lessons, you have one secondary teacher for every 50 students. What tweaks do you have to make, you know, to scale your online session to 2000 per class.

Vamsi: So there are a lot of parts to it. Right? So first and foremost is the, the teacher itself, right? So the teacher training needs to incorporate that change when you are teaching 50, so let’s say you’re teaching, let’s say, 500. Yeah, so when you’re teaching 50, you can still probably, you know, afford to do some interactions, right? And take names and 50 it’s not a big group, like in a normal offline class, also, you take 50, not a big deal. But when you’re taking 500 now, suddenly, you need to be much more organized and orchestrated. Right. And there we use, not just teacher training, but also technology. For example, in primary school students now which names so the teacher take, so the class fields by now, everyone is being addressed to and motivated. So the algorithm itself, you know, sort of like tries to identify that and being the teacher and so on and so forth. A lot of small to big things which we do to, you know, to train the teacher, that’s fun. The second part is the interface itself. Now, as Madhu was mentioning earlier, in an offline class, if you are in a classroom of more than hundred, you literally feel it. Because you are sitting there you see all these students you feel a little stuffy, the teacher is that much more distant, the biggest advantage of an online LIVE classes, you don’t feel that, you don’t know that, that you are sitting in a classroom of 50 or 500. And that’s where a lot of interface design comes into play. Wherein, because for you, it’s just the teacher in front of you. But you know, there’s a lot of other product interventions we do, so that the child feels that he’s part of a group, but he he doesn’t know that that group is a 500 or 50. Right. So there’s, you know, those that product interventions, which we do, which makes him part of a group thing, but you know, not that he’s part of a very big group. Yeah, the third and the most important and that this is very specific to India and that comes down to somewhere adaptations are you were mentioning from Southeast Asia to India we had to do is the doubts. So what we observed in, let’s say, at least in China is students are very disciplined. And they don’t interrupt a teacher a lot while the session is happening, right?

Hans: Right. Not so much elsewhere.

Vamsi: Oh, I mean, not at all in India, I mean, you should see, in our sessions, the students are left right and center asking anything and everything right. So, this required a lot of product interventions, right, and also an orchestration. So here, what we did was for a group of 50 to 100 students, we have the secondary teacher. So the doubts of the students first goes to the secondary teacher, and he or she solves it, and the best ones, they get bubbled up to the main teacher, and the main teacher then reserves time for doubts after like every 15/20 minutes, and then he would address the best doubts. So in that way, we actually distribute our, cut the class into these sections and these roles. And that’s how we are able to, you know, organize a fine students class, right? So these are some of the, there are a lot of things, right. But yeah, these are some of the top of the level things, which we use. And last, but most importantly interactions. So if you are constantly interacting with the main teacher, every few minutes, you are not much more engaged, and you feel not much more energized and not participating in the class. So the whole pedagogy itself had to change when we move from one to one to let’s say, a smaller group to a bigger group, right. So the content had to go through a lot of changes with respect to interactions, the quizzes, and so on and so forth. So yeah, this was one of the things we had to you know, change in order to adapt ourselves from a you know, one to one to a larger group.

Madhu: Our podcast is listened to by tens of thousands of people, across U.S., China, and across the world, how can some of them come and join the mission of Vedantu?

Vamsi: So education is not just a high impact. But according to us a big level of. Me personally, healing from a middle-class background, we have seen the power of education in our life and how it has helped us achieve what we are able to achieve. So I think especially in a country like India, which is very aspirational, education, as seen as the only way in which people from tier three, tier four locations can actually be able to change their lifestyle and achieve, you know, greatness. That’s mission of Vedantu, our fundamental singular belief is can we provide a 10x better version than the best of the offline experience at quarter of a cost? And that’s how we are able to reach to, you know, if not billions, the millions of the students, there are 260 million students in India, right. And that’s, that’s what we want to, you know, change. So if people out there who are really, you know, motivated in creating solutions, which impacts this many millions, I think, Vedantu is like the perfect platform where you can really be able to see that impact happening. With respect to the platform itself. I think we have just got started in India, all of us combined are probably less than 1% of the market penetration, right. It’s a huge market now offline. And we are just getting got started. As we speak, we are looking for enough people to help us build the next level teaching learning platform. We are actually looking to ramp up our AI talent as well. So yes, any, you know, people who are really mission driven and are motivated to contribute, would love to have you guys coming and seeing what we are doing and yeah, I would love to take that up.

Hans: As you know, very happy to become a new investor in Vedantu. And we love the fact that you’re building something that’s country-building and making impact in society. And pushing that idea further, given the talent of the Indian teachers, and it’s quite obvious being on a platform, they’re very engaging, and very good at their work. It’s not given their English fluency. It’s not hard to imagine that given the large talent pool of Indian teachers here, that the business could exponentially expand beyond India at some point in the future, that share a bit about that and how you think about that, and even when there’s something that would be appropriate for Vedantu to embark on.

Vamsi: Sure Hans. So you said it right. So the big advantage with the Indian teachers and Indian workforce in general is when is the language comfort around English and also the Indian teachers are really good. In fact, as we speak at Vedantu, we have around 7% to 8% of our paid students coming in from outside India as we speak, and this is without even us doing anything outside India remotely. And why that happens is primarily Indian expats, but they want their kids to study from an Indian teacher. So the quality as well as the price point both have a significant role and impact in that. So going forward, we always imagine Vedantu as a category agnostic and a geography agnostic platform. I mean, nothing prevents this from adding more categories and more geographies. And we see that happening in future and to Madhu’s point, I think there are two ways in which we know we are looking at it. One is obviously the talent line or recite or invest or even in China, where we are very, very inspired to, you know, to see some of the pioneering work happening in AI and other fields and we’d love to partner with other local groups or the people experts there to build out our next set of innovations in these fields. That’s one. And second is, you know, from the supply itself. We see the Indian teachers, and very soon, more so from a developing nations perspective, where there is a lot of need for getting access to high quality teachers at a low price, we see that Indian teachers can play that role. And in future, we look forward to taking a few of these new geographies and where there is a standardized curriculum and seeing that can Indian teachers post getting trained, can they deliver for these local requirements? Yeah, that would be very interesting to see how that spans out. Right? There are a few exams which are pretty much international in nature, like SAT. I know, that’s pretty obvious for us to do. But we are also interested in taking up some local curriculum and see how it goes so yeah, exciting to see how that pans out.

Hans: As a global fund with presence in San Francisco, New York, Beijing, Shanghai and Singapore, we’re love to help.

Vamsi: I’m in really impressed with the kind of exposure GGV has with the best practices and the best teams in all these geographies. I personally, along with my team, are really, you know, waiting to get started and learn from your exposures and experiences. And also probably, you know, interlaced with these amazing entrepreneurs in other parts of the country in your portfolio and share knowledge.

Hans: Thank you.

Vamsi: Thanks a lot Hans.

Madhu: Have a bunch of quickfire questions. Who or what is your best teacher and why?

Vamsi: I think in the fifth grade, there was a social studies teacher and I still remember her as a best teacher because that was one subject which I just literally hated. And I used to almost like barely pass and this teacher came out and I just, obviously the next year that I top that exam. This is a profound influence which a teacher has. And I’m a big believer of that. So yeah, that was the first remembrance I have of an inspiring teacher.

Madhu: If you could spend a day in someone else’s shoes, whose would they be and why?

Vamsi: One day I would probably would love to spend in education ministry’s shoes. Right. in India, because I think there’s a lot of change which can be done from a government side. Right. And I would, I would really be excited to, you know, be there and bring forth some of the changes, which I believe is very much critical for Indian education system.

Madhu: What’s something you read recently you recommend to our viewers?

Vamsi: I mean, the most recent book I’m reading is that everything store that amazing story, I think, that because it’s the latest, very recent one I’m reading, so it’s fresh in my mind. Right. And there are few other reading list recommendations I will give Madhu. But in that one thing, which actually really stuck to me, which I was reading through last week was, despite the, you know, the ups and the downs. the singular focus around, impact never went away. Right. And I think that’s, that’s very important. Any business will obviously go through its own ups and downs, and so on and so forth. But, but the singular belief that we can, I mean, at least in Amazon’s case, they can create everything store that was at the center, that was something which was really transformation. And the second thing is the customer obsession, tailoring everything around a customer and not, you know, freaking out about the competition or probably what others are doing, but actually just having the best interest of the customer in mind can really help you navigate very, very tough corners and situations and I think there is a very, very powerful message I could take out of that. So that’s one. Apart from that one of my top reading book recommendations is in the Hard Things About The Hard Things. I really love that. And zero to one. That’s, that’s pretty standard. But apart from that, the, you know, I’ve also recently started doing some, you know, introspection on this thing. So I think there is a few books on mindfulness also. Right. I, you know, I really think entrepreneurs should also, you know, read a few of that.

Madhu: Who’s, beside Bezos, I guess, who is the entrepreneur you admire the most and why?

Vamsi: Apart from Bezos. I think Elon Musk is someone I do admire. And Steve Jobs as well. Right. Elon Musk for just, you know, dreaming big. I think, you know, I think dream is what it’s starts everything starts with, I think I just admire him for the diversity of the dream, right. And Steve Jobs was simply, you know, reinventing, not just one, but you know, multiple categories. And it requires, you know, innate understanding of the customer at the center to be able to transform not just one industry, but for multiple industries as well. So those are the few from outside India, but inside India, I really admire, you know, the Infosys founders, and then Narayana Murthy for actually creating some of the best like the big entrepreneurs like I obviously admire the recent ones like Flipkart and all, but I think Infosys was one of the first companies which actually made us believe that big companies are possible out of India. And I think these examples are very important for local entrepreneurs, to have that belief that you know, we can create some outstanding companies from India and Syria. That That’s very important for the ecosystem.

Hans: Yeah, just to add that, I think, you know, our first few investments in India, we’ve been very impressed with the quality of the founders and the management team. And in addition as well as the investor syndicate, you know, thanks to you and your team for working at about something amazing the last four or five years.

Vamsi: Yeah, but we do look to learn, you know, the best practices and the stuff from you guys as well. And that that’s really the it’s really important that even though if we can gather what you have learned, as the best practices and experiences from other entrepreneurs happening in other parts of the world that will really help us.

Hans: Sure, we’ll be happy to share. And besides Madhu and myself in San Francisco Bay Area, you also have, as you know, you met Jixun and Jenny and Erica, in Beijing and Shanghai and we connect to you to Dimi in Southeast Asia and Robin in New York. And also amazing talent team in both in China in the US, that can help you as well. Again, you have a very good investor base too. Anand from Accel India, Siddharth from Omidyar, Scott from Tiger Global. You have TAL from China and also Westbridge in India. Kudos to you for building all that together. Not easy.

Madhu: Thank you, Vamsi for joining us. It’s been a pleasure talking to you.

Vamsi: Thank you Madhu. Thank you Hans.

Hans: Thank you. Thank you Vamsi.

S2 Episode 11: Rajesh Yabaji of BlackBuck: Building a Startup is a Marathon of Sprints

This episode is co-hosted by GGV’s investment team colleague Madhu Yalamarthi.

On this episode we have Rajesh Yabaji, co-founder and CEO at BlackBuck. BlackBuck is India’s largest truckinglogistics company, often referred to as “Uber for Trucks”.

In the episode, we covered creating a full-stack logistics marketplace in India, the conviction and rigor it takes to create a new category, building an agile company culture, and the choice of living in the same building with his co-founder.

Prior to starting BlackBuck, Rajesh worked in the Indian multinational conglomerate ITC Limited for four years as a manager in supply chain and category management. He holds a bachelor’s degree from the Indian Institute of Technology (IIT) in Kharagpur.



First of all, please tell us a bit more about BlackBuck or actually should I say BlackBuck 2.0. If I’m a fleet operator and FMCG company in India, what can I do through BlackBuck?


Yeah. So, trucking is one of the largest unorganized segments in India. And every stakeholder who deals in this industry has a large number of pain points. And what we are doing is making things simple for people and making things efficient. So, we as a country have very high cost of logistics. We spent about 14 % in logistics as part of the economy. And, you know, and at the same despite spending a lot clients which are basically customers like large multinationals who are want a truck, the fulfillment rates are lower, the costs usually are higher. On the fleet operator side, it’s not only that he has to deal with millions of intermediaries to get to a transaction, the utilization levels in terms of in 30 days in a month, typically he’s on the jobs for like 15 to 17 days, right? So what BlackBuck has essentially been able to create is a tech stack, which basically enables these guys do most of these most of this work in a simple way as possible, in the most efficient way as possible. So if you were a large company wanting to get trucks, when you come to BlackBuck, you would typically find a truck between 95 to 99% kind of an accuracy, kind of fulfillment rates. If you are a fleet operator in the country, if you turn to BlackBuck and work with BlackbBuck, within three months of partnering with the company, broadly you will be making 20 to 30% more utilization for your trucks. So this is what we do. Our goal is very clear. How do we support the country expand? How do we really get into the fundamental building blocks of logistics, of trucking, debottlenecking them, and ensure that you know, whenever these have to scale in the most seamless way from an availability construct from a cost construct, you know, we are able to do that. That’s, that’s broadly you know, what BlackBuck does.


So, rewinding the reel a few years ago, how did you first come up with the idea of BlackBuck? It’s heard that you got it while working at ITC. Can you share with us how did that happen?


You know, for a lot of entrepreneurs, it’s like serendipity. It’s basically a cool story behind how accidentally they got to the idea, right? But for me, it was a very, you know, a long journey right from the mid stage later, as far as my former years at college. I’ve been into operations then got into doing projects in logistics, joined ITC, did the entire you know supply chain logistics work for like four years, helped ITC reduce its costs by 20%. One of the areas where we did really well but in a very small fraction was basically trucking. We used to transport in like close to about 300 lanes, and we basically picked up lane by lane, and essentially what we were doing, like if you look at that very abstract level, we were enabling the fleet operators we’re working on those lanes, get more tips, have assurance of return loads, and generate economic surplus which we were able to keep some, we were able to share some with the fleet owners, right. So this was a strategy like, you know, lane by lane, and one of the first lanes we did which had which gives us a highest one of confidence was a movement we were doing from Mysore, Mysore in India which is close to Bangalore, we were shipping tobaccos from Mysore to Chennai port for exports, and tobacco is a very you know as a commodity which we typically deal with very sensitively which means we need to have full grade transportation right. So, we used to like bring empty container from Chennai port into Mysore and then ship it back right which means you know, any fundamentalistic you know, view towards it would say that half of it is waste, right. So, that was like the one of the first drifts and what we did is that, we stood at toll gates from like Chennai to Bangalore through all these tours across the country, mapped every truck, which is coming inside carrying cargo, we noted down the shipper name, who’s the shipper, who’s bringing cargo inside. We knew definitely that the guy is bringing in cargo inside sending this container empty back right, shortlisted 20 companies from that shortlisted of companies, based the shipping line we are using. So we were using MAERSK  70% using MSC 25% and balance smaller shipping lines. So the ones who are using MAERSK more and then in that the DNA fitment right. So we froze down onto Bennett Coleman India the time you know Times newspaper The Times group company, and we matched this. Earlier we were going to have large freight forwarder, who used to go to a small broker, small broker used to go to supply broker, transport brokers or supply broker, supply broker used to go to a truck owner, right. We directly went to the truck owners who had trailers brought in about 45 truck owners who had trailers, right, give them synchronization of this load, help them plan these goods, right. And like, you know, a very rule of thumb you would think that okay, when you cut this waste by half your transportation costs probably would have been like 30-40% lower right, but not, our transportation costs went down by like 60% because we not only reduce the dead miles, we remove the intermediaries, we plan the synchronization, made the trucks to more number of trips per month, right. So the first project, so of course, this was I think the maximum saving we ever got in a project right and minimum was, you know, in the lower bounds like between 8% and 12% points, right. So this was a range 12 to 60 is where we got the savings right. Out of 400 lanes, we were able to only do it in like 25 to 30 lanes because of densities, because of locational constraints. Right? And it was very clear that in even in these lanes, the coverage was like 50%,60% because all of this matching has to happen right, with Bennett Coleman also the matching was only 70%. But we were able to do it successfully right. So, the entire thought process was that when you extract this out, you were disintermediating, you are generating more kilometers, you are improving fleet operators earnings and you are keeping surplus, right. So we wanted to do this at India level, right. That’s what led to, you know, led to the creation of BlackBuck and I was, you know, very fortunate to my work experience at ITC that it led me into this thought process number one. Number two is that ITC work experience also gave me my co-founders. So Madhu’s classmate was a junior of mine as well from college. And he was my intern, right so 2011 right. He was in third year he had to do a summer internship. So he worked in my team and we offered him full-time employment in 2014. And so he joined my team in 2014 when I wanted to start this in like 2015, I pulled in Chanakya right these are you know, one of the co-founders of the company, the other co-founder was a consultant to me. So I was at ITC from 2010 to 2015. he consulted me for like the first three years we did like a lot of projects together. He was the managing partner of a consulting firm called Miebach Consulting, it’s a German consulting firm, and yeah, so we three hit off together well and April 2015 BlackBuck started.




I was the third wheel for Chanakya and his wife for four years.


So as we’re talking was complicated problem with the matching shippers and  fleet operators, how did you decide how to prioritize what you need to do and to get started? And did you spend time looking at any models elsewhere for inspiration help to figure it out?


So basically, today, I mean, when we started off in April 2015, there was no company, which was disrupting intercity tech, intercity transportation. We were the first ones. Now if you see the companies which are, you know, in this space of the similar business model like ours are like Convoy in the US, Uber freight and us. There is one large company in China called Man Bang, they are more subscription based models. They’re more classified, they help in matching, but they do not do the resistivity


GGV portfolio as well.


Yeah, exactly. so at that point in time, I think there was like, essentially, the inspiration that, you know, at ITC at a smaller scale we were able to do, and that was actually the first problem because the first 10 VCs we met in India only asked us that, you know, which is the US company, which is a Chinese company has been able to do this.  So we really did not have any example. And, you know, mostly the expression was that such a big market and globally facing it’s a 4 trillion market, 100 billion in India. How come nobody has solved this and you want to do it in India, right. So that was the question. But that’s where, you know, I think my first investor Anand Daniel, he had a thesis from last two years, like he was searching for a company from 2013 to 2015 to do something in trucking? Right? And that’s how he, I mean, I met him on April 4 or April 5, and he did the deal on April 7. Yeah. Right. So the rest everybody I met before, but none of them really understood what I’m doing. They thought that, you know, this is a clumsy, you know, space. And probably it’s all built out there DHS of the world who have built it out, right, there’s no need for you to sort of go in, right. That’s what people felt right. So there was no inspiration from a business model or an entrepreneur, you know, you know, to whom we could look up to at that point in time. But I was a shipper, right. I was basically buying freight. I was like shipping goods. So, yeah, the mindset of yeah, this is what I thought, by the way that I understood the pain points, right. the mindset of The businesses that I’m not sure I know everything what exists in this market I’ve also been able to prove sustainability across like 25 data points are able to reduce costs I can I can build this right. But when we came and started building you know, this business and the platform right first one and a half years was actually about you know, being more centric to demand. Demand is the one who has so many problems they’re not getting trucks they’re getting taxed at higher prices, how can really optimize right, this was one very obvious, until we really realized that Indian ecosystem the supply is fully broken right? Supply comes from like tire three towns in the country. Yeah, these guys do not have access to technology. These you know, India do not have companies like fleet corvex, which have like completely automated the payment system on fuel. We don’t have electronic tolling in the country, we do not have like any of the services which are around trucking and not baked out right. So fundamentally, you know, the problem statement which we define any started was that there is a problem for shippers, they’re not finding trucks, the costs are higher, one and a half year, we realized that if it did not invest, solve the supply side problems, right? Bring them online, help them make more money, right? This is not going to really get solved. Right. So the first one and half year for us was really targeting and tracking demand, really understanding and structuring the value proposition for them. The last two years right, last one of us had been all about really thinking through how to correct supply. Where do these small suppliers live? Right. They’re living in this tire three towns. We don’t even know these names. Right. So today as BlackbBuck like we are super proud, you know, of course, so proud of achievements that shippers in the country are able to ship seamlessly, enjoy low cost by working with us, right, like she would have reduced the cost by like 10 to 15% over the last four years. Yeah. Because of you know, the efficiency that you have delivered. And the fulfillment rates, you know, are in between 90 and 95%. Right. And 95 – 100%. And when we when you look at the look at the trucker side right which that we have super proud of, we look at the trucker side, we today have our penetration close to what 8,000 villages right, we man these villages, right the other villages, where one guy has four village coverage five village coverage, right go in educate these guys on what the trucking app is all about, educate these guys on, you know, what is these entire services all about? How does it make their life simpler? How will they make more money through this? Right? That’s been the story the last two years right where the economy on the shipper side is actually quite visible. Yeah. The economy the truckers are uprooting and bringing it online and trying to fuse this out. Right. And and a lot of tailwinds in the Indian economy are helping us do this. I don’t know if you are aware in India went into the electronic tolling in 2017 just right, we today own 15% market share of electronic tolling in the country and our market share is probably scaling five times the market share of the country, which means India’s market share is only 12 to 15% points of that 15% point we do we just started one year later Yeah. And for us that category is like growing at a user growth of like about 35 to 40% month on month and we are trying to from that angle right. So this is like one of the services service lines which we have, which not only like has a very strong economics which is offered itself but also is basically enabling us to go from 20% market share of supply in India to 70% market share of supply in India, which means every truck owner would get digital would come on the application, it would get trained how to use an app. Right. So that’s like that’s the India story. From December 1st, all Indian toll gates go mandatory on told on electronic tolling, right. So it’s a land grab opportunity, right? It’s basically once in a lifetime opportunity, which we are essentially trying to address. So yeah, so the entire like, you know, inspiration, like for us was very internal, right, which we, which we want to really build out, right. We really wanted to solve this problem for like, you know, the thought process you started was that the least I would be when if I start BlackBuck would be the supply chain manager for probably 200 companies in India. Right. That was the thought process right. And from there to the demand problem that you started solving? Sure. Then we moved to supply right supply is like probably probably we are able to get our hands on too. In two years. you’ve invested a lot of time and effort. And now again, it is slipping into being more demand tracking from right But like it sort of keeps changing and keeps evolving for and keeps us going.


So you’ve written the sort of blueprint charted a new path for category creation. And in India, we’re seeing marketplaces moving from information matching to manage marketplaces to now either supply creation or demand enhancing through other ones. How do you see as these models become bigger, how do you see them scaling in India to marketplaces 4.0 or them going global?


So, so basically, I think like India, I have I have not come across like any entrepreneur building marketplace businesses, not have initially having to think that supplies solid, and like falling after like a year or two coming into the business that oh my God, I don’t have supply, right. I think most of us have shared these stories, right. So I think Indian businesses face with Indian demography context, which are about trust, which are about full accountability, which are about you know, what the unit economics which is involved in that particular transaction? And what is it? What is the experience that you’re giving me? Right? So I think, in that in that kind of framework, freight sort of sits in where a fleet owner, like doesn’t trust anyone, he’s like, he just trust some people of his villages, somebody who knows from a long period of time, might be okay to lose money, but he would only would want to work with them, right. So, that kind of population would deal with you know, and we are in a b2b context, where clients again need huge amount of trust, right. Companies are evolving between these models, but I think for freight in India, because we are aware of lot of companies in India, which does, which did classified, but those things did not scale in India, because of trust, you know, levels. And, and we, from day one started off as a full stack marketplace, you know, taking the accountability of the transaction. taking accountability of the experience of the transaction, right, making, you know, making, you know, material displacement for both the shipper both the trucker adding value, you know, step by step and scaling that marketplace, right. So that’s been our story, and as you’ve also seen in the recent past, like multiple marketplaces from India have gone global. Right. And, you know, a part of it is also is also because of some of these markets where companies in India went in first, right? Second is it the problems were such that if you solve that in India, you could solve it anywhere because you become so, you know, your DNA becomes stronger than anywhere else. It’s more immune. Right. That’s like second part. And the third part is that I think we also need to move out with certain cliched concepts like let’s say, if somebody asked me typically that, hey, Rajesh, you you guys BlackBuck has done so well in India, what would be the next market you would go to right? Mostly 95% of the people expect that my answer would be Southeast Asia, right. Because, because India seen these waves where, you know, either the demography and the government regulations have acted more as a anchor or a cover towards launching new markets, what that is leading to launching new markets. Second aspect would be, you know, I dealt with these consumers here. Now the consumers psyche of Southeast Asia is probably similar. Now my used case sort of appears right, but for our business right trucking. What is important is landmass, how big is the landmass? What is important for us is that how where are the demand centers? Where are the supply centers? What is important for us is that supply –  how fragmented is it? demand – how fragmented it is? Right? What is important is that if a trucker reaches a particular point, right from this point, what is the liability that he’s going to get his load back to his mother, you know, home point is really we really we actually struggling? Is there a symmetry in that market? What is important for us is that in really putting tech to this problem, what economic leavers would you move that he was generating economic surplus right, these are important. Consumer psyche of a b2b in a b2b business, a fleet operator wants to make more money or customer wants to make more money right. So for us sizing, we do it in this way, and hence we get very different results, right. So I think we have aspirations because I think we today as you as I was telling you guys the story, I think there are only three companies in the full stack matching space globally. And I think you know, our scale in between these is quite comparable and most of the times we have taken data points quite leading compared to the other two companies. So, I think we do have aspirations to look at, you know, globally what we could do.


Questions for Hans, you’ve been bullish on Indian companies going global, not just enterprise SaaS, but also on consumer and b2b2C. But can you explain more to our audience and where that thesis comes from?


Sure. It doesn’t take a rocket science to see that one. India has more stem graduates than anyone else in the world with the exception of China. But the English language capabilities are much stronger. So the chance of that talent to be able to produce on a work, worldwide basis, much higher big, more impact. Secondly, you look at the number of executives who have done well in the US, whereas Google or Microsoft or Citibank, or even in academia like Harvard University, you see the impact that that’s being made. And, again, doesn’t take a rocket scientist to see that given time, the talent from India can do more in the mobile internet era, as well. And then a lot of founders in India right now is first time founder, someone’s second time founder, again, doesn’t take a rocket scientist to see that over a next five years, six years, seven years, more and more Indian founders will be more experienced and be able to leverage the talents that’s available overseas. So, since China went through so much, in the last 20 years with urbanization, India can pick up and learn from that as quickly as possible. India is also go through got a lot of issues, so you can solve problems for India. You can solve problems for a lot of other places. less less competitive and less complicated. That’s the experience we thought with China. But China is not as many teams like Bytedance and Xiaomi can go global. But India is different. So once you learn those lessons, you can go global. So you’re exactly epitome of our hypothesis from a year ago.


I’ve already seen this being based out of both Bangalore and Bay Area, I can see the trends of my colleagues and friends in Bay Area, not just Indians, but even American colleagues like American classmates going and working for Indian companies trying to expand and vice versa. This question is for Rajesh, since you founded BlackBuck, there have been several waves in India. And so from that stage of, you know, entering a category such as trucking, there was not a quote unquote, hot sector then to creating that whole category now and riding on two different cycles of an ecosystem. What are some of the noticeable changes you’ve seen?


There are like two times during the entire funding, my company had these two large macro events: demonetization and GST, where the entire business was shaken, but for the better, yeah. So, demonetization was exactly when we actually as a company, realized even more deeply the need for a services infrastructure around trucking to enable these guys, right. So, I think, after the demonetization, I think people, this industry which works on 90% plus cash. I think after that people really appreciate it because trucks were stranded for like days on Indian Roads for cash, cash was not there, right. And most of the notes which are used in the trucking segment are 500 rupee notes and 1000 rupee notes and, like, everything was out, right. So I think, you know, after, you know, after demonetization, I would say the cash used in this segment would have probably come down to 90% of the level to probably 80%. But it’s of course back right. And that’s point number one, point number two is that if you if you look at the entire input on infrastructure creation by the government in the past, like you know, you know five to eight years has been very high, the road speeds have definitely improved, which which dramatically will improve the macro index index of, you know, the the macro freight index, right. So the so the road speeds have improved with two reasons. One is better quality roads itself, I think we’ve built large number of kilometers of roads in the last five to eight years. Now, point number one, point number two is that after GST, most of the border check posts right. So in India to before GST, it was more difficult to cross the border between Karnataka and Maharashtra, than Germany and Poland. Right. I mean, like Germany, Poland could do easy business, but two states couldn’t do easy business. Right. So, I mean, we as entrepreneurs used to always, like, you know, feel super, like bad about this idea. So I think a lot of that has got rationalized. Right. But I think there’s still a lot of room for improvement because it’s not fully seamless. It’s not like you need not stop there is still manual checking, which happens, which is not needed. Right, I think. But that still happens. So there’s still scope for improvement, right. The next thing which we have seen is that, you know, because the trucking is, like, major part of the economy, government has been looking at this particular areas continuously, right. So electronic tolling is going mandatory on first of December right? now, that like not only creates a wave of digitization from a fleet owners, it just it just lifts up the efficiency because at every tollgate if you calculate right when I was telling you that our truck works for only 15 to 17 days in a month, I actually did not knock off the truck waiting time at tollgate. And the check There is still additional time it is still in this 15 to 17 days right. So, everything starts becoming more and more efficient right. So, I think, you know, you know consumption took a shock in both these areas, but after that soon recovered very fast right. And for logistics, I think things have got much more streamlined things have got much more useful, like we have a very standard available number, earlier we used to have pretty we have one one compliance for lievable number earlier we used to have for all the 26 states independent compliances. So, we had created a technology product if a truck is starting at Bangalore and going to Delhi and it is going to touch four states automatically. We used to lock you know, ways to get the credit crawlers which used to log into these government websites because the government says what our API’s we still log into these government websites fill all these details from our servers automatically, create this compliance documents right. So a driver used to like when he is going to start used to have these all compliant documents for four states, right, that is all used to manage right and, and that product matured and GST happened That product went out of order. We don’t need that product anymore. Right. So I think trucking as a segment has been, you know, a very a very decent beneficiary to these large economic changes. And I think a lot more could be done right I’ll throw some points right. let’s say a truck from Poland can go to Germany and can do three shipments within Germany and then it has to come out because it’s a production law which the government’s have created for themselves right. In India, a truck from Hyderabad which is registered registration of Andhra Pradesh, right Alyssa Telangana will come to Karnataka get unloaded in Bangalore, it cannot if it is finding the next load in Mysore. It cannot take a load from Bangalore to Mysore, it has to go empty. This is state protection laws, it doesn’t make sense. We still have that law. Right. So, given we are we are long distance transportation, it still doesn’t like affect us. So you know, highly but it still affects the country. Right? In deadmines. It still affects our country in increased transportation costs, right. So I think we to leapfrog and all of this right, second part, right, all of us know that large capacity vehicles is more efficient than small capacity vehicles. India had small capacity vehicles only because of infrastructure, but infrastructure has improved. Now it is paving the way to large capacity vehicles. Now, I’ll give you one economic incentive. Right. So when you pay for permit, and you look at a permit cost per damage level, right, it’s costly for a large capacity vehicle, which means is dissuading you to buy a large capacity, which has to be the reverse, right? Because you need more cost efficient transport modes to be enabled in the country. Right. So I think some of these policies, people like us probably have much more like narrow I do, working with the government, like, you know, you know, giving them all this information every three months, or like we have, we have about 350,000 trucks on our platform we have we actually actively track like almost a large portion of them. So we know all the hot pockets in the country. We know where trucks are spending the largest amount of time, we correlate that with, you know, breakages of bridges or breakages of compliance checkpoint. Right, all of these, you provide all this information to them, you know, the ministry, but they work on it on a priority basis as well. I think there is a very close coordination between, you know, between the the authorities and us in terms of what can be priority, what we could work together, how will we do all of this? I think we are offer a very, you know, very, very strong underlying, I would say, measures, I think we are going to reap benefits in the next, you know, probably coming years, two to five years is where I think we can probably see the sector becoming much, much more seamless and impactful. Yeah.


Switching back on the startups ecosystem, the much earlier stages of your journey. What is some of the advice that you would give to entrepreneurs who are building category creating products, both in fundraising, mentors and talent?


I think I would say, you know, personally, I think I was inspired by I think it’s a good story for me because I was inspired by, you know, Flipkart funding, when they founded when they created it. I saw all of this happening in front of me, right? As a middle class boy, I think I would never have a kind of courage to throw in my decently paying job and trade off with a risky career. And, you know, I saw, you know, I started reading about Sachin and Binny every night and that was my inspiration. And it’s so it’s so, you know, I’m so lucky that, you know, Binny has been on our board for the last like, you know, two and a half years. He’s supporting the company continuously, right. And yeah, so, you know, the people I got inspired from, got them to partner in my journey, and are there with me, you know, as I keep building it larger, right. I think that is like, I think good part about for entrepreneurs starting today because they have examples. It’s not a completely unknown territory. It is, you know, probably something for everybody. It’s not only for people with a very high aptitude right at the highest capability, right. I think that’s how the ecosystem is transforming, right? My advice for, you know, category creators is to, is to remember that when you are creating categories, people don’t understand you. Right? You come out you would say a story. People will 90% of times they won’t get you. Right. So I think that was happening to me right for you and when it started, even today, when I look at different spaces when I am like you know, looking at different values, different areas where we are to create value, I think more often than not, you are not understood, right. I think my advice would be to if you have found out, narrowed down onto an opportunity, which you think is large with you thing is going to add phenomenal value and impact to the Indian economy to the country to users, right. Stick to it, right, believe, not just giving your opinions right. But at the same time. I mean, you have to you have to know how well you’re making decisions. You have mentors around you whom you’re bouncing off things with.


You should make the right decisions.


Yeah, right. I think, you know, being being foolish, like painfully headstrong and foolish is your friend. That’s like unhygenic. Yeah, but really believing in yourself that doing your math properly knowing your numbers properly, doing your unit economics properly, right from day one, that you’re creating something, right? Yeah. Is it value to anyone? Will anyone pay for it? or Why do you exist? Are you going to like unlock something which will, you know, make you a business model or not? I think that’s something which is really important. Yeah. So I would say that category creators have to believe in themselves have to believe in their inner voice right? And go according to that.


and fundamentally, if you’re helping with country building, in a long run you you will win in our people will change your mind to know that you’re doing the right thing. Yes. Yeah, that’s that’s definitely key lesson we learned from being in China.


Hans, what advice do you have for category creators as it as far as it comes for funding and for growth?


I agree with Rajesh’s point that sometimes investors tend to want to mitigate risk and look at successful models elsewhere, and encourage their founders to adopt or copy that model. But each country is different despite their similarities. So you have to figure out a way to do the analysis and make sure that you are adding value to country building. If you are doing that. I think that the opportunity will be so massive that the smart investors will come around sooner or later. You were featuring HBS key study? Yeah. How did that come about? And what were what were your own lessons after you’re going to experience?


Yeah. So I was basically trying to look at how to build a board. I was making, I was meeting people from the industry. I was meeting established entrepreneurs. I was meeting academia. So that’s where I got introduced to Professor Shikhar Ghosh. And it was basically a session to know each other. And, and I mean, the org structure in my organization changes every six months. Right? I mean, people ask me that, like, you know, and and the there is a case being written on dynamic city in an organization. Yeah. Right. So the meeting with Shikhar went reall well. One our meeting we just like kept on over lunch is expanded to like two to three hours meeting. Yeah. And he was very curious on, you know, how did we like, outpace and out scale, like, you know, within like, you know, six, nine months of funding and also the initial part of scaling, right. And also, when he looked at how the competition of funding team was, how did these guys split equity? How did these guys really build the initial leadership team? Right? He was very curious because all these decisions were very unorthodox. It was very unconventional. He did not have any, any in our meetings. He was always confused. Why did I make that decision? But it was like, None of this makes sense.


Right. To him.


Yeah, it did. Right. So he said he wants to deep dive right. So he flew in, he spent, you know, couple of days with us. He, you know, spoke to a lot of my leadership team members. Yeah. Right. And they were a company, when you build a company, you go through a series of journeys, right. So there was there were ultimately definitely very high moments, you know, in the first year, but also low moments, because, like, you know, we were able to break even with a Series B, yeah, after Series B. Investors, you know, we got, and we got a lot of investors and everybody was like saying that, hey, at this point in time, there’re like, two large companies, one of them gross margin is negative 70, one of those gross margin negative 40. You guys have gross margin 15. And you guys have raised enough money. Now you need to scale right? So I was like, Okay. And then I started scaling, right? And I didn’t cross minus 10. And I thought minus 10 is a very respectable number. Right? And, but 2015 was an environment like this very beyond, you know, you know, a good entrepreneur, if you throw the stone a million dollar come back. Right was like that. 2015, 2016 was a freeze. Right? Right. Everybody started asking the business, you know, the bottom line is if it’s a business, it should make money. where is money in your business. This is the first question. My money was right, but now I was told to scale.  And it ended hit me in like march april 2016. That you know, business is business, right? The entire of the company, which was in September October, like very clear of unit economics, doing a transaction if it is 15% doing a transaction, which is double digit margin, keeping costs low, like we still have, like, you know, in the entire company, only product guys and engineering guys have Mac books that do from 2017. The rest of us have Dell laptop. That’s the kind of business in logistics, you can’t be. I can’t have a culture like Google right, I mean, we have to fight for pennies, right. So so so that was a culture which we built. Then from this culture, we evolved into the culture of expansive growth, right. And everybody thought, you know what happened, right? Why is why is this guy talking like this, but everybody acclimatized by like, November. They’re all he means scale right there, nothing else. So the entire DNA changed. And then I had to, again, take my DNA and fix it back. Right. Right. And it was like so all right, I told him I went through all of this and for Shikhar this was very, like, unusual, like something as a, of course. I mean, like, it’s a case, you know, but by the concept of a case study, you’re like a specimen was so, so that was that’s what that’s what happened to us. And we like came back from a very, you know, very bad situation where, you know, we didn’t have payrolling right. And from that situation, we bounced back Yeah, right. So, the case talks about the and this puts the entire entrepreneurial bonds in stress, this puts co-founders ship, you know, how co-founders gave each other you know, under through various like, you know, areas, what are the reactions, how do how do I evolve, right? So, the entire case study will actually on studying our behavior. As a company, how did we evolve? How did the DNA evolve? What did we do? How did we take decisions? And it comes to that point that, hey, this is situation? What should Rajesh be doing? Right? And so, you know, I had really nice time because I think Shikhar has a detailed study of what worked and what didn’t work. And he has this study where on a cube of three, right, so let’s say a software company has a multiplication, multiplication of three, right, which the company company has three people, nine people, 27 people, 81 people, you know, in 243 people. The entire you know, what methodology you need to manage an organization changes. And his thoughts going through that, going through these six, six to seven shifts within nine months. Yeah. So he didn’t know how we manage. Within nine months, you went through all of this, it was really close to find it people by mid 2016. And like you did all of this, how did you guys do it? So it was that case. So I was able to learn from him like every concept, what really has worked and what I did, right and and I even taught the class last year. I’m teaching the class this year. So it was it is good and and the kind of perspectives the students came up with which was more very rational perspectives, all the decisions with which we took where they were completely against it. Like this is not the way you should have done right but the only outcome was that there’s nothing right there’s nothing wrong but it’s what is needed to build a mission to build a story to build what something wants to. So yeah,


very good.


So on the rational decisions, you once said it was engineering over joining the army is the most crucial decision you’ve ever made in your life. Can you tell us more about that?


It was not rational. It was basically I wanted to join forces, my father did not want. So it was basically you know, a simple Indian family. Having a discussion with a 15 year old is having a discussion with you know, a father Yeah, and the father has essentially given his entire life to educate the kids. We have four kids in the family. Yeah. And it was essentially and my father served in the army. So I wanted to be a fighter pilot. So my entire thing about you know, the adrenaline and flying and you know, all of this is more my personal want but what surrounded this want was that because my father in army was a noncommissioned officer, as a soldier, and they used to be like his bosses, who were very young were like, 17 year old kid was gonna be you. Yeah, exactly. And these kids in front of my father, my father used to they just stand up straight and then solute right? What these guys man, right, I mean, my father is 40 and these kids are 17 this coming on my father just standing up and saluting, and I’ve lived through my life seeing that right and, you know, this huge amount of respect in those positions. Right, right. So do you and when father always, you know, obviously, you know, really respected those, you know, officers, etc. And nowadays I always knew that my father respected them. Right. But I think my father knew more about me as well. Right that I think he can, he did not do that he definitely could get into that, because I cleared everything. I had to just go for the interviews to get through. But yeah, I think it was more a family choice. So it was not rational. It was a family thought process. And as I told you, right, I think, you know, there’s nothing right. There’s nothing wrong, it’s a decision, and you need to get into that and make it work. Right. So yeah, and then engineering, I didn’t know anything. So it was more like okay, so you want to you should be an engineer. So which is the topmost school, okay, it is. Okay. So who gives the preparation for that? Okay, these are the preparations so okay. You just go study. It was like that. Yeah. Yeah.


I was told you’re also an athlete. How has sports affect your views of entrepreneurship?


I think, so, in college. I was a sprinter. And after college I was marathoner.


That’s are much more relevant. being a marathon runner is more relevant for startups.


but But in today’s day the startups it’s actually a marathon of sprints. Right so basically the sprints, but keep hydrating sprinting, keep hydrating, right? So it’s basically like a marathon, you just carry a bottle and keep hydrating. Right? I mean, you just virtually don’t even stop, you keep drinking and you keep moving forward. Right. So I think sport has taught me a lot. I think some people you know, a little also say that Rajesh you do not win every time. Right? So I think the winning attitude keeps in very strongly. Yeah, right. I think you know, I’ve been battling basketball and during my sprints and pole vault, like very serious, very serious injuries. But I think you know, in the match in the games, you know, that you know, you can contribute in a particular level to your team so you will do it right. So it taught me very strong winning attitude. Yeah, very strong about that if you’re not practiced, you will do shit in the games. Right. So, so it has taught me that without preparation, you’re nothing. Yeah. Right. It has given me the the tenacity to go at a journey at a mission. Because, you know, as various teams, we were nothing, but when we, you know, exited when we were in college, we were a good team, right? Which means that, you know, how much you want it, you know, essentially get there. Right. And, yeah, and it, I think, perseverance, right, I think I mean, we I used to, like I typically used to practice every day for like, six to eight hours, I’d starting off to cough like 5pm Eastern, like 11,12pm on the court, to keep doing all the stuff and after that, we still do dramatics after that we used to do like different societies, you know, different cultural activities. That was how the entire, you know, college experience was it was more for me. 80% not work and 20% not studying. Yeah. 20% was more studying and courses that was how my college experience was.


Now the round of quickfire questions, what’s your source of inspiration recently and why?


Building India. I can see that I can be the material contributor towards the logistics economy of India.


What’s the most frequent advice you give to other aspiring entrepreneurs?


I told you before, repeating again, believe in yourself, believe in your inner voice and be hungry. be hungry, keep going at it, you will succeed.


What’s a habit of you that has changed your life?


Coming out of duality, for a very personal thing, I should not drink till 2016 I started drinking because I was also in in I was at the alternative it used to help me be out of it as well. Right and I should not like the taste right. You know, believe in duality of life. I think so far, probably. starting up has made me realize that duality isn’t right. Yeah, there’s nothing in life which is good or bad. I think what is apt, what is truth,is very, like non obvious and like very simple, generally.


What do you do for fun besides marathons?


you took over marathons? Really? Playing with my son, he’s two and a half now. So he brings a smile on my face and irrespective what I’m going through on that day, so he walks to me, he walks with me to my office at least five times a month. I spend at least half my Sundays with him. And yeah, he’s, I think he’s, he’s super exciting. And like, with him, I think I’m able to forgo duality very easily because I think he doesn’t proceed any he doesn’t, he does not have any framework to make decisions. Right. So I can actually see him being very neutral and direct right on something. I think that is good in life. Yes. Because I think visions Yeah. So I love spending time with him. My wife is very jealous of that.


For our listeners, if you’re wondering walking to the office, the office is right next to their house, the co founders lived together under in the same building. I’m curious and what does 996 mean to you?


I think 996 to me is actually, I didn’t I didn’t really get the philosophy of 996 till I visited China two years back. Right. I met a lot of entrepreneurs. Yeah. read a lot of books. Yeah. Right. And, I mean, very candid, I knew that Chinese people are doing well. I didn’t know that they were like, multiple notches apart above right. So 996 to me is basically you know, a definition of the framework of how to go at tough problems. And, and countries like ours, like in India, still we have 30% people, you know, in poverty which we need to lift, I think 996 is still understating lifestyle maybe I think we need to go much harder. Right? So yeah, so I have two hours more than average Bangalorians, my office and home and, and like me and Chanakya can like continue our chats over dinner after dinner. We just stay in different floors. Sure. Right above.


Sure, make sense, maximize efficiency.


Yeah. So So even if you don’t assuming 996 for us, it’s easy to do 12126.  We don’t spend those extra two hours we will spend double six. Yeah, so yeah, so I think I think Chinese culture is also now changing from nine nine to more, I think, you know, eight eleven six?


We will see. The millennials. They grew up in a different China, so may not have the same hunger or drive that India is going through right now. So we will see.


Yeah, we are.

Hans & Madhu:

Yeah. Okay. Thank you so much. Thank you.


Yeah, thank thanks so much for having me.

S2 Episode 10: Chen Ying of Shihuituan: Why Community Group Buy Works in China

In this episode, we have Chen Ying, the founder and CEO of Shihuituan, the leading community commerce company in China. The literal meaning of Shihuituan means plenty of things. It’s also a pun for value for money.

With its network of 80,000 community influencers, the company currently serves 20 million households in 60 cities in China. For November of 2019, it recorded a monthly GMV of 500 million RMB
roughly 71 million dollars). Shihuituan is a GGV portfolio.

Before launching Shihuituan, Ying founded an NGO aimed at helping farmers selling their goods online and another eCommerce company called “The Good Stuff”. Ying worked in Bain Consulting and Bain Capital for 5 years before he got his MBA from Harvard Business School. Being an intellectual cowboy, Ying has always been fascinated by the next frontier, which in his mind is the space, Africa and rural China.

We discussed the ins and outs of how the community group buy model works, including how he found the product-market fit, the role social apps play in the business model, the multi-layer delivery system, and the replicability of this model in other markets.



Ying, it’s amazing to see you here. I remember the first time we met at a hotel in Beijing. You were selling goods to farmers. I said that’s the right direction. But it’s a very tough market. So you’re trying to figure out how to figure out a way to monetize it even after you scale it. And then it seems like you have done a couple pivots since and found a very interesting product-market fit, right?


Yes,  it’s been an interesting few years, trying to think about the same topic, but work on it with different approaches. I think the primary changes of the last few years in China is that we see the infrastructure for rural agriculture and mobile payment getting ready.

So for things that I cannot do in a few years back is right in time now. We got mobile payment ready, people all in the WeChat groups, talking and doing business there. And now we have logistics, delivery service, everything for lower-tier cities and rural areas. So, everything combined gets us to a good position to serve more people in lower-tier cities well.


For people who have never lived in China, can you explain what does Shihuituan do? Why does community group buy make sense as a business model? How is it different from an e-grocers or the conventional retail stores?


Sure. Firstly, Shihuituan is also an e-grocer. The primary product we’re selling is fresh produced fruits, vegetables, and other packaged food. The primary difference of our model is that we have community leaders. They are social connectors and the point of sales for us. So, we outsource a lot of things to these people to help us acquire new users, sales and marketing, and last-mile delivery. Because of that, we lowered a lot of cost in a traditional e-grocer business model.

These people are very interesting. Firstly, they are socially very close to the consumers they are serving. Because of that, they have an easy way to get people to trust them, buy product from them, even if they don’t know where these products are coming from. It’s actually very powerful. We know right now, in eCommerce business, you probably need to spend $10-20 or even more to get a paid customer. But in this model, the cost for user acquisition is almost close to zero. So that’s one biggest advantage.

Secondly, because these community leaders live in a community, they’re also geographically very close to the consumers. And because of that, they can take the role of handling last mile packages, and have the people come to their point of sales to pick them up. And by doing that, we also substantially lowered the logistics cost. We know that in the eCommerce business model, user acquisition and logistics are two major cost items. And they’re very hard to cut, right? Because of these two disruptive innovations thanks to the community leaders, we are able to reinvent the whole eCommerce model and make it more friendly to lower tier cities. Because right now, we have a lower cost structure, we can now lower the price and make this service more available to more people. I think that’s the interesting part of this model.


Some of the obvious questions for people who are outside of China who have not used the app before would be, how did you recruit these influencers? Community influencers? What’s their motivation for doing this? What’s their take rate? How do they help you with the actual delivery of the goods or other users to pick up? How much did you leverage WeChat for the initial user acquisition and how do we convert such users onto your own app at some point in the future?


Let’s take the questions one by one. Firstly, where are these people and who are they? We started primarily with moms in communities. Because those are people care a lot about the quality of the products and spend a lot of time sharing. They also want to make some extra money. Especially for a lot of mothers, they just had babies and have some time. They also want to make some money out of it. We started by hiring mothers to do that. But as we gradually grow this business, we find that actually a stable delivery site is also very important. So we started hiring a lot of the mom and pop shop owners as well. Right now we have about 60% to 70% of our community leaders being the shop owners around our communities, while we still have 30 to 40% community leaders being mothers. So that’s like a combination of how these people look like.

Secondly, we give them like 8 to 10% of commissions on average. Some products can be higher, some are lower. But in general, they earn this commission by helping us acquiring new users, doing sales and marketing in the groups on a daily basis, and also provide the pickup services on every order. So they do all of those things and we’ll give them a 10%, and the reason why you know the 8% to 10% of commission is meaningful enough for them is because we primarily serve communities in lower tier cities. In those areas, if you can earn like a few hundred RMB or 1000RMB or 2000 RMB, that’s meaningful add up to their household income. So they are happy to provide labor, quite heavy logistics work to earn that money and cash. I think that’s the second part. The third is that we do use a lot of WeChat groups to help people organize is because WeChat is where people now clustering in China. So it’s very easy for you to bump into someone tell them about a services and add him into your group. So that’s the primary way to get users.


So the definition of lower tier cities in China is actually a pretty broad concept. So in your customer base, can you paint a picture of what type of city, what is the scale of the population. And for each community, how many like say consumers each influencer can actually serve?


So first, let me give a landscape of the tiers in China. So we have what we call the first tier cities, which are Beijing, Shanghai, Guangzhou and Shenzhen. And now we have a whole bunch of tier two cities, the primary like the headquarter city for that province. That we have tier three. Tier three are mostly the cities that you hear, you kind of know the name, you don’t know where they are. So that’s the tier three cities are like most of our transactions are coming from. But not only that, we can also do tier four, tier five, tier six. So my definition of tier four is like the satellite cities around tier two and tier three. And tier five are counties. So counties are the satellite city of the tier four city. So every one of the tier four city actually has like 10 to 20 counties around them. And a tier six are the towns. So every county has like 10/15/20 towns around them. And now we have the rural areas. So that’s like the tier one to six. So for this business, we have successfully proved that it can actually serve consumers from tier one to tier six. In some of the areas we can even send like the fresh meat to rural villages, and still making profit margin. So we also see some of our competitors serve tier one city. But strategically, we think this model has more advantages in cities in tier three and below because in those areas you see less competition and people probably don’t get a lot of good products. I was in a rural and lower-tier city for quite a long time. And actually, I know that lower tier cities, they actually have lower quality products offering with higher price because of the logistics inefficiencies. So if you can provide price competitive high quality products in lower tier cities actually have a great edge. The problem is how you can do so. And the core problem to that is actually the cost structure. So right now, we have killing solution to really cut the cost down then we get an edge in the lower tier cities.


So in theory, your model could be even better than Pinduoduo’s model. Pinduoduo has been growing very fast.


Our internal slogan is that we offer products at a Pinduoduo’s price, they’re like 19.9, we’re like 10 to 20 RMB per order for better quality. And we can do next day delivery. We can do fresh. So that’s like our value proposition, you can see how this model can be a killer solution in lower tier cities.


Pinduoduo aggregates demand with discounts. But when it comes to delivery, it’s one by one, you aggregate delivery as well and makes it even more efficient. And then now you can do fresh delivery.


So let’s go back to the network of community influencers that you have been built, because obviously that would be the moat for you. They both do last mile delivery as well as user acquisitions. So how do you build a system that incentivizes them to keep growing for you?


So we gave ourselves a topic like a research topic is how to really manage a sales organization of a million people. I think that’s the fundamental question when you answer in the end. Because right now we have like a few hundred thousand, like 80,000 of them. But in the end, if you really want to grow this business into like 100 billion RMB business, you need a million of them. So I think the core of that is to think about the parameters of new leaders we actually want. I think there are few, we think about the quality of those community leaders meaning are they really sales professionals? Can they actually generate a lot of sales?

Secondly, we think about their loyalty. And thirdly, we think about the density. So in your sales organization, all those three things are very important. For this model, we think that density is the most important at current stage. The reason is for this sales organization, we actually add location into that. Location is like a unique characteristic for this excellent sales organization. Think about if you have a million delivery sites, that’s also probably one of the biggest logistics networks in China as well. So bringing up density can give you size, can lower your cost, and also keep you in a game and give you an opportunity to actually train and shuffle those community leaders in the future. So at the very beginning in this very competitive market, we want to increase the density of our community leaders. And in the longer term, then we bring in, for example, the training programs, and we also want to group into different categories, different training and different services and try to make them improve their sales capability over time. But in the future, as we grow and as we mature, we need to bring in more techniques from the convenience store, retailing industries, to really look at the same store sales growth of those community leaders. But currently as we are still competing very fiercely, I think density is still the most important parameter we’re looking at.


Do you have someone from Alibaba that runs your community influencers program?


Yes, we do have Alibaba business development experts that help us with acquiring and training community leaders. But we also feel that BD capability is only one aspect of the whole puzzle. We also need retailing and sales experience in our organization. So we also need someone to take care of not only the sales revenue but also profit margins. We need people to understand that as well. So now our organization also has people from retail industries.


From where do you source such people to come in to help you to train that up?


Well actually because this very innovative model, you don’t see anyone in a market that actually can do them all. So what we do is that we bring in people with different backgrounds and try to have them collide and work with each other to get the right kind of qualities out. We have retail people, good people from convenience stores. We also have internet people; we have people from like Alibaba and like from other internet companies as well. They all bring in different qualities and put them into the real battlefield to have the right quality is coming out.


Right on the side of your own app, how do you get users when influencers to move from WeChat onto your own app? What experience does your app provide for the benefit of those who don’t have access to it that’s offer superior shopping experience. I ask the question because we’re seeing more and more teams in Latin America, Southeast Asia, in India, that copy and learn what has worked well on WeChat onto WhatsApp. But the shopping experience on WhatsApp is limited. So the challenge is I was figuring out how to offer better shopping experience in their own app, while still retain the stickiness and ability to aggregate a lot of users quickly on WhatsApp.


Firstly, I think it’s important to think through the role of social apps play in eCommerce, no matter it is WeChat, WhatsApp or Facebook. Social apps are where people get together, they talk, interact and share information here. But it’s not necessarily where transactions take place. It’s a traffic pool, a user reminder place. It reminds people where you can get good products, good promotions etc., but not a purchase destination. I think this clarification is very important, because every one of our community leaders on average only takes care of around 100 customers. So as long as we have good products, good prices, good promotions, straight-forward user experience. Community leaders can literally talk to each one of those customers and guide them to make purchase at our own app or in the programs. So in a sense, without these community influencers, it’s very hard to make these conversion happen. But with the presence of them, it gets much easier, and it’s also a very smooth experience for consumers as well. I think the second interesting thing is that as more and more consumers form a perception that they can get good and valuable food and vegetable needed from Shihuituan, they sometimes directly go to us and buy stuff from us. We have a purchase frequency of 14 times a month for old users, if you have good products, prices and service that beat consumers’ expectations, people can form such a good perception about you over time. We actually now see 30% of transaction traffic not from social groups but directly from consumers’ proactive purchase in our site. So I’ll say that if you have a fleet of community leaders that serve customers well, and if you have good products and service offerings, consumers will love to use your own App as well. So I think that’s actually something we can manage over time.


As you grow, what are the top five kind of products that sell well on your platform? For Pinduoduo, do you know a lot of FMCG goods like diapers and so forth sell well. On your platform, What sell well?


It’s the fruit, all kinds of fruits and fruits all sell very well here. And secondly are the vegetables. Thirdly is the frozen seafood, like we have the shrimps and all those kind of stuff like imported shrimp, they’re selling really well. And fourthly, is some of the also the FMCG, the tissues and stuff like that. And also have some what do we call the fashionable stuff like the cosmetics, for example, I buy a lot of like green plants, and flowers, those other things selling well as well.


So if it is the produce that sells well, is the frequency of transaction per user on a weekly basis, like once a week, kind of frequency or is even higher? When you do delivery, what kind of special refrigeration do you have to be able to provide to keep the goods fresh? And do you work with outside delivery companies? Or do you have built your own fleet?


So actually, for the first question, actually it’s more frequent than that. Like old users, after two to four months’ time, can go to like 14 times of purchase on a monthly basis.


14 times? Every other day? That’s amazing.


One time every two to three days. Because you know our ticket size is very low. Like if we saw vegetables we saw like really for a meal, like 5 RMB for bunch of vegetables, 6 RMB for carrots and things like that. People come here and buy things for one meal or for one dinner and then they can come here to buy for the next dinner. That’s actually very powerful. And that also adds up the frequency. The reason why we can do that is because our logistic cost is really low. It’s like 1 RMB or 1.5 RMB per order per item. So if you think about that, if we can really reduce the warehousing and delivery costs to 1 RMB, now we can afford an average price for 10 RMB. 10% logistic costs is alright within ecommerce business model. So that’s the that’s the first thing. And second thing in order to maintain the cost, we actually think very carefully of where and whether to add cold chains. We’re not a full cold chain logistic model, we try to actually increase the efficiency of the model to reduce the time that a fresh product needs to go through between the warehouse and our consumers. So that we can have the products fresher. So our total solution that on one hand, we have the cold box for vegetables, have the frozen box for the shrimps. Secondly, we really try to reduce the period of time for this thing to turn. So for example, we’re right now trying to achieve our own two on one for the model, which people buy anything before 11pm at night will get a product the second day before noon.


That’s amazing.


So that’s like 12 hours, 13 hours, right? So you can really do that and then the vegetables actually only go out of the warehouse for like five to seven hours. So if you didn’t really achieve this speed, and then even vegetables and the fresh stuff can be add relatively fresh stage, when it reaches to the point of cells to the community leaders. And for community leaders, most of them have certain storage capabilities. For example, they have a freezer, a refrigerator. If they are a store, they probably have some place to store the cold drinks. So they can also store the products in a relatively good state to wait for their consumers to come to their store. For example, like 4 to 5pm in the afternoon to pick it up. So that’s how we manage to get people relatively fresh products at lower tier cities.


So you can do within a 12 hour delivery into tier four tier five cities. And then to make that work, what kind of warehouse network do you need to have in his delivery done by you, yourself, your own fleet or third party?


Firstly, address the easy question first. So we have our own IT system. But everything like all the fleet of trucks are actually outsourced so we don’t own any fixed assets. In order to accomplish such a delivery system, we actually have a multi-layer warehousing system, the warehouse where different types of suppliers will ship their products to us. We have the warehouse for the fresh, where we actually package their farm produce into item size, like four carrots in a packet. We also have the frozen storage, we have the standard product storage. So that’s the first tier.


Is your own people doing it or you recruit suppliers to do it?


Okay, so there are two models. So if the supplier for example, for the standardization of the fresh produce, if the suppliers do that, then they can offer us to a higher price. If they don’t have the capability to do that we can do that for them with a fee. So also for the storage the same, so our model is actually a corporate close to zero inventory model. So if the supplier, if he doesn’t want to ship to us on a daily basis, they can store products temporarily in our warehouse, and we charge them as well. So that’s the warehouse.

For warehouse, is that your own fixed asset or you recruit warehouse too?


We run the warehouse, but we kind of revamp the warehouse to suit our needs. When I say revamp, I mean that for example is a standard warehouse that we want to add a frozen like warehousing into that. We want to open more doors on the wall. We want to put our own like light fixtures and the assembly lines. So that’s other things we do. We organize in the warehouse we were wanted. And we implement our own systems and IT system and the working process to that. But we don’t own the fixed asset. We don’t own the land of the warehouse.


Sure. How long have you usually signed up the lease for these warehouses? Five years? More?


Generally, we want to sign up for shorter period of time, because we’re growing too quickly. And we want to change the size and location on the warehouse very frequently. So we usually sign up for like one or two years. If they agree, sometimes they don’t agree, so we need to sign longer time and to worry about that later.


Well, how long did it take you to do this? Sounds like only like three years.


And this one is only one and a half years and we grow from zero to right now, 500 million sales on a monthly basis.


Just under 100 billion-dollar US in sales in one half years.


Yes. But it all came from the kind of experience we had over the last seven years because as you know, Hans, what I did before then is all in this area. It is always e-commerce, rural agriculture, social networks all those kinds of stuff. And also, for example the IT system that I built, if you only take one year it is impossible for you to build it but in the previous experiences is actually we can share a lot of experience from the past to help us today.


A lot of people want to know, they asked Rita and asked me, like how much sacrifice you have to make until you actually can get to a true product-market fit, and how many pivots you have to take in order to find that part of market fit. Like you said, you had been on a 7-year journey when you and I met was about four years ago. And so you already have been doing this for three years struggling, and then you spent the last three of the last four years to get to some kind of a promise. In the last year and a half really took off, so can go through the seven-year journey, how much sacrifice ever made? And what did you have to do to find them a product market fit?


So probably a little bit storytelling right now. So I graduated from Harvard Business School in 2012. When I applied for HBS, like 10 years ago, I wrote in my business school application, my career vision is to help rural villages. So that’s what I wrote. I was just authentic with what I wrote and acted on it. So after graduating from Harvard, I actually started a NGO helping little villages to build a new model of retail channel. So that’s what I did. I get some money from Harvard, I applied for the social venture track. I also get some money from an NGO called Echoing Green in New York. So on average,  I have around 1 or 2 million RMB to help me get started with the NGO. If we look at the model of NGO back then, it is actually very similar to what I’m doing today. It is really bringing the rural mom and pop shop owners as the trust agent to bring the concept of e-commerce to extremely lower tier and the rural areas. I think two primary challenges back then were, firstly is that you don’t got the infrastructure ready, you don’t have the mobile payment. The rural villages, they don’t even have a credit card. They don’t trust any form of prepaid sales model. And we know e-commerce is a prepaid model, right? You don’t get the logistics. Back then seven years ago, very few of the delivery services actually extended to rural areas. We actually need to bring our own warehousing to counties and ship our stuff to the rural villages. So back then it’s very hard, because you don’t have the infrastructure. People don’t do a lot of e-commerce and because of that the density of yourselves of your demand is also very scarce. So the model doesn’t work on a for-profit sense. So that’s why we start with the nonprofit model.

And the second challenge that you don’t get money that easily from nonprofit. I actually did a lot of fundraising trips to New York, DC, San Francisco, Shanghai and you don’t get a lot of understanding from a bunch of foreigners. For people trying to connect the meaning of my work to some big concepts like bring connectivity and stuff like that. So, after one or two years doing that, I found it is really challenging, so I go back to thinking about the venture backed model. So that’s after one or two years, I started going to the capital markets and getting venture money. But I still try to experiment around what I have in rural areas and counties.

So firstly, we started the business primary doing media and marketing in rural towns and counties because back then WeChat has started to pick up in rural towns, counties. So what I did before is back then is really get from a lot of organizers, a lot of WeChat groups and put them into categories and help different types of local service providers with the promotions. So we have groups for mothers so that’s for the mother infant shops. We have like the group for food lovers, that’s for the restaurants. We do a lot of that and thanks to that, that traffic growth we also grow our business from zero to a few hundred counties in China. So that’s my first venture. We got the money from Dianping. We want to compete with Meituan but later on they merged.

The second thing what I did is the good stuff. I think the good stuff is to find a product market fit as well. Because back then we sourced really differentiate good tasty fruits and sell them only to tier one cities like tier one, mothers in tier one cities, who care about your quality, they care about the tastiness of the fruits, because otherwise that the kids don’t bite them. They care for the health news of the product. So we find a product, the product market fit there. And really enabling the groups, WeChat groups, are really to tier one mothers.

And Shihuituan actually is incubated from “the good stuff”. Because after you know a couple years development, we do pretty well in Tier One cities. We think about national, we think about really growing this business to national and if you want to do national, you need to really take care of the price point issue. Because back then during “the good stuff” days, our price points around 100 RMB per order. That’s why we can afford a logistic cost of 10 to 15 RMB. If you want to go national, you need to think about how to cut costs, how to innovate, how to be innovative on that. So that’s where the Shihuituan comes in. So my feeling is that, as entrepreneur, it takes some efforts, but I think it’s okay to find market-product fit in relatively short period of time if you have some experience as an entrepreneur. But it’s hard to think about the timing of infrastructure or think about where the wind really blows. So even the model is similar seven years ago, but at that time, even if it’s a great model, it becomes a poverty alleviation model, because it’s too early. Right now things seem to kick off pretty well.


The three aggregation that you’re doing one is on the demand side with the influencers. Second is obviously delivery again with the convenience stores, mom and pops, as your delivery point. The third is supply. This intermediate the existing supply chain and curate the best suppliers, for example, Meicai is the third part and try to bring best food from the farms all the way to the restaurants and do that as efficiently as possible. Usually you see a company doing one of those three aggregation and focus on that and do that very well. Pinduoduo does the demand aggregation coupon purchase. Meicai does the supply, disintermediation and curation. You’re doing all three. So as you build the organization, how do you get people to understand what you’re trying to do? You may, you get it, how to get the next two layers of team members on your team to get it as well?


Right. I think firstly, Hans, you are very right. I think the challenge of this model is big. And the reason why we need to pick up this pack challenge is because e-commerce is already a very mature market. And if you only do one aggregation at a time, you probably don’t get a chance to have room in this market in the longer run. So I think the beauty of this model is that at the very beginning, we’re in a platform mentality, we think about outsource. And whenever we outsource a piece of work to someone, that is not an organization that has an incentive to do them well because they want to make some money for themselves, the cost goes down, the efficiency goes up.

So I think that’s something I really think a lot recently, and I think that actually applies to my own organization as well, is because when you hire more and more people, and you want them to do the things you want them to do, it’s getting harder and harder, because everybody has their own perceptions. You only add layers and layers of communication and you make decision making process slow, and they still have their own perceptions about things. So I think probably a more efficient way to tackle this problem is that don’t think about this as a top down communication issue, but think about we create a platform or ecosystem where everybody can actually make money. I’ll make something out of it. But if the system is designed right, then all of the people’s work will actually contribute to the well-being of the whole platform.

So if you think about a few things with it, we asked the community leaders to do the sales and marketing. And they had to do it well because they make every penny of their money from gaining the trust from the consumers. And by gaining the trust, I mean, that they have to provide good service. And they have to tell them very frequently what the consumers want and where we haven’t done well. So we have the kind of pressure and the push from every one of the community leaders that we have to be really consumer centric. The power is not from within. The power is from those community leaders. That’s thing number one. Second thing is the suppliers, we actually adopt a more like a platform model is that the suppliers actually have their own stores, or they have their own rooms in our platform. But they only have limited resources to help them to grow. So suppliers also need to think about if we see longer term benefits within this organization, I really need to give out of my best products best price, because otherwise, if my sales growth is not as high as the platform, then probably I don’t get a room anymore.

So think about this versus, we got a whole bunch of sourcing guys supervising the suppliers in a zero sum game, where we need to supervise the sourcing guys, then it doesn’t work. The bigger you grow, the harder it gets. So on every piece of our value chain, we think about a different way to put it. I’ll give you another very interesting example, is on the after sales service. Well, after sales service is actually critical to this model. We outsource that to our community leaders as well.


Right, you have to.


We actually give them an autonomy like below certain amount, you can just do it by yourself, we don’t need to approve it. And if we after doing that, we also lower the after sales service costs as well and people’s satisfaction actually goes up. So think again about what you can do to change a certain value chain of the traditional e-commerce to bring more power from the ecosystem and help you to move up the efficiency. So I think that’s very, very, very key topic. We need to think again to for the eCommerce otherwise I don’t think there’s a way for us to come out.


Right, just add one more question on the supply side. What do you think is the overlap between your suppliers on your platform with suppliers from Meicai?


Firstly, I think Meicai is more still to restaurants. They are to small businesses. But we are directly to consumers.


I know the difference. I’m just curious on the suppliers, the actual suppliers. Is the suppliers, the restaurant suppliers to the consumers the same? Therefore, there is quite a bit overlap or different set of suppliers altogether.


I think it’s a different set of suppliers because for us, we do bring a different set of standards for the products. And because of the standards, so to put it in a more direct way, our products probably have a higher grade in a fresh produce. So because of that, our suppliers also tend to be different. Many of our suppliers actually also the supplier for the local supermarkets.


Okay, doesn’t overlap. And if the supermarkets are not growing as fast and you’re growing faster, then the suppliers are more willing to work with you.


We also provide better terms like our campaign is actually very short, would give them like…


a supermarket is terrible and you are much better.


And we don’t have any fees and other stuff. We are very simple.


There is no entrance fee to get into the store for you.


No, no.


Got it. I mean, you’re riding on a lot of existing infrastructure, but made that much more powerful by having the ecosystem approach. But you need the team members who have built ecosystem elsewhere to leverage that kind of thinking to come here.


Right. Well, I think, firstly, it’s a philosophy. It’s something that, I, as the founder and my core team really buy in. And I think that’s the key thing. I don’t rely a lot on the past experience of the people because every experience comes with the specific occasions where this experience can actually work out. I think the most important thing is to have everyone in this organization really understands what we’re doing, why we have a chance, and how we can make this better. And all this is under a philosophy that we really need to build an ecosystem to have everybody contribute to it. So if you understand that you probably can make judgment decision makings much more relevant to this model. So we actually do a lot of internal communications, we have our own culture sessions from time to time to really help people think, at least on a strategic sense, closer to each other so that we can move this organization more efficient and faster.


So how many people do you have on your team now? And how many of them were with you from the NGO or good stuff days?


We have like 1500 people right now. I think that the core member from the NGO stage will have like five to six people today that’s deals with organization.


How about from Good stuff days? 


Well, good stuff here because we were splitting off the to two companies, I have to maintain most of the good stuff people still with good stuff. Otherwise the shareholders investors will not be happy with that.


Okay, very impressive.


So I have a question regarding your motivation or vision for helping Chinese villagers. You wrote that in your Havard application. Can you tell us more about that? Where does that come from?


Well, actually, from a vision for myself, I see myself as someone who is very curious about the next frontier. Because I see more challenges there and I see more opportunities there. And I also feel that with my brain, I probably can bring more values to something that is still very nascent. So if you want to know my three steps of my career vision, I can tell you right now. And you probably understand my theme with rural better. My first one is with a rural China, second one probably was Africa, my third one was space.


Yeah, space is even poorer than the Africa and rural China. That’s the next frontier. So I see myself as the intellectual cowboy. And I was trained well to really tackle with very complex problems that other people probably don’t want to tackle with. I’m happy and with that I enjoy the process. So I picked a really challenging problem and add my value to that. So I think that’s the thing number one. And secondly, I think I have a heart. I want to really help people. The misconception had before is really make that a one-way thing because NGOs have a lot of givers. But people probably don’t want you to give things to them for free. And that’s not the right way to do anything. So I think one of my mind shift over the last seven years that if you can create something that people want to pay for it, you probably find a common ground between economic values and social values at same time. And then you don’t need to worry about a double bottom lines because you have a single bottom line, which is generating profit and creating values, making investors happy. But you still have a heart and a social mission. You still have making organization of values and that actually make me happy as well. So to scale an organization of value is something that makes me very satisfied and happy. So I think that’s the two things.


Very good.


That is very powerful. Last question to both Hans and Ying. So apparently we are recording this episode because of the requests we receive every day from Brazilian founders, Indian founders, Indonesia founders. So how replicable do you think is this model to other markets? And what are the conditions people need to watch out for when they build similar startups in other markets? Maybe we can start with Hans?


Yeah, I think when my colleague Eric first invest in it, we thought about doing delivery to very urbanized tier one, tier two cities where you have tall buildings. Each building has 50 floors. Each floor has 4 to 6 units, and in a community with you know, 20 to 50 of such towers. So you can have a captive consumer base of 5000 to 10,000 people. And that’s a key ingredient to scalel. I think improve that over the last 18 months, you don’t need that. Now you can scale into tier four or five, six cities with a model that he has come up with. So as a result of that, I think that the model has a lot of potential in Indonesia, Vietnam, India, Mexico, Colombia and Brazil. And so I think it’s going to be quite interesting for people who listen to this episode to think very hard about how to aggregate demand, aggregate supply, aggregate delivery. And so it is not easy to execute because this has a lot of pieces. And you need to have team members who gets how to build the ecosystem, have their values to help them make those kinds of decisions. It’s not as intuitive as it seems. It rests on China having had 10+ years of internet ecosystem building. And I think it requires a founder whose heart is in the right place is not just to create value for himself or herself but figure out a way to help more people. So it is not an easy model to get adapted. But I think with the right kind of founders, who are more missionary, and I think over time, it is possible to have this work in other places I can see for Frubana in Latam, I can see Udaan in India, I can see Telio in Vietnam all try considered different variations of this model over time.


Right, right. So I’m currently not surprised that people are keen on this model in less developed areas. Because indeed this is not a new model. If you think about myself, I have a background of nonprofit and social development. And you can actually see similar things 10 and 20 years ago in India, in Africa, we call them branchless banking. What is branchless banking? Essentially, we have a lot of kiosk owners in those last 12 areas, and they serve the clients nearby and give them mobile banking services, give them micro lending service and things like that. And if you think about the core of that, is to bring trust, bring social networks into the formula. So I don’t think there’s something new, it actually has its own tradition over time from micro lending, from the rural finance, from those kind of stuff. And people have done something around that over the last 20 years already. So firstly, I completely agree that there is an opportunity in many less development areas like India, Southeast Asian and Brazil, places like that. And secondly, I think it’s important to think through the key elements of this model. I think there are two, firstly, you got to be able to find a bunch of people that can be community leaders. So as I mentioned earlier, the kiosk owners in those places can be one. And secondly you probably have to have a infrastructure for social networks. I don’t know what that is. But it can be something that people want to cluster in that area. And thirdly, you need to have mobile payment. mobile payment system is not a must. If you think about our early development, people actually paying cash to get products as well. But if you want to scale the business, you need a mobile payment to really manage the data and the transactions. So if you have the three, then probably you get something out of this in a reasonable way. So I do look forward to see entrepreneurs all around world to leverage this model and create some value for our for their consumers.


I think after this episode Ying is going to be very popular, a lot of founders going to want to come and ask Rita how to set up the meeting with Ying. And I think I will say this, I think it’s easy for people who don’t know much about China, I think that Chinese company, just copy and clone what has worked in the US hope through an episode like this, that people realize that China has changed dramatically, you now have founders who have great values and want to change the world for better, is leveraging smart tech and mobile tech and ecosystem way of thinking to build that out. A lot of people who listen to our podcast know that many founders work very long hours, people who don’t listen to the podcast think that these companies that have long working hours are exploiting labor for cheap and it’s terrible. How do you think about that issue? And what’s the schedule in your company like?


Well, you know, I think if people are kind of motivated by the missions, they treat working hours as time that is bringing value to not only people but also to themselves. But if you think about a work as a means to an end, and of course if you only work one hour a day, you will feel it as a torture. So I think for us, firstly, what we do is a great work that brings value to a lot of people and to ourselves, it is in reaching process. So I think we have a pretty positive working culture here in terms of high hours, I don’t know how to put it. It’s mostly work. I don’t think there’s a balance you can strike if you are an entrepreneur in China. I’m just trying to talk to my wife to convince her that that’s the case. But I don’t think there’s a balance. 

I think the way you think about things will give you, your body will respond to that in a different way as well. So if I enjoy work, I think my body overall reacts better. And secondly, I do carve out a meaningful amount of time for myself to do exercise. The lucky thing that, recently there’s a gym, which is like only 15 meters away from my office, or I’m able to go there on a more frequent basis. I think that’s good for me and good for the office overall as well.


Or you can use KEEP, another GGV portfolio app, and you start to exercise.


Exactly. Right. I’m also a fan of KEEP. I do a lot of episodes on that as well, training sessions.


I want to give a special shout out to Charlwin Mao, founder of Xiaohongshu for connecting us in the first place.


Right. Thanks, Charlwin.


That’s right. It’s just very interesting and motivating to see a lot of young founders in China with a vision of dream, very smart and went to the best schools and have the best tools and experiences and build something quite special. So thank you.


Thank you Hans.


Okay, so we’re gonna end this episode with a round of quickfire questions. Just say whatever comes to your mind. First question is what’s your most frequently purchased items online?


Recently is green plants for my office and home. I just bought a tiny Christmas tree with lights at night. it is now next to my next desktop right here.


Very good. Looks great.


Second question. So what keeps you going every day?


Well, I mean, I think primarily is the intellectual curiosity and a sense of achievement from tackling really complex problems.


Right. You’re an intellectual cowboy. You described yourself as a cowboy. Yes. Last question. So what is the best non-financial investment you’ve made in 2019?


I invested a bit of time reading more about a stoic philosophy and resonate with it very well. I find peace and strength from the from the philosophy.

Well I can give a little bit more explanation of that. I think stoic philosophy in my own personal perception about that is three things really make the best out of the things you can control and make peace with the things you cannot control. And have the wisdom to differentiate these two.


That is very, very true. When you travel, which countries or cities do you go to outside of China, if any?


I really like Japan.


I know you would. That was my number one guess.


Japan’s really nice. It’s good for relaxation.


And for Zen Buddhism, and that kind of stoic way of thinking as well.


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


Thank you. Pleasure.

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.