Is the Indian Internet becoming a "data colony" for American giants?

India is the hottest place for entrepreneurship besides China. The natural demographic dividend has not only attracted a large number of foreign predators, but also forced local people to start from scratch. However, due to deep-seated reasons such as the serious lag in infrastructure and the widening gap between the rich and the poor, India's entrepreneurial ecosystem has always given people the impression of "vigorous on the surface, but full of problems on the inside". Some people even describe it like this: In India's entrepreneurial ecosystem, today is springing up, tomorrow is dead, chaos and vitality have been fighting each other. Recently, Amir Efrati, a columnist for the foreign media Information, wrote two articles respectively, describing the current situation of this entrepreneurial country from different angles. After combining the two, perhaps we can get a more objective understanding of the current situation of the country's entrepreneurial circle.

Today, in Bangalore, India’s “Silicon Valley,” you can still smell the rotten, burnt smell left over from last month’s arson. (Note: In order to compete for water sources, riots broke out in Karnataka and Tamil Nadu in southern India last month. On September 12, the riots spread to Bangalore, the capital of Karnataka. At that time, due to suspicion that the government was heavily biased towards this technology center in resource allocation, angry people rushed into the offices of several multinational companies in Bangalore and set them on fire.) The hatred of local residents for foreign technology companies is self-evident, but this emotion cannot be converted into the energy needed by local entrepreneurs. Therefore, they are not in the mood to gloat. How much chicken blood was injected into this entrepreneurial country by the influx of foreign investment two years ago, but now it is half dry (the amount of financing for technology startups in the first half of this year has dropped by nearly 40% year-on-year). Anxiety is like drought, grinding the nerves of many people.

Under the high pressure of competition, many "Yin"-born startups are in a state of panic

There is almost no undeveloped virgin land in the Indian startup world. There are well-known newcomers in e-commerce, data analysis, health industry and even hot AI and VR/AR fields, such as GreyOrange (providing warehousing and logistics services for e-commerce through robots, and received $30 million in Series B financing last year), Swiggy (takeout O2O platform, received $35 million in Series C financing this year), and Cardekho (online car trading platform, received Series B financing last month, the amount is unknown, but the valuation has reached $300 million), etc. But in fact, not many of them are really doing well.

Since the end of last year, a large number of Indian startups have begun to lay off employees, including Common Floorlipkart, India's largest online real estate platform (laid off about 100 employees in March this year), Grofers, a food delivery company invested by Japan's SoftBank (laid off 10% of its employees in May this year), Foodpanda India (laid off about 300 employees in December last year) and e-commerce Askmebaza (laid off 650 employees in April this year).

According to survey data released by consulting firm Xeler8, among the more than 2,000 startups established from July 2014 to August this year, 997 have closed down, with a premature death rate of 43.7%. The average survival period of these premature deaths was only 11 and a half months, less than a year.

So, can those seemingly fat and strong unicorns remain unmoved? You are wrong. Flipkart, Snapdeal and Ola are represented by them, with dark clouds over their heads and thin ice under their feet. Among them, Ola has recently announced a 4.5% layoff and has shifted more energy to niche areas such as food delivery, which is equivalent to directly handing over part of the online car-hailing market to Uber; Snapdeal is even worse - investors and some internal executives believe that it is very likely to be sold at a super low valuation of less than US$500 million.

Life is so difficult, and foreign predators are to blame

"India is a hot commodity. Chinese companies can't enter the United States, and some American companies are banned by various laws and regulations in China. In the end, they all come to India."

—— Nandan Nilekani, former CEO of Infosys

It is said that some startup leaders who have a say in the government have expressed the hope that Modi and his colleagues can temporarily close the country's borders to the big foreign companies that are looking in. Otherwise, many Indian companies that are called unicorns but are actually young companies may not be able to survive for long.

But will everything be peaceful if they leave? Of course not.

First of all, in terms of the domestic environment, the Indian government has done everything it can to encourage entrepreneurship (this will be discussed later), but the problem of corruption has not been eradicated.

The Indian National Council of Applied Economic Research published a survey report in 2015, which showed that corruption has become a way of life for Indians. On average, each urban family spends about 4,400 rupees (about 429 yuan) a year on bribes, while each rural family spends about 2,900 rupees (about 283 yuan) a year. In such a "big environment", all kinds of weak startups are naturally no exception. Not only do they have to serve the local government well, but they also have to be ready to spend money to please the street police at any time to prevent them from being in a bad mood and harassing them at home.

Although Prime Minister Modi has adopted a drastic stance since coming to power, firstly, corruption in India has lasted for thousands of years, and curbing it will certainly not be a matter of a day or two; secondly, Modi’s main task during his term is to stimulate economic development (of course, development is difficult without eliminating corruption), so up to now, India has not made any convincing results in anti-corruption.

The external environment is disappointing, and the startups’ own internal inadequacies are equally shocking. Among them, the most criticized is the “lack of foresight”, which has led to many problems.

"Nine out of ten Indian startups I've seen lack vision. They are nothing, not even a scallion, and were probably born to sell themselves."

—Kishore Biyani, Founder, Future Group

Faced with the viciousness of foreign giants, the first move Indian startups use is to engage in price wars. Take Flipkart as an example. After obtaining financing, it often spends a lot of money to maintain the discount of online products, trying to please the group of consumers with an annual income of around $10,000. This type of people accounts for about 2% of India's 1.3 billion population and belongs to the middle class (the lower layer of people accounts for about 10%, and the annual per capita income is only $3,000. The huge gap between the rich and the poor in India can be seen here). In other words, only these 2.6 million people are Flipkart's main target, and most of the remaining 1.27 billion people are not within its coverage. And this precious resource is undoubtedly also seen by Amazon, so the tug-of-war between the two sides has a long history of burning money.

However, after a few years, Amazon not only did not get burned out, but also accumulated impressive customer loyalty. The reasons are: 1. Amazon is already rich, and although the money-burning war is fierce, it can't hurt its vitality at all; 2. Its data collection and analysis work is much better than Flipkart. According to Nandan Nilekani, Amazon has real data scientists while Flipkart does not, so it can often quickly sniff out consumers' potential purchasing desires and promote transactions; 3. Flipkart did not provide excellent customer service (for example, the delivery service is not as fast as Amazon), and lacked the courage to improve this shortcoming, and was ultimately constrained by the lack of user loyalty.

In addition, Indian startups are also plagued by problems such as irrational asset allocation and too many employees. All these self-inflicted internal injuries have opened the door for outsiders to suppress them.

"Unless the headache of over-employment is addressed, many companies will have to continue to tighten their belts."

——Amit Somani, a well-known Indian investor

In this situation, if Indian startups want to break through the difficulties and regain their own territory, they must cooperate with the government and go all out.

Now, let's take a look at what efforts both sides have made:

I The Indian government has made a lot of efforts to encourage entrepreneurship (data cited from Forbes)

1. The "Startup India" project was established in January this year. According to the plan announced by the project's initiator, in the next few years, the Indian government will build a large number of research and innovation industrial parks, and gradually allow more and more large companies to participate in the funding of various incubators, striving to increase the number of Indian startups to 12,000 by around 2020;

Second, the Ministry of Industry and Economy has clearly stated that all states in India must establish their own entrepreneurship service centers. In addition, the Ministry of Finance has also made it easier for entrepreneurs, not only reducing their taxes, but also providing them with a "one-day fast registration" service. In the next four years, the department will also provide entrepreneurs with a fund of up to $475 million per year to help them get started as soon as possible;

3. In the next few years, the Indian Ministry of Science and Technology will provide startup subsidies of up to US$150,000 per company to eligible startups.

In addition, the Indian government has done two things: first, it launched an entrepreneurial assistance program called PRAYAS, and second, it established an e-commerce entrepreneurial park (Electropreneur Park) on the campus of Delhi University. In the next few years, PRAYAS will gradually implement cooperation plans with companies such as Intel, Lockheed Martin and Boeing, and open research and innovation parks and entrepreneurial service centers across India; and the e-commerce entrepreneurial park will incubate 50 startups and create at least 5 multinational companies in the field of electronic system design and manufacturing.

II In terms of improving domestic infrastructure, both the government and enterprises have taken some actions, among which the following are worth mentioning:

1. Mobile Internet access charges are expected to drop significantly. In early September, Reliance Jio, a telecommunications company under the Indian Reliance Industries Group, officially launched its 4G service at a very low cost. Prior to this, the company had taken the lead in building a nationwide 4G VoLTE network in India and had spent $16 billion to purchase spectrum. It is reported that this is the largest investment in the history of Reliance Industries. In response, the boss behind Reliance, India's richest man Mukesh Ambani, was accused by his opponents of "declaring war on the entire mobile operator industry."

Indeed, it is no exaggeration to say that this is a "declaration of war". At present, there are 200 million smartphone users in India. If they go online, most of them have to pay a tariff of US$3/G. Under such circumstances, many people are cautious to limit their monthly traffic consumption to between 10M and 20M, which invisibly restricts the development of many startups and prevents them from developing mobile customers.

In this case, Reliance Jio's move may become "a pair of hands that open the shackles." It is reported that after the company's 4G service is launched, users can enjoy free Internet access and free voice calls in the first three months. If you want to continue using the service after three months, you only need to pay an ultra-low price of US$0.7 (about RMB 5) per G, which is only one-fifth of the current mainstream price in the Indian telecommunications market. At the same time, Reliance Jio also launched Lyf, a 4G mobile phone with video calling function; due to the low starting price of US$45, the product has been greatly sought after by young people since its launch, and many people are even willing to get up in the early morning to line up at the door of Reliance Jio's major stores to buy it.

In short, Reliance Jio has successfully created a catfish effect. Now, many old operators, including Bharti Airtel, which has 300 million users, are getting restless. If nothing unexpected happens, they will soon reduce their respective tariffs. According to the forecast of Kunal Bajaj, a consultant in the Indian telecommunications industry, the tariffs of the industry will be reduced across the board within a few years, and the number of people accessing the Internet through mobile terminals will increase exponentially. For those startups that want to make money on the mobile terminal, the situation of too many people and too little porridge is likely to be greatly alleviated within a few years.

2. The biometric identification system Aadhaar has been successfully developed and widely used. A few years ago, Nandan Nilekani, mentioned above, assisted the Indian government in developing this system. Due to the latter's strong promotion, as of April this year, more than 1 billion Indians (approximately 83% of India's total population) have registered for the system.

By collecting residents' photos, fingerprints and iris information, the system can provide everyone with a unique 12-digit ID number. Moreover, since the number is bound to the mobile phone number and bank account, registrants can easily enjoy medical care, social security, training, employment, mobile business processing, online payment and other services through the Internet. Due to the outstanding advantages of the system and its large audience, many companies (including startups) have already bound their businesses to the system.

In addition, because Aadhaar provides an open protocol in the form of an API, all kinds of companies can use it to develop various applications, such as micro-loan apps, online transfer apps, and even recruitment apps, etc. Overall, Aadhaar has benefited many companies.

Take Paytm, India's largest mobile payment and business platform, for example. Currently, there are 15 million active users per month using the platform for transfers, payments, and small loans. According to Paytm CEO Vijay Shekhar Sharma, the platform will soon introduce the Aadhaar system to query users' identity information and credit records at any time, and decide whether to open a money market account for the user and approve their loan application.

By the way, Paytm is currently valued at $4.8 billion, and its share price has doubled year-on-year. Alibaba, which stands behind Paytm and regards it as a "strategic asset," will use it to compete more fiercely with Amazon in the Indian market.

Conclusion

In the author Amir Efrati's opinion, on the one hand, India's entrepreneurial ecosystem does appear to be strong on the outside but weak on the inside, and on the other hand, people can clearly see the strong desire of the government and enterprises to change the status quo. According to his summary, the common vision of the two is to make the Indian entrepreneurial ecosystem like China, and ultimately achieve: its own country is controlled by its own enterprises, and it is never like Europe, which is willing to be the "data colony" of the United States. Therefore, the Indian government and startups must show considerable courage and take the lead in policy support, talent introduction, investment attraction and other aspects (of course, they must also fight corruption with an iron fist). Only after several years of hard work can people see real changes. Of course, Amir Efrati still believes that Indian startups, which have natural advantages in culture, policy and other aspects, will always wait for that day.

“A large number of Indian startups are emerging…India’s startup ecosystem is becoming more rational and mature.”

——Nandan Nilekani

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.