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'Video-oriented or social commerce to go big in India'

India has a lot to learn from China, says Arpit Agarwal of Blume Venture

Dec 31, 2019 by Ruiyao Luo
'Video-oriented or social commerce to go big in India'

Since its founding in 2010, Blume Ventures has been quite hands on in early stage investment in India.

With three funds so far, the VC has invested in more than 100 companies ranging from agriculture to B2B, commerce to education, fintech to deep tech.

The Passage spoke to Arpit Agarwal, an investor in Blume Ventures, who is based in Delhi, about the Indian startup ecosystem, the impact of data price rise, and the outlook of early stage investment in India in the coming years.


The Passage: Could you enumerate Blume’s focus sectors this year?

Arpit Agarwal: Blume do not focus on a particular sector. We are sector agnostic. We pick up investments in any sector; fintech, consumer internet, deep tech, SAAS, B2B and so on. We are always looking out for newer and newer opportunities in early stages.

We have noticed that while fintech continues to be important in India, not too many opportunities exist in the stage of investment we focus on.

However, other sectors are becoming interesting. For example, agritech, edutech and deep tech are important areas our fund has invested in this year.

We think, we will see a lot more activity in deep tech in the coming year.

As an ecosystem, we have observed a few more opportunities are becoming mature. Consumer brand is a case in point.

In general, various types of e-commerce will also come back. Video-oriented or social commerce is going to become very big in India.

The Passage: You said there is less opportunity now in early stage in fintech segment. Could you elaborate?

Arpit Agarwal: Every sector goes through a degree of maturity. All the companies who have raised money in 2018 are busy proving themselves, or are busy building a better model in 2019. Actually, not all the companies went to the market to raise money.

Also, in 2019, a few regulatory changes emerged, which made their business a little harder. Availability of all online KYC was made impossible. Earlier, KYC was available, which meant that companies did not have to waste too much time or effort on KYC and document verification.

Banks have become more cautious about lending to people who are to some degree subprime. So, when that happens, the fintech companies with that outlook are basically going to suffer.

Payments have become much larger business in India today, and UPI also has grown very well. Phonepe, Googlepay and Paytm are the ones who benefited the most.

In general, fintech had a little bit of a struggle from regulatory side, because regulation made paperwork a little more important and the cost a bit higher.

The Passage: Blume has invested in Milkbasket and Dunzo. India is also seeing some changes in online grocery and fresh delivery with the foray of Flipkart and Amazon into the segments. Your views?

Arpit Agarwal: Grocery is the largest part in retail in India. There are many winners possible in the grocery space. The market is so large and will probably support many, many players. With Amazon and Flipkart joining the competition, the market is going to be more mature.

The core proposition of companies like Milkbasket and Dunzo won’t get significantly impacted, because the kind of offering Amazon and Flipkart are providing are different from the offering Milkbasket and Dunzo are providing.

Dunzo is an on-demand service. They also have relationships with grocery providers and warehouses where Dunzo can pick up stuff and make it much more optimal to deliver the same via its delivery workforce.

At the same time, Milkbasket is a morning delivery service. It does not work on an on-demand basis, because the order has to be placed previous night and get delivered the next morning.

The core preposition of both of these companies also tends to be focused a lot more on the millennial audience, and the audience which is relatively a bit upper class as compared to others.

As far as the feedback from consumers is concerned, we have noticed that the demand as well as the customer loyalty of both Dunzo and Milkbasket is very high.

The loyalty is so high that people do not want to move away from the services, even if they are presented other options. At some point, Dunzo and Milkbasket will become very large because their core strength and customer loyalty are so strong.

The Passage: Bigbasket put a stop to the 90 minutes on-demand service owing to higher operational costs. How is Dunzo coping?

Arpit Agarwal: For any on-demand service, the primary cost is the cost of the rider. The prime ability to reduce the costs is strongly dependent on the density of orders, which are placed in a hyper local area.

We know that if there is a tipping point, beyond that, numbers start making sense. Dunzo is very close to making that tipping point in some hyper local markets in Bangalore. If there is enough demand, you will be able to reduce the cost dramatically. And that is how these models work.

Dunzo has crossed over in a few markets beyond that tipping point, and makes money on every order. Every incremental order on top of that densityallows for better economics and total bottom line.

The Passage: Blume has invested in Mech Mocha. What did you see in this company?

Arpit Agarwal: I absolutely believe there is an opportunity in what is called as India 2 audience, and be able to monetise the India 2 audience. Already, there are apps like Bigo Live, which are very popular in the India 2 segment. And a lot of their content also tends to be vernacular. The key thing that Mech Mocha changed is that they are bringing games to the center of this conversation.

It's not only pure video, because there is a game happening. People get the benefit of building a friendship and playing a game.

The key part here is using technology you are able to bridge a lot of gaps. For example, some people who are on the mobile network are looking to practice English.

They also help you to build a friendship between strangers. There is a lot of free time, and there is a need for people to connect with each other. You can also invite friends and play the game, so that option always remains. You can also play the game with strangers.

No one else has done this in the past. We don't know how this will actually turn out, but we are very, very excited.

The Passage: You are closely working with Chinese investors here in India. From your perspective, do you think the investment interest from the Chinese side has changed in last three years?

Arpit Agarwal: In 2019, the Chinese VC investors were a little bit slower or muted compared to 2018. I have also noticed people who had invested in 2018 are basically looking and waiting, while new players have invested this year.

For example, GGV has done three deals. Hillhouse and Qiming have done some deals.

India is not like China, where companies grow very fast. So, therefore, they must be waiting for the companies to grow or for the investments to show the returns.

Every investor goes through these phases, they will first deploy capital and then they will wait for capital to grow. And then they will deploy more capital, because ultimately it is about making money.

In terms of stage, while earlier Chinese investors are very happy to play in a series A company, they are typically now looking for the later stages, maybe B or even C.

That is partially because a lot more capital can be deployed, and a lot less competition exists for India for a B or a C company. So they will be able to get access to better deals.

The Passage: How do you think the Indian startups can benefit from Chinese investors?

Arpit Agarwal: India has a lot to learn from China.

China is a market which has the largest number of Unicorns. We also know their economics is very strong.

When an entrepreneur has an option of taking Chinese money, they definitely will take it because they know that they can tap into a new network of both investors and also entrepreneurs who are based in China. From there, they can learn a lot of things about how to make business models work better, because China is ahead of India in many ways.

We are welcoming this relationship and we are also very lucky to have a few Chinese investors in their first few deals in India with Blume.

The second thing is, because of Chinese experience, some of these companies will start focusing a lot more on economics. Also, the ability to take the company to IPO is very important and critical for Indian startup ecosystem to become very large.

Third part is Chinese investors are also a lot more decisive in their approach and fast. We also like the fact that when Chinese investors are moving fast, there is expectation, which is set on investors in India also, to work fast and make quick decisions and so on.

The Passage: The data price in India has slightly gone up of late. Do you think it will have an impact on internet startups?

Arpit Agarwal: India is a large country. Someone's challenge is someone else's opportunity. The companies have raised their data prices because it is important for their economics. But the key to understand is that a lot of people are already in it. And these people are not going to get out of network.

Last year, we heard there are 450 million internet users in India.

The growth of internet users in India may slow down a little bit. I don't think it will slow down dramatically. Already there are so many people that can be engaged and then monetised via various services.

It will probably impact the growth of users online. However, it is important and it is almost certain that the users who were already on internet are unlikely to give it up because they have tasted something which they didn't have before.

The Passage: This year Sequoia has launched the Surge program focusing on Southeast Asia and India. What difference it’s going to make in India’s early stage space?

Arpit Agarwal: When Sequoia launched Surge, we already knew we have been squarely focused on early stage which Surge also happens to focus on. We know there is a lot of excitement in this space. So we welcome the fact that Sequoia has launched the Surge program, which makes early stage a lot more focused.

They also bring all their experience and network, which is very useful to the entrepreneurs in this stage. There are a lot of opportunities that you can work together and collaborate. In fact, there are already two or three deals we have overlapping with Surge.

However, the key part to understand - I think this is where Chinese investors can also learn - is that if you are focused on early stage, you will get access to companies, which may not be the case at later stages.

A lot of business models will emerge and lot of new entrepreneurs will happen. However, if you keep waiting for this companies to become more mature, the companies may actually not survive that long because they don't have access to capital.

So, expanding the base of capital only means that a lot more will have to happen at later stages.

We welcome Surge and any such program that any other VC would launch, because this is only proving the potential in the early stage in India.

Ruiyao Luo

Ruiyao Luo is a Beijing-based tech reporter. She focuses on emerging startups and tracks the trends in the startup industry in India and China. She can be reached at

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