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'Indian entrepreneurs have realised copy-paste model don’t work'

Rahul Chowdhri—the partner in Stellaris thinks the sectors like e-commerce, healthcare, logistics, transportation and education have performed reasonably well in the last one year.

Dec 10, 2018 by Ruiyao Luo
'Indian entrepreneurs have realised copy-paste model don’t work'

It’s still early days for Stellaris Venture Partners. The company—founded in 2016—is going full tilt even as the early stage investment market is stumbling along.

However, Rahul Chowdhri—the partner in Stellaris and an accomplished investment professional on his own right – thinks the sectors like e-commerce, healthcare, logistics, transportation and education have performed reasonably well in the last one year.

Stellaris raised USD 50 million in its first close in January 2017. Later on, funds including IFC, CDC and Cisco have also invested in Stellaris. Rahul Chowdhri has been making early stage investments in tech startups for the past 11 years with an impressive portfolio including Shop101 and Mamaearth at Stellaris and Bigbasket, Livspace, Toppr, ID at his prior fund.

2018 has been a lean year for the early stage investors in India. While the overall early stage funding fell 26% from USD 67.6 million in 2017 to USD 40.9 million, the number of deals also dropped from 82 last year to 67 (as of October). The average deal size has also plunged 25% to USD 617,232 from USD 813,624 in 2017 (data from venture debt specialist InnoVen Capital).

The Passage reporter spoke to Rahul to get his insights on early stage funds, Indian and Chinese investors, and market modalities among others.

Edited excerpts:

TP: What does the road map look like for Stellaris in 2019?

RC: Stellaris is an early stage tech-focused venture firm. We broadly focus on three areas. 1) Consumer businesses targeting the next 300 million internet users in India. 2) Tech products for 50 million SMEs in India. 3) Software businesses built from India for global customers.

Stellaris typically invest in either series A or seeding rounds. The idea is to invest in 20-25 companies in a year. On an average, we get 120 pitches a month. We have been investing for two years now and have made 10 investments already.

In 2019, the focus is to continue looking for companies across all above themes.

TP: How did the Indian entrepreneur change over the last three years?

RC: Today’s entrepreneur is much more mature and sane. A lot of them come from big startups and understand the nuances of building a company. Also, they are clued up on the mistakes made by the startups while scaling up. They have gone through a lot of learning and the experience have given them perspective.

The new entrepreneurs are still keen on building big companies with one difference. In 2015, people were only interested in top line. Now, they also realise the importance of margins, marketing cost efficiency etc. That makes it much easier for early stage investors like us.

Now, we also have more interesting and diverse sectors.

TP: Do you think Indian startups can replicate Chinese models here?

RC: China and India have a lot in common. There is a strong desire to learn. In the last two to three years, entrepreneurs have realised that the copy-paste model don’t work. What’s good for china is not necessarily good for India, especially in sectors like education and healthcare.

However, e-commerce and logistics sectors have a lot of parallels.

Now, there is a lot of cultural exchange as well. Not too many people used to go to China three years back. Now people do and hence have a better understanding of how Chinese market work.

TP: How do you see the latest influx of Chinese investors to India?

RC: Firstly, we don’t have a lot of late stage tech investment firms in India. That gap will be filled by global investors, including from China.

Second is the learning and the experience Chinese investors bring.

There is also a flip side. India is not on the same level as China is today. Things that work in China might not necessarily work in India. There is a possibility of an expectation mismatch. Because of the per capita GDP, the margin structure would be different, even if the growth rate is same.

The Chinese investors should appreciate such things.

TP: Does it make sense for Chinese investors to keep on investing in India?

RC: It is hard for me to say what a Chinese investor's expectation is in India. A lot rides on expectations as to whether an investor should continue to invest here.

The reason Chinese investors come to India is to diversify. They understand the China market is kind of saturated. There are only so many new internet users you can tap and the consumer demand is also starting to slow down. Which begs the question, if I have to go beyond china, where do I go? You can go to Southeast Asia, but those are all small countries. India is a large country and in close quarters. In that regard, going to India makes a lot of sense.

Next question is, is this the right time to invest in India? We are obviously bullish on Indian market. If you are an investor from China, unless you start investing now, you wouldn't learn and miss out on a lot of opportunities in India.

We are very positive on where Indian economy will be five years from now. So if you come with a time frame, this is the right time to invest.

TP: Was Shop101 a strategic investment given Stellaris has invested in Wydr as well?

RC: They are entirely different companies. While Wydr helps offline retailers procure items, Shop101’s business is entirely online. In the case of Shop101, the sellers are not typically businesses. The seller could be a housewife, a student or a trader. They don't stock items and sell only on social platforms. The whole approach of selling is not to build shops, but to cultivate a follower base.

TP: Do you think Shop101 can emulate PDD’s success in China?

RC: PDD is a consumer app and has a slightly different model. Shop101 occupies a different space. It is a combination of Yunji (social e-commerce app) and Shoppify. The end consumer will never realise they are buying from Shop101. They will think they're buying from a social seller on WhatsApp, Instagram or Facebook. Shop101 enables the social seller and curates their products.

For Shop101, the seller is the customer. The company is growing 30% month on month.

TP: Do you think Indian enterprises are not too keen on group buying models?

RC: Interestingly, Indians had a leaning towards shopping in groups ten years back. We used to purchase in bulk for friends or families with a lot of bargaining going around. Now, there is a shift in attitude, thanks to the proliferation of nuclear families and more and more people moving to towns.

Part of the reason for the popularity of group buying in China is WeChat. Unlike WhatsApp, WeChat allows business to business transactions on its platform. WhatsApp doesn’t allow mini programs or offers logistics support. The lack of payment options is also a handicap.

The PDD model worked in China because the distribution part is already taken care of. WeChat users open the app at least five times a day. I think that’s what allowed PDD to grow despite Alibaba being there.

The other reason for PDD’s growth is the depth of manufacturing in China. On account of the economic situation in China, a lot of the manufacturers have spare capacity. They are ready to manufacture at a marginal cost for companies like PDD. Will the same model work in India? Maybe not. While an Indian startup can build group buying as a feature, it will still need to figure out life outside WhatsApp and how to get products to the customers at a competitive rate

PDD has the supply and demand elements in their favour.

TP: Tell us more about your investment in healthcare platform Mfine?

RC: Mfine is an AI-based healthcare platform. Mfine offers solutions for your health problems.

The first step is consultation. When you open the app, the bot will start a conversation with you and collect information on your symptoms and medical history. The bot will hand over the data and a probabilistic diagnostics to the doctor when she comes online. You can interact with the doctor through text, image and video. The doctor will write a prescription based on the differential. Mfine has tie-ups with labs and pharmacies to collect test samples and deliver medicines at home. If the diagnosis is serious and requires surgery, the doctor can direct you to the relevant hospital as well. The large part of the process is AI-based and in a couple of specialties the diagnostic accuracy is around 95%. The doctors' productivity has also gone up two and a half times in some specialties.

The doctors come from 70-plus reputed hospitals in India. Mfine is becoming an end-to-end healthcare platform.

TP: What do you think of edtech sector’s prospects?

RC: While we think there is a large customer pain point to address in education sector, as an investor, the challenge is to figure out where to put the money in. Players like Byju’s, Toppr, Unacademy are doing really well. The Cuemath’s model has still space. We are not looking for incremental innovation over existing Ed-tech companies. We will back players who bring a totally new paradigm to learning - be it in k12, test prep or professional learning space.

I don't see a challenge in the revenue model. But I think there are two major challenges for tech companies. One, the marketing cost is very high and edtech is not a high repeat business. Second, most of the startups don't focus on efficacy.

TP: What’s your thoughts on the bicycle-sharing segment?

RC: We have invested in scooter sharing startup Vogo. While there are some great founders in bicycle-sharing, the business will not work in India for three reasons. Firstly, Indian climate doesn't support bicycle sharing. Bangalore is fine. But if you go to Bombay or Delhi, you will struggle to cycle for even fifteen minutes.

The other challenge is the road conditions. The roads here are not designed for cycle. Third is the stigma. In India, cycle is seen as a poor man’s vehicle. There are a few cycling enthusiasts, but most of the Indian population do not think of cycling as a mode of transportation.

Hence we decided to invest in scooter sharing. The proposition is similar. Both are trying to solve the last mile transportation. Vogo sits between bus and auto as a choice of commute.

Autos are slightly more expensive. A typical auto will cost you about 15-20 rupees per kilometer. Whereas, Vogo scooter costs you six to seven rupees per kilometer. The price is halved. The problem with auto in India is, there is a lot of haggling over the fare. Those are the issues the scooter-sharing companies are trying to address.

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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