China could become a role model for Indian tech entrepreneurs

3 min read
Image credit: Masha Borak/TechNode

“Indian startups are not as ruthless in execution as Chinese startups because we still have a culture of democracy,” serial entrepreneur Kunal Shah joked at Startup Grind Beijing’s India: The New Startup Destination.

Democracy does not necessarily work well in startup situations because running a startup is like fighting a war, Shah continued noting that this is something he learned from Chinese companies. But there’s a flipside—there are generals in the startup battle that press too fast and end up destroying their units.

Shah, a former Y Combinator part-time partner and advisor at Sequoia, spoke along with Sequoia Capital’s Bangalore-based Prateek Sharma on August 21. The two speakers compared their experience in working in both Indian and Chinese startup ecosystems.

Aside from startups, they also talked about differences in the market which is growing faster in China than India. Although India has plenty of its own idiosyncrasies, a particularly glaring one is the rate of women that work. In India, the rate of employed urban women is far lower than in China which means that half India’s users will behave differently than in China.

Still, India has much to offer both to local and Chinese entrepreneurs. In 2009, India initiated its digital identity project Aadhaar, the world’s largest biometric ID project. It is the first step towards offering digital services such as financial services including loans, payments, as well as government services.

Another is the falling prices of mobile internet. While India is still a very price-sensitive country, lowered costs have made entertainment options as well as other services more easy to access. The combination of Aadhaar and mobile internet is set to boost smartphone usage, the two speakers explained. This will also amass more data that can be used to launch new products.

“India is finally realizing that copying models from the West won’t work,” said Shah. “Now entrepreneurs can understand what the market needs instead of copying the needs of the West hoping for best.”

The question is whether China can serve as a new innovation model for India. Indians may not be used to looking up to the East for products and business methods to copy. However, exchanges are are growing meaning views are likely to change quickly too. Aside from the mobile-first development, India shares a lot more with China.

“Trust is fairly concentrated in the East and not so concentrated in the West,” Shah said, noting that an example of an Indian brand that holds much power would be Tata. He mentioned how Chinese companies try to launch products in many more verticals that would be considered normal in the West. Alibaba, for instance, is not only an e-commerce giant but offers payments, investments, and loans, buying movie tickets, and booking accommodation and travel, to name just a few.

“Institutions have been much stronger in the West and customers would naturally trust any new product without worrying about downsides,” Shah said. In the East, we are attracted to a few known brands to do more things and therefore app bundling makes more sense”

Investments from China into India have been growing. Aside from Chinese smartphone makers such as Xiaomi which have been making waves in the country, other companies have made strides, especially in the e-commerce sector. Many Indian companies in the field have been partnering with Chinese investors with Alibaba already building a significant presence.

Since its entry in 2013, Alibaba has invested in key companies such as payments platform Paytm, e-commerce platform Snapdeal, and online grocer Big Basket. The latest rumor is that Alibaba is exploring a joint venture with Reliance Retail which might further its new retail push into India. The company, however, is facing formidable rivals including Amazon as well as Walmart and Tencent-backed Flipkart. E-commerce in India is the last big market to be captured—and it is going to be a bloody battle, said the speakers.