00:00hi everyone welcome to the a6 & Z
00:02podcast I'm sonal and today we're
00:05talking about India and China and we
00:07have two partners from andreessen
00:08horowitz joining us for this discussion
00:09we have Connie Chen who is a partner in
00:11the investing team and she covers all
00:13things China for the firm and we have a
00:16new hurry run who is a partner in the
00:18deal and investing team and covers
00:20marketplaces ecommerce and a bunch of
00:22other areas India and China is obviously
00:24really huge topics that we're talking
00:25about everything from the nature of the
00:27competition that's hot playing out there
00:28right now whether global players have an
00:30advantage or dude local players truly
00:32have an advantage we're talking about
00:34logistics and infrastructure we're
00:35talking about the talent landscape but
00:37locally and beyond and whether that even
00:40matters given the permeable boundaries
00:41between borders and so much more so
00:43we're just gonna get started what do you
00:45think are some of the biggest
00:46misconceptions that people have when it
00:49comes to thinking about China and India
00:51at least from what I've heard and the
00:53venture capital community in Asia India
00:56is a fascinating place to me because I
00:57have a coal group of investors who think
01:00India is the next China and they believe
01:02that that wave is starting right now and
01:04they're eager to deploy money and then I
01:06have a whole other camp of investors and
01:08advisors who are saying oh no it's much
01:10longer there are far bigger differences
01:13than you realize and just because
01:15they're both countries that have massive
01:17populations doesn't mean that they're
01:19similar so I agree with you I think
01:20there are a ton of misconceptions out
01:22there about India in particular how it
01:24compares to China yeah and I think you
01:27know not just in comparison to China the
01:30other misconception I have seen is also
01:32that you know a lot of the companies are
01:33easily classified as clones of US
01:36companies you know you almost start
01:39seeing things like oh is this the Amazon
01:41of India is this the uber of India and
01:44you know they may not be completely
01:45wrong in saying that but I do think
01:47there's a lot of elements in execution
01:50that's quite different and local to
01:52those markets that's very different from
01:54the US so it's not necessary that a u.s.
01:57player going into those markets has all
01:59the advantages I think there are local
02:01advantages which is why some of the
02:04local players who understand the
02:05ecosystem better if they end up
02:06executing have the potential to win
02:08those markets why is that
02:10for those who don't live in India or
02:11China is it really true that that local
02:14makes a difference or is that just a
02:15theory because when I think of
02:16businesses like Amazon who have the
02:18scale of operations to really be able to
02:20execute on doing something in India and
02:22then I think of players like Flipkart
02:24and other companies who are basically
02:25the Amazons of India may be having
02:28so-called local advantages what would
02:29those look like so let's take the
02:31e-commerce market in India since you
02:32brought up Flipkart and Amazon so
02:34Flipkart would entered the market or
02:36started in the market in 2007 so way
02:38before even Amazon entered India and it
02:41was actually started by two guys who
02:43worked at Amazon and they in fact
02:45started with books as a category now no
02:48doubt India is you know it's almost just
02:51at the beginning of the e-commerce wave
02:53but to answer your question on what are
02:55some of the differences online payments
02:57right in the u.s. I would say that a
03:00credit-card penetration has higher
03:02payments are more online in India cash
03:04on delivery is still the biggest
03:06component in fact I think there was a
03:08report that was recently quoted saying
03:10that credit card penetration in India is
03:12only about four percent so you can't
03:14really think of doing transactions
03:16online so Flipkart was one of the first
03:18players in India to roll out cash on
03:20the second is logistics and
03:22infrastructure for example Jeff Bezos
03:24has said this many times when he started
03:26Amazon he drove in his car the packages
03:29to you UPS or USPS and they took care of
03:31the shipping you can't expect that to
03:33happen in India overnight it's not you
03:36know national network is far and far and
03:38few in between many of the packages are
03:41actually delivered by air and then the
03:43last mile has to be fulfilled by two
03:44trucks in fact there was a recent post
03:47that said one package was touched by 30
03:49people well in India in India and and
03:52just to put this in context for example
03:54I think that same report said that if
03:56you look at percentage of net sales 30
03:59percent of net sales in India is
04:01delivery versus Amazon and the US says
04:03it's about 10 or 11 percent so you can
04:05just see the amount of delivery cost
04:08that goes in to make sure the last month
04:10fulfillment happens so those are some of
04:12the reasons that the local market may
04:13have certain advantages or disadvantages
04:15depending on how you look at it over
04:17like competitors coming in from other
04:18places Connie how does that play out in
04:20China I think the bigger issue around
04:22this local expertise is a true
04:25understanding of the customer
04:28so for example like even on the
04:29e-commerce side the same thing kind of
04:31played out in China where Alibaba really
04:34understood what customers in China
04:35wanted and similar thing around payments
04:38Alibaba facilitated various kinds of
04:42payment options including cash on
04:44delivery as well logistics I think is a
04:46little bit more built out in China as my
04:48guess than India I bet that's true
04:50having continued myself many times and I
04:52can dust2 that you know a concept that I
04:57think some Western companies didn't
04:58fully grasp which is that a lot of
05:00Chinese consumers love deals they love
05:02coupons they love sales they don't like
05:04paying full price for all kinds of
05:05things right maybe a luxury excluded and
05:08so that understanding and how to market
05:10to that specific consumers is a really
05:12big important piece I think about that
05:14local functionality and local expertise
05:16I completely agree with you Connie I
05:18think the local market needs a deep
05:21understanding of the local market needs
05:23is critical to win in those markets
05:24having said that I think in India it's
05:27unlike in China where you have Alibaba
05:29as a clear market leader in India the
05:31e-commerce is a hyper competitive market
05:33even today it has always been a hyper
05:35competitive market you know it started
05:37off with about more than 50 ecommerce
05:39players in the market and now you know
05:41the top four are actually flip kart snap
05:43deal amazon india and PTM and what's
05:46interesting about Amazon India is they
05:49came into the market only about three
05:51years ago of course they have a lot of
05:53financial muscle because of the backing
05:55from the US but there are many things
05:57I'm I've seen that they're leveraging
05:59the learnings from the US but still
06:02catering to the local market and
06:03executing pretty well so for example
06:06logistics being the significant
06:08challenge Amazon actually was the one of
06:11the first players in India to partner
06:12with the Indian postal network I thought
06:14which was really smart because if you
06:17look at distribution they are the ones
06:18that have national distribution and the
06:21rural market in India is significant
06:23smartphone penetration is increasing and
06:25the rural people in rural market are
06:27looking for purchasing online and so you
06:30need to have that distribution point
06:32right I'm actually waiting for the day
06:33where someone partners with the local
06:35Tiffin carriers coz aren't if you guys
06:37know this but there's like there was
06:38actually some famous business cold case
06:41for the Tiffin carriers of Bombay or
06:43Mumbai and basically the Tiffin carriers
06:45are people who carry lunch to people in
06:48the city and there is like an assistant
06:49like an artery system that connects
06:52people riding on bikes and somehow the
06:53Tiffin goes all the way from the top of
06:55Bombay made in someone's home and it's
06:58basically full of all these food like
06:59roti chapati rice you know sub G
07:01whatever all these like vegetables
07:02dishes and makes any these little metal
07:04tin containers the Tiffin's all the way
07:06to the lunch place and the logistics
07:08infrastructure for it is incredible
07:09especially because this was before
07:12yeah and just imagine taking those
07:13smarts and applying that for like the
07:15last mile to what you're driving yes I
07:17think what this is getting at is I think
07:19you need to have a baseline level of
07:21technology in order to be competitive
07:24with the local player and this is true
07:26for both the global and the local player
07:27both of them need to have a baseline
07:29level of tech and logistics is one I
07:30think where there's a lot of tech
07:32involved yeah on top of that though
07:34after their baseline tech is met I think
07:36then it comes down to marketing
07:38partnerships distribution and things
07:40like that and that's where the local
07:41expertise is really critical how about
07:43on the product innovation side actually
07:45more specifically the design side you
07:47know there's a lot of things that people
07:48write about the differences in designing
07:50for a different cultural market are
07:52there any universals here are there like
07:54specific things that you guys have
07:55noticed in both China and India and how
07:57some of the design trends play out I
07:59think that today because of a lot of
08:01traffic between the two countries and a
08:03lot of people who live in the US and
08:04move doing their and there's also brand
08:06perception I think the at least the
08:09consumers and in India have an
08:11expectation for how that particular
08:14fulfillment should work similar to how
08:15in the US for example you know when
08:17Amazon came to India they actually had a
08:19guarantee same-day delivery and so
08:21immediately the consumers expectation
08:22was you know all ecommerce players in in
08:25India should offer that okay some of my
08:28friends who had moved from here to India
08:30wanted Amazon in India to work like how
08:32Amazon worked in the US so that is that
08:35perception in terms of unique product
08:38innovation specific to the country you
08:40know I've not seen something in India
08:41like what we chat has done in China for
08:43example I think in India it's still a
08:46lot more it's quite early to be honest
08:49and then I also think that at the local
08:51players now in the e-commerce category
08:54extent have actually followed Amazon
08:56India's approach by trying to partner
08:58with the postal network by trying to
09:00offer same-day delivery so I wouldn't
09:03say on the product innovation angle I've
09:04seen a lot of differences I'd say on the
09:07product design comparing Chinese apps
09:09versus us apps Chinese apps that I've
09:12used in general seem to be more complex
09:15and I think it's important to recognize
09:17that it's more complex but not
09:19necessarily more cluttered but cluttered
09:21is often the critique that I hear from a
09:23lot of my US friends when they're
09:25looking at a Chinese app but it's really
09:27interesting when you go to China and you
09:29speak with the Chinese consumers if they
09:30have an app that only does one thing or
09:33if there's a screen that only does one
09:34thing that then seems too basic and they
09:38actually prefer the complexity and the
09:40ability to do a bunch of things per
09:43every inch of screen space versus the
09:45states where I think you like the
09:47cleaner look so for example like that
09:48Google search page home page where
09:51there's a single search bar that kind of
09:53design would not do as well in China and
09:57there's a bunch of reasons for this I
09:58mean one even the mobile data plans
10:00there were structured very differently
10:02and a lot of it was paper use right or
10:06there's a specific quota per month and
10:07so having as much information per inch
10:10of screen space was much more important
10:13in China than it was here
10:14that's a fair point actually because you
10:16know the mobile data speeds in India are
10:17really bad if in fact if you look the
10:20average speed is like 2 megabits per
10:22second and mobile is even worse than web
10:24so some you know some of the companies
10:26are trying to figure out how to handle
10:28that because smartphone is the ecosystem
10:31and so how do we sort of design do we go
10:33for the best UI UX or do we go for
10:36utility right which means sometimes it's
10:38not as graphical right maybe maybe
10:41you'll get a bunch of pages where it's
10:42just full of text links but it's
10:43partially for that reason exactly so the
10:46constraints of the infrastructural
10:48constraints and actually influence the
10:50design some of the cultural expectations
10:52around how the design should look how
10:54does this play out with payments and the
10:57philosophy run payments I know you
10:58mentioned earlier that you know one of
11:00the things that the local retailers had
11:03was an advantage in the fact that
11:04they've designed for systems of
11:08yeah I think in India it's still pretty
11:09nice and so cash on delivery is still
11:11predominant and depending on who you ask
11:12at any point in time people would say
11:14it's as high as 50% or 70% actually
11:16didn't Ola in India which is a
11:18competitor to uber in India our sorry
11:21uber actually in India didn't one of
11:23them actually allow for the very first
11:25time in that market cash instead of
11:27other alternative payments Ola hot cash
11:31I think uber recently started
11:32introducing cash on delivery and they
11:34did it by city by city approach the
11:36tricky part is two things fraud can be
11:38really high so it's not easy execution
11:42by fraud you mean people just like
11:44collecting the money under the radar for
11:45themselves or yes and there's a lot of
11:47black money involved and how do I you
11:49know how do I make sure I'm getting the
11:51cash delivered to the merchants at the
11:54end of the whole transaction yeah puts a
11:56whole new spin on the whole concept of
11:57both leakage in the marketplace and
11:59shrinkage in inventory world exactly
12:01like just absorbing this loss right the
12:03credit card penetration is really low
12:05and the Indian central government has a
12:07two-factor authentication protocol as a
12:10result of which what happens is it's the
12:13conversion rate obviously gets impacted
12:14because you have more steps to close the
12:16transaction when it's online you
12:18actually have to go through like few
12:20more multiple steps than how it is in
12:21the US we you just have entered a credit
12:23card and a transaction is done and that
12:25has also sort of you know while it's
12:29helping solve the fraud problem on the
12:31online payment side it has impacted the
12:33conversion rate of the user because it
12:35is more cumbersome and given all the
12:37data challenges that we talked about you
12:38know it makes it harder to do an online
12:40payment but people are trying to come up
12:42with more creative ways and I think
12:44mobile wallet is just beginning and it
12:46has a long way to go but I do think that
12:49if you ask any of the e-commerce
12:50retailers they don't want to rely on
12:53cash on delivery they would much rather
12:54rely on online payments and I think
12:57you're just beginning to see early signs
12:59of that shift it's nowhere close to
13:00maturity at this point
13:01yeah I'd say in China I don't know if
13:04mature is the right word I would use for
13:07it but I would say it's far more
13:08advanced than what I do see in the
13:10states and probably what's happening in
13:12India I'm extremely impressed by both
13:15WeChat and Ali pays for a into payments
13:17so there are so many places now when you
13:21que se where you can pay with your phone
13:23by simply showing a QR code from either
13:26of these kinds of applications right and
13:28and if the ally pay app if you even look
13:31at that up itself it's so much more than
13:34just a payments app you can use it to
13:36check your socks you can use it to
13:38invest your money you can use it to get
13:40your own personal type of sesame credit
13:43score which is equivalent to like a FICO
13:45score it is so much more packed of
13:49functionality than just the transaction
13:50piece you can use it to order food get
13:52coupons and and it's really more about
13:55wealth generation and wealth management
13:56and not just payments so why does that
13:59matter is it because it's all happening
14:01at the smartphone level I mean I mean
14:03obviously you were talking about the
14:04fact that China is a very mobile first
14:06place and that's a huge part of what's
14:08enabling a lot of this and you're
14:10describing what's happening in the
14:11payments in China putting those two
14:12together though at the end of the day I
14:14think transactions are very critical for
14:16any kind of business whether they're
14:17selling products or services and the
14:19more you can chip away at that friction
14:21of transaction and make it more seamless
14:23I think the faster innovation happens so
14:26interesting so you guys are describing
14:27um a lot of interesting players and
14:30companies and the way things are playing
14:31out what's a funding landscape like
14:33they're compared to here in both China
14:35and India there's so much capital in
14:37China right now that's yo yes but I
14:41think people underestimate how much
14:43capital is available in China and that's
14:46for a number of reasons one a lot of
14:48capital that used to be directed towards
14:51real estate or other traditional
14:52industries are shifting towards tech and
14:54shifting towards startups you have
14:57another dynamic where the big players
14:59$0.10 ali-baba and Baidu are all making
15:03large investments and acquisitions in
15:05the space so there's a lot of capital
15:06coming from strategics
15:08and the third huge dynamic is now
15:10there's a second wave of very successful
15:13entrepreneurs or executives from these
15:16companies who are now millionaires and
15:17are seeding a lot of companies so I mean
15:21it is true I've heard that in the last
15:23funding has slowed down a bit but it's
15:26still a very real ecosystem I would say
15:29it's true for India as well I think
15:30India is more recent than China
15:33in terms of funding inflows there is a
15:36lot of interest from global investors
15:38one interesting thing that I learned in
15:40my recent India trip is that ninety
15:42percent of the funding is actually from
15:44foreign money and it's not from domestic
15:46and so there is a lot of global interest
15:48I do think that you know it is easier
15:51probably to get funded in the earlier
15:53stage in India then in the SE series B
15:56or Series C and that's partly driven by
15:58almost every single vertical is hyper
16:01hyper competitive from what I've seen
16:02and a lot of these players as a result
16:05have focused on growth at the cost of
16:06profitability and so you therefore start
16:09noticing sort of a crunch and funding
16:12when it comes to the you know Series B
16:14or cdc stage and so on on that point on
16:17you know foreign versus domestic there's
16:19a nuance there when when it plays out in
16:21China which is whether the fund is
16:23Reming beaten on movement or a US dollar
16:26one and that also affects that
16:29particular startups ability to go public
16:32in the States first let's go public and
16:33one of the China stock exchanges why is
16:35it well well for example if you are it's
16:39all related to the company structure and
16:41it's very complex in terms of legal
16:43ramifications if you choose to set up a
16:45US dollar fund versus a B fund
16:48it changes the kinds of companies and
16:49invest in and for those companies which
16:52indexes they can go public on is the
16:55ecosystem similar in terms of like like
16:58VCS like Andrews and Horowitz or you
17:00know private equity players are like is
17:02it like you know big conglomerates or
17:05big companies with like corporate
17:06venturing arms like who are these
17:08players that are sort of providing this
17:09capital needs in both of these
17:11ecosystems so in the Indian ecosystem I
17:14would say on the seed stage it's
17:15probably similar you have a lot of angel
17:18investors and you have venture funds in
17:20fact you know Sequoia is quite an active
17:22investor and so is Axl and Lightspeed so
17:24it's very similar as we were talking
17:26about the CDs B and Series C is when
17:28it's sort of changes I think a lot of
17:31the money at the later stages have come
17:33from Tiger DST and Softbank in India so
17:36just to be clear Tiger which is us-based
17:39DST which is based in Russia or
17:41technically headquartered in London I
17:45Softbank which was originally Japanese
17:48correct yes and recently Alibaba and
17:50Tencent have also entered the market so
17:52we have investors from all over I would
17:55say so it is slightly different in terms
17:58but you know you do see a lot of
18:00similarities and we've seen like you
18:01know Tiger especially now is doing
18:03investments in India at all stages so
18:05they are also participating actively in
18:06Ceylon cities a I think in China the mix
18:09of domestic versus foreign is probably
18:12fairly steady between series a and
18:15onward see it is probably the only one
18:17where I'd say it's mostly domestic
18:19so when you say steady though for the
18:21mix in the early that there are funds
18:25that are both domestic money as well as
18:28funds that are headquartered there's a
18:30lot of Chinese investors investing in
18:31India talk to me little bit more about
18:33how that's playing out yeah I think so
18:35they've recently entered the market I
18:36mean my I would think that Alibaba
18:39entering the market is you know this is
18:41speculation but I would think it's
18:43probably a strategic interest as well I
18:44mean they are the biggest market place
18:47in China with a global ambition and
18:49given the hyper competitive space in
18:52India and given Amazon India is also
18:54actively increasing their presence I can
18:57only imagine that you know at some point
18:58in time they may want to make an entry
19:00there also proactively scouting for
19:02investments in other spaces consumer
19:04Internet I would say is really hot in
19:06India these days across many many
19:08verticals so I'm sure you know they're
19:11looking at investments across to sort of
19:13also keep an eye on how is the landscape
19:15really evolving and it keeps you know
19:18gives them more information on when to
19:19make an entry if they need be my guess
19:21is it's less tied to India and more just
19:24tied to the fact that these companies
19:26want to be global companies they have
19:28global ambition they are rock stars in
19:31their own countries and they have the
19:33capital and the execution ability to now
19:37figure out what their international
19:38strategy really should be tunson and
19:40Alibaba and a bunch of other Chinese
19:42companies are now looking at all kinds
19:44of international expansion and figuring
19:47out for each country should it be M&A
19:49should it be go to market what exactly
19:51should they be doing in that country I
19:53know Southeast Asia is is a huge target
19:55for both of those two companies you
19:58but even the United States both of them
20:00are very active here as well speaking of
20:02the global ambitions Chinese companies
20:04want to become huge Indian companies
20:06only become huge these innovations do
20:08not have to start from the US any longer
20:11but at the same time US companies are
20:14just dying to go to China and India I
20:16mean is it just because there's a huge
20:17large global market and that's it or are
20:19there other reasons that you think or
20:21other factors that are playing out there
20:23I think that reason it's good enough the
20:28market the number of consumers that are
20:30out there I mean you take the population
20:31of China you subtract the population of
20:33the United States you still have a
20:34billion people left it's a massive
20:36massive market and on top of that the
20:38markets growing you know no matter what
20:40your thoughts are on how quickly it's
20:42actually growing it is growing
20:43undoubtedly and so that alone I think is
20:47reason enough to try and figure out what
20:48a China strategy should be on top of
20:51that though I mean if you really do
20:54believe that innovation can come from
20:55anywhere it's a market where you can
20:57study an entire new ecosystem of
20:59startups that are in related spaces and
21:02sometimes from studying your
21:04counterparts you're gonna learn that
21:05they are similar but extremely distinct
21:07and there are always ways that you can
21:09learn from them so I think interest from
21:10United States startups in Chinese
21:13companies or indian startups should only
21:15increase as they start to become aware
21:18that these companies are not exact
21:20copycat I agree with it I think if you
21:22look at internet usage globally like the
21:24number one country is China scorning
21:26mentions like 650 million users the
21:29number two is India so United States is
21:31actually number three so why wouldn't
21:33you want to go tap the market and
21:35arguably China and India are still very
21:36nascent India has only you know about 20
21:39percent penetration of Internet users
21:40and so this is only growing and you know
21:43so I do think you know the the the
21:45reasons why US startups are interested
21:48in expanding in India India and China
21:49there are really big market
21:51opportunities but having said that I
21:53would caution though on when to sort of
21:56enter I think what you're also seeing is
21:59all in India and China there's a lot of
22:01innovation happening within those
22:02countries and so they try to look at us
22:05and they see which verticals are doing
22:07well and what business models are doing
22:09well and so you start seeing companies
22:10being incubated in those spaces we
22:12seen that at e-commerce in India we've
22:14seen that in ride-sharing we've seen
22:16that in grocery right so we're seeing
22:18that in almost every vertical so what
22:19happens is then the u.s. startup feels
22:21they need to enter these countries right
22:24away and what you often see is there is
22:27a right time to enter and I think when
22:30you have cracked your own market your
22:32domestic market or your first market
22:34that you launched it's actually easier
22:36when you have done that to enter rather
22:38than fragment yourself you know across
22:4010 or 20 countries when you're an early
22:42state startup because then you started
22:44you know you haven't really understood
22:45what it takes to execute in one and no
22:48year and 15 so there's a difference
22:50between getting to a good outcome was a
22:52great outcome the classic example is
22:54Amazon India right they waited so long
22:572007 was when Flipkart started they
22:59entered the market only three years ago
23:00but from everything we've heard on the
23:03ground they are doing pretty well
23:04they're doing very very well with
23:06respect to the rest of the competitive
23:07landscape it's so fascinating watching
23:09all the players trying to compete with
23:11each other both domestic and
23:12international especially when it comes
23:14to ride-sharing like what are some of
23:16the interesting things that are playing
23:18out there in terms of how to do business
23:21in China transportation in China is
23:23changing very quickly it's always been a
23:26big need in China despite your
23:28population the largest subway number the
23:33largest subway in the world is in
23:34Shanghai and the second largest is in
23:36Beijing and it's just because there's
23:38been massive urbanization happening in
23:41China and so the kinds of traffic that
23:44you have to deal with now when you're in
23:46these cities is so much more painful
23:48than what you have to deal with even in
23:50a city like Los Angeles and so the whole
23:52need for innovation and transportation
23:54has been has been a need that's been
23:57just bubbling in China for a very long
23:59time as a result I think that that world
24:03is also changing very quickly and maybe
24:05innovating at a pace that's faster than
24:07what I see happening in Silicon Valley
24:09so for example like didi they are going
24:14beyond just cars to also thinking about
24:16what are other services you can offer to
24:20what are interesting what are other
24:24interesting sources of revenue that they
24:26can come up with whether it's rolling
24:28out buses and not just personal cars or
24:31thinking about you know can you tackle
24:34on insurance or can you tackle on gas
24:38refills or whatever it is they're
24:41starting to brainstorm these kinds of
24:42additional services they can offer both
24:45passengers and drivers and and that and
24:48the DD lifts example of a company in
24:52Silicon Valley who really figured out
24:54how to work very well very very well
24:57with a Chinese company there is true
24:59partnership dynamics happening where the
25:02executives are exchanging notes and
25:04thoughts and strategies on a very
25:07regular basis and interactive app DDL so
25:10invested in all our recently in their
25:12latest round and so this just goes to
25:13show how a player in China also has you
25:16know global ambitions and it's no longer
25:18just the US companies trying to enter
25:20the various markets and the other
25:22interesting thing about uber and Ola
25:24evolving in the Indian landscape I would
25:26say is a you know all obviously
25:28partnered with on all modes of
25:29transportation right in India it was not
25:32just the taxi cabs there was also the
25:34three wheelers which we call the auto
25:35rickshaws and so there are different
25:37levels and you know you have different
25:39price points which they sort of
25:40innovated but I would say right sharing
25:42in India is probably still much earlier
25:44than in China in terms of where they are
25:47in their evolution and uber has sort of
25:49also entered the market relatively early
25:51so it would be interesting to see how
25:53both of them sort of evolve as they grow
25:56I think the other key point I want to
25:57note here is both of these markets are
25:59really high volume markets so I don't
26:02think for a global pair while their
26:04ambition is to be number one in all
26:06those markets I think even having a
26:08significant presence and a good enough
26:11share will give them a great outcome I
26:13totally agree with that I think a lot of
26:15companies if they want if they go into
26:17China and they have realistic
26:18expectations of maybe only getting 5
26:20percent market share that could still be
26:22millions of users yes exactly
26:25just one last question on the
26:26ride-sharing note one thing that
26:27fascinates me is the cultural
26:29interactions with technology and when I
26:32think of ride-sharing in the u.s. I
26:34really disrupted isn't just a taxicab
26:36industry it's actually car ownership but
26:40when I think of car ownership in
26:41countries like China and India first of
26:44all it's very expensive like the the
26:45economics are very different right
26:47because people don't have that kind of
26:48income there's a huge poverty gap but
26:51there's also this fact that owning a car
26:53culturally is still a huge status symbol
26:56and a milestone that maybe we culturally
26:58not to imagine eyes it but just
27:00generally speaking have could possibly
27:03move past now and so I'm curious to hear
27:05your guys's take on how that those
27:07things are playing out culturally like
27:08are people just ride-sharing in China
27:11and India because it's more about just
27:12it not heard of two taxis is it because
27:15they never have aspirations to own a car
27:17so in India I do think people are
27:19probably not making the trade-off of
27:21owning a car versus relying on uber or
27:23or like yet but the discussions are
27:25definitely happening to give you more
27:28color on it in India it's not just about
27:30owning a car almost you know most people
27:32also have a driver employ a driver to
27:34drive a car that is extra cost as well
27:36and you're studying ours and ours and
27:38traffic so if you don't have a driver
27:40and you're driving the car then that is
27:41unproductive time because it could even
27:43take two hours to get to work each way
27:45in metros given the infrastructure is
27:48I do see quite a few people therefore
27:50relying on uber or Ola given the cost
27:53efficiencies and therefore choosing that
27:55over you know asking the driver to come
27:58to drop you at the airport and so on I
27:59also see the senior population in India
28:02relying more on uber and Ola which is a
28:04very interesting from and then it is
28:05interesting because I think that one of
28:07the most fascinating cultural shifts and
28:09China and India and compare the u.s. is
28:11how people take care of and think about
28:13their elderly so that's really
28:14interesting yeah I've seen a lot of you
28:17know people who are in you know above 60
28:20for example who do really worry about
28:22driving in that traffic when you know
28:25there's not really lanes in particular
28:27or rules in particular and so they
28:29actually really appreciate our line over
28:31and this under services and almost rely
28:34on there was even for their day-to-day
28:35activities I think in China smartphone
28:38penetration for that particular age
28:39group this is still a lot lower than
28:42what the smartphone penetration is for
28:43people in their 20s so I wouldn't go as
28:46far to say that elderly folks and
28:48are able to use DD to get around or over
28:51to get around that easily yet just by
28:53sheer not having a cell phone I would
28:56say that I think the answer to this
28:58question at least in China is is going
29:01to be completely different if I think
29:03about a tier one versus a tier two city
29:04and also if I compare different age
29:06demographic and China I think also the
29:09general trends around age demographics
29:12are also much more distinct than I would
29:14say even in the United States people who
29:16are born in the 80s or 90s will behave
29:19very very differently and it's partially
29:21a cultural and a history related
29:24phenomenon where people who are born in
29:26the 90s have never really experienced
29:28that much poverty they're mostly all
29:32single children where they don't have
29:35siblings and so they're either
29:36inheriting a lot of money or they are
29:39responsible for paying for not only both
29:41parents but both sets of grandparents
29:43and they have a lot of financial burden
29:45it can be one or the other and so the
29:47behavior I think of age demographics in
29:49China is going to be really different I
29:52do think a lot of people who are born
29:54maybe after the 1990s in China are
29:58probably much more eager to use didi and
30:00uber as a car replacement the older
30:03generations I don't think is fully there
30:06same thing about drivers is happening in
30:09China what's happen for a very long time
30:10a lot of people who have the means do
30:13have their own personal drivers and
30:15there's also fun nuances here and when I
30:17talk about tier 1 versus tier 2 cities
30:19so for example in Beijing even if you do
30:21have a personal driver just by sheer a
30:25la based off your license plate there is
30:27one week day every single week where
30:29that car is not allowed to drive and so
30:31you either have a second car for a
30:33second license plate or you are using DD
30:36or another service for that particular
30:38day it's so fascinating well on another
30:41cultural note just to revisit a theme
30:43that's kind of popped in and out of this
30:45entire conversation which is around
30:46copycats versus innovation and how we
30:50define it because a lot of people when
30:52they think about China and India
30:53initially thought about the innovation
30:55happening as just duplicating what was
30:56happening here and we're talking about a
30:58lot of local customization but we're
31:00also talking about something more
31:01what other people have described
31:03improvisers versus just copy cutters and
31:07then what comes next after that do you
31:09guys have thoughts on what innovation
31:12means in China and India I think in
31:15India you improvise this probably
31:17characteristic of the types of
31:19innovation that you're seeing so if you
31:21look at ecommerce you know the initial
31:23ambitions of these players where we want
31:25to be the Amazon of India if you look at
31:27grocery it's like oh it should be be
31:29like instacart right so I think that
31:32it's more about rolling out those models
31:34but then learning quickly what are the
31:36challenges of the Indian market and so
31:38how do we sort of tailor to that to make
31:40sure you know we're able to satisfy the
31:43customer or delight the customer in the
31:45end-to-end experience I think in terms
31:48of totally new innovation which is like
31:51you know should the US companies look at
31:53it and learn from it I think we're still
31:55very early in that ecosystem I would say
31:58though that in fact they because the
32:00resources in India and the labor cost is
32:03relatively cheap what you tend to see is
32:06sometimes a problems are handled with
32:09heavy operations versus technology that
32:12is a stark difference I've seen when
32:14looking at us startups versus Indian
32:16startups for example to give you an
32:18example when you look at a series a US
32:20startup or a seriously if you know you
32:22sort of get surprised if they say 150
32:24people or 200 people like that's a lot
32:26of people in India it's quite common to
32:28say I have 650 and 900 people in a
32:30series a 900 yes you can hear people say
32:34650 or 9 and yeah I think it's largely
32:38because you have a call center
32:40operations for even getting orders so
32:43even though we live in the online
32:45economy people you know some of the
32:48custom consumer behavior is I'll use the
32:50website or the mobile app to browse but
32:52I want to be able to call to place the
32:54order and so people start investing in
32:56call center operations and so I think
32:58that because labor is cheap people don't
33:00think twice about you know how should I
33:03for technology and keep costly labor
33:05market really influences one of the
33:08resources that people use for how they
33:10actually innovate that's just
33:11fascinating yeah I'd say innovation is
33:13it's so hard to define but
33:15my mind innovation is improving the
33:16status quo and so in China that can play
33:19out in so many ways like with companies
33:21like Xiaomi but a bunch of other
33:22hardware players China has a lot of real
33:24innovation happening on the supply chain
33:26side and manufacturing on the consumer
33:29internet side I think a lot of the
33:30innovation is around business models how
33:32do you monetize how do you figure out
33:35what that Chinese consumer really wants
33:37and how do you market it to them so
33:39speaking of that is the nature of the
33:41firm like the definition of a company
33:43kind of different in both of these
33:46places because again one of the threads
33:48that struck me is so fascinating about
33:50the WeChat story is the role of the
33:52conglomerate versus like an individual
33:55company like a small company or whether
33:57it's a start-up or a huge company like
33:59you know an IBM but we're talking about
34:02a different type of firm like a
34:04different organizing entity that has a
34:05different mindset how is that kind of
34:07playing out with this question of
34:10innovation in both China and in India
34:11Honua yeah I mean in China $0.10 Alibaba
34:16I do but even companies like like a
34:19Xiaomi or a Qi who are very active in
34:22areas that are outside of their core
34:24product and they're very active in
34:27making investments they're very active
34:29in doing partnerships and I think that's
34:32a wonderful thing I actually think that
34:34that just gets the ball rolling even
34:36faster in terms of innovation and I
34:39really do think it's fantastic for the
34:42Chinese startup ecosystem as well that a
34:44lot of these companies are not just
34:46looking at what's hot and rebuilding it
34:48themselves they're now spending a lot of
34:50their own dollars to partner and invest
34:52in these startups I think the engine
34:54echo system is quite different from that
34:56and it's partly driven by the fact that
34:58it's still early you don't have an alibi
35:00but yet in India you don't have the buy
35:03the buy it the Google of India is Google
35:05the Facebook of India is Facebook right
35:07so you're almost seeing the first wave
35:10of innovation only now I would say I
35:13would argue that it's very recent and so
35:16you have to we have to wait and see how
35:17this ecosystem evolves but I do see
35:20those entrepreneurs really helping out
35:22the other startups in the ecosystem and
35:24also keeping an eye out on potential
35:28has done a lot of acquisitions I mean as
35:29I mentioned earlier there were 53
35:31commerce companies in India at some
35:33point and they have acquired you know
35:35like lots of them in different verticals
35:38that are made solid dating so I do think
35:40that you will see this phenomenon of
35:42this behavior only in the next wave
35:44because we're still nascent in the
35:45startup ecosystem in $0.10 minor and
35:48only by us mind my guess is a big reason
35:49why they're doing so much M&A is because
35:52they understand the value of
35:53distribution and in China distribution
35:56is so valuable if you have some kind of
36:00partnership with WeChat that is almost
36:02instant guaranteed success for any
36:04startup and I think it's very clever for
36:07a ten-cent to capitalize on that to
36:09really seek out partnerships at
36:11favorable terms and help these companies
36:14by sharing that distribution so how I
36:17have one question here then how do you
36:18gauge the health of these businesses
36:19like how do you measure and think about
36:21it because when I think of you know the
36:23fact that we always have this tension
36:25between you know going for growth and
36:27profitability profitability and in the
36:28speed you want both obviously but the
36:30speed at which you're growing when I
36:32think of what $0.10 did with WeChat it
36:34essentially helped bootstrap an
36:35architect a lot of the cross
36:37collaborations that allow the payment
36:39system to get going and do a lot of that
36:41so that was a case where that sort of
36:42subsidization of transactions was a very
36:44good idea because it allowed it to
36:46become what it is today but the other
36:48hand I knew you've shared that there are
36:51some cases and some of the companies
36:52you've observed where this there so many
36:55transactions are being subsidized at the
36:57expense of the product innovation so and
36:59on the outside to all the users and the
37:02and the business people watching this it
37:04looks the same on the surface but how do
37:07you tell the difference between what
37:08sort of a healthy version of that in an
37:09unhealthy version of that the way to
37:11think about it is you really have to
37:13look at your burn right and is your burn
37:15really subsidizing transaction or is
37:17your burn because you're investing for
37:20the long term and the classic thing that
37:22you want to observe is if you're
37:23spending money on infrastructure in
37:25India and building that logistics
37:27distribution network so that you're set
37:29up for success long term in terms of
37:31improving customer experience and you
37:32own that then it's okay to burn that
37:35cash but if most of your burden is
37:37towards customer acquisition cost and
37:39subsidizing that first transaction the
37:41second transaction the transaction then
37:43those that's what I would worry about
37:45and the con you hear two sides of the
37:48argument for that one argument is well
37:50you know you have to do that early on
37:52because you want to grow and you want to
37:54maintain market share but how long
37:56right there is there's only so much
37:58capital you can raise and you know
38:00capitalists even though it looks like
38:01it's infinite and available at some
38:03point it will stop and so I think that's
38:05when the real test for these companies
38:07will happen and so I think companies
38:09that invest in fulfilling infrastructure
38:12in making sure that their business is
38:14sustainable for the long term is will
38:18have advantages you know in the long
38:21term even in terms of becoming the
38:23market leader that has been the case in
38:25with us you've we've had lots of
38:27competitive space that's right like food
38:29delivery is a classic example it's
38:31extremely competitive and I think the
38:33distinction you would have to make as an
38:35investor is is this the company that's
38:36going to invest for the long term or is
38:38it all about subsidizing transactions
38:40yeah I think this is a global issue for
38:42sure I don't think it's specific to
38:43China or India and its really do these
38:45companies have a path to profitability
38:47is the subsidy program a short-term
38:49program or do they have to do it forever
38:52and while these companies ever be able
38:54to make that product or service
38:55profitable okay so one more question
38:57then about anything follows naturally
38:59from this so let's talk about the talent
39:01ecosystem then um how does that play out
39:03we were talking about these as three
39:05separate entities the US China India as
39:08if there's not these permeable
39:09boundaries and borders and people aren't
39:11actually you know moving between them
39:12and you don't have like a huge base of
39:14Union and Chinese engineers in the
39:16United States and vice versa people
39:19going to various parts for the world etc
39:21but you also do have local pockets so
39:24I'm curious to hear your guys's thoughts
39:25on first of all some of those movements
39:27has brain-drain reversed and then
39:29secondly about the talent markets in
39:32general and culturally their mindsets
39:34someone once recently told me that I
39:37think at Facebook over 20% of the
39:39engineers are Chinese I haven't fact
39:41checked better yet but you know I do
39:44think there are a lot of engineering
39:47talent in the Silicon Valley that is of
39:51Chinese or Indian heritage whether or
39:54trend has a verse I think is a little
39:56bit early to say but there have been a
39:59lot of Chinese companies that have been
40:00very successful in hiring top executives
40:04from not just Silicon Valley but all
40:06over the United States and all over
40:07Europe and I think part of it is they
40:10have the capital to do it they also have
40:12very exciting growth markets that just
40:15individuals who love tech and innovation
40:16want to be a part of so I even
40:19personally know a lot of Chinese
40:20companies that have been able to either
40:22set up R&D shops in Silicon Valley or
40:24convince people to actually move back to
40:27China there's a lot of excitement in
40:28India there's no doubt about it I think
40:31you know this is sort of the inflection
40:34point where things can really take off
40:36and grow and so people want to be part
40:37of that growth and so you see a lot of
40:40interest from Silicon Valley as well in
40:44terms of Indian engineers wanting to
40:45move back and working for the startups I
40:48I think the Indian ecosystem in general
40:51I love the fact that there's so much
40:54energy in the startups and they want to
40:55you know really go build global
40:58marketplaces I think one of the areas
41:00where they really need help is on the
41:02product side and they themselves have
41:04realized that you know Flipkart is
41:05actively looking to hire engineers from
41:07the US in fact their chief product
41:09officer is from Google who was based
41:11here in Mountain View and they recently
41:13in fact made another announcement where
41:15they hired another senior Google exec to
41:17sort of manage their mobile offering and
41:20so you are so you are seeing that shift
41:22I think the other shift you're beginning
41:25to see in India is people have a lot of
41:27excitement to join startups or you know
41:29graduating out of colleges it's not
41:31before where it was you know I wanted to
41:34join multinational companies versus now
41:36it's like you know what's the next big
41:38thing that's going to be was the next
41:40big company that's happening in India
41:42and they're willing to work in those
41:44startups but the other phenomenon that
41:47I'm also noticing is if you look at the
41:49companies from us that expand into India
41:51to take Amazon India for example I met
41:53who leads Amazon India worked in Amazon
41:57Seattle for more than 15 years and so he
42:00has and he knows the Indian echo system
42:03and so he brings the blend of both those
42:06markets and the eggs
42:07Dushan now knowledge of having worked
42:10through Amazon Seattle that he can then
42:12bring that to Amazon India so it's no
42:16longer a question of like a brain drain
42:17one way or the other it's almost like
42:19this bidirectional thing it's like
42:21people are just moving in both
42:22directions and and more importantly
42:24blending some of those exactly assets
42:27yes what about the cultural differences
42:28in the talent markets what do you see
42:30happening in China Akane are there
42:32cultural differences in the talent
42:33market in China I mean down to the
42:36mindsets or other aspects of how they
42:38think about you know working at startups
42:40versus big companies I'd say the best
42:42students are still open to working at
42:44startups just as they are working in
42:46Alibaba or a 10-7 or Baidu and in
42:49addition to that they're very excited to
42:51work for domestic companies it's not
42:53just this halo effect of a Microsoft or
42:56Google in China that those students want
42:59to go work at a lot of them are very
43:01excited to work for domestic ones and
43:02part of it is because they've seen you
43:04know other students work for domestic
43:06companies and become very successful and
43:08monetize that opportunity extremely well
43:10and so I think it's a misconception that
43:13some people have that you're always
43:15naturally going to get the best talent
43:17just because you're a global brand
43:18that's definitely not the case in China
43:19you still have to find that unique
43:22person who is very passionate ideally
43:24fluent in Chinese who is very excited to
43:28work at a global brand versus the
43:29domestic one it's unclear now that you
43:32have a huge advantage of just being a
43:33global brand I'd say another cultural
43:36difference is at least something that I
43:39noticed that Alibaba which has been
43:41extremely successful for that company at
43:43least in its early years is a really
43:45strong sense of building company loyalty
43:47and I think that paid off for Alibaba
43:50tremendously versus the eBay China team
43:53in the early years because Alibaba was
43:56able to retain really good talent they
43:58were extremely hard-working they have
44:00this one rule which is if you leave the
44:03company twice you cannot come back a
44:05third time I think they've only broken
44:06that rule once and the tens of thousands
44:09of people they've ever hired
44:11and so they value loyalty a ton and as a
44:14result you have a bunch of employees
44:16there that have worked across different
44:18departments who have worked across
44:20different cities and the same thing
44:21that Anu was mentioning about a person
44:24who was coming from Amazon Seattle going
44:27to Amazon India that same kind of
44:29ability to pass on that culture that
44:31history that product knowledge happened
44:34at Alibaba for its early years very
44:36successfully so this idea of building
44:39loyalty and team culture at least for
44:42some of the big companies in China has
44:43been working out really well that is
44:45very interesting because in India I
44:47actually see the attrition problems to
44:49be as significant as in Silicon Valley
44:52you do see that a lot of Engineers move
44:55across startups they switch every two
44:57years or every three years and there's
44:59heavy competition in terms of
45:00compensation and pay as well as the
45:02result so it's very interesting to see
45:04how Alibaba was able to do that build
45:07that loyalty that only offers probably
45:08still attrition happening in the Chinese
45:10startup ecosystem but for the big
45:12players I've been shocked at how how
45:14well they've been able to maintain their
45:15folks and inspire them and keep them
45:17motivated I wish we had a lot more time
45:19to talk about it I feel like the three
45:20was just having a typical lunch
45:21conversation that we would have just
45:23talking about all these great things
45:25thanks for joining a success the podcast
45:27will be many more head thank you thank
