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Top tech investor bets India corner shops can fight Amazon

Bengaluru

ONE of the most successful Silicon Valley-Asia venture capital firms is counting on the humble mom-and-pop store that dominates India's retail landscape to hold its own against Amazon.com Inc. and Walmart Inc.

Menlo Park, California-based GGV Capital, a US$6.2 billion investor in some of the biggest unicorns in the United States and China including Airbnb, Xiaomi Corp., and Slack Technologies Inc., is backing startups that serve the tiny, family-run businesses known as kiranas.

"It's all about powering the little guys," said Hans Tung, managing partner, in a recent joint interview with fellow investor Jixun Foo in Bengaluru, where the duo was meeting a dozen entrepreneurs.

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"We're backing startups that provide technology and working capital to make kiranas more efficient, so that these mom-and-pops can become e-commerce and lending enablers in their communities," Mr Tung added.

From the poshest neighborhoods to teeming slums, typical Indian kiranas are cramped spaces that can just about fit a king-size bed but are chock-full of sacks of rice, lentils and dried chilli peppers. Their floor-to-ceiling shelves are stacked with toothpaste and cooking oil, and their shopfronts festooned with colorful bags of potato chips, tiny sachets of shampoo and pickles. With their personalised service, the stores usually offer door-step delivery and interest-free credit.

GGV, which has focused almost exclusively on China and the US for two decades, is bullish about India. "We are seeing the same movie played out a little differently in emerging economies," said Mr Tung. "India can be very big over the next 10 years."

As much as 20 per cent of the US$1.9 billion fund raised by the VC firm last year will be allocated to India as well as South-east Asia.

India has the market size and talent pool to make things happen and now investors are lining up with capital, said Mr Foo. GGV Capital will write US$5-10 million in cheques in the case of very early-stage entrepreneurs and US$50 million cheques for later-stage startups, he said.

The firm has built an investment strategy around kiranas based on the premise it's better to play with a model that already exists rather than building new supply chains that could take as long as a decade to materialise.

GGV's first such investment amounting "to tens of millions of dollars" is in Udaan, a Bengaluru-based B2B marketplace for small businesses, the partners said.

Large global investors like Tiger Global Management, Lightspeed Venture Partners and even consumer giant Unilever's investing arm are backing technology startups that serve kiranas but GGV Capital is the first to crystallise a proposition that goes beyond India to include the neighborhood-store equivalents of kiranas in Indonesia, Vietnam and Latin America.

"Across these countries, the value of the average online order is still low and the cost of last mile logistics is very high," said Mr Foo.

"Entrepreneurs are finding a different way by empowering the mom and pops and that can get e-commerce going." BLOOMBERG