He thinks India will have more SaaS (software as a service) unicorns than China by the time the number of startups with a valuation of $1 billion or more hits the 100-mark in India. He also believes apps with high-frequency usage will do better in the country.
In a chat with STOI, Tung said government regulations were not enough for local startups to grow, and execution was still the key. Edited excerpts:
You said, going forward, 9 out of 10 top apps here would be Indian. What makes you think so?
Indian apps will get better and better, and they (firms) will move faster. If that doesn’t happen, it would be because other companies, from China or the US, moved quickly. I still favour local startups based on our experience in China. We will see if the analogy holds for India.
Which apps do you think can surpass popular apps from China or America?
Anything that has a high frequency of usage. Entertainment, social network feeds, and content tend to be the stuff that people consume every day, multiple times a day. Apps covering these areas have the highest chance to succeed. Over time, we have seen that apps which allow users to transact more often will do well — on both product services and physical goods.
What’s your plan for investing in Indian firms?
We will make some big investments this year. We have been thinking about it for almost a year now, and we have held discussions with companies. We are learning more about the market.
We are a multistage investor.
For India, we are looking from Series B to pre-IPO.
We tend to make a few strate gic bets coupled with Series B and Series C investments.
There are many great Indian funds, and we will partner with them.
What are the key sectors you are looking at in India? Where do you see new unicorns coming from?
Consumer internet and SaaS. In the consumer space, there’s a variety of subsegments. On the SaaS side, we know that Indian firms catering to Southeast Asia or the US will grow, and we believe that will be a market worth watching.
A partner of your previous fund, Qiming, felt that some investors entered the Indian market too early. How is the market evolving?
I was with Bessemer earlier. It entered China in 2005, and it entered India around the same time. There are many funds that entered China early. But if you don’t invest in the right sector, you don’t invest in the internet, it’s hard to make money in the long run. With internet, in the long run, it creates so much more value. We don’t think we are late. Many funds came to China after we did, and they still tend to do well. India has 26 unicorns and now to go to 4x of that, to 100, 75 need to be built.
When do you see that happening?
That I don’t know (laughs).
We will see. One prediction I can make for India’s top 100 unicorns: there will be more SaaS companies than in China.
What do you make of India’s recent internet policies that have a tinge of protectionism?
I think the Indian government is borrowing a couple of pages from the Chinese government, so the polices favour local companies more. But I always say that government regulation is not enough on its own. People may think that it’s sufficient, but we think it’s not necessary. It still comes down to execution, speed, and quality of products Indians startups produce.
Chinese companies are facing scrutiny in India. Does that affect your view about India?
A Chinese or any foreign other company needs to have a strong local presence and it should be able to respond fast to regulatory changes.
You saw what happened with TikTok. Chinese or American companies need to invest heavily in government relations, marketing, and public relations in India to stay on top of things.
Why do Chinese funds or companies place so much importance on working with local partners?
You saw how the US companies failed in China by not partnering. So, when you don’t partner, you lose the advantage of having other people’s experience locally. Chinese funds understand that as something which is needed. We are in the US and China; we understood early on that it’s important to partner in local market.
You are closely tracking the food delivery battle. What’s your prediction?
I think it will come down to whoever offers better customer experience; the other new services each one will provide. The example to learn from is Meituan-Dianping, which offers many other services apart from food delivery. I think Swiggy will be more aggressive one to do that.
Looking from a distance at these two companies (Swiggy and Zomato), Swiggy is the more aggressive one. It’s delivering good value.
India and China are seen as similar markets by many, but Jeff Bezos thinks otherwise. What’s your take?
He said that because he missed China. Whereas in India, Amazon is doubling down on the domestic market. So, yes, for him and Amazon, China doesn’t look anything like India, but that’s not based on choice.
Are you following Walmart vs Amazon here?
To some extent, one can argue, Walmart has an Amazon envy, and it wants to do the exact same thing. I think Walmart could be more different.