In December 2015, when a Princeton and New Jersey-headquartered venture capital firm SOSV made its first investment in India through its “mobile-only” accelerator, MOX, in Gift on the Go, the startup didn’t last long. But that did not deter William Bao Bean, general partner at SOSV, who is also the managing director of two SOSV accelerator programs—MOX and Chinaccelerator—from making bets in India.
However, it did take three years before he went all out. Last year alone, MOX, which based in Taipei, invested in 15 Indian startups, bringing the total number of its portfolio companies in the country to 22. MOX invests in apps, platforms, and services that target mobile-first and mobile-only users in markets such as India, Vietnam, and Indonesia. This year, Bean is eyeing more than 12 deals.
In an interaction with KrASIA, Bean said he believes that the timing and experience of entrepreneurs are very critical to their success. “We don’t invest in kids or super young founders,” he said.
To ramp up its operations in the world’s most populous country, SOSV brought Naman Sehgal, former general manager of co-working company 91springboard, onboard as its India director in November 2019.
KrASIA (Kr): How has the Indian market changed since you started investing here?
William Bao Bean (WBB): On the internet side there are a couple of trends that have really opened things up for India, such as payments and inexpensive internet.
When you first go into a market, sometimes it doesn’t work that well. For the first couple of years after we entered India, we didn’t do that many investments compared to what we have over the past 18 months.
I’d say India has a lot more foreign capital coming in. The capital is not constrained to people who went to Stanford and Harvard. For all the 15 deals I did in the last year, I didn’t really pay attention to where the people I invested in went to school. I focused more on what their traction was such as users, revenue, and engagement.
Kr: How many companies has MOX backed so far?
WBB: We have invested in 56 companies (via MOX), not all of them are still alive. Of these, 22 are Indian companies. The first company that we invested in was in December 2015: Gift on the Go. I’m pretty sure they are dead. We invest in entrepreneurs with a cockroach-like temperament: someone who never gives up.
SOSV has backed about 1,000 startups globally. According to TechCrunch 2018, we are the number five most active angel and seed investor in the world.
Kr: How has your strategy developed in India over the years?
WBB: We came to India during pre-internet times and we realized it was a bit early. In the first three years we invested in seven companies and last year alone we did 15 investments.
From 2016 to 2019 we made bets on the change that has come to India. We’ve seen it happen in China and the US. In the 90s I was in the US doing tech investment when the internet boom happened.
We’re focused on mobile-first, mobile-only, and don’t go after the 30 million rich people in India. We’re focused on the populace living in smaller towns, people who don’t really make that much money, and where technology has the opportunity to change their lives.
The companies we are working with, many of them had almost no revenue when we invested. For example, Coutloot, the e-commerce site we invested in, were barely selling anything, and now they’ve grown by something like 20 times in a year. It’s all the entrepreneurs’ efforts, not ours, but we are trying to be helpful with a slightly different perspective.
We’ve had some experience in mobile-first and mobile-only models in China. So, we come in and help entrepreneurs with this experience. The early-stage entrepreneurs, they don’t have the benefits like the big guys have of Chinese money or parachuting 50 engineers in from Silicon Valley. We are helping these entrepreneurs with the tips, tricks, tools, and strategies that all the big guys have.
I think the combination of timing, expertise, and approach that we bring, allows us to make quick investment decisions. Our companies first get traction, then they raise money, and not vice-versa. That’s one of the things that we help them with.
Kr: How involved are you with your portfolio companies in India?
WBB: The problem with the internet in India and not just India, but in many countries is the high customer acquisition costs.
We are not just about investing money; we help our companies lower their acquisition costs as close as possible to zero. We help our companies make more money and increase their lifetime value. We are able to lower customer acquisition costs because our companies cooperate with each other and they cross-promote each other. Our companies don’t have to pay for users, but they do get revenue share on the back end. We have got 56 million monthly active smartphone users and a lot of these are cross-promoting each other. That’s our first strategy.
People love our portfolio companies’ apps and they’re super sticky, but the problem is they don’t have a business model. So, we help them get a business model and increase their lifetime value. One of the main ways to monetize in India is e-commerce affiliates and financial services. We make it possible for them to start monetizing from e-commerce affiliates and microloans.
On one side you have free acquisition, on the other side, you have monetization, making customer acquisition costs decrease, and the lifetime value goes up. All these happen without raising money and without an entrepreneur giving away half of his or her company to a VC only to turn around and spend all that money on advertising.
We try and help the companies to get the positive unit economics where the lifetime value is above customer acquisition costs. We help them try and get the scale and when we do that a good number of them can go out and actually raise money at a proper valuation from a proper VC.
Kr: What are the segments in India that you are focusing on?
WBB: Just open up your smartphone and look at anything on the first two pages. Except for the browser, we have one form of everything. We work with media companies, Indian cell phone brands, and global cell phone brands inside India. We have apps that enable anybody with users and trust to become a super app. You can be a TV station, a media company, a cell phone brand, or a telco, and our MOX apps will turn you into a super-app. Our partners bring them users, and we bring revenue share.
Kr: Do you also look for companies that have the potential to expand to the Southeast Asia region or maybe even China?
WBB: We try to help our companies get customers in other markets. One of our portfolio companies TryNDBuy launched on Indian fashion e-tailers Myntra and Jabong. It helps their buyers virtually try the clothes they want to buy, thereby reducing the return rate. We are also helping them launch in other markets including China.
Most of the Indian companies on the consumer side are not looking to venture out yet as the Indian opportunity is big enough. We talk about global opportunities from year two, but not from day one. If you don’t have a business model that’s working well in one market, you should not extend to a second market, because you’re just multiplying your problems.
We’re early-stage VCs, so we’re helping these companies scale up first in one market. But of all the companies that we invest in, the vast majority of them have that opportunity to expand across Southeast Asia and South Asia. There are many challenges that consumers in Southeast Asia have, quite similar to the challenges that consumers in India have.
The interview has been edited for brevity and clarity.