Chinese apps ban watershed moment for desi startups’ user experience, valuation only if sentiment stays

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July 1, 2020 8:28 PM

The government on Monday had banned “malicious” 59 Chinese apps including TikTok, Helo, WeChat, Club Factory, Shareit, UC Browser, Cam Scanner and more for being "engaged in activities which are prejudicial to sovereignty and integrity of India, defence of India, the security of the state and public order.”

Now might be the right time for Indian startups to latch onto India’s sputnik moment.

If the government’s anti-China rigour, which saw the banning of 59 Chinese apps and keeping a hawk-eye on Chinese investments in India with FDI policy tweak, won’t deflate with normalcy in India-China relations, this might well prove to be the watershed moment for probably many Indian startups. While Chinese investors and technology companies won over Indian businesses and customers a few years back to stifle opportunities for other domestic startups and technology players, it might now be the actual time for the latter to latch onto India’s sputnik moment. Arguably, this is likely to help create future unicorns and global startups from India but only if this sentiment against China stays for long and isn’t temporary. And experts Financial Express Online spoke with believed this to be sticking around.

“Similar privacy and security concerns have been raised about a number of Chinese companies by several nations, and there are serious underlying issues in the way Communist Party of China gets involved with private enterprise in China that is prompting these concerns. So although the current tensions may be the trigged for these actions, the underlying policy concerns are not likely to evaporate with an easing of those tensions,” said Utkarsh Sinha, Managing Director, Bexley advisors told Financial Express Online.

The government on Monday in a press release announced the banning of “malicious” 59 Chinese apps including TikTok, Helo, WeChat, Club Factory, Shareit, UC Browser, Cam Scanner and more “in view of the information available they are engaged in activities which is prejudicial to sovereignty and integrity of India, defence of India, the security of the state and public order.” The consistent affirmative response to Chinese aggression, hence, seemed to stay here. “The actions taken by the government are in line with the narrative being disseminated by the ruling Government – which is India will hit back hard if provoked. First, the FDI restrictions, then cancellation of contracts and now the banning of apps are all responses in this direction. India-based apps like Mitron can replace TikTok over time,” Divakar Vijayasarathy, Founder & Managing Partner of professional services firm DVS Advisors told Financial Express Online.

There are other apps like ShareChat (social network), Roposo (video sharing) Chingari (short video app), Rooter (live gaming and sports) etc. for which the current scenario is nothing short of a eureka moment to multiply growth that remained challenging amid Chinese apps dominance.

“The talent this country has is insane. They just need a platform to showcase and consume good content,” Sumit Ghosh, Co-founder, Chingari (TikTok alternative) told Financial Express Online. Amid India-China backlash, Chingari was able to break into top 200 apps on Google Play Store last month while on July 1 it was the top free app in the ‘social’ category. The company is adding 3 lakh new users every hour, Ghosh had tweeted on Wednesday.

Rooter too is looking at high growth ahead. It is looking to add more than 1 million new users in the next two weeks “as the demand is very high ever since we launched gaming content. And we are also increasing our community of content creators to 10x providing them with a great monetization model for their content,” its founder and CEO Piyush told Financial Express Online.

Also read: Notice to Amazon, Flipkart, others: Delhi HC seeks e-commerce firms’ stand on displaying country of origin

The growth for these startups, as a consequence of this newfound opportunity, might also translate into better valuations. However, this is not to say that investors would also blindly jump into it and jack up the price in favour of startups. They will evaluate startups basis the value they are creating and the market they are addressing. “We will see more funding activity if there is certainty in the investment community about the permanence of these measures, which could also lead to a valuation fillip,” said Sinha.

“Investors would have to be sure about the steps taken by the government will not be reversed. It makes sense only then for them to reassess the opportunity for Indian startups and whether they can scale to the level these Chinese apps managed to with sticky product and quality. Also, how easily and faster do Indian apps replicate the user experience from Chinese apps for customers will be important to understand for investors before they bet big on valuations,” an investor who has backed Indian startups along with Chinese investors told Financial Express Online.

Lifestyle videos app Trell that offers short videos, photo series, visual blogs and articles to customers said that investors should also see this as an opportune time for Indian companies to have their network effects seep in at a high scale. Also, on the back of their network effects gaining scale, it will be very difficult for foreign players to replace Indian brands in the long run. “Thus, it is a window for VCs to support Indian start-ups as they capitalize on the hyper-growth that is on the horizon. If VCs believe in Indian brands and support them at this juncture, the returns in the next 5-8 years will be massive,” Pulkit Agrawal, Co-founder, Trell told Financial Express Online. India is already beginning to see funds out of Singapore and US replacing Chinese investors. For instance, said Vijayasarathy, Temasek investing in Zomato in place of Ant Financial is a classic example.

While consumer behaviour is difficult to alter, however, in times of high emotions, people tend to get swayed by the narrative and find solace in the larger cause. Hence overtime the Indian alternatives would look to substitute the Chinese alternatives irrespective of their shortcomings. However, looking at the current scenario, a handful of technology investors and leaders are already encouraging startups that are ready to replace the banned 59 apps. For instance, Flipkart’s former chief product officer and currently the founder of Suki – digital assistant for doctors tweeted on Tuesday that If anyone is building Indian versions of these (banned) apps, I want to help.” US-based angel investor Balaji Srinivasan also tweeted that “If you are building an Indian version of these apps, @naval (Naval Ravikant — AngelList co-founder) and I want to see it.”

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