One of Bob van Dijk’s learnings has been that as a foreigner, it is hard to build a business in India
Image: Amit Verma
I am photogenic,” grins Bob van Dijk. That’s not the only reason the Naspers CEO isn’t too keen to spend too much time getting clicked (Forbes India
got just two minutes for a photo shoot). The head of Africa’s most valuable company would rather use every minute available to scout for investment opportunities across the world. The South African internet giant has invested over $2 billion in the Indian startup ecosystem over the last few years—it has stakes in Swiggy and MakeMyTrip, and owns PayU and OLX. And it counts its stake in China’s Tencent as its most prized bet.
Naspers raised $9.8 billion in March by selling a 2 percent stake in Tencent, and netted another $1.6 billion profit from the sale of stake in Flipkart to Walmart in May. In spite of exiting Flipkart, Bob still gives the local ecommerce player an edge over American rival Amazon. “Local entrepreneurs, at times, can do things that others can’t do,” he argues, stressing on his love for Indian food as well. “I like making butter chicken and chicken tikka,” he says. In New Delhi to host a Naspers global summit, Bob spoke exclusively to Forbes India
on a wide range of issues. Excerpts: Q. Naspers is a strategic investor. So what made you exit Flipkart?
It was not an easy choice for us to sell our shares in Flipkart. It’s a great company. We have been in Flipkart since its early days. When Sachin (Bansal) and his co-founder Binny (Bansal) started the company, there was no reliable logistics, people didn’t have methods to pay and there was little structured retail. So the persistence to get the company where it is today is a fantastic story. That’s what we are about as Naspers. We try to find amazing entrepreneurs in a market like this and then be with them in their amazing journey.
When the Flipkart board got this offer from Walmart to buy a vast majority of the company, it was a difficult moment for us in a sense that we believed in the future of the company. But we are strategic investors; not financial ones. When somebody, who is clearly strategic, comes in with such a large stake, it means your role as a strategic investor gets marginalised. That was the choice we had to make, and that’s why we decided to sell. Q. Would you miss the ecommerce action here now or scout for more investment opportunities in the segment?
I think we are, in many ways, still in ecommerce. Travel is a strategic part of ecommerce and we are invested in MakeMyTrip; then we have OLX, which is in second-hand goods, which is very much ecommerce. While buying new products is good for people, trading second-hand goods is even more valuable. It recycles, reduces waste and gives people more options. This idea of increasing this business in big scale in a country of huge scale is very valuable ecommerce. Look at what PayU does. It enables consumers to pay to merchants, and that again is the backend of ecommerce. So I think we are still very close to ecommerce.
Q. Coming back to Flipkart, did you always believe that an Indian company could take on the might of Amazon?
When we got into Flipkart in 2012, Amazon wasn’t really present in any significant way. We believed in the founders and what they were planning to do. But there is one thing broader than that which we actually believe in across the world. If you have good local entrepreneurs and they bring the best people from their country into their group, they can innovate better and can understand the local market better than others. The Indian market is not an easy retail market. It’s complex. The logistics is complex. The ability to do well increases if you have Indian founders and a team that is only focussed on India. Amazon is a formidable company. They have their leadership in the US and do a lot of developments there. Though they are international, they are still quite Western-world-focussed. That is a structural advantage that Flipkart has had over Amazon and that has played out in excellent results. Q. Do you still give Flipkart a chance against Amazon?
Absolutely. Local entrepreneurs, at times, can do things that others can’t.
Q. Do you see Swiggy as your next Flipkart-in-the-making?
I am bullish on Swiggy for many reasons. We have invested in food delivery, as a segment, for a few years. People eat about 100 meals a month on an average. But the occasion when people order meals now is quite large. Swiggy’s business has grown 4x in a year. It’s spectacular. Swiggy is already the biggest in India. We believe that the opportunity in food delivery is at least 50 times bigger than it is today. And India as a market is ripe for this mode. Sriharsha (Majety, Swiggy’s co-founder) is focussed on doing a good job for his customers. He calls his mission to be ‘King of Convenience,’ and he has executed that incredibly well. So my hopes and aspirations for Swiggy are high. There has been a fair amount of competition in the food market in India. What really excites us is the size of the market and the ability of Swiggy to execute. Q. Is there a room for a third player in ecommerce after Flipkart and Amazon?
It’s really hard to answer. Different markets have developed differently. If you look at the US market, Amazon has done a tremendous job. But still there are other vertical companies in etail that are strong. If you go to a market like the UK, there are definitely more companies than two. In China as well, apart from Alibaba and JD, there are plenty of other successful businesses. Ecommerce is such a broad space that there is room for other players. Another thing to keep in mind is that the Indian market is still in its early days, the percentage of etail to retail is fairly low, structured retail is not so large. This makes the overall opportunity for etail quite large. Q. But when there are two big players with deep pockets, why would any investor bet on a third player?
For one reason. The overall opportunity in India is larger than anywhere else. I won’t be surprised if ten years from now the percentage of etail to overall retail would he higher (in India) than in any part of the world, except China. That means a massive opportunity in a massive country. It creates room for more businesses. I don’t think etail is a ‘winner-takes-it-all’ game. It’s a scale game. If you are small, it’s hard to make money. But if you are large, you can make money and you don’t need to have the entire market to have a successful business. That’s why there is room for more than two players. Q. What’s your take on cash burn? Startups, especially in India, are notorious for burning cash…
I have had the luxury of seeing internet startups for a long time, and remarkably the burn at some stage does start making money. Take, for example, the OLX group. The Indian arm is in aggregate profitable. But we also lost money there. We burnt for over six years. But we knew the business model was sound, we had an operating metrics, monetisation followed and the entire business is still growing very fast. So cash burn is logical if you really want to grow fast in a competitive market. That doesn’t come for free. Flipkart and Amazon are good examples. Both the companies have invested a lot here. But when they do that they do it with a belief that over time you will build a great business. OLX has proved it. I believe that our other companies will also get there. Q. And how do you view the trade-off between top line and bottom line?
It depends on the circumstances. If you are in a market where the potential and competition are high, like India, it means that if you don’t grow fast, you will be out of the market. So you have no choice but to grow fast. In a market with huge opportunity, speed and competition, you have to grow fast. That’s the dynamic you see in the Indian ecosystem. People prioritise growth over profits for quite a while and I think it’s a right thing to do. Q. You spoke about listing some of your global ventures. Do you see any of your portfolio companies in India (besides MakeMyTrip, whose shares trade on the Nasdaq) getting listed anytime soon?
I would be surprised if it happens anytime soon. All are in the aggressive growth stage. And during such a stage, companies can benefit quite a bit from being privately held. You don’t have to explain cash burn all the time to your investors (laughs). In many cases it is absolutely the right thing to invest more but, when you go public, it can put a lot of pressure. This can be a distraction. So over time many of these companies (in the Indian portfolio) would be ready to get listed, but not anytime soon. Q. You love mythical animals: Unicorn and decacorns…
I love owning decacorns (laughs). The Tencent investment is quite unique. There is tremendous opportunity in our current portfolio to be a unicorn or a decacorn. We have the quality of the business model and the quality of the teams to make it happen. If it’s going to be one in India, it’s going to be one of ours.
Bob van Dijk has high hopes from SwiggyQ. So do you mean Swiggy has that potential?
Image: Joshua Navalkar
If it’s going to be one, it’s going to be one of ours (laughs).Q. Flipkart has forayed into ticket bookings; this pits it against your portfolio company MakeMyTrip. How do you see this?
I am a positive person and would rather look at the brighter side. The market for travel in flights in India has been growing double digits for ages, which is quite unusual. I don’t think it grows that fast anywhere in the world. This means that there is opportunity for several players to do this. I would be surprised if Flipkart becomes a destination for travel. But if it can sell tickets, no worries. There is plenty of room for all. I don’t think it will hurt MakeMyTrip. Q. Do you see any possibility of another consolidation in the travel space with MakeMyTrip buying out maybe Oyo?
Ibibo got into hotels much earlier and as a much more technology-led play than MakeMyTrip. They were focussed on flights and good in packages. But they were late into the game with hotels; by that time there was an advantage that Goibibo had built up. So it made sense to merge the two companies. Oyo is doing a good job, but I don’t think Oyo is trying to be what MakeMyTrip is. They work together in certain ways, which is fruitful for both. I don’t see how Oyo becomes the overall No 1 travel destination for India the way MakeMyTrip is.
Q. Do you reckon that the secret sauce for any foreign company to make it big in India is to find a good local entrepreneur and let him/her run the show?
It’s exactly the way we operate. We have done that in China, and Brazil. We fly around the world and meet people and, if they are the best, we back them for the long term. There are other companies that would like to have control decisions in one place. But that’s harder to make work.
Q. What have been your top mistakes in India?
Plenty. Initially when we came here, we saw the young population and got excited about the potential. And then we realised that the number of people with internet connection was limited. Even with 20 or 30 million internet connections, most of them were terribly slow. We came with a lot of enthusiasm, saw a lot of opportunity, tried to launch a social network—Ibibo—but it went nowhere. And then Ashish Kashyap (Ibibo’s founder) said there is an opportunity in travel. So we shifted from social networking to travel and built a fantastic business. That was a huge success story. A broader learning on India is that the country is a large market, people are entrepreneurial and cost-focussed. You can’t overcharge in India. It’s not an easy market to make money in. But if you have something good then you can scale it quickly. It’s a tough market but once you get the customer proposition right, you can be big quickly.
The other learning is that India has great entrepreneurs. As a foreigner, it is hard to build a business here. So you have to find the right entrepreneur here and back them to do great things.
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(This story appears in the 12 October, 2018 issue of Forbes India. To visit our Archives, click here.)