A month ago, on an aimless drive around the twisting and turning back roads of Chickamagalur, which is a coffee district some five hours drive west of Bengaluru, this reporter stopped at a small mom-and-pop store.
They sold coffee and tea and also squashes and preserves made from locally grown fruit. They ran this micro enterprise from their own house, one part of which had been converted into a store-cum-canteen. “Paytm accepted here,” announced a small board proudly.
In Bengaluru, it’s not uncommon to hail an autorickshaw, and discover as soon as one is seated, a big blue sticker on the back of the driver’s seat announcing “Paytm accepted.” In one hilarious incident though, “no no, please pay by cash, because I’m using my cousin’s auto,” one driver told this reporter.
Anyway, Paytm, which was already on its way to becoming a household name in India, with backers such as Alibaba Group, has now been crowned de facto king among India’s payments startups, by SoftBank Group Corp, which just pumped in $1.4 billion into the venture. India’s mobile payments market is now clearly one for founder Vijay Shekhar Sharma and his team to lose.
About two-and-a-half years ago, Masayoshi Son, Japan’s top Forbes billionaire, committed to investing $10 billion in India over the following decade. At the rate at which he is going, SoftBank could well get to that mark easily. Already SoftBank is among the top investors, if not the top investor, in every consumer-internet-driven area where there is any sizeable venture in India.
Among its beneficiaries are Ola, India’s largest cab-hailing service provider, which competes with Uber, and Oyo Rooms, which helps people book last-minute rooms in hotels, not-quite an AirBnB competitor, but a rival of sorts nonetheless. Ola and Oyo have both recently raised more than half a billion dollars collectively from SoftBank.
With InMobi, an ad-tech company, SoftBank has backed an Indian enterprise tech venture as well. These Indian startups are all either unicorns, meaning they’ve topped valuations of $1 billion or more, or very close to getting to that milestone. And SoftBank is the kingmaker for all of them. Not only does an investment by the Japanese telecom and internet company bring them financial heft, but also makes it extremely difficult for a competing startup to stay in the game long enough to find a route to sustainable growth and eventually, profits.
SoftBank, with its Saudi-backed $100 billion vision fund, is making these strategic bets around the world — from Didi Chuxing, the ride-hailing provider that ousted Uber in China, to Improbable in Britain, which wants to become the Google of simulations.
Rivals will be having sleepless nights. After the latest investment at Paytm, the road ahead definitely got tougher for rivals such as Mobikwik. The husband-wife duo who founded Mobikwik, Bipin Preet Singh and Upasana Taku, run a tight ship by all accounts, and had even tasted profitability early on, before jumping back into investment mode for rapid growth.
They retain control of their company, and have well-known global investors as well. They have been looking to raise additional funding at valuations that would make them one more Indian Unicorn, and are reportedly close to concluding a series D funding deal.
Deep-pocketed Paytm isn’t the only challenge. There are plenty of other payments players in India, which will jockey for second position. Delhi’s PayU, which acquired Bengaluru’s Citrus Pay, is one example. Competition will be fierce and the government-backed Unified Payments Interface app, called Bharat Interface for Money, or Bhim, has added its own twist to the tale as well.
In ecommerce, currently the biggest chunk of India’s startup ecosystem, many are waiting for SoftBank to conclude a deal that will make it an investor in Flipkart Internet. Flipkart pulled off its own coup recently, also coincidentally raising $1.4 billion from Microsoft, Tencent and EBay. It is widely believed to be in talks over a deal that will see its rival Snapdeal fold into it and in the process make SoftBank a large investor in the Bengaluru company.
SoftBank originally chose Snapdeal and has sunk some $900 million into the Delhi company, which squandered the advantage to lose out to Flipkart and Amazon’s Indian unit. Now, SoftBank is looking to turn this into an opportunity to become an investor in Flipkart. For Flipkart, the latest round of funding has put it on a much stronger footing, from a negotiations perspective, but its largest investor Tiger Global may be looking for at least a significant partial exit.
And in three years’ time, Amazon will still be here, and probably be even more entrenched in the Indian market. Therefore Flipkart may yet need SoftBank or an investor who can bring that kind of muscle to the fight with Amazon. Therefore, winning in the Indian ecommerce slash startup market could boil down to becoming the chosen one from SoftBank’s perspective.
The thoughts and opinions shared here are of the author.
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