NB Financial Health
The Challenge of Keeping it Simple: India’s best start-ups focus on solving real customer problems
In December, my colleague Alina Kogan wrote this NextBillion post about how start-ups in Latin America bring “copycat” technologies into developing markets and adapt business models to suit local contexts. Accion Venture Lab provides capital and guidance to financial inclusion start-ups around the world – which means that we, too, need to adapt to changing and varied realities on the ground.
In India, already a massive and diverse market all its own, we see the development trajectory presenting itself differently from Latin America. Entrepreneurs there constantly face the question, “How can we build solutions for real problems facing 1.3 billion Indians in light of complicated and cumbersome local realities?” The best answers come from start-ups that build solutions from the bottom up and, increasingly, understand that gaps in the market do not necessarily equate to clear consumer needs or viable business opportunities.
But this hasn’t always been the case.
Too often, even now, we see plenty of start-ups that try to do too much. We love it when entrepreneurs have vast, world-changing ambitions – and we fully expect that all of our investees will indeed change the world. But in a country as varied and complicated as India, it is impossible for any individual outfit to solve every problem. Instead, we look for businesses that take local realities into account, focus on a basic customer pain point, and then work from there.
Take mobile payments. Despite the more than 550 million active cellphone users in India, consumers continue to take a cautious approach toward going cashless, and there is a long line of start-ups that have failed to put together all the pieces to solve this problem. For too long, start-ups in the mobile payments space have tried to play a central (but solo) role in enabling rupee digitization by trying to build large, nationwide infrastructures, working across banks, regulators, merchants and mobile operators to enable cashless banking for the Indian consumer. But the adoption of mobile payment technologies by the vast majority of consumers has been limited – despite efforts like these by companies with terrific founders, access to capital, and tremendous ambition.
Today, however, there is more and more infrastructure put in place by outside bodies like Airtel Money, Vodafone M-Pesa and the government’s IMPS system, as well as increasing regulatory support for ideas like Payment Banks and enhanced mobile payment services (as seen in the Mor Committee Report). As a result, we see a tremendous opportunity for start-ups to create simple solutions that customers will actually use. Services like Airtel Money have massive agent networks and large captive consumer bases in place already, and these structural advantages would be nearly impossible for a start-up to replicate. But start-ups can still play a role in enabling Airtel Money for real consumer use by adjusting products based on ground-use cases and adding in customer-centric services, such as financial planning and literacy.
Similarly, with IMPS, the National Payments Corporation of India (NPCI) has built a vast and connected mode of bank-account-to-bank-account money transfer on its own dime. Use has remained limited, however, due to overly complicated sign-up processes and a lack of customer-friendly applications. Venture Lab is now looking at a number of start-ups that leverage this infrastructure to create customer-oriented products with intuitive interfaces, such as simple money transfers, mobile top-ups and payment-history tracking. This, in our view, is real “last-mile” distribution, and it could be instrumental in finally enabling vast swathes of Indian consumers to go cashless.
Building these types of customer-focused businesses takes a lot of work, but it doesn’t require an incredible amount of regulatory or bank coordination. Instead, nimble start-ups can focus on a simple issue – such as getting customers to transfer money without cash – and use existing, outside infrastructures to do much of the heavy lifting. Ezetap, for instance, has focused on solving a basic problem: how to get merchants to start accepting credit and debit card payments cheaply. Their home-grown solution offers an ultra-low cost swiper that allows merchants to accept card payments on mobile phones or tablets. Zaakpay has focused on enabling e- and m-commerce payments for Indian consumers, simplifying the payments process and making merchant sign-up quicker and easier.
These are terrific examples of Indian mobile payments businesses focusing on basic pain points, without worrying about the expense of building massive agent networks or large-scale bank partnerships. These start-ups can solve core problems without selling complicated products or cross-selling – and still make the economics work.
Venture Lab has looked for similar customer-centric solutions in the health care space. Take MeraDoctor, one of our portfolio companies and a shining example of how a start-up can create new, unique solutions that customers actually need. MeraDoctor sells a simple, annual subscription product that combines 24/7 on-call primary-care support with robust health insurance coverage and discounts at local pharmacies and clinics. By merging these services into one easy-to-use product, MeraDoctor solves a crucial pain point (and cause of poverty) for many underserved Indians. Others have tried to build more complicated products, with on-the-ground doctor care, self-funded microinsurance services and complicated hospital partnerships. But MeraDoctor is staying focused on what customers need – and that’s why it’s poised for success.
Going forward, Venture Lab will continue to seek out Indian start-ups that appreciate the challenge of keeping it simple, even in India’s ever-complicated environment, and that want to build usable, customer-centric solutions. Customer focus and simplicity are emerging as the guiding lights in a start-up market that is re-grounding itself in practical but critical solutions for India’s underserved, and we are thrilled to be a part of it.
Vikas Raj is a senior investment officer, leading Venture Lab’s work in India.