How to Build a Startup in an Emerging Market
What do you do when your startup is deemed inferior — less talented, less experienced, less innovative — and you also happen to be less funded? Many local teams in emerging markets are thrust into these circumstances from the beginning and remain in that state perpetually. This week on the Kauffman Fellows Podcast, Pinn Lawjindakul (KF Class 25) welcomes two incredible entrepreneurs who learned to expand, evolve, and thrive as the underdog.
Tune in to hear Ritesh Agarwal, Founder and CEO of OYO Hotels and Homes, and Vaibhav Gupta, Co-founder of Udaan, reveal their best practices for building in emerging markets and share inspiring anecdotes of how they kept and capitalized on their underdog culture to build enduring companies, even when they were strapped for cash.
This season of the Kauffman Fellows Podcast is produced in partnership with Mighty Capital. Together, we unravel what truly makes a great VC investor.
OYO Hotels & Homes Founder, Ritesh Agarwal, On Building A Top Platform In An Emerging Market
Kicking off week 2 of her miniseries, Pinn welcomes Ritesh Agarwal, Founder and CEO of OYO Hotels and Homes, one of the leading technology and revenue growth platforms. Together they discuss the biggest challenges of building in an emerging market and Ritesh shares his philosophy for building a dream team.
Tune in and catch some of our favorite soundbites below!
On the hardest part about building for emerging markets that other people overlooked
Ritesh has noticed three elements that are typically challenging when building for emerging markets.
“The first and foremost is the quality of talent that you bring with yourself, because I can’t stress enough that you need the top talent, but a top talent who relates with the problems of that geography to be a part of the solution building. That’s something that I really invested in from day one.
The second thing that I believe is very crucial is a lot of times people build products and believe that with Internet penetration going up and you know, usage of digital devices going up, our user base will also increase. I think that is wishful thinking, I think we need to remember that at the end of the day if you build a product that is truly worth using, people will use it regardless of you know, their negativity in using the product.
And last but not the least, instead of designing for just the consumer. It’s critical to design for the merchant. Because if your merchant is not designed to use technology in the right way, your consumer demand and consumer service will be broken, which will effectively mean that the previous way of doing things will continue to remain the status quo. So I think empowering and enabling the small business owners in my view creates 10x more value than just doing it for the customer.”
On his leadership philosophy in building his team
Ritesh has a well-defined philosophy for building his team, and it’s centered on recruiting the best talent.
“A lot of these are a very high-quality talent that has consistently come in and created a substantial amount of value in our management. The reason for doing that was because we’ve learned that good talent is the single biggest way of enabling value. And the reasons we could recruit them were two to threefold.
First, if you ask them why they joined you, they would say that OYO is what comes closest to being an entrepreneur for themselves. The second is they have felt that they have a substantial sense of ownership, both philosophically as well as commercially, to make them feel that there is a massive upside they can create. And the third is good talent breeds good talent, which means that as you know, the first four or five people came, then the multiplication was super easy.”
The first four or five was very hard, Ritesh said, but he employed a few tactics for making sure that they were successful.
“The first is very active collaboration, like venture firms. Our company also has a Monday morning meeting, and I start preparing for it on Sunday afternoon. Because I constantly have this good sense of insecurity, am I adding as much value as they are? So this sense of everybody wanting to do good for the company, and making it more successful has been one important attribute.
The second is…every policy right from compensation to awards is designed with a sense of collaboration rather than the dog-eat-dog world. That’s not how we operate.
And the last is if you speak to our colleagues, you know, you will hear what you would hear typically in startups is that there is zero politics or ego. There is no space for that. And if there are people who are great performers who demonstrate those, they are shown the door. And if there are people who are okay, but demonstrate a great attitude, hunger, and wanting to do more and learn. We encourage that because we believe that’s what creates long-term lasting value.”
On the startups and founders that have inspired his journey
Ritesh has participated in the Thiel Fellowship, a program that gives $100,000 to 20 people under the age of 20.
“I felt that’s great. You get paid not to go to university. But the first time I went to the fellowship and met a lot of other fellows, I was fascinated. This meeting of entrepreneurs who are building incredible companies…really young people. But one thing that really struck me about them was the ability to think big. One of the things that in my view differentiates entrepreneurs in the emerging markets, is the entrepreneurs who think big versus the ones who don’t. As I was growing up, I was told not to think big. I was constantly told to think in a box. So that was the first time I saw thinking big was not just okay, it was actually encouraged for the first time.”
Udaan Co-Founder, Vaibhav Gupta, On Building Unicorns for India
Vaibhav Gupta (VG) joins Pinn for an enlightening episode on the vast prospects in one of the world’s largest economies, India. As the Co-founder of Udaan, India’s largest B2B e-commerce platform, Vaibhav offers expert insight into the abundant opportunities in India, the sectors that are the most overlooked, and his key to scaling operations in the region.
Tune in and catch some of our favorite soundbites below!
On succeeding big in India
As one of the largest economies in the world, the opportunities are abundant and nearly every use case is underdeveloped. However, succeeding in this environment requires a specific approach.
“There are some product managers who are mission-driven, and there are some product managers who are customer-driven. In India, I believe if you can be very deeply customer and problem-driven then it’s very core to the success because India is just a very unique economy and unique society.
And your ability to just be very first principle, hyper-realistic about how this market operates and how the users of your product over a period of time will change. I think being very first principle is the key in India to do anything big.”
On how a customer focus drove growth
India’s garment industry includes 700,000–800,000 shopkeepers, and his team had to adapt to the shopkeepers’ buying behavior of needing to touch the product before buying. That necessity was a challenge for a tech company trying to scale the business, but their customer-driven approach eventually earned trust and changed buyers’ behavior.
“One of our team members started circulating sample bags with our buyers. And that really kickstarted the category for us. Obviously, we wondered how would you ever scale such an operation; it is not scalable. And what we realized after a year and a half, two years, it was not needed anymore. The buyers built the comfort of being able to trust the quality and product on the brand platform.
And we slowly scaled it up, but it established the trust platform and this is something which I believe is very first principle; you have to trust what the customer wants, and you try to solve for it. And over a period of time you find a way how you will solve the scalability, how you build technology, leverage that.”
On the hardest and most overlooked aspect of building for the Indian market
India’s history has resulted in a different consumer market than in the US or China, and several factors highlight those differences. The British colonial influence remains alongside the “core” Indian traits.
“Indians tend to be more emotional as humans, they tend to be more skeptical as humans, they tend to be very price sensitive. I think they’re socially very different. They’re quite social, but in a very different way than what I’ve seen in China and other countries. So it is a very uniquely Indian consumer, and you just have to be approaching it that way.
“Second, I believe the internet ecosystem in India has developed differently. We have had companies like Yahoo and Google and Microsoft in this country for a long period of time. We have also seen Indian startups getting stronger, like Flipkart. So it is a very different ecosystem in the way it is developing, not very similar to the US, not very similar to China.
My third point, I think, in very large market segments in India, especially, you have to be quite aware of the laws of the land, how the policies are going to shape up over a period of time. You need to be quite aware of it and what does it mean for your business in terms of your scalability or opportunity?”
On what he would do differently
Even with massive success, VG continues to prioritize learning and identifying ways to improve.
“There is a journey in the context of at least the commerce startups is that you start with product market fit, and then you go through the growth journey, and, and then you go through business building. You got the product market fit, you scaled it up, and then post scaling, you start thinking about how do I sort of really build this business?
One of the things I would do differently is the phase of scaling and business building. When I started it was a little bit more sequential in my head. I would now actually, if I were to change, I would make it more parallel.”