'Next Half Billion' investment is unique to India: Omidyar's Roopa Kudva

'Our first cheques have ranged from $500,000 to $5 million,' said the MD of Omidyar's India operations

Philanthropic investment firm Omidyar Network announced six investments in the first four months of 2018 in start-ups that help first-time internet users to go online via their mobile phones – a population often referred to as the “Next Half Billion”(NHB). Roopa Kudva, partner and managing director, Omidyar Network India, explains to Sudipto Dey the firm’s investment philosophy in targeting the next 500 million internet users and the business opportunities this could throw up. Edited excerpts from the interaction:

How has the progress been in identifying entrepreneurs who facilitate first-time access to the internet?

The Next Half Billion (NHB) Indians coming online over the next five years present a large market for businesses. However, this wave of internet users has characteristics that make it very different from the initial users, including income profiles, education levels, language skills, and social and cultural milieus.

We are supporting early-stage businesses with the aim to create access to jobs, education, healthcare, transportation, financial services and government services for the NHB. We also share insights and learning from our unique portfolio of investments that serve the NHB to benefit entrepreneurs in this space. We recently published a study on the NHB which captured our insights into the impediments this population faces and how its needs differ from the existing middle class.

In recent years, Omidyar Network has made several interesting investments in companies that work with new internet users: 1MG, DailyHunt, Indifi, IndusOS, Quikr, NeoGrowth, NowFloats, RailYatri, i2e1 and Scripbox. Additionally, we announced six new investments in the first four months of 2018– Doubtnut, Pratilipi, Healofy, Vedantu, Kaleidofin, and Affordplan– all of which align with our goal of supporting entrepreneurs that serve the NHB.

What are the key attributes that you look for while identifying such businesses for investment?

We look for businesses that are scalable, sustainable and innovative. An important consideration is how an entrepreneur’s business model addresses the language, social, cultural, affordability, trust, and confidence barriers encountered by the NHB.

For example, English language content currently dominates the internet. Internet adoption by the NHB requires considerably more content and social and communication apps in India’s local languages. Social and cultural barriers are also hindering use of online services. For example, this population has not been exposed to the self-service shopping experience, so icons like shopping carts and language like 'proceed to checkout' can be foreign and intimidating.

This is a frugal population that will require highly affordable data services and innovative approaches to building businesses that can both earn their trust and address their needs in a cost-effective way.

Despite accelerated smartphone adoption by the NHB, many believe that transacting online is a complex process that requires special skills. Very few users conduct financial and commercial transactions on their mobile devices because they lack the confidence to transact online. Additionally, many in this population perceive the internet as a 'bad influence' — for example, something that will damage marriages, leading to limited or restricted online access for women, a key consumer demographic in the NHB.

What is the typical investment size for start-ups under the Next Half Billion programme?

Omidyar Network is an early-stage investor. Our typical investments are in Series A funding rounds, although on several occasions we have come in at the seed and Series B stages as well. The investment sizes vary with the size of the round, a number of investors in the round and the stage – our first cheques have ranged from $500,000 to $5 million.

Could you indicate Omidyar Network’s expected investment in India under this programme in 2018?

We do not have a specific target for investment here. We are seeing interesting opportunities to invest in entrepreneurs who serve the NHB across a range of sectors.

Earlier, Omidyar Network announced changes in operational structure giving local markets more autonomy in decision-making. What are the implications of this change for India?

India is an important geography for Omidyar Network. All the major areas that the firm works in globally – education, financial inclusion, emerging technology, governance and citizen engagement, property rights and digital ID– are well represented in the investment portfolio that we have built in India.

As part of the continuing evolution of Omidyar Network, some initiatives and geographies where we have a significant operation, such as India, will exercise greater control and decision-making authority over their work - including strategy, budgets, investments, staffing, and performance metrics. Additionally, we have identified several areas of investment that are unique to India. The “next half billion” population segment is one of them. There are other new areas we are exploring, including public (open API) platforms, enabling non-profits to scale and ag-tech.