India and Southeast Asia in the eyes of investors

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Wen/Fu Jixun Editor/Yonnie
Source: GGV Capital
I have been to India many times, the first time in 2001. From 2001 to 2005, I traveled to India more than a dozen times, from Bangalore to Delhi and then to Mumbai, where I closely followed the entire Indian market.
In 2001, in the initial stage of Internet development, India was similar to China. Its Internet portal at that time was called Times Internet. There were also some mobile value-added service companies.
But the difference between India and China is that over the past decade, its PC (personal computer) Internet has not developed. The number of PC users in India has remained at 450 million for a long time, and the population of second-and third-tier cities can hardly access the Internet. On the basis of such small PC users, consumption can not complete the migration from offline to online. When I went to Bangalore, there was only one Shopping Mall in the city, and the consumer market was not ideal.
I have been there many times without finding an investment target. The only opportunity I have is from software outsourcing business, such as Infosys, Vpro and a series of outsourcing companies of different sizes. But these companies are businesses that rely on low human costs to earn price differentials, and the rising ceiling is obvious.
I went to India again in December 2018 and found many things changed. This country has introduced many policies and measures, including GST to unify the so-called value-added tax and reduce cross-provincial frictions; 4G license operator JIO to reduce the cost of data communications; and the introduction of a unified payment ID, namely UPI (Unified Payments Interface), to reduce the complexity of the payment link. Today, with 400 million mobile users in India, transactions are beginning to migrate across the Internet.
India’s economy is developing imperceptibly. Although it has not experienced the rapid development of China, it is developing slowly. India’s middle class is beginning to have a certain size, and the consumption power of second-tier cities is also increasing – the population base of this country is similar to China, and now the real effective consumer population is not small.
Hans (Tong Shihao, GGV Jiyuan Capital Management Partner) and I went to India one after another and came back to set up a group specializing in the Indian market. One of the new colleagues who will join GGV is an Indian, who grew up in rural India and graduated from Stanford MBA. The other is an Indonesian, who has just finished Harvard and spent one to two years in India. They are helping us seize the opportunity of India.
But from an investment point of view, there are two polarization trends in the Indian market: the head Unicorn company has a high valuation and is somewhat irrational. It can be seen that everyone is paying for India’s future. Compared with the so-called profits and values, the actual consumption or transactions generated by these companies are still relatively low, at least lower than those of Chinese companies.
In addition to large unicorns, India has many early companies. You can see from the amount of funds in India: Accel, speed of light and other investment institutions in India are not very large, mostly $1-200 million. This is different from China, where many funds have reached a new level, even in the early years.
India’s start-ups have actually broken down. There is a lack of B-turn C-turn companies. There may be a lot of companies that can’t go through this fault, but there will undoubtedly be good investment opportunities.
Vietnam is also the market I care about. In fact, in Southeast Asia, I value two markets most: Indonesia and Vietnam. Indonesia has a population of nearly 250 million to 300 million, and is expected to “move the capital” and see the courage of the government.
Vietnam is a very interesting place. It is very close to China, and it is also a Confucian culture. Apart from its language, Vietnam is very similar to China in many ways. Vietnamese can also bear hardships, can work hard, very resilient, as can be seen from the war between the United States and Vietnam. Its economy is much smaller, equivalent to a province in China, with a population of less than 100 million. Next, there will be structural reforms.
Many advanced manufacturing industries are migrating to Vietnam, including a series of multinational enterprises such as Samsung and Intel. In the next 10 years, it will have a dividend period for economic development, and the country’s engineering and technical capabilities are stronger than those of Malaysia, Thailand and Indonesia, where software developed is more likely to be used by other countries. The software of an enterprise we recently saw in Vietnam is used by companies in many Southeast Asian countries, such as Singapore.
The dividends of developing countries are double dividends: economic dividends and Internet dividends. In these countries mentioned above, policies are reducing economic friction and improving economic development efficiency.
In fact, from 2001 to 2005, I did not find an opportunity for India, but I found an opportunity for China to come to Shanghai and start investing.
In 2000, I did an analysis of the Internet market in China. At that time, the advertising revenue of Sina, Netease and Sohu combined was only $30 million, which was too backward compared with the United States.
But in the next four years, Baidu as the representative of the company developed and grew, and then the color ring and SP business also rose. It can be seen that China has a large population base and strong consumption power.
Apart from being big, it’s fast. The government has vigorously promoted broadband and rapid development of high-speed rail, which has driven cash flow, people flow and logistics. I think as long as these three points are developed, the economy will naturally be greatly promoted. It took 3-4 hours to see the project from Shanghai to Hangzhou by car, but now it takes only 45 minutes by high-speed rail.
When I moved from Singapore in 2007, my family was particularly unsuitable. Singapore is a small but efficient place, where food, clothing, housing and transportation are very convenient. By contrast, shopping in Shanghai at that time was not used to and very inconvenient. However, today, more than a decade later, Shanghai’s life efficiency is no less than, in some respects, even better than Singapore’s. You don’t need to carry your wallet when you go out. Mobile phones can solve everything, but you have to use cash in Singapore.

By contrast, Singapore has become an “old money country”.
Anything you look at at at a certain time may have something you don’t understand and don’t understand. But if you look at it in the long run and put it on the timeline of three months, six months, one year or even ten years, you will see changes.
The value of trend change is far greater than that of the present. Who can analyze the changes, who can grasp the future.