How India’s start-ups are rising up to challenge Big Tech

This month, among India's biggest start-ups Paytm, challenged the dominance of global internet giant Google - by launching its mini-app store.

The homegrown FinTech took the ultimate step after it had been temporarily taken off Google's Android app store, accused of a policy violation.

“App developers are effectively dependent on an extremely giant monopoly, namely Google,” Paytm’s founder and leader Vijay Shekhar Sharma said during an online conference announcing its "mini software store". He likened Google to “a toll collector”.

App developers are effectively reliant on an extremely giant monopoly, namely Google

Vijay Shekhar Sharma

Mr. Sharma isn't the only person feeling the necessity to endure a bigger rival.

More than 95 % of smartphones in India use Google's Android operating system, and tech start-ups have already been angered by the web company's plans to charge a 30 % commission on purchases made in its app system, which was due to enter into effect this month.

In reaction, dozens of Indian start-ups are banding together to set up a collective to lobby against the dominance of Big Tech. In at least a short-term victory for these firms, Google has delayed its deadline by half a year for Indian companies to adhere to its new billing policy.

In a statement on October 5, the internet search engine giant said it had been “mindful of local needs and concerns” and subsequently it had decided to create “listening sessions with leading Indian start-ups to understand their concerns deeper”.

The tussle between local start-ups and digital giants comes as the united states of just one 1.3 billion persons offer a lucrative chance for companies targeting its large, growing base of internet surfers.

Analysts say that local start-ups, supported by global investors, are in a solid position to fight back.

“India as a country has long used western civilization as a frame of reference,” says Suraj Ravi, the founder of Mumbai-based technology star-tup QWR. “However when it comes to being truly digital society, we're actually giving them a tough fight.

“We've enough technology that eliminates the entire dependence on a middleman. We must have our very own system that is run by us, with an Indian solution.”

Nikhil Kamath, the co-founder, and chief investment officer of asset management firm True Beacon and FinTech fund and incubator Rainmatter, says India was long regarded as a back office for the world's IT needs. However, “since 2010, the prominence of Indian tech companies which try to create consumer-centric products like Paytm, Flipkart, Zomato is on the rise”, he explains. “They are competing with multinational companies in the largest consumer market.”

Bangalore-based Flipkart is probably the major success story out of India that took on a global giant. Like its American rival Amazon, it began as an online bookseller and premiered by two young Indian entrepreneurs Binny Bansal and Sachin Bansal in 2007. The business, which was set up out of an apartment in Bangalore with only a few thousand dollars, went from strength to strength to compete as an alternative online marketplace to Amazon.

In 2018, Walmart acquired a 77 % stake in Flipkart for $16bn. By 2019, Flipkart was the largest online retailer in India, with a market share of 31.9 %, ahead of Amazon's 31.2 % share, according to data from market research firm Forrester.

“In virtually any consumer segment, a company that can be transparent, customer aligned and make lives easier will certainly succeed,” says Mr Kamath.

This is true of the ride-hailing iPhone app Ola. Also emerging out of Bangalore - a city in south India often referred to as the country's answer to Silicon Valley - Ola has truly gone head-to-head with Uber. Both rivals claim they have the lead in India’s ride-hailing market. Uber said in February that it had a lot more than 50 % market share, while Softbank-backed Ola said at the time that it had been the largest platform, with more than 200 million customers.

However, experts explain that a lot of major start-ups in India are inspired by their Silicon Valley rivals, raising concerns about innovation.

The occurrence of Silicon Valley giants in India has served as the nucleus to create Indian innovators

Utkarsh Sinha

“In some ways, that may end up being a hindrance,” says Utkarsh Sinha, the managing director of Bexley Advisors, a Mumbai-based advisory firm that supports tech and media companies and investors in early funding rounds. “However, paradoxically Personally i think that has been best for India. The growth of global platforms in India helped seed the city of creators that are going on to generate 'unicorns' [start-ups with $1bn plus valuations] today. The occurrence of Silicon Valley giants in India has served as the nucleus to create Indian innovators.”

Praveen Tyagi, the founder of the Indian education technology start-up STEP app, says: “Global companies have offered a base for growing individuals and Indian companies to come forward and explore these opportunities for growth and success.”

Many have observed immense success as well. Paytm, for example, has managed to fight competition from Google Pay to be the major operator in the two 2,000tn rupee digital payments space in India, according to a written report released in August by consultancy RedSeer. The FinTech has nearly 50 % of the neighborhood payment market share while Google Pay commands just 10 per cent, the report says.

RedSeer explains that Paytm's extensive growth has been helped by its occurrence in India's small towns and big cities, which has allowed it to add an incredible number of shopkeepers to its platform.

"Paytm gets the highest top-of-mind recall and unaided awareness among merchants,” according to RedSeer. It's the “most used app” among the merchants, with 68 % of these cited in RedSeer’s study using Paytm to accept payments.

Like most of India's major tech start-ups, Paytm has attracted substantial funding from abroad to help fuel its growth in fact it is backed by investors including Softbank, Berkshire Hathaway, and Ant Financial.

“These are not small start-ups - they have huge investments from [foreign] private equity investors,” says N Raja Sujith, the partner and south India head of lawyer Majmudar and Partners.

He explains that if companies like Paytm lobby against Big Tech, the federal government will have to listen to them.

But Google can be an important investor in India's tech space, having focused on injecting $10 billion into the sector over the next five to seven years. This includes its investment of $4.5bn in July into Indian conglomerate Reliance Industries' digital arm, Jio Platforms, for a 7.73 % stake. Facebook has invested in Jio Platforms also.

India's tech and Big Tech are heavily intertwined which is exactly why, Mr Sujith explains, the federal government and the major players will probably want to “look for a middle path solution” to the current dispute which has flared up over Google's new iPhone app billing system.

“Using areas, like Google and Apple software store, you don't have a competitor at all,” says Mr Sujith. “You will find a real dominance due to their technological advancement.”

Paytm’s mini-app store is no comparison to Google’s mammoth app store, according to experts. However, the fact a local start-up ventured to challenge a competitor with their own home-grown alternative shows how Indian tech start-ups are challenging their bigger rivals.