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This was a 2,500-word feature for AVCJ that centered on Jio Platforms, India’s upcoming ‘super app’ with the artic;e published long before the company became a regular talking point in financial media.

Nearly three months have passed since Reliance Industries launched Platforms as a holding company for its digital businesses. Is it poised reshape India’s technology landscape? [Note: it did.]

Amit Shukla is on a mission to make government services in India more accessible. He believes many basic functions are not digitized for two reasons. First, officials fear being overwhelmed by the level of public utilization. Second, politicians use paper-based systems to maintain a stranglehold on service delivery and thereby manipulate voter favor.

“After getting married, an Indian woman usually needs to change her last name on five official documents,” he says. “It costs a lot of time and money and rarely gets completed within a single visit. Many women are also daily wage laborers. Around seven million marriages take place every year – the amount of money being wasted is phenomenal.”

Shukla’s start-up, EasyGov, brings digitization to the most neophyte corners of Indian bureaucracy. Getting permission to access central databases in order to automate processe and move them online is a significant challenge, but Shukla has an ace up his sleeve. Last year, Reliance Industries (RIL) bought a majority stake in EasyGov and its telecom unit, Jio, integrated the service into its growing app ecosystem.

Now known as JioEasyGov, the company continues to operate independently, billing government agencies for its services. However, a direct link to Jio’s customer base means user acquisition costs are lower than whatever its private sector peers might achieve on the own.

Countless Indian start-ups seek to establish partnerships with RIL so they can tap into the conglomerate’s vast resources. In the past two years, 13 would-be Jio collaborators have accepted a counterproposal: acquisition by RIL. “I reached out to them because they had the largest customer base,” Shukla says. “The talks quickly changed in another direction.”

The Jio proposition is uniquely powerful – and potentially transformative for India’s technology sector. The company is positioning itself not only as a gateway for consumer- focused start-ups seeking scale and an exit route for their venture capital investors, but also as a prospective digital giant that can make its own rules.

Transition time

At present, RIL generates most of its revenue from offline business. In the most recent financial year, refining was responsible for INR3.9 trillion ($54.5 billion) in sales, over half th annual total. Digital services – the unit comprising the firm’s telecom and internet business activity – contributed 6%.

Mukesh Ambani, the company’s chairman, has said he expects more than half of future EBIDTA to come from consumer-facing businesses, principally Jio and Reliance Retail, the country’s largest retailer. In the most recent quarter, that proportion was 37%. The success this transition will depend on how loyal Jio subscribers are to its app ecosystem.

The company already enjoys a position of dominance in mobile services. Its subscriber base numbered 370 million as of last December and it is likely to grow if Vodafone-Idea is forced to file for bankruptcy in the coming weeks over a tax-related fine of INR530 billion ($7.3 billion). Vodafone-Idea is India’s third-largest telecom carrier with 304 million customers.

“If you see typical Jio users – a guy with a basic plan who can now watch videos nearly for free – they live in a completely different parallel universe and use different apps,” says Anan Prasanna, a managing partner at local venture capital firm Iron Pillar.

Jio’s digital push has two prongs: engaging Jio users directly through service-oriented apps and JioMart, an e-commerce platform that displays inventory from small-scale retailers. Th question being asked by many investors is whether the competitive pricing that underpins the company’s telecom offering could prove to be its Achilles heel.

“A majority of people in India are pre-paid customers, that’s where Jio is massive,” says Rajesh Raju, a managing director at Kalaari Capital, an investor in two start-ups that have since been acquired by RIL. “Can you monetize with a universe of apps that could work alongside the Jio mobile platform? Yes, it could work at very low price points, but it needs t work for hundreds of millions [of users] to really make money.”

Jio’s average revenue per subscriber is INR128.4, lower than Airtel’s INR135. In the most recent quarter, Jio lost 22.3 million customers after it reversed a longstanding promise of free outgoing calls for life.

There are currently 13 consumer-facing apps on the Jio platform offering video content, payments, messaging, news and music streaming services. Saavn, India’s leading music- streaming app, was the first acquisition in March 2018. Since then, the ecosystem has grown substantially, with Reliance Strategic Business Ventures (RSBVL) leading the deals. More recent additions include cloud-based web development services provider NowFloats Technologies, which was acquired last December, facilitating an exit for Iron Pillar.

Reliance Corporate IT Park, the official name for the developer of Jio apps, leads the list of India-based developers on the Google Play store. Over the last two years, total installations of its apps have grown by 46% to 536 million. In comparison, Hotstar, the country’s most popular video streaming app, ranks second with 100 million installations.

However, JioSaavn is not a runaway leader. According to App Annie, an app data and analytics provider, JioSaavn posted 69 million downloads across Android and iOS phones last year. Gaana, another music streaming app, was close behind on 58 million.

Given successful app-based ecosystems are usually anchored by a single category killer that wins permanent digital estate on smart phones, Jio appears to be lacking. In China, for example, Tencent Holdings has leveraged the dominance of its WeChat messaging app to enter other segments, notably financial services, and become a conduit for other start-ups. Indonesia’s Go-Jek has done the same, initially relying on ride-hailing.

“They will have to pay a price,” says Manish Kheterpal, founder of WaterBridge Ventures. “They will have to buy [a leading app] like ShareChat [a regional language social media platform] or Paytm or create one of their own.”

The counterargument is that Jio can achieve critical mass by catering to a wide variety of use-cases – mobility services is the only major vertical missing from the platform – but it must still convince local consumers that its offering is comparable to those already availabl This isn’t easy for a late entrant, even if there is an existing mobile user base to target.

“Jio is a great brand and today it stands for a telecom service,” says Rahul Chowdhri, an investment professional at Stellaris Ventures. “As they expand into other categories, they wi get the benefit of the Jio [telephony] platform but will also need to build a value proposition for consumers in each of those categories.”

Gopal Jain, a managing partner at Gaja Capital, puts it more bluntly: “I don’t think every ap they have will become valuable – only a select few will.” However, he does concede that Jio could pose a threat to the likes of Byju’s in education by offering mass-market products at low cost. Content providers may see value in teaming up with Jio in these efforts.

A $70b holding company

Three months ago, buoyed by the progress of its app ecosystem, RIL announced the creation of Jio Platforms, a private holding company for its internet and telecom businesses. There are plans to launch a host of news apps focused on services related to healthcare, education, agriculture, e-commerce, gaming and manufacturing.

It is still early days, but market watchers are quick to talk up the potential value of Jio Platforms. “Even a 10% stake sale could bring in about $7 billion,” says Vikash Kumar Jain, an investment analyst at CLSA.

Jio has yet to raise third-party capital by selling minority interests in its digital assets, but RI is a regular collaborator with foreign investors. Its debt pile of $22 billion implies a need for external support. Last year, it formed partnerships with BP, Saudi Aramco and Brookfield Asset Management in retail fuels, chemicals and telecom infrastructure, respectively. Amba has said there is “strong interest” from potential strategic partners for Jio Platforms.

Should RIL go down this path, the spotlight will inevitably fall on RSBVL. A corporate VC arm established last year, it makes acquisitions for Jio Platforms but also supports other RIL business units. This creates powerful cross-pollinations – Fynd, a start-up that helps brick- and-mortar retailers fulfill online sales, was acquired by RSBVL last August and now works with Reliance Retail – but also potential conflicts of interest.

Alongside another RIL-owned investment firm, the conglomerate made nine investments totaling INR8.5 billion ($117.5 million) last year. RSBVL concentrates on technology firms with a B2B2C focus and is said to allow founders a high degree of autonomy despite buying majority control.

“Most of our customers are third-party customers and that’s how it should be,” says Aakrit Vaish, the co-founder of Haptik, a cloud-based virtual assistant provider. “If you want to build a large independent operation, you need to depend on large independent customers rather than intergroup captive companies.”

Founded in 2013, Haptik sought to create a chat-based assistant for individuals but did not attract enough paying customers, so pivoted to an enterprise service model. It was seeded by Kalaari Capital and acquired by RIL in April 2019.

“They were trying to basically create a virtual personal assistant for each one of us that can’ afford a personal assistant handling 70-80% of our daily needs whether that’s making travel arrangements or answering simple questions like where is the closest ATM,” says Kalaari’s Raju. “You can use search, but it’s a cumbersome process.”

His conclusion is that Haptik was ahead of its time. By aligning with Jio, the start-up may have achieved a second lease of life. They are primarily focusing on premium markets where there is already considerable comfort with internet services delivered over mobile devices. The expectation is that India will get there eventually, and Haptik will be ready and waiting.

This is keeping with RIL’s willingness to make moonshot bets. It has backed drone manufacturers, artificial intelligence-enabled teaching assistants, augmented reality headset manufacturers, e-commerce enablers for micro-businesses and language-as-a- service firms – all with a long-term view.

Source of liquidity

For venture capital investors, RIL represents a much-needed exit route, given India has yet t fully accept IPOs by internet-related start-ups. The annual average number of trade sales in India’s technology space since 2015 is 29, according to AVCJ Research. Most of them are secondary exits to other financial investors. Last year, RSBVL and Reliance Investment Holdings (RIHL) were the most active strategic buyers.

“We do think of them as potential acquirers for some of our businesses and sometimes as partners,” says Chowdhri of Stellaris. “I would also say that the market they will go after will be a really large market which is good, since it will likely allow for multiple large companies to co-exist.”

Indeed, RSBVL is expected to become more prolific once it becomes more familiar with VC and figures out what works for RIL and for Jio Platforms. The combination of comfort and confidence may also lead to bigger investments.

“I would like to believe that at some point they would like to take stock of what they have acquired, how those acquisitions have worked for them,” says Ashish Fafadia, a partner at Blume Ventures, another early investor in NowFloats. “When they see some of these early acquisitions develop as successful case studies then they will start going deeper and acquir bigger companies with larger acquisition values.”

Despite RIL’s recent acquisition activity, the newest addition to the Jio app ecosystem attracting the most interest was developed in-house: JioMart.

The e-commerce platform was launched in January and is currently only open to customers who pre-register in three districts of Mumbai. It will enable customers to purchase daily items – often at a discount – usually found in a kirana store or a neighborhood shop, with the nearest such establishment to the buyer taking responsibility for fulfilling the order. Wholesale goods come from Jio-owned superstores.

It is a highly localized solution – another RIL-owned start-up, Reverie Technologies, could help with execution by providing local language integration – which could become the glue that holds the Jio ecosystem together. However, app-based grocery delivery, much like e- commerce, is already well-penetrated. The likes of BigBasket and Grofers, which are backed by Alibaba Group and SoftBank, respectively, have been operating in the space for more than seven years.

JioMart differs from the rest in that it owns some of its inventory, but it remains to be seen whether this translates into a service offering strong enough to wean users away from the incumbents.

Dominance predetermined?

Any technology company, regardless of its financial and strategic resources, that seeks to imprint itself on an existing internet ecosystem faces a litany of challenges. But proponents of JIL argue that the 46-year-old company recognizes it is running a marathon, not a sprint. Jio-related ventures don’t need to deliver immediately. In any case, given the bureaucratic complexities inherent in a large corporate, it will take time for Jio to finalize its plans.

Should it succeed in creating a dominant ecosystem serving India’s price-sensitive mass market, the balance of power will shift not only within India’s technology sector but within the broader consumer sphere as well. “In a market like India with players like Reliance, if they decide to put their minds to something, they can change the game,” says WaterBridge’ Kheterpal. “We’ve seen it in telecom.”

The earlier comparisons with Tencent’s WeChat ecosystem are not idly made. Baidu, Alibaba and Tencent used search, e-commerce and social networking, respectively, to carve out substantial digital domains in China. Alibaba and Tencent – which have monthly active user counts of 824 million and 1.15 billion – have pushed most aggressively into new verticals. Their shared dominance of digital payments should not be underestimated in this context.

Both have become prolific backers of start-ups – Tencent made 50 investments in China last year to Alibaba’s six, according to AVCJ Research – and their value proposition can be compelling. Few consumer-facing businesses have achieved critical mass in China without their support, but they are feared as well as lauded. VC investors often counsel founders against entering into alliances too soon in case it limits future options.

Will Jio Platforms become to India what Tencent and Alibaba are to China? Investors downplay the threat, citing the relative freedom foreign strategic and financial players enjoy in India. “India is a lot more open,” insists WaterBridge’s Kheterpal. “Domination by players can only happen in closed markets where outside competitors are completely shut out and government support is given to a finite number of companies for category leadership.”

Moreover, even in markets like the US where Amazon is the runaway leader in e-commerce, there is still scope for specialists to thrive. “And Jio is a long way away from being the Amazon of India,” Gaja Capital’s Jain points out, stressing that the company has yet to demonstrate its value proposition through a couple of successful apps.

In the meantime, stakeholders will look on with interest as the Jio Platforms story develops Different industry participants have their own perspectives. For EasyGov’s Shukla, there is n dilemma: RIL’s digital foray is a welcome one because there were few competing sources of capital for technology start-ups with an impact focus.

“Civic technology is not an investor-friendly sector because working with government bring a lot of uncertainty,” says EasyGov’s Shukla. “It only appeals to those who understand the larger impact of investments where it’s difficult to get an immediate return and the problem is complex.”