For Hike to win, WhatsApp doesn’t have to lose: Kavin Bharti Mittal
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New Delhi: As Hike became the 10th Indian start-up to hit a valuation of at least $1 billion, founder and chief executive Kavin Bharti Mittal spoke in an interview about raising money from WeChat’s owner Tencent and Taiwan’s Foxconn. Mittal also spoke about deployment of the funds, possible synergies with Tencent and competition with WhatsApp. Edited excerpts:
What are the factors that helped you in raising the money?
I think the product did well—it starts there. We are a great team working at Hike. Tencent and Foxconn saw that very clearly. I think we are the only true tech company in this country. We have no warehousing, no logistics, nothing; we are fighting our battles on tech and product. The fact that we made so much progress in the social space is a big deal, and the growth has been good in the last year.
From user perspective, we announced earlier this year that we have crossed a 100 million and we have 40 billion messages exchanged per month on our platform. And it continues to grow.
Tencent launched WeChat in India in 2013 but it hasn’t been very successful. What kind of synergies can we see between WeChat and Hike now?
WeChat did not take off. I think we understand the need to be very local in terms of how the mindset operates and understand the local nuances that only help to be more successful in the market.
There are no synergies between WeChat and Hike. That is something that didn’t even come up during our discussions with Tencent because we know how complicated this is.
Hike has always been portrayed as the WeChat of India. What did you do differently to win over WeChat?
Tencent is known for WeChat but Tencent is huge. They have music, games and a bunch of stuff. The reason why we succeeded, we were from early on very local and timed to the market. We launched Hike as Hike to SMS back in 2012 when not many had smartphones and data plans. We further evolved to Hike offline whereby even if your data plan was over, you could fall back on free SMS. Then, we further evolved to Hike Direct last year where you can pair phones and chat.
Today, we are doing over 150 terabyte of data. It is huge. Second was privacy, which was a primary need for the market like India where a billion people were coming on the Internet for the first time and where smartphones are shared in households. Kids and adults both need privacy. So, we introduced this hidden mode where we can hide chats and content. That’s the key. Third is local content and it goes beyond languages.
This kind of valuation must have made you really happy?
I will tell you why it excites me. It’s a milestone, not success—you must realize that.
What it represents is the game, not the valuation. What it represents is fast growth... And the valuation will also help us in raising the profile of this company. I can hire better.
Where are you using this money?
We continue to grow on the people, office space and we also want to invest in machine learning. We have been tinkering with some stuff but now we can double down on that. Maybe some acquisition in the right spaces…
What kind of categories are you looking at? What is the ticket size?
We are willing to pay the right amount for the right team and right technology. Machine learning and artificial intelligence...we are looking at these spaces. We might look outside India—Korea is a big space for this, Israel is a good place for video technology.
What about competition from WhatsApp?
Once you realize that for us to win, WhatsApp doesn’t have to lose, the whole perspective changes. Now, data shows us that we sit side by side with WhatsApp. People use Hike as much, they do different things with different people in different apps. The kind of stuff you can do on Hike, you cannot do on WhatsApp. We have large amount of people using Hike alone, but an even larger amount people using both Hike and WhatsApp.
Our engagements puts us at No. 2 in the market. If you see engagement per user, we are by far No. 2 after WhatsApp.
What about the growth plans now? Can we expect you to launch in other countries?
It is way too soon. In India, there is a lot to be done. Market is changing constantly... There are a lot of markets which are similar to India. But the question is which are those markets? You can’t just take one model that works in your country and bring that to another market.
How big is the opportunity in India?
We have 1.275 billion people. There are one billion SIM cards in circulation. Half a million unique people have one million SIM cards; 250 million people have smart phones and 200 million have Internet; 130-140 million people are Internet users as 30% of the bottom of the 200 million are only accidental users. Our goal is that this has to grow.
All smartphone buyers are not new smartphone buyers. So, the market itself has to grow and we believe that will happen in the next 6-12 months. The Internet market in India is very difficult. It is a prepaid market. Most people buy data in sachets. That does not work. My guess is with things like 4G, things will change because the spectrum telcos have is much larger than 3G, which allows them to price things lower because they can handle much more capacity.
So what do Tencent and Foxconn bring to the table?
We talked to a bunch of people. We were very clear that if we had to get someone on board they had to add tremendous value apart from capital because the market has got to a place where we have to buy time with knowledge as well.
Tencent are the ones who have pioneered the messaging of platform service and from the product itself to the entire business model. Access to that, the learnings, technology, insight, people—we get all of that from Tencent.
On Foxconn, people underestimate how good their software side of business is. Most of it happens on Android. India is an Android market. From Foxconn’s perspective, they have been wanting to diversify into Internet services.
Is there no conflict of interest as Tencent will be sitting with your data, your knowledge of the market?
There is a saying in the company that ideas are a dime a dozen. If I am thinking it, there are a million people thinking (it) as well. There are 100,000 people building it and 100 people launching it in the market and one has already launched. It is more about execution than anything else.
Are you not going to compete with WhatsApp?
Indirectly, we compete with everybody in respect to time spent, in that perspective we compete with YouTube also for time spent…but like we believe we are a very different service and we sit next to something like SMS and WhatsApp.
How do you plan to increase the engagement? Are you looking for more third party tie-ups like commerce, payments etc?
Not yet. We think about it and talk to everybody all the time. But it is long term. Commerce is more of a monetization strategy versus an engagement strategy. Content is more of an engagement strategy.
Are there plans to monetize it?
No. What do you think we raised all the money for? On the monetization front, we think you have to get to a very comfortable critical mass on the product before we start to investing time in thinking what the business model could look like. Our goal is to look at that in 2018 or 2019. We knew from day one that it is going to be a ten-year game. My guess is that we will try and start thinking about making money in 2018 and we may not end up making meaningful amount of revenues until 2020.