A window of opportunity for Indian apps: Investors

While Indian investors said the ban does open a window of opportunity for home-grown social content apps, there is still uncertainty on whether the ban is temporary or permanent.

“There is surely a window of opportunity for entrepreneurs in the space who are fundamentally fulfilling something they are passionate about. However, it remains to be seen if this window is going to be a long-term one, as policies could change and established goliaths could be back," said Sanjay Swamy, managing partner, Prime Venture Partners.

“The space vacated by TikTok will see a scramble for accessing market share. Large ones like YouTube, Instagram and Indian startups will see this accrual to themselves. This will bring advertising revenues to them as well in greater amounts which will no doubt raise the valuations," said Anup Jain, managing partner, Orios Venture Partners, an early-stage venture capital fund.

Investors also highlighted the challenges around technology, product talent and capital investments, which are required to scale these social platforms.

“Back in 2018, Indian VCs did make investments in Indian social content platforms, but were soon to realize that product skills and the capital requirements needed to scale these platforms can be a big challenge. Some of them ended up burning their hands in the process," said Anand Lunia, founding partner, India Quotient, which has invested ShareChat, Frnd and Kukufm.

According to Lunia, social content platforms are hard to build owing to product innovation around artificial intelligence and machine learning, and the talent pool needed for scaling up.

Investors said social content constantly requires large investments to scale, which domestic investors may be unwilling to do. “When it comes to the product, Indian social apps weren’t so technologically advanced to compete with Chinese platforms. Post-ban, there might be one or two Indian outliers which may emerge, but Indian apps will need to look at serious innovation," said Bhavik Hathi, managing director, Alvarez and Marsal (India), a management consultancy.

Indian platforms also lack global content, said Hathi. “Unfortunately, the government allows foreign companies to come and steamroll Indian startups. We saw this with Amazon and now ByteDance. There has to be some support given to Indian startups," said an investor who didn’t want to be named.