One would think that an active angel investor like Rehan Yar Khan would have little to worry about, given the buzz in entrepreneurial activity in India. But the truth is quite the contrary. In a video interview with Techcircle.in, Khan (also the founder of Flora2000 Gifting & Design Pvt Ltd, the company that runs Flora2000.com, an e-commerce site retailing flowers across the globe) shares his favourite investment theme, his note of caution about the new age e-commerce ventures in the country and why his own company recently spliced out the India business into a separate brand.
The Indian e-commerce Jungle
Khan says one of the reason for the negative sentiment around e-commerce is that most of the players that come online just take a product and start selling it online, which in turn means high customer acquisition costs, lower margins and no loyalty.
"If you are only selling Adidas online, there are already a number of people doing the same, so what happens is that the customer buys the product from the one giving the most discount," said Khan. "But companies, which have their own brands or add proprietary value to the products tend to get good margins as well as customer loyalty."
According to him, there is a lot of opportunity for new brands in the garment space as it is much easier for them to launch a brand online in comparison to a brick and mortar store (note he is himself an investor in e-commerce site Exclusively.in!). He also believes that we have been too quick to pass judgements on whether the e-com ventures have passed or failed, and going forward there will definitely be more than a few success stories.
On investing in the country
"Strangely in India, the industry developed in reverse. There were a lot of PE's, fewer VC's and even less seed funds, making it a very odd-shaped pipeline. Due to this, the entrepreneurs who came up faced a lot of issues. But I think the breed of new entrepreneurs that are coming now will be of very high quality," he said.
Khan's favourite investment theme is SaaS, followed by e-brands (but not vanilla e-com companies). He has already invested in over 15 companies. Without disclosing the names, Khan claims that three of his portfolio companies have already grown 50-60x.
His key investments include holiday comparison site Polama, online taxi services firm Olacabs, Buytheprice.com, mobile video streaming app maker Jigsee Inc, Druva Software, Kwench Library Solutions Pvt Ltd, Innovize Tech, real estate group buying site Groffr.com, Reach Accountant, luxury e-com site Exclusively.in and the most recent one Cherish Life Products Pvt Ltd, that runs Cherishmaternity, an e-shop offering maternity wear and infant products.
He also rubbished claims of a bubble being built at the seed stage by mentioning that India is still a nascent market even now. "Out of a country of over 1 billion, even if 150 odd companies are getting funded, it's not something very big."
And his advice to entrepreneurs, "Think proprietary - build a new brand, or if you are a vanilla seller then think about proprietary in terms of delivery time, special packaging etc., to make you stand out."
"Secondly, think life time value (LTV). Think about what will make the consumer come back time after time and focus on that (like garment where you have a lot of repeats). You might have the best mobile site, but how many cell phones can you sell to a guy in a year?" he asks.
Update on Flora2000:
Khan says the Indian logistics infrastructure has its own set of challenges. His entrepreneurial venture Flora2000 Gifting & Design Pvt Ltd, recently rebranded its Indian portal Flora2000.in to Goldboxx.in.
The rebranding was initiated early this year and the firm is now looking to revamp the user interface around Diwali.
"Flora2000 is focused on the US market (basically for people in America who want to send flower overseas), mainly because when I started the venture, there was hardly any scope for it in India. Now we have reached a full circle and have launched Goldboxx for the Indian market," he added.
He also mentioned that the reason for the rebranding was because in India, the company sees an opportunity to get into gifting as a larger business instead of just floral gifting. "In India, flowers is not one of the top gifting items (unlike chocolates, apparels etc.), that is why when we came here we had to do so with a different model altogether." The company has brought all the software as well as a few top team members from Flora2000 to Goldboxx.
See the video for more:
(Edited by Prem Udayabhanu)