With growing readership, Indian content startups stir interest from investors

Photo: Ramesh Pathania/Mint

Investments in content start-ups are picking up pace, as venture capital (VC) firms bet that indigenous content will attract Internet users despite concerns over the ability of these companies to generate digital advertising revenues in a business dominated by Google and Facebook Inc.

At least three content start-up deals are in the works, multiple people familiar with the matter said. Self-publishing platform Pratilipi (Nasadiya Tech. Pvt. Ltd) is in talks for a Series A round from Omidyar Network, short-video start-up Clip is close to raising a Series A round and social media network Sharechat (Mohalla Tech Pvt. Ltd) is raising a Series B investment from Shunwei Capital and Xiaomi Corp., the people cited above said.

The deals mentioned above are in the range of $3-15 million, the people cited above said on condition of anonymity. The Economic Times had reported news of Sharechat’s funding talks earlier.

Pratilipi declined to comment and the other companies and investors didn’t respond to emails seeking comment.

Over the past 18 months, investors have talked up the potential of content start-ups that can serve tens or hundreds of millions of Internet users in the country.

Before the current wave of investments, content start-ups such as InShorts, YourStory, ScoopWhoop, FactorDaily and The Ken received cash from venture investors and others.

These start-ups are text-based and cater mostly to an English-speaking, upper-class audience.

Investors, however, are most excited about start-ups in video and local language content—platforms that can aggregate user-generated content or even firms that can produce original content at low cost in local languages.

They hope that Indian content start-ups can replicate some of the success of their counterparts in China, where dozens of digital media and content platforms such as Toutiao, Tencent Holdings Ltd-owned Tian Tian Kuai Bao, Weibo, Bigo Live, Kuaishou and others have attracted billions of dollars in funds and built attractive businesses.

“India isn’t a homogenous country, so it’s logical to assume that not everyone will be served by YouTube, Facebook, Netflix, etc.,” said Anand Lunia, co-founder of India Quotient, an early-stage VC firm.

“There are two or three kinds of content platforms that will work, in our view. News or information providers and entertainment or ‘timepass’ content platforms. These can be in local languages or even English, if you’re only serving the top cities. I think there’s space for original content start-ups also, provided they can figure out the cost structure and are built to publish on different platforms.”

India Quotient is one of the most bullish investors in content along with Kalaari Capital, which has invested in at least three digital media companies.

Tiger Global Management had earlier backed several content start-ups such as InShorts and The Viral Fever, but it hasn’t invested in any company over the past 18 months.

Lightspeed Venture Partners, IDG Ventures and Nexus Venture Partners have invested in content.

The investor interest in content start-ups comes despite the small size of the online advertising market. Digital advertising spending is expected to reach Rs9,490 crore this year, according to a February report by media agency Group M.

But a majority of this will go to the two digital ad giants, Google and Facebook, leaving very little for start-ups, traditional publishers and everyone else. For now, investors and start-ups are trying to attract as many users as possible—and praying that advertisers will follow in future if they have a large enough audience.

“Both monetization and (user) expansion will catch up over a period of time—you cannot prioritize one over the other,” said Virendra Gupta, CEO, of DailyHunt (Ver Se Innovation Pvt. Ltd), a vernacular news content aggregator.

“Some investors look at monetization when you move out from early-stage. The way we run our business is keeping in mind both the user base expansion and monetization strategies. But India is right now more of a user market than a revenue market. But the revenue generation opportunities are not that small as well.”

Some investors, however, are bearish on the content and digital media business because of the relatively small size of the market and the dominance of Google and Facebook that doesn’t look like ending any time soon.

“It’s very tough to build a content business. The shift to digital is not happening fast enough to accommodate a lot of content start-ups and then you have Google and Facebook who are taking away most of the market. You’ll see that even the start-ups that are able to build a decent-sized user base will struggle to monetise,” said a VC, who declined to be named.

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This story was first published on Livemint