Angela de Giacomo, coordinator for India at German Startups Association talked to Shobhna Mohn, Executive Vice President for Growth Regions at Bertelsmann, about investing in India. What distinguishes India from other growth markets? What should a founder be aware of when entering the indian market? What is the Bertelsmann strategy when it comes to invesments in India? Shobhna Mohn gives some interesting insights.
Angela de Giacomo: Bertelsmann is one of the world’s largest media companies also active in the services and education sector. RTL Group, Penguin Random House, Gruner + Jahr and BMG are well-known international media brands. What makes India such an interesting market for Bertelsmann?
Shobhna Mohn: India offers significant growth opportunities for us: A large and relatively young population, one of the fasted growing economies in the world, a rapidly growing internet penetration, a growing middle class and thus an increasing demand for media products and education and last but not least a dynamic start-up and VC sector. All of these developments, which have further intensified in the last two years offer good opportunities for our established businesses and our Corporate Venture Capital activities.
Angela: You have Indian roots; have these roots played a key role on why you and Bertelsmann choose India as a country to invest in?
Shobhna: That would be an honor, but unfortunately that is not the case! In 2012, before I took over the role of Executive Vice President Growth Regions, Bertelsmann chose India besides China and Brazil as part of the corporate strategy leading to a more dynamic, digital, diversified and international Bertelsmann. The fact that I have Indian roots of course helps me to better understand the local (business) culture, the characteristics and challenges in India as a marketplace as well as the differences to other countries in which Bertelsmann has businesses.
Angela: As per your view what is the difference between India, China and Brazil, when it comes to your Bertelsmann investment strategies and what distinguishes India?
Shobhna: All 3 countries have their own very specific opportunities and challenges. Due to the specific legal environment in China as well as the faster innovation cycles at Chinese start-ups in general, our current focus in China is more on trend scouting digital business models, establishing partnerships with innovative entrepreneurs and delivering attractive financial returns.
The current instability and de-growth in Brazil has dampened some of the growth expectations but we are still optimistic on the country in the long run. Especially the higher education market offers significant opportunities for us along our global education strategy.
In India, the current dynamics and market sentiment are positive for us to invest. While recognizing that India is highly competitive with capital coming from US, Europe, China and local investors to compete in the very large market with a lot of opportunities, the large young entrepreneurial workforce as well as English as business language are certainly an advantage when investing in India.
We like to invest in companies that want to be successful while at the same time contributing to the development of the respective country and society. In India as also in Brazil we are investing in start-ups with the option in some cases of becoming a majority shareholder in the future. It is our goal to establish platforms for Bertelsmann that enable long-term growth in these countries.
Angela: What sectors / industries in India are you most interested in?
Shobhna: Our Corporate Venture Fund in India, Bertelsmann India Investments (BII), which was set up in 2012, is particularly focusing on investments in digital media and services in e-commerce and fintech as well as higher education leading to faster and better employability. Besides some Fund of Funds-investments, we have made 10 direct investments so far. For example, our last investment was Eruditus, a company from the higher education sector that brings Ivy League content in the form of executive education to Asia through blended learning and online courses. Besides that we have also invested in Pepperfry, India´s leading digital marketplace for furniture and home accessories, Saavn, India´s leading music streaming service or the fintech company Lendingkart that provides business loans to Indian SME´s.
Angela: What does Bertelsmann expect from its Indian startups?
Shobhna: Our goal is to invest in start-ups that want to become a market leading company in their specific segment and are willing to shape the future of their specific industry. Ideally, they make a significant contribution to the development of the society. In return, we offer a long-term partnership, entrepreneurial spirit and social responsibility. All of these values are deeply rooted within the Bertelsmann DNA.
Angela: What advice would you give German startups, who want to enter the Indian market and vice versa to Indian startups who want to come to Germany?
Shobhna: Be patient: India is complex and still runs on an inefficient regulatory system. On top, it is a very diverse country with different regions, languages and sub cultures. You cannot enter the entire Indian market at once, you have to focus on specific cities or regions first. The gap between students´ skills and employer´s requirements can make it difficult to find enough qualified employees and infrastructure is still underdeveloped, especially in rural areas.
From an Indian perspective Germany is characterized by a limited market size when it comes to volumes and a lack of venture capital compared to the U.S. Customers often expect a fully baked product and are not so keen on beta trials.
Angela: Are there companies in your Indian portfolio that are likely to come to Germany?
Shobhna: At their current stage most of our portfolio companies are focusing on further developing their businesses in India. As a next step some of them will put more effort into expanding their business activities abroad including – in very selective cases – Germany. From the perspective of a corporate investor we are of course open to support our portfolio companies if and when international opportunities arise and are happy to connect the founders and top management of our portfolio companies with senior management members of our businesses in Germany or in other relevant countries for Bertelsmann.
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