Avik Ashar: Zilingo Ethical Dilemmas, India vs. Southeast Asia Startups & Market & Consumer Diversity - E466

Avik Ashar, Principal at Artha Venture Fund, and Jeremy Au discussed:

1. Zilingo Ethical Dilemmas: Avik reflected on his experiences at Zilingo where rapid expansion led to questionable practices such as buying and selling Apple watches on their fashion lifestyle platform just to meet monthly sales targets, in order to achieve founder and board expectations of non-stop growth. He warned that crossing ethical lines for short-term gains, like funding or fame, is difficult to reverse over the medium term. Adhering to ethical standards is key to decisions that might push the boundaries of integrity, with the option of walking away from the job.

2. India vs. Southeast Asia Startups: Avik explained the similarities and differences between Southeast Asia and India, particularly the diverse and non-homogeneous nature of the two. In Southeast Asia, the cultural diversity within countries like Thailand and Indonesia requires tailored management strategies for each locale, much like in India where the cultural landscape changes dramatically over short distances. A deep understanding of local nuances is crucial for effective business operations. With examples from his management experience, he noted the distinct approaches needed in cities like Bangkok versus rural Thailand, and the cultural shifts encountered when traveling from metropolitan centers like Mumbai to smaller towns within India.

3. Market & Consumer Diversity: Avik explored the complexities of the Indian market, the stark economic disparities and varied consumer behaviors. He described the high spending power of urban elites compared to the rising middle class’s evolving consumer expectations. He also discussed the integration of technology in traditional sectors like textile manufacturing, and the transformative impact of digitization on industries traditionally lacking in infrastructure and capital expenditure.

They also covered the critical importance of stringent due diligence in financial dealings, especially in emerging markets like India, the nuances of ethical leadership within rapidly scaling startups and socio-economic stratification with distinct spending behaviors in India.

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(01:48) Jeremy Au:

Hey Avik, how are you?

(01:49) Avik Ashar:

Hey, Jeremy, pleasure to be here. Very well.

(01:51) Jeremy Au:

Yeah, great. Well, lots of folks have been asking about the Indian ecosystem and how it relates to Southeast Asia. And I thought to myself, maybe this could be a good conversation for us to get started and see how it goes. So Avik, could you share a little bit about yourself?

(02:02) Avik Ashar:

Perfect. I'm happy to. So I, a little bit about me, I, my name's Avik Ashar. I grew up in the Middle East. I moved to India, studied here in Bombay, worked here in the Indian tech ecosystem, then got poached by family office to run their startup investments in 2012. My first investment, ironically, was in Singapore. And post that I invested in 22 more companies in India across 2012 to 2017. At that point in time, it was, it was insane. There were no, there were about 10 VCs in the entire country. There were about 30 family offices and a handful of angels. We'd meet together we'd literally meet at the national stock exchange office.

They, they were kind enough to host us and give us a room to, to meet up and chat, and a few other folks, offices and meetup is run, is primarily through Indian angel network, which is the first angel network in the entire country in an organized manner. And there was nothing more than that. And I got poached because a family office was traditionally into diamonds and real estate as old school businesses as you can get. Woke up one day and said, Hey, we see these startups raising ridiculous sums of money. And we can't raise it, but we want to be part of this entire journey. So let's try and invest.

So ended up investing on their behalf for five years. Post that, I got, I was really soul searching, wanted to know what I want to do next. And a whole bunch of mentors said, you need to go and build something. I firmly believe that you should build something if you find a really big pain point. And I hadn't found that kind of pain point yet in my life. So then the next best thing was to help somebody else build something. And I ended up joining Zilingo with Ankiti Bose and Dhruv Kapoor. And that turned out into its own entire story. That's what brought me to Southeast Asia. I moved to Bangkok for a year and then Singapore for about seven years, its own journey.

(03:45) Jeremy Au:

Definitely a whole journey.

(03:46) Avik Ashar:

Yeah. So I think the Zilingo story is always something that people want to know and let's get it out of the way a bit early in the conversation. There was definitely a period where I said that we were doing something a bit stupid. I could not believe that we raised the level of money that we did, the way we did, the speed at which we did, and the amount that we were given. This was all across 2017 to 2020 2021, and I've never seen capital deployed at that speed or scale in my life. One of the most like startling memories for me was when I first joined my first week and I was in office on a Friday evening. I left by about seven and suddenly I get a call from Ankiti, he's saying, Hey, why have you left office? And my initial reaction, so it's seven and Friday my first week. I have left office. I said goodbye to my boss and I walked out. And she's like, no, your boss is sitting there and he's working very hard to make sure that we don't have a de-growth month.

And that's when I asked her, what does that mean? And she's like, in our history, we have never had a month where our revenue for the last month or less than this month. I'm like, but we're a marketplace that really shouldn't be the case. How does that work? I mean, it could work in a predictable SaaS business. It could work in a few other kinds of businesses, but in a marketplace, you're basically at the mercy of customers. There might be a bad month. It happens. So how do we never have a bad month? She was like, go to office. I reached there and they, and my boss said, okay, we have to do something. We're going to give you money and you have to go and buy Apple watches. And put it on the platform and we're going to sell Apple watches. I'm like, we're a fashion lifestyle platform. Why are we doing this? He's like, no, we're going to buy these watches and then we're going to sell them at a discount. And then we're going to hit our monthly numbers. At this point, I might have sounded like a broken record, but I was like, but why? And my boss was like, no, that's what we have to do. So that, that kind of kicked off the entire Zillingo. Post that, I stayed with the company. I ended up being asked to monetize the company.

And in my attempts to do that, I ended up discovering the intricacies of B2B manufacturing, textile garment manufacturing. I went to Bangladesh, Vietnam, China, India, Indonesia, went and visited factories on the ground and really understood how they operated. And that's where I figured that they needed a lot more tech. They needed a lot more digitization. They needed a lot more support across the board. And we went in to give them that support. And it started off pretty well. We started acting as their liaisons, because typically with factories what happens is that they are very mom-and-pop run. So your pop is the CEO, your mom is the CFO, the daughter's the head of marketing, the son's the head of sales, and they literally traverse the world trying to sell their products. And we're like, this really can't be the way this has to operate. The biggest amount of tech they have in the entire factory is Excel. So we went in and said, Hey, we're gonna give you guys solutions. We're going to improve visibility. We're going to make sure that you have better control over your factory, better control over your production.

And that, that was the pitch. And of course, better access to raw materials. So we started going further upstream to get them cotton, to get them polyester, to get them yarn, fabric. And in this entire journey, I think the entire message was lost somewhere in the middle of where a famous Indian unicorn founder, not going to mention who, suggested to us that why don't you start giving everybody, in this supply chain, a 2% discount. And the moment you do that, you're going to missing step, make a lot of money. I'm like, this sounds intriguing, but could you tell me more about the missing step. And they never mentioned anything about the missing step. This conversation happened late at night over drinks. I was hoping that nobody's going to remember it in the morning. Unfortunately, he did remember it in the morning and the next day she was like, Hey, we have to start giving out a 2% discount to all our merchants. Here, I'm sighing internally. We're like, we've taught these merchants that we're not giving them a free lunch, that we are a valuable platform. We are earning very little, like our take rates were in the few single digit percentages, very low single digits, but we taught them that there's value to the platform and the instructions were then passed that you need to give these discounts and it was over lunch in Bangkok once where I said I don't want to do this and the response was, then we need to find somebody else to lead the B2B team.

(07:51) Avik Ashar:

At this point, I'm just going to stop with one piece of advice for anybody who's listening to this. If you ever feel that anyone in your life is asking you to take decisions that don't fit well with you, don't sit well with you or follow any form of ethics that you follow, quit, assuming you have the capability. Quitting is a privilege as well, but quit. Anyway, I didn't do this. So I jumped on the bandwagon and said, if you're not going to quit, you have to listen to whatever your boss says. So I jumped in, started doing what my boss said. And within six months, we were at 50 million a month in gross merchandise value, fancy numbers, and we were raising money. And I was like, this can't possibly work. And lo and behold, in a couple of months, we had raised money from from Temasek, from Susquehanna International Group, from Sofina, from Burda, from every fund that Sequoia has virtually in the world. We raised money from every single who's who in the world. We raised a round of 226 million, on the back of numbers that hopefully, a old public market analyst should have been able to see through. So it was an interesting and eyeopening experience. And I carry that experience with me as a VC every single day. One of my first thoughts is India and Indians are not for beginners.

(09:00) Jeremy Au:

When you think about all of that, obviously there's lots of advice that you have, and, we'll talk about this more in the future, but when you reflect on that, what do you think were some of the lessons that you took away from that?

(09:09) Avik Ashar:

I think some of the lessons I took away were, and I'm going to go first with a founder hat on and then as a VC hat on because I sit both sides. I think my lessons from that were as a founder, it's very, very tempting to cross the line. And everyone knows their line. Everyone knows they have a line. The moment you question a decision, the moment you think about a decision, like should I, is this questionable? Is this okay? The moment you have those kind of internal thoughts, you know you're staring at a line. And I think the only advice I have is that if you cross that line, it's very, very, very hard to go back. I'm not going to judge anyone who crosses it, not crosses it. Those are people's personal decisions in life, but if you cross that line, it's a very hard decision to walk back on. And that line, that line looks tempting. It has money. It has fundraising. It has status. It has glamour. It has your face probably on Forbes 30 under 30. And we all know where that leads you. It's tempting. So my advice as a founder is stick to your guts, stick to your guns. Build a real business. It's tempting to cross the lines.

As a VC, my piece of advice is, and especially since I know a lot of Southeast Asian folks are looking at India in the past six months, since I moved back from Singapore to India, I've had about 25 funds reach out to me saying, Hey, what's going on in India? We are in varying degrees, either we have no allocation to India and now we're allocating some money to India. We have a 20% allocation to India. Now we're increasing it to 50%. And varying degrees of we were Southeast Asian fund. Now we're looking at India. My advice to them is India is really not for beginners. Be tight on the valuations, be super, super diligent on diligence itself. Almost any number you see could be fabricated. Bank statements. Ask for a live viewing. I've literally had an experience where I've had a founder send me fabricated bank statements for cash flow. So anything and everything can be fabricated. But that being said, I don't think I've seen an opportunity like this country is for the next decade, barring probably China in the 1980s. There is a level of growth here that's unbelievable. There are people coming out.

India has 1.4 billion people. We have more people than USA, Brazil, Indonesia, and another 10 countries you can throw in, put together. One of our states is the population of Indonesia, Uttar Pradesh. So that just gives people a little bit of context of the size and the sheer scale. It's also really important to remember that this nation has to be looked at almost in the way you look at different countries, where you have people and it's sad to say, but I'm going to break it down. It's broken down by socioeconomic strata. You have people who have the spending capability and capacity of anyone in New York, London, or Singapore, and that sits at the top of the pyramid. That's maybe 30, 40 million people and that's incredible because these cities don't have that many people. And these folks have a crazy amount of disposable income and they are not afraid to spend it. They want better and better products, produce. The fact that they have chosen to continue living in this country is because primarily, they have business interests. They could live anywhere in the world. They're here and now they want the kind of access they had to global luxuries in this country. I was at an event a couple of months ago, and we had a few ministers speaking. They were talking about the growth of the country, but for me, one of the biggest takeaways was sitting in the audience and somebody next to me was from a private jet company. I just started having a word with them and said, Hey private jets, are they picking up in India? Are people willing to spend on it? And she looked at me, she handed me a card and said, yeah, but we usually booked out three, four months in advance. We've been adding one jet or plane every two weeks. You have my card. Maybe I can get you something a bit quicker, but that's our timeline. I'm like, who the hell are these people booking private planes and helicopters on a regular basis? So that's India 1.

Then you have India 2, which I mean, I think I'd put myself in India two. You have this bunch of folks who started off firmly, like in the middle class and at that point in time, salaries didn't really pay much. When I started my first job, my salary was 30, 000 rupees a month that works out to the three and a half lakhs a year. That's effectively under 4,000 Singapore dollars on an annual basis. That was my starting salary. After doing a degree in Economics, maybe I didn't pay that much attention, but it was from a very good college. That was the kind of salaries that you would expect. And today, the world has just opened up. People are paying more, people are realizing that there's a market, there's opportunity, there's income, and people's expectations have risen.

So India 2, which I would bucket as about 70 to 100 million people, is something I think I'm the most excited about, that's driving the consumption story of this country.These are e folks who have probably, in their lifetimes, their parents and them have unlocked money, to travel abroad two or three times, see the world, taste ramen in Japan or something else like have wine in Italy. And they're coming back and they're like, Hey, we want something resembling that. So you're seeing a massive boom in consumption, in direct-to-consumer, in the consumer ecosystem over here with new brands coming out. I mean, this is something that reminds me of something I grew up with in Oman it's roasted corn with a lemon, chili, and cilantro flavor, which you wouldn't be able to access in India, even three, four years ago. This is the way the consumerism wave has basically just flown across, where everybody wants to access different products, different things, taste different things, try different things. And I think it's a fantastic time both to be an investor as well as consumer in this country, because you're just trying things that are different. I had a butter chicken risotto yesterday. And it was the craziest mishmash of Indian, North Indian and Italian. It's like people are experimenting and having fun with it. So my advice to anybody in the world right now, especially capital and founders, this is a country to look at very seriously.

(14:46) Jeremy Au:

I think what's interesting, of course, is that, you've experienced in both, like Singapore as well as India and Southeast Asia. Could you share a little bit more about those links from your perspective?

(14:55) Avik Ashar:

Sure. I think that my experience, especially in Southeast Asia, has taught me, my first thought was that everyone said, Oh, Southeast Asia. I mean, the entire world breathes Southeast Asia in one breath. So you think it's fairly homogenous and put together. That is absolutely not the case. I think I saw this first when I started interacting with colleagues and then more importantly, when I became a manager and started managing people, especially across different countries, that the way you interact, the way you work, the way you want to motivate people in Indonesia versus a Vietnam versus a Thailand versus the Philippines is entirely entirely different. They have their own, every culture is absolutely beautifully unique. And that's beautiful, but also very tough as a manager to grasp for the first time. And learning that, understanding that was, my biggest takeaway living in Southeast Asia, it was beautiful. And the link that I think that I took back with me to India was once again, when people say the word India, you're like, yeah, okay. There's this little country, I go back to 1.4 billion people, people can't grasp the size and scale of what 1.4 billion people means. It's, it's very, very hard. I think I only grasped it the first time I ever took a local train in Mumbai. And when you are squeezed in like a sardine. You look around and you're like, Hey, each station has the equivalent of about a million people at any given point of time, like, yeah, I, I think I understand a bit better, but what the word 1. 4 billion really represents.

But the takeaway that I took was the fact that India is also not homogeneous. We are definitely one country, we are one people in a sense of pride, in a sense of nationalism. But India is another, the uniqueness of this country is if you travel 120 kilometers in any distance, north, south, east or west, you will encounter a different dialect transitioning to a different language. A different set of belief, barring base beliefs, a different set of cultural values, a completely different set of food, which is just amazing for anyone who's on a foodie exploration, and a different way of interacting a different way of working. And it's so important to understand that because while traditionally, startups in India were software, what technology we will build it here because we have amazing engineers and then we will sell it to the US, in Europe and Southeast Asia and the Middle East. But now that the India story is building, people are trying to build for and a lot of them use the colloquial term "Bharat," saying we're building for the old world. We're building for the broader world. And I always see that there's a big mismatch because the people who grew up like me maybe not abroad, but like in a Bombay or a Delhi, a Mumbai or Delhi or a Bangalore. And these cities aren't representative or reflective of the country. They are microcosms that effectively are emulating your New York, London, Singapore. They aren't reflective of the entire country. So for anyone who's looking to work with the country on a deeper level, engage with the country on a deeper level, you cannot use these cities as examples.

You cannot use these cities as, I know India, you don't. Indianized version of any global city in the world. If you want to understand India, you need to jump in a car and drive out and you really need to reach or Satara or Sangli, you need to go into the heartlands of the country to understand what people need over there. It's very different from what people need over here. And that's my entire kind of takeaway. And the link between what I see between Southeast Asia and India because Southeast Asia has its own challenges in the same way. When I went to Thailand for the first time, there were, I think, 20 million people in Bangkok. That's somewhere around 10 percent of, of Thailand's population in Greater Bangkok. But that's again, an internationalized city. If you really want to understand the Thai people, you need to go. And again, Chiang Mai doesn't count. It's tourism. You need to go deeper into every other city that nobody knows the name of in Thailand. You need to go and see that. In Indonesia, similarly, Jakarta, the greater Jabodetabek area is about 30 million people. Indonesia is about 260 million people. And anyone who goes to Jakarta stays in that Kenningan microcosm, which is maybe a few kilometers across. You're not looking at Jakarta. You're looking at the internationalized version of Jakarta, of Jakarta and of Indonesia. You're not, you don't know the country, you've not seen the country. So for folks anywhere that are looking to engage with Southeast Asia, with India, don't make the mistake of thinking that your commercial capital is representative of the country.

(19:17) Jeremy Au:

Well, thank you so much Avik for sharing your point of view and looking forward to chat more about India's conditions.

(19:23) Avik Ashar:

Thank you, Jeremy. It has been wonderful sharing everything with you. And I think just overall, following Brave and the podcast and seeing so many people's diverse points of view, it's been incredible. India's infrastructure is getting there, but still has a long way to go. Thank you.

(19:39) Jeremy Au:

On that note, we wrap up.