Story Highlights

• Ever since news broke that Sharechat is in talks to raise about $100 million in a funding round at a valuation of nearly half a billion dollars, interest in this company has peaked big time.
• Apart from a few apps like DailyHunt and Clip India, not many content apps have found traction with the regional language user so far. But competition is on its way.
• It is banking on a greater understanding of local nuances, investment into machine learning, and an ecosystem of mini apps to make itself the go-to app for millions of Indians who are new to the internet.

You’ve heard of Toutiao? Bytedance? They have feed-based apps…

I actually carry all the Chinese apps with me.

Oh, is it?

Farid Ahsan pulls out a Rs 12,000 Xiaomi phone with a giant screen and shows me a screen full of Chinese apps on his phone. The apps are all in Mandarin.

How do we make sense of this? It’s like totally random.

You need to use Google Translate for this.

Ahsan, the co-founder of Sharechat, pulls out another phone in which he opens up Google Translate and points the camera towards the Xiaomi phone. That’s supposed to do the trick.

Why do you use a Rs 12,000 phone?

Because our users are mostly on that.

You should just learn Mandarin. This is too much effort.

If that was the case, then I would have learned 10 Indian languages.

It’s about 10 am on a Thursday. We’re at his office in Koramangala, a southeast Bengaluru suburb that still arguably is India’s startup hotspot. Ahsan, 25, has just uttered the most profound words almost an hour into our conversation. That he’d rather learn 10 Indian languages is deep in its subtext: it’s about thinking about users first, instead of looking for successful apps to copy from.

This grounded approach to building a product has served Ahsan and his colleagues well. Sharechat’s growth, from a chatbot used by a few thousand users to a large local language social app, has been nothing short of explosive. In October 2016, when we first wrote about Sharechat, the company had only about 100,000 daily active users. At the time Ashan and I met (in July), it was clocking 7.5 million daily active users.

Ever since news broke that Sharechat is in talks to raise about $100 million in a funding round at a valuation of nearly half a billion dollars, interest in this company has peaked big time. Is this startup a ‘soonicorn’ — the next billion-dollar startup from India?

“Lots of media has reached out but we had nothing to share,” Ankush Sachdeva, Sharechat’s CEO and co-founder, also 25, told me last week. My purpose behind the meeting was not to find out more about its funding talks but what makes Sharechat the next big thing. How do they plan to scale into a company befitting the size of India’s internet population?

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Venture capitalists, typically, don’t invest in pure-play content startups. But if it’s a platform, they’re all ears. As we’d written earlier this month, this is even more so in the case of Chinese investors who have seen how content has played a role in growing platforms.

“We’re super bullish on vernacular language social networks. Because we have an extremely high conviction that India will have at least one social network with at least 100 million daily active users,” Chinese investor Tuck Lye Koh had said at an event last month. Koh, the founding partner at Shunwei Capital, along with Xiaomi, led a $18 million round in Sharechat late in 2017.

“Platforms are definitely more investable because they basically create distribution and once you have distribution, you can do a lot more things,” says Ashan, Sharechat’s chief operating officer. “In China, they have taken content as a first entry point and then built everything on top of it.”

“Content play still remains open when it comes to regional languages,” says Himanshu Gupta, a former executive at WeChat in India. WeChat, often described as China’s app for everything, folds messaging, gaming, content, payments, and much else into itself. “Look at what ByteDance has done. That same thing may play out if Sharechat is able to create that community.” Apart from a few apps like DailyHunt and Clip India, not many content apps have found traction with the regional language user so far. But competition is on its way. (Also see: Inside DailyHunt’s bid to become India’s content King)

As Chinese investors hit a growth ceiling in their home market and friction with the US escalates, they’re looking to markets such as India. Not only venture capitalists, but a new wave of Chinese entrepreneurs have also started coming to India in search of the next unicorn (read our earlier story: The Third Wave). Established Chinese app makers, such as Bytedance have also launched their products Tik Tok and Helo in India.

“There’s a lot of competition in the space right now. All these people are copying from each other. Helo from Bytedance is almost a copy of Sharechat,” says Gupta, who now heads growth at Walnut App, an app for users to manage expenses. (Also see: The Sharechat phenomenon (paid access).

Sharechat believes that it can beat the competition. It is banking on a greater understanding of local nuances, investment into machine learning, and an ecosystem of mini apps to make itself the go-to app for millions of Indians who are new to the internet. “We want to be at a place where we become the first-you-know portal for people to find other people, discover content, discover services,” says Ashan. Sachdeva sees Sharechat as a one-to-many broadcasting platform where a user can reach millions of other users.

But it’s not a given that the Chinese playbook will win in India just because it has worked in China. WeChat, for instance, officially launched in India in May 2013, with much fanfare but isn’t popular in the country yet. WhatsApp, with over 200 million users in India, is still the biggest instant messenger in the country.

Nuances of local language play a key role here. Despite being home to several minority languages and thousands of local dialects, some three in four Chinese speak Mandarin – that is, nearly 1.03 billion people. So, it’s easier to launch an app and quickly scale without having to localise for languages. But in India, though Hindi holds primacy with nearly 44% citizens saying it is their primary language, there are 22 scheduled languages, over a dozen scripts and hundreds of dialects.

“It’s a very diverse country. And the diversity doesn’t end at language. It extends to a culture of new habits, economic diversity, educational diversity, like people in different parts of India look at education differently, look at business differently,” says Ashan. Nearly half of the 77 member team (average age is in the early 20s) at Sharechat works on managing different languages.

Sharechat has a team of 35, who focus on 14 different languages supported by the app. Their job is to make sure that they catch trends and promote them in the community. For instance, if it’s Eid, they could promote Wish Your Family Eid and try and get the community to do that. The language team also seeds different communities with hyperlocal content.

The company also uses the data generated on the platform to train machine learning models on local languages. Obtaining data on local languages is often a challenge for companies looking to build machine learning models on Indian languages (Also see: Inside Madhan Karky’s quirky experiments with Tamil).

“Our biggest source of learning is the content and hashtags people use on Sharechat. That data is proprietary to us,” says Sachdeva. The hope is that as more and more people start using a language, the ML team at Sharechat would be able to capture that data and train their models.

About a million pieces of content are posted on the app every day. When the user posts a piece of content, it is reviewed to make sure it doesn’t run afoul of Sharechat’s community guidelines. The ML models give every piece of content a confidence score so as to weed out pornography, violence and such. Signals such as the time of the day, hashtags posted by the user, and likes and shares are fed into the recommendation engine to suggest content to users.

Since the app has grown to a large extent through word of mouth, users are closely mapped to each other. This makes it easier for Sharechat to figure out a user’s affinity to content. When a new user joins, Sharechat already has an idea of what the user’s friends have liked and that’s used to seed the algorithm. Over time, likes and shares are used to customise a user’s feed further.

Another big bet at Sharechat are mini apps or, as Ashan says, “around building a developer platform”. The company has already started testing games similar to Flappy Bird on the platform. “The platform should enable certain people to build mini apps on the platform to solve very simple use cases,” Sachdeva adds. The apps could also do simple tasks like looking up booking status of railway tickets.

If the mini apps strategy pays off, there’s big winnings to take home. Sharechat could become much bigger than an app to discover ‘good morning messages’ and perhaps even be as successful in India as WeChat is in China. It may not sound like much in the beginning but opening the platform to developers can be a game changer for Sharechat.

The growth of Facebook because of games like Farmville by Zynga or the success of mini programs that run within WeChat are a testament to this. Mini programs are apps that are less than 10 megabytes in size. The apps, aimed at keeping users from leaving the WeChat ecosystem, have started taking off. About one million mini programs were used by over 600 million users in June 2018, the South China Morning Post notes.

The most promising revenue channel for Sharechat right now looks like the digital advertising market. That market, about $1.7 billion in size, is small and crowded. If the Mini App strategy pays off, the company could look at microtransactions and even facilitating e commerce in the future.

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