Rajat Garg, 39, realised the potential of the vernacular sector when he started an e-commerce website called Shimply in 2014 selling indigenous products and handicrafts. He witnessed that when the content on the website was converted to Hindi, they had more people visiting their website. His sales went up by 50%. But it was not good enough to compete with likes of Flipkart, Amazon and others.

Although he shut down Shimply in 2015, he realised at the time that even in terms of consuming information, people prefer their content in vernacular languages like Hindi, Marathi, Kannada as compared to English. Rajat's understanding of the market served very useful for him later.

A year later, Rajat founded myUpchar, a healthcare startup which has also seen investment by Shunwei Capital. He recalled his early interactions with Shunwei. “Shunwei was quick in deciding to invest in our platform as they had been interested in content companies. It was the easiest conversation we had across all the investors,” he said.

myUpchar is one of the six start-ups in vernacular content space that has raised about $150 million in funding from Chinese investors. 

PopXo, a digital media startup based in Delhi, got investments for its vernacular content (Hindi) this January from Oppo, a Chinese mobile communications company. Dailyhunt, a local language content app, received $25 million in funding from Bytedance, yet another Chinese internet technology company operating machine learning-enabled content platforms.

Analysts and startup founders believe that it is a strategic investment by Chinese with increasing internet penetration leading to opening up of markets that have been locked by language barriers. Chinese understand the vernacular market better than Indians, said Vijay Anand, founding CEO of The Startup Centre, a professional consultation company for entrepreneurs. “The focus of startups in India has been on the 45 million upper middle class Indians with English as their primary language. But China has created billion dollar companies by catering to the indigenous Chinese market and by that, they might understand this market’s potential far better,” he says.

Deloitte published a report this May stating that India had nearly 432 million internet users and that by 2021, vernacular users will be more than 2.5 times the number of English internet users. These findings are corroborated by a KPMG report released last year, which revealed that the Hindi internet user base, along with vernacular languages like Marathi and Bengali, is likely to grow in India. It also pointed out that users of southern languages like Tamil, Kannada, and Telugu will be among the most digitally engaged till 2021. 

According to Hitesh Sawhney, partner and leader of the China business group at PwC, Chinese players are more interested in new, rising sectors and see India as beginning to play an important role in the world economy. “The startups that we have seen the Chinese interested in, whether new or mature ones, they look towards the next scope of growth,” he points out.

Ishaan Preet Singh, an investment professional at Lightspeed Venture Partners, points out that the Chinese have observed how a rapid increase in internet penetration leads to multiple high value content platforms being created, and how they push monetisation as consumption grows and the market matures. “This gives them conviction that the same journey is likely to play out in the Indian ecosystem,” says Singh, adding that “it's not only Chinese investors who have been excited about the vernacular market, but a number of Indians and global investors are bullish too.”

The Telecom Regulatory Authority of India released statistics on telecom services, showing that the total number of internet subscribers per 100 population is 39.32. The report also highlighted the disparity between urban (82.10 per 100 population) and rural users of the internet (19.48 per 100 population). The reason why internet penetration has been low in India for so long is that most of the content that can be accessed on the web does not cater to those who do not speak English. 

Aprameya Radhakrishna, founder and CEO at Vokal India, a knowledge-sharing platform that caters to vernacular language speakers, insists the potential of the segment is evident from the statistics. His startup raised $5 million in Series A funding led by Chinese VC firm Shunwei Capital this July.

Shunwei Capital

Shunwei Capital has been the most aggressive Chinese investor. It has put in money in companies such as Vokal, Sharechat and myUpchar, with Sharechat recently raising $100 million from it.

Vijay Anand, CEO of The Startup Centre, a professional consultation company for entrepreneurs, pointed out that the Chinese do not look at fast results when investing. “Both Japanese and US investors have scaled down and are focusing on growth stage companies at this point. That gives China a big opportunity - simply because we don’t have too many options for outside capital, and domestic capital is far too risk averse,” he says.

Tuck Lye Koh, founding partner and CEO at Shunwei Capital, listed several reasons to invest in the vernacular content sector. He says that when they started investing in India in 2016, they knew that millions of new-to-internet users will be onboarded with the fast penetration of mobile phones, and that they would prefer to consume content in their own language. 

“We believe that in a large economy like India, online marketing will eventually become a huge market and that whoever wins traffic on the internet will get a big slice of that cake,” Koh adds. Shunwei surely wants to leverage the new-to-internet wave and gain a large and loyal user base. They also want to create a network effect on the platforms by having more user-generated content and social interactions. In the long run, to monetise growth, they want to expand to online marketing and accrue from micro-transactions, Koh revealed.

Another common belief is that Chinese investors are looking to build fundamental products and services in India that will become the backbone for future development. “For example content platforms such as Sharechat could become the major distribution channels for other companies,” says Singh of Lightspeed Venture Partners.

Untapped potential in India

Internet penetration is pretty low in India and this has a lot to do with the fact that most of the content that can be accessed through the internet does not cater to those who do not speak English. This shows that there is tremendous scope to tap into this sector by generating content that can be consumed by those who use a vernacular language in their daily interactions.

Badri Pillapakkam, Invesment Partner at Omidyar Network, believes that over the next five years, over 500 million aspiring Indians will come online for the first time. These ‘Next Half Billion’ (NHB) are not native English speakers and the internet needs to be redefined for them, in terms of language, content, cultural context, user interface and user experience, he says, optimistically adding that there has never been a better time for the next half billion to come online.

Omidyar Network is a philanthropic investment firm and the Indian arm of this company has been investing in vernacular startups like myUpchar, Dailyhunt, Pratilipi, Healofy IndusOS, and, Doubtnut among others that address language barriers.

“This provides a massive opportunity for companies that offer services such as payments, loans, news, healthcare, skilling, online shopping, etc. to provide differentiated content in verncular languages,” he points out. The Omidyar Network is a philanthropic investment firm and its Indian arm has been investing in startups like Dailyhunt, Pratilipi, Healofy, IndusOS, and, Doubtnut that address language barriers.

On China betting on the vernacular sector, Pillapakkam says that while incremental user growth in the nation is slowing down, there is potential for exponential growth in the Indian context given the relatively lower smartphone and mobile data penetration rates. “High speed audio and video streaming, made possible with better quality mobile broadband infrastructure recently, is also a driving factor behind their investing strategy,” he adds.