My competition is with users’ time spent on mobile phones: DailyHunt founder Virendra Gupta

In an interview with Moneycontrol, Gupta and Bedi spoke about the record funding, their roadmap, and monetisation plans.

Edited excerpts:

You raised $805 million amid talk of a tepid funding environment. You guys managed to pull the rabbit out of the hat…

Umang Bedi: I think this round is unique and special for a few reasons. The first one is the quality of capital, which is long term. (The investors who have come on board) support companies historically, not only various stages of growth, but IPO and beyond. They fund other funds more often than not, instead of direct funds. When you think about it, even for funds like CPPIB, this is probably the single largest cheque that they’ve written.

In the light of bleak capital markets, (the fact that) we have been able to get this quality and quantum of capital is a huge validation. I think we are the only company in the local language space in the country that has cracked the three-prong code – user growth, engagement and monetisation. Nobody else has been able to really build the third layer at scale, where we are already at over $128 million in revenue. Finally, great future prospects in terms of technology and use-cases, I think, make us attractive.

Was it more challenging considering the overall market environment? Investors are asking tougher questions on valuation, monetisation and business models. Did it take longer than expected to close the round?

Virendra Gupta: When you say markets are changing, it is the stock market that is changing. For a common man/common user, what is changing? He is doing his job, he’s buying his glucose biscuits, going to Starbucks and having coffee. That is one way to look at life. Second thing is the quality of investors we attract are the people who are not FOMO investors. They are investors who see what your business is. And when they come to business, they work on first principles. You know, your business should be beautiful in its own sense. It is not about whether my business is beautiful relative to somebody else. So for us, honestly, in spite of Covid, working from home, and remote teams, such a large round closing in such a short period of time, I’m amazed about this. I would commend our teams and the teams of investors who have done the work to make this happen.

Bedi: I would say this was our record round. We started getting inbound interest in January. Investors… finished their due diligence across commercial, technology, financial, legal, tax, so on and so forth, and documentation, all in a period of three months. I would say for this quantum, it’s probably the fastest I’ve seen, and probably the most efficient process.

ShareChat’s Ankush Sachdeva has said he doesn’t see Indian rivals as competitors. How do you gauge the competition for short videos, considering the consolidation with MX TakaTak?

Gupta: I think this question has two parts – how we see competition and the consolidation that has happened.

What is a short video supposed to do? I think the biggest competition is to read the mind of a consumer and give them the content/video which he or she likes. I think this short-video space is such a competitive and big space. China’s TikTok spent three years in India building this space. Today… both Kwai and TikTok spend billions of dollars to engage consumers.

Look, we are not the ones who give war cry statements, saying he or she is my competition. My competition is with users’ time spent on mobile phones and other things that users are doing. Our investment is going into building great AI (artificial intelligence)  and ML (machine learning) and into increasing content supply. That is number one.

I think it’s very important for any business to decide what they are focusing on, what they stand for in the minds of consumers, and then go with the proposition to the consumers to get that market. I will not get into any verbal warfare. Second thing is when you consolidate two big lossmaking businesses, I don’t know what you consolidate. So I leave it to your judgment.

Let’s talk about VerSe’s financials. You posted a loss of over Rs 800 crore, though your sales went up 2.5x. So, what is your path to profitability?

Bedi: We have built Dailyhunt to where it is and we have made all our monetisation on Dailyhunt, which is $128 million. This, in our view, is among the largest digital advertising businesses among Indian companies. Dailyhunt is at break-even level. In 18 months, we have invested into Josh, which we have not monetised. Facebook did not monetise for seven or nine years of its journey. Google did not monetise for nine years of its journey. Those are different businesses, they had economies of scale because they weren’t spending money on marketing. We have monetised a lot faster.

When will you start monetising Josh?

Bedi: From April onwards. We have already monetised the core app. If you have not monetised the core app, which has existed for 8-9 years at scale, it’s very hard for you to do it on short video, which is a different ball game altogether. I think that is the proof point, which investors have looked at. Valuation and fundraisers are an outcome of the business. So you are right that the losses have increased, but I just wanted to highlight that Dailyhunt, on a standalone basis, is generating revenue, close to break-even and generating cash. Josh is where we have spent all the investment because we haven’t monetised it. This year onwards, we’re going to be monetising it and you will see that trajectory change.

Gupta: When the market is going through evolution and formation, it is very important to also see what not to do. You were talking about how markets went up and then they went down. Similarly, businesses should not go through swings of up and down.

Apart from ads and live commerce, what avenues are you looking at for monetising Josh?

Bedi: At a higher level, it is ads and commerce. However, the ad load naturally has to be low in a short-video app because it’s a full-screen experience. So you have to make the monetisation models more contextual. The way we are doing that is by connecting brands with influencers. Two, around live commerce and tipping. Three, shoppable commerce experiences with marketplaces, and finally the Web3 model that we are going to be talking about soon in the next couple of weeks.

Could you share a little more on how you are looking at Web3?

I like to stay away from that today. All I can tell you is wait and watch. Are you getting support/advisory from TikTok owner ByteDance, which holds a 10.3 percent stake in the firm?

Gupta: ByteDance has a very small investment in the company and we have the lowest Chinese investment in the whole internet ecosystem in India. That’s one thing I want to put on the record. Second thing is they’re just financial investors. Every piece of code, AI/ML, everything we have done ourselves with Indian engineers. So I hope that sets the record.

Would you consider diluting their stake in the company given the tension between India and China?

Gupta: We have been diluting them over a period of time and eventually, yes. Short-video platforms have the challenges of high cash burn and user retention. How are you attracting and retaining creators?

Gupta: The size of the opportunity in a short-video app is large because it plays into the entertainment TAM (target addressable market). When the size of the opportunity is that large, the kind of investment which is required is also huge.

But for a sustainable business, you have to drive the generation of short-video content on your platform because that is what will keep the flywheel on. The size of the opportunity demands investment of this size. And you have to look at the first-principle basis to continuously invest both in AI/ML in content generation and content creators to drive the retention.

Bedi: Short video is not a passive platform, it is an active platform. The reason why TikTok is so potent is because one, it has great content and AI, but also because it encourages content creation. For TikTok in the US, the user-to-creator ratio is 50 percent. We are at 33 percent, where real users convert to creators. So this is a journey.

We are Instagram for Bharat on what we build on Josh. Over time, you will see engagement, retention and timespan grow. We had reported that Dailyhunt is working on a live commerce feature, which will be launched soon. Can you share the status of that?

Bedi: We are in the process of getting that live over the next couple of weeks. Our goal is very simple. We want to democratise that process at the creator and marketplace levels. We are going to be working with the large horizontal or vertical marketplace.

With the focus on AI/ML, how difficult is it to find talent in India? We are seeing some companies setting up centres overseas to tap these engineers.

Gupta: The thing about AI/ML is you cannot outsource your brain somewhere else. You can outsource work when it is defined, But AI and ML are not defined work, they need to be where the action is. If AI and ML is the brain of your company, it better happen where the action is. That is number one.
You can set up AI/ML everywhere. People call data moderation guys AI/ML guys. We have hired a great entrepreneur, Ram Prakash H, and he is very much in Bangalore with us. He runs very interesting boot camps. And we have cracked this mode of hiring of ML engineers in a big way. We are also using companies and people abroad in setting up small shops, which are focused on specific problems. But the way AI/ML works is it needs to work very closely with engineering to make an impact.

Are you looking at an IPO?

Gupta: So the way we love to build our businesses is that it should be IPO-able. But IPO is a separate activity, because it depends on a lot of things which are beyond our control. We have been consistent that fiscal prudence, working with making business on its first principle, making it a large business is our game and building systems and processes (for that). You should always have an option where your business is self-sufficient and independent so that you can decide the destiny.