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Startup Project: Subscription Updates

Startup Project: Subscription Updates
By Nataraj • Issue #5 • View online
Hi :)
Few updates before I jump into this editions topic. If you are receiving this update via the newsletter and wondering if you have not subscribed to this. That’s because I have combined my different modes of communications into 1 newsletter making it simpler for future scaling.
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Here are some of the topics I will be writing about:
  • Startups (trends & business models)
  • Deals Memos (Opportunities to coinvest in early stage startups)
  • Product (Strategies & techniques) & Podcast Updates (New Episodes)

Deal Memo: Kaagaz
I have recently invested in Kaagaz, one of the Indian companies in the current YC W22 batch. Here is the deal memo I have written for Kaagaz. For confidentiality reasons, I have left out certain parts of the memo.
Deal Memo:
 Kaagaz from YC W22 (Kaagaz means paper in Hindi language) is a documents & productivity super app for India.
  Company website: Kaagaz
Problem & Solution:
Most of India never had access to computers. India went from never using a computer to having a supercomputer in every pocket in the last 5 years. In India, day to day interactions with business, individuals, banks, governments (local, state & central) require lots of paperwork. And the processes require documents to be edited, shared, signed and reshared all the time.
 
Scanning, storing and sharing documents using mobile is a foundational pain point for an average Indian consumer.
 
Kaagaz created a mobile app to solve this problem. Started as an app that is mainly used to Scan documents to easily share and reuse. Today the app is evolving to become a super app that allows consumers to scan, edit, store, share & sign documents in a mobile first dominated world. 
Traction:
Here are some of the latest stats: (Some stats are redacted)
  • App Downloads - 10M+
  • App Rating - 4.8 (150,795 Ratings)
The App has been growing at a rapid pace since the launch in Jun 2020. The growth of the app was helped by India’s policy to ban Chinese origin apps which also included the ban of TikTok. The move gave the company the initial momentum for their go-to market strategy as an Indian alternative to the cam scanner app which was a Chinese original app.
Product-Market Fit:
  • With the traction and the customer love that we are seeing, it is fair to say the company is close, if not already found product-market fit.
  • They were able to achieve this with a previous fund raise of $550k and a small team of 6.
  • The current fundraise along with the demo day raise, will be used to focus on the growth of the product. 
 
Competition:
  • Even though there are multiple large players in the productivity space including MS Office, G Suite and Adobe. The products they offer are not designed for the use cases of Indian and other emerging economy consumers.
  • They are not mobile first and do not focus on localized use cases. There are no product teams in either of these companies addressing how an individual living in India uses his/her Aadhar Card (National ID Card). Making Kaagaz a unique app, filling the gap in the space.
Why Invest in Kaagaz?
  • Foundational or Not: This is a key criteria I evaluate when investing in Indian companies, are the ideas and thereby the products are serving a foundational use case that can span national audiences (in the order of 100M+ users) either directly or indirectly. 
  • Ideas are still gold: It’s easy to think that ideas are cheap and execution is hard, which is true. Ideas are direction while teams are fuel to compound the speed in which you travel. There are still great ideas that are unique and have strategic advantages and are just better than other ideas in the market. If you are pursuing early stage investments at seed/pre-seed Ideas that are new/unique are powerful forces. So I often look for unique ideas that have great teams.  Kaagaz is uniquely Indian and the traction shows that the team can execute. No other app in India attempted to make an individual mobile first productivity suite before, and for sure it didn’t start with scanning one page at a time.
 
  • Fortune favors the bold: When Kaagaz was started there was a simple market need to scan and organize documents, today after 1.5yrs they evolved to store, share, organize and edit those documents. The future for the company and product scales will be about creating products & features that help the consumers be more productive in a mobile first way. Give the power of productive software to solopreneurs to average consumers. The ability to provide productive software at scale for a large consumer population hasn’t been done by an Indian company yet, but that’s the value of early stage investing, to back ideas that haven’t been done yet.
  • Bottom up Flywheel: Sarah Tavel in her famous Hierarchy of Engagement presentation, talks about what it takes to build a $1B Company. 
I think the Kaagaz as a productivity suite is in the early stages of Level 2. They are able to successfully attract users to complete a core action (scan the document). Right now the company is making sure the product is getting better as they use more and users have more to lose by leaving the product. This is achieved through making the existing features like scanning, storing better and at the same time making it harder for users to switch to a different product by introducing ancillary products like Signing & Editing. If executed well, with the current round of capital the company has the potential to reach Level 3 where self-perpetuating growth loops will kick in.
 
Future Potential? 
Although on the surface the idea and what Kaagaz went into the market with is very simple. The potential of what it can become over time is incredible.
  • Scale: The scale of current scanner + signing + storage can reach up to 100M users in the next 5-10 years.
  • Super App with 10’s of productivity use cases: Scanning of documents becomes the top of the funnel activity for the product. And once the most important documents are stored, scanned & signed on the app, additional use cases and bottom up network effects start to kick in. And the app could explore launching a productivity suite based on the user’s needs. Some of them could include but not limited to payments/banking, notary Services, tax payments, document shipping & tracking integration
  • Potential to monetize: As the scale and use cases for which the product is used starts to change, the ability to monetize will also increase. This could include but not limited to:
  1. Ads
  2. One time payments for all document  related services
  3. Premium Subscriptions to power users
  4. New Marketplaces
  • Expand to other geographies with similar user behavior: Total addressable market in India being still in 100M+, there are other countries in South Asia (Bangladesh) and others.
 
Exit Scenario:
  • As the company scales from here it could create a successful individual company, with more products to help their customer base do more.
  • They would also become attractive for companies in Mobile Ads (InMobi), Operating Systems (Google) & Document tooling space (Adobe & Canva) as an acquisition target. Especially the global companies which are looking to get deeper into the Indian consumer base.
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