A Netflix for the village - India's start-ups go rural

In India, a significant portion of the population, approximately 1. 4 billion people, resides in rural areas. Recently, the small villages in Haryana, located in the north-western part of the country, have gained unexpected attention as they transform into movie-making hubs. A start-up named STAGE is at the forefront of this change, creating a burgeoning film industry in these rural settings. Farmers' homes in the vicinity of Rohtak, an industrial town, are now being utilized as film sets. Amidst the sounds of livestock, it is not uncommon to hear directors calling out 'lights, camera, action. ' According to Vinay Singhal, the founder of STAGE, the company has produced over 200 films since its inception in 2019, a remarkable feat considering that only a handful of Haryanvi films were made prior to their arrival. STAGE focuses on creating content that resonates with local audiences, taking into account the unique dialects and cultural nuances of rural life. With 19,500 dialects spoken across India, STAGE has identified 18 that have enough speakers to support their own film industry. Currently, the app offers films in Rajasthani and Haryanvi, boasting three million paying subscribers, with plans to expand into other dialects such as Maithili and Konkani. Mr Singhal has also mentioned that they are in the process of securing funding from an American venture capital firm to facilitate this expansion. The rise of STAGE is part of a broader trend among Indian start-ups that are increasingly targeting rural markets as a new frontier for growth. While a large segment of India's population lives in its 650,000 villages, these areas have not been the primary focus for many tech start-ups until now. India has seen a surge in innovation, giving rise to numerous unicorns, or tech companies valued at over $1 billion, but most of these have catered to the wealthiest 10% of urban residents. Anand Daniel, a partner at Accel Ventures, which has invested in some of India's most successful companies, notes that while there have been exceptions, such as online marketplace Meesho, the start-up boom has largely overlooked rural areas. However, this trend is shifting as more entrepreneurs successfully address the needs of rural consumers and secure funding for their ventures. Mr Singhal reflects on how the investment landscape has changed, stating that five years ago, it was challenging to secure funding, but now investors are more open to supporting rural-focused ideas. Accel Ventures has recently announced plans to invest up to $1 million in rural start-ups through its pre-seed accelerator program. Additionally, Unicorn India Ventures reports that half of their investments are now directed towards start-ups based in tier 2 and tier 3 cities. In July, the Japanese automotive giant Suzuki also announced a $40 million fund aimed at investing in start-ups that cater to rural markets. The driving force behind this shift is the realization of the vast market potential in rural India. Mr Daniel emphasizes that two-thirds of the population lives in these areas and collectively spends around $500 billion annually. Interestingly, the wealthiest 20% of rural consumers spend more than half of what their urban counterparts do. As India’s economy continues to grow, it is projected that a portion of this growth will be influenced by digital advancements in rural areas. The increasing adoption of smartphones among middle-income rural families is a significant factor in this transformation. Currently, around 450 million Indians use smartphones, surpassing the entire population of the United States. The introduction of digital payment systems, particularly the UPI interface, has revolutionized the way companies can engage with rural consumers. Mr Daniel notes that just a few years ago, reaching this demographic was challenging due to logistical and payment issues, but the current environment is much more favorable for start-ups targeting rural markets. Despite the opportunities, there are still hurdles to overcome when it comes to serving rural consumers. The small-town consumer tends to be price-sensitive and geographically dispersed, making it difficult for companies to reach them effectively. Gautam Malik, the chief revenue officer at Frontier Markets, a rural e-commerce start-up, points out that traditional e-commerce models often fail to penetrate the last mile in rural areas. Customers in villages are often hesitant to trust companies that lack a local presence. To build this trust, Mr Malik's company has partnered with local women entrepreneurs to serve as sales and delivery agents. This strategy is crucial for establishing credibility and successfully tapping into the $200 billion market opportunity that rural India presents.