KhataBook vs. Goliath

Last week when I saw the following Tweet from the KhataBook co-founder:

It got me thinking about another David vs. Goliath battle….Dropbox vs. Google Drive. Dropbox is a cross platform file-syncing app that was launched in 2007. Since it first launched everyone kept on saying “this is a a feature not a product” that any large technology company can launch. I used Dropbox when it first came out and it was magical because it just worked – files would get synced.

In 2011, Dropbox had a meeting with Steve Jobs of Apple who wanted to buy Dropbox and use their technology as the core for their upcoming iCloud platform. Dropbox passed and said it wanted to be independent. Then in 2012, Google finally launched their long awaited Google Drive syncing product. Which people had been saying for years was going to kill Dropbox. Well, Dropbox didn’t die and in fact in 2018, it went public and as of early 2020 it has a market cap that is just under USD $7.4 billion.

DBX price chart

I know in Silicon Valley that market cap means it’s a feature or lifestyle business when compared to Apple at $1.3 trillion or Google near $1 trillion. Part of that is because there are many file-syncing products that offer similar capabilities and most consumers can’t tell the difference. And when Google Drive is free, most users will opt for that and that makes it tough to compete against free. But, when you compare the market cap of Dropbox against some of the public companies in India it would rank among Grasim and Tata Steel. Dropbox has built a business that most people would be happy to call their own.

So what is KhataBook? It’s an Indian based startup that has taken the simple idea of keeping track of a small businesses credits and debits on a simple Android app. The startup has raised over $29 million from investors like Sequoia, DST Global and others. I’m guessing part of their monetization strategy will be based on their ability to give short term loans to those businesses. Recently the 800 pound gorilla, Paytm, entered with their own version called Business Khata.

For KhataBook the reality is that they do have an uphill battle and companies like Paytm, Instamojo and many others have taken the wind out of their sail by offering a simple to use debit/credit app. For Paytm this is another product offering and they will capture the lion’s share of the market because of their brand name, reach and distribution. On the other hand, the founders and employees of KhataBook will do well and end up building a respectable business just like Dropbox has. From a VC perspective, KhataBook will not be some crazy 50x return with hyper growth going forward. Of course, I really hope I’m wrong.

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