B2B Tech Startups Are On the Rise in India
While the initial years of India’s startup ecosystem were largely dominated by consumer-facing companies, business to business (B2B) tech startups are now taking the country by storm. Despite the pandemic, there has been a lot of momentum in the country’s tech startup ecosystem in recent months.
According to a report by NetApp and Zinnov, there are over 4,200 B2B tech startups in India, 63% of which are working on enterprise technology in the BFSI, healthcare, retail and automotive verticals.
The study found that about 44% of all startups are B2B tech companies and 43% of Indian unicorns are B2B tech startups. A unicorn is a firm with a valuation of over $1billion. About 24% of B2B startups operate in areas of advanced technology like AI, blockchain and IoT, and are driving adoption of advanced tech in Indian enterprises.
“Big data, analytics, AI, and ML are advanced technologies in focus for B2B startups. Enterprises in every industry want to gain the first-mover advantage using the power of these technologies,” says Ravi Chhabria, VP and managing director, NetApp India, adding that the investments mark a clear preference for technology providing business-relevant solutions that can be adopted across the value chain.
Over 415 B2B tech startups received a cumulative equity funding of $3 billion with a two-fold growth in average funding. A key driver of this growth is an increase in cloud-born startups that are using advanced technology to solve new use cases across industries.
“The global digital engineering spends, which is expected to reach $750 billion by 2023, underscores the trend of accelerating enterprise digital transformation and creates a massive opportunity to be capitalized on. As companies rethink resilience, forge newer partnerships, and leverage the external ecosystem, new-age infrastructure becomes critical,” said Pari Natarajan, CEO, Zinnov.
A total of 18% of all startups in India are advanced tech startups and B2Bs hold 24% share in this pool. The BFSI sector spent around $32 billion on digital solutions in 2019 which included focus areas such as robo-investment advisory, payments technology, and telematics-based insurance. For example, a data gathered by BuyShares, reveals the total amount of funds AI startups raised over time reached $61.6bn in the second quarter of 2020, a 35% increase in a year.
Sector wise, the auto industry spending – Despite its woes – was pegged at $25 billion with focus on producing autonomous vehicles, connected cars, and advanced driver-assisted systems. Healthcare was another major adopter at $18 billion spent across remote patient monitoring, diagnosis prediction, healthcare robots, and physician assisted technology.
However, owing to the pandemic there is a trend of decline in investment in start-ups in 2020 according to another report titled: State of Indian Startup Ecosystem Report 2020.
While $4.1 Billion was invested in Indian startups in Q1 2020, the amount fell 74% to $1.05 Billion in Q2 2020, a clear indication that India’s startup economy is reeling from the financial disruption caused by the pandemic, with growth capital and funding deals hard to come by
The funding amount has since recovered from the dismal Q2 numbers, increasing 167% to $2.81 Billion in Q3, with Sequoia India, Accel and Mumbai Angels Network among the top 10 investors.
To spur innovation, government and corporates now need to focus on being prominent stakeholders in the system. They can effectively take on the role of venture capitalists and provide market access, funding, and guidance to early-stage start-up, says Dr. Satya Ranjan Acharya, Associate Professor & Incharge Department of Entrepreneurship Education of Entrepreneurship Development Institute of India (EDII), in a recent article with Financial Express. Further, he believes that corporates can establish accelerators and play mentor to early and mid-stage start-up sector. This phenomenon is still at a very nascent stage in India and needs to be encouraged.
On the brighter side, a host of technology startups are helping businesses strengthen their digital presence amid the pandemic have stepped up hiring, even as the jobs market remains under tremendous pressure. B2B startups are looking to add roles across the board, including engineering, analytics, corporate functions, sales, business development, and marketing. According to estimates, their salary packages start at Rs 10 lakh a year, and go up to Rs 40-50 lakh.
Another Zendesk Startup CX Benchmark Report that polled over 4400 early stage startups from around the world including India states that early stage B2B companies that invest in customer experience (CX) can outperform their peers. Continuous engagement with your customers can earn you loyal customers and can accelerate your growth. As Arjun Chopra, VC and Partner at Floodgate summed up, “Companies need to have systems that continuously engage their customers across multiple channels, anticipate their needs as they relate to their product, and service those customers effectively. Companies who do not holistically serve their customers should prepare for a lot of customer churn.”