Lead Story

Rise of B2B Startups in India

B2B businesses are thriving, gaining billion-dollar valuations and seeing blockbuster listing. Can the good times last?

If you ask us, Icarus wasted his time sticking wax onto feathers. He should have simply moved to India, built a logistics app (since he was looking for a mobility solution) and waited for demonetisation and Goods and Services Tax (GST) rollout. Wait, what? These disruptive changes brought many sectors and companies crashing to the ground! Yes, that is true. But they also gave wing to many B2B start-ups. Udaan became a unicorn in the shortest time, in three years since its founding. A handful of other start-ups, including Rivigo and Delhivery, too, got billion-dollar valuations. In June 2019, IndiaMART, which runs a marketplace for businesses, saw an impressive listing — 21% premium over its issue price of Rs.973. Within three months, its price doubled and today, its market cap is at $0.8 billion. Internet firms rarely see such success on the trading floor. The company, founded in 1996 by Dinesh Agarwal as an exports marketplace, made a clever pivot to the domestic market in 2008. Today, the listing platform has more than 130,000 suppliers. “In the early 2000s, China began to dominate international trade, which directly impacted Indian exports. At the same time, domestic consumption started to grow. That’s when I decided to change our market focus,” says Agarwal. Of course, this two-decade-old company is a bit long in the tooth to be a start-up, but its success is illustrative of the optimism around the B2B segment in India. 

Show me the money

These start-ups largely serve small and medium businesses (SMBs) in the country, and a recent report by Zinnov says that these businesses will have nearly 7x the money to invest in about five years. India is home to around 75 million SMBs — accounting for nearly 40% of the nation’s GDP — and generate 180 million jobs currently. The report estimates that they will spend around $14-16 billion on productivity, communication, discoverability and payments solutions in 2019 and this figure will rise to $105 billion by 2024 as the SMB base expands. It pegs the SMB digitisation opportunity alone at around $80 billion over the next five years. No wonder that there is a huge spurt in the number of start-ups addressing this opportunity. 

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