In the last several years, tech startup space in India has seen tremendous activity. The number of tech startups, the quality of the ideas and entrepreneurs has matured dramatically. From a slow start in 2005 to rapid growth in 2016, India is the fastest, and the arguably the 3rd largest startup ecosystem in the world. In 2015, Microsoft decided to take stock of the progress startup space had made and published a blog – The Great Indian Startup Ecosystem Periodic Table. The viewpoint of the blog was developed with the lens of funds raised. Not surprisingly, startups from ecommerce, consumer services and marketplaces dominated the growth stories, the mindshare and the numbers.
India has been known for its eCommerce and B2C startups, 7 of the 9 unicorns in India are B2C startups, and together have raised 15x more funding than the B2B unicorns in India. The rapid ecommerce growth in India feeds the mainstream fascination with startups. Ecommerce evolved from listing, to portals, to marketplaces, and from web-based to mobile. With eCommerce sector looking to be a US$100B market by 2020, this sector is throwing up unprecedented challenges to entrepreneurs in reach, volume and complexity. This has led to ecommerce companies sourcing deep technologies from tech startups. Some of this has also translated into them acquiring and acquihiring tech startups to solve their problems.
Independent of the demands placed by the ecommerce sector, tech startups have been slowly making the steep uphill journey of overcoming challenges in technology, market, regulatory and other areas. This reflects the maturity of the tech entrepreneurs and the depth of the technology solutions that they are building for India and the global markets.
Tech startups started in India as companies that replicated offerings in the US in India. However, as the ecosystem evolved, startups started building solutions that were uniquely positioned to solve problems typical to the Indian context, in a manner that utilized the available local advantages to the fullest. Today, tech startups are building solutions that are addressing problems not only for India, but are taking these same solutions to clients that are present globally.
This time, we decided to take stock of a phenomenon which has been growing rapidly in the country – the enterprise – startup partnerships. Over the years, the need for digital transformation has created a demand for startup technologies across all sectors, lowering the entry barriers for the startups. However, during our conversations with enterprises and startups, we could see that the identification of a startup who has the product and team which can scale up as per the enterprise’s needs and deliver continues to be a challenge. In other words, determining the ‘Enterprise Readiness’ of the startup is the bottleneck. By the end of the process, we identified the top 151 Enterprise Ready startups in the ecosystem today. The report can be viewed online here.
Besides ecommerce throwing technology challenges, there are other sectors that were actively looking for new and innovative solutions. Microsoft through the work of Microsoft Accelerator get inbound interest from various sectors in India. We chose the top sectors based their growth potential, complexity of technology solutions sought in this sector and openness to innovative technology solutions.
In this study, we have focused on those startups that are serving large and small enterprises through deep and complex technological solutions. There are no readymade tools to measure the success and maturity of such startups. We based the evaluation on available data to lend objectivity to the analysis, we aggregated the data to represent the key metrics for enterprise readiness are used some largely proxy measurements and inferential scores, and includes some elements of subjectivity. Our methodology, inspired by the e=mc2, focuses on Enterprise Readiness Score, which is measured based on three parameters – customer traction, funding and size of the company.
In the process of building this analysis, we reviewed close to 500 enterprise ready startups, and saw some interesting findings:
1) 50% of the Enterprise Ready startups are in the Healthcare, Retail and Banking sectors
Driven by optimization, these three sectors have emerged as the biggest adopters of the enterprise technology solutions. Banking and Healthcare have proven to be the most receptive to startup solutions. With the rise of digitization across sectors, deep technology companies play a pivotal role in empowering these corporates to build innovative ways to engage with customers and address complex business requirements. With the help technology banks manage to increase customer traction and achieve customer satisfaction while companies in the healthcare space are expanding physical reach and affordability through machine learning and data sciences.
2) Data Sciences and Security startups find it easiest to find customers
This is driven by the broad base of customers and sectors that these startups can address natively. Disruption of technology has helped these businesses to build deep expertise and position them uniquely vis-à-vis other companies in multiple sectors and domains.
3) Startups catering to Banking sector find it easiest to raise funds
The startups catering to Banking sector are at the forefront of the digital transformation of India. India already has a billion mobile phone users, as well as a billion citizens with active bank accounts that are linked to their digital identities by way of Aadhaar. The tremendous scope of opportunity these startups can leverage is one of the key reasons these startups are successful in attracting funding.
Not only has India emerged as the third largest startup ecosystem in the world, but the tech startup landscape shows tremendous potential in terms of revenue growth, business stability, and disruptive creation. India’s potential to produce disruptive solutions lies in the hands of all three dynamic change agents – startups, corporates, and the government. We were pleasantly surprised to find respectable number of startups that met our criteria and were building interesting solutions.
Our research shows that contrary to popular belief, the most conservative yet disruptive sectors (such as BFSI) are embracing startup solutions more openly than others. This should inspire other sectors to also open up to finding solutions from from startups. The rapidity of changes in the business environment and global climate, can no longer be addressed in enterprises by incremental changes from traditional vendors, but small and nimble startups.
However, enterprise-ready startups are still far from maturity for two primary reasons: One, we are building solutions that are addressing surface level problems; and Two, we havent yet unlocked our ability to scale and grow these startups. For corporates to offer disruptive solutions, they must first define the business problem and partner with or acquihire startups that provide robust solutions. The maturation of the Indian startup ecosystem will depend of getting mature entrepreneurs taking larger problems (especially those found in India) that pose challenge in scale, cost structure and distribution.