50% of all new startups in 2017 are in the B2B segment

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It’s always interesting to observe trends in the red-hot startup space, especially if it’s from the most sought-after industry report. According to the latest NASSCOM-Zinnov report on the ‘Indian Start-up Ecosystem – Traversing the maturity cycle’, almost 50% of all new startups incorporated in 2017 are in the B2B segment, up 34% from last year. Of this, advanced tech startups grew at a 5-year CAGR of 30% wherein Artificial Intelligence and Analytics were the key growth segments.

As per the report released on the sidelines of the annual flagship NASSCOM Product Conclave 2017 in Bengaluru, India continues to be one of the most vibrant landscapes for startups strengthening its position as the third largest startup ecosystem across the world, amid “intensifying” competition from countries like UK and Israel. It added more than 1,000 tech startups in 2017, taking the total number of tech startups to 5,000-5,200, India is witnessing a rapid rise in the B2B tech startup landscape, focused on verticals like healthtech, fintech, and e-commerce/aggregators. While Bengaluru, Delhi/NCR and Mumbai retained their position as the key start-up hubs in India, 20% of the startups emerged from tier II/III cities.

Sharing his thoughts, Raman Roy, Chairman, NASSCOM, and CEO and MD, Quatrro Global Services, said, “The Indian technology industry is renowned globally for its pioneering innovation and the startups arena is no different. India is one of the fastest growing startup landscape in the world and every major accelerator, investor, angel group, is participating in becoming a part of this growth journey. Today, Indian ecosystem is flooded with innovative ideas and needs the right channel and guidance in terms of acceleration, scaling up and funding to continue to disrupt.”

GROWTH THROUGH VERTICALISATION AND INNOVATION

With 40% of startups in the B2B segment, B2B’s share in the overall tech startup funding is over 30%. Corporates are playing a vital role in supporting these with over 50+ collaboration programs, 20+ corporate accelerators (recording a 33% YoY growth), and 30-40 active corporate investors, thus increasing their role in the rise of the start-up ecosystem.

Fin-tech startup base is estimated to be 360 in 2017 indicating at 31% YoY growth with over $200 million funding received in H1-2017, recording a growth of 135% since H1-2016. Sub-segments like digital payments and lending are maturing, while wealth management and insurance-tech emerging as growth areas. Implementation of advanced technology also becoming prominent, with 33% of fintech funding towards advanced technologies such as Artificial Intelligence and Analytics.

Witnessing a 28% YoY growth in 2017, Health-tech vertical has an estimated total base of 320 startups. The vertical also garnered a total funding of $160 million in H1-2017, up by 129% since H1-2016. Areas like health information management, aggregator/e-commerce have continued to mature with growth in areas like anomaly detection, disease monitoring, and tele-health/tele-medicine. As for advanced technologies, 31% of health-tech funding went towards Artificial Intelligence, IoT, and Analytics.

With over 60% startups, the B2C tech startup segment focused on creating innovative business models and taking the vertical approach, securing close to 70% of the overall tech startup funding in H1 2017. Leading vertical in the B2C segment are travel and hospitality, food-tech, fin-tech, and health-tech.

Speaking on the occasion, R Chandrashekhar, President, NASSCOM, said, “The Indian startup ecosystem is maturing, driven by young, diverse and inclusive entrepreneurial landscape. This is leading to emergence of focused domain solutions for verticals like healthcare, agriculture, and education. Findings of the report is a testimony to the potential of the start-up landscape and the scope of growth and opportunity that India presents. NASSCOM will continue its drive towards catalysing deep tech start-ups, build category leaders and support start-ups to create for India.”

RISE OF NEW-AGE ADVANCED-TECH STARTUPS

Growing at 5-year CAGR of 30%, advanced tech startups focused on creating solutions in segments like Artificial Intelligence, Analytics, Augmented Reality / Virtual reality, Blockchain and Internet of Things, among others. Enterprise and SMB-focused horizontal solutions startups, 90% of which is SaaS-based, are also witnessing significant inflow of funding.

DRAMATIC RISE IN UNICORN FUNDING AND M&A

Unicorn funding took center stage with big deals announced in the year. Investors from non-US countries expanded their investments in Indian startups. Indian unicorns in the B2C space continue to garner global funds and stir-up the competitive landscape. With a growth of 167%, the funding of entire Indian start-up ecosystem (led by unicorns) amounted to $ 6.4 billion in H1-2017. The average funding for B2B tech startups in 2017 saw an increase of 5% while B2C tech startup average funding saw a decline of 10%.

Driven by the need to enhance tech capabilities, expand markets and portfolio, global corporates are now drawn towards the Indian tech startup arena. H1-2017 saw 50+  M&A deals, indicating at a growth of 25% since H1-2016. Over 325 startups emerging, with YoY growth of 18%, catering to social challenges in the areas of healthcare and education, and are thus building solutions for India, creating social impact.

BUILDING A ROBUST WAY FORWARD FOR GROWTH

Continuing the ‘By India, For India, Of India’ movement, the Indian tech startups will continue to innovate enabled by technology and newer business models and will have a long-lasting impact in improving the quality of startups arising from India, in the coming years. NASSCOM will continue to catalyze and support deep tech startups, and help build category leaders who can create solutions for India.  The top priorities for the various other stakeholders will be as follows:

  • For startups: Building products that address need-gaps and challenges, defining a full-bodied go-to-market strategy to scale-up, while building a team in the technology, domain, sales, and customer experience.
  • For incubators / accelerators: Provide deep mentoring, help start-ups internalise organizational best practices, and help establish global connects
  • For corporates: Accelerate startup partnerships and help identify white spaces for innovation
  • For government: Enable ease of doing business by minimising regulatory impediments, remove asymmetry in policies, provide access to government projects, and help secure early stage funding

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