The software products industry has grown significantly in India over the last decade. This was due to the increase in availability of mobile phones, the ease of adoption of SaaS (Software-as-a-Service) and the increased collaboration fostered by social media.
Still, India has not produced a global tech powerhouse yet. Japan had electronics giant Sony twenty years ago. Similarly, when one mentions Korea or China, he or she thinks of Samsung or Xiaomi. But we’re still waiting for an Indian tech company to conquer the world.
India is well-known all over the world for its pool of software engineers. The Indian software services industry contributes about 14% to exports in the country and employs nearly 3 million people, according to statistics from the think tank iSPIRT.
Many engineers are trying to replicate the success of Indian unicorns Flipkart or Snapdeal, both competitors of Amazon.
Bengaluru alone has 4,000 active startups that have raised a total of over US$1 billion over the last two years. This has made Bengaluru the second largest startup hub in the world – trailing behind only Silicon Valley.
Bangalore is defining its position as a startup hub on the world stage, trailing behind only the US’ Silicon Valley.
Despite a huge talent pool and a large number of startups, sustainable and successful businesses have been few.
“We have startups but we have poor outcomes for those startups. India has the worst multiple in terms of M&A exits”
mentions iSPIRT on their website.
An analysis by iSPIRT and SignalHill reveals that the Mergers and Acquisitions (M&A) exit value in Israel was 7 times of the Venture Capital (VC) / Private Equity investment during the same period.
In the United States, the exit value was 5 times that of VC/PE investment.
In India, it was only 1.1 times. Moreover, this value was inflated as it included IT Services M&A exits as well.
Read more on the definition of Mergers and Acquisitions (M&A) and the differences between VC/PE investments.
The growth of incubators and mentorship programs, including Corporate ones
The figures listed above have spurred the emergence of communities, incubators, accelerators and mentorship programs. They are unified by a single goal – to help developing startups build a successful venture.
The French accelerator NUMA launched its first Asian hub in Bengalore.
“In France, there are a lot of business guys struggling to find CTOs. In India, there are a lot of tech guys but they require business support. This is why we brought a 6 months incubation program to Bengaluru.”
explains Clarisse Tonon, Innovation Projects manager at NUMA Bengaluru.
Corporations have also created accelerators to help startups better understand the needs of the clients and the context of their industries.
For example,
- the American retail giant Target launched its accelerator in Bengaluru three years ago,
- the French plane’s manufacturer Airbus launched its BizLab last year,
- Microsoft Ventures just announced its 8th batch of accelerated startups and
- the German enterprise software company SAP just launched its Startup Studio programme.
“We believed we could play a bigger place in the ecosystem”
explains Mohammed Anzy, initiator of the accelerator at SAP.
“More and more of partnerships and collaboration between startups and corporates should happen and will happen in India”
said Shailendra Singh from Sequoia India at TechSparks.
Supporting Indian Startups : iSPIRT
One important player in the support of software product entrepreneurs is iSPIRT.
Founded in 2013 by volunteers from the software industry, iSPIRT creates playbooks for product entrepreneurs. These playbooks aim to help them “anticipate customer needs rather than just react to them”.
Moreover, iSPIRT hopes to bridge the gap between startups and the corporate world by “making more Indian innovations discoverable”. By launching the M&A Connect program, iSPIRT can play a part in the M&A of various startups.
They have also launched the Global CXO Connect Program. This program gathers Chief Innovation Officers from corporate companies for a unique pitching event called InTech50.
Opportunities for Indian Startups beyond e-Commerce and Fintech
Many opportunities still exist beyond the e-commerce space.
“So far, we have only replicated things that have already existed in the United States. We want to solve Indian specific problems now – especially problems pertaining to financial inclusion.”
explains Nikhil Kumar of iSPIRT.
Fintech is the new buzzword in the Indian startups scene. The most powerful driving force is probably the Indian government, with its India Stack platform.
Bringing financial services to the majority of the population has attracted all the attention of entrepreneurs and VCs this year with an impressive growth of startups in this sector.
However, there are many more problems in India that have not been tackled yet.
“India is the worldwide capital of inefficiencies”
mentions Kunal Shah, founder of the Fintech startup FreeCharge.
To give some examples, the country has some of the worst traffic jams in the world, and one of the lowest density of teachers to students or doctors to patients.
Tapping on the Local Demographic
Out of the 1.2 billion population, only 220 million Indians have a smartphone. Moreover, most of them have a very specific way to use their mobile devices.
It is crucial for aspiring entrepreneurs to understand this phenomenon better.
“We found it very difficult to relate to these users, but it is crucial to scale. They are not the early adopters, they are the mass Indian consumers. They have phones which cost from 60 to 180 USD, salaries of 200 to 700 USD, they are split in Tier I, II, III cities and villages. Battery, balance, storage and data usage are so important to them. There is a lot of arrogance, scepticism towards monetizing to this audience, but there is a lot we can learn from talking with them”
explains Ankur Singla, founder & CEO of HelpChat (now Tapzo).
Tapzo aims to be the biggest all-in-one app in India with 50,000 transactions per day.
Tapzo intends to be India’s first all-in-one app. (Photo by Innovation Is Everywhere from tapzo.com)
In essence, Indian startups must see a shift away from borrowing used concepts from the US. Instead, the focus should be on creating products and services specific to their local market and demographic.
Innovation Is Everywhere organizes Learning Expeditions in India to understand the potential of the country to build new generation software products, and how to engage the next billion consumers.