Survival of most evolved is the new normal in the B2B Startup Sector

It may not be a stretch to suggest that we are now into the second wave of the startup phenomenon. The segment has shown consistent high growth in terms of numbers ­ aggregating 5,000 and counting.

In the last couple of years, the B2B segment particularly has shown healthy growth. This year, having garnered almost a 40% share (37% in 2016), it makes for one of the prominent findings. Fiscal 2017 saw an addition of 1,000 startups of which nearly half were in B2B in areas like fintech, healthtech, media-tech etc. In this, analytics, machine learning, artificial intelligence, internet of things (IoT), augmented and virtual reality and blockchain need special mention.

Funding, or the lack of it, has been many a founder’s pet peeve, but this year it was encouraging to see enterprise and SMB-focused horizontal solutions (especially SaaS) find favour, a trend which should catalyse many more enterprise-driven accelerator programmes. The leading verticals of fintech and healthtech remain locked in a battle for highest number added (300 or thereabouts for both) and largest share of funding. The nation has many other challenges but to startups these are, in fact, billion dollar opportunities waiting to be tapped. The social flavour of “Build for India” is manifest against this backdrop.

There was a significant double digit percentage growth in numbers as startups lapped up this opportunity to venture into education, environment, agriculture and even prevention of crime.It’s perhaps too early to say if it’s a complete shift from the frenzied adoption of aggregator and ecommerce models, but certainly the direction of the wind is changing rapidly. Bengaluru, NCR and Mumbai remain the key startup hubs.

Interestingly, Tier 2 locations now account for 20% – up from 16% last year. A flourishing entrepreneurial mindset is a sign of ecosystem maturity. This rising maturity is also evidenced by the increase in median age – 32 this year. In the case of advanced technology , it’s a notch higher. The student startups remain undeterred though.If anything, there has been a high double-digit growth in the latter category , denoting a healthy mix.

Yes, there has been a marginal dip in total funding over last year but B2B has garnered a larger share, showing an overall shift-from seed stage to early growth expansion stage. Specifically , the government should take note of somewhat ominous decline in seed stage funding and work towards addressing issues such as angel tax problems, various regulatory impediments, including the asymmetry that exists between effect of regulatory conditions on Indian startups vis-avis companies based and operating overseas and finally, to enable participation of smaller, innovative companies in government-led projects.

The number of corporate accelerators and coinnovations have increased significantly to lend heft to the B2B cause. A special mention of the indefatigable B2C Indian unicorns must be made, as they continue to attract global funds and take on the severest of competition and stake their own claim to glory.

Indian startups are competing with those from powerful nations -the likes of UK, Israel and China. In this battle there are many enablers, of which, Innovation Index and Ease of Doing Business will be crucial. The government has been supportive and continues to work on introducing policies which are more industry-friendly. At the same time startups too are leveraging deep-tech to architect solutions. The ecosystem is now much more collaborative. To ride this new wave successfully and get the product market fit right, the war for specialised talent will get even more intense. And to misquote Darwin, “Survival of the most evolved!”

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