Consumer-centric start-ups aren’t the only ones struggling to raise fresh funds these days. Business-to-business (B2B) ventures too are finding it hard to convince investors to back them.
Consumer-centric start-ups aren’t the only ones struggling to raise fresh funds these days. Business-to-business (B2B) ventures too are finding it hard to convince investors to back them. Data from Tracxn Technologies show just $433.30 million was invested in B2Bs between January and August this year, less than half the $940.44 million that flowed in over the same period of 2015. Also, investors are spreading their risks by putting in money across a larger universe of ventures. This time around, 197 companies attracted funds compared with 173 in 2015. B2B start-ups include, inter alia, research and analytic firms, logistics players and online distributors of goods and services.
“B2B start-ups have an asset-light model including a low cost of customer acquisition compared to consumer centric start-ups such as Amazon or Flipkart,” says Sunil Goyal, CEO and co-founder, YourNest Angel Fund.
The company is an early-stage investor in several B2B start-ups such as Uniphore, which provides speech recognition solutions for enterprises.
Some B2B start-ups have been forced to shut shop after having run out of money. In May this year, Rahul Yadav’s second venture Intelligent Interfaces closed down; it had been funded by Flipkart co-founders Sachin and Binny Bansal and Paytm’s Vijay Shekhar Sharma. Yadav had earlier co-founded Housing.com. Similarly, last October, Townrush, a delivery logistics start-up, shut down its operations after failing to raise fresh funds.
For R Narayan, founder and CEO, Power2SME, an online marketplace that sells raw materials to small and medium enterprises (SMEs) in India, despite a few shutdowns, B2B start-ups have better unit economics and can turn profitable faster than B2C online firms. “Investors are now looking for companies which are able to provide solutions for problems, not a ‘me too’ kind of online company,” explains Narayan.
According to a report released by Deloitte India and Confederation of Indian Industry in April this year, the size of the B2B e-commerce space, which was pegged at $300 billion in 2014, is expected to reach $700 billion by 2020.
Just Buy Live, an online distributor of consumer brands to retailers, is hoping to raise a series B round of funding of about $30-50 million by the end of the year. “We distribute consumer brands to 60,000 retailers in Delhi and Mumbai,” says Sahil Sani, chairman and CEO, Justbuylive.com. The e- distributor had in January this year raised $20 million in a series A round of funding from Alpha Capital Advisors.