B2C euphoria is dying, why this has come as a blessing in disguise for B2B startups

By: | Published: September 4, 2017 3:06 AM

The spotlight is now shifting towards B2B start-ups as they are seen as ventures with sustainable business models thus creating a wider impact.

B2C euphoria, B2C, B2B, start-ups The B2B segment is expected to see a longer run unlike the marketshare run of the B2C companies as they are built on the platform of a more sustainable business model.

The euphoria over investing in business-to-consumer (B2C) companies seems to have died down and this has come as a blessing in disguise for business-to-business (B2B) start-ups which can now seek their rightful place as the country continues to incubate newer ventures.

The B2B start-ups in the country never had the glamour quotient associated with them and they were not chasing any marketshare. The key ingredient of such ventures was cutting-edge technology which were out to solve business problems of enterprises.

Today, there is a growing interest among the investment community to fund these ventures with many such firms sectorally devoted to funding B2B companies.

V Balakrishnan, former board member of Infosys and founder of Exfinity Venture Partners, said initially there was euphoria in the B2C start-up space with a lot of investments coming in which was not required. “Now the realisation is coming up that you need to invest in companies which have a sustainable business model like that of B2B start-ups.”
The B2C start-ups witnessed a funding boom during the years between 2014 and 2015 but the subsequent drying up of funds in 2016 witnessed the closure of many firms. It has also made it difficult for firms from this segment to raise any more fresh rounds of funding.

According to Manish Singhal, founding partner, Pi Ventures, an early-stage fund which is focused on artificial intelligence, machine learning and Internet of Things, all that money which did not go into B2C has actually meant that there are now funds available for B2B startups. “There is a transistion happening in India from a market share led thesis of investment to a more product, IP led type of companies attracting funds. This establishes the ground for becoming a product nation.”

The space of B2B is quite vast and any venture cannot be dovetailed to particular sector or segment though the underlying theme is on the use of technology. According to Balakrishnan, a B2B start-up is not about focusing on particularly industry but about how to use technology which helps businesses in various areas like improving efficiency or customer acquisition.

Today, there is a stronger platform for B2B companies to thrive as the ecosystem has strengthened with the government also having a dedicated focus on this segment.
Sunil K Goyal, managing director and fund manager, YourNest, said that the B2B start-up ecosystem has become much more vibrant and mature. “There are many more people who are now starting ventures.” YourNest is an early stage venture capital fund that invests in areas such as Internet of Things, electronic system design, artificial intelligence, advanced robotics, enterprise software and the mobile internet.

The scenario for the B2B start-ups has changed with entry of more seasoned professionals entering the segment. According to industry observers, the slowdown in the Indian IT industry has had a positive rub off on the start-up community as the new ventures are led by people who have the much-required depth in technology and also understand the requirements of the enterprises. A case in point here is YourNest, which receives over 7,000 applications every year though it invests only in four
to six companies.

For firms like Exfinity, Pi Ventures and YourNest, it is about getting into the action early so that they can be part of the exciting journey of these start-ups. “We like to nurture them in the early stages and believe that maximum value comes from that,” said Goyal.

However, this would not mean that there is a flood of good and cutting-edge start-ups in the B2B space. Singhal said that the depth of companies in India is not anywhere near that of United States but it has been improving. “We need some success stories and I feel it is just around the corner,” he added.

Today, the capital infusion scenario has also improved for B2B start-ups with many more funds focused on this segment. Even venture capital firms which were skewed towards the B2C segment are allocating part of their funds into this segment as they would not like to let go of an opportunity which might arise. The reason why the tide has turned in favour of these start-ups is the growing interest among large Indian enterprises to adopt their solutions. Goyal believes it is difficult for start-ups to sell to the enterprises but VC funds are able to guide these entrepreneurs with strategy and also help them through their networks.

Said Balakrishnan, “If you have to test the product, then India is the best place because of its complexity. But if you have to get value then you will have to take it to the West.” The idea here is that if a product works in India it will be much easier to ensure its success in global markets.

The B2B segment is expected to see a longer run unlike the marketshare run of the B2C companies as they are built on the platform of a more sustainable business model.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition