Go global: The only mantra for Indian tech startup ecosystem

Indian

As an Indian investing in startups for the last 10 years, I have yearned to see Indian companies and brands expand to and dominate global markets. Beyond a few select companies, that trend is yet to take off.

Through this article, I will share my assessment of the challenges that have limited this expansion and shed light on developments in today’s investing environment that promise a new era of growth and expansion. With these developments making headway, I firmly believe that a US$100B equity value Indian tech behemoth that dominates global markets will be a reality before 2025.

Key challenges that have plagued the global growth of Indian startups

For B2C businesses, an excessive focus on the untapped potential of the Indian market has slowed down global expansion. Apart from a few unicorns that have gone global in the ride-hailing, restaurant booking and hospitality sectors, founders of B2C businesses and their investors have prioritized tapping into the vast potential of the Indian market as a faster way to scale promising a better return on capital deployed.

Focusing on winning within the Indian market has remained a priority with a better understanding of the consumer and deeper networks.

On the flip side, B2B businesses, especially tech startups, have always viewed global markets as the fastest way to achieve scale. Despite this understanding, most B2B tech startups in India seemed to have flatlined near US$10M ARR. Boasting of some of the world’s best products, they’ve failed to scale primarily for two reasons:

Lack of access to the Enterprise Consumer

Most B2B startups that have achieved global sales have generated business through either inside sales or digital advertising, focusing on small and medium businesses through these channels.

Also read: Scalability lessons from Indian tech startups for enterprises in SEA

However, listing large enterprises as clients has always remained a tough nut to crack. Given that enterprise companies represent over 75 per cent of the global target market for SaaS companies, this segment is critical for B2B businesses to achieve scale and growth.

Lack of international market insight

It has also been an impediment. Historically, neither founders nor their advisors (including the investors) had a deep understanding of the international markets that they were expanding into.

In my own investing experience, I have seen several cases of startups hiring senior sales team members at exorbitant compensation packages to focus on the United States (priority market to achieve scale) and subsequently firing the entire team within six months due to lack of strategy, precise market positioning, and failed execution.

Changing environment with the emergence of new trends

Venture risk (capital) as an asset class is relatively new in India, where the first significant round of tech VC funds began around the last decade – the early 2010s. They have, by now, completed one complete cycle and, in many cases, have returned the money to their LPs, with decent returns (estimated at high teens).

Therefore, this has established venture risk as a credible investment alternative in India. With this credibility, LP profiles of VC funds now being raised are very different from those presented a decade ago. 10 years ago, funds mainly were raised through family offices and UHNIs, who committed a small portion of their capital to VC funds.

However, a new emerging class of investors has appeared. Large Indian enterprises, who previously scoffed at IPO valuations of tech startups, are now seen writing sizable cheques into VC funds, looking to actively get in the game and get a piece of the pie.

These business services companies have deep connections in the enterprise domain, and the four-decade-old US$200B IT/ITES industry is the right partner that most Indian tech startups need to scale globally. This emerging investor will allow emerging tech startups to quadruple their addressable market by enabling them to tap into the global enterprise segment.

With the most marquee names in the business services space now becoming LPs, the lack of access to the enterprise segment has been solved. Additionally, one cycle of advising startups to expand globally has tremendously benefited GPs by increasing their network and general know-how.

These GPs are now in a much better position to aid and advise their portfolio on how best to go global. Another key aspect that reflects the increasing maturity of Indian startups is that these startups are not shying away from opening Global Delivery Centers to acquire tech talent, which may not be readily available in India.

These developments have primed the Indian tech startup space to scale and dominate global markets in the years to come. And as we’ve seen historically, this is just the beginning as tech companies will lead the way, and consumer companies will follow soon after.

Editor’s note: e27 aims to foster thought leadership by publishing views from the community. Share your opinion by submitting an article, video, podcast, or infographic.

Join our e27 Telegram group, FB community, or like the e27 Facebook page

Image credit: adsniks

The post Go global: The only mantra for Indian tech startup ecosystem appeared first on e27.

,
Indian

As an Indian investing in startups for the last 10 years, I have yearned to see Indian companies and brands expand to and dominate global markets. Beyond a few select companies, that trend is yet to take off.

Through this article, I will share my assessment of the challenges that have limited this expansion and shed light on developments in today’s investing environment that promise a new era of growth and expansion. With these developments making headway, I firmly believe that a US$100B equity value Indian tech behemoth that dominates global markets will be a reality before 2025.

Key challenges that have plagued the global growth of Indian startups

For B2C businesses, an excessive focus on the untapped potential of the Indian market has slowed down global expansion. Apart from a few unicorns that have gone global in the ride-hailing, restaurant booking and hospitality sectors, founders of B2C businesses and their investors have prioritized tapping into the vast potential of the Indian market as a faster way to scale promising a better return on capital deployed.

Focusing on winning within the Indian market has remained a priority with a better understanding of the consumer and deeper networks.

On the flip side, B2B businesses, especially tech startups, have always viewed global markets as the fastest way to achieve scale. Despite this understanding, most B2B tech startups in India seemed to have flatlined near US$10M ARR. Boasting of some of the world’s best products, they’ve failed to scale primarily for two reasons:

Lack of access to the Enterprise Consumer

Most B2B startups that have achieved global sales have generated business through either inside sales or digital advertising, focusing on small and medium businesses through these channels.

Also read: Scalability lessons from Indian tech startups for enterprises in SEA

However, listing large enterprises as clients has always remained a tough nut to crack. Given that enterprise companies represent over 75 per cent of the global target market for SaaS companies, this segment is critical for B2B businesses to achieve scale and growth.

Lack of international market insight

It has also been an impediment. Historically, neither founders nor their advisors (including the investors) had a deep understanding of the international markets that they were expanding into.

In my own investing experience, I have seen several cases of startups hiring senior sales team members at exorbitant compensation packages to focus on the United States (priority market to achieve scale) and subsequently firing the entire team within six months due to lack of strategy, precise market positioning, and failed execution.

Changing environment with the emergence of new trends

Venture risk (capital) as an asset class is relatively new in India, where the first significant round of tech VC funds began around the last decade – the early 2010s. They have, by now, completed one complete cycle and, in many cases, have returned the money to their LPs, with decent returns (estimated at high teens).

Therefore, this has established venture risk as a credible investment alternative in India. With this credibility, LP profiles of VC funds now being raised are very different from those presented a decade ago. 10 years ago, funds mainly were raised through family offices and UHNIs, who committed a small portion of their capital to VC funds.

However, a new emerging class of investors has appeared. Large Indian enterprises, who previously scoffed at IPO valuations of tech startups, are now seen writing sizable cheques into VC funds, looking to actively get in the game and get a piece of the pie.

These business services companies have deep connections in the enterprise domain, and the four-decade-old US$200B IT/ITES industry is the right partner that most Indian tech startups need to scale globally. This emerging investor will allow emerging tech startups to quadruple their addressable market by enabling them to tap into the global enterprise segment.

With the most marquee names in the business services space now becoming LPs, the lack of access to the enterprise segment has been solved. Additionally, one cycle of advising startups to expand globally has tremendously benefited GPs by increasing their network and general know-how.

These GPs are now in a much better position to aid and advise their portfolio on how best to go global. Another key aspect that reflects the increasing maturity of Indian startups is that these startups are not shying away from opening Global Delivery Centers to acquire tech talent, which may not be readily available in India.

These developments have primed the Indian tech startup space to scale and dominate global markets in the years to come. And as we’ve seen historically, this is just the beginning as tech companies will lead the way, and consumer companies will follow soon after.

Editor’s note: e27 aims to foster thought leadership by publishing views from the community. Share your opinion by submitting an article, video, podcast, or infographic.

Join our e27 Telegram group, FB community, or like the e27 Facebook page

Image credit: adsniks

The post Go global: The only mantra for Indian tech startup ecosystem appeared first on e27.

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