Startups focus on B2B segment in 2017: Nasscom

Forty percent of 5200 startups in the country are in B2B tech segment, focusing on areas of healthcare and Fintech.

The business-to-business tech segment has become the hot favourite among startups, according to industry body Nasscom’s Startup Report-2017 that it released on Thursday. Currently, India, which is the third largest startup hub in the world, houses 5200 startups which include 1000 new startups founded last year. Out of this 40 percent of the startups are focused on business-to-business segment.

Angel funding come down by 53 percent

Nasscom has said the fact that seed funding is down by 53 percent is a red flag to be raised. Raman Roy, Chairman, Nasscom said this is mainly because the government has not addressed the angel taxation issue.

The report further found that 50 percent of 1000 new startups set up this year are in the B2B segment. This is a significant increase from 34 percent last year. The key verticals where B2B startups are entering is healthcare and fintech.

“The 50 percent startups in B2B segments, is marking a small yet significant shift to the B2B segment away from B2C.The share in terms of funding has also gone up. It is now 30 percent of the total tech startup funding. There is also a huge jump in mergers and acquisitions. This shows the interest that B2B startups are gaining,” says, R Chandrashekhar, President, NASSCOM.

Start-up talent:

·        Median age of founders: 32 years

·        ~550 female entrepreneurs

·        Over 450 student start-ups, driven by academic incubators

Chandrashekar further added that the focus areas for the B2B startups is on advanced technology in Artificial Intelligence, IoT, augmented reality, virtual reality, blockchain and analytics.

According to the research 26 percent of the B2B funding has gone into enterprise and SMB focus of which 90 percent is on SaaS.

“Hopefully all this will translate into more competitiveness of the SMB’s. Corporates are playing a critical role by having accelerator and incubator in promoting B2B startups,” adds Chandrashekar.

Explaining why startups are looking at B2B segment, Guru Malladi, partner advisory services, EY India, says, “Trends such as micro customer segmentation and mobile businesses are pushing companies to be more data driven. In addition, the retention of B2B customers is much longer than the ones in B2C segment which is making the segment more attractive to build sustainable business models with a promise of reasonable return. Thus, reducing the dependence on constant infusion of fresh investments.”

Key takeaways

·        No of new startups in 2017:  1000

·        B2B segment:  50% of  new startups 

·        Advanced tech ( AI and analytics)  startups growing at 30% CAGR

“What happens right now, even the funding is taken as income which means founders are constantly spending time with the tax department. Also as an investors I have invested in more than 60 startups as seed investment but I am facing issues now. So this is critical as these are the seeds of tomorrow. We have spoken to the government but a methodology has to be found. Ideally this was brought in place to avoid money laundering which was true and proved with data. Now it is about having a new methodology and the government has also acknowledged it,” adds Roy.