Start-up wave spreading into India's hinterland now
The start-up wave is spreading its wings far and wide. The big three, namely Bengaluru, National Capital Region (NCR) and Mumbai are gradually making way for the Punes , Chandigarhs , Ahmedabads and Surats to gain a foothold in the start-up ecosystem.
The start-up wave is spreading its wings far and wide. The big three, namely Bengaluru, National Capital Region (NCR) and Mumbai are gradually making way for the Punes, Chandigarhs, Ahmedabads and Surats to gain a foothold in the start-up ecosystem.
Entrepreneurs say multiple market opportunities abound in cities that go beyond the big three. According to Jasmeet Singh, director, Liv India Group, for a large number of businesses like ecommerce, agri-tech etc., smaller towns are now becoming thriving growth centres. “We ourselves are seeing a boom from a large number of people who are based in small towns for starting their own businesses by adopting our franchise model.”
“Increasing connectivity has ensured faster information dissemination. The telecom infrastructure has also improved. A person in any town can now access a huge pool of information. These things have opened up opportunities for the young in non-metros. We are increasingly moving into a knowledge-based start-up culture, rather than a capital-based start-up culture that was seen earlier. This will propel more start-ups, ” says Vishwavijay Singh, co-founder of SaleBhai.com, an e-commerce start-up based in Ahmedabad that retails confectionaries.
Making an idea big in a small town means having a ready consumer market waiting to be tapped. Non-metro consumers constituted 42% of online shoppers in 2016. This will rise to 55% by 2020, says data by RedSeer.
The growing consumer numbers are backed by a growth in the number of mobile users, ensuring a readymade base of digital natives thriving in a hyper-connected world. Zenith predicts India to have 530 million smartphone users by end of 2018.
Besides growing consumer and smartphone user numbers, being in a non-metro has its own set of plus points, says Sanjeev Bhatia, co-founder of Onlymobiles.com, a Surat-based venture that retails mobiles, wearables, tablets and accessories through online and offline.
According to Bhatia, the costs of rentals and manpower are much lower in a smaller city. “We pay about 35% lesser than what is paid to employees in metro cities. There are big advantages in rentals. The more we save, more we earn in e-commerce.”
But advantages aside, non-metros carry their own sets of drawbacks. According to Yogesh Ghorpade, CEO and Founder of Uplodefoodie, start-ups in small cities are moving against a prevailing mindset that big ideas and big businesses emerge only from the country’s big cities. ‘’This makes it harder for newer businesses in small towns to be taken seriously. But the mindset is slowly being dispersed,” says Ghorpade, whose start-up in Pune caters to the F&B industry with SaaS-based solutions.
Funding is a major challenge for small town start-ups. The Annual Indian Tech Start-up Funding Report 2017 says Bangalore, NCR and Mumbai were the top cities to receive start-up funding. While Bengaluru received $7.5 billion in funding across 366 deals, NCR garnered over $4.3 billion across 223 deals, and Mumbai start-ups together received $582 million across 145 deals. The report mentions that start-ups in tier II and III cities put together received $145 million last year.
Experts say many potential investors continue to operate from metros. ‘’Entrepreneurs face problems in contacting relevant funds. Entrepreneurs have to visit metros and get connected with the funds. This has been true for SaleBhai as well,” says Singh.
Besides pumping in money, investors bring in a gamut of positives such as connections, visibility and mentorship, which small town start-ups again stand to miss. Bhatia says non-metro start-ups miss out on the overall value which a good investor brings.
Funding woes aside, getting the right talent is also a hurdle for small town start-ups. “Also, ensuring timely delivery is a task. Since we are in Surat, which does not have air-connectivity, we end up dispatching through our warehouse in Chennai or end up paying more to a logistics partner,” says Bhatia.
However, start-ups are moving ahead in a quick fashion, leveraging technologies like big data, analytics, cloud, artificial intelligence, etc. to move ahead of legacy competitors and gain an edge with the early tech adopters in the ecosystem. This has catalysed their growth plans. Ghorpade says Uplodefoodie has seen a 200% growth in its customer base.
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“We are currently targeting on-boarding 3000+ restaurants in the next six months’ time across Maharashtra. Post this, we intend to initiate a plan to offer solutions to restaurants across India, ” says Ghorpade.
Onlymobiles has eight offline stores in Surat. “We have a target of operating 40 new stores by 2018-19. We are looking at Ahmedabad, Rajkot and Baroda as our next growth market for our offline business. On the online front, our business generates Rs.44 lakh new sales a day, with an average order value of Rs21,000,” says Bhatia.
SaleBhai is looking at doubling their customer base to 200,000 customers by this financial year. “We also aim to end the year with a monthly dispatch of over 30, 000 units,” says Singh.