The number of business-to-business (B2B) tech start-ups that raised funding in India has been on a decline for the last two years.
As per data from Tracxn — a firm that tracks investments and financials of private companies and start-ups — the number of B2B tech firms that garnered funding fell from 668 in 2018 to 619 in 2019.
The count dipped further to 538 firms in 2020. Start-ups that have been founded since 2010 have been considered for this analysis.
Rajeev Suri, Managing Partner, Orios Venture Partners, said this is because global B2B tech funding has not been flowing into India as much.
“B2B tech space in India has been dominated by business efficiency pursuits such as productivity improvement, process and product automation, support, and helpdesk.
In comparison, the large high-tech funds are more focused on the likes of Artificial intelligence, Machine Learning, Neural Networks, Deep Tech, etc.
“Our ability to produce high-grade start-ups in this space has been a bit limited, reflecting this trend,” Suri added.
Digital driving demand
However, this does not indicate the B2B tech segment now has less room for newcomers. Suri noted that in a world that has gone sharply more digital, more B2B tech will be required, and the success of companies such as Shopify (which saw a 71 per cent quarter-on-quarter jump in new store creation during the pandemic) on the one hand and Infosys (the digital shift driven by the pandemic has led to substantial growth for Infosys this fiscal year) on the other, stand testimony.
With entrepreneurs in the B2B foray steadfastly upping their game to make digital workflows seamless, experts said that although the business to consumer (B2C) space will always be in prominence in the country, the stage is now increasingly being shared by B2B start-ups as well, alongside the B2C firms.
Uptick in B2B deals
The B2B tech segment in the last five years have accounted for at least 30 per cent of the total funding for tech start-ups in India.
In 2020 alone, they raked in over 46 per cent of the overall investments that went into Indian start-ups during the year, and experts said they expect this trend to only continue in the years to come.
“As things return to normalcy, we are witnessing an uptick in deal activity/fund announcements in the B2B segment in 2021 already. We expect the momentum to continue further in 2021 and we will see some pent-up demand from last year also figuring in this year,” Jatin Desai, Managing Partner, Inflexor Ventures, said.