Even as the COVID-19 pandemic wreaked havoc on the world and ravaged global economies, it ushered in winds of positive change for India’s startup ecosystem. According to recent reports, 43 startups were identified as unicorns in 2020, and 42 others in 2021, making it a bumper period for homegrown startups. The Indian startup ecosystem also witnessed 706 seed-stage deals and raised USD 42 billion from investors across the board in 2021.
In the current digital world order created by disruptive technologies, several Indian startups are seeking to consolidate their position by exploring foreign markets. A recent survey revealed that over 42 per cent of Indian startups are looking to build world-class brands by tapping into overseas markets in 2022. Interestingly, over 64 per cent of these startups are in the SaaS (Software-as-a-Service) sector and are expected to touch USD 30 billion in revenue by 2025.
Recently, high-profile tech startup Freshworks saw a stellar listing on the US bourses, making it the first Indian SaaS firm to debut on Nasdaq. Freshworks founder and CEO Girish Mathrubootham echoed the sentiments of the Indian startup ecosystem at large when he declared, “We are showing the world what a global product company from India can achieve.” From its early days as Freshdesk to its current USD 6.7 billion valuation as Freshworks Inc., the company is a fine example of how ambitious Indian startups can realise their dream to go global through proper planning and strategy.
Seizing new opportunities in foreign shores
Innovation has been the mainstay of the startup ecosystem since the outbreak of the pandemic in 2020. The inventiveness of India’s entrepreneurs is fuelled by their tech-focused approach to finding unique solutions to real-time challenges. The maturing startup ecosystem has witnessed Indian startups creating cutting-edge products and services that are being recognised in overseas markets. The slew of startups that filed for IPOs in 2021 has further strengthened India’s position as the third largest startup ecosystem in the world.
Today’s homegrown startups are eager to reach a larger global audience by offering innovative ‘Made in India’ solutions. In my view, however, before blindly leapfrogging into international markets, founders should weigh the pros and cons of going global. They should have an astute understanding of their priorities and the business outcomes they seek to achieve.
Among factors Indian startups should consider are whether the products and services they offer have the potential to scale global markets. The critical decision should also be based on the availability of viable international sales distribution channels to both identify and onboard potential customers. Further, market attractiveness and product-market fit are essential for expansion plans beyond the domestic market. If required, startups should also be willing to customise their offering and pricing model for highly competitive foreign markets.
Crucially, Indian startups must overcome the cultural barrier that might exist in an overseas market to build a global brand.
It is important to become acquainted with the country’s culture, business practices and regulatory mechanism before entering new international markets. I believe forging strategic partnerships with local businesses and stakeholders can help Indian startups navigate global markets and overcome potential entry barriers. For instance, seeking to accelerate its growth, EdTech decacorn Byju’s plans to launch in the US, UK, Brazil, Indonesia and Mexico under the aegis of Byju’s Future School. The startup plans to hire teachers in local non-English speaking markets to extend into these geographies.
Funding gives homegrown startups a competitive advantage
The year 2021 proved to be momentous for India’s growing tech startups as they attracted a record amount of funding from private equity and venture capital firms. The new digital economy triggered strong investor support for SaaS companies, resulting in homegrown tech startups to capture 8-9 percent of the global SaaS pie. It is a testament to our flourishing startup economy and the investor appetite for India’s entrepreneurs.
In my view, funding is not restricted to merely monetary benefits. Indian startups that attract foreign investors must have easy access to international markets to tap into investors’ vast network. Investors also allow startups to acquire new skills to disrupt the conventional way of doing business. Such benefits would pave the way for startups to raise capital in the future. Additionally, onboarding foreign investors would also enable Indian startups to gain a global perspective on the functioning of international ecosystems.
Creating new pathways to expansion
On the flip side, I would also caution startups on the dangers of ignoring the domestic market in favour of foreign territories. It pays to create a strong brand presence and product-market fit in India, especially for consumer-facing brands that enjoy a large clientele in the country. Indian startups have also faced hurdles in global markets for reasons such as failing to modify their business model to suit the local customer demands. Sometimes, it may also make for poor economics to expand into overseas markets. Also, sectors such as healthcare and FinTech tend to operate in regulatory environments that could pose challenges for India’s startups.
Currently, however, the winds of change seem to favour Indian startups. In the pandemic era, several startups adapted the online model—and thrived—making their geographical location irrelevant for doing business. An increasing number of startups are consciously building products and services for a global audience. The trend is likely to continue in the years to come. It is an exciting time for startups to expand their global footprint and add heft to India’s startup ecosystem. However, adequate preparation would save time and resources for companies experimenting with globalisation.
In today’s digital era, efforts must be made to leverage platform partners to recognise customer demands in foreign markets. Indian startups should also connect with peers to learn from their mistakes and understand how to adapt technology to serve the unique needs of local markets. Startups should identify accelerators, incubators and other institutional intermediaries that cater to a particular ecosystem and geography. Such collaborations would provide sharp insight into local competitors and stakeholders.
While India’s talented startups should take wings and boldly venture overseas, they should do so without losing their core business proposition. Remember, it’s their ‘Indianness’ that has brought them this far.
Srinivas Rao Mahankali (MSR)
NOTE: This article was originally published in Telangana Today on March 13, 2022 with the title Connect globally, with Indianness