Opportunities in India: Why German Startups Should Take Advantage of India’s Growing Digital Economy

India’s booming economy and flourishing startup ecosystem is gaining global attention and presents great new opportunities for German startups.

“Startups have emerged as engines of growth for our economy,” says Nirmala Sitharaman, India’s Finance Minister, whose new policies have infused tremendous energy into the country’s entrepreneurship ecosystem. Amongst the plans are a U.S.$1.5B fund supporting startups and company tax breaks to attract large-scale technology, investment, and employment opportunities. These initiatives showcase the hopes pinned on startups to lead India towards an ambitious GDP goal of US$5T by 2025.

Startups are playing their role in contributing to India’s economic growth:

A big boost to this ecosystem is the recent rise of B2B startups. With a funding growth of 364% and the number of firms almost tripling since 2014, B2B startups have given India’s innovation a new growth trajectory. Many Indian entrepreneurs are harnessing their IT knowledge, and India’s cost arbitrage benefit to create global, enterprise-level solutions to facilitate the digital transformation of multinational companies (MNC). Unicorn status and funding for B2B startups have risen sharply in comparison to their B2C counterparts. Freshworks (SaaS), Udaan (trading platform), Druva (contract management), and Rivigo (logistics) are the latest Indian B2B unicorns benefitting from this new momentum. The ecosystem is also gaining popularity among foreigners to set up or expand their startups; companies like Zoomcar and UiPath are thriving due to their first mover advantage.

Here’s what makes India a great market for German startups:

Strong Country Ties

Germany is India’s largest trading partner in Europe, and more than 1,700 German companies have established operations in India. Among them are big corporations such as Volkswagen, BMW, Audi, Bosch, Deutsche Bank, SAP, Merck, and Siemens.

As one of Germany’s “global development partners,” India plays a key role in finding solutions for global challenges such as climate protection and received a record of 1.7B Euros in 2019 to fund development. The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH has also partnered with the Indian government on key initiatives such as Smart Cities, Clean India and Skill India to address some of the country’s economic, environmental, and social challenges.

Unique Tech Landscape 

India’s economic reforms and inherent entrepreneurial spirit enabled it to become a prominent IT hub in the 1990s. With an influx of foreign companies and the creation of homegrown companies, India’s US$150B IT industry now contributes to over 9% of the country’s GDP. However, with IT budgets now shifting towards digital technologies such as cloud computing, AI, and IoT, the traditional IT business model sees a decline.

Global In-house Centers (GICs) are using this market transition to their benefit. MNCs are leveraging the Indian startup and university ecosystem to utilize GICs as innovation hubs that drive global initiatives, enable digital transformation, and converge into centers of R&D excellence. India houses 1,250 GICs that employ more than 1M individuals (in 2019) across all the major Indian cities. With more MNCs looking to maximize their footprint in India, GICs are fantastic launchpads for startup-MNC collaboration.

Corporate accelerators are another prominent contributor to India’s growing tech ecosystem. Over 25 MNCs, including Microsoft, Google, and Cisco, have set up accelerator programs to capitalize on emerging trends and establish a funnel for corporate investments. More B2B startups have recently emerged, thanks to such strong market players backing innovation.

India is now expanding its tech landscape to include deep-tech product innovation. The deep-tech startup pool is rapidly growing at 40% annually, which has led to one in five startups leveraging deep-tech. This trend opens up tremendous opportunities across sectors such as healthcare, education, AI, and CRM for domestic & international consumption.

Talent

India’s large population (16 times that of Germany) churns out one of the largest talent pools, with 4.75M joining the workforce annually. While most developed countries face imminent talent shortage, India is one of the few countries with a talent surplus. By 2030, it aims to add 245M more workers by further educating and training its large youth population.

To assist with this goal, Germany’s Federal Ministry for Economic Cooperation and Development (BMZ) is advising Indian government agencies on vocational education and training across six industries – automobile, electronics, construction, retail, solar energy, and pharmaceuticals. Corporations such as Siemens and Bosch have also committed to training thousands of students as part of strategic deals between Germany and India.

A vast pool of talent is also present in the tech sector, thanks to the IT boom and a renowned engineering education system. Over 4.3M employees are equipped with a strong understanding of tech products, making them sought after globally. Cities such as Bengaluru, Hyderabad, and Pune are well-established hubs for tech MNCs with readily available talent, making recruitment an opportunity rather than a challenge.

Partnership Opportunities

India is a complex yet promising market for foreign companies to enter. Introducing a brand and technology into the country requires complete knowledge of the Indian consumer, relevant infrastructure, and a route to market. Partnerships with Indian companies enable foreign firms to share investments, reduce risks, and achieve success. With more than 1,600 Indo-German collaborations and 600 Indo-German joint ventures, it’s an interesting market for German companies.

Here are some of the key sectors that offer significant opportunities for German startups:

Enterprise Tech

With two new unicorns, Druva and Icertis, and 49% funding growth, India saw a massive boost to its enterprise tech sector last year. The proactive government push towards digitalization, growing digital presence of businesses, and broader M&A opportunities have helped this sector flourish.

Sector Opportunities: Solutions that focus on use-cases such as network security, business intelligence, data analytics, DevOps, business process automation, and cloud optimization.

HealthTech

The ongoing COVID-19 pandemic has put Indian healthcare under further strain and exposed the lack of innovation in this sector. With India’s healthcare market valued at US$372B by 2022, numerous tech startups are entering the industry to disrupt traditional models and gain market share.

Sector Opportunities: Solutions that utilize AI and Machine Learning to improve access, affordability, and quality of healthcare. Key verticals include online pharmacy, telemedicine, personal health management, home healthcare, fitness & wellness, diagnostics, biotech R&D, medical devices, healthcare IT, biopharma, and genomics.

Logistics & Mobility

India’s large supply chain, growing e-commerce sales, and rising urbanization present opportunities for a tech disruption in these sectors. In 2019 alone, transportation logistics startups in the country attracted funding of over US$2.4B.

Sector Opportunities: Solutions that improve labor/routing efficiency, traffic/mobility management, or overall safety and security. Here’s a deep dive into these sectors’ opportunities.

AgriTech/Sustainability

Agriculture is the primary source of livelihood for about 58% of the population. In 2019, the gross value of agriculture, forestry, and fishing was estimated at US$265.51B. This sector faces problems at various levels, from logistics to financing, and needs tech disruption.

Sector Opportunities: Solutions that improve farming processes, automate machinery, improve agricultural efficiency, and predict weather patterns.

 

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