An early trend that I am noticing in B2B startups in India

Something interesting is starting to happen among the B2B companies that are starting / getting funded in India. Companies that have a larger price point (> $1000 per month for e.g.) are all either a) moving to the US (company founder, key employee) or b) they are hiring larger inside sales (telesales) teams and teaching them how to sell outside India. There are exceptions (Visual Website Optimizer) but I am seeing more companies moving to US to seek faster adoption in the early stages.

By B2B (Business to Business) I mean companies that sell to other businesses, either small or large. There are enough documented issues selling in India to businesses, some of which include:

1. An extreme focus on cost by Indian businesses, which results in much lower (or non-existent) profit margins.

2. The inability to find good, trained sales professionals

3. The “request” by many “decision makers” to be paid a kickback, which if not paid, results in unpredictable sales cycles

There have been many company founders (OrangeScape, InterviewStreet, Mobstac, etc.), who all started in India, sold to their first few business customers here in India, but have now either moved to the US or are focusing on the US market alone.

Besides the fact that early adopter companies are largely there in the US, many or all of the issues listed above tend to go away bringing mostly issues of upfront investment on sales resources as the primary barrier to a US only distribution strategy.

So what does this mean for new entrepreneurs looking to start B2B ventures in India?

1. Dont. Seriously. Find easier and more fun things to do than sell to Indian businesses (This is a personal opinion alone).

2. If you still insist on doing that, get an awesome sales director / manager from a kick-ass company to head up your sales efforts sooner rather than later and help create a detailed training plan to hire, train and manage new sales professionals.

3. Look to partner and ride an existing distribution channel that exists. Tally has an excellent list of re-sellers / partners who you might want to talk with.

One last thought – Entrepreneurship is hard. Dont make it harder by choosing a distribution strategy that’s even harder.

 

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20 thoughts on “An early trend that I am noticing in B2B startups in India”

  1. Most annoying are the kickbacks. I personally agree with on not getting into B2B. You will end up dealing with brokers, politicians and stranger people who act behind the scene, you may not even know they exist. This is a personal experience.
    But there are many businesses run by family or sole owner, which in most cases are not willing to change.

    1. I agree with you Anil. The kickbacks and the blatant nepotism towards “favored” vendors is frustrating.

  2. The sales cycle is really long and tough when marketing to Indian businesses. They will hear your pitch and then go silent – for an unpredictably long time, like months. If you are lucky, the purchase manager might ask you for something like 75% discount with a promise of referring your name to several more people 🙂

    I have tried many sales processes like time bound discounts, but that hardly works. Scarcity is no issue at all. They will rather go without the service than buy from you now.

    Of course, this is not like this with everyone but is more of a trend.

  3. This is so true – while I have not seen kickbacks, most companies (especially large ones) will treat this like a PoC and refuse to pay you. They expect you to survive with just the “references” that you may provide. Also the process is very long, as the decision making takes a long time – agree with the fact that selling to Indian businesses is very tough.

  4. Hey Mukund,

    Nice post and interesting perspectives.

    I guess we guys@QwikCilver stick out as a contrarian example here.
    We are onto the B2B space. We are focused on India. But then, true. The sales cycle has been long and lonely !
    I guess it helped us that we were focusing on evangelising/pioneering a new concept for the Indian corporates , that hitherto did not exist.

    PS : and no kickbacks too!

    1. Pratap, thanks for the note. Quick question though (what we talked over coffee the other day) – how predictably and quickly are you growing? If you are growing sales and closing business fast and consistently you are the exception. The alternative to kickbacks is to grow slowly. It might take you 10-15 years to achieve the same revenue and profit growth that a consumer company might in 3-5 years is my suspicion.

  5. What approach did you take to get your sales team to close sales for Buzzgain? Buzzgain was one of the early products in social media monitoring space and I think it is often difficult to sell new ideas when there is a segment of people who often feel threatened by it. How did you manage to get an appointment with these decision makers, and what factor do you think that finally convinced them to pay for the product?

    1. Dev, 95% of BuzzGain customers were in the US. I did not target the Indian market. I sold to US from India. Indian customers if they came, were a bonus, not my main focus.

  6. Hey Mukund, another good post to keep us updated on key issues. Do you have some insights into how to approach a large company for a partnership to benefit from their distribution channel (similar to what you suggested re Tally) – how to make it mutually beneficial, commercial agreements, etc.

    Thanks

  7. For us (ContractIQ) startups & dev firms that sell to startups are the customers. The sell side has an India flavor while the buy side is globally distributed.

    Its easy to sell to Indian dev firms that are in the startup market. They are professional (except in occassional cases when they say “Even big companies take so much time..why do you insist on a contract before starting”.

    Buy side customers from India are an exception for us and they are “bad” – No contracts, No response, No courtesy!

  8. It’s interesting how it’s the complete reverse in USA. A snippet from a Wired article about Github –

    By January of 2008, Hyett was on board. And three months after that night in the sports bar, Wanstrath got a message from Geoffrey Grosenbach, the founder of PeepCode, a online learning site that had started using GitHub. “I’m hosting my company’s code here,” Grosenbach said. “I don’t feel comfortable not-paying you guys. Can I just send a check?”

    Source – http://www.wired.com/wiredenterprise/2012/02/github/all/1

  9. Hey Mukund,

    My company Capricorn Gifting (www.capricorngifting.com) is into the B2B space albeit on the non-tech side.

    Your advice to NOT get into the B2B space was a little surprising, considering jivity.com is more or less in the same space. How do you over come the limitations of B2B in your business?

    I too face the issues (nos 2 and 3) but have managed to get over the first one (not completely and not fully out yet ) by trying to focus on value addition and hence margins increase instead of cutting cost and hence getting into a race to the bottom: (http://articles.elitefts.com/articles/business/losing-the-race-to-the-bottom/)

    I think your feedback on this will be a welcome checklist for startups like mine.

    Regards,
    Rajiv Lulla

  10. Mukund, you have a good blog going. Wonder why a lot of other folks who’ve done it/doing it don’t share their insights on such key issues.

    Your B2B thesis is spot on except that there are opportunities where the demand for a technology product is already high. We are chasing one such opportunity.

  11. Good points Mukund. Luckily, we sell DeskAway from India to international customers 🙂 According to me this is the best of both worlds – earn in dollars and live at home with friends/family.

  12. Indian businesses typically will not buy from the internet, while US and Western Europeans will. From our limited experience this is a fact. Out of the hundreds of licenses we have sold globally – only 2 have been to Indian companies. If they wont buy from the net, it follows that you must explore a different sales model to sell in India. It would be terrible if Indian entrepreneurs give up on B2B startup ideas totally (which would be like vacating about 80% of viable idea space)

    Not everything is bleak.

    1. Indian businesses are usually very receptive to a POC (a Trial). Use it to hone the product and listen to REAL problems they have to solve.

    2. Once you develop the right relationships, you can have an unprecedented insight into the business you potential customer is in – thereby giving you more to think about in terms of how you position your product.

    3. Indian businesses give you lavish praise in testimonials and leads. Use that.

    I agree about building a partner network in India. I am in early stages of trying this route, so cant comment much about its effectiveness, but there is little choice in this matter. I have also observed large enterprises pay a lot of respect and attention to their distributors/VARs – if your product isnt pitched by them, it has an uphill battle.

    A good read overall thanks!

  13. Mukund,

    Great post – especially on an important issue. And, to see OrangeScape name on this was a pleasant surprise. Thanks.

    We are possibly one of the top 10 companies in India who have decent experience in selling to B2B market in India, hence I thought I will add my 2 cents as elaboration/addition to your post.

    Please note when I use B2B (Big B) means Enterprise Market and b2b (small b) means SMB market.

    1. First, if you have a great product you should have a price that co-relates to the greatness of your product – when you are selling to B2B. I learned this from Rajan Jaswa, CEO of Selectica, where I worked prior to OrangeScape. Our list price for a 1 CPU OrangeScape Server license was $40,000. Yes, you read it right US$ 40K. As you have guessed by now we did some discounting and the final price point is in the range of $25K. As you know, this is not small value and most people thought this is a very expensive price point in India. We acquired customers like Unilever, CitiGroup, Pfizer, AstraZeneca, Geojit, Fullerton, Sify, Everron, Sterlite and more consisting of both Indian and MNC customers. So, the issue is NOT that Indian customers pay less but the number of B2B customers in India who have the problem our platform solves is limited. If you are pricing less, you are leaving money on the table. And, by pricing less you are not going to substantially increase your customer base. Also, being platform (PaaS) don’t appeal to b2b companies – SaaS would surely. That is good news for my friend Kishore who runs ImpelCRM.com

    2. The second problem is professional services. Unlike Products whose price point comparison for B2B customers is equivalent International Offerings (side effect of not having too many B2B products from India), for services the comparison is a guy with a “DEVELOPER” label right across the street. Esp. in India the whole education system is targeting their output in securing “IT Jobs” for their students. Hence there is tremendous supply of resources while their quality might be questionable. So, a B2B customer would think he can hire a guy at Rs. 40,000 to Rs. 60,000 per month. But to deliver complex enterprise solutions we have to engage resources whose inputs costs would come to Rs. 1.5 Lacs to 2 Lacs per month. All the more tough when you compare the opportunity costs of working for US/UK customers @ a blended rate of US$ 35 – 50 per hour. B2B customers think this is very expensive because they are comparing with local prices. For our large SI partners like TCS, Wipro, Cognizant servicing Indian clients is not a profitable one and in cases where we took those projects ourselves ended up becoming a big drain on us (OrangeScape). The economics for professional services is all screwed up here – Another reason for us to look away from Indian Market

    3. A.R Rehman said this in an interview to a Tamil TV channel when asked why he moved to Hollywood and Tamil cinema is missing him so much. At that time he hasn’t been awarded oscar. His response was, “if we need to secure our place in music in International arena (read as Oscar!?) you have to be in Hollywood. The game is played there”. PaaS is a technology game. Whether we like it or not, technology game is played in Silicon Valley. So, to secure our position in the PaaS market we have to be in the Valley.

    Oops, it became 3 cents. Hope it is useful to folks out here.

    Thanks,
    Suresh

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