Biggies Look at Startups to Build Synergies

The start-up ecosystem has been throwing great opportunities to entrepreneurs who are exploring niche areas of their competence to solve existing business problems of the industry

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Till a few years ago, bigger companies chose to develop their own solutions from scratch or use their cash pile to acquire smaller firms to integrate and grow. But entrepreneurs today are much more confident of their ideas and choose to compete rather than be a sold out. This is pushing corporations to instead look for partnerships and co-branding to build synergies that benefit all.

The start-up ecosystem has been throwing great opportunities to entrepreneurs who are exploring niche areas of their competence to solve existing business problems of the industry. The tech space is especially critical where start-ups approach the same problems to solve them differently and that becomes the big difference. Innovation in every category is also moving so fast that it becomes unviable for a corporate to either start building a separate in-house software division or even acquire a start-up for that reason. While becoming a mid-term client of a start-up might appear expensive and hurt their high brows, a collaborative approach is what bigger firms are exploring as the new trend.

That is why the industry body for ITeS- NASSCOM has started a partnership program in India to connect large enterprises with emerging product tech start-ups. Over 600 B2B product tech companies and 32 large business houses such as, Hindustan Unilever, ICICI, HDFC and Axis have become the part of the programme. In fact, the global FMCG giant Unilever has independently started the ‘Unilever Foundry’ to act as an entry point for innovative start-ups and entrepreneurs to work with over 400+ Unilever brands across nations and geographies to solve each of their unique problems while making their operations more efficient and cost effective. Similarly, IBM and Facebook have independently partnered with NASSCOM to explore unique product and design start-up companies in India and utilize their innovative strain while helping them grow.

An interesting case in point towards the collaborative approach is the example of Freego- a two wheel self balancing battery operated scooter. Freego scooters have been deployed across major malls and office buildings which commuters can use to cover short distances while operating the vehicle with their smart-phones. On 1st of April, 2007, through a viral post, Freego announced a partnership with Ola for in-campus travel on an incredibly low cost operation. “While it was a marketing gimmick on the April Fool’s Day, Freego has actually entered in talks with Ola cabs to explore a similar opportunity,” tells Deval Shah, Founder, Freego. Similarly, Uber India partnered with Practo, an online health based start-up to ferry Practo’s patients directly to their destination (clinics/hospitals). Oyo rooms has also partnered with Thomas Cook to offer hospitality services to its customer base. This model has thus helped partnering companies to explore each other’s customer base without diluting their own brand name.

Another case is of a Hyderabad based automobile manufacturing company, Gayam Motor Works, led by brothers Raja and Rahul Gayam, which chose to overhaul their strategy and entered into the innovative electric motors space. Sri Harsha Bavirisetty, COO, Gayam Motors says, “We started focusing on passenger autos initially but soon realized that bigger companies like Flipkart, Big Basket etc. have an unsolved need of last mile connectivity. Our autos are powered by Li-ion batteries that give a power equivalent to diesel powered autos and can run up to 100 Kms with a load capacity of 450 Kgs. Similarly, our bikes can run up to 60 Kms on a full charge that takes 2.5 hours. As against a diesel powered vehicle that costs Rs. 3- 4 per km, our vehicles run at a minimum cost of just 7 paise per km.” It is thus no surprise that Flipkart, Big Basket, Swiggy, ID Fresh Foods, logistics company- Gati, UberEATS (Singapore, Hongkong and San Francisco) and Govt. of Andhra Pradesh are the most prominent partners of GMW today.

Similarly, the home-grown Android-based operating system maker Indus OS has entered into a partnership with iris scanning technology provider- Delta ID to introduce the first-ever Aadhaar-authenticated operating system (OS) smartphones with Iris pattern recognition technology for the Indian users. Yes bank has partnered with Cashkaro.com to introduce India’s first card- linked offer for cash-back proposition. ASUS has announced its partnership with Home Credit, to offer interest free EMI on smartphone purchases.

HDFC Life, one of India’s leading private life insurance companies, has announced its partnership with Rubique, the one-stop online marketplace providing technology-enabled end-to-end solutions to the financing needs of individuals and SMEs. The agreement will allow HDFC Life to offer its life insurance products and services on Rubique’s online marketplace. Mobile wallet company MobiKwik, has announced its association with web portal and mobile application, Bhopal Plus, which is part of Bhopal smart city initiative. The tie-up will enable residents of Bhopal in paying taxes and bills for utility services such as electricity and water, digitally.

Design automation startup Invilogic Software, ENIT Invilogic GmbH and MHP – a Porsche company from Germany, have joined hands to design automation applications that will enable design time reduction by more than 90% for automotive and manufacturing industries. This solution is considered to be unique as it integrates design automation technology to automate product development with a seamless integration into enterprise IT tools. Chinese e-commerce giant, Alibaba Group’s wholesale trading platform Alibaba.com has partnered with Delhivery to provide logistics support to Indian SMEs.

IDFC Bank has partnered with Bangalore-based online lending platform, Capital Float, to provide digital lending to small businesses across India.  The partnership will address the needs of borrowers who have no access to organized bank credit, with limited or no documentation and without existing credit history. It is thus expected to bring more small businesses into the organized finance architecture. Capital Float is IDFC Bank’s first partner in the digital lending space. It will provide the Bank access to Capital Float’s digital network of borrowers, thereby enabling it to diversify its portfolio of small ticket loans and grow its customer base.

While most of these partnerships have been formed recently, big corporations in manufacturing choose to form age-old associations with MSMEs that helps in long term synergies. A case in point is the example of Imperial Auto, a SME into fluid transmission products whose one of the major customers are JCB, Caterpillar, Bosch and Kirloskar. Talking about the role that these kinds of associations result to the benefit of both, Vipin Sondhi, MD and CEO, JCB India Ltd. says, “SME/MSME’s play a vital role in the economy as they form the backbone of the supply chain of large businesses. JCB India has made significant investments in building and supporting an indigenized supply chain for almost four decades now. Over 300 world class suppliers in India have been with us for decades. Today, these suppliers not only supply material for JCB India, but also supply to JCB Group.”

While partnership has become the leading trend in the industry, a few have chosen to go beyond that and actually part with equity to raise capital to grow further. Fino Paytech, a financial technology company that is helping Bharat Petroleum Corporation Limited (BPCL) simplify digital payments to its customers, has sold the state- owned oil and gas giant a 21% stake for Rs. 250 crore. Earlier this year, ICICI Prudential Life Insurance and ICICI Lombard also acquired a 10% stake in Fino Paytech for Rs 118 crore.

The interconnectivity, usability and competence of innovators are at an all-time high demand which only appears to grow incrementally in the times to come as the industry looks for better integration and optimization. Technological innovation continues to drive the ecosystem that is spread across manufacturing, services and IT/software spaces. Certainly, the time for small and new businesses in India is at its prime.