THE BLOG
11/30/2016 09:20 am ET Updated Dec 06, 2017

Startup Idea for SMB Channels in India

If you are trying to sell B-to-B software to Indian SMBs, you know that it's a very big market, and by and large, inaccessible.

There are hardly any mature channels through which to cater to this audience of customers profitably.

There are a couple of companies that have successfully scaled their businesses by selling to Indian SMBs: Greytip (payroll SaaS) and Knowlarity (virtual telephony). To learn more about these two companies, I've interviewed Girish Rowjee of Greytip and Ambarish Gupta of Knowlarity.

VC after VC will tell you that they don't invest in India facing B-to-B SaaS ventures because the channels are not developed to scale fast-growth businesses. Sasha Mirchandani (Kae Capital) and Sandeep Singhal (Nexus Venture) discussed these issues with me recently.

So, what is to be done to unlock this market and make it accessible to SaaS vendors? And to flip the point of view, why should millions of SMBs in India not get the benefit of software? After all, software is eating the world, delivering incredible productivity gains all across the board!

Well, I see opportunity here for a different class of startups: not just the SaaS vendors, but the value added resellers who could build for themselves nice businesses by working with a portfolio of SaaS vendors to bring their technologies to specific regional SMB clusters. Whether it is CRM, HR, ERP, or any other type of software that can help these SMBs, there is clearly an opportunity for VARs to advise, select, implement, and train.

Each VAR should focus on a specific region, and a specific size of SMB and deeply understand the needs of that class of SMBs. This includes understanding the cost structures, the opportunities for delivering ROI with the introduction of software, training needs to fully deliver the benefits thereof. Effectively, for these SMBs, the VARs would be operating as business transformation consultants.

Some numbers:

There will be different segments of SMBs with different budget levels for buying technology. Some will be able to afford $500/month, some $1000/month, some $1500/month and some $2000/month.

Assuming a 40% commission structure, a VAR focused on the $500/month budget segment will need to service ~400 customers to get to $1M. The $1000/month segments will need ~200. The $1500/month segment will need ~150. The $2000/month segment will need ~100.

India has over 50 million SMBs. Only 40% of these are currently using technology in any meaningful way. Even that is 20 million SMBs. So the numbers I am talking about (100-400) are relatively small and quite doable.

In fact, if we can systematically stimulate 100,000 VARs to focus on developing their practices, and build systems and methods to manage 100-400 SMBs effectively, it would be an enormous value creation opportunity for India's technology future.

And, each of these VARs would become good solid livelihood generating million dollar businesses.

Photo credit: Andrés Nieto Porras/Flickr.com.