Bharat 2.0: The Next Disruption in the Indian Startup Ecosystem

By Team Brand Solutions

  • 13 Feb 2023

From where will the next Myntra, Big Basket, Nykaa or Spinny come from? It is a question that every investor in India is trying to answer, in hunt for the next multi-billion valuation behemoth. Looking at the macro picture, it is clear that the digital landscape in the country is rapidly transforming, specifically in terms of its size and demographic. The next stage of disruptive startups would likely emerge in the context of Bharat 2.0, the large proportion of new digital natives from Tier II and III cities, and rural India. 

Two underlying factors specifically have been catalysts of the boom in the startup ecosystem in India that we have witnessed in the last few years. Firstly, the large scale of active internet users, estimated to be 646 million according to a recent Bharat 2.0 internet study by Neilson. Secondly, the deepening penetration of smartphones, currently about 750 million users as per Deloitte's 2022 Global TMT (Technology, Media and Entertainment, Telecom) predictions. Furthermore, favourable outlook of the Central Government towards startups and investors, programmes like Startup India and Digital India, and operationalisation of digital public goods like the Unified Payments Interface (UPI), have all significantly shaped the ecosystem. Even in recently announced budget, the focus on enabling start-up ecosystem is clear. Initiative like setting of accelerator fund to encourage rural entrepreneurship in agri-tech space demonstrate the government’s vision for the start-up ecosystem as major force towards building the New India in the ‘Amrit Kaal’.  

What are the visible changes that are now leading towards Bharat 2.0? Until recently, the digital consumer demographic could be largely characterised as relatively urban, residing in Tier 1 cities, consuming content of more international character on Netflix or Amazon Prime, doing larger e-commerce transactions, colloquially being referred to as Bharat 1.0. However, that is changing. The Neilson study shows rural India showed 20% higher growth in terms of internet users as compared to urban.  

The new set of digital natives would have unique tastes and needs, requiring different forms of products and services.  

For example, agriculture is one sector that is ripe for disruption. As per the latest Economic Survey, 46.5% of the total workforce participated in agriculture in 2020-21. Disruptive innovations in this sector could include the use of drones for tasks like fertilization, crop evaluation, or land mapping, cost-effective cold storage services for perishable items, e-commerce platforms for agro-related products and animal husbandry, AI-based data services that provide information on crop health, and fintech services that cater to the credit needs of the entire agricultural value chain. 

On the entertainment side, the needs of Bharat 2.0 are distinct on two levels. Firstly, there is a need for more pocket-friendly content, since paying for multiple monthly subscriptions for various over-the-top (OTT) platforms does not appear feasible. Secondly, there is a bigger need for more context-specific and vernacular language-based content, rather than for content with more international or urban character. The newer natives would be more willing to consume such localised stories or video clip on a low cost (say rupees 5-10), as a one-time purchase. There are various startups currently venturing into this space, specifically building their revenue models around large volume micro-transactions rather than advertisement based streams, which is already witnessing some saturation. The rapid growth of audio-content subscription platform KuKu FM, one of our portfolio companies, is a testament to the kind of products and services that are resonating with the new consumer base. 

An important dynamic of Bharat 2.0 is the emerging entrepreneurs from this context, having a sharper understanding of the needs of the new natives. These entrepreneurs have a better insight into specific product and service demands, pricing issues, or comfort-levels with technological interfaces. In fact, these entrepreneurs are not only building for Bharat 2.0, but also building solutions that can be scaled for the global stage. Some of these solutions might be attractive and scalable in the markets of lower and middle income countries as well. We already have examples of software-as-a-service (SaaS) companies from Tier II cities exporting their services.  

Investors need to identify and help build such businesses and enable entrepreneurs who understand the opportunity this rapidly growing segment presents. Investors also need to address the barriers that entrepreneurs coming from rural or semi-urban contexts face and guide them in their scale-up journey. This would entail innovative practices and approaches on part of the investors to solve unique problems that founders coming from such contexts encounter. The extent to which investors understand these challenges, and the solutions that founders and investors together implement may decide the next phase of India’s startup story. 

About the Author: 

Prateek Jain is a Principal at Fundamentum, one of India’s first home-grown tech venture fund led by a team of ex-entrepreneurs - Nandan Nilekani, Sanjeev Aggarwal, Ashish Kumar and Prateek Jain. The fund has an approach of concentrated portfolio and invests in early growth stage start-ups which have attained product-market fit. 

Brand Solutions is a marketing initiative for sponsored posts. No VCCircle journalist was involved in the creation of this content.