Investment temperament: MSMEs, artisans, cleantech & new age startups see investor interest

The Indian startup sector, a foundational pillar of the country’s development goals, has seen significant expansion over the years with over 90,000 startups and more than 100 unicorns as of 2024. Despite their growing resilience, access to capital for these companies in the current dynamic environment presents an ongoing challenge. Still, all news isn’t bad.

With a burgeoning SaaS sector and big investments from Apple and Tesla, India is rapidly emerging as a contender for tech dominance in Asia. Investors put up $160M+ across 21 deals in the past few weeks.

Onboarding MSME Artisans & Craftsman on ONDC

This week, Easy Pay, a payment solution company, tied up with the Grameen Foundation for Social Impact (GFSI), a not-for-profit organization, to onboard MSME sellers to the network with a focus on onboarding special skilled sellers covering artisans, weavers, and others onto the Open Network for Digital Commerce (ONDC) platform, empowering them to become online sellers. 

This collaboration aims to provide these entrepreneurs, both women and men, with access to a wider market through e-commerce, thereby generating employment opportunities and opening new avenues for growth and supporting the livelihoods of millions of skilled group specialists such as weavers and sculptors.

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Through this partnership the company will address the challenge faced by sellers who are doing business in small geographies and skilled professionals who currently sell goods at lower margins through distributors, by enabling them to access online markets with higher revenue potential.

Nilay Patel, Founder & Managing Director of Easy Pay, said,“The absence of a robust ecommerce ecosystem has long hindered small merchants, artisans, and craftsmen from venturing online. Integration with ONDC eliminates these barriers, offering unrestricted access to the e-commerce world along with numerous benefits.”

By leveraging the ONDC network, these individuals will not only be able to showcase their products and services to a larger audience but also benefit from access to a range of other services on the ONDC network such as credit facilities, digital payments, delivery solutions, and more. EasyPay will also train sellers to act as agents for onboarding other sellers onto the ONDC network.

The onboarding process will include seller registration, catalogue setup, logistics settings, and training for handling inventory updates, order confirmation, and ticket management. Sellers onboarded through EasyPay are available to take orders from all buyer apps on ONDC, Easy Pay’s initiative will target sellers who have not yet been onboarded, most of whom will be joining an online marketplace for the first time.

Empowering NBFCs that Finance MSMEs

In April, Small Industries Development Bankof India (SIDBI) and Global Alliance for Mass Entrepreneurship (GAME)  completed the first cohort of the NBFC Growth Accelerator Programme (NGAP). Recognising the critical role that smaller NBFCs play in financing MSMEs, particularly new and micro-enterprises, SIDBI and GAME joined forces to create NGAP.

NGAP Cohort 1 comprising 17 Non-Banking Financial Companies (NBFCs) was designed for NBFCs in their growth phase to understand the nuances of the sector, grow as leaders and shape a future-ready organisation through design interventions. This was achieved through a combination of experiential learning modules on risk management, governance, leveraging technology, staying ahead of industry trends etc; personalised mentorship from seasoned industry experts; providing opportunities for peer-to-peer learning & knowledge sharing; and an assessment of each NBFCs operational and financial health.

The five-month intense program has been designed to scale up small NBFCs through various design interventions, thereby facilitating and accelerating the flow of institutional credit to them. 

Sivasubramanian Ramann, Chairman and Managing Director, SIDBI, said, “The NGAP initiative is a significant step forward in empowering NBFCs to better serve the MSME sector and reiterated the commitment of SIDBI to nurture the financial entities that serve MSME sector, by equipping them with the tools and knowledge that they need to thrive.” 

Ramann highlighted the fact that there is a large pool of non-GST registered entities, which are not funded by Banks, and NBFCs should focus on meeting their unmet credit needs. SIDBI has been playing its part in the formalisation of such entities, with about 1.80 crore of Informal Micro Enterprises (IMEs) already registered on to the Udyam Assist Platform (UAP).

Ketul Acharya, President of GAME, said, “The success of the first edition of NGAP is in line with GAME’s mission of bringing together and supporting key stakeholders from all sectors to collaborate, lower systemic barriers and create favourable growth conditions for new and existing entrepreneurs.”

Launched in October 2023, the program is the first-of-its-kind initiative aimed at addressing the funding challenges faced by smaller NBFCs. With the success of the first cohort, SIDBI, with the support of GAME looks forward to empowering a larger pool of NBFCs to foster a more robust MSME ecosystem in India. 

Sector-Agnostic Incubation

In April, JITO Incubation and Innovation Foundation (JIIF), an Indian incubator and angel network, launched JITO Incubation Centre (JIC) Cohort 10. Following the success of Cohorts 8 and 9, applications for the Cohort 10 Incubation Program have commenced, with a submission deadline of April 30th, 2024. This program will be sector-agnostic.

Rajat Mehta, Chairman of JIIF, said, “I’m thrilled with the success of our initiatives like Cohort 8 and 9, as they promote innovation and entrepreneurial excellence in alignment with the ‘Make in India’ initiative. We foresee that Cohort 10 will give a boost to our reputation, expand our network, facilitate knowledge exchange, spur ecosystem growth, and ensure continuous support for budding ventures.”

Vikash Kawar, Vice-Chairman, JIC, said, “I’ve had the pleasure of witnessing the potential of India’s entrepreneurial ecosystem through our diverse range of supported startups. We’re proud to contribute to PM Modi’s dream of a ‘Viksit Bharat,’ and I believe our efforts will continue to attract investments and enhance the digital innovation in India.”

The incubation program spans 12 weeks and offers a wealth of benefits, including incubation and co-working facilities, technology and business mentoring, marketing, networking, and outreach. Participants gain access to national and international events for global exposure and collaboration with government grants and schemes.

Climate-Conscious Disbursals

In April, Stride Ventures crossed the US$120 million mark in India’s climate-focused startups, achieving one of the largest climate-conscious disbursals within 2 years by an INR venture fund in the country. This investment reflects the growing market enthusiasm for environment-conscious businesses and their clear path to profitability. Through strategic investments in pioneering companies like Battery Smart, Lohum, BluSmart, MoEVing, Solar Square, Euler Motors, ChargeZone, Oben Electric, Intangles, and Solar Ladder, Stride has a strong emphasis on electric mobility and renewable energy solutions.

“Acknowledging India’s potential to pioneer sustainable, global solutions, Stride is invested in nurturing startups poised to redefine the green technology landscape,” Ishpreet Singh Gandhi, Founder and Managing Partner of Stride Ventures and StrideOne remarked. “We are focused on empowering innovative startups to lead the charge in sustainable innovation”.

To date, Stride’s portfolio companies have collectively achieved significant environmental impact, including the saving of approximately ~90,000 tonnes of CO2, covering ~521 million electric kilometres.

Stride’s portfolio companies are at the forefront of India’s green revolution, achieving significant environmental and economic milestones. BluSmart has led the charge in sustainable urban mobility, achieving over 12 million electric trips and saving 27,500 tonnes of CO2. Lohum has committed to saving 4 million metric tonnes of CO2 by 2026 and creating 30,000 jobs. Through its swapping network, Battery Smart supports the EV ecosystem with over ~700 swapping stations. Transforming clean logistics, MoEVing aims to integrate 1 million EVs and manage half of India's charging stations to drastically reduce carbon emissions, having already facilitated 21 million electric kilometres. Beyond public mobility solutions, Farmart’s focus on reducing food transport emissions has successfully avoided 41,974 metric tonnes of CO2, supporting local agriculture and reducing the carbon footprint.

This strategic investment thrust at Stride aligns with the global mandate for escalated clean energy investments, highlighted by the International Energy Agency’s call for tripling investment by 2030 to meet climate objectives. India’s ambitious targets, including the goal to achieve 40% non-fossil fuel power capacity by 2030, underscore the nation’s commitment to an eco-friendly future, thereby creating a fertile opportunity for investments in sustainable ventures.

Lending for Newage Startups

Recognising the disruptive power of the startup segment, particularly those harnessing emerging technologies, in March, DBS Bank India announced a lending commitment of USD 250 million for new-age startups.

Rajat Verma, Managing Director & Head, Institutional Banking Group, DBS Bank India, said, “We are inspired by the ability of new age entrepreneurs to harness innovation to solve real world challenges and hope to play a constructive role in their growth. We believe that our lending commitment of USD 250 million for startups comes at an opportune time as the sector has been demonstrating improved operating metrics and a sharper focus on profitability in recent years.

Read more: 2023 Indian tech startup investment is a mixed bag of pvt. & govt.

“DBS Bank India intends to leverage our advanced digital expertise, deep Asian connectivity, and ecosystem partnerships to offer holistic support, even going beyond banking to empower these innovators to streamline operations, manage logistics and gain access to larger business networks. As a different kind of bank, our overarching objective is to become a trusted partner for startups across sectors and support them throughout the business lifecycle.”

The bank’s advanced risk assessment framework, which combines traditional metrics with modern analytical tools, ensures a balanced approach to financing. The comprehensive evaluation process ensures that DBS Bank India can deliver tailored banking solutions that match the dynamism of the industry innovators it partners with.