Entrepreneurship Industry News

Why India’s Biggest Multinationals Are Seeking Out The Smallest Startups To Collaborate With

Small and agile companies have an inherent ability to quickly adapt to sudden changes in their market environment; they exist and operate to solve unique problems. Noticing the benefits of collaborating with these smaller firms, established multinational corporations such as the Tata Group, Mahindra Group, PwC (Price Waterhouse Cooper) and Facebook are stepping up their efforts to engage with startups. The big economies of scale-driven organizations are establishing business relations by investing, mentoring or hiring services of fledgling companies.

Investors

Ratan Tata, the 79-year-old former chairman of Tata Sons, is an investor in several internet startups such as automotive sales site Cardekho, healthcare platform Lybrate, lingerie e-tailer Zivame and women’s clothing brand Kaaryah. In addition to Jungle Ventures, he serves as an adviser with Kalaari Capital and IDG Ventures. Giving a take on his involvement in the world’s third biggest startup ecosystem, he has stated: “When I retired in 2012, I hit upon investing and interacting with startups as a new page in my life. I left the big business, crores of rupees and large challenges behind. I became so excited by the innovation, passion (in startups). It stimulated me.”

The scion of Tata group has made early stage investments in Indian unicorns such as Snapdeal, Ola and Paytm. Most of his investments have been made through RNT Associates in which he holds about 99.9% stake. In 2016 RNT’s investment in startups rose by 30% to reach more than $12 million (Rs 80 crore) from more than $9 million (Rs 61 crore) in 2015. In 2015-2016, RNT’s highest investment of more than $4 million (Rs 31 crore) was made in a company called Human Longevity. This year his venture capital firm RNT Capital Advisors has made investments of more than $62 million (Rs 400 crore) in India’s largest taxi aggregator Ola.

Due to his positive experience in dealing with startups in India, Ratan Tata has managed to persuade the Tata Trusts, a group of charitable institutions that own 66% of Tata Sons, to set up a three-tier structure to finance social enterprises. This proposed fund will look at investing in social enterprises in agri-tech, healthcare and waste management. It will use the innovation centers of the Tata Trusts housed in the Indian Institute of Science, Indian Institute of Technology and Massachusetts Institute of Technology as the first layer in the structure through grants provided to these institutions. Businesses that demonstrate the ability to scale up will then get transferred to the Foundation for Innovation and Social Entrepreneurship (FISE), the second layer of the structure where the enterprises will get accelerated. This will finally be followed by the planned fund where enterprises will be connected to an investor eco-system being set up externally by the Tata trust.

Besides the investments of Ratan Tata, 71-year-old farms-to-financials conglomerate Mahindra Group has emerged as an active sponsor of startups operating in the Indian agricultural sector. In September last year it invested $1 million in “MeraKisan” which sources fresh vegetables and fruits directly from farmers and sells them to customers. Other than investments in other startup entities, this group has launched its own fledgling enterprise called Trringo, an online platform that rents tractors and other mechanized farm equipment. Trringo has been followed by MyAgriGuru, an agricultural advisory app that helps farmers manage their crops by providing information on weather, pricing and connecting various “mandis” (markets) across the country.

Mentors

Facebook has entered into a partnership with Bengaluru based startup accelerator TLabs to effectively engage and educate entrepreneurs. This association will build on the knowledge and experience of in-house senior mentors and co-host events for solving issues around user experience, analytics, app installs and monetization of products and services. Facebook will also provide FbStart referral codes to TLabs for use by TLabs’ mobile portfolio companies. FbStart is a global program awarded to select startups after a review by the Facebook team. It has been designed to help startups build and grow their mobile apps.

Other than the California based social networking giant, Chennai-based software-as-a-service (SaaS) company Zarget has launched RespectStartups, an online platform where startups and large companies offer budding startups assistance in the form of free trials for products, access to services and office space. The platform is aimed at helping early-stage startups that often struggle with funds to buy licensed software products. Put together by a team of six people over six months, Zarget plans to manage the RepectStartups platform until it gains leverage and picks up momentum on its own. The platform will allow companies to list their offerings to the startup community and also allow early-stage startups to post requests on it.

Consumers

As tier 1 cities get more crowded, employees of large companies are increasingly working out of a co-working space near their homes. Following this trend global behemoth Alibaba recently took 30 seats in Bengaluru based CoWrks to start its operations. Co-working space startups including the likes of CoWrks, InstaOffice, 91springboard and Awfis have uncovered unlikely customers in SMEs and corporates that now occupy up to 40-50% of their space. Companies such as GE, Dr Reddy, Accenture, Digital Ocean, ReNew Power and Paypal, alongside industry associations including Federation of Indian Chambers of Commerce and Industry (FICCI) have emerged as clients for the services of these office-sharing enterprises.

Corporates emerging as probable startup customers is a phenomenon that is not just confined to the city of Bengaluru in Karnataka. In order to collaborate with startups and provide access to its corporate clients, one of the big four accounting firms, Price Waterhouse Cooper, has started an innovation program housed in the Telangana state-backed incubator T-Hub. PwC is filtering startups to find a good fit for its corporate clientele and is also looking for possible synergies with the startups for some in-house innovation. According to Murali Talasila, who will be heading this innovation program, “Two large international banks have already given us their problem statements and have asked us to scout for startups who could solve the problem for them…The biggest hurdle for startups is to cross the corporate barrier. We want to bridge the gap.”

These collaborations are proving to be a boon for both fledgling and established organizations. Startups get access to capital, knowledge and a network of mentors, while learning about the importance of systems, processes and structures required for orderly expansion; on the other hand, established organizations are able to learn about the latest technology, seek solutions to problems and overcome resistance to change that exists in hierarchical structure of these global behemoths.

Read More : Forbes