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The Freemium Business Model – What it is and how to make it work.

Summer’s here!

The sun, the vacations, the beach and last but not least, the lemonade stands.

Those little kiosks on the roadside and kids standing beside each of them with jars of cold lemonade, glasses, and inviting smiles.

So Joshua was among those 8-year-olds who had setup his own lemonade stand, for the first time.

The stand was set, the lemonades were ready, he was good to go.

Just then he realised something: there were about 5 lemonade stands in his neighborhood and all of them were the same. He wanted his stand to stand out.

And so he came up with a plan.

In his stand, people would get a plain lemonade for free. In addition to that he will offer around 5 other flavoured lemonades (watermelon or strawberry flavours, anyone?), which would come at a price of $1 a glass (to make up for the cost of giving free lemonades).

The result?

Joshua’s stand not only attracted more crowd, but also got him earning more than his friends.

Well, what we saw here was a small-scale version of what we call the “Freemium model”.

For those of you who need a concrete definition for this term, here goes:

“Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc, then offer premium priced value added services or an enhanced version of your service to your customer base.” – Fred Wilson, VC

Basically the objective of this model is to get the users hooked to the free product, thereby motivating them to subscribe for the paid plan and also promote the product via word-of-mouth.

Chris Anderson in his book “Free” explains that Freemium works on the 5 Percent Rule – where 5% of premium customers support the remaining 95% of free users and also the cost of servicing the 95% is close to zero.

Companies like Evernote, Dropbox, Pandora, Linkedin, Skype, etc., are among the many Freemium success stories.

In fact, Mailchimp has reported a whopping 150% increase in paying customers and 650% increase in profit, within a year of going freemium.

The main plus-point of the Freemium model is that you can do away with the traditional sales-driven marketing strategy – the potential customers get to learn by themselves about the benefits of the product by trying it out, before even buying it (winning their mind share).

In addition to this, with the help of the data from your free users’ behaviours, you can easily find out what features of your product are/aren’t their favorites and which segments of the market are getting the most out of your product (cohort analyses will help).

A good example would be Box, which uses their Freemium model to identify potential upgrade customers, who are then contacted by the salespeople.

But just like any other business model, Freemium has also seen its fair share of failures and criticisms.

In 2006, Google Apps launched a feature for businesses, where they could customize their domains (@yourcompany.com). In 2012, the company announced that they’re taking away the free version and that businesses of all sizes must pay $50 per user per year (or signup for a flexible plan of $5 per user per month).

In one of our previous posts, we had discussed in detail about the various risks associated with a Freemium model for a SaaS business and what you can do to monetize the free users who don’t have an intention to upgrade.

CrazyEgg claims that their monthly revenue doubled once they dropped their free plan.

BUT, this was what Hiten Shah, its co-founder, had to say about the move:

“It was a short-term great decision for increasing revenue but I believe it was not the best decision for the long-term….If I’m starting a new SaaS business today, I would highly consider having a free plan that you invest resources in and plan on keeping forever.”

So what can you do to make your Freemium model a success, like how Joshua nailed it?

Firstly,  not all business models would suit all businesses alike and choosing the model that works right for you is crucial. The Freemium model is no exception to this rule.

A Freemium model would suit you, IF

  • You are positive that your lemonade is the best in the neighbourhood:

You have a high-quality free product which people would want to get their hands on (solves an immediate need/pain).

Also, you know that your long term Freemium users will eventually convert to paid users – which will only happen if the users derive sufficient value from your free product.

  • You’re certain that making 10 lemonades and 100 lemonades would cost you almost the same:

The cost of duplicating and distributing your free product is close to negligible.

The basic economics behind this model is that with the advent of SaaS (multi-tenancy), the marginal cost of distributing a software product among a 100 or a 100,000 is nominal.

  • Your customers know what a lemonade is, how to consume it and how it quenches their thirst:

The features of your free product are simple enough for the customers to educate themselves about and they don’t need hands-on training or support from your side (remember, keeping the cost as minimal as possible is the key).

Any business that involves high customer acquisition or customer service costs is not suitable for a Freemium model.

  • Your stand is in a busy street corner where there are a lot of passers-by – you’ve got enough people thirsty for your lemonade:

Your product will have a large reach and your potential market is huge.

As only a small percentage (1-4% on an average) of your free users would convert into paying customers, you need make that a small percentage of a large number to run a profitable business.

This also means that you have the sufficient infrastructure and operations to serve a mass market.

“The easiest way to get 1 million people paying is to get 1 billion people using.” – Phil Libin, CEO of Evernote

  • You know that people will keep coming back for more lemonade!

Your product promotes repeat usage (increases the stickiness). For example, Evernote’s smile graph. Or, it makes use of the network effect, i.e., the product becomes more beneficial as more people use it (e.g. GitHub).

Evernote’s Smile Graph

Image Source: http://www.inc.com/magazine/201112/evernote-2011-company-of-the-year.html

You must also look at ways of increasing your switching cost. One way could be enhancing the usability of the product, so that the users make use of more features, add more data, and get more value over time.

Because the user commitment drastically reduces when the customers use a product for free, you need to look at other ways to increase commitment.

  • People would love free lemonades, but not free babysitting!

Your product falls into a category where the customers would be happy to get it for free.

For instance, you’ll be happy to use a free app for storing your photos, but not a free lasik surgery. Mission critical products that require extensive support upfront may not be suitable for this business model.

Chargebee itself would be a good example for this case. We experimented with a freemium model for 6 months and learnt some interesting lessons about the type of customers we were attracting and the ROI in terms of free to paid conversions. We eventually decided to grandfather-in the pricing for our existing customers and to discontinue the plan for our new customers.

That pretty much sums up the set of criteria that need to be satisfied to choose the Freemium model.

And if you replied “Yes!” for each of the above points, then read further.

Rob Walling, CEO of HitTail compares the Freemium model to a Samurai sword – “Unless you’re a master at using it, you can cut your arm off.”

Now that you’ve decided to pick up the Samurai sword, let’s look at the “right” ways of using this sword – a few aspects that you need to pay attention to, to make sure that you don’t cut yourselves.

  • No one’s gonna be interested in drinking water from a lemonade stand – even if it’s for free!

You need to find out the optimal balance in the features that you’re offering for free.

If the free features aren’t captivating enough, you simply won’t attract users. If the free features are in abundance, then there’s a good possibility for you to get the required traffic, but you will fall short in the conversion rate.

Also, if your users are getting converted to paid customers all together, it might even imply that your free product is not good enough – which again would be a concern.

You need to know where to draw the line.

  • Joshua chose ‘flavors’ as the segmentation parameter – what about you?

For starters, you could choose a single parameter to differentiate your free plan from the paid plan.

It must be the best possible representative of your product’s value and it must increase with usage, like file storage space and number of stored messages for HipChat.You must then decide on how much of the parameter is going to be for free – set the limits.

Once this is done, you can even think about further enriching your paid plan with a few other premium features – but remember to keep it uncomplicated and straightforward.

  • Who doesn’t want to try out interesting flavours in lemonades?

You need to have a clear upgrade path for the users. For example, Dropbox starts charging the users once they exhaust the free storage space – here the reasons to upgrade into a paid customer is clear to the user.

You must also clearly distinguish the free and the paid plans to help the users see the value in paying you more (to answer the “what’s in it for me?”), thus making it more compelling to upgrade.

  • Are your customers talking about your lemonade stand – is the news spreading?

You need to pay attention to the virality quotient of your product.

Are your free users liking your product? Yes.

Now how to make them spread the word?

You need to device proper referral programs and incentives to achieve that. Yesware, an email tracking tool, attributes its revenue margin to its referral program.

The baseline is this – Your free users SHOULD fall into one of these two categories:

1. Those who will convert into paid customers in due course (Asana allows about 29 people to use its services for free, beyond which it starts charging them)

(or)

2. Those who will help in acquiring more free/paid customers (Dropbox’s referral program)

If not, then it is time to rethink your strategy.

Conclusion:

Joshua’s goal was simple – to make his lemonade stand attractive and earn more than the other stands in his neighbourhood. And he made sure that his goal was met. If it hadn’t been met, he would’ve tried out yet another plan.

You must have a specific set of clear objectives of why you’re choosing the Freemium model – conversion rates, revenue, virality and ultimately your ROI and profitability.

If you’re not getting the expected results, then you might be doing something wrong.

For instance, Chris Anderson says that you must strive for a 10% conversion rate from free to paid.

If the rate falls below that, the cost of serving the freeloaders will make it difficult for you to make money. On the other hand, a rate more than that would signal that you’re offering too little in your free version, which might limit your reach.

Set yourself measurable goals in the long run and ultimately if your goals and your customers’ goals don’t coincide/align, you mustn’t hesitate to pivot. Like how Google did.

May be you need a different model to make your lemonade stand succeed.

Reblogged from ChargeBee, blogpost by Sadhana Balaji.

 

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The #PNgrowth Series 1 – The @Vidooly Secret to Scale

When we as a ecosystem try to help our entrepreneurs, we make the mistake of always focussing on the mistakes others have made, and trying to steer away from those. This is evident even from the stuff we write on blogs and platforms with the purpose of helping others. The things ‘not to do’ always take a upper hand over things ‘to do’.

Maybe it’s time we step away from that.

In this new blog Series from #PNgrowth, we are going the other way. Starting today, we are going to publish a series of posts on what we call the #OneThing. Our best product people will be asked a simple question – what is the one thing that worked best for you when you were trying to scale your company? These answers will be insightful partly as success stories and partly as guides for other startups who find themselves in a similar situation. In the first blog of the series, we talk to Subrat Kar, the CEO of Noida based Vidooly, the video analytics tool that has just secured its first round of funding, and is on its way to becoming an Indian startup success story.

Subrat Kar, CEO of Vidooly

Vidooly has been one of this year’s poster boys for the Indian startup community. The product is awesome, the market is growing, and the opportunities are endless. The team is completely homegrown, and for a company that’s growing and making waves, has a founding team that lets their work do the talking. There’s no gimmickry and absolutely no noise, except about the product they are making.

When I talked to Subrat, he was travelling back to his home state of West Bengal, and I asked him the question point blank, because I wanted to know the first thing that popped into his head.

#TheOneThing

His answer was quick too – “That blog we wrote.”

On further investigation, this turned out to be a post on the Vidooly blog, published in October last year called ‘How to maximise your YouTube views organically’. Subrat said that though at that time, this wasn’t a marketing move at all on their part, the reader interest and viral lift they got out of that post made them believe in the power of content marketing. “We don’t spend any money at all,” he says, “Our marketing is purely content.” This is incredible for a new entrant like Vidooly, and Subrat acknowledges it.

Vidooly“This is the one thing that helped us grow”, he says, “The confidence that initial number of readers and commenters told us that we were on to something. And we built on it. We didn’t do anything to actually make it go viral, so maybe there was an element of luck involved. But it convinced us that if we gave out good information, there were people hungry enough for it who would become our customers.”

About #PNgrowth

PNgrowth is ayear long mentorship program with some of India’s top product people and founders, with learning sessions and curriculum prepared in collaboration with the universities of Stanford, Harvard and Duke. Content marketing will be one of the major areas being covered, as will all the other points our #PNgrowth series will highlight. Nominate your Startup here (Apply before 15th November)

 

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Why WebEngage’s CEO @avlesh wishes #PNgrowth existed a few years ago?

WebEngage is probably the most important product startup from India’s business capital Mumbai – it builds customer engagement tools for SaaS businesses, is very popular and successful, and is used by thousands of businesses worldwide. Avlesh is one of the original hustlers of the Indian ecosystem, and he has built a world class product company in a matter of just four years.

When we talked to Avlesh about #PNgrowth, he was very excited, and stressed the importance of peer to peer learning in an ecosystem like ours which still hasn’t got as much attention as it should have. As he stresses, it would be very helpful for people if they don’t make mistakes in the first place, rather than learn after making a few. #PNgrowth would have helped him and WebEngage if such an initiative exited when they were starting out, he said.

Avlesh says that #PNgrowth can help entrepreneurs share different ideas of growth among them, and in doing so, share stories of how they scaled, the challenges they faced, and how they got to where they are.

#PNgrowth, in collaboration with Stanford’s Graduate School of Business and Duke’s Fuqua School of Business, iSPIRT’s #PNgrowth initiative aims to get the people who want to learn, and the people they need to ask in a room, and give them the perfect space to learn and grow.

You can learn more and apply for the program here.

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Why the CEO of OrangeScape thinks you should go to #PNgrowth

Orangescape is one of India’s first true product companies. KissFlow, their workflow automation software for small and medium sized businesses was one of the first successful products made out of India. This makes Suresh Sambandam, the CEO of OrangeScape, a visionary who saw what was coming long before any of us even had an idea about it. As Suresh himself says, it was a slog for him and the core team for the first year or so, working more than 18 hour days and trying to get things right and providing as quick customer service as possible. He was constantly learning because his team had to do everything themselves.

When asked what would have helped him most when he and his team were trying to get to crtitical mass, he is prompt in his reply – peer advice. If he had known that someone had already tried what he was doing, maybe he would have discarded the plans that were not working quickly, in order to focus on the things that actually were.

In this short video from #PNgrowth, Suresh talks about his product, its awesome launch, and its struggle to go from recognised, profitable product to something more, something special, something customers want to use.

This is where #PNgrowth comes in, he says, a platform to bring together India’s early stage software product companies. In collaboration with Stanford’s Graduate School of Business and Duke’s Fuqua School of Business, iSPIRT’s #PNgrowth initiative aims to get the people who want to learn, and the people they need to ask in a room, and give them the perfect space to learn and grow.

You can learn more and apply for the program here.

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Growth is a bitch!

Capillary Technologies is an information technology company headquartered in Bangalore, India. Established in 2008, Capillary is present in about 30 countries with over 200 enterprise customers.

In this short candid chat with Aneesh Reddy, the co-founder and CEO of Capillary Technologies, he bluntly mentions that growth is a bitch! Aneesh shares how his company spent 1.5M to reach 1/6th the current company size versus spending 24M to grow the next 5/6th.

Watch the video below and see why Aneesh thinks growth is tough.

PNgrowth is an iSPIRT initiative in collaboration with Stanford’s Graduate School of Business and Duke’s Fuqua School of Business to facilitate entrepreneurs to scale their business.

Please click here, to join a hangout session where members of iSPIRT, Stanford and Duke university share how the issue of scale can be addressed and how PNgrowth can facilitate the same.

Contributed by Rohith Veerajappa, Wow Labs

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India Innovation Session with Jeff Immelt, CEO, GE

GE

Every sector has a long period of evolutionary change that is only occasionally interrupted by a short (5-10 year) period of intense non-linear change. Global corporates like GE are able to position themselves to successfully embrace the evolutionary change. However, to leverage the period of non-linear change, a new kind of partnering model is needed.

Keeping in mind this theme, iSPIRT, India’s software product think tank, spent an hour with Jeff Immelt, CEO of General Electric, and his team, to discuss the implications of such non-linear change to GE and the larger global ecosystem. To drive home the point, six inspiring startups showcased their respective cutting-edge innovations that are helping drive change in their individual sectors. Their stories are captured, in brief, below.

Team IndusTeamIndus

Infrastructure for NextGen Apps

Team Indus, a highly qualified group of ex-ISRO scientists and systems engineers, spoke to GE of two moonshots they are attempting. Literally. The first is landing a privately funded spacecraft on the moon by 2017. As part of this mission, they India’s only entry, and top 3 of 16 global teams, in the Google Lunar XPrize Competition.

The second is a derivative of the first, where they aim to put up a high-altitude long-endurance platform to deliver payload to stratospheric orbits. In laymen’s terms, they are enabling wide-area connectivity for terrestrial applications, essentially disrupting satellites as they’ve been known and used. And at the current pace of progress, they are on track to be the leader in Asia by 2021.

Nimble WirelessNimble

Cold Chain Monitoring

Nimble Wireless’ pioneering IoT solution is built on top of the future of pervasive connectivity that TeamIndus is working towards. Their platform helps enterprises connect, control and manage their business critical assets to enable greater efficiencies and savings. A great use case is in helping leading food/cold chain companies ensure food safety and reduce wastage, especially important in a country that has 33% malnourished children but wastes nearly a third of its dairy products. Here, Nimble deploys real time temperature monitoring and alert management systems to help ensure food safety, eliminate wastages and attain visible RoI for food and logistics companies.

SavariSavari

V2X: Connecting Vehicles to Everything

Moving beyond the world of cold chain to the world of automobiles is Savari’s technology that connects vehicles to everything – each other, smartphones and road infrastructure. There is a battle ensuing between Silicon Valley’s revolutionary approach in favor of self-driving cars and the auto industry’s evolutionary approach in favor of connected cars. Savari’s patented middleware software is enabling the auto industry to realize the gradual, incremental change they believe is the way forward in connecting vehicles. Their technology is pushing forward safety, fuel savings and automation and ensuring auto companies don’t become ‘the Foxconn of Apple’.

Julia ComputingJulia

An Open Platform for Brilliant Machines

The consistent theme emerging is that machines are all going to be connected in not too distant a future. All well and good, but there’s a small problem. Today the programming language for machines (iron) is different from that of the cloud (silicon), where software and analytics reside. That means large time and cost investments are needed in translating algorithms between the languages to connect the machines.

Which is where Julia, an open-source language being built out of MIT, fits in. Their solution, a language with a strong mathematical foundation, serves as a common language for machines and the cloud, so the same engineers can write analytics that run on sensors and scale to the cloud. The language has visible use cases across machines (air collision avoidance algorithms, 3D printing) and cloud applications (predictive analytics, pricing algorithms), enabling immense savings in time and complexity. The industrial world until now only had proprietary platforms to choose from but now Julia provides an alternative that is open and neutral, where firms can retain strategic control of their products.

LogistimoLogistimo

Open-source supply chain

Continuing with the theme of improved efficiency is Logistimo, an open-source supply chain software enabling manufacturers, distributors and after-sales partners to better reach and serve frontier markets.  There are unique challenges of implementing such systems in low-resource settings of rural India, where nearly 70% of Indians live. But Logistimo’s nuanced methodologies to manage this low-resource context is what has helped reduce infant mortality, electrify villages, and improve the overall quality of life for citizens of the hinterland.

India StackiSPIRT

Impact on Service Delivery

Tying this all together was the final session about a pioneering initiative, the first of its kind globally, being spearheaded in India towards a cashless, paperless and presence-less service delivery. The India Stack ties together the Identity Layer (Adhaar), a Paperless Layer (eSign, eKYC), a frictionless Payments Layer, a Transaction Layer (GSTn) and finally a privacy/data-sharing Consent Layer to revolutionize the Indian landscape in not too distant a future.

 

Lots going on, lots more to come. And this is just the beginning of the excitement for India and the non-linear change that the startup ecosystem is enabling.

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Announcing the biggest software entrepreneur school in India – #PNgrowth

India’s product startup ecosystem is at an exciting stage right now. There are several startups who are being talked about as unicorns, several others which are bring touted as the next big things, and a whole host of others who are in their infancy. Though India’s metres are the ones driving this revolution-in-a-bottle, smaller cities are also catching up.

One reason for the emergence of these companies has been the inspiration that India’s first product startups have been. These were the trailblazers, the ones who went where no one had gone before, and learnt things by making mistakes, and in some cases a lot of them.

And these are the companies that are now going one step ahead. They are coming together, of their own accord, to help India’s growing product companies who are at a particular stage of their lifecycle – the growth curve.

iSPIRT is happy to present to you, in association with Stanford’s Graduate School of Business and Duke’s Fuqua Business School, a new initiative for India’s growth-stage product startups. We call it PNgrowth, under the now-familiar Product Nation banner.

pngrowthWhat are we doing?

PNgrowth is a year long mentorship program with some of India’s top product people and founders, with learning sessions and curriculum prepared in collaboration with the universities of Stanford, Harvard and Duke.

The program, prepared with some of the best minds in business and academia, is aimed at equipping the new age internet entrepreneur with an understanding of every skill he/she needs to build and scale a world class organisation.

Who is eligible?

Applications are now open. The program is open only for growth stage companies and is limited only for 200 entrepreneurs. The companies can be either B2B or B2C, but they will need to have already achieved product-market fit and must be aiming to become category leaders in their space.

We’ve started receiving applications here, and you can also follow us on Twitter or Facebook to keep abreast of everything that’s happening.

What’s the program schedule?

The program will start in January 2016 with a 3 day residential event in Mysore, where everyone will get together to learn how and what they are going to learn and implement in their companies in the course of the next year.

Applications are due by November 15th, and we’ll also be having Selene Delecourt and her team over in Bangalore in August in order to understand the challenges starts are facing and what kind of help they might need. You can reach out to us to participate in that as well.

You can see the entire program schedule here.

We are super-excited about this, and so are the mentors we have brought together for the program. We have here a sneak peek from Pallav Nadhani, CEO of FusionCharts who is telling you why you should be applying to #PNgrowth.

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Inviting the most ambitious product founders to learn growth mantras at PNGrowth

FusionCharts is one of India’s oldest product companies, and easily one of the first to get on the SaaS wave to world recognition. This makes Pallav Nadhani’s company one of the first few in India to actually face the problems that are now ruining the sleep of the nation’s new product company CEOs. As Pallav himself says, building the product and validating is one thing, and scaling it completely another. The challenges are different and tougher, as are the decisions you need to take.

In answering the question as to what would have helped him and his company at the stage when they were reaching the point when they needed to scale, Pallav says what we’ve heard from so many people in the last year or so – that there was no one to guide him and the organisation at that time. Simply put, no one he knew had done this before, and there was no one to go to for advice.

In this short video from us at PNgrowth, Pallav talks about all of this, and how much organisations need this kind of help at that stage, thus making the case for why we are trying to put together PNgrowth, a platform to bring together India’s early stage software product companies. In collaboration with Stanford’s Graduate School of Business and Duke’s Fuqua School of Business, iSPIRT’s #PNgrowth initiative aims to get the people who want to learn, and the people they need to ask in a room, and give them the perfect space to learn and grow.
In this video, Pallav Nadhani talks about FusionCharts’ journey, why he’s part of this initiative, and why he believes that PNgrowth could help product companies take their game to the next level.
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#SaaSx2 is here – The premier event for SaaS companies looking to scale

When SaaS was discovered by India, a group of young people saw its potential and built incredible businesses around it.

These were the originals, the first SaaS hackers.

We brought a few of them together in March this year, under the banner of SaaSx1, so other SaaS entrepreneurs could learn from them, and don’t have to commit the same mistakes all over again. The idea was that the learning would allow the new, driven breed to leverage experience when building innovative companies. As we said then, the knowledge needed to grow SaaS business from zero to $10k to $100k to $1m in MRR is rare, and the only people who can tell you something about it are the people who have done so already.

The super successful event ensured that we kept getting mails asking us to do another, and soon.

But the quality of the first event ensured that we had to wait and work to put together speakers of the same calibre again, so SaaSx could become a premier event in the ecosystem.

And so here we are.

saaSxWith #SaaSx2, and in the same place where it began – the newest kid of the startup ecosystem, Chennai. The event now returns with a leaner, meaner program that aims at ensuring that people ask the questions they want answers to, and take away specific action items they can immediately implement. This season will also debut an extended networking session, thus ensuring that everyone’s ideas have equal space in the ether, and the information shared and gained benefits everyone in the ecosystem.

Each one of the elements of the program has been tweaked keeping in mind last year’s experience, and the several Playbook RTs and meetups we have facilitated over the last few years. The speakers this year include Girish(Freshdesk), Aneesh Reddy(Capillary), Few SaaS startups and the tentative program is as follows.

Time Session Title
1030 to 1300hrs Pre-Event Playbook – “What it takes to Fund SaaS companies”
1030 to 1300hrs Pre-Event Playbook – “Are you ready to hit the growth pedal’ MVP”
1300-1400hrs Registrations & Lunch Networking
1400-1415hrs Introduce & Welcome #SaaSx2
1415-1515hrs Fireside Chat – “Assembling a Commando Team in the early days”
1515-1535hrs 3 SaaS Founders talks about “One Thing” talk for 5 min each
1535-1635hrs Fireside Chat – “The Nuances of Enterprise SaaS”
1635-1700hrs 3 SaaS Founders talks about “One Thing” talk for 5 min each
1700-1830hrs Group Event
1830-1850hrs SaaS Landscape report to be launched by Signalhill/iSPIRT
1850-1905hrs SaaS Guide to be launched
1905-2000hrs Keynote Address
2000hrs onwards Entertainment – Standup comedy, Networking Cocktails & Dinner

We will keep you updated over this as and when we have information, and please don’t hesitate to reach out to us if you need any sort of assistance or have questions you need answered.

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India B2B Software Products Industry Clocks Solid Growth from 2014 to 2015

India’s B2B software product industry has grown nicely since we published the first edition of this index in November 2014 – the top 30 companies are valued at $10.25 billion (₹65,500 crores) and employ over 21,000 people.  The index has grown 20% in USD terms and 28% in INR terms from October 30, 2014 to June 30, 2015.

There has been an acceleration since 2010 in the pace of creation of B2B companies.  Vertically-focused offerings in retail, travel, financial services, media have reached scale and we are likely to see some larger exits in terms of IPOs or M&A over the next couple of years. In parallel, we are seeing horizontal offerings targeting global markets emerge and start to breakout of India into the US and other global markets – we are starting to see not only India-based venture funds backing these companies but also Silicon Valley funds coming in once there is initial customer adoption in the US.

A new set of founders are coming into the B2B software products ecosystem. These include an increasing proportion who have worked at consumer and B2B startups that have scaled in India and who have identified problems that they can solve with software automation.  We are also seeing continued venture creation from founding teams that have backgrounds from established enterprise software companies and some from IT services companies.

In terms of target markets, fast-growth Indian companies (in sectors such as organized retail, organized healthcare services and technology startups in product commerce and services commerce i.e. online-to-offline) are starting to purchase software from Indian B2B software product startups and have globally-aligned requirements, helping these startups get closer to product-market fit before or in parallel to starting to sell globally. We are also seeing many startups go global from day-one through a desk-selling model, as evidenced by many of the companies in the index. And finally, several startups have moved founders to the US and are succeeding in direct selling models there.

Some of the numbers: 80% of companies have global customer bases, while the rest are India-focused.  67% of companies are domiciled in India, with the rest principally in Singapore and the US.  Bangalore and NCR account for half the companies’ principal city of operations with Chennai and Pune as key secondary hubs – there is a trend to newer companies starting up in Bangalore, Chennai and Pune and away from NCR.  Average enterprise value per employee is climbing toward Silicon Valley levels – the index currently nets out to $480k per employee.

The top 30 companies in alphabetical order are:

Here’s the report in its entirety:

Thanks to all the volunteers at iSPIRT who worked on this project as well as Professor Sharique Hasan of Stanford Graduate School of Business, Stanford University; Professor Rishi Krishnan of IIM-Indore; as well as Signal Hill for providing public market valuation comparables and Rakesh Mondal  for designing the document..

We will publish an updated iSPIxB2B index every year starting with the next one in June 2016 – please do click here to submit names of companies you think should make this list.

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India innovated and celebrated @Inno_fest #IndiaCanInnovate

With whatever little humility we can garner, we created a platform for showcasing, inspiring, and celebrating innovation in India – in less than 27 days!!

20931485302_e541c3daaf_bWith the awesome support from our partners, sponsors, believers, dreamers, creators, speakers, patrons, volunteers and each and every one who was a part of InnoFest – we rocked it J

You asked us – Why the focus on Innovation?

Well, the trigger for this innovating idea was a little report that caught our eye. Our entrepreneurship deficit has grown while our innovation deficit is slipping. If we don’t build our innovation capability, two things will happen. First, we will not be able to solve the myriad problems that are specific to India. Second, our current national winners like Flipkart and Ola might lose out to their global competitors over time.

And how do we address the Innovation deficit?

There is no shortage of imagination and creativity in India. We need to build our skills where this imagination and creativity is applied to generate unique solutions to local problems. To give innovation scale – to make it grow; to inspire young minds to innovate…

Sharad Sharma, Co-Founder of iSPIRT and Co-Convenor of Innofest, said that “If companies can innovate and transform their functioning and performance radically, why can’t countries? The idea of Innofest is to distil the best ideas in enterprise and inspire individuals, corporates and Government organizations to take innovation to the common man. We are delighted that the Government has stepped in, in a big way to enable this transformation and this cooperation between public bodies and private enterprises will lay the foundation for radical transformation in the country.”

And… we were pleasantly shocked (that is not a phrase, I know :).

From robots and cars to 3D chocolates: we saw it all !!! (Click here for the complete array of displays that were a part of innovation).

Innofest was a phenomenal success. We reached the message via TV (CNBC Awaaz), RadioCity, Hoardings, and most importantly social media to over half a million individuals across the country. Over 1200 participants attended Innofest and immersed themselves into activities like maker-space, experience zone, young innovator’s zone, etc. The team curated and showcased over 75+ innovations from across India that ranged from an 11-year boy who had developed a mobile charger to Team Indus who are building a spacecraft that will go to the moon. The main session with our patrons – Nandan Nilekani, Mohandas Pai, Jayant Sinha, and Kiran Mazumdar Shaw was a huge hit with some of the most inspiring speeches one could experience(Videos shared below). Of course, Minister Babul Supriyo’s singing and dancing was just the finale that Innofest deserved.

A team of 10 committed and highly enthused volunteers – spread across 5 Indian cities – worked remotely and delivered Innofest 2015. And how…

The craziness of schedules, deadlines, and record turn-around times was exhausting yet exhilarating to the core… From media, sponsorships and venue discussions to the unlikely innovations that we experienced – it was indeed an unforgettable experience for each one of us.

And not surprisingly, we have been flooded with requests from all parts of the country – from individuals/companies/cities, offering to host the next Innofest – and it feels good and satisfying …

20948742491_2e3fe98f8e_bWhile we go about thinking what to do – this is a call for volunteers for our next. We anticipate it to only get bigger and better and we will need all the help that we can… because we cannot create this magic without YOU.

Do let us know how you can help us. Think.Innovate.

#IndiaCanInnovate.

Just let us know 🙂

Guest Post contributed by Ritika Singh, Proud Volunteer for Innofest

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As somebody rightly said “it was all a notion but hey, its innovation now”

What’s more, when you give this notion a Woodstock fever! That would be Innofest’2015. My participation was courtesy iSPIRT and Avinash, with whom I was interacting for my startup. One thing lead to another, and like a typical startup guy, I asked for a discount. Voila, got a free pass.

So, the day was 22nd August, a Saturday; excitement was there in the air, I am still at home but the thought of meeting fellow entrepreneurs along with rockstars of the startup world was good enough a reason to put that extra zeal on my steps.

And then, I reached the Venue – IISc, one of the best campuses to have a Woodstock for Innovation. One could get a glimpse of what’s- in-store – we see a band tuning-up their instruments center stage; the batmobile; the crew in their black T-shirts going about giving a final touch to the venue. But the black T-shirts were for real and they were the volunteers who had put the InnoFest event together and I was told – in less than 27 days!!. True startup spirit this J

The registration was smooth – go to the designated counter, pick your tag, go online.

Yes, we were provided with wifi, and it helped a lot of participants, especially students. And there were quite a lot of them who had traveled from Pune, Hyderabad and New Delhi just to attend the event. The sheer number of youngsters that participated showed the startup spirit that the country is experiencing. I interacted with few of them; they were 2nd year, 3rd year students. Gone are the days when they were worried about only grades; now they are worried about the next big thing and identify themselves as the ones who can lead it.

Once inside, there were booths showcasing various products, I was particularly interested in hearing the discussions by, as I mentioned “rockstars” of the ecosystem, and that was happening in Hall C. And I was hanging around the venue. But then, you can’t keep your curiosity down when you see an exhibition area and some strange things hanging from the trees. The exhibition area was showcasing some of the best products that the young minds had developed. I didn’t venture inside all the arenas but it was jam packed, felt like I was in a ‘mela’ where the kids are intrigued by everything that they see but here it was students and grownups showing the same spirit and instead of the usual ‘throw the ring,’ it was all about technology. The discussions were very informative and in a different format. It was packed; every inch of the hall was occupied so much so, that the black T-shirts had to become bouncers to get the speakers to the podium. The discussion varied from – where are the cut-copy-paste ventures heading to the scope of product manufacturing in India. Manufacturing would be the next thing that India will experience, fuelled by product innovation. Be it making 60k chapatis in one hour, i.e., a 1000 chapatis a minute by Akshaya Patra or 3D printing of a knee joint. Again as Mr. Shridhar Venkat, CEO- Akshaya Patra, said, it started with a jugaad but now it has become an invention. And Mr. Kunal Shah, CEO-Freecharge, reaffirmed “ a jugaad/ hack becomes an innovation when it works”. Think audacious but be smart.

Through the afternoon, there were different DIY camps around the venue and workshops on crowd funding etc.. Once outside the Hall C, I thought I will explore a little, that’s when I heard someone strumming the guitar and singing the blues. I went in the direction of the sound only to discover that I can have my lunch and listen to him. Perfect. And if you are not into live music there was a Dj mixing up a deep house. Just when I was thinking ‘all in all a good day’, there were people milling about the main auditorium and realized it’s not yet over, the heavy weights who started the startup revolution and put India on the world map were yet to address. Mr. Jayant Sinha, Prof. Anurag Kumar, Mr. Nandan Nilakani, Mr. Mohan Das Pai, Mr. Sharad Sharma, Smt. Kiran Mazumdar Shaw, Dr. Kshatrapati Shivaji, and Mr. Babul Supriyo. And I expected serious power talk by these gurus, instead it was a combination of power talk, motivation, humor and out right Woodstock when Mr. Babul Supriyo took the auditorium by storm with his songs combining it with witty one liners. One never expected the heavy weights to let their hair down and take a jibe on one another, be it, ‘I was asked to come for one hour a month back to discuss something and I am still here’ or ‘Ministry will work on subsidy for the entrepreneur ecosystem but you will become rich’ or Mr. Babul Supriyo asking Mr. Jayant Sinha ‘are you texting the center that Babul Supriyo is going to sing, again’ !!

Disruption – what they did and that is what innovation is all about.

It was clear from the interactions, events and speakers that India is experiencing a mammoth change in the field of technology innovation and everybody – the policy makers or rock star entrepreneurs or the heavy weights – all of them are supporting it in whichever way they could. Innofest’2015 was one such event to bring all the stakeholders on one platform and celebrate a notion that will become innovation tomorrow.

It was one the best initiatives that I had attended; the only thing that I missed was tasting the ‘3D printed chocolates.’

There’s always a next time J

Guest Post by Rajesh K, ProgrammedV

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Innovation @ Innofest 2015

Here is small write-ups of stalls I visited and could relate better with innovations at stalls@Innofest. Wish that innovation stalls were open for viewing by public,children and youngsters. Captured innovations to share and motivate readers to dream.

Let me start with TeamIndus, prototype design and aerial vehicle. Young guys have been able to innovated on large scale and serve as motivation for all to dream big and achieve.They stand to demonstrate that fundamental innovation can happen in India too.

Kisan Raja , powerAdapter to enable farmers to swtich on motor pumps in the field from his home and save the effort to walk across a long distance.

Visited stalls of 3D printers PRAMAAN and PRAMAAN-Mini. Learnt  what items can be made with 3D printers and raw materials used to create items like keychain, table tops, flower pots. Wish the innovators work to enable audience to relate to product easily, something like create some pre-designed items, make items and share with audience to take home(for charge). Connected auidience has ability to share with more people.

vSkin is a wearable glove to creates a sense of touch on the users’ fingers in a virtual setting.  One can feel the hand movements while working with a digital piano or use glove as part of video conferencing calls to perform remote handshake. The innovators are currently in age group of 19 to 22 years.

Tesseract is a Virtual Reality headset. The prototype headset works with content created or stored on a laptop; new ones work with mobile phones also. Wish Tesseract becomes complimentary item with XBox for customers to think about. They have sourced optics from China, acrylic lens from India and manudactured in China.

RideLogik helps with charging base for the smartphone. Wish they provide more value propositions around the vehicle efficiency and performance. Though they can integrate with any vehicle that runs based on electronic control unit, their focus is 2-Wheelers. They need to develop channels to reach existing 2-wheeler owners.

Found innovation of insulin pen to enable diabetes patients to take care of their health better more connected at ground level.The innovator has patent filed In India.
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Shrishti  has displayed multiple innovative items. Though I am not covering all of them, I would like to cover the chair they have made using old newspaper. This chair can be used for outdoor purpose too and would not spoil in rain.  A means for paperwallas to become furniture makers? Here is my photo on the chair to say that chair was stable with my body weight.
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Plugzee is device to turn any audio speaker system into a Bluetooth speaker. The device plugs into the 3.5 mm audio jack of speaker & lets you stream music wirelessly by Bluetooth pairing with a smartphone. They have leveraged crowsourcing to transform innovation to reality. Already started to ship last week- that is nice.

For more innovative items present in the stall, please check Madan article Passion and policy – startups and ministers at InnoFest 2015!

Guest Post contributed by Srinivasan

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Promote innovation and entrepreneurship to achieve sustainable economic growth

We are at a profound moment in India’s history. We have a young and energetic workforce, a robust macroeconomy and a strong leadership at the Centre. This is our chance to power India forward. A key aspect for achieving sustainable economic growth and providing jobs to our youth is to promote innovation and entrepreneurship. We need to do more to enable our young people to think creatively, create innovative solutions, and take them to market and achieve global scale.

The government is committed to creating a supportive environment for innovators and entrepreneurs. Major initiatives such as smart cities, direct benefits transfer and ‘Digital India’ will create a large, domestic market for innovative products and services. Additionally, streamlined policies, new infrastructure and an overall thrust on fast-tracking innovative ideas through public, private and public-private initiatives will see more innovations hitting the market.

Indians are known for their ingenuity. Our creative thinking, when applied to problem-solving using meagre and locally available resources, Jugaad, is universally recognised.

The number of innovations highlighted by the National Innovation Foundation are an eye-opener to the innovative thinking that Indians bring to play while solving problems. Anumber of these innovations are centred on addressing issues in rural India, which can tremendously impact our economy and society.

Over 750 MNCs have their R&D centres in India. Many of these are creating products and solutions for global markets. India is where the zero, cataract and plastic surgery, high quality crucible steel, buttons, ink, and rulers were invented. So, despite such a rich history, why is India today not Innovation Nation?

Our innovations have largely been about affordability and designing solutions for local problems by making incremental changes in existing products and solutions. We have focused on process and price, not enough on product innovation. Examples of innovation abound: cheaper and faster drug discoveries; faster and better ways of creating software to make air travel safer; modifying existing farm tractors as a rural transportation solution; lowering telecom prices; organising over 3.6 million small milk producers in a cooperative movement and creating a global dairy brand; fighting hunger and malnutrition by using technology and forging strategic partnerships; Mumbai’s ‘dabbawalas’ delivering lakhs of meals to people with a home-grown, un-automated process with precision; and more.

But this innovation is often not apparent to the world, because it is usually localised and not scaled up. We need to encourage innovators to scale up their solutions to global levels, particularly in the developed world. The government’s new policies and programmes are designed to make it easier for innovators to find larger markets for their solutions and products.

Today, we need a two-pronged approach: one, encouraging and enabling more product innovation; two, facilitating innovators to scale up their solutions for commercial success or social good. To that end, we require a grassroots-driven movement that will celebrate and inspire entrepreneurship.

Many ecosystem players, such as the Indian Software Product Industry Roundtable (iSPIRT), the Small Industries Development Bank of India (Sidbi), the department of science and technology (DST), the tech startup accelerator TLabs, the Indian Institute of Science, the 10,000 Startups initiative of the National Association of Software and Services Companies (Nasscom), Paytm, Practo and the Anita Borg Institute, are coming together in Bengaluru on August 22 at Innofest to jumpstart this process.

In tandem with the just-announced ‘Start Up India, Stand up India’, the India Aspiration Fund and the Atal Innovation Mission are encouraging startups like never before.

Guest Post by Sh. Jayant Sinha, Union minister of State for Finance. This article was first published in ET

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India Inc’s Innovators Are Setting The Stage For The Ecosystem

Steve Jobs, the late co-founder of Apple Inc and one of the greatest innovator from the tech world, believed that innovation was the only way to win, and by no means did he just see innovation in making things more complex. An advocate of simplicity, he also reiterated, “Simple can be harder than complex; you have to work hard to get your thinking clean to make it simple.” That’s why we, at GHV, believe “Innovation is not just doing something new. Sometimes it means pushing the existing more powerfully and elegantly.”

Innovation or doing things differently is something that has set the momentum of the “startup scene” in India. It is because of thinking differently, the “old wine in a new bottle” syndrome that has revamped and fuelled the success of top startups in the country today. Innovation is all about bringing something new and exciting to the customer. Given the cutthroat competition in the market today, innovative products and ideas are the key to differentiating yourself from others in the race.

Successful businesses often anticipate future trends and develop an idea, product or service that allows them to meet this future demand rapidly and effectively. It is not just about fulfilling the pain points of the consumers, but also being able to preempt the future needs of the consumers before they even feel them. In essence, predicting and fulfilling a future void and working on its solution in the present, staying ahead of the curve. Innovation can help you stay ahead of your competition as markets, technologies or trends shift, thereby giving you a definite edge.

This year, India has slipped 10 places in the Global Innovation Index to a disappointing 76th position. Imagine what we can accomplish as a nation if more people were to focus on innovation. We can easily transition to become a nation of job creators than job seekers.

Renowned global brands like 3M, GE, Lego, Nestlé, Pepsi and Starbucks are all from different industries, but have been constantly innovating their products. These companies have successfully created and supported an internal innovation capability that drives new products into the marketplace year after year with remarkable success. In fact, the very reason behind their success is that they made innovation a critical capability within their organisations. These companies recognised innovation as a key driver for success by enhancing the value that the business was delivering to customers.

With Indians like Nikesh Arora and Sundar Pichai, leading the heavy weight ‘innovating’ companies like SoftBank and Google, we are looking at a complete change in the way India and Indians are perceived globally; whether it is Indra Nooyi, Satya Nadella, Ajay Banga or Shantanu Narayen.

Innovation helps large companies survive challenges. According to Clayton Christensen, disruptive innovation is the key to future success in business. For companies to become market leaders and retain that position, they have no choice but to innovate and disrupt an existing technology or market by recognising opportunities.

For example, Patym had revolutionised mobile commerce in India. Earlier, people were wary of storing their debit or credit card information online. The company created a secure digital wallet where a user can put in a small amount without threat of online and credit card fraud. The payment solutions provider uses an RBI approved semi-closed wallet that is being used everywhere, right from Domino’s Pizza to Zivame to Uber. The company now has over 80 Mn mobile wallets and more than 15 million orders per month.

Innovation is that one thing that all successful businesses worldwide have in common. Innovation is a part of their culture… it’s in their DNA.

To foster a spirit of innovation in today’s youth, iSPIRT is hosting InnoFest, a daylong event focused on kick starting the next wave of innovation in the country. The event to be held at Indian Institute of Science, Bangalore on 22ndAugust 2015, will offer young innovators a platform to present their ideas and interact with like-minded people from across the country. The daylong fest is meant to celebrate innovation and bring forward ideas that can become game changers for the nation.

Guest Post by Vikram Upadhyaya