In 2006 there were 26 million micro, small and medium businesses in India. 97% of these businesses do not show up in international statistics because they are unregistered or operate as sole proprietorships and partnerships. Only a very small percentage of businesses in India (> 3%) are incorporated. Over 98% are ‘Micro’ enterprises do not have employees and provide services to local markets with minimal investment. They use traditional techniques and do not have access to bank credit.
In India, businesses are classified as Micro, Small or Medium depending on the amount invested in plants & machinery (MSME). Within Manufacturing sector, micro businesses have an investment range of under USD $ 50 thousand. Small businesses have an investment range between USD $ 50 thousand and less than USD $ 1 million. Medium businesses have an investment range between USD $ 1 million and USD $ 2 million. SMEs form 95% of the total manufacturing and manufacture thousands of quality products that are used domestically and exported. As per estimates from SME Chamber of India, 21 Million SMEs in the manufacturing sector contribute 45% of the nation’s industrial output and 40% of the total exports.
Within the service sector, micro businesses have an investment range of under USD $ 20 thousand. Small businesses have an investment range between USD $ 20 thousand and less than USD $ 400 thousand. Medium businesses have an investment range between USD 400 thousand and USD $ 1 million. MSME employ ~ 60 million people and contribute ~ 20% to India’s GDP.
Internet Usage in India
India’s Internet base in 2013, was 150 million users representing about 10 percent of the country’s total population. Indians primarily use the internet is for communication including email and social media. India has 110 million mobile internet users.
India’s eCommerce Market
India’s eCommerce market is USD $16 billion industry and is estimated to grow at a CAGR of 40% $18 billion by 2015 from $4.75 billion in 2011. The eCommerce market grew by 88 percent in 2013. Popular products sold in India include tech and fashion categories like iPads, digital cameras and jewelry. 78 percent of shoppers prefer to shop on mobile phones for deals. Approximately 75 percent of online shoppers in India are 35 years old or younger.
Venture Capital and IPO in India
On an average less than 100 Indian companies get VC funding each year. The average VC deal size in India is 20 crore (USD $4 million). The average pre-money valuation at 40 – 60 crore (USD $10 million). Very few businesses receive angel funding and government schemes for startups fund approximately 100 businesses every year.
Approximately 50 companies get listed (IPOs) on Indian stock exchanges. Most companies listed on exchanges (NSE and BSE) are quite illiquid. To stand a chance of an IPO on the NSE or BSE, a company must ideally have revenues of over 100 crore.
Indian IT services is USD $52 billion and grew at 17% during the year 2011-2012. About USD $ 40 billion is from exports and the remaining USD $ 12 billion is from the domestic market.