Long before Mukesh Ambani set his eyes on the millions of mom-n-pop stores, a bunch of e-commerce startups were preparing the ground ⁠— they are now getting their due

• These ecommerce startups have raised over $135 million since August 2021.
• Khatabook alone has raised $100 million in the last one month.
• India is home to 60 million small and medium businesses (SMBs).

It was the year 2019, when India’s richest man Mukesh Ambani declared that he would connect 13 million kirana stores —the Indian word for mom and pop stores — with his tech platform JioPlatforms. Amazon and Flipkart have been on hot pursuit of these neighbourhood stores for at least half a decade.

However, for quite some time before that, a bunch of young startups like Dukaan and Khatabook have been preparing the ground for these big tech giants to make a big splash. These enablers are getting their due from venture capitalists (VCs) now.

These ecommerce startups have raised over $135 million since August 2021. Key deals include:
Other major businesses in this segment include OkShop and MyStore.

“The recent rounds in September are indicative of growing interest from investors in this segment,” Madhur Singhal, managing partner and chief executive at Praxis Global Alliance told Business Insider. He noted that Google and PayU’s investment in online-to-offline commerce platform DotPe further substantiate this claim.

Devendra Agrawal, founder of investment bank Dexter Capital echoed the same sentiment, highlighting that while offline retailers have been severely impacted by the pandemic, online retail received a huge boost. “To compete with online retailers, offline retailers have started adopting solutions offered by ‘Dukan Tech’ startups at an unprecedented rate,” he said.

India is home to 60 million SMEs and 13-14 million kirana stores, which employ over 130 million people. “Clearly, it is an extremely vast market and provides great opportunities for digital solutions,” he added.

But what are the challenges ahead of these companies?

According to Singhal, finding the right product market fit for these startups is going to be extremely challenging for these startups as they have a diverse mix of customers in terms of region, scale and vertical of operations.

“Another challenge would be the monetisation aspect. Given the free adoption and availability of Dukan Tech solutions, it would be crucial for these start-ups to figure out what percentage of their merchant base become paid users,” Agrawal added.

Sequoia-backed Khatabook is facing similar challenges when it comes to monetisation. The company, valued at $600 million due to its size and scale, is currently in a pre-revenue stage. The company is currently piloting some monetisation engine, according to sources within the company.

But the biggest challenge remains the emergence of big tech companies in the segment. Agrawal told Business Insider that any segment where customers are interacting on a daily basis always has the potential for big players jumping in. The question, however, remains how and when they do it.

They can either enter organically or follow Walmart’s approach and acquire another company, he added.

However, he emphasised that companies that have figured out their business model and are raising capital will be able to survive. “But another thing to keep in mind is that the current dukan tech companies are in the customer acquisition phase. They need to figure out the business model and monetisation engines,” Agrawal added.

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