Time is ripe for startups to crack at Bharat opportunity

Surge in Biz Due to UPI 

• Startups struggled in rural markets due to inadequate infrastructure

• Top 20-30% of rural market spends more per month than in urban cities

• Introduction of the UPI payment system has revolutionised transactions

• Surge in the demand for used iPhones in Tier 2 cities and beyond

New Delhi: Accel, one of the world’s top venture capital firms, has identified ‘Bharat’ as a massive blue ocean opportunity for Indian startups, citing promising economic indicators and evolving consumer behaviour across Tier 2, Tier 3 cities and rural areas.

Accel defines Bharat as middle-income households that earn between INR 5 to 15 lakhs annually and spread across Tier 2, Tier 3, and rural India.

In an interview, Anand Daniel, partner at Accel, discussed the immense potential of building for Bharat. Historically, startups have struggled in these markets due to inadequate infrastructure, limited digital penetration, and insufficient understanding of consumer preferences, Daniel said.

The recent advancements in technology, logistics, and payment systems have laid a foundation for sustainable growth in these underserved regions, he added.

Despite the common belief that rural means poor, the top 20-30 per cent of this untapped market spends more per month than about half the population in urban cities, Daniel said. This highlights a substantial purchasing power in rural areas that is often overlooked.

In a recent blog, Accel wrote that contrary to conventional notions, which paint this demographic as primarily price-sensitive, this segment is highly aspirational and shows a growing preference for products and services that promise a better lifestyle and reflect upward mobility. This trend is exemplified by a surge in the demand for used iPhones in Tier 2 cities and beyond, the VC firm added.

“We believe this market is more ripe for disruption than ever before. Founders need to take a crack at the Bharat Opportunity,” Daniel said.

The ‘build for Bharat’ theme has gained momentum among investors such as Accel and entrepreneurs alike, reflecting a strategic shift towards developing business models that cater to this segment of India and its unique needs.

But why have startups not succeeded in building for Bharat till now? Until recently, startups aiming to serve rural India struggled due to inadequate infrastructure, unaddressed customer behaviour, and a lack of focus, according to Accel. Challenges included poor delivery networks, incomplete pincode coverage, and inefficient reverse logistics, which inflated costs for handling small orders. Sparse digital payment options and unreliable internet connectivity added to the problems.