Elevation Capital today announced the launch of its report “What If…We Win? Unlocking The India Consumer Tech Opportunity”. Addressed to founders who are building or looking to build in the consumer tech space, the report identifies vast untapped opportunities backed by in-depth data-led analysis. Through its theses, the report aims to dispel the growing chorus of skepticism surrounding the consumer tech startup space in India. The optimism is fuelled by India’s rising online consumer spends, estimated to more than double from $140 Bn to $300 Bn by 2030, according to Elevation.

The Indian startup ecosystem is in a promising phase, as the narratives of startup winter recede and India emerges as a bright spot in the global economy. By 2031, India’s GDP per capita is expected to hit $5,200 (2.3x current), accelerating discretionary spending by consumers.

Despite the rebounding excitement, skepticism, however, persists around the potential for new large businesses that can be created and become profitable in the consumer tech space. This lack of confidence is based on three key arguments – (i) Doubts about Indian consumers’ willingness to pay for high-quality experiences, (ii) the perceived lack of depth in the consumer market, and (iii) that large marketplaces have already been built, leaving no room for new players.

In an attempt to counter these narratives and showcase possibilities to founders, the report identifies several areas where large scalable tech-enabled consumer businesses can be built in coming years through a set of theses. This includes value creation opportunities arising out of emerging monetization models for new media platforms, building businesses catering to India’s affluent, new-age consumer brands targeting discretionary needs, and offline-dominant consumer categories.

In a joint statement, Mukul Arora, Co-managing Partner and Mayank Khanduja, Partner, who leads Elevation’s Consumer Tech investments, said, “Of late, India’s startup ecosystem has started questioning the viability of delivering new high-quality businesses in the consumer tech space. With all our conviction, we say yes, these businesses can be built. This is not just because we have partnered with multiple category winners in the past consumer tech waves but because all markers today strengthen our conviction. Our consumer tech portfolio and 100+ consumer tech founders we meet every month show that the market is only getting deeper. With more disposable income in the hands of the consumer, large share of the new revenue and profit pools would accrue to the consumer tech companies.”

The report encourages current and budding founders to embrace the incredible opportunity to create lasting, mission-driven companies in the Indian consumer tech space in coming years, and not get dispirited by cynical, dismissive takes of a few commentators.  With a 2+ decades history of being early backers of category-defining companies such as Swiggy, Unacademy, FirstCry, Spinny, NoBroker, MakeMyTrip, Meesho, Sharechat, Ixigo, BookMyShow, and Country Delight, Elevation Capital believes it has the perfect vantage point to identify and uncover these possibilities. The fund has also followed up its conviction with action, with as many as 14 investments in the last 18 months in the consumer space. Elevation continues to be hugely bullish on the Indian consumer opportunity, and the fund is “All In” on India.

Addendum:

Building on each of the opportunity areas.

1. Indian Media Platforms Will Monetize Users Directly At Scale. Historically, giants like Google Meta have dominated the digital ads market, accounting for over 50%. It is worth $8 Bn and grows at 16-18% annually. Emerging marketplaces and e-commerce platforms contribute 15% of this pie, with 10-15% of their revenue from ads. Some believe Indian consumers don’t spend much, leading to a misconception that consumer apps can’t profit there. However, platforms are proving otherwise by exploring diverse monetization methods beyond ads. Today, social platforms in India are pioneering new direct monetization methods, focusing on subscriptions, microtransactions (virtual gifting and digital commerce), and digital services. New-age social platforms and gaming experiences are uniquely positioned to capture the largest time-share of today’s digitally-native Gen Z/Alpha user.

2. India’s top 2% are a $100 Bn opportunity. The top 5 million households, constituting approximately 2% of the population, allocate approximately $40 Bn annually towards discretionary expenditures. Over the next decade, this spending pool will expand to $100 billion as their incomes grow. For founders building in this space, a fail-fast, one-size-fits-all mantra will not work; instead, they should focus on consumers’ unique needs and premium quality, all built on trust. The report shows emerging opportunities like pets ($7 Bn opportunity), premium leisure travel ($20 Bn opportunity), real estate ($8 Bn opportunity) and premium healthcare ($ 10 Bn opportunity).

3. Many Massive Marketplaces Are Waiting To Be Built. The assumption that there are no whitespaces left in consumer marketplaces and that every nook and cranny has been filled—be it food, travel, or e-commerce—is misplaced. A major axis where there is room for builders to disrupt would be complex categories that conventional online marketplaces have not adequately served. The report shows a ringside view of the creation of such marketplaces through Spinny, Urban Company, and Country Delight. Consumers gravitate toward organized markets for their discretionary purchases. Marketplaces benefit significantly from network effects, creating strong reinforcing moats that lead to increasing consolidation in their target markets. ‘Spinny’ for homes, home furnishing, and targeting new consumer archetypes are some of the themes where we believe new marketplaces can materially elevate consumer experience.

4. New-Age Consumer Brands Will Create $50 Bn Of Listed M-Cap. For a while, India’s startup scene wondered if modern consumer brands could achieve big success. India lacked strong brands despite a huge retail market worth over $800 Bn. But things are changing. New consumer brands are booming with the rise of direct-to-consumer (D2C) strategies. The combined revenue of new-age consumer brands tracked by Elevation has crossed $5 Bn/₹40,000 crore, a figure that continues to scale rapidly. Deepening e-commerce penetration, lowering cost barriers and internet access before discretionary income are enablers that are now converging to make brand-building both lucrative and exciting for entrepreneurs. As a consequence of the above, Elevation sees $50 Bn of public market cap to be contributed by new-age brands in discretionary categories by 2030.

5. Offline-Dominant Models Will Unlock Deep Customer Value Across Education, Healthcare and Consumer Brands. Despite predictions of doom for offline businesses during the pandemic, they’ve made a strong comeback afterwards. In 2023, hotel occupancy in India surpassed pre-pandemic levels, reaching 70%. Despite the growth of OTT platforms, multiplexes have seen weekend occupancy rates rise to 65% from 35-40% post-Covid. India is at an inflection point where markets are leapfrogging from an unorganized structure, leading to the emergence of omnichannel businesses. Education, consumer brands, and healthcare are three areas where an offline-dominant approach will be critical to building scale.

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