What happens when creative ideas meet deep pockets? Disruptive innovation, or so believe big businesses.
Most entrenched enterprises in India are now readying dedicated war chests to invest in the country’s startup ecosystem.
The latest to do so is the local arm of US consumer goods giant Procter & Gamble (P&G), best known for products like Ariel detergent, Whisper sanitary napkins, and the personal care products brand Gillette.
On Oct. 11, P&G India said it has set up an “innovation sourcing fund” to collaborate with startups, entrepreneurs, and small and medium enterprises (SMEs) that operate in areas related to supply chain solutions, innovations around raw materials, brand and marketing solutions, and packaging.
The intention is to invest in ideas that help its business grow here, P&G said in a release on Oct. 11. “The idea is to collaborate with external partners on disruptive and innovative business solutions for the company,” the release said. For now, the firm has only said that it’s a “multi-million dollar” investment.
This is certainly not a first for corporates. Market watchers add that it is getting increasingly hard for large companies to ignore what startups are doing in India. Large companies in India, such as Reliance Industries and Marico, are already working with startups, often picking up stakes in young companies that complement their businesses.
“It’s happening because startups are coming up and innovating right under the nose of the large companies,” said Srinivas Kollipara, CEO of startup catalyst T-Hub. “Investing in startups helps large companies access cutting-edge technology and solutions, which helps to keep them ahead of the curve. On the other hand, these companies provide a quick scale that might be beyond the reach of most startups.”
But for P&G India, operating in the country since 1964, this is only the first such fund. It also comes at a time when “consumer behaviour is evolving in a dynamic market,” Madhusudan Gopalan, P&G India’s managing director and CEO, said in the statement. Through this fund, P&G will be able to identify solutions that suit its business, he said.
As part of the investment, P&G has set up two programmes to tap into the startup ecosystem.
The company is setting up a “vGrow programme,” to identify and collaborate with startups, small businesses, individuals or large organisations. It held a two-day event in India’s financial capital Mumbai (Oct. 10- Oct. 11) where entrepreneurs pitched ideas to P&G’s senior management. The company is also setting up an online platform, P&G Hackathon, similar to the ones it already hosts in Europe, which will help startups and entrepreneurs work along with P&G.
Over the past few years, traditional firms, in line with changing consumer trends, have acquired new-age brands, launched dedicated e-commerce channels, and innovated on products.
In 2017, P&G’s rival Unilever, through its arm Unilever Ventures, invested in Peel-works, a technology startup that provides software solutions to FMCG companies. Unilever Ventures also has water treatment company MORF and ice cream and dairy firm Hangyo in its portfolio.
Earlier this year, United Spirits (USL), owned by the London-based global distiller and brewer, Diageo, made its first technology investment in India: Rs27 crore (around $4 million) in HipBar, a Bengaluru-based online drinks-ordering and payments platform. In August, the Asia-Pacific arm of Colgate-Palmolive picked up a 14% stake in the three-year-old men’s grooming firm, Bombay Shaving Company, which mostly operates online.
With money in the pipeline, India’s startup ecosystem may be in full bloom soon.