Business Models for IoT Startups in India

If you have an IoT-based Startup, here are some considerations to keep in mind:

The IoT space consists of 3 major players:
1. Device Manufacturers
2. Networking Providers
3. Software Solutions

Depending on what you want to do, there are 2 approaches in any industry — (i) Platform (ii) Application-specific.

A platform play is extremely resource hungry in terms of (i) Time to engineer (ii) Time/effort/credibility to build acceptance (iii) Time/effort/capital for proliferation. These are much easier for large organizations with the customer base and gestation capability to pull it off. Most large companies started in the same way — one specific application done extremely well so that the world sees you as the leader in the space.

Startups, I believe, must always begin with the application-specific approach, create traction and then build further. If that road leads to a platform play so be it, but never enter a platform play in the IoT space without significant capital in your pocket from Day 1. Making sufficient progress will always be a challenge. It is far easier to build expertise in one area & create 2–3 value-add use cases which address significant pain points, than on 30 different industries and 500 different use cases.

An application-specific approach requires you to really map the landscape, the market that you can target & acquire, and see where the big gaps are.

The really big gaps are not where the big noise is. Always keep that in mind.

To find these gaps:

1. Dive deep enough with at least 5 companies within the domain you understand best and then formulate the problem that needs to be solved.
2. Ensure that they are willing to pay for the solution. If they clamor to pay for it before you begin to build, that’s the ideal state to be in, but that never happens. Ensure they are willing to try and that it solves a problem that either clearly affects their top-line or bottom-line and choose your positioning accordingly.
3. Each domain has its own set of challenges if you dig deep enough. It’s not an exercise you can complete in 2–3 months. It might take 6–8. Be prepared for it and go in!

For application-specific models, there are both B2B and B2C approaches. The most acceptable models in the B2B space are:

1. Annual licensing cost + Maintenance
2. SaaS
* Charging per device
* Step function based on number of API calls
3. For B2B2C cases, revenue share based on what is sold. I discourage this as it has too many challenges in the India only context. It is decent for a global play with the right partners.

This post has been contributed by OVL Kiran Kumar, Managing Partner, OVL Advisors. To engage with an alumni-focused platform supporting startups, visit IvyCamp or contact us.

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