PE-VC funding in B2B software sector plunges, but select segments see jump

Annapurani V Chennai | Updated on September 10, 2020

Programming tools, logistics, education software makers among biggest gainers

Investments across sectors took a hit this year due to Covid-19.

The scenario for B2B (business-to-business) software companies was no different. The private equity and venture capital (PE-VC) funding that went into these companies in the January-to-August period this year fell 48.18 per cent to $870 million, against $1,679 million during the same period last year, according to data from Venture Intelligence, a firm that tracks private companies’ investments, financials and valuations.

However, certain sub-sectors in the B2B software space, such as programming tools, CRM/CLM, logistics, education, travel and transport, have been making hay this year. For instance, the PE-VC investment that went into the B2B programming tools software space was $219 million in the January to August period, up 318.7 per cent from $52.31 million during the same period last year.


Similarly, the logistics B2B software space, which received only $56.6 million last year, raked in $115.61 million this year. The education space — thanks to the ed-tech sector picking up in a big way due to the lockdown — received $89.69 million, up from a mere $2.33 million last year.

Anuj Golecha, co-founder, Venture Catalysts, said that with the pandemic affecting economies and necessitating physical distancing, even smaller businesses are trying to work on digital platforms, and hence customer relationship management (CRM) and software as a service (SaaS) companies are seeing a huge demand.

“The sudden spurt in PE investments is also coming from the fact that the B2B companies have been able to survive the pandemic because of their sheer focus of top-line and bottom-line, compared to the consumer-focussed start-ups that are cash-burning businesses. There are companies like Postman and Zoho who have seen the spurt,” Golecha added.

The digital pivot

Due to the lockdown and the disruption in supply chains across industries, companies were forced to pivot to the digital mode to ensure seamless operations for clients and customers. Schools began to adopt online teaching methods, and businesses stepped up their software systems to better their workflows and manage efficient remote working.

Online retail and e-commerce also kicked off in a huge way, especially for essential goods and services, as people reduced physical retail visits and purchases for fear of contracting the virus. Home delivery of food also began to gain over dine-in.

A recent survey by McKinsey and Company showed that services such as restaurant curbside pickup, grocery delivery and restaurant delivery in India are potentially here to stay post-Covid too, with nearly 74 per cent of consumers intending to continue with grocery delivery, and 73 per cent, restaurant delivery services.

“Millions of Indians are ordering food, medicines and groceries online. Timely delivery, route optimisation and predictive capabilities are the need of the hour. These technology-enabled solutions are drawing the attention of investors,” said Pankaj Raina, Managing Director, Research and Investments, Zephyr Peacock India. “Start-ups and businesses specialising in door-step delivery and goods movement, and software solutions enabling these logistics, are trying to capitalise on this momentum and raising funds,” added Raina.

Published on September 10, 2020

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