Facebook Partners With VC Funds For New SME Incubator in India

There’s a growing interest among the investor community and the government to modernise and capitalise on the 42.5 Mn enterprises that make up India’s SMEs sector. And there’s a new tech giant throwing its weight behind this movement — Facebook. 

Facebook, the world’s largest social media company, announced a collaboration with venture capital funds to accelerate the growth of the fund’s portfolio companies that come under the category of small and medium businesses (SMBs).

The initiative called the ‘VC Brand Incubator Program’ will be the first in a series of programmes by Facebook that will focus on SMB growth in India by providing them with skill training and mentorship.

An inspiration for the programme is the Indian government’s key goal of building the ecosystem for SMB growth in the country by establishing 50K startups by 2024. 

“As part of this program, Facebook will work with VC funds with the aim of skilling and mentoring the brands by sharing insights on best practices, proven solutions, playbooks, vertical-insights among other key learnings,”  Facebook India said in a release. 

The VC Brand Incubator Program is a series of events that will be held across Mumbai, Bangalore and other key cities, where SMBs will be provided with skilling and training sessions by Facebook experts on a range of themes and topics that will help them build their brands on the digital medium more effectively. 

The first edition was held last month in collaboration with Sauce.vc and saw participation from 25 brands of which five were women-led businesses. 

What’s In It For Facebook?

Inc42 sat down with Archana Vohra, director of Small and Medium Businesses at Facebook India to speak about what the social media giant hopes to get out of this initiative. 

Vohra said that the programme in line with Facebook’s overarching focus on building community and connections. Vohra added that the platform will be looking to extend technical expertise to small advertisers and trying to ensure that they are suitably funded.

 Working with VC funds is crucial as it allows us to scale and support SMBs at an early-stage itself, fast-tracking their growth-  Archana Vohra, director of Small and Medium Businesses at Facebook India

The Indian e-commerce market is expected to grow to US$ 200 billion by 2026 from US$ 38.5 billion as of 2017. This boom is will bring with it the rise of online sellers who may not necessarily sell on Flipkart or Amazon, especially while starting out because of intense competition. 

Social media, on the other hand, is not only a primary influencer of consumer purchasing decisions but now also a place where users can transact for real-world goods, like for example on Instagram. 

What these burgeoning online sellers also represent are potential customers for paid Facebook services such as helping with user acquisition and building online presence through ads. 

The Idea Behind The Facebook VC Brand Incubator Program

For the first edition of the programme, Facebook is working with Sauce.vc, a Mumbai-based early-stage venture capital fund that among others has partnered with startups in the food and beverages, personal care, apparel, and the lifestyle space. 

“The VC Brand Incubator Program provides a much-needed understanding of Facebook, it’s family of apps, and the digital landscape. As a consumer-focused investor, we look for social marketing expertise in teams that we back as it is a huge driver of success for small startups that have to optimise every rupee spent,” said Manu Chandra, Founder of Sauce.vc. 

At the moment, Facebook’s officially stated goal is to help build the SME  ecosystem and this could potentially be a welcome move for the ecosystem. 

According to the Confederation of Indian Industry (CII), constraints such as high cost of credit, low access to new technology, and poor adaptability to changing trends are hampering the growth of Indian MSMEs.

“This is a great time to renew focus on the SME sector. The backbone of GST, UPI, affordable mobile connectivity and horizontal banking infrastructure has now been laid for SMEs to exploit and grow on top of a strong foundation. They can now focus on product development, differentiation, O2O models, and new customer acquisition,” said Pranav Pai, cofounder of venture capital firm 3one4 Capital. 

According to Pai, the role of platforms such as Facebook, WhatsApp as well as startups building domain-focused platforms like ‘Open’ will be important. 

“What we try and do with the SMB with customer backwards approach and not Facebook first approach. We want to reach out to as many as microbrands as possible which will be done via a combination of partnership and outreach,” added Vohra, who also said that the company may partner with state governments to help scale startups.

Details regarding what exactly these skills programs will involve and their tenure are still not clear at the moment, but could this be a vehicle for Facebook to make future investments in India like its investment in Meesho?

“The lens that I look at is that all startups are exciting and as we go along if we feel the need to make investments, we will make those investments but this will not be a funnel to drive those initiatives,” said Vohra. 

Facebook, which has the highest numbers of its users from India, is opening another front in its India growth story and it is launching a slew of programs in the coming weeks for SMBs at different stages of their lifecycle. 

India’s SME sector contributes nearly 37% to the country’s GDP and Facebook, which claims to have 90 Mn small business partners globally, would ideally look to become one of the key players as this segment grows in India, and this is the big statement of that ambition. 

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