In the dynamic landscape of Indian startups and fast-moving consumer goods (FMCG), recent developments highlight both promising trends and emerging challenges. A Y Combinator (YC) executive has expressed increased confidence in Indian founders, while FMCG companies are experiencing rising costs in the quick commerce (q-comm) sector.
Y Combinator's Endorsement of Indian Founders
Ankit Gupta, a general partner at Y Combinator, has affirmed that the desire to invest in Indian founders is stronger than ever. This enthusiasm stems from the emergence of a new generation of young, technically proficient individuals who possess an innate understanding of artificial intelligence (AI). Gupta emphasized that the best companies are yet to be built, expressing hope that many will be founded by Indians. He cited Emergent and Giga as two of YC's fastest-growing companies founded by Indian entrepreneurs.
Gupta noted that AI tools have democratized technology, making it more accessible to those previously excluded. This shift has leveled the playing field, diminishing the advantage of experience and emphasizing the importance of technical skills and the ability to iterate rapidly based on customer feedback. YC itself has adapted to this new reality, with a significant in-house software team dedicated to leveraging AI tools.
However, it's worth noting that despite Y Combinator's investments in Indian startups, the accelerator has seen its India cohorts shrink by over 70% in recent cycles. Some factors contributing to this decline include limited success in Series A funding, regulatory hurdles from foreign holding structures, and startup shutdowns. Since 2012, only about 20 India-linked startups backed by YC have gone on to raise a Series A funding or beyond.
FMCG Companies Face Rising Costs in Quick Commerce
The rapid growth of quick commerce has presented both opportunities and challenges for FMCG companies in India. While q-comm platforms offer a fast-growing sales channel, profit margins are being eroded by increasing advertising expenditure.
Industry executives report that profit margins in q-comm have fallen to levels comparable with those in traditional kirana stores and organized retail chains. This decline is attributed to the heavy spending required to secure premium listings and time slots on q-comm platforms, where shoppers often make decisions impulsively within a minute. As Angshu Mallick, executive deputy chairman at AWL Agri Business Ltd, noted, companies are forced to invest more to ensure their brands are visible, as consumers spend only 30-40 seconds to decide.
The cost of marketing on q-comm platforms has reportedly doubled during peak shopping periods. In categories with intense price competition, such as staples and essentials, brands that are not among the top three or four listings risk losing out on sales.
Despite the challenges, quick commerce remains a viable channel for FMCG companies. The key lies in optimizing strategies to balance advertising costs with sales growth and maintaining healthy profit margins.
FMCG sector in India
The FMCG sector in India is characterized by major players such as Hindustan Unilever (HUL), ITC Limited, Nestlé India, Procter & Gamble (P&G), and Dabur India. These companies offer a wide array of products, including home care, personal care, food, and beverages. The Indian FMCG market is expected to reach $220 billion by 2025, with startups playing a crucial role in reshaping the industry.
Several FMCG startups have emerged in recent years, challenging established players by offering niche, consumer-driven products tailored to modern preferences. Some notable examples include Mamaearth, boAt, Paper Boat, and Slurrp Farm. These startups have leveraged digital-first strategies, influencer marketing, and sustainable product development to gain traction in the market.
The rise of D2C brands, the growing preference for sustainable and organic products, and an increased appetite for premium consumer goods are driving the growth of FMCG startups in India. Quick-commerce platforms like Blinkit, Zepto, and Instamart provide these startups with opportunities to reach customers faster than ever.
The FMCG industry is witnessing a trend of consolidation, with larger companies acquiring promising startups to tap into new markets and consumer segments. For instance, Marico is reportedly in talks to acquire plant protein brand Cosmix.
