One of the successful startups operating in the SME ecosystem, Power2SME has announced that its existing investors have pooled together to make additional investments in the company to the extent of $36 million (Rs 230 crore). The investors include Inventus Capital Partners, Accel, Kalaari Capital and Nandan Nilekani, with participation from IFC, a member of the World Bank Group.
Having been launched in 2012, Power2SME turned the corner towards the end of 2016 and has 7 offices and operates in 14 states in India. The main activities of the company include helping SMEs with cost-effective procurements of raw materials, like steel and certain common chemicals.
They also extend their assistance to SMEs in need of working capital financing utilizing their relationship with banks. The third model involves offering support in the SME MRO space, where, again, Power2SME uses the economy of scale advantage in bulk ordering stores and other machinery and spares and then selling them to the SMEs who are registered on their site.
According to last count, some 50, 000 SMEs are already on board and more are likely to get added as they expand their operations geographically. The company has a staff strength of 250 currently. To place the MSME population in perspective, India has the second largest number of MSMEs in operation after China. There are 48.8 million micro, small and medium enterprises MSMEs.
“Power2SME’s goal is to empower SMEs to reach efficiencies of scale thus driving profitability for them. Our work has been driven by our vision to make SMEs bankable. Our deep networks and relationships with the banking sector and financial institutions helps us to make our SMEs succeed like never before. This capital gives us additional resources to expand quickly and strategically into new markets, innovate rapidly, and deliver on our vision,” says R Narayan, Founder and CEO, Power2SME.
Power2SME is trying to use its model to help those SMEs who have the potential to grow, but are hindered by economy of scale and therefore have to end up having to pay higher costs for their inputs. This makes them less competitive and this cycle never breaks. And access to finance at reasonable rates of interest is also another common difficulty encountered by the SMEs. Power2SME is trying to put its weight behind their SME customers in mitigating this trouble as well.
The investors are all unanimous in their acknowledgement of the role Power2SME is able to play and the bright future it has in the years to come.
“In 2012, we invested in Power2SME because we believed in SME growth story. Since then, Power2SME has shown proof of concept of its procurement offering as well as its finance offering and has emerged as a leader in its category. For India, SME growth and empowerment will help in bringing up the GDP contribution of the sector to the nation and Power2SME is leading this change from the front. We are committed to helping the team become the dominant player in this market,” Says Vani Kola, MD, Kalaari Capital.
With the government’s thrust on expanding the manufacturing base in India, the SMEs can contribute immensely and if provided with proper support, it will be a win-win situation for all stake-holders.