How large is the Indian market for B2C tech businesses in terms of users who can generate revenue? Maybe 15 crores max! Here’s why, with Fintech as a reference, since some data is available. I guess it is important to know this, so we can all be rationally optimistic.

I get puzzled whenever someone says India has 140cr people & only 9cr demat accounts (6% of the population), & this can grow to 40 crores (25% as in developed nations) over the next few years. Almost everyone building an investing app seems to be sold or selling this idea.

Firstly, India has 9 crore demats, but they aren’t unique. The unique count is ~6 crore. But active demats with holdings above Rs 10k is less than 3 crore. This is in line with the ~3.4 crore unique MF investors—despite the MF Sahi hai and other campaigns.

So ~3cr or 2% of Indians out of 140cr invest. Large opportunity? Not yet & not the right way to look.

ITR filings for FY 20/21 by income. ~4.8cr < ₹5lks ~90lks ₹5 to ₹10lks ~43lks > ₹10lks

If people have to invest or spend more, they need to earn at least ₹2.5lks/yr?

If there are say 5cr more who earn ₹2.5lks+ but don’t file ITR, max Indians who make >2.5lks are just 10cr? Beyond 10cr, income starts dropping below ₹ 1lk. They can’t really invest or have discretionary spending. Now, 3cr out of 10cr is 30%, which isn’t bad at all?

The other question for fintechs focusing on investments is how large can the audience that hasn’t already invested be? Remember, we’ve had a bull market, mega ads, freebies, WFH, IPOs, low interest rates, & social media frenzy? If this hasn’t got people in, what else can?

There are maybe ~20cr on UPI & user growth seems to be plateauing. But among UPI users, the majority (90%) of transactions are again from <10cr Indians. This seems similar to the assumptions of potential users who can invest or spend based on ITR and capital markets data.

Assuming I am wrong by 50%, that total number at max is maybe 15 crores?

Growing this number is the real problem to solve for all of us. Yes, there is incremental wealth created, but that is only within maybe the top 2 crore Indians, easy to miss the fact from our bubbles.

To solve this, the focus should be to do whatever it takes to enable entrepreneurs to build resilient businesses at home. So that they create wealth, share it with employees, shareholders, & invest it back in the economy. From Infy to Tatas to tech startups to lakhs of MSMEs

Not every business is VC’able or can be valued at $10mil, $100mil, or $1bil. Sustainability is more important than valuation. Misjudging the market size and opportunity, then setting wrong expectations and chasing valuations are probably the biggest reason why startups fail.

It is crazy how everyone starting a business today wants to be called a startup, and talk is mostly about overselling market size & valuations, but not about sustainability. I hope this gets corrected in this global reset. We need resilient businesses for India to do well.

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