Amazon Launches $250 Million Fund for Indian SMBs

Amazon announced a new $250 million venture fund on Thursday, dedicated to investing in startups and entrepreneurs within India. The focus will be on the digitization of small and medium-sized businesses (SMBs) in this crucial overseas market.

Context of the Investment

This announcement arrives as the American e-commerce giant, having already invested over $6.5 billion in its Indian operations, faces scrutiny from both governmental authorities and the SMBs it aims to support.

The Amazon Smbhav Venture Fund

The newly established fund, named Amazon Smbhav Venture Fund, will prioritize startups that facilitate the online presence of small businesses. This includes aiding in online sales, operational automation, and expansion into global markets. The company has not yet specified the fund’s operational timeline.

Executive Statement

“Small and medium businesses represent the core and vitality of economies,” stated Andy Jassy, Amazon’s incoming CEO, during a virtual event. “We are deeply committed to accelerating the growth of SMBs.”

Initial Investment: M1xchange

Amazon has already made its first investment from the fund, leading a $10 million round in M1xchange. This Gurgaon-based startup, founded three years ago, operates an invoice discounting marketplace for MSMEs.

M1xchange connects MSMEs with banks and financial institutions, enabling businesses to assign invoice dues for financing at improved rates, thereby addressing payment challenges.

Focus Areas Beyond Fintech

While fintech is a key area, Amazon’s new venture fund will also concentrate on the agriculture and healthcare sectors. However, the company remains open to considering tech startups from diverse industries that contribute to SMB empowerment.

Sector-Specific Investment Goals

• Agriculture: Investments will target startups leveraging technology to enhance access to agri-inputs for farmers, provide credit and insurance solutions, minimize food waste, and improve produce quality.
• Healthcare: The fund will support startups enabling healthcare providers to utilize telemedicine, e-diagnosis, and AI-driven treatment recommendations.

Amazon Smbhav Event and "Spotlight North East"

The announcement was made during Amazon’s annual Smbhav event, a four-day event dedicated to India-based SMBs. During the event, Amazon also launched “Spotlight North East,” an initiative to onboard 50,000 artisans, weavers, and small businesses from India’s North East region by 2025.

This initiative aims to boost exports of commodities such as tea, spices, and honey from the region.

Previous Commitments and Current Impact

At last year’s Smbhav event, Amazon pledged $1 billion to digitize 10 million SMBs. The company reported earlier this month that it has generated 300,000 jobs in India since January 2020 and facilitated $3 billion in exports for Indian-made goods.

Onboarding Retailers and the Local Shops Program

Currently, over 50,000 offline retailers and local stores – known as kirana stores – are utilizing the Amazon marketplace. Approximately 250,000 new sellers have also joined the platform. Amazon intends to onboard 1 million additional offline retailers and neighborhood stores by 2025 through its Local Shops on Amazon program.

Ongoing Challenges and Protests

Similar to the protests surrounding last year’s Smbhav event, attended by Amazon founder Jeff Bezos, demonstrations occurred today. Traders voiced concerns and called for government intervention, naming their event Asmbhav (“impossible” in Hindi).

These protests highlight the ongoing challenges Amazon faces in navigating the Indian market.

Allegations of Unfair Practices

In February of this year, an influential Indian trader group, the Confederation of All India Traders (CAIT), called for a ban on Amazon in New Delhi. This followed a report alleging preferential treatment given to a select group of sellers, misrepresentation of relationships, and circumvention of foreign investment regulations.

CAIT’s Demands

CAIT “demanded” decisive action from the Indian government following the revelations in a Reuters report. The organization maintains that Amazon has consistently bypassed India’s Foreign Direct Investment (FDI) laws to engage in unfair trade practices.

Competition and Previous Investments

Numerous international tech companies, including Google, Facebook, and Microsoft, have invested in Indian startups in recent years. Amazon has also previously backed firms like Shuttl and MyGlamm. The company acquired retail startup Perpule for approximately $20 million last month.