Can AIF Shape the Next Public Market Champion?

India’s Small and Medium Enterprise (SME) sector is full of untapped potential, waiting to spark the country's next wave of high-value startups. Historically viewed as the economy's backbone, these businesses are now recognized for their potential to be transformed into billion-dollar enterprises after becoming companies, e.g., Advait Infratech, Waaree Renewable Technologies Ltd., D.P. Abhushan Ltd., and many more. This shift in perspective is not random, but it's a strategic move by AIF, which saw a significant opportunity to invest in and scale these businesses. With an evolving MSME space, digital adoption, and renewed focus on India’s vast domestic market, the perfect conditions are emerging for VCs to help India's SMEs evolve for tomorrow, so surely we can say that  “yes,” AIFs can create other multibagger stocks in India’s SME Space.

Powered by Froala Editor

• SMEs are the backbone of the economy as they provide a significant number of jobs and are critical for industry. As per the recent press release by PIB, as of June 2025, India has 0.5Mn SMEs out of 65.1Mn MSMEs we contribute about 30 to 45% of GDP and the sector employs more than 280Mn people. 

• SMEs encompass a wide variety of industries and sectors. Some of these primary sectors include manufacturing, logistics, agrotech, B2B services, retail, and technology-enabled solutions, often providing entrepreneurial opportunities to the market demands. 

• Once again, SME are considered to be high-risk by traditional banks, creating a financing gap that AIF can help fill.

• According to a recent NASSCOM report, SMEs that adopt digital tools and scalable business models can grow 3–5x faster, making them prime candidates for venture-backed growth.

Powered by Froala Editor

AIFs not only provide capital but also bring resources that can be transformative for an SME.

• Leadership & Mentorship: AIF provides amazing guidance & leadership in transitioning startups into growing SMEs. Alongside providing operational support to founders, they also counsel on appropriate marketing, using finance, and preparing for the next funding round. This on-the-ground support can help mitigate risk and drive speed.

• Network Access: AIFs provide a network of potential customers, suppliers, talented professionals, and future investors to SME companies.  The valuable relationships open doors for small businesses that overcome barriers in speeding up expansion and market reach. 

• Operational Expertise: Venture Capital firms (VCs) usually have an established team of specialists in finance, marketing, product, and technology who collaborate with the founders to professionalise their operations, enhance efficiencies, and set a foundation for scalable SMEs.

• Funding for New Ideas: Several SMEs are developing innovative ideas in areas like manufacturing, logistics, agritech, and niche services, and Venture capitalists not only provide funding to enhance the new ideas but also provide a layer to the ideas to make them execute the operations more proactively than before.

• Risk Mitigation: With structured funding and strategic partnerships, venture funds can de-risk, making investors and banks more confident in supporting them. 

These funds are coaches & partners who help in transforming their journey for professional and resilient SMEs to debut and for bigger leagues.

Success Stories in the SME SPACE:

Powered by Froala Editor

Based on current trends and their interest, the SMEs sector could contribute significantly to India’s unicorn ecosystem by 2030. Upon data crunching, we have made certain projections which show their continuous increase in the SMEs unicorns.

Growth of SMEs is supported by the following reasons:

• Government Initiatives: Under the PMMY scheme and SIDB, I provide Direct financing support to micro and small enterprises.

•  PLI Scheme: Encourages manufacturing startups to scale and compete globally, providing subsidies, helping them in setting up the plant with the help of DPIIT, a government body under the Ministry of Commerce.

• Startup Policies: Incentivizes early-stage growth and innovation startups by launching tax policies that exempt them from paying tax under the 80IAC Act.

When these policies are combined with VC funding, they create an ecosystem where SMEs not only survive but scale rapidly. 

Powered by Froala Editor

Even though Indian Startups can evolve into Small and Medium-sized Enterprises (SMEs), this endeavor is not always easy. Many SMEs do not keep their business finances adequately documented, are not willing to dilute their equity, and/or may not be prepared for the speed of movement that is associated with venture capital funding.. Furthermore, a sizable portion of SMEs are in Tier II and III cities, which means venture capitalists have to build and develop some local networks.

In addition, Venture capitalists have a role to mentor SMEs through the phases of equity funding and provide support for the petionization of the business. Meanwhile, the government has been essential in the uptake of digital infrastructure and providing incentives for investors, investing in non-tech SMEs.

Conclusion

Thus, the era of unicorns entering the SMEs space in India is not just a distant dream but a present reality. While challenges always exist over the SME sector presents a huge opportunity for venture funds. With the right strategies, support, and vision, traditional SMEs have a strong chance to become the next unicorns emerging from the Indian market.

Powered by Froala Editor