Saas Tech News: SaaS Tech: Building for India, winning the world

The recent pandemic has changed the way we work. Organizations have been forced to rethink their business models and the way they serve customers. With the pandemic, investments in technology have undergone a massive paradigm shift. Technology is no longer a catalyst, but an integral part of survival and the ability to thrive in a rapidly changing business environment. Increasingly, technology and digitization strategies are becoming key priorities for boards of directors.

The pandemic has accelerated technology investments in most of the world’s businesses. Companies have launched digital transformation initiatives, new models of access to the workplace or improvement of the consumer experience, etc. Remote working / digital economy / automation and supply chain improvements have made accelerated spending on technology a reality and these trends are here to stay for the next decade. We are entering an era where businesses and technology-based businesses will generate greater value creation for all stakeholders.

Beyond new application areas, emerging technologies such as cloud, data and analytics, artificial intelligence, machine learning and industry 4.0 are rapidly expanding the horizon of opportunity. The technological infrastructure in companies that have undergone a major update with enterprise resource planning is also ripe for change. As India has emerged as a global leader in outsourced IT services and the industry is expected to reach $ 350 billion over the next five years, the opportunity arising from many of the areas outlined above will be much greater and may easily represent a trillion dollar market. opportunity for Indian businesses over the next decade.

The adoption of new technologies allows for easier acceptance by customers and, as a result, the technology is democratizing, allowing for much faster adoption. This bodes well for many small and medium businesses who can create unique solutions and reach relevant markets through profitable digital marketing initiatives. Overall, therefore, the competitive landscape for technology solutions is increasingly becoming a level playing field with a diverse set of solution providers serving diverse customers. The adoption of technology by small and medium-sized businesses around the world is also creating a new set of demands that are primarily served by SaaS (Software as a Service) companies.

The evolving global opportunity is seized by entrepreneurs and investors, which has led to a very strong positive dynamic in the ecosystem of Indian startups. According to the Hurun Index, India today ranks among the third fastest growing startup ecosystem in the world and recently replaced the UK as the third country with 54 unicorns. Investment in SaaS companies increased 170% in 2020 and is expected to reach $ 4.5 billion in 2021. This interest extends to all early stage companies, with transaction size increasing by 85% in companies. companies in the seed stage and beyond. Bain India SaaS Report 2020, indicates that the number of transactions beyond Series D has also increased by 20%.

The opportunity is vast and spans a wide spectrum. Promising areas are:

  • Horizontal SaaS solutions: This covers areas such as CRM, business collaboration, HR technologies, application and developer productivity. Many Indian companies developed solutions designed for Indian businesses, evolved the business and then started to address the global market. Some examples in this space are companies like Zoho, Postman, Freshworks, Browserstack, etc. Freshworks is a prime example of not only reaching out to global markets but also gaining acceptance in overseas capital markets and was the first Indian SaaS company to be listed on NASDAQ and currently has a market capitalization of almost 10 billions of dollars.
  • Vertical SaaS solutions: These are solutions that address specific vertical business processes. With tools available for seamless data integration, this is a great opportunity for Indian SaaS companies to identify the right niche in vertical segments and build solutions around those niches. Here again, a number of Indian SaaS companies designed their products for Indian customers, evolved the solution, and then began to reach global markets. Many of these companies have ARR (Annual Execution Rate) revenues comparable to their global peers and therefore are able to compete effectively with the global competition. Some examples of companies that have reached the scale of vertical solutions are Eka software, Capillary Technologies, High Radius, ChargeBee, etc.
  • Technology empowerment for global SMEs: this is largely an untapped market for the tech industry and with the changes taking place it represents a huge opportunity. The cost of technology is falling and therefore becoming affordable for a wider range of businesses. The technology also allows SMS to compete more effectively with large companies. Indian companies like Khatabook, Open, etc. are aggressively developing this market with the ambition of being present on a global scale.

The global SaaS market is around $ 150 billion and growing at a CAGR of 23% and according to Nasscom India’s market share in this area is now only at a high figure. The Indian market for SaaS products is also growing rapidly and will be multiplied by 6 by 2025. With the strong growth opportunities in India, many resourceful entrepreneurs are demonstrating that they can start a business with Indian clients and then start reaching out to global markets. With the strong momentum demonstrated, Indian SaaS companies are expected to gain 19% market share by 2025 (Indian SaaS revolution 2021 – Chiratae-Zinnov report).

What is driving the rapid 70% + growth of Indian SaaS? There are facilitators who help with this. The government has played a key role in nurturing and building a strong startup ecosystem. There is also a diverse set of foreign and domestic investors who have started to focus on supporting these businesses. Another big plus is the talent pool available in India. Added to this is the emergence of serial entrepreneurs and professionals who have worked with large global product companies and are ready to take the risk and enter into entrepreneurship.

Median revenues of global SaaS companies have doubled in the past five years, but their valuations have increased fivefold during the same period. The market for technology products is strong for the foreseeable future and hence the opportunities for Indian SaaS companies are immense. With the support of the strong ecosystem that is already in place, the number of unicorns in India can easily increase 10 times from current levels over the next five years. The day is not far away when we will see over 1000 unicorns in the Indian SaaS ecosystem. Not only will these companies create significant value for the stakeholders, but they will also create a large number of high quality jobs which are of great value to the Indian economy.

When India becomes a $ 5,000 billion economy, will Indian SaaS companies be able to contribute at least 10%? The answer is that there is a high probability. Indian entrepreneurs are fearless and have the courage and vision to conquer global markets. There are already some great role models out there within this ecosystem of Indian startups and we will soon see that the number of role models will increase rapidly. This will help us achieve a double digit contribution to India’s $ 5,000 billion economy and the mantra is simple – build for India – win the world.

(Author is Managing Partner – Mela Ventures, President, Nasscom Foundation and Member, VC Council, IVCA)

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