Amazon, Twitter, Hyundai, and Domino’s are buying Indian software fuelling a $75 billion dream chased by top VCs like Sequoia and Tiger Global

• The Indian SaaS segment has the potential to clock a total turnover of $75 billion by 2025.
• One in five global software demand is likely to be met by Indian SaaS companies in the next four years, according to experts.
• On one hand large global corporations, even tech giants like Amazon and Twitter, are buying software solutions from India.
• This has led to a mad rush from venture capitalists who have pumped in $1.7 billion into these startups in 2020.
• Seven unicorns have been created in this space in the last year and a half alone.

The sudden change in global trends and the rise of ‘remote everything’ — from learning to work — has propelled the software-as-a-service (SaaS) industry.

And their customers include marquee names like Amazon, Twitter, Hyundai, Domino’s, and Philips, just to name a few. Venture capital firms like Accel, Tiger Global and Sequoia, looking for the next gold rush, have pumped in $1.7 billion across 128 deals in 2020, and more in 2021, creating at least seven unicorns in the space of less than 20 months, in India alone.

Enterprise tech accounted for 13% of deal volume among top investors in the first half of 2021, says a NASSCOM PGA Labs report.

According to a report by investment firm Chiratae Ventures and consulting firm Zinnov last month, the Indian SaaS segment has the potential to clock a total turnover of $75 billion by 2025.

But where will this revenue come from?

The answer is simple — market and product expansion. As the world stepped into a lockdown in March 2020, the SaaS companies had a new reality to face — the demand for softwares and solutions that required limited/no physical efforts and showed faster results was the need of the hour.

More enterprises were on a hunt for tech solutions in the latest virtual scene and SaaS companies started seeing more customer interest. The increased customer interest also resulted in increased flow of venture capital for this segment and India added seven SaaS unicorns — private companies valued at or more than $1 billion — during the pandemic since 2020.

While the investors’ interest brought in more money for the SaaS companies to grow, the increased customer interest has brought in more revenue. Zoho, which is a 25-year old bootstrapped company that has not raised funds so far, has customers like Amazon, Zomato and Xiaomi.

Here's Sridhar Vembu, the founder of Zoho, explaining the software boom, in a recent interview with Business Insider.


Conversational artificial intelligence (AI) solutions company Uniphore ⁠— backed by Cisco, Sistema Capital Partners and ⁠Chiratae Ventures — claims to have noted a 3-fold year-on-year increase in their revenue in the financial year 2021, meanwhile contract management system has termed this fiscal the best one for them.

Similar trend of increased revenue has been witnessed by most of the big SaaS names in India.

Backed by Google and led by founder Girish Mathrubootham, help desk software company Freshworks ⁠— which has bagged contracts from Vice Media Group, Toshiba and Cisco ⁠— claimed to have crossed $300 million in annual recurring revenue (ARR) in February 2021. ARR is a metric used by SaaS businesses to show the revenue one can expect on a yearly basis.

“It’s no secret that the future of business and scale is SaaS-driven, more so in the post-pandemic landscape. What’s interesting however is how quickly Indian companies have set a global benchmark for the industry. The exponential growth unlocked in the last 5 years is a testament to how capital efficient the Indian SaaS industry is,” Venkatesh Peddi, executive director and head of SaaS investments at Chiratae Ventures, previously said.

One in five global software demands will be met by Indian SaaS companies in the next four years, Chiratae-Zinnov report added.

What are Indian startups doing to attract these customers?

With enough revenue and funding to aid sustain and grow their businesses, Indian SaaS companies have now put in greater focus on penetrating deeper into the international markets.

Monish Darda, co-founder and chief technical officer (CTO) of Icertis, talked to Business Insider about the three important aspects for international expansion for any SaaS business. First, ensuring that the technology is in accordance with the market one if planning to enter. Second, readiness from the team perspective and having local workforce who understand the market well. Third, cracking right partnerships to expand business.

“If you look at contract management, you will see that for India we will not only integrate electronic signatures from Adobe Sign, which are global, but also add e-Mudhra which is a very Indian specific digital signature. You always have these different things in different markets that you need to cater to, to be successful. So there is technology,” he explained.

Ankur Bansal, co-founder of BlackSoil Capital, in an interaction with Business Insider said that it’s almost a given for all SaaS companies, who have found their product-market fit, to think global. Having global customers changes the valuation of a SaaS company “dramatically” and offers much better margins to the company.

“In terms of the size of the contract, the understanding of it and the speed of execution — everything on all counts in favour of a SaaS company… Anyway SaaS business margins are great, and on top of it if the company is catering to customers based out of the US or Europe then it becomes way better,” Bansal added.

SEE ALSO
Infosys, Airtel, Kaveri Seed and other top stocks to watch out for on August 26

Google Pay to let users open fixed deposits on its platform

Popular pro-vaccine Reddit page calls on founders to do more to combat COVID-19 disinformation