GROW YOUR STARTUP IN INDIA
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Indian SaaS companies are doubling down on growth (revenue generation) while ensuring operational and capital efficiency. According to a report by Chiratae and Zinnov, the Indian SaaS industry’s resilience shines bright in the face of a stiff funding winter, defying expectations with a projected ~2.5X growth to reach USD 26 Bn in revenues by 2026.

The steadfastness of the Indian SaaS industry, coupled with its ability to adapt to changing market dynamics, has led to its outperformance on a global scale

Venkatesh Peddi, Managing Director at Chiratae Ventures

Venkatesh Peddi, Managing Director at Chiratae Ventures, and head of SaaS investments, stated, “The steadfastness of the Indian SaaS industry, coupled with its ability to adapt to changing market dynamics, has led to its outperformance on a global scale. Given India’s robust foundation, presence of visionary leaders, and strategic exploration of key sectors, we predict that the Indian SaaS industry is poised for tremendous growth, surpassing the significant milestone of USD 26 Bn by 2026.”

Global Recession: A Concern but Not a Deterrent for Indian SaaS

Though concerns of a recession loom large, the Indian SaaS industry has displayed remarkable antifragility to withstand turbulent times. In a recent survey by Chiratae Ventures and Zinnov, an overwhelming 93% of the founders surveyed, anticipate an increase in revenues in the next 12 months. Amidst the wariness of global macroeconomic headwinds, 9 out of 10 investors continue to believe in the India advantage and are betting on existing and newer growth areas. While the world and India – to some extent – witnessed layoffs, 96% of the Indian SaaS unicorns and potential unicorns grew their headcount throughout 2022. In a remarkable contrast, US tech startups announced 3X higher layoffs than their Indian tech counterparts between January 2022 and March 2023.

Steady global IT spends, positive investor sentiment, fundamental entrepreneurial rigor and belief, are helping the ‘build in India, for India and the world’ playbook play out

Pari Natarajan, CEO at Zinnov

Pari Natarajan, CEO at Zinnov, opined, “Indian SaaS startups are defying odds and continuing to attract significant investments. The ability of Indian SaaS to create newer categories, ride the wave of repeatable revenue, play the cost and talent arbitrage game, while building for a more discerning consumer, is enabling them to play at par, and in some cases, outshine their global SaaS counterparts.

“Steady global IT spends, positive investor sentiment, fundamental entrepreneurial rigor and belief, are helping the ‘build in India, for India and the world’ playbook play out. With the might of India’s 3Mn-strong pool of tech talent behind them, Indian SaaS startups have solidified their position as a global SaaS powerhouse, and are on a fast-tracked path to shape the global technology landscape.”

Despite a widely acknowledged funding winter in the Indian startup ecosystem, seed-stage funding witnessed a 1.5X increase, while early-stage funding experienced a notable 1.6X surge in value during 2022. In fact, Indian SaaS start-ups secured 3X more funding in 2022 compared to 2019, demonstrating a steady CAGR of 47%. However, the decline in SaaS company valuations in the public markets has greatly affected private markets, driving down late-stage funding. But stable deal volumes in Q1 2023 indicate that the funding slowdown for Indian SaaS companies has bottomed out, signalling a gradual recovery to look forward to in the upcoming quarters.

The Numbers Game: Indian SaaS Witnesses Normalisation

Housing 1650+ funded SaaS startups, India also witnessed a surge in the number of companies surpassing the USD 1Mn+ ARR in 2022. 2022 was also a record-breaking year with ~280 SaaS companies clocking in revenues between USD 1Mn – USD 10Mn, a significant leap from previous years.

Notably, global public valuation multiples, which were accelerated by the pandemic, underwent corrections in 2022. However, they have gradually recovered since October 2022, with today’s median valuation multiple standing at 6.6X.

Although slightly lower than the pre-pandemic median, this trend indicates that Indian SaaS valuation multiples have displayed higher resilience compared to their global counterparts and that the impact of macro-economic variables are less pronounced on them. These numbers evidence the fact that the Indian SaaS ecosystem exhibits greater resistance to economic shocks in comparison to global markets. They also underscore the unwavering belief that founders and investors have in the industry’s potential for growth and success.

This ‘herd immunity’ indicates that Indian SaaS companies are not just equipped to survive in challenging times but are poised to adapt, evolve, and emerge stronger

Atit Danak, Partner at Zinnov

Atit Danak, Partner at Zinnov, asserted, “The single-most common question in the past 18 months has been – If and when will tech stocks recover to 2021 all-time highs? While it’s unlikely we will witness those valuation multiples in the near term, we are seeing steady stabilisation and signs of a gradual rebound. Despite challenging circumstances, investors’ confidence and founders’ resilience remain unwavering.

“The Indian SaaS ecosystem has exemplified remarkable adaptability and resilience in the face of recessions and external disruptions. This ‘herd immunity’ indicates that Indian SaaS companies are not just equipped to survive in challenging times but are poised to adapt, evolve, and emerge stronger. With 93% of founders expressing optimism about their revenue growth prospects for the upcoming year, we see a clear shift towards bolstering revenue growth on the back of solid fundamentals – a testament to the future growth and success of the Indian SaaS landscape.”

The India advantage also extends to key opportunity areas – DevOps, Cybersecurity, and Vertical SaaS – which will lead the next phase of growth and innovation across SaaS categories. India has emerged as a disruptor in the global DevOps market, becoming the number one contributor to global AI-related GitHub repositories, a function of 10% of the global developer base being located here.

Furthermore, the increasing global VC funding in Cybersecurity, coupled with the rapidly evolving threat landscape, presents Indian SaaS companies an opportunity to create and offer innovative Cybersecurity solutions. Vertical SaaS also emerges as an attractive investment opportunity, as 80% of the investors surveyed are more likely to invest in Vertical SaaS start-ups in 2023 as compared to the previous year. India’s 70Mn+ SMBs present a lucrative opportunity for Vertical SaaS players to dive into.

Read more: Indian companies expanding into foreign markets: A growing trend in automation esports gadgets logistics & SaaS

With approximately 16% of the global AI workforce, India takes the lead in AI product development and emerges as a frontrunner in the latest global trend of Generative AI. This demand arises from a heightened focus on enabling customer experience and content generation, and is being serviced by the 800+ Indian start-ups focused on this technology. The global Generative AI market projected to reach USD 110 Bn by 2030, makes for an attractive investment area in 2023 and beyond. Moreover, India’s emergence as a leading player in the global Web 3 market further solidifies its position. With 11% of the global Web 3 talent in India growing at the fastest rate, this investment theme is hard to miss in the coming years.

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