- The landscape is poised to provide a massive boost to the Indian economy in terms of growth and employment rates.
- SaaS industry is well poised to overtake the IT services industry by 2030, Zinnov says.
- The possibility of becoming a trillion-dollar-valued industry by 2030 is a strong reality and will create more than 260,000 new jobs over the next five years.
- Stage is set for many more unicorns to emerge over the next few years.
Indian SaaS (software-as-a-service) players are poised to fulfil 19 per cent of the global SaaS demand by 2025 from about five per cent in 2020 and have witnessed an unprecedented bull run in the last five years, an industry expert said.
“Indian SaaS companies are on an incredible bull run, with the ecosystem maturing at an accelerated pace. The companies have all the ingredients to take the pole position. The SaaS industry is well poised to overtake the IT services industry by 2030,” Pari Natarajan, CEO of management and strategy consulting firm Zinnov.
According to a study conducted by Zinnov and technology venture capital funds advisor Chiratae Ventures, the global SaaS market is estimated to reach a massive $400 billion by 2025, and this will firmly position Indian SaaS companies as major players on the global stage.
The growth in India continues unabated at about 51 per cent annually, making the possibility of it becoming a trillion-dollar-valued industry by 2030 a strong reality and will create more than 260,000 new jobs over the next five years.
The total talent employed by the Indian SaaS industry is expected to grow fivefold in the same time frame.
In 2020, total talent employed by the Indian SaaS industry stood at more than 56,000.
Of the 51 unicorns in India, 10 are from the SaaS space, with four joining the coveted unicorn club in 2021 alone.
VC investments rev up
This propulsion of start-ups into the unicorn club has been accelerated by global Venture Capital (VC) investments, especially in the last decade.
Resident unicorns such as Freshworks, Postman, Uniphore, Druva, etc., and non-resident unicorns such as Zscaler, Nutanix, Automation Anywhere, etc., are putting the stake in the ground for India’s role in shaping the local and global SaaS narrative.
The Chiratae-Zinnov study highlighted that global VCs have been at the forefront of capitalising on the rising trillion-dollar Indian SaaS opportunity, with VC investments surging tenfold in the last 10 years. Investments to the tune of $6 billion have been made in Indian SaaS companies so far, with about $4 billion coming in the last three years alone.
According to data and analytics company GlobalData, a total of 635 VC funding deals were announced in India during the first half while the corresponding disclosed funding value of these deals stood at $9. Billion.
Most of the months during the first half of this year, except May, experienced growth in deal value while February and May were the two months that experienced a decline in deal volume.
“Considering the second wave of the CovidD-19 pandemic, VC investors were seen shying away from committing big-ticket investments in India during the first half. Nevertheless, some of the startups in the country still managed to gain investors’ traction amid the challenging times,” Aurojyoti Bose, Lead Analyst at GlobalData, said.
Some of the notable VC funding deals announced during January-June 2021 in India were $502 million raised by ShareChat, $500 million funding by Zomato Media, $400 million raised by Dream11 Fantasy, $400 million raised by Dream Sports and $350 million funding by Byju’s.
“With more than 600 global VCs actively investing in the Indian SaaS industry, the stage is set for many more unicorns to emerge over the next few years,” Venkatesh Peddi, Executive Director and Head of SaaS at Chiratae Ventures, said.
The study shows that the fivefold explosive revenue growth and the twofold growth in the number of Indian SaaS companies have been built on the track record of the SaaS industry being highly capital efficient as compared to any other industry.
Setting a global benchmark
“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,” Peddi said.
As an early investor in the Indian SaaS ecosystem, he said that they are stoked about the ground-breaking progress our companies have made and are excited to unlock what the future holds in the form of newer industry milestones and innovations.
Moreover, he said that SaaS is quickly emerging as the gold standard for businesses, from traditional accounting firms to AI start-ups, and from small family-owned businesses to large multinational corporations.
Natarajan said that India is uniquely positioned to capitalise on and propel the SaaS revolution to even greater heights.
“The soaring valuations that we witnessed even at the height of the pandemic, the revenue per employee compared to that in IT Services (twofold in the last two years), and the rise in median revenue – stand testament to the potential that SaaS as an industry holds, even beyond the pandemic,” he said.
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