Indian software-as-a-service (SaaS) startups can potentially generate annual revenues of USD 50–70 billion by 2030, capturing 4–6% of the global market, said a new report released on Wednesday by SaaSBOOMi, an Asian community of SaaS founders and product builders. Consequently, these companies will have an opportunity to create USD 1 trillion in value over the next nine years.
There are nearly 1,000 funded SaaS firms in India, of which ten are unicorns. These startups generate about USD 2-3 billion in total revenues and employ nearly 40,000 people, noted the report titled “Shaping India’s SaaS Landscape.”
As the Indian SaaS ecosystem continues to mature, investors are becoming increasingly bullish about the space. At USD 1.5 billion, the segment accounted for the second-highest quantum of investments after consumer tech in 2020, which saw local startups raising a total of USD 10 billion from VCs, as per an earlier report by the Indian Venture Capital and Private Equity Association and Bain & Company. The average deal size for SaaS investments also increased dramatically in 2020 to USD 25 million from USD 14 million in 2019.
“Over the last five years, the number of funded SaaS companies has doubled, and the number of SaaS companies drawing Series C or later stage capital has quadrupled, representing significant traction,” said researchers at Bain & Company in a separate note late last year.
“With distinct competitive advantages enhanced by a level playing field around the world, Indian-heritage SaaS companies are well poised to reach USD 18 billion to USD 20 billion in revenue and capture a 7–9% share of the global SaaS market by 2022,” they observed.
However, to reach its full potential by 2030, the Indian SaaS ecosystem may need to increase funding to three to four times the current levels, the SaaSBOOMi report noted.
Overall, the global SaaS market is expected to cross USD 500 billion in revenue by 2025, hitting USD 1.3 trillion by 2030, driven by growth in content, collaboration, and remote work enablement software. For instance, enterprises worldwide spent USD 600 billion in 2020 on software, including SaaS, constituting 2% of the total USD 3 trillion that global IT and communication enterprises spend.
Even at the peak of the COVID-19 pandemic, software and SaaS were the highest-performing categories in the technology, media, and telecom industries,” it added.
In India, the COVID-19 pandemic has given local SaaS firms an unprecedented push, with organizations across industries moving to online and remote work. Since the onset of the healthcare crisis early last year, six new SaaS unicorns have been born in the country—Postman, Zenoti, Innovacer, Highradius, Chargebee, and Browserstack.
“India has an exciting opportunity to propel itself onto the world stage as a SaaS force to be reckoned with. While there are challenges ahead, these are not insurmountable,” said Manav Garg, CEO & founder of Eka Software Solutions and founding partner at SaaSBOOMi.
According to Girish Mathrubootham, founder and CEO of Freshworks and founding partner of SaaSBOOMi, India has emerged as a hotbed of innovation for SaaS companies.
“I’ve always believed that for those of us who helped pave the way, we owe it to others to pay our learnings forward. When we share knowledge, experience, successes, and even failures, we make entrepreneurship more accessible than ever before,” he said.