The Indian Software as a service (SaaS) market is projected to be valued at $50 billion by 2030, according to a report by a venture capital firm, Bessemer Venture Partners.
The report states that India’s SaaS market has reached a critical inflection point as venture dollars deployed in the region reached $4.8 billion in 2021. With digitisation increasing year-over-year due to an increasingly hybrid world, SaaS start-ups founded in India have seen significant growth in recent years.
Anant Vidur Puri, Partner, Bessemer Venture Partners, told BusinessLine, “The growth of SaaS market in India will be a multi- decade journey and today is just the beginning. We are excited that SaaS adoption is on the rise and will continue to be so for many years to come. .” For Indian SaaS founders, there could be no better time to take advantage of the digital rails and rising cloud adoption and build category creating products, he added.
Macro forces driving innovation
The India SaaS market has reached a significant inflection point due to three macro forces driving innovation, i,e, universally accepted digital rails across industries (such as Aadhar, UPI, FastTag, ONDC), use of smartphones for business purposes and rapid acceleration of digitisation. With these macro changes picking up speed, India’s SaaS market has gained the attention of the venture ecosystem, the report said.
Other findings of the report showed that the key signal of traction within the India SaaS market is the growing cohort of maturing businesses. Since 2015, the number of private SaaS companies in the region at the $100 million ARR milestone has increased steadily from approximately two businesses to just under 10.
The report said, “Based on our limited data, early indicators show that Indian SaaS businesses tend to be far more efficient than their US counterparts.” Most best in class SaaS companies in the global SaaS market have approximately 70 per cent sales efficiency at $10-$30 million ARR. As a business grows its revenue, efficiency drops to about 30-40 per cent by the time the company reaches scale, it explained.
Best in class early stage Indian SaaS companies usually have 150 percent efficiency. This means most Indian SaaS companies will spend less than $100 million to get to $100 million in revenue. “Across the number of businesses we’ve got to know in the region, the ability to break even at $10 million of ARR is far more common,” the report said.
Published on
June 28, 2022
