As the first-order macroeconomic headwinds reach Indian shores, several SaaS companies say there has been heightened churn in the small business segment. Macroeconomic worries have been identified as a clear and present ‘risk factor’, though businesses claim operating margin levels for the Indian SaaS industry are higher compared to global peers and cross-country rivals in the consumer segment.
Nasdaq-listed business software company Freshworks said in its quarterly performance report that the business mix was steadily gravitating towards larger deal sizes, lending resilience to its business model, even though the small and medium business (SMB) segment was seeing more customers leave.
“As our business has moved more upmarket, our largest customers today represent the majority of our business at approximately 57% of our ARR [average recurring revenue, a key SaaS metric]… we are seeing steady increases in the average revenue per account, reflecting our ongoing customer expansion and larger deal sizes,” Freshworks said.
User retention and engagement software company CleverTap believes India cannot be immune to the financial woes of the United States, but the cost arbitrage of running a business with most of its product development and go-to-market (strategy) divisions in an emerging economy like India still has its advantages.
The impact is also not across the board.
Discover the stories of your interest
“The SMB segment is seeing some churn but if you look at the enterprise segment, which is $100,000 Annual Contract Value and above, there is resilience. Thirdly, there is nothing like a crisis to spot an opportunity,” co-founder Anand Jain said.
Indian SaaS startups should scout for new market entries and untapped geographies in Southeast Asia and Latin America to fuel growth, he added.
SaaS demolished the on-premise model of software service by taking applications to the cloud, a migration that continues to make the sector an attractive opportunity to start up, said Manav Garg, co-founder of SaaSBOOMi, a collective of SaaS and product company founders.
Because of the US factor, companies would witness some short-term slowing which might lead them to look carefully at marketing spends and slow hiring speeds, he added.
Some SaaS firms have launched customer retention products positioned to help businesses retain customers and earn more from them during challenging times such as these.
SaaS company Chargebee rolled out a customer retention suite aimed at helping businesses earn more from their customers.
The company’s co-founder Rajaraman Santhanam said SaaS companies will spend every dollar more judiciously now, as the cost of funds has gone up, given the high-inflation low-liquidity scenario prevailing in the United States.
SaaS firms in India raised a record amount of capital last year.
According to a report by Bain & Company, it was pegged at $4.5 billion.
This means most firms on scale-up mode were adequately capitalised, said Everstage CEO Siva Rajamani.
With valuations tapering down and consumer-focused startups ready for down rounds – fundraising at lower valuations – SaaS companies aim to fly through the clouds without venture capital fuel, he said.
