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Software-as-a-Service (SaaS) companies like Zoho, Druva, Icertis and Freshworks have field the innovation in India, with SaaS firms poised to reach between $18 to $20 billion in revenue by 2022, a new report forecast on Tuesday.
The Indian SaaS companies have the potential to capture a 7-9 per cent share of the global SaaS market by 2022, according to a new report by Bain & Company that analysed a wide range of Indian SaaS companies which have, since 2010, evolved from the rise of a few upstarts to a multibillion dollar industry today.
Such companies such as Zoho, Druva, Icertis and Freshworks have breached the $100 million annual recurring revenue (ARR) mark, with a healthy pipeline of companies well placed to follow over the next 12 to 18 months.
Acclaimed first-gen founders, such as Sridhar Vembu of Zoho and Girish Mathrubootham of Freshworks, have played a pivotal role in India's SaaS journey by actively engaging to build a community of budding entrepreneurs, which led to the development of many new ventures and immense job creation.
For example, Freshworks created an entrepreneurship cascade of more than 25 companies, including Voonik, Revv and SurveySparrow which, in turn, have already created 500 to 1,000 jobs.
"We now have a thriving ecosystem of enablers comprised of both domestic and global SaaS investors, over a hundred SaaS angels with four or more investments, incubators and accelerators and SaaS development events and initiatives sponsored by communities such as SaaSBOOMi," said Arpan Sheth, partner and leader of Bain & Company's Asia-Pacific Technology, Vector and Advanced Analytics practices.
"The impact of these enablers can be witnessed in SaaS companies' faster trajectory to scale in recent years, with over 50 companies having breached the $10 million ARR milestone and many more are expected to follow," Sheth added.
The Indian SaaS companies are trying to scale through specific initiatives such as investment in market creation via freemium offerings, innovative monetisation models and clear articulation of benefits to the customer with tangible return on investment (ROI) metrics.
"Companies such as Yellow Messenger and Vernacular.ai are closing large, global-sized contracts by targeting marquee customers in the Indian market," the report mentioned.
Indian SaaS companies today have different areas of focus, classified across multiple vectors such as size of customer, type of solution and geography of focus.
"SaaS in India has recently witnessed significant funding traction, surpassing $1.3 billion of annual investment in 2019. Horizontal business software was the largest sub-segment, accounting for two-thirds of all SaaS investment and vertical-specific SaaS grew the fastest, albeit on a small base," informed Lalit Reddy, partner and leader in Bain India's Private Equity and Digital Delivery practices.
Even amid Covid-19, SaaS has been a prominent investment theme with a growing share of venture capital (VC) and growth equity (GE) investments.
"SaaS investments were 15 per cent of VC and GE investments in the first half (H1) of 2019 versus 20 percent in H1 2020. SaaS also emerged as the top priority technology sub-sector of focus in an investor survey, we conducted last year," Reddy added.