After being one of the key leaders in the Information technology (IT) revolution, India is now rapidly accelerating its growth in providing services to the established IT base. Underdogs Indian SaaS startups are now reflecting India’s digital supremacy with their multi-billion dollar industry.
A massive spike in capitals raised by SaaS
Bain and Co., an American management consultancy firm has revealed in its report that Indian Software as a service (SaaS) startups raised more than $4.5 billion in 2021. This is a remarkable figure as not less than a year ago, Indian SaaS startups were facing uncertainty issues due to which they were able to raise only one-third of total capital raised this year.
The report further reveals that a total of six unicorns were created in the SaaS sector this year, which is equal to the total number of unicorns created in 2019 and 2020. A unicorn is a company whose valuation is at least $1 billion. The Unicorn status came on the back of Indian companies being able to address global challenges through service software. Most of the companies in the SaaS sector are currently valued at between $25-30 million ARR (annual recurring revenue).
In a statement to money control, Aditya Shukla, partner at Bain said, “These are companies that have not just found product-market fit (the first sign that a company’s product is viable) but have also scaled. They have found acceptance from a wide variety of customers and buyers,”.
Saas is servicing as well as creating a new niche for themselves
Shukla appreciated companies for breaking the shackles of servicing only customer relationship management. He said that the companies are now servicing diverse segments like salon and spa management or newer technology needs such as managing tech stacks and testing applications.
Shukla was also appreciative of the fact that SaaS companies are creating new categories of services which will only help in enhancing the base of companies themselves. “A lot of these companies are category creators in areas such as DevOps (software development and IT operations), infrastructure, and new verticals. SaaS companies are addressing really large markets. Even for classic CRM or ERP solutions, the penetration is low, so there is headroom for growth. That leads to some of these multiples,” said Shukla.
Shukla cited the success of companies like Classplus, Khatabook, and Darwinbox and asserted that these companies are catering not just to software chains, but are also digitizing specific industries such as education, bookkeeping, and human resources, respectively.
SaaS-An extremely underappreciated but potentially huge industry
SaaS as an industry is extremely underappreciated all around the world. If a carefully planned roadmap is prepared for the industry, it has the potential to become the biggest contributor to India’s GDP. After the advent of Reliance Jio in the Indian market, the IT sector has rapidly transformed from an exclusionary to a higher inclusionary sector. As the nation is digitizing, even the smallest of jobs are requiring a software-based system to hire, execute, provide a salary or even fire an employee.
SaaS will contribute $1.1 trillion to Indian GDP
The rapid digitization has opened a huge market for the secondary services category to the software industry. According to a report by US India Strategic and Partnership Forum (USISPF) and Crosstower, India’s yet-to-be-discovered digital business segment contributes $1.1 trillion to Indian GDP.
The report cites the fact that the Internet’s exponential explosion into daily combined with the advent of blockchain technology, Non-fungible tokens (NFTs) will mean that the digital world will contribute $22 trillion to world GDP in 2021 and $25 trillion in 2025. This will provide a huge opportunity for India’s SaaS sector to expand its already broad market share.
Currently, India’s major chunk of the population belongs to the working-age category. Prime Minister Modi has laid emphasis on changing India’s business landscapes through start-up India and stand-up India along with the advent of Aatmanirbhar Bharat.
These initiatives only mean that Indian SaaS companies will have the world’s biggest market to serve. In addition to having the biggest market, it will have the biggest employable cheap labor force in the world for availing services at a cheaper rate. We may not have been number one in the IT sector, but SaaS will turn out to be the roaring lion for India.