Over the past five years, the number of software-as-a-service (SaaS) firms have doubled in India, and the SaaS firms in the country are poised to reach $30 billion in revenue by 2025, a new report showed on Tuesday.
India now has 13 SaaS unicorns and between seven and nine companies with over $100 million in annual recurring revenue (ARR).
The investments in Indian SaaS companies rose to $4.5 billion in 2021 – an increase of 170 percent from 2020, with growth primarily driven by a surge in the number of deals over $50 million, according to the report by management consulting firm Bain & Company.
In 2021, more than 35 Indian SaaS companies had more than $20 million in ARR.
“With heightened interest in SaaS, India has witnessed the emergence of dedicated SaaS-focused funds as well as participation from new investor categories, including corporate venture capital (CVC) and sovereign wealth funds,” said Arpan Sheth, Bain & Company partner and leader of the firm’s India’s Private Equity and Alternative Investor practice.
The top 10 investors’ share in total deal value across 2019-2021 was 30 per cent-35 percent, with Tiger Global (by value) and Sequoia (by volume) being most active over 2020-2021.
According to the report, India’s SaaS is driving value creation in four key ways.
The number of Indian SaaS exits increased by 100 percent from 6 in 2018 to 12 in 2021 with Freshworks’ initial public offering (IPO), therefore initiating a new wave in exits.
Further, Indian SaaS firms have exhibited high capital efficiency with an excellent ARR-to-funding ratio in line with their global SaaS peers.
“Select Indian companies are even outperforming their US counterparts. Currently, these SaaS companies employ more than 62,000 people, which is in effect, helping to build a talent pool of professionals with SaaS-relevant skills, in India,” the findings showed.
In addition, more than 250 new Indian firms were founded by former employees of Indian SaaS companies themselves, who now employ more than 5,000 people.
“This strong demand for high-quality SaaS investment opportunities also means that beyond capital and network access, investors increasingly offer a value add’ operational support in areas such as GTM (go to market), product, and recruitment to meet rising expectations from founders and to participate in deals”, explained Sheth.