Indian software-as-a-service (SaaS) startups are reportedly set to see exponential growth over the next four years, to reach $100 billion in net revenue by 2026. According to the Indian SaaS Landscape Report, 2022 by Indian venture capital (VC) advisory fund Chiratae Ventures and US-based consultancy firm Zinnov, the SaaS industry of India generated $8 billion in net revenue across the industry in 2021.
The growth projections affirm the bullish outlook in the SaaS space by other industry consultants as well. In March 2022, a Motilal Oswal report stated that Indian SaaS startups could collectively account for $70 billion in net revenue by 2030, or about 5% of the global SaaS industry. According to the report, Indian SaaS startups earned $2.6 billion in revenue by 2020 to account for 1% of the global market.
At present, India is the third largest SaaS provider in the world, behind USA and China.
Pari Natarajan, chief executive of Zinnov, claimed that Indian SaaS startups could overtake China in “the next few years” in terms of annual revenue. He also added that investments in Indian SaaS ventures would continue to grow proportionately.
The Chiratae-Zinnov report stated that in 2021, VC investments in SaaS companies stood at $4.2 billion – which could increase by 55% this year to reach $6.5 billion. Indian SaaS startups have been earmarked by numerous reports for strong growth potential previously, too – according to a report by Bain & Co in December 2021, these startups accounted for 8% of all private equity (PE) and VC investments in 2021.
These investments reportedly grew by 170% year-on-year over 2020, and are projected to grow exponentially in the coming years as well, according to Bain & Co.
In terms of market maturity, the Chiratae-Zinnov report claimed that numerous Indian SaaS startups succeeded in hitting a 40% revenue contribution in 2021. The revenue contribution is the surplus left when operational costs such as project expenses are deducted from the gross revenue earned by a company in one financial year. Revenue contribution also includes fixed costs of a company such as maintenance of office and information technology (IT) infrastructure, which when removed amounts to the profit earned by a company.
Indian SaaS startups that have recently acquired unicorn status include Postman, Zoho, Freshworks, Icertis and Druva, among others. According to the report, sectors in SaaS that have seen the highest investor interest include sales and marketing, retail and ecommerce, healthcare, and infrastructure.
Going forward, the report states that sectors such as cloud infrastructure, intelligent automation, cloud security services and web3 ventures may attract the highest interest from investors in the Indian SaaS space.
Increasing digitalisation, more affordable automation tools across industries and tighter cyber security regulations could become key factors behind the growth of SaaS startups in these sectors. For web3 ventures in India, clarity on regulatory policies in blockchain and cryptocurrency technologies could be key for startups in this sector to grow, and attract investor interest as well.
However, even without regulatory clarity, web3 ventures have continued to grow in India. CoinDCX, an Indian cryptocurrency exchange, announced a $135 million funding round earlier today to see its valuation grow to $2.15 billion. Other activities have also sought to support the web3 space in India, such as the Blockchain Accelerator Programme organised by web3 startup incubator Buidler’s Tribe, crypto exchange WazirX and the Atal Incubation Centre at the Goa Institute of Management.