saas startups: Funding for Indian SaaS to rise 62.5% to $6.5 billion this year: report

Bangalore: Indian software-as-a-service (SaaS) startups, which have been at the center of investor interest, are expected to generate total revenue of $116 billion by 2026, with a compound annual growth rate (CAGR) of 55-70%. growing from. According to the latest report by venture capital firm Chirate and management consultancy Jinov.

In a report titled ‘India SaaS: Punching Through the Global Paying Order’, Chirate and Zinov said that total funding for Indian SaaS startups is expected to reach $6.5 billion this year from $4 billion in 2021 – an increase of 62.5%.

The report said that the average size of investment in Indian SaaS increased from about $25 million in 2020 to $56 million in 2021. It said there are currently over 1,150 active Indian SaaS companies.

“We are very excited in certain segments of SaaS, such as cloud-native services, cloud security, hyper-intelligent automation that integrates AI and ML (artificial intelligence and machine learning) and the Web 3 infra layer to further enable digital adoption. There is a lot of scope for doing services,” said Venkatesh Peddi, managing director, Chirata Ventures.

Chirata Ventures (formerly IDG Ventures India) has backed software startups such as conversational automation platform Unifor, no-code platform Hevo and customer experience management platform CloudCherry, among others.

Fundraising for SaaS

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With investors continuing to support Indian SaaS startups for their projected revenue and growth results amid the global slowdown, the report said eight SaaS startups could become unicorns in 2022.

Of the 14 startups that became unicorns in the first quarter of 2022, five were SaaS companies – HR software provider Darwinbox, analytics company Fractal, conversational automation startup Unifor, cloud broadcasting software company Amagi Media Labs and developer tools platform Hasura.

SaaS companies raised $2 billion in 93 deals in the first quarter of 2022, according to data from research platform Venture Intelligence.

Despite the funding winter that affected Indian SaaS between 2012 and 2018, nearly 15 SaaS companies have achieved unicorn status in the last four years alone, a nod to the Indian SaaS story, said the Chiratae-Zinnov report. Is. According to Zinov’s analysis, a total of 17 Indian mother-in-laws are unicorns.

In addition, late-stage deals in Indian SaaS continue to boost funding in the region. In 2021, about 40% of the total funding invested in Indian SaaS was in growth in late-stage rounds, compared to only 15% between 2018 and 2020.

“The confidence of large investors in Indian SaaS has increased significantly over the past few years and will continue to grow. However, the pie between early-stage and late-stage funding remains flat,” said Praveen Bhada, Managing Partner, Emerging Technologies at Zinov.

“We are certainly being careful with the investment … although we predict that investments of $4.2 billion last year will cross $6 billion this year,” he said.

Last year there were around 1.3 million people working in the Indian SaaS ecosystem and this number is expected to more than double to 2.8 million this year in line with rising revenues.

“While we expect talent to grow in this area, the rapidly growing nature of SaaS is making it difficult to feed the right talent. We are hopeful that this will change going forward,” Peddi said.

Bhada said that post the pandemic, customer acquisition is becoming a challenge. “During the pandemic, for customers, it never really mattered where the company is from, but now things are changing in the post-Covid world. We see that the cost of acquiring a customer is increasing, which is a challenge to the pace of growth of the SaaS ecosystem,” Bhada said.

Web3 in focus

As Web3 continues to capture investor interest, venture capital firms like Elevation and Accel bet big on the space, with the sector seeing a surge in SaaS innovation.

The report said that Web3, data analytics, developer tools and security represent the next frontier for SaaS startups.

“From an innovation standpoint, Indian SaaS in Web3 is still at a very early stage. There is room for growth and we will be watching companies innovating in the application layer, from decentralized automation to NFTs and Metaverse. Analytics in Web3, Security and developer tools are also exciting,” Peddie said.

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