Indian SaaS shows remarkable resilience, with steady growth projected for 2023 and beyond - report by Chiratae and Zinnov

PRNewswire
Bangalore (Karnataka) [India], June 8: The Indian SaaS industry's resilience shines bright in the face of a stiff funding winter, defying expectations with a projected ~2.5X growth to reach USD 26 Bn in revenues by 2026. According to "
," the latest edition of the India SaaS report, jointly done by Chiratae and
, Indian SaaS companies are doubling down on growth (revenue generation) while ensuring operational and capital efficiency.
Global Recession - A Concern but Not a Deterrent for Indian SaaS
Though concerns of a recession loom large, the Indian SaaS industry has displayed remarkable antifragility to withstand turbulent times. In a recent survey by Chiratae Ventures and Zinnov, an overwhelming 93% of the founders surveyed, anticipate an increase in revenues in the next 12 months. Amidst the wariness of global macro-economic headwinds, 9 out of 10 investors continue to believe in the India advantage and are betting on existing and newer growth areas. While the world and India - to some extent - witnessed layoffs, 96% of the Indian SaaS unicorns and potential unicorns grew their headcount throughout 2022. In a remarkable contrast, US tech start-ups announced 3X higher layoffs than their Indian tech counterparts between January 2022 and March 2023.
Despite a widely acknowledged funding winter in the Indian start-up ecosystem, seed-stage funding witnessed a 1.5X increase, while early-stage funding experienced a notable 1.6X surge in value during 2022. In fact, Indian SaaS start-ups secured 3X more funding in 2022 compared to 2019, demonstrating a steady CAGR of 47%. However, the decline in SaaS company valuations in the public markets has greatly affected private markets, driving down late-stage funding. But stable deal volumes in Q1 2023 indicate that the funding slowdown for Indian SaaS companies has bottomed out, signalling a gradual recovery to look forward to in the upcoming quarters.
The Numbers Game - Indian SaaS witnesses a Normalization
Housing 1650+ funded SaaS start-ups, India also witnessed a surge in the number of companies surpassing the USD 1Mn+ ARR in 2022. 2022 was also a record-breaking year with ~280 SaaS companies clocking in revenues between USD 1Mn - USD 10Mn, a significant leap from previous years.
Notably, global public valuation multiples, which were accelerated by the pandemic, underwent corrections in 2022. However, they have shown a gradual recovery since October 2022, with today's median valuation multiple standing at 6.6X. Although slightly lower than the pre-pandemic median, this trend indicates that Indian SaaS valuation multiples have displayed higher resilience compared to their global counterparts and that the impact of macro-economic variables are less pronounced on them. These numbers evidence the fact that the Indian SaaS ecosystem exhibits greater resistance to economic shocks in comparison to global markets. They also underscore the unwavering belief that founders and investors have in the industry's potential for growth and success.
The India advantage also extends to key opportunity areas - DevOps, Cybersecurity, and Vertical SaaS - which will lead the next phase of growth and innovation across SaaS categories. India has emerged as a disruptor in the global DevOps market, becoming the number one contributor to global AI-related GitHub repositories, a function of 10% of the global developer base being located here. Furthermore, the increasing global VC funding in Cybersecurity, coupled with the rapidly evolving threat landscape, presents Indian SaaS companies an opportunity to create and offer innovative Cybersecurity solutions. Vertical SaaS also emerges as an attractive investment opportunity, as 80% of the investors surveyed are more likely to invest in Vertical SaaS start-ups in 2023 as compared to the previous year. India's 70Mn+ SMBs present a lucrative opportunity for Vertical SaaS players to dive into.
With approximately 16% of the global AI workforce, India takes the lead in AI product development and emerges as a frontrunner in the latest global trend of Generative AI. This demand arises from a heightened focus on enabling customer experience and content generation, and is being serviced by the 800+ Indian start-ups focused on this technology. The global Generative AI market projected to reach USD 110 Bn by 2030 makes for an attractive investment area in 2023 and beyond. Moreover, India's emergence as a leading player in the global Web 3 market, further solidifies its position. With 11% of the global Web 3 talent in India growing at the fastest rate, this investment theme is hard to miss in the coming years.
On the report's launch, Sudhir Sethi, Founder and Chairman, Chiratae Ventures, stated, "We are excited to present the India SaaS report. The SaaS industry in India has hit global scale, and Chiratae leads that scale. Through our advised funds, we have invested over USD 160 Mn in over 35+ SaaS companies, supporting and nurturing notable names such as Pixis, Uniphore, Hevo Data, Healthplix, Pando, and Deepfence to name a few, which have eventually gone on to raise more than ~USD 850 Mn in follow on capital. We have seen successful exits in this sector, including IPO (Newgen), secondary sales (Hevo Data, Uniphore, Manthan), and acquisitions (UnBxD, CloudCherry, Netcore)."
On the launch of this report, Venkatesh Peddi, Managing Director at Chiratae Ventures, and head of SaaS investments stated, "The steadfastness of the Indian SaaS industry, coupled with its ability to adapt to changing market dynamics, has led to its outperformance on a global scale. Given India's robust foundation, presence of visionary leaders, and strategic exploration of key sectors, we predict that the Indian SaaS industry is poised for tremendous growth, surpassing the significant milestone of USD 26 Bn by 2026. With 38 SaaS companies in our portfolio, Chiratae remains dedicated to supporting and nurturing the growth of this dynamic industry, solidifying our position as a key player in India's journey towards global SaaS leadership."

, CEO at Zinnov, opined, "Indian SaaS start-ups are defying odds and continuing to attract significant investments. The ability of Indian SaaS to create newer categories, ride the wave of repeatable revenue, play the cost and talent arbitrage game, while building for a more discerning consumer, is enabling them to play at par, and in some cases, outshine their global SaaS counterparts. Steady global IT spends, positive investor sentiment, fundamental entrepreneurial rigor and belief, are helping the 'build in India, for India and the world' playbook play out. With the might of India's 3Mn-strong pool of tech talent behind them, Indian SaaS start-ups have solidified their position as a global SaaS powerhouse, and are on a fast-tracked path to shape the global technology landscape."

, Partner at Zinnov, asserted, "The single-most common question in the past 18 months has been - If and when will tech stocks recover to 2021 all-time highs? While it's unlikely we will witness those valuation multiples in the near term, we are seeing steady stabilisation and signs of a gradual rebound. Despite challenging circumstances, investors' confidence and founders' resilience remain unwavering. The Indian SaaS ecosystem has exemplified remarkable adaptability and resilience in the face of recessions and external disruptions. This 'herd immunity' indicates that Indian SaaS companies are not just equipped to survive in challenging times but are poised to adapt, evolve, and emerge stronger. With 93% of founders expressing optimism about their revenue growth prospects for the upcoming year, we see a clear shift towards bolstering revenue growth on the back of solid fundamentals - a testament to the future growth and success of the Indian SaaS landscape."
Chiratae Ventures is a 16-year-old Indian technology venture capital fund advisor, having advised funds that collectively (across 6 funds) have USD 1.1 Bn AUM, 130+ investments, 48 exits, 8 Unicorns, 3 IPOs and, a track record of having returned capital to LPs in each of the last 12 years. The funds advised by Chiratae Ventures have investments across sectors such as Consumer-Tech, SaaS, Fintech, and Healthtech and have been early backers of companies such as Myntra, Flipkart, Lenskart, FirstCry, PolicyBazaar, Bizongo, Uniphore, Pixis, and Fibe, amongst many others

Founded in 2002, Zinnov is a global management and strategy consulting firm, with presence in New York, Santa Clara, Houston, Seattle, Bangalore, Gurgaon, Pune, Japan, and Paris. Over the past 21 years, Zinnov has successfully consulted with over 250+ Fortune 500 enterprises to develop actionable insights to help them accelerate their technology journeys to create value - across dimensions of revenue, transformation, and optimization. With core expertise in Digital Engineering Talent, Digital Transformation, Innovation, and Outsourcing Advisory, Zinnov assists clients by:
- Enabling global companies to develop and optimize a global engineering talent footprint through center setups and accelerators - in an as-a-service model, as well as optimizing their global portfolios, to achieve higher R&D efficiencies, innovation, and productivity;
- Advising global PE firms in asset shortlisting and target evaluation, commercial due diligence, and value creation;
- Growing revenue for companies' products and services in newer markets through account intelligence, market entry, and market expansion advisory;
- Helping global companies outline and drive their open innovation programs, design and operate accelerator programs, and enable collaboration with start-ups across specific use cases and predefined outcomes;
- Structuring and implementing Digital Transformation levers enabled by technologies like AI/ML, Intelligent Automation, Cloud, IOT, etc.
With their team of experienced consultants, subject matter experts, and research professionals, Zinnov serves clients from across multiple industry verticals including Enterprise Software, BFSI, Healthcare, Automotive, Retail, and Telecom in the US, Europe, Japan, and India. For more information, visit
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