By Ankit Kedia, Founder & Lead Investor, Capital A
A long time ago, the domestic SaaS industry was not given much value compared to the potential that the export of SaaS had. Today, we are looking at a nearly $1 trillion market for the Indian SaaS firms. Apart from economic growth, this evolution is also likely to generate half a million jobs by 2030. In the past, there were several factors to boost the growth such as GST implementation, reduction of bandwidth costs, improvement in internet speeds and easy cloud access. By bringing about the UPI interface, authorities have made digital payments simple. With so much happening, investors are keen to ensure that they don’t miss out on the multi-billion-dollar opportunity before them. In fact, NASSCOM estimates that the Indian domestic SaaS sector itself will grow 6x by 2025.
The urgency to digitally transform business operations in the wake of the pandemic has turned things around for the domestic SaaS market as well. Although the Indian domestic SaaS market is much smaller in size than most of the leading western markets, what is driving investor interest is the humongous opportunity that lies ahead. Almost every other day, investments are being made across sectors such as Ed-tech, Fin-tech, Health-tech, retail-tech, agri-tech, supply chains, and manufacturing etc. Going beyond the conventional CRM, ERP or marketing automation domains, the SaaS companies are now exploring new avenues and a more integrated approach with their clients. As one of the most impactful Indian SaaS brands, Freshworks has demonstrated how the new age solution providers are building on the competitive advantage generated by Indian IT sector. From HR to sales and marketing and customer experience, Freshworks is catering to the global audience and building a roadmap for other Indian SaaS firms.
Driving Digital India
Whether it is the startup founder community or investors, SaaS companies are set to be the backbone of ‘Digital India’, catering not only to the foreign markets, but also India’s domestic manufacturing and retail landscape. A few decades ago, when computers entered Indian offices, accounting software Tally made major impact. It became the benchmark for financial accounting, and there is every reason to believe that SaaS products and platforms will now become such defining operational standards in all business verticals.
Today, whether it is retail, banking, finance, insurance, or governance, everything is being rapidly accessed through smartphone apps. The demand for web-based platforms and robust cyber-security tools is growing at a pace that is outdoing the supply in some cases. For instance, Zoho offers a holistic suite of solutions ranging from virtual meetings and webinars to online file management for teams. This kind of service suites are tailor-made to take care of the work-from-home as well as hybrid offices of the future. In the next 5 years, Indian businesses as well as governments across states and centre will undergo extensive digitization, only the tip of which we have seen so far. In the wake of the pandemic, there has been a tremendous surge in the D2C retail arena. Even SMEs, local travel agents, small manufacturers and even local stores are going online to offer their products to the target audiences. This has generated need for tools that can automate, streamline and secure the various processes for these resource-crunched enterprises. Competition is getting harder and D2C brands are being increasingly differentiated on the basis of the customer experience they offer, and not just the products. Home grown conversational AI solution providers such as Yellow.ai are deploying most advanced technologies to create smart virtual assistants that are redefining customer engagement. The platform has been identified as the Leading conversational AI platform in 2021 by Gartner, and has won several other accolades.
There are various use-cases which are primed for tech adoption and all they need is the access to the right solutions at the right prices. For instance, in the wellness and hospitality industry majority of the spas, restaurants, and even small hotels rely on manual processes to make and manage their bookings. However, in the post-pandemic scenario, software driven online booking platforms bring to fore options that are not just related to booking management, but, offering coupons, recording payments, management of inventory and employees seamlessly. While the ticket size for domestic SaaS B2B transactions might be smaller, the market is humongous, and constantly expanding.
Now that software-driven business operations have become the new benchmark, there is an understandable investors’ rally behind the SaaS companies. From $184 million in 2019, we saw the investments scale to a reported $251 million in 2020, and there is absolutely no doubt that the fund flow in 2021-2022 is going to be significantly higher than last year.
The mantra among investors is, “as long as you can build a product that is capable of catering to mass markets without glitches, we will have your back.”
