The Indian SaaS industry is set to clock in $100 billion in revenues by 2026, as per the 2022 edition of the Chiratae-Zinnov India SaaS report titled, “India SaaS - Punching Through the Global Pecking Order.” The industry in India is witnessing a ‘coming-of-age’ moment, “with an incredible bull run that has firmly anchored its position on the global stage,” the report said.

Indian SaaS witnessed massive growth at approximately 55 per cent CAGR in 2021. Further, it aims to attract a strong private capital infusion of close to  $6.5 billion in the coming year alone, the report noted. The report observed that there has been a tremendous growth in the sector in India and that the country has “created ~90 per cent of all SaaS unicorns in the last four years alone, with the potential for many more in the offing”.

According to the report, India is on track to surpass China as the second-largest SaaS nation in the next few years, after surpassing UK this year in the number of SaaS unicorns.

“The industry has matured, profitability has become a realistic milestone for SaaS companies, and they have cracked the Enterprise conundrum with over 40 per cent revenue contribution,” it further added.

Attracting investors, talent

The various pro-start-up policies will play a key role in attracting more founders and investors.  The report also identifies the key attributes that have accelerated the success of the SaaS industry- ‘SPARK,’- Supportive Policies, Proven Global Caliber, Abundant Liquidity, Rearing Domestic Talent, and Kindled Exit Options. 

“The early SaaS companies are attracting unicorn valuations and also successfully listing on the public markets. These successes, coupled with stronger fundamentals and the path to profitability, are making SaaS companies in India an attractive investment theme,” it said.

The next wave of digital talent is expected to come from Tier-II and Tier-III cities that have a talent pool of over three million skilled workforce to help scale up the industry in the coming years.

‘2021, a watershed year’

Pari Natarajan, CEO, Zinnov, said, “2021 was a watershed year for Indian SaaS – including exponential valuations, successful IPO debuts, a vast influx of VC investments, and an unprecedented number of unicorns.” “Not only have Indian SaaS companies come of age, but they have also been at the forefront of creating new for India and new for the world products, led by visionary founders and a critical mass of engineering and product teams serving this purpose,” said Natarajan.

Sudhir Sethi, Founder and Chairman, Chiratae Ventures, said, “India is a global SaaS leader, and Chiratae Ventures has been fortunate to be at the center of this surging momentum.” Chiratae Ventures has over 35 SaaS companies in its portfolio including companies such as Uniphore, Pixis, Hevo Data, Healthplix, CropIn, Pando, Deepfence, and Squadcast.

Focus areas

As per the report, the key areas of interest for investors in 2022 and beyond include Cloud Security, Cloud-Native Enablers, Hyper Intelligent Automation, Web3, and Verticalized solutions. “Cloud-Native is an approach to building and running applications as a Cloud-based delivery model, which is expected to accelerate modern application development based on its various advantages,” it explained. 

VC investments in this space are exceeding $7 billion in funding, giving rise to many unicorns in the segment. “Hyper Intelligent Automation, the new avatar of Automation, has become a top CXO priority within enterprise digital transformation charters,” the report said. 

Automation platforms are attracting significant interest from investors, with a 15-20 per cent growth forecasted in digital transformation spend.

Cloud security, the fastest growing segment within Enterprise Cybersecurity in 2021, recorded a 6X growth in funding, especially across growth-stage deals. “Web3, based on Blockchain, is another segment garnering a lot of attention from investors. Perceived as a compelling SaaS opportunity, areas such as Data Analytics, DevTools, and Security have bubbled up,” the report further said.

Verticalized SaaS is also gaining traction with  global VC funding in this category exceeding $11 billion in 2021.