Even as the Indian start-up ecosystem faced a bitter funding winter over the past two years, the software-as-a-service (SaaS) sector not only managed to weather the downturn but emerged stronger.

In fact, a joint report from SaaSBOOMi and McKinsey & Co projects revenue of $50-70 billion and enterprise value of $500 billion by 2030 for the SaaS sector in India.

Using cloud technology, SaaS firms provide subscribers access to applications over the internet, while they take care of the required physical and software resources.

Business-to-business SaaS players operate through a combination of transaction-based fee and a fixed rate-based subscription fee.

Since 2019, B2B SaaS start-ups have raised $9.18 billion funding. In just five months of this year, they have raised $413.2 million across 70 rounds, compared to $683.4 million across 243 rounds last year, according to data intelligence platform Tracxn. 

The investments had peaked in 2021 at $3.9 billion.

Over the years, the zero-interest rate phenomenon or ZIRP (RBI policy to stimulate economic activity) led to an influx of cash for start-ups, as they became attractive to risk-taking investors. 

Market expansion

B2B SaaS players focus on segments such as banking, financial services and insurance (BFSI) technology, consumer products, and industrial conglomerates, which employ thousands of people. Leading Indian SaaS companies are even catching up to the revenue trajectories of US peers in stages. 

Blubirch, which offers enterprises an SaaS and AI-based reverse supply chain management platform, eyes an annual recurring revenue (ARR) of $25 million, says its co-founder and CEO Sapan Jain. 

While retailers and original equipment manufacturers or OEMs grapple with rising volumes and product returns, Blubirch’s solutions help them automate the returns management process, improve transparency and compliance, and enhance their operating margins by 300 basis points, Jain says. 

He says that the returns automation-platform-as-a-service (RA–PaaS), a new market category created by the start-up, has a total addressable market (TAM) of $33 billion globally. 

“Currently upwards of $25 million worth products go through the platform for liquidation; we expect this to exceed $100 million in 2-3 years,” Jain says.

He is confident of breaking even in the next 2-3 quarters.

“We recently forayed into the Middle East, starting with our existing customers, and are expanding to other established marketplaces like Europe,” he adds.

Maturing ecosystem

The Indian SaaS ecosystem, which remained concentrated in a few categories in the initial stages, has matured with a growing presence across several sub-sectors.

Set up in 2008, Perfios, a B2B SaaS fintech company, turned profitable in FY23 and plans to go public within the next two years. 

It operates in 18 countries across regions, including Southeast Asia, West Asia, and Africa, and eyes the US too. 

The company develops a wide range of products and solutions, says CEO Sabyasachi Goswami, so it cannot be boxed into the fintech space, given that it is industry- and market-agnostic.

An SaaS focused on airline retailing, Mystifly offers a full-stack platform. From online travel agents and travel management companies to fintechs and the ecommerce platforms of travel agents and airlines, the company has solutions for a range of stakeholders in the travel ecosystem, says founder and MD-CEO Rajeev Kumar. 

“Mystifly enables sale of $22 million worth of tickets on a monthly basis. We expect this to cross $100 million over the next 24 months,” he says. The company expects to break even in the next 2-3 quarters.

Investor attention

There is an increase in the number of early-stage companies crossing the $10-million revenue mark, signifying a robust foundation for expansion, says Anant Vidur Puri, partner at venture capital firm Bessemer Venture Partners.

“One distinctive advantage is observed in Indian software companies, which boast higher efficiency metrics compared to their global counterparts. Moreover, the prevailing high-interest rate environment provides an edge to India’s SaaS businesses,” he notes. 

Cornerstone Ventures’ optimism in the start-up ecosystem is largely due to its focus on the SaaS segment. It believes homegrown B2B SaaS start-ups have a lot to offer to large enterprises, and is doubling down with a larger quantum of investments.

“We saw the emergence of a new class of founders who were experienced professionals with strong domain expertise. That is when we decided it was a good time to build a B2B fund in India,” says Abhishek Prasad, partner at the VC.

India is one of the top five countries in terms of funding raised in the B2B SaaS space globally. 

“India presents a lot of opportunities for the growth of B2B SaaS companies due to ample government support, a flourishing start-up ecosystem, and easy access to quality talent, among other factors. B2B SaaS companies are among the key drivers of digital transformation in enterprises across many industries. With the recent advancements in AI and the rapid adoption of cloud-based technologies, we expect this space to see significant growth in the near future,” says Neha Singh, co-founder of Tracxn.