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Indian SaaS industry to grow $26 billion in revenues by 2026: Report

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Indian SaaS start-ups secured 3 times more funding in 2022 compared to 2019, demonstrating a steady CAGR (compound annual growth rate) of 47%

Bengaluru: Indian SaaS (software as a service) industry is expected to post 2.5 times growth to reach $26 billion in revenues by 2026, according to a report titled ‘India SaaSonomics: Navigating Growth and Efficiency’ by technology venture capital firm Chiratae and strategy consulting firm Zinnov.

While the world and India, to some extent, witnessed layoffs, 96% of the Indian SaaS platforms grew headcount throughout 2022.

“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,” said Venkatesh Peddi, Managing Director at Chiratae Ventures.

Seed-stage funding witnessed 1.5 times increase, while early-stage funding experienced 1.6 times surge in value during 2022. Indian SaaS start-ups secured 3X more funding in 2022 compared to 2019, demonstrating a steady CAGR (compound annual growth rate) of 47%, the report added.

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 (quarter 1) 2023 indicate that the funding slowdown for Indian SaaS companies has bottomed out, signaling a gradual recovery to look forward to in the upcoming quarters.

“The SaaS industry in India has hit global scale. Through our advised funds, we have invested over $160 million 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 $850 million in follow on capital,” said Sudhir Sethi, founder of Chiratae Ventures.

Housing over 1650 funded SaaS start-ups, India witnessed a surge in the number of companies surpassing the $1 million ARR (annual recurring revenue) in 2022 and almost 280 SaaS companies clocked revenues between $1 million and $10 million.

“The Indian SaaS ecosystem has exemplified remarkable adaptability and resilience in 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,” said Atit Danak, partner at Zinnov.

“With 93% of founders expressing optimism about their revenue growth prospects for the upcoming year, we see a clear shift towards bolstering revenue growth,” Danak added.

The India advantage also extends to areas like DevOps, cybersecurity, and vertical SaaS which will lead the next phase of growth and innovation across SaaS categories. Companies are also focusing on generative AI which improves customer experience and content generation and is being serviced by the 800 Indian start-ups.

“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 3 million-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-track path to shape the global technology landscape,” said Pari Natarajan, chief executive officer at Zinnov.

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