Secret of success: What makes Indian SaaS firms winners?

Driven by smart founders and strong investor support, the Indian SaaS business model is set to redefine the global startup ecosystem

Harshil Mathur, Cofounder and CEO, Razorpay
Harshil Mathur, Cofounder and CEO, Razorpay

By Srinath Srinivasan

Indian startups had a landmark year (2021) with over 40 of them reaching the covetted unicorn status. As per a recent Bain & Company study, in India, investment in Software as a Service (SaaS) has grown 170% over 2020 and is expected to reach $4.5 billion in 2021, comprising 8% of overall private equity and venture capital deal value in India. Further, in terms of the overall revenue, Indian SaaS companies are expected to generate revenues up to $30 billion by 2025, capturing 8% to 9% share of the global SaaS market.

“In our experience, winning SaaS companies exhibit a combination of characteristics, like, vision and strategy, winning approach—investing time in achieving the right product-market fit, designing pricing, support for the product, customer success and lastly, setting up a global organisation with a culture of innovation and teamwork,” says Aditya Shukla, partner, Bain & Company, Mumbai & leader, Bain India’s Private Equity practice.

The SaaS ecosystem in India has also been enabled by the government, investors, experienced founders, corporates operating in India and universities providing skilled talent. “The Covid-19 pandemic helped us expand further into newer categories wherever there was an opportunity to automate payments and enable faster checkout. Many small businesses wanted deep integration into social and communication channels, which gave rise to newer features and solutions. We grew over 150% during the pandemic. From creating awareness about digital payments, we progressed to creating more products and pricing them attractively in the last year,” says Harshil Mathur, co-founder and CEO, Razorpay, talking about pricing and packaging, entering adjacencies across products and geographies and sales. These have been identified as top three winning factors commonly found among Indian SaaS companies.

As per the report, SaaS companies founded in India in 2021 have doubled since 2015, from nearly 5000 to 9000. In 2021 over nine startups have reached the $100 million annual recurring revenue (ARR), from just two startups in 2015. “Indian SaaS companies are generating value in line with global SaaS peers, with a comparable ARR to funding ratio,” says Shukla. This ratio for global SaaS companies is 0.48 while for Indian SaaS companies stands at 0.41, as per the report. Browserstack, Chargebee, Freshworks and Gupshup are some of the startups maintaining this ratio with Freshwork’s ARR to funding ratio topping at 0.70.

Indian SaaS companies have also been an important generator of employment in India and outside. “We have employees in over 25 countries,” says Praval Singh, VP, marketing and customer experience, Zoho Corp. Indian SaaS companies have added over 62000 jobs in India in 2021. In 2019, this number was over 42000. Over 75% of this workforce today are technically skilled across technologies like cloud, AI/ML, advanced analytics and project management. The nature of skills required have evolved though.

“We have more than 2000 open roles right now across our offices in India. These roles span across development, design, sales, customer support, and marketing,” says Singh. Some of the SaaS startups are founded by ex-employees of top Indian SaaS companies. As per the report, more than 500 ex employees from Indian SaaS companies are now founders. Zoho tops the list with over 130 ex employees founding new startups, followed by Freshworks, Highradius and Druva In all, there are over 250 startups founded by ex-employees of Indian startups, creating over 5000 jobs.

Riding on the winning formula in their target markets, several of the Indian SaaS startups are expanding geographically. “We have customers in over 180 countries. We’ve been expanding to new geographies as part of our transnational-localism approach, which is about locally rooting our growth while staying connected globally through shared culture and know-how,” says Singh.

One of the major deal breakers for the growth of the startups would be talent demand in the coming years. As per the report, talent demand in India for digital and SaaS-specific roles is expected to grow by three times from 2021 to 2025 with a lower increase in talent supply. This demand is expected to make governments and universities create re-skilling programmes for existing workforce while startup founders are expected to drive several knowledge sharing platforms to guide other founders as well as digital talent.

“I have personally invested in an ed-tech startup conducting bootcamps and we are actively hiring from many other bootcamps, forming a good ecosystem of lateral hiring across the country,” says Mathur.

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