/dqc/media/agency_attachments/3bO5lX4bneNNijz3HbB7.jpg)
Follow Us/dqc/media/post_banners/wp-content/uploads/2017/12/SaaS-Based-Multi-Cloud-Management.png)
EY has launched a report titled ‘Bellwethers of Indian SaaS’ in partnership with Upekkha Value SaaS Accelerator. The report reveals that Indian B2B SaaS industry continues to have an optimistic outlook for 2023 despite global headwinds. It states that Indian SaaS growth is highly capital-efficient by default across stages and remains largely unmoved by recessionary trends of the past year.
With 8 out of 10 Indian SaaS companies under a burn multiple of 1.5x, the growth outlook is balanced by financial and operational prudence, reflecting strong focus on building and scaling capital efficient businesses. Globally, a burn multiple of less than 2x to 3x is a good state for growth stage ($1M to $100M ARR) companies.
Insights from the survey reveal that 4 out of 10 Indian B2B SaaS CXOs are targeting over 100% ARR growth (ultra-growth), whereas a majority 8 out of 10 CXOs are targeting above 50% ARR growth (hyper-growth) in 2023. The majority of ultra-growth companies are from AI, HCM (human capital management) Fintech, CRM (Customer resource management)/CDP (customer data platform) SaaS segments, having aggressive growth outlook.
The report highlights that with expected economic recovery in H2’2023 and availability of dry powder within the SaaS focused Indian VCs/PEs ecosystem, funding activity is expected to gain traction. This presents an opportunity for Indian SaaS companies with demonstrated profitability to raise capital at favourable terms and double down on growth.
Commenting on the findings of the report, Kamalanand Nithianandan, Partner, Business Consulting, EY India said, “Indian B2B SaaS is about 2x capital efficient compared to its global counterparts. This places them well, when the capital ask shifts from ‘growth at all costs’ to ‘profitable growth’.”
Adding to it, Thiyagarajan Maruthavanan, Partner, Upekkha Value SaaS Accelerator said, “In 2021, a 13-year bull run ended, and the capital frenzy subsided. Today this means that only companies that can be capital-efficient can survive and thrive. Strong capital efficiency being the inherent India SaaS advantage means the next generation of long-lasting SaaS companies will emerge from India and the next phase of Indian SaaS will be pronounced global.”
The report also explores the current state of Indian B2B SaaS through the lens of performance metrics, growth strategies and challenges impacting businesses.
Top strategic priorities, challenges and shifts for India B2B SaaS
60% of company CXOs reported product innovation, pricing changes and partner-led expansion as their top strategic priorities. Top challenge inhibiting growth was ‘delay in customer closure cycle’ for 51% CXOs, whereas and sales inefficiency came next for 41%+ CXOs.
Hiring and retention continue to be a key challenge, but CXOs also emphasised on adopting reskilling and training strategies to mitigate the talent shortage risk. Alternative funding instruments, such as convertible notes, were emphasized against the backdrop of access to equity funding due to rising inflation rates.
The report further identifies that 1 out of 3 Indian SaaS companies are Trailblazers with very low burn multiple (less than 1x) and ultra or hyper growth targets (greater than 50% ARR growth target). Trailblazers adopt deep focus on product innovation to win niche market opportunities and rely on low-cost customer acquisition process.