Indian SaaS Companies Poised To Reach $30 Bn Revenue By 2025

This interest spans both, early-stage Indian SaaS companies with an 85% increase in the average value of seed rounds and later-stage SaaS deals with a 20% increase in share of Series D+ funding rounds, over 2019

Investments in Indian Software as a Service (SaaS) rose to $4.5 billion in 2021—an increase of 170% from 2020, with growth primarily driven by a surge in the number of $50 million + deals, according to a new report by Bain & Company titled, “India SaaS Report 2021: SaaS companies will lead India’s next wave of technology giants”, released today. The report explores the Indian SaaS landscape which continues to mature rapidly, with more companies reaching larger scale and driving heightened investor interest. This interest spans both, early-stage Indian SaaS companies with an 85% increase in the average value of seed rounds and later-stage SaaS deals with a 20% increase in share of Series D+ funding rounds, over 2019.


Over the past five years the number of SaaS firms have doubled, and more than 60 SaaS firms have received Series C+ funding. In 2021, more than 35 Indian SaaS companies had $20 million + annual recurring revenue (ARR). The top 10 investors’ share in total deal value across 2019–2021 was 30%–35%, with Tiger Global (by value) and Sequoia (by volume) being most active over 2020–2021. “With heightened interest in SaaS, India has witnessed the emergence of dedicated SaaS-focused funds as well as participation from new investor categories, including corporate venture capital (CVC) and sovereign wealth funds. Investors are also increasingly active across investment stages, with traditionally early-stage investors now focusing on growth investments and later-stage investors participating in earlier rounds. This strong demand for high quality SaaS investment opportunities also means, that beyond capital and network access, investors increasingly offer ‘value add’ operational support in areas such as GTM, product, and recruitment to meet rising expectations from founders and to participate in deals”, said Arpan Sheth, Bain & Company partner and leader of the firm’s
India’s Private Equity and Alternative Investor practice.


According to Bain & Company’s analysis, India’s SaaS is driving value creation in four keyways. The number of Indian SaaS exits increased by 100% from 6 in 2018 to 12 in 2021 with Freshworks’ initial public offering (IPO), therefore initiating a new wave in exits. Further, Indian SaaS firms have exhibited high capital efficiency with excellent ARR-to-funding ratiosin line with their global SaaS peers. Select Indian companies are even outperforming their US counterparts. Currently, these SaaS companies employ more than 62,000 people, which is in effect, helping to build a talent pool of professionals with SaaS-relevant skills, in India. In addition, more than 250 new Indian firms founded by former employees of Indian SaaS companies themselves, who now employ more than 5,000 people. From an investment standpoint, SMB-focused India for India and enterprise-focused India for the world companies, are attracting most of the funding with 65%–70% volume share in 2021. Horizontal business software remains the largest subsegment accounting for more than half of all SaaS funding in India, while vertical business software and horizontal infrastructure software constitute the remainder.


While horizontal business software growth is due to higher average deal values, vertical business software has seen approximately 100% year-over-year growth driven by larger number of deals and several Indian success stories continue to emerge in the space. Within horizontal business software, there is growing interest in subsegments including enterprise collaboration, events tech, conversational AI, and HR Tech. EdTech, Healthcare tech, logistics tech and e-commerce enablement are gaining traction in vertical business software. And within the horizontal infrastructure software space, cybersecurity, DevOps and dev tools, and data management and observability are emerging themes.