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1、Remaining steady through turbulenceIndia SaaS Report 2022 Copyright 2023 Bain&Company,Inc.All rights reserved.AcknowledgementsWe sincerely thank the Bain India team,including Naveen Kumar Reddy,Devanshi Agarwal,Himanshu Sharma,and Saurabh Lahoti for their in-depth analysis and insight generation.We
2、thank the OPEXEngine team,including Lauren Kelley and Dushyant Sharma,for their time and insights.We also wish to thank Sitara Achreja and Shelza Khan for their editorial support.OPEXEngine connects SaaS companies to higher performance,growth and valuation through performance benchmarking.With the t
3、racking of 250+metrics from industry leaders,OPEXEngine provides the tools and insights SaaS companies need to scale with confidence.AuthorsArpan Sheth is a Partner in Bain&Companys Mumbai office and leads the Private Equity and Alternative Investor practice in IndiaAditya Shukla is a Partner in Bai
4、n&Companys Mumbai office and a leader in Bain Indias Private Equity practicePrabhav Kashyap is a Partner in Bain&Companys New Delhi office and a leader in Bain Indias Private Equity practice Gustaf Ericson is an Associate Partner in Bain&Companys Mumbai office and a leader in Bain Indias Private Equ
5、ity practice Key contactsArpan Sheth in Mumbai()Aditya Shukla in Mumbai()Prabhav Kashyap in New Delhi()Gustaf Ericson in Mumbai()For media queries:Sitara Achreja in Mumbai()India SaaS Report 2022ContentsExecutive summary .2Indian SaaS landscape .4Indian SaaS investment overview .12Key SaaS themes .1
6、8Focus areas for Indian SaaS companies .23India SaaS Report 20222Executive summary The Indian Software-as-a-Service(SaaS)ecosystem continues to gather momentum despite prevailing market headwinds and has become a global leader behind only the US in scale and maturity.Whether measured in total annual
7、 recurring revenue(ARR)of$12 billion$13 billion in 2022,up four times over the past 5 years;or investment($5 billion in 2022,up six times),Indian SaaS progress is irrefutable and its future trajectory promising.This momentum is driven by a mutually reinforcing flywheel of SaaS companies and investor
8、s,with a proliferation of new SaaS companies with proven growth models,supported by investors who are allocating increased capital to Indian SaaS across stages.Indian SaaS companies are being founded in record numbers and are proving they have a right to win in the global market.Of the 1,600 Indian
9、SaaS companies that have now been funded over the past five years,around 14 of them exceed$100 million in ARR(vs.around 5 in 2020)and are reaching this growth milestone as quickly as their US counterparts.Indian SaaS companies win using a variety of approaches,including product leadership,attractive
10、 pricing,and service qualityand emerge as globally best-in-class across numerous categories.While software buyer sentiment has softened in the second half of 2022,Indian SaaS companies play in categories that benefit from long-term,secular-demand tailwinds.Encouraged by this growth,investment in Ind
11、ian SaaS reached an all-time high of$5 billion in 2022,bolstered by a record$1 billion investment in Securonix.However,2022 has been a game of two halves.While 2021s funding momentum carried over into a record first quarter,there has been a subsequent 40%year-on-year decline in investment across qua
12、rters two through four as global sentiment has softened.Behind this has been a decline in large deals as investor sentiment meets with scaled Indian SaaS companies that previously raised capital,benefit from supportive eco-nomics,and choose to stay out of the capital markets for now.Despite this mar
13、ket slowdown,proven revenue growth combined with attractive margins has made SaaS a comparative bulwark for investors,with Indian SaaS venture capital (VC)investment up 10%over quarters one through three in 2022while overall VC investments are down 22%vs.2021.Investors in Indian SaaS benefit from an
14、 opportunity to back a wide array of companies across sub-categories and have a clear path to realisation,with 40 SaaS exits in 2022(almost doubling year-on-year)across a variety of modes.As a result,more than 70%of investors expect to increase their investment in Indian SaaS going forward.Growth re
15、mains at the top of the agenda for Indian SaaS companies,with new market entry enabled by effective enterprise go-to-market(GTM),a key priority.Selling into scaled SaaS markets such as the US(close to$150 billion in SaaS spending)is a strategic imperative,and today just around 20%of revenues for Ind
16、ian SaaS companies are generated from India.Going global necessitates effective enterprise GTM playbooks that Indian SaaS companies are increasingly refining.However,Indian India SaaS Report 20223SaaS companies are also being confronted with a new economic reality that emphasises efficiency,and cost
17、 and liquidity management now need to be part of any management teams toolkit.Near-term turbulence aside,Indian SaaS remains in its early stages and has proven that it is building world-leading companies across categories.We expect that over the next 5 years,Indian SaaS companies will collectively r
18、each$35 billion in ARR and capture 8%of the global SaaS market.4 The Indian SaaS landscape has matured rapidly over the past 5 years,expanding on every dimension from total ARR(a three-to four-times increase)to investment(about a six-times increase)making it the second largest SaaS ecosystem globall
19、y.This maturity is driven by a robust company/investor flywheel where a proliferation of new SaaS companies with proven growth are driving investors to allocate increased capital across stages to Indian SaaS.Indian SaaS companies are proving they can be truly world-class,with 1214 companies exceedin
20、g$100 million in ARR(vs.12 companies 5 years ago)and tracking US peers on the time they take to reach this milestone.Indian SaaS companies are going after,and winning in,global SaaS end-markets through product and pricing leadership,enabled by increasingly mature GTM playbooks.Product leadership:Num
21、erous Indian SaaS companies have best-in-class product offerings,enabling them to price at premiums vs.global peers.Price leadership:Other Indian SaaS companies focus on value,notably when serving the small and medium-sized business(SMB)/mid-market segments.GTM:Indian SaaS leaders are building clear
22、,US-centric GTM playbooks,spanning direct(field and virtual)sales and indirect/channel sales as well as customer success and support.Indian SaaS companies achieve this growth with larger employee bases(resulting in 30%to 50%lower ARR/full-time employees FTE vs.the US)as they draw from a less tenured
23、 talent pool(Indian SaaS engineers have half the work experience of US equivalents,on average).However,Indias labour cost advantage nonetheless gives these companies equally attractive economics compared to US peers.Indian SaaS landscapeIndia SaaS Report 20225Notes:1 2022 figure refers to cumulative
24、 number of companies till October 2022;2 Attribute annualised for 2022;ARR:Annual recurring revenueSources:Bain PE-VC deals database;Tracxn;Crunchbase;Pitchbook;VCCEdge;Public filings;Venture Intelligence;Secondary research;Industry participantinterviews;Bain analysis20193x4xNumber of companiesreach
25、ing$100Min ARR120222019Annual funding forIndian SaaScompanies2Total ARR of IndianSaaS companies($B)2Number of companies progressing beyondSeries C funding1Total investor exits(number of companies)2Number of annual seed deals22022InvestmentCompany Growth341214$1.3B$5.1B2.5x2.5x$56B$1213B253080+4x2x10
26、40118230Figure 1:The Indian SaaS ecosystem has come a long way over the past three years In the future,buyer sentiment in SaaS will remain broadly positive,with approximately 65%of enterprise software decision makers expecting to increase their 2023 software budgets;however,sentiment has clearly sof
27、tened since the second quarter of 2022(when close to 80%of decision makers expected an increase).We see long-term tailwinds for Indian SaaS as companies continue to build winning product offerings and refine their growth playbooks while benefitting from a highly robust investor ecosystem.We expect I
28、ndian SaaS growth of 20%to 25%per annum over the next 5 years to reach close to$35 billion in ARR by 2027,with a nearly 8%share of the global SaaS market.India SaaS Report 20226Figure 2:This momentum is self-reinforcing,as both companies and investors contribute to a rapidly growing Indian SaaS ecos
29、ystemNotes:1 Cumulative#of funded companies;2 Annualised basis October 2022 year-to-date deal values excluding$1B Securonix deal;3 Attribute annualised for 2022;ARR:Annual recurring revenue;M&A:Mergers and acquisitions;IPO:Initial public offering Sources:Bain PE-VC deals database;Tracxn;Crunchbase;P
30、itchbook;VCCEdge;Public filings;Venture Intelligence;Secondary research;Industry participant interviews;Bain analysisOverall Indian SaaS ecosystemmatures and scales upTotal funding in IndianSaaS companiesTotal ARR of IndianSaaS companies$5.1B2$1213B3$1.3B$5$6BDemonstrated revenue growth fromSaaS cos
31、.leads to follow-on fundingDeal value inSeries AC$2.3B2$0.9BSaaS companies achieve scale and category leadership in deep SaaSmarkets such as the USScaled businesses invite further late-stage investors,as buyouts,M&A,and IPOs provide exits#cos.with ARR$100M+Deal value in Series D+Revenue from US/EU(%
32、)#of exits1214$2.5B270%40234$0.4B50%10Year20222019SaaS companies use establishedgrowth playbooks to drive initialscale,often looking beyond India#of companies withARR$20$50M20251520Founders launch SaaS companies supported by prior experience andavailability of capital&talentConfidence in SaaS and pr
33、oliferationof companies drive early-stage deals#of funded IndianSaaS companies1#of seed dealsAverage seed deal size1,60022302$1.7M1,000118$0.7MCompaniesInvestorsFigure 3:The number of SaaS companies being funded in India has doubled compared to five years agoNotes:*Total SaaS companies in 2022 annua
34、lised based on H122;Companies that have raised funding have been considered for above analysis;number ofcompanies listed above are directionalSources:Tracxn;Crunchbase;Venture Intelligence;Pitchbook;Bain PE-VC deals database;Bain analysisCumulative number of funded SaaS companies in India+110%201720
35、2020212022*7501,2001,3501,600AnnualisedIndia SaaS Report 2022720192022Notes:Quid analysis on public,India-focused data sources using SaaS as a Keyword;Each node represents a deal(or a unique company)in the respective time periods;Each link between the companies represents a shared story;Size of the
36、node represents similarity with other nodes(i.e.,number of connecting links);The Keywords used for above analysis on Quid were SaaS or Software as a Service;Other includes Hospitality Tech,Workflow Management,Edtech,Autotech,Mediatech,etc.;2022 data refers to LTM September 2022;CRM:Customer Relation
37、ship Management;ERP:Enterprise Resource Planning;BSFI:Banking,Financial Services,and Insurance;HCM:Human Capital Management;BI:Business Intelligence;SCM:Supply Chain ManagementSources:Quid;Bain analysisEach node represents an SaaS company and each link represents a relationship between companiesHori
38、zontal SaaSHorizontal Infra SaaSVertical SaaSHCMMarketing tech CRM ERPData,analytics&BIDevToolsCybersecurity Real estate tech Retail tech SCM techOtherCommunication BSFI tech Cloud infrastructureThe Indian SaaS ecosystemhas gone from being nascent with concentration in certain categories to an incre
39、asingly mature one with presence across many subsectorsThe US SaaS ecosystemcontinues to be extensive,with a consistent proliferation of companiesThe UK SaaS ecosystem has seen moderate growth since 2019 and now lagsbehind IndiaFigure 4:This rapid evolution has made India the second largest SaaS eco
40、system after the USIndia SaaS Report 20228Figure 5:Indian SaaS companies are also scaling rapidly,with 1214 SaaS companies now exceeding$100 million in ARRNotes:Based on latest available ARR data in 2021 or 2022;ARR:Annual recurring revenue;number of companies is directionalSources:CapIQ;VCCEdge;Pub
41、lic filings;Secondary Research;Bain analysis;Industry participant interviewsNumber of SaaS companies201720202022$100M12451214$50M$100M12561416$20M$50M3515202025$10M$20M71025303035Figure 6:Indian SaaS leaders are tracking US peers on ARR growth,targeting global markets,supported by best-in-class GTM/
42、product and scale investorsNotes:1 US SaaS leaders composite includes Atlassian,AvidXchange,Blackline,Coupa,Code42,Everbridge,HubSpot,Paycom,RingCentral,Salesforce,ServiceNow,Smartsheet,Semrush,Twillio,UiPath,Workday,Zendesk,Zoom,Zscaler,and Zuora;Indian composite includes:BrowserStack,Chargebee,Dru
43、va,Eightfold,Freshworks,Gupshup,Innovaccer,Icertis,Securonix,and Uniphore;Gupshup and Securonix revenues have been indexed to years when they pivotedto SaaS model(i.e.,2010 and 2017,respectively);All curves are smoothed out;ARRs have been extrapolated at certain stages due to lack of publicly availa
44、bledata;2 New age refers to SaaS companies founded in the last 10 years;ARR:Annual recurring revenue;GTM:Go-to-market;TCO:total cost of ownershipSources:S&P Capital IQ;VCCEdge;Bain analysis Average ARR of leading SaaS companies1($M)Key enablers Successful,globally focused GTM strategies enable acces
45、s to large SaaS end-markets Repeatable GTM playbooks enable Indian SaaS companies to grow faster New age2 Indian SaaS companies like Innovaccer have reached$100 million ARR in just 67 years Early entrants in Indian SaaS like Zoho have achieved more than$1 billion in ARR Established leadership across
46、 categories driven by distinct competencies/strategies,ranging from product leadership(e.g.,Securonix)to competitive TCO(e.g.,Freshworks)A strong investor ecosystem with deep access to funding across stages20015010050Years(indexed to founding year)50%of SaaS leaders01023456789USIndiaYears to$100M AR
47、RIndia SaaS Report 2022903 years37 years710 years1015 years15+years03 years37 years710 years1015 years15+yearsNotes:1 Includes top 20 Indian SaaS companies by scale;2 Includes top 20 US SaaS companies by scale;3 Includes overall professional experience/tenure;FTE:Full-time employeesSources:Secondary
48、 Research;LinkedIn;Bain analysisAverage career experience in engineering(percentageof employees)Average career experiencein sales(percentage of employees)Average3(in years)Average3(in years)6 years9 years12 years13 yearsIndian SaaS1Indian SaaSUS SaaS2US SaaSIndia draws on large-scale accessto highly
49、 skilled but lower-experiencetalent:Access to large domestic talent supply,with 700K graduating engineers per annum in India vs.200K in the US 95%of engineering FTEs in Indian SaaS cos.are based in India vs.15%for US peersAverage experience for sales islower but is catching up with UScounterparts:In
50、dian SaaS has greater reliance on India-based sales teams(60%of sales FTEs)Indian SaaS companies face greater challenges finding experienced sales teams in India and the US12Figure 8:Indian SaaS companies hire more compared to US peers as they rely on less experienced talent across both sales and en
51、gineeringNotes:ARR:Annual recurring revenue;FTE:Full-time employeesSources:OPEXEngine;Secondary research;Bain analysisAs Indian cos.scale,ARR/FTE rises given scale benefits,but still lag behind best-in-class US peers on ARR/FTEThis differential is driven by lower like-for-likewage costs and less exp
52、erienced talent bases ARR/FTE for US and Indian SaaS cos.(in$K,2022)$25$100MARR Cos.$100$500MARR Cos.US PublicSaaS$250K$210K$130K$160K$80K(-40%)(-50%)Indian SaaS companies have a 40%-50%lowerARR/FTE vs.US counterparts as a result of higherheadcounts at similar scaleDespite higher headcount,Indian co
53、s.are ableto maintain comparable growth and marginprofiles to US peersHigher headcount is driven by:Employee cost advantages in India:50%-70%lower like-for-like salaries compared to the US market(80%of Indian SaaS FTEs are in India vs.10%for US counterparts)Less experienced talent:6 years average ex
54、perience for engineers in Indian SaaS cos.vs.12 years for US counterpartsUSPublicSaaSUSPrivateSaaSIndianSaaSUSPrivateSaaSIndianSaaS123Figure 7:This growth has been achieved with larger teams,driving lower revenue/FTE vs.US SaaS companiesIndia SaaS Report 202210Figure 9:Indian SaaS companies win usin
55、g a variety of approaches,including best-in-class product,customer support,and attractive pricingNotes:Advocacy is a high if rating is 4.5/5 or rated competitive/better vs.peers or considered a leader/visionary,b high-moderate if rating is 4/5 and 3.5/5 and=50%expected increase in software spending
56、in 2023 vs.2022)High spending growth(25%50%expected increase in software spending in 2023vs.2022)Moderate spending growth(10%25%expected increase insoftware spending in 2023 vs.2022)Presence of IndianSaaS companies*Increase by 2050%Increase by 50%Cut by 020%Remained sameIncrease by 020%Not sureApril
57、20April21May22Oct22Cut by 50%Cut by 2050%Slightly weakenedbuyer sentimentin Q422LowHighIndia SaaS Report 202211Notes:CAGR:compound annual growth rate;*Forecasted for 2022Sources:IDC Worldwide Software as a service and Cloud forecast 2022;Bain PE-VC deals database;Tracxn;Crunchbase;Pitchbook;Venture
58、Intelligence;Bain analysisIndian SaaS revenue($B)Growing share of Indian SaaScompanies in global marketFactors driving growth forIndian SaaS20202022*2027(P)$7-$8B$12-$13B$35B20202022*2027(P)8%5%4%20%-25%CAGR2022-27Expansion across categories,with a wide array of high-qualityand innovative SaaS offer
59、ings(e.g.,Avataar in 3D augmentedreality)Leveraging established growthplaybooks from US SaaS,focusing on go-to-market,product,and customer support/successA strong investor ecosystemfrom seed to pre-initial publicoffering,fueling the next phaseof growth for Indian SaaSecosystem123Figure 11:Going forw
60、ard,we expect Indian SaaS companies to grow at 20%25%CAGR over 202227 and further increase their global share to 8%by 202712 2022 was another record year for Indian SaaS investments,with investments reaching$5.1 billion in 2022,up 20%vs.in 2021.Growth has primarily been driven by increased interest
61、in earlier-stage deals;there are more seed deals happening(+65%vs.2021)that are larger($1.7 million vs.$1.3 million average in 2021),while the number of Series A investments have nearly doubled(+90%vs.2021)as a greater supply of companies meets more early-stage capital across existing and new invest
62、ors.Later-stage deals have become smaller($75 million average vs.$100 million in 2021)as some of the largest Indian SaaS companies choose not to raise in prevailing market conditions.Investment growth was primarily driven by a record$2.2 billion in investment in the first quarter of 2022(55%of the t
63、otal year-to-date,excluding Securonix);from the second quarter onwards,there has been a substantial decline(-40%)in investments vs.2021 as global investor sentiment has softened.Indian SaaS has seen a large increase in the breadth of investible companies,with funding con-centration reduced in recent
64、 years.The top 15 deals for Indian SaaS accounted for just 50%of deal value in 2022,down from 60%to 70%in prior years and below the 70%observed in Indian tech.In an environment of softening investor sentiment,SaaS has emerged as a comparative bulwark for India-focused venture investors given proven
65、revenue growth and attractive operating economics,becoming among the fastest-growing venture investment sectors and accounting for 17%of total investments in the first 3 quarters of 2022,up from 12%in the first three quarters of 2021.Indian SaaS is beginning to provide realised returns to investors,
66、and the number of exits almost doubled in 2022,reaching 40 exits across a variety of modes,including large-scale secondary transactions,strategic acquisitions,and public market exits/initial public offerings(IPOs).Public markets offer a meaningful path to exit,and many Indian SaaS companies are alre
67、ady IPO Ready based on their scale;however,deteriorating market conditions have led to muted IPO activity throughout 2022.Indian SaaS investment overviewIndia SaaS Report 202213Notes:Deal value and volume only for deals with known/available funding amount;1 Q4 2022 projected basis JulyOctober 2022 i
68、nvestment run-rate;2 Percentage change in value of BVP Nasdaq Emerging Cloud Index,Quarterly value derived from basis average of opening and closing value of the quarter;3 Value only for October 2022 vs.October 2021 index value change;4 Excluding Securonix deal;YoY:year on year;BVP:Bessemer Venture
69、PartnersSources:Bain PE-VC deals database;Tracxn;Crunchbase;Pitchbook;Venture Intelligence;Bain analysisIndian SaaS investment value by quarter for 2022 vs.2021(Funding amount,$B)20212022$4.3B$5.1BQ1,$0.8B(50 deals)Q2,$1.6B(60 deals)Q3,$1B(40 deals)Q4,$0.8B(30 deals)$0.45B(60 deals)Securonix($1B)Q12
70、2YoYchange(%)42%42%44%156%54%50%33%8%BVP IndexChange(%)$0.6B(90 deals)$0.9B(70 deals)$2.2B(80 deals)2022 started strong with Q1 2022investments of$2.2B4 Driven by strong activity in large late-stage deals($1.5B in Series C+deals in Q1 2022),higher traction in early-stage dealsInvestments in Q2 and Q
71、3 22 havedropped by 40%50%vs.2021 Driven by a slowdown in late-stage activity as large Indian SaaS companies that raised in 2021 chose to defer funding rounds12Early-stage funding remains strong Deal volumes have increased every quarter vs.20213Figure 13:After a record 150%year-on-year investment gr
72、owth in Q1 2022,investment value has slowed down as market sentiment has softenedNotes:Investment data based on deals with known funding amount;*2022 data annualised basis addition of H1 2022 data and linear projection for H2 2022 usingJulyOctober 2022 data,excludes$1B Securonix deal,considering it
73、as a one-time,high-value dealSources:Bain PE-VC deals database;Tracxn;Crunchbase;Pitchbook;Venture Intelligence;Bain analysisIndian SaaS investments($B,annual)200212022*$4.3B$1.7B$1.3B$0.8B$5.1BAnnualised(Ex.Securonix)SecuronixTotal Deal Value(Ex.Securonix)20%Figure 12:Indian SaaS investm
74、ents increased by 20%in 2022 vs 2021,boosted by a record$1 billion investment in SecuronixIndia SaaS Report 202214Figure 14a:Investment growth has been driven by an increase in early-stage deals while late-stage saw increase in deal volume but decline in average deal valueNotes:*Data excluding Secur
75、onix deal;Impact of change in average deal value/volumes are computed excluding Securonix;Deal volume and average deal valueare for deals with known values onlySources:Bain PE-VC deals database;Tracxn;Crunchbase;Venture intelligence;Pitchbook;Bain analysisInvestment evolution across deal sizes(Q1Q3
76、2021 to Q1Q3 2022,$B)(+35%)Q1Q3 2022*$4.3M204$75M37Q1Q3 2021Q1Q3 2021Average deal valueDeal volumeAverage deal valueDeal volumeSecuronixQ1Q3 2022$3.6M136$101M29Large deals$2.9BSmall deals$0.5BSecuronix$1.0B$3.4B$0.1B$0.3BSmall deals($25 Million)$1.0B$0.8B$1.0B$4.6BSmall deals$0.9BLarge deals$2.7BFig
77、ure 14b:Early-stage interest in Indian SaaS has increased,with significant growth in both the value and volume of seed deals over the last three yearsNotes:1 Data for 2022 is till 31 October 2022;includes 35 seed deals with undisclosed funding amount,annualised for comparison;2022 data annualised by
78、adding H1 2022 data and linear projection for H2 2022 using JulyOctober 2022 data;2 Average deal value is for deals with known values onlySources:Tracxn;Crunchbase;Bain PE-VC deals database;Pitchbook;Venture intelligence;Bain analysisNumber of seed deals each yearAverage seeddeal value(US)Average se
79、eddeal value2(India)$1.7M$2.5M20221#dealsAnnualised230(+95%)2021$1.3M$2.0M139$0.9M2020$1.6M126$0.7M2019$1.5M118More seed deals are happening Increasing supply of SaaS companies:more second-generation SaaS founders Existing early-stage investors are doubling down(e.g.,Nexus made 2X seed investments i
80、n H1 2022 vs.H1 2021)Emergence of SaaS-focused early-stage investors(e.g.,Together Fund,with 4+seed deals in H1 2022)Growing interest from incubators,angel networks,accelerators(e.g.,Indian Angel Network invested in 3X deals in H1 2022 vs.H1 2021)1Seed rounds are getting larger Average number of inv
81、estors per seed deal has been increasing(from 2 to 2.5 investors/deal)Investors are also increasing their average investment($0.6M in 2021 vs.$0.7M in 2022)Average Indian seed deals are closing the size gap with US SaaS(from 0.4X vs.US in 2019 to 0.7X in 2022)2India SaaS Report 202215Figure 14c:This
82、 trend has also led to a near-doubling of Series A deals;however,we have seen a notable slowdown in later-stage(Series B+)dealmakingNotes:1 Annualised for comparison,2022 data annualised by adding H1 2022 data and linear projection for H2 2022 using JulyOctober 2022 data,excludes$1B Securonix deal;2
83、 Other tech sectors include edtech,fintech,B2B commerce and tech;3 Top-15 deals contribution to total funding has been calculatedexcluding Securonix deal;Deal value is for deals with known values onlySources:Bain PE-VC deals database;Tracxn;Crunchbase;Pitchbook Venture intelligence;Bain analysisInve
84、stments by deal size($B,%)CompanyType of SaaSLead investor(s)Deal value($M)400New Enterprise Associates250Sequoia,Tiger Global153Westbridge Capital125Softbank Vision Fund115Softbank Vision Fund105CDPQ,Tiger Global,Sequoia capital100Insight Venture Partners100Softbank Vision Fund95AccelVertical Busin
85、ess85Partners Group77B Capital Group,Goldman Sachs72TCVHorizontal Business65Singularity Growth Opportunity Fund62Alpha Wave Global,Tiger Global100GreenoaksHorizontal BusinessHorizontal BusinessHorizontal BusinessHorizontal BusinessHorizontal BusinessHorizontal BusinessHorizontal InfrastructureHorizo
86、ntal BusinessHorizontal BusinessHorizontal BusinessHorizontal BusinessVertical BusinessHorizontal InfrastructureAmagiDarwinboxUniphoreChargebeeLeadSquaredObserve.aiCommerceIQCleverTapBuilder.aiPixisSirionLabsMoEngageServifyClassplusHasura80%Other techsectorsTop-15deals(%)84%72%70%74%72%58%51%2019202
87、020212022Top-15dealsOthersJust 20%of top-15 cos.in 2021(by dealsize)raised funding in 2022Figure 15:Funding concentration has reduced,with many scale Indian SaaS companies and well-capitalised companies funded in 2021 deferring fundraisingNotes:*Data for 2022 till 31 October 2022,annualised for comp
88、arison,2022 data annualised by adding H1 2022 data and linear projection for H2 2022 usingJulyOctober 2022 data;Deal volume is for deals with known values only;CAGR:Compound annual growth rate Sources:Bain PE-VC deals database;Venture Intelligence;Tracxn;Crunchbase;Pitchbook;Bain analysisDeal volume
89、 split by company stage(Series A and above)19%Share of C+deals28%32%24%20022*CAGR212228%11%18%4%91%60+65+90+120+Series ASeries BSeries CSeries D+21Declining from35%in Q122 to13%in Q322Early-stage(Series A)investmentscontinue to grow Rise in seed funding has created a strong pipeline for S
90、eries A investors,with investors willing to back promising,pre-revenue businesses Aided by the emergence of new investors(40+new post-seed investors in 2022)and increasing interest from existing investors(e.g.,Sequoia made 4X Series A investments in 2022 vs.2021)1Late-stage investments(Series B+)hav
91、e seen a decline Declining valuations have led companies with strong economics to defer fundraising Investors have become increasingly cautious about later-stage businesses with weaker economics2India SaaS Report 202216Figure 16:SaaS has emerged as one of the few growth areas in an otherwise slowing
92、 Indian VC market,driven by proven revenue growth and robust economicsFigure 17:SaaS companies that grow efficiently,balancing S&M/R&D investments with revenue growth,attract higher valuationsNote:VC:venture capital;ARR:Annual recurring revenue;1 VC investments are defined as investments in companie
93、s headquartered in India or that havemajority workforce in India,with deal value less than$20 million or where deal value is above$20 million,a VC fund is the lead investor or accounts for majority ofinvestment;Includes deal values for deals with known values only.Sources:Bain PE-VC deals database;T
94、racxn;Crunchbase;Venture intelligence;Pitchbook;Bain analysisSaaS continues to see investor appetite givenproven growth and attractive economics ARRs continue to grow 50%YoY,even for scale players Attractive economics,with 60%80%gross margins in SaaS vs.10%15%for e-commerce Capital efficiency with r
95、evenue scale achieved with comparatively lower funding1Other tech categories have seen coolinginvestor interest Evolving revenue models:Many B2C sectors are developing paths to monetisation as they pivot business models post-pandemic Growth-first economics:Growth-focused categories are still moving
96、towards establishing positive unit economics2Total Indian techVC investments 22%Indian SaaSinvestments 10%5%Increase in share ofSaaS in Indian VC(in 22 vs.21)Year-on-year Indian VC investments growth(2122,Q1Q3)Note:1 Efficiency is defined as every$earned in response to each$spent;2 Ratio of ARR grow
97、th to S&M spending,calculated as(last quarter recurringrevenue preceding quarter recurring revenue)*3)/S&M spending from previous quarter;3 Ratio of growth in revenue to R&D spend;calculated as(Currentyear revenue preceding year)/R&D spending last year;S&M:Sales and marketing;R&D:Research and develo
98、pment;ROI:Return on investment;Sources:OPEXEngine;Secondary research;CapIQ;Bain analysisEBITDAmarginValuation/revenue multipleKey efficiency metrics(November 2022)2.9X15%0.71.0Bottom quartileR&DROI3Mid-range7.0X14%0.71.52%1.21.9Top quartile19.0XMarkets reward growth efficiency;1 companieswith high R
99、&D and sales efficiency enjoyhigher valuations While growth remains a focus area for SaaS investors,with softening market sentiment investors also value efficiency in key spending categories,including R&D and S&M While S&M efficiency,as measured by Magic Number,has a clear correlation with valuation
100、,we have found that R&D ROI is a stronger predictor of valuation1To drive efficiencies,SaaS companies shouldbenchmark the underlying levers of S&M and R&D Comparison with peers facilitates the identification of areas of operational strengths and weaknesses2MagicNumber2India SaaS Report 202217Notes:*
101、Data for 2022 has been annualised post-30 September 2022;includes deals with unknown deal values;2021Freshworks IPO,2022Tracxn IPO;M&A:Mergers and acquisitions;IPO:Initial public offeringSources:Tracxn;Crunchbase;VCCEdge;Secondary Research;Public releases Number of Indian SaaS exitsIndian SaaS compa
102、nies are becoming moreacquisitive Rapid rise in acquisitions in the last 5 years:Top 10 Indian SaaS companies made 8+acquisitions in H1 2022 vs.1 in 2018 Indian SaaS companies with significant scale are making acquisitions primarily to drive capability/product extensions1Mega-scale deals providing e
103、xits for investorsthat took early bets Vista Equitys$1 billion investment in Securonix in March 2022 is the largest private deal in Indian SaaS2Indian SaaS companies are getting increasinglyIPO ready As they reach meaningful scale,Indian SaaS companies like Gupshup,Capillary Technologies are announc
104、ing their plans for IPO IPO plans have been deferred given weak market sentiment and the macroeconomic slowdown32020022*67XSecondary saleIPOStrategic saleAnnualisedFigure 18:SaaS exits are increasing&span a variety of modes;M&A/secondaries are likely to be nearer-term options,h
105、owever many Indian SaaS cos.are IPO-ready18 Indian investors continue to back a range of companies across horizontal business,horizontal infrastructure,and vertical SaaS.When we look at investments in these sectors,excluding the Securonix deal:Horizontal business:Largest investment category(nearly 7
106、0%of 2022 investments),driven by large end-markets(more than$140 billion for top-5 horizontal categories)and numerous proof-points of$100 million ARR companies(70%of top-20 Indian SaaS companies are horizontal business).Horizontal infrastructure:Around 15%of 2022 investments,with numerous global lea
107、ders emerging out of India in DevTools in particular(e.g.,Postman,BrowserStack)given Indias extensive developer base(10%of global total)and rapid,product-led growth.Vertical:Around 15%of 2022 investments,with smaller end-markets($30 billion)compared to horizontal business.Vertical SaaS is typically
108、high-retention,with Indias notable healthcare and wellness and logistics companies seeing rapid growth.An increasingly mature Indian SaaS ecosystem provides investors with an opportunity to back companies across a variety of sub-sectors within horizontal and vertical SaaS:Indian SaaS companies often
109、 bring a unique approach to these sub-sectors(e.g.,mobile-first solutions in MarTech and underserved geographies/verticals/employment models in human capital management).While select categories are comparatively mature,there are clear white-space opportunities for existing and new Indian SaaS compan
110、ies(e.g.,pricing management,workflow automation,identity and access management).Indian SaaS investors consistently back companies in larger and more mature sub-sectors such as Customer Relationship Management&Sales and Enterprise Resource Planning.An increased diversity of companies has enabled Indi
111、an SaaS investors to begin developing sub-sector specialisation for the first time(e.g.,Nexus in DevTools).Key SaaS themesIndia SaaS Report 202219Notes:HCM:Human Capital Management;SCM:Supply Chain Management;ERP:Enterprise Resource Planning,includes Finance and Accounting,GRC software,etc.;CRM:Cust
112、omer Relationship Management;API:Application Programming Interface;*Other vertical businesses include Agritech,Content Management,Retail Tech,Cleantech,Banking,Financial services and Insurance,Tech,Automotive,Utilities;archetypes listed are not exhaustive Source:Bain analysisMarket focus12SaaS arche
113、types and categoriesIndia for the World(Firms targeting customersworldwide)Horizontal BusinessCRM&SalesERP&FinanceHCMSCMContentMgmt.Augmented RealityCommu-nicationData,Analytics,and Business IntelligenceDevToolsApplication DevelopmentAPI ManagementTesting ToolsHealthcare&WellnessMedia&EntertainmentE
114、ducationReal Estate TechHospitality TechWeb 3.0Logistics TechOther*Cloud InfrastructureCybersecurityE-commerce EnablersWorkflowMgmt.Marketing TechSaaSMgmt.CollaborationtoolsVerticalBusinessHorizontal InfrastructureIndia for India(Firms targeting Indian customers)Figure 19:Indian SaaS investors can c
115、hoose to back companies across an array of end-market focus areas and archetypes/categories The outlook for Indian SaaS investment remains broadly positive over the next 12 months,with 90%expecting to increase or maintain their capital allocation to SaaS driven by strong business economics,path to s
116、cale,and successful exit trends.Investors count dev tools,CRM,and logistics tech among the most exciting sub-sectors,while portfolio priorities are product market fit and GTM for early-stage companies,and talent management/acquisition and overseas GTM for late-stage companies.India SaaS Report 20222
117、0Notes:Deal value is for deals with known values only;1 Includes$1 billion investment in cybersecurity firm Securonix;Shift left paradigm is an approach to software testing and system testing in which testing is performed earlier in the life cycle;ARR:Annual recurring revenue;CAGR:Compound annual gr
118、owth rate;Infra:infrastructureSources:Bain PE-VC deals database;Tracxn;Crunchbase;Pitchbook;Venture intelligence;Bain analysis;IDC;GartnerIndian SaaS investments($B)Q1Q3 cumulative investments for each yearArchetypeHorizontal businessapplicationsHorizontalinfrastructureapplicationsVertical-specificb
119、usiness applicationsKey trends20022$1B$1.1B$3.4B$4.6B45%25%31%CAGR 1922VerticalBusinessSecuronixHorizontalInfra.HorizontalBusiness Growth in horizontal SaaS funding led by late-stage deals,40%+growth over H1 20212022 Horizontal applications address large end-markets($140B+market for top-5
120、 horizontal SaaS categories)Indian horizontal-business SaaS companies have demonstrated scale(13 out of top-20 Indian SaaS companies by ARR are horizontal-business focused)8 million developers in India(10%of the worlds total),making it an attractive supplier and demand generator for developer tools
121、Frequent reliance on product-led growth enables rapid,low-cost growth in numerous markets Vertical businesses serve relatively smaller end-markets(vertical SaaS market size constituted$30B+in 2021),but given limited competition,businesses are known to have high customer stickiness Key Indian SaaS ve
122、rticals(healthcare&wellness,logistics tech)saw rapid growth during Covid-19Figure 20a:Horizontal business continues to attract the most capital given large end-markets,while Indias developer base makes horizontal infra highly attractiveFigure 20b:Within horizontal and infra businesses,numerous sub-c
123、ategories are seeing accelerating investor interestNote:The$1 billion Securonix deal is excluded in split of horizontal infrastructure;1 High growth refers to more than 50%growth in value or volume(with atleast 3 deals)in Q1Q3 2022 vs.Q1Q3 2021;API:Application Programming Interface;CRM:Customer Rela
124、tionship Management;HCM:Human Capital Management;ERP:Enterprise Resource Planning;BFSI:Banking,Financial services,and Insurance,BI:Business IntelligenceSources:Tracxn;Venture Intelligence;Crunchbase;Pitchbook;Bain PE-VC deals database;Bain analysisIndian SaaS investments($B)High growth in value/volu
125、me1Q1Q3 2022Horizontal BusinessHorizontal Infrastructure Vertical BusinessSecuronix$4.6BHorizontal BusinessCRM and SalesCommunicationERP and FinanceHCME-commerce EnablersWorkflow ManagementMarketing TechOther$2.6BHorizontal InfraCybersecurityDevToolsApplication DevelopmentAPI ManagementTesting Tools
126、$0.6BVertical BusinessMedia and Entertainment EducationHealthcare&WellnessReal Estate TechHospitality TechBFSI TechLogistics TechOther$0.5BData,Analytics and BIOtherIndia SaaS Report 202221Notes:Maturity based on scale and number of Indian players present across each category and sub-category;Vertic
127、al-focused SaaS categories have not beenconsidered for the analysis;AI:Artificial Intelligence;API:Application programming interface;BI:Business intelligence;CRM:Customer relationship management;CX:Customer experience;ERP:Enterprise resource planning;HCM:Human capital management;LCM:Life cycle manag
128、ement,SIEM:Security information andEvent management;SMB:Small and medium-sized business;Categories listed are not exhaustiveSources:Tracxn;Crunchbase;Secondary Research;Bain analysisRelatively scaled playIndian SaaS maturity vs.US SaaS:Nascent playLimited/no playHorizontal BusinessHorizontal InfraCR
129、M&SalesWELL-SERVED BY INDIAN SAASWHITE SPACE OPPORTUNITIESHCM SaaSMarketing TechWorkflow mgmt.CybersecurityDevToolsData analytics&BICommunicationERP&FinanceSalesenablementCustomer guidanceCRM suiteCX managementConversationalAIContact centerintelligenceAudio/video ToolsBusinesscommunicationReceivable
130、s and payableautomationTalentrecruitmentSubscriptionaccountingAccounting for SMBsExpensemanagementPricingmanagementHR suite(enterprise-focused)MarketingsuiteMarketingIntelligenceSMB-focusedHCMLearning and developmentPerformancemanagementContractLCMProject mgmt.WorkflowautomationIT operationsmgmt.Whi
131、teboardingData securitySIEMIdentity and access mgmt.Email securityAPImanagementApplicationdevelopmentTestingDeploymentDataengineeringProductanalyticsIT infrastructuremonitoringDatabaseplatformEndpoint and cloud securityFigure 21b:When compared to mature markets like the US,there are clear white spac
132、e growth opportunities for existing and new Indian SaaS companiesNotes:Heat map based on the scale of companies present in each sub-category;Vertical-focused SaaS categories have not been considered for the analysis;API:Application programming interface;ARR:Annual recurring revenue;AI:Artificial int
133、elligence;BI:Business intelligence;CRM:Customer relationship management;CX:Customer experience;ERP:Enterprise resource planning;HCM:Human capital management;LCM:Life cycle management;SIEM:Securityinformation and event management;SCM:Supply chain management;SMB:Small and medium-sized business;sectors
134、 listed are not exhaustiveSources:Tracxn;Crunchbase;Secondary research;Bain analysisLowSub-sector maturity within India(basis ARR scale and#of scaled cos.):HighHorizontal BusinessHorizontal InfraCRM&SalesHCM SaaSMarketing TechWorkflow mgmt.OtherCybersecurityDevToolsData analytics&BICommunicationERP&
135、FinanceSalesenablementCustomer guidanceCRM suiteCX managementConversationalAIContact centerintelligenceAudio/video ToolsBusinesscommunicationReceivables and payableautomationTalentrecruitmentSubscriptionaccountingAccounting for SMBsExpensemanagementPricingmanagementHR suite(enterprise-focused)Market
136、ingsuiteMarketingIntelligenceSMB-focusedHCMLearning and developmentPerformancemanagementContractLCMProjectmgmt.WorkflowautomationCollaborationSCM SaaSE-commerceenablerAugmentedrealityContentmgmt.Data securitySIEMAPImanagementApplicationdevelopmentTesting toolsDataengineeringProductanalyticsOthersClo
137、ud infraFigure 21a:Indian SaaS has begun to see depth in numerous horizontal SaaS sub-sectorsIndia SaaS Report 202222Figure 22:Investors in Indian SaaS remain positive and are likely to increase Indian SaaS investments,driven by strong fundamentals and maturing exit opportunitiesIncrease(73%)Maintai
138、n*(18%)Decrease(9%)Notes:*Implies that spending will remain flat(0%growth in spending);1 top companies by valuations and ARR;ARR:Annual recurring revenue;M&A:Mergers ad acquisitions;IPO:Initial public offeringSource:Industry participant interviewsWhat is your outlook for Indian SaaS investing for th
139、e next 12 months and are you expecting to increase/maintain/decrease capital deployment?Improved sentiment given strong unit economics and path to scale displayed by SaaS companies along with proven exitsExpected capital deployment towardsIndian SaaS over the next 12 months Share of Indian SaaS inve
140、stors(%)AttractiveeconomicsPath to scaleProvenexitsHighvaluations60%80%gross margins for topIndian SaaS companies$100M in ARR in 67 yearsfor top Indian SaaS companies40 exits in 2022,up 2x vs.2021Indian SaaS companies command high valuations given rapid growthFigure 23:India SaaS investors are most
141、excited about DevTools,and are currently focused on GTM and talent management for their portfolio companiesNotes:AI:Artificial intelligence;GTM:Go to market;CRM:Customer relationship management;M&A:Mergers and acquisitionsSource:Industry participant interviewsDevTools,CRM&Sales,and Logistics Tech ar
142、e the most exciting themes among the top SaaS investorsProduct-market fit,GTM(early stage)&Overseas GTM,and Talent(late stage)are the key focus areasDevToolsCRM&SalesLogisticsTechEmerging themes for investors in Indian SaaS(number of mentions in investor interviews)Conversational AICyber-securityEar
143、ly StageSales-led vs.product-led growth motionTalent acquisitionProduct-market FitLate Stage GTM(Overseas Markets)Talent managementCost managementM&AKey portfolio focus areas(percentage mentions based on investor interviews)23 Bains experience shows that focus areas for Indian SaaS companies vary by
144、 scale but centre on several key themes:Smaller companies(less than 1,000 FTEs)are primarily focused on entry into new markets,managing downturns,and talent acquisition and retention as they look to scale.Larger companies(more than 1,000 FTEs)additionally focus on enhancing their GTM model and are m
145、aintaining a long-term view towards IPO readiness.Global markets are a key step for Indian SaaS companies looking to achieve substantial scale(more than$100 million ARR).Developing a clear overseas market growth playbook is a strategic imperative for most companies that involves:Market opportunity:I
146、ndia remains a comparatively smaller market opportunity($23 billion)when compared to the US($150 billion).The majority of Indian SaaS companies looking to achieve meaningful scale build an overseas focus,with the US alone comprising 50%of top-20 Indian SaaS company revenues.Growth model:The US SaaS
147、market is highly competitive,and Indian companies that succeed do so through a combination of product excellence,competitive pricing,and a focus on distinct/underserved market segments combined with a clear GTM playbook.Downturn management is becoming increasingly critical for Indian SaaS companies.
148、Cost and liquidity management are essential toolkits for management teams,while downturns are an opportunity for well-capitalised companies to“play offense”and engage in tactical mergers and acquisitions.Focus areas for Indian SaaS companiesIndia SaaS Report 202224Note:*Includes top 20 Indian SaaS c
149、ompanies by scale:Freshworks,Zoho,Securonix,Postman,Druva,HighRadius,Chargebee,Eightfold,Gupshup,Innovaccer,Zenoti,Mindtickle,Observe.ai,Amagi,BrowserStack,Icertis,LeadSquared,CommerceIQ,Hubilo;GTM:Go to market;FTE:Full-time employees;IPO:Initialpublic offering;YoY:Year on year;M&A:Mergers and acqui
150、sitions;p.p:percentage pointsSources:Bain analysis;LinkedIn;Founder interviews Criticality(Based on feedback)Focus AreaNew MarketEntry50 x80%90%40%15p.p.25%$200M80%10+US SaaS market size vs.India($150B vs.$2$3B)Have a clear path to globalexpansion early on,buildinga winning GTM machine by settingup
151、overseas teams to tap intoenterprise accountsManage cost and liquidity and/or proactively pursue competitiveoutperformance and M&ABuild a differentiated talent strategyto drive competitive advantage to attract and retain talentPrepare early for IPO,with key tenets(strategy,equity story)in placeShare
152、 of non-India revenues for topIndian SaaS companiesYoY decline in investments in IndianSaaS in Q2,Q3 2022 vs.2021Drop in buyers who are likely to increase2023 budget(80%65%,MayOct 22)FTE growth of top Indian SaaS companies*in 2 yearsAttrition at top Indian SaaS companiesin 2022Average ARR of SaaS co
153、s.that haveIPOed globallyIndian SaaS cos.that are IPO readybased on scaleShare of Series C+funding goingto India-for-world SaaSEffectiveEnterpriseGTMMitigating downturnsTalentIPOReadinessKey Actions for SaaS WinnersKey Observations 1000 FTEsSaaS cos.ABCDLong-term consideration when markets are favou
154、rable Figure 24:Indian SaaS companies have largely similar priorities;however,as they scale,enterprise GTM is critical while mitigating downturns is increasingly crucial Building winning talent models is critical to maintain growth and a competitive edge.High demand and long-term attrition:Talent de
155、mand from Indian SaaS companies is increasing rapidly(more than 80%headcount growth over 20202022),and Indian SaaS companies compete for talent from similar sources.Winning talent models:Talent outperformers have more than 10 percentage points lower annual attrition.Building winning talent strategie
156、s involves focusing on key interventions across priority areas for employees,namely culture and values,compensation and benefits,and leadership engagement.Numerous Indian SaaS companies are at an IPO-ready scale(more than$100 million ARR).Going forward,as capital markets recover,going public will re
157、quire a well-defined pre-and post-IPO strategy,a compelling equity story,thoughtful timing,and technical readiness.India SaaS Report 202225Notes:Top by amount of total funding received;SMB:Small and medium-sized business;HCM:Human capital management;SE Asia:South East Asia;MSME:Micro,Small and Mediu
158、m EnterprisesSources:Company press releases;MCA filings;VCCircle;Forbes;IDC;Market participant interviews;Bain analysisCurrently,60%of revenues fortop*Indian SaaS companies are from the US marketMost companies expand to US/EU or nearshore,while only a few scale in India85%of top*Indian SaaS companie
159、s have expanded to the US marketIndian market as initial focus Most companies utilise Indian market as a test bed before expanding overseas(e.g.,Whatfix,Zuper)Others with core Indian focus largely target SMB/MSME customers with value-focused SaaS solutionsSoutheast Asia/Middle East market acts as na
160、turalexpansion outside of India Expansion to Southeast Asia/Middle East driven by similar market conditions(i.e.,presence of large number of SMBs and legacy enterprises)and limited presence of established global peers(e.g.,Darwinbox,MoEngage)US/EU to drive rapid growth via large numberof enterprise
161、accounts Select Indian SaaS companies put US market as core focus(e.g.,Innovaccer,CleverTap)Companies enter scale markets like US/EU primarily targeting large enterprises offering them deep-tech products(e.g.,cyberthreat analytics)or niche/point solutions(e.g.,HCM solutions for new talent models)Reg
162、ionsUSEuropeIndiaSE Asia,Middle East,Others 100%Revenue split of top 20 Indian SaaScompanies across regions(%)US80%85%Europe70%India65%SE Asia,Middle East,Others 65%Percentage of top 20 Indian SaaS cos.with presence in region(i.e.,5%revenue)Figure 25b:Going into new markets(primarily the US)has been
163、 a critical element of scale for the majority of Indian SaaS companiesNote:SaaS market size includes system infrastructure software SaaS;*Per organisation per month billed annually and assuming USD/INR=75;CAGR:Compound annual growth rate;SMB:Small and medium-sized businessSources:IDC;CapIQ;Glassdoor
164、;Secondary researchUS SaaS market is large compared to UK andIndia,but Indian market is growing fasterBuyer maturity and presence of scale enterprises makes the US SaaS market attractive$140$150B$13$15B$2$3B20%25%SaaS Market($B,2021)Higherwillingnessto payBigger pool of scale enterprisesHigher matur
165、ityof SaaS buyers15%20%30%35%CAGR(201721)High employee costs in US drive higher adoption of substitution/automated solutions(e.g.,average developer salary in US is 4X that of Indian developers)US enterprises have large IT and software budgets Leveraging higher digital adoption and large budgets,SaaS
166、 companies employ higher prices in US vs.other geos(Zoho Books standard plan costs$15 in US vs.$10*in India)High number of large enterprises($1B revenue)allow SaaS companies to scale large individual accounts(2,500+companies with$1B+revenue in US vs.200300 in India)US enterprises and SMBs are ahead
167、in terms of digital journey US SaaS penetration is 35%in 2021 vs.10%for newer markets like India Large number of US enterprises are tech-oriented and faster to adopt digital solutions(vs.legacy companies in India)Figure 25a:The US SaaS market presents a substantially larger($140$150B)opportunity for
168、 Indian SaaS companies,driven by multiple structural factorsIndia SaaS Report 202226Note:1 Sales team includes account executives(AEs)and sales support teams such as pre-sales,SDR/BDRs,renewal team;Core sales team here is the number of account executives;2 CSS:Customer success and support;3 Indirect
169、 channel partners usually involve IT service firms,technology consulting companies,other companies in different stages of value chain;GTM:Go to market;ARR:Annual recurring revenue;CTO:Chief Technology Officer;CRO:Chief Revenue Officer;CCO:Chief Commercial Officer;SDR:Sales Development Reps;BDR:Busin
170、ess Development RepsSources:Industry participant interviews;LinkedIn;Bain analysisARR Scale:Up to$5M$5M$20M$20M$50M$50M$100MGeographicpresenceTypical Founder Team locationSales team size1(of which AEs)1012(35)2025(46)5060(1215)80+(2025)5810253050+0+25NoneFocused on direct sales,with limit
171、ed emphasison partnershipsFounder-led GTM usingstrategic advisory boardsSmall-scale sales teams(incl.inside sales)acquire initial accountsEmerging tiering and segmentation of accounts,Sales org increasingly mapped to account segments(verticals/tiers)Appointment of CRO/CCO to support leadership team
172、on GTMBuild-out of formalised,on-shore field AE teams,but with limited customer segmentation Build-out of supporting functions such as pre-sales,customer success,and BDR/SDRsInitial partner ecosystembuild-out,includingappointment of dedicatedpartner teamsDevelopment of scalepartnerships and increasi
173、ngemphasis on“sell with”10153040Overseassales teamCTO/ProductCEO/CommercialCSS2 team sizeDirect sales overview#of channel partners3ChanneloverviewDirect GTM&SupportIndirect ChannelCTO/ProductCEO/CommercialCTO/ProductCEO/CommercialFigure 25d:India-for-the-world enterprise focused SaaS companies have
174、begun to develop clear GTM playbooks as they scale overseasNotes:*Top 5 basis segment revenue,3-year data unavailable for leader Microsoft in cybersecurity;Top 5 players data thus excludes Microsoft;CAGR:Compound annual growth rate;CRM:Customer relationship management;GTM:Go to marketSources:Industr
175、y participant interviews;Gartner;IDCLeading Indian SaaS firms competing with incumbents in US have grown 1.53X vs.the segments they play in3 key strengths have given them a right to winStrengthDescrptionExampleProductexcellenceCompetitivepricingGTM strategytapping nichesWorld-class productdevelopmen
176、tSecuronix is a marketleader”in cybersecurity;Druva and Postmanrecognized as“visionary”for their productexcellence by GartnerSignificantly lower personnel costsenable qualityproducts at lowerpricesZoho recognized byGartner for offering valuefor money(e.g.,Zoho Desk is 40%50%cheaper vs.Zendesk)Focus
177、on untapped/unserved segments,enabling higher chances of winningFreshworks targeted mid-market players as an affordable alternativeto existing solutionsSecu-ronixFresh-works30%35%Indian SaaS cos.business growth in US compared to segment and leading peers growth(CAGR 201821)25%30%30%85%90%25%30%30%40
178、%45%Zoho20%25%25%Druva7%8%11%14%15%Segment growthCybersecurity Analytics andIntelligenceContact centerapplications CRMClient endpoint management CRMData security/protectionTop 5 segment leaders*growth(Avg)Player growth1113323223Figure 25c:Indian SaaS companies often find themselves competing with in
179、cumbents in these markets but are able to win across a range of dimensionsIndia SaaS Report 202227Notes:1 Includes top 20 Indian SaaS companies by scale:Freshworks,Zoho,Securonix,Postman,Druva,HighRadius,Chargebee,Eightfold,Gupshup,Innovaccer,Zenoti,Mindtickle,Observe.ai,Amagi,BrowserStack,Icertis,L
180、eadSquared,CommerceIQ,Hubilo;2 Includes top 20 Indian consumer tech cos.Including edtech,online food delivery,e-commerce,etc.;3 Glassdoor average salaries comparison;GTM:Go to market;EMEA:Europe,the Middle East,and Africa;FTE:Full-time employeesSources:Bain analysis;LinkedIn;GlassdoorHeadcount(in 00
181、0s)Rapid growthin Indian SaaStalentRise in demandfor specialisedtalentCompetitionfor top techtalentIncreased overseas hiring Headcount at top Indian SaaS companies has grown at 80%+during 20202022,faster than consumer tech(65%70%)Demand for talent is driven by growth in sales(+140%b/w 202022)and eng
182、ineering(+90%b/w 202022)functions Specialised functions like sales and product marketing are seeing high growth at companies with significant enterprise sales focus SaaS companies compete with each other as well as consumer tech for top tech talent(30%40%overlap in sources of engineering talent)In o
183、rder to attract and retain tech talent,SaaS companies were paying 20%above market average salaries Indian SaaS companies are going overseas to set up on-ground sales teams in enterprise markets like US/EMEA(40%of sales FTEs are based in international locations)Indian SaaS companies are also outsourc
184、ing work to captive teams in competitive engineering/nearshore bases Indian SaaS2020202Indian Consumer Tech120150200+8085%+6570%Figure 27a:Talent demand from Indian SaaS companies is increasing rapidly,with high competition for top technical and GTM talentNotes:M&A:Mergers and acquisition
185、s;R&D:Research and developmentSources:Secondary Research;Bain IPLeverDetailsNotable examples of winning companiesZoom is controlling its subscription management costs in 2022 byoptimising usage across the public cloud and increasing numberof co-located data centers to share cost of managing faciliti
186、esZoho substantially cut down on ad spending in responseto the pandemicElastic has accelerated cash collection cycles by offering earlypayment discounts to select customersHubSpot has increased its R&D investment in 2022 and is focusingon product innovation to enhance its marketing automation offeri
187、ng:Marketing Hub,a complete CRM platform(all marketing and data tools are integrated on a single platform)ServiceNow has been building out a pipeline of acquisition targetsto strengthen its current offering in response to the 2022 slowdown,starting with acquisitions of Era Software(to deliver unifie
188、d observability solution at scale)Restructure costs beforethe downturn without cutting musclePlay offense by reinvestingselectively for competitive outperformancePursue a proactive M&A pipeline to get acquisitions at good valuePut the financial housein order:diligently manageliquidity and balance sh
189、eetRestructurecostsManageLiquidityPlayOffenseIdentify M&A targets earlyFigure 26:Successfully navigating downturns involves both defensively managing costs and liquidity,while also playing offense where requiredIndia SaaS Report 202228Figure 27b:Sources of talent for Indian SaaS varies by scale;howe
190、ver,Indian SaaS companies typically compete with each other to get talent from the same sourcesNotes:*Attrition annualised to facilitate comparison;Legacy Software includes large software companies with majority on-premise,like Oracle,ADP,etc.;Global Big Tech companies include Microsoft,Google,and o
191、ther large organisations;Big 4:Deloitte,KPMG,EY,PWC;Indian IT Services refers to IT companies headquartered in India(e.g.,Infosys,Wipro);Global IT services includes Accenture,CTS,etc.;Talent inflow assessed since the companys inception;FTE:Full-time employeesSources:Bain analysis;LinkedInTalent infl
192、ow in Indian SaaS cos.with less than 1,000 FTEsLegacySoftwareZenotiEightfoldZohoFreshworksMindtickleAmagiObserve.AiCommerceIQHighRadiusIcertisChargebeeInnovaccerGupshupPostmanHubiloGlobal BigtechIndian ITServicesIndian ITServicesUS SaaSBig 4India SaaSGlobal ITServicesLegacySoftwareGlobal BigtechUS S
193、aaSBig 4India SaaSGlobal ITServicesFROMTOFROMTOTalent inflow in Indian SaaS cos.with more than 1,000 FTEs Talent sources vary by scale ofcompanies:Smaller SaaS cos.meet their talentneeds by sourcing from software/productcompanies Large Indian SaaS cos.look to larger pools of talent like IT services
194、to meet demandIndian SaaS cos.source talent from thesame locations:IT services companies such as Cognizant,Accenture,etc.are keysources of talent for scale companiesGiven the competition for talent,attritionhas been high in Indian SaaS cos.(25%between Q1Q3 2022*,droppingto 15%in Q3)123Figure 27c:Ret
195、aining top talent requires a winning talent strategy involves assessment of key employee focus areas and building best practicesNotes:1 Sum of mentions on Glassdoor across six key criteria,N=16,000 mentions by SaaS employees in India;2 Glassdoor ratings among top global SaaScompanies by scale;3 Numb
196、er of times leadership engages with employees,including town halls,surveys,workshops,etc.in a defined time period;CTC:Cost to companySources:LinkedIn;Glassdoor;Bain analysis Culture&compensation mostimportant for Indian SaaS employeesContinuous assessment and building best practices around employee
197、focusareas critical for talent strategy Focus areas for employeesCulture and valuesWork/life balanceSenior managementCompensation and benefitsCareer opportunitiesMost important factors for employees(number of mentions)DiversityKey parametersTop Performers2Best practices of top performers based on Ba
198、in experience eNPS Employee Engagement(Glassdoor ratings)Salaries vs.top competitors Percentage of variable in total CTC Percentage of positions filled internally Leadership engagement rate3 Global:HubSpot(4.7)India:Zoho(4.6)Consistently implemented 360-degree feedback mechanism(monthly/quarterly pu
199、lse checks from employees)Community building across teams(especially among developers/engineers of all levels),networking events with senior executives,and affinity/interest groups Global:Salesforce(4.5)India:LambdaTest (4.7)Healthy balance between fixed and variable compensation(e.g.,60:40 fixed to
200、 variable is the Indian tech industry standard for sales roles,80:20 for non-sales)Comprehensive benefits include must-haves(insurance for self/family,stock options as bonus),routine essentials(exclusive discounts on daily apps),back-to-office perks(travel allowances,recreational facilities,food,etc
201、.)Global:Asana(4.5)India:Postman(4.3)Involvement in key decision making for employees at all levels in the org(e.g.,impromptu multi-day workshops to solve companys most pressing problems)Multi-level mentorship programs with team managers,peer mentors and external coachesIndia SaaS Report 202229Sourc
202、e:Bain analysis IPO SuccessfactorsFull potential strategy for the IPO and after Lay out full potential strategy and future business growth plan Articulate future stock market positions to set investor expectations Delineate clear value creation path through IPO proceeds deploymentTechnical capabilit
203、ies and IPO structuring Ensure set-up of technical capabilities required for the IPO process Decide early on IPO offer details,e.g.,listing location,free float,greenshoe Check guardrails and parameters with shareholdersIPO timing Monitor stock market development closely to tap macro sentiment and in
204、vestment momentum(e.g.,number of IPOs,valuation multiples,indices)Follow IPO pipeline of other companies and position IPO date strategicallyEquity story Communicate credible investment case,teeing up with attractive valuation level Demonstrate track record of strong/improving results(profit&loss,cas
205、h flow,balance sheet)Figure 28b:As capital markets revert to trace upward momentum,companies targeting successful initial public offering(IPO)listings will require getting four key areas rightNotes:US composite includes Atlassian,AvidXchange,Blackline,Coupa,Everbridge,HubSpot,Paycom,RingCentral,Sale
206、sforce,Semrush,ServiceNow,Smartsheet,Twilio,UiPath,Workday,Zendesk,Zoom,Zscaler,Zuora;Indian composite includes Freshworks,Gupshup,Chargebee,Innovaccer,HighRadius,BrowserStack,Icertis,Securonix,and Druva;ARR range at IPO stage for US public SaaS companies is derived considering standard deviation ar
207、ound mean ARR;All curves are smoothed out;ARRs have been extrapolated at certain stages due to lack of publicly available data;ARR:Annual recurring revenue;IPO:Initialpublic offering;companies listed are not exhaustiveSources:Tracxn;Crunchbase;Bain PE-VC deals database;Venture intelligence;Pitchbook
208、;Secondary research;Annual reports;Earnings releases;SEC filings;Bain analysis;Industry participant interviewsAverage ARR by deal stage($M)ARRs for leading Indian SaaS companies(Estimated,$M)300500Seed Series A BCDEFGHIPOIndianSaaSARR range of 80%of US SaaS companiesIPO feasibleTypical IP
209、O rangeIPO highly likelyIPO rangeUS SaaSFreshworks345(At IPO Stage)HighRadiusGupshupIcertisDruvaBrowserStackChargebeeSecuronixInnovaccerPublicAnnouncedintent to IPOEstimatedARR RangeLeading Indian SaaS companies arefollowing similar revenue trajectories ofUS peers by stagesLeading US SaaS companies
210、typicallyfiled for an IPO within$100M$300M ARRrange;several Indian companies arechurning similar ARRsready for IPOsubject to favourable market conditionsProfitability has not historically been key,with just 20%of US SaaS cos.profitableat IPOSaaS companies like Gupshup andCapillary Technologies have
211、announcedIPO plans;however,their IPOs plansare deferred as they wait for favourablemarket conditionsFigure 28a:Indian SaaS leaders are tracking US peers on their growth paths,with a growing pipeline of companies ready for IPO subject to favourable market conditionsFor more information,visit Bold ide
212、as.Bold teams.Extraordinary results.Bain&Company is a global consultancy that helps the worlds most ambitious change makers define the future.Across 64 cities in 39 countries,we work alongside our clients as one team with a shared ambition to achieve extraordinary results,outperform the competition,
213、and redefine industries.We complement our tailored,integrated expertise with a vibrant ecosystem of digital innovators to deliver better,faster,and more enduring outcomes.Our 10-year commitment to invest more than$1 billion in pro bono services brings our talent,expertise,and insight to organisations tackling todays urgent challenges in education,racial equity,social justice,economic development,and the environment.Since our founding in 1973,we have measured our success by the success of our clients,and we proudly maintain the highest level of client advocacy in the industry.