Bootstrapped SaaS firm Kovai.co mulls fundraise in next 18 months

Saravana Kumar, founder and CEO, Kovai.co

Bootstrapped for more than a decade now, Software-as-a-Service (SaaS) startup Kovai.co is in talks with external investors for a possible fundraise in the next 18 months.

“For the next 18 months we have the budget in place and there is no immediate need for external capital…but post that if we feel there is a need to grow faster and we need a cushion, we will consider raising capital outside,” said Saravana Kumar, founder and chief executive of Kovai.co in an exclusive interaction with Moneycontrol. 

The company is receiving a lot of interest from external investors and Kumar is also having high-level discussions regarding the same. 

“There is no promise that the firm will be bootstrapped forever and I’m holding high-level discussions, which are at a very nascent stage, with investors and experts to consider raising funds,” he said. “I am trying to find out who will best suit us, want to be prepared, so we don’t have to rush for capital at the last minute, when we need it." 

However, Kumar also reiterated that if their new products, Document360 and the customer success product Churn360, pick up at a faster pace and add more to the revenue, the firm will postpone the timeline to actively look for an external investor. 

Founded in 2011 by Saravana Kumar, Kovai.co is a Coimbatore and London-based SaaS firm that offers enterprise software products for Microsoft ecosystem. It counts ABB, Biocartis, Vodafone, Whatfix and Toyota among others as its clients. 

The firm reported an Annual Recurring Revenue (ARR) of $10 million in 2020 and reported a profit of 40 percent of the revenue.

Around 40-45 percent of the revenue comes from the US market, 30 percent from EU, 10-15 percent from Australia and NewZealand and the rest from other countries including India.

However, in the past two years, the company has shifted its focus from profitability to investment and growth through which the firm has set a target to reach $30 million in revenues by 2025. 

“We were reporting around 40 percent of revenue as profits in 2020; however in the next two years we may not be profitable but the revenue generated will be invested fully into business development…We are operating as if like a funded company and plan to achieve $30 million revenue by 2025,” Kumar added.

The SaaS firm consolidated its offerings recently and is focusing on four product segments -- BizTalk360 which contributes almost 70 percent of the revenue,  Document360, Churn360 and Serverless360. It closely competes with firms like Gainsight and Totango in the customer success product segment.

“Churn360 is successful, up and running. We are seeing significant interest in the market. Customer success/retention is getting more attention these days as the market is witnessing a downturn and a fear of recession being set in,” Kumar said. 

The firm is going slow on hirings for the next year partly due to the focus on business growth and due to the external market conditions, he observed. 

“We recently shifted to an office with a capacity of 300 people and we are around 240 people now…Our focus has now shifted towards building our product and investing in the business and we have decided to go slow on hirings and do it only if it is absolutely essential,” Kumar said.