The Indian Software as a service (SaaS) industry is set to clock in $100 billion in revenues by 2026, according to a report released by venture capital firm Chiratae Ventures and consultancy firm Zinnov on April 19.
The report said that venture capital investments in the sector grew three-fold in 2021 to over $4 billion and it is expected to grow by 55 percent to touch $6.5 billion over the next year.
"2021 was a watershed year for Indian SaaS – including exponential valuations, successful IPO debuts, a vast influx of VC (venture capital) investments, and an unprecedented number of unicorns," said Pari Natarajan, Chief Executive Officer of Zinnov.
"On the path of crossing the milestone of $100 billion in revenue by 2026… India is fast emerging as a clear leader in SaaS, and will supersede China to become the second-largest SaaS nation in the next few years," said Natarajan.
The report mentioned that about 90 percent of all SaaS unicorns have achieved the status in the last four years and there are currently more than 1,150 active companies, with a cumulative revenue of $8 billion in 2021. About 40 percent of the revenue is coming from the enterprise segment, making profitability a "realistic milestone for SaaS companies", it noted.
Globally, India recently surpassed the United Kingdom in the number of SaaS unicorns and is gearing up to surpass China to become the second-largest SaaS nation by 2026, the report said.
It noted that the growth in the sector has been accelerated due to supportive policies, abundant liquidity, proven model, availability of domestic talent, and exit options offered by startups.
"India is a global SaaS leader, and Chiratae Ventures has been fortunate to be at the center of this surging momentum, with over 35 SaaS companies in our portfolio like Uniphore, which recently raised $400 million, and others like Pixis, Hevo Data, Healthplix, CropIn, Pando, Deepfence, and Squadcast which are valued over $3.5 billion and last year overall raised $600 million," said Sudhir Sethi, Founder and Chairman of Chiratae Ventures.
Among the key categories that are emerging as areas of interest for investors in 2022 are cloud-native software development, hyper-intelligent automation, cloud security, Web3, and verticalised SaaS, all of which have seen a significant increase in funding activity globally this year, the report said.It also noted that the next wave of digital talent is expected to come from tier-II and tier-III cities that offer a vast pool of over three million digitally skilled workforces.