India’s diamond city Surat is now mining SaaS startups for the world

Unlike the SaaS startups in Chennai, which largely target global enterprises, the ones in Surat also cater to traditional industries locally.

“We started off small in 2021. Today we have more than 50,000 users across the globe and 60 percent of our business comes from the US,” says Vishal Virani, founder of Dhiwise, a programming platform where developers can convert their designs into developer-friendly code for mobile and web apps.

“I got inspired by Girish (Mathrubootham, founder and CEO of Freshworks). How he built the entire community sitting in Chennai and went for a US listing. It had a trailblazing effect… I’m building my playbook in a similar manner. We are, in fact, the first company in Surat to have grabbed the attention of VCs like Accel and Together fund,” says Virani.

Those who visit Surat will quickly notice that it is a hub for many things. To name just two, it is the world's largest diamond manufacturing centre; it is also a textile powerhouse, home to India’s largest synthetic fabric market. And now, inspired by the brilliant minds in the southern jewel that is Chennai, it is fast becoming a hub for Software as a Service (SaaS) startups, home to entrepreneurs such as Virani.

Data sourced from Tracxn shows that Surat has more than 2,530 startups, of which 164 are SaaS-based startups offering services such as financial management, export-import management and cloud-based solutions. Together, they have raised nearly $224 million so far.

Among the prominent SaaS startups in the city are Dhiwise, Trezix, Ezee, VideoSDK and Wishbook. They have clients in markets stretching from Gujarat and Chennai, to the UK and the US. In all, some of these fledgling companies employ about 150-200 people. Many of these employees are graduates of the local National Institute of Technology, so the companies do not have to cast a wide net to draw in developers.

The first SaaS startups in India were outsourcing services such as Business Process Outsourcing (BPO). The success of Zoho and Freshworks, the posterboys of the SaaS industry, fostered the belief that an Indian company could build for global markets from India.

Many top executives from Zoho and Freshworks left to start up on their own. Chennai became their hub and is home to more than 1,132 such startups today, according to data from research agency Tracxn.

Indeed, this prowess has earned the city the sobriquet ‘SaaS capital of India’.

Chennai certainly played a part in inspiring Virani, who attended a SaaS community event in the city. The event was organised by SaaSBOOMi, an industry body representing founders and product builders shaping the SaaS ecosystem, which was conceived by Mathrubootham and other SaaS entrepreneurs.

Virani returned home, shared his takeaways and encouraged others to attend such events.

“In 2022 there were 12 people who accompanied me. In 2023, it was 25, and the number will keep growing. I’m seeing a lot of interest,” he says. Today, he heads the Surat chapter of SaaSBOOMi.

Avinash Raghava agrees. “Mark my words. In the next 5-10 years, the next Zoho and Freshworks kind of a company is going to be coming from Surat and other smaller tier III and IV cities like Rajkot or Bhopal,” says Raghava, who is the CEO of SaaSBOOMi and former managing partner of the SaaS-focussed Together Fund.

“These guys are very smart, they understand how a business works. They don't understand the VC business; they only know that ‘there is X amount of money going into the investment, there is some profit, and I must make this profitable’,” says Raghava.

A SaaS founder offering products in HR services seems to epitomise that assessment by Raghava. “I have a very Gujarati mindset.…I don’t know much about many finance metrics but all I know is that I need to make profits in the business that I do. And I do make profits, consistent ones,” says this founder, on condition of anonymity.

He claims that his company is closing in on a funding round and presently reports an Annualised Revenue Run Rate of (ARR) of $6 million.

As with any business in Gujarat, costs are watched closely. “If you need $10 million to build a company from Bengaluru, we can build it in $1 million. The real estate is very cheap,” says Dhiwise’s Virani.

“For Rs 20,000 to Rs 30,000, you will get a rockstar software programmer in a city like Surat, but the same guy in Bengaluru will cost you Rs 2-3 lakh. That's the kind of difference,” added Raghava.

Industry associations also played a role in putting Surat on the SaaS map.

“In 2018 and 2019 industry bodies started emphasising the importance of startups and started conducting events here in Surat. TiE events started happening in Gujarat and Surat,” says Vipul Kapoor, Cofounder of Ezee Technologies, which offers a suite of products, including eZee FrontDesk, a desktop-based hotel management solution.

“We did a small session on marketing back in 2010 and for the first time I saw a founder coming from Rajkot to Bengaluru. It was really fascinating for me; many didn’t even know where that city was,” recalls Raghava of  SaaSBOOMi.

The efforts began to pay off. “Once people started seeing our metrics, we started seeing huge traction. Sequoia, Accel and others want to invest here. I have many DMs (direct messages) in my LinkedIn approaching me to understand the company and invest here. In the past two years things have changed,” says a Surat-based founder.

Since 2018, however, some startups in Surat have been moving beyond SaaS converting the SaaS offerings into products which has helped firms in clocking more profits. “We started as a SaaS company and transformed to a SaaP firm as it is more profitable,” says Kapoor of Ezee.

Unlike the SaaS startups in Chennai, which largely target global enterprises, the ones in Surat also cater to traditional industries locally. Indeed, many SaaS products or services in Surat are solving for the traditional textile or diamond industry.

“Traditional industries are looking at modernisation or digitalisation. For example, there is a SaaS product built for textile manufacturers to manage their warehouses and other needs. The diamond industry is also undergoing a transformation. Many startups started building SaaS products for these traditional industries,” says Arjun Kava, CEO of VideoSDK, which enables developers to easily build live audio-visual experiences on any platform. It was founded in 2021.

TreZix Software Private Limited is a SaaS company digitising the import-export process for SMEs and automating collaboration with stakeholders.

“Surat is like an ignition. There are large manufacturing companies ready to give you business and you can literally start from there and scale up. You will get a very quick validation here,” says Haresh Calcuttawala, the company’s cofounder.

Just as IIT Madras and many leading engineering colleges in Tamil Nadu played a pivotal role in producing talent for deep-tech and SaaS firms in Chennai, many founders say that Surat-based Sardar Vallabhbhai National Institute of Technology (SVNIT) university has played a big role in creating a talent pool for the city’s startups.

“NIT has got really good students. AI/ML and next-gen knowledge and other latest tech are taught in this college,” says TreZix's Calcuttawala.

But the talent isn’t just local. Software engineers from Mumbai and Pune, and astonishingly, even some from Bengaluru, have shifted to Surat and are currently working from there.

“A large amount of talent from Gujarat moved to Pune and Mumbai before the pandemic and they all came back to their hometowns. The engineering talent wanted to settle in Surat or Ahmedabad. In the last four years, the standard of learning has improved, with colleges in Saurashtra, Ahmedabad and Surat doing well,” Kava added.

Trezix’s Calcuttawala says the sense of community makes Surat different from other SaaS hubs.

“The entrepreneurship here is very different. The Community plays a larger role than competition. Professional rivalry is also not very big. Right from help with financials, networking, sourcing and others, I can depend on another founder,”  he says.

Visibility is still a major challenge that SaaS startups in Surat face. Consequently, funding has been hard to come by, even in 2021, when it was in free flow.

“We struggled to raise our first rounds, we had more than 40 rejections to be honest. Finally, India Quotient gave a seed round and then we got selected for Accel Atoms (an accelerator programme). That gave us great exposure,” recalls Virani.

Only a few startups could attract investors. “The first few investments were local in many of the startups. The first believers were those who had worked with founders already. However, we need a huge mindset change among investors,” says Kava.

Some investors have made that shift. Today, venture capital firms such as Accel, India Quotient, Together Fund and Upekkha are willing to bet on enterprises from smaller towns.

“Many Tier-2 cities, especially those with strong IT services and freelance IT developers, are picking up. We have founders building in Jabalpur, Indore, Raipur, Chandigarh,” says Krishnamoorthy of Upekkha.

Another challenge is the lack of understanding about government initiatives and schemes. “The only thing that is limiting is the lack of knowledge — many firms don’t know about these initiatives and programmes,” says Kava.

Again, while there is enough developer and engineering talent, management-level talent is still hard to come by.

“We can get engineering talent but for GTM (go-to-market) or management, talent, it is a little difficult. We are hiring from Delhi and Bengaluru,” says Virani.

To be sure, Surat has made a decent beginning. But it still has a long way to go to match Chennai.