No new SaaS unicorns so far in 2023 as funding winter lingers, says Bessemer report

No new SaaS unicorns in 2023, efficiency is key for sustainable growth: Bessemer Report

Amid tough funding environment and tight macroeconomic conditions, no Software-as-a-Service (SaaS) startup joined league of unicorns so far in 2023 as against around nine of them registered by this time last year.

Startups like Amagi, Yubi, LeadSquared, ShipRocket, DarwinBox, Uniphore, CommerceIQ and Hasura became unicorns in 2022, showed a report by venture capital firm Bessemer Venture Partners, titled ‘Rise of SaaS in India 2023’, released on August 8. The term unicorn refers to a privately held startup company with a value of over $1 billion.

“While there are no new unicorns this year, there are three new Centaurs (a business that reaches $100 million of annual recurring revenue (ARR))... So the fundamental ecosystem is growing very strongly and it should be noted,” Said Anant Vidur Puri, Partner at Bessemer, at a media roundtable.

The concept of unicorns is evolving and changing, Puri said.

“The term unicorn tries to link between the fundamental business metrics to externalities that founders really have no control on… Nobody knows what will happen to interest rates tomorrow and the math equation will completely change,” he said.

The Indian software-as-a-service (SaaS) industry is facing a funding slowdown as investments dropped nearly 81 percent to $635 million in the first half of 2023 from a massive $3,406 million recorded a year back.

The report also stated that by 2030, India’s SaaS market size is poised to grow to around $50 billion in Annual Recurring Revenue (ARR) from $13-$25 billion now.

As per the report, the number of companies with more than $100 million ARR went up to 11 in 2023, as against nine in 2022. Companies with $50-$100 million ARR went up to 16 in 2023 from 12 last year.

“The SaaS ecosystem is getting mature and growing… When interest rates rise, investors flock towards higher efficiency businesses and efficiency is a proxy for sustainable growth,” Puri said.

The report also stated that the existing SaaS majors and unicorns will add a revenue of $22 billion this year. “While India-first SaaS companies like Billdesk, Razorpay, DarwinBox and Zeta will add around $5 billion of revenues, Global-first companies like Freshworks and Zoho will add about $17 billion in revenues,” it said.

Investors are choosing companies with high efficiency and 2023 is the year of most-efficient entrepreneurs, the report said. “We still think that Indian companies are more efficient than their global counterparts,” Puri said.

On the UPI front, the report said the growth of the Unified Payments Interface will create SaaS and infrastructure opportunities across the spectrum. “As UPI is growing to fuel Indian payments to a $1 trillion market… SaaS built on UPI infrastructure or credit on UPI firms like AdvaRisk, Card91 and M2P are poised to grow,” Puri said.