As the Indian SaaS ecosystem continues to mature, AI and efficiency are emerging as key themes for cloud growth in India.
India's software-as-a-service (SaaS) market continues to go from strength to strength—it’s projected to reach $50 billion of annual recurring revenue (ARR) by 2030, nearly quadrupling its size today. Cloud builders in the country serve domestic and international customers alike: “India-first” companies sell software that reaches the country’s population of 1.4 billion, while “global-first” companies primarily sell to customers around the world.
While India’s SaaS ecosystem is still in its early innings, we’re already seeing promising signs of growth and durability. In particular, we’ve seen significant growth in the number of early-stage companies that surpass $10 million in revenue. Six years ago, we identified approximately 30 businesses with revenue over $10 million, and today that figure is over 85 companies, an almost threefold increase.
In today’s high-interest rate environment, India’s SaaS businesses have a leg up. Capital markets around the world are placing a valuation premium on efficient businesses, and India’s SaaS market is poised to benefit, Indian software companies tend to have higher efficiency metrics than their global counterparts.
Across revenue ranges and levels of business scale, we observed that Indian SaaS companies have higher efficiency scores (defined as FCF% + Growth for mature companies, and as Net New ARR/ Net Burn for early stage companies) than their U.S. counterparts.
There are two key drivers behind India’s efficiency advantage: (1) SaaS businesses in India already value efficiency on a cultural level; they can upstart and scale with less capital than startups in other countries; (2) India’s SaaS companies tend to build additional products faster and earlier in their lifecycle.
On the horizon
India’s SaaS market continues to differentiate itself among global innovation hubs. As entrepreneurs around the world navigate a higher-interest rate environment, capital efficiency stands out to investors, making India’s already efficient software market poised to benefit in aggregate. Favorable regulatory and infrastructure developments continue to lay a strong foundation for product development, and high rates of AI adoption will enhance delivery and transform industries. We look forward to seeing India’s SaaS founders build the next generation of cloud software.
Full report at: https://www.bvp.com/atlas/rise-of-saas-in-india-2023