In 1954, Roger Bannister became the first human to run a mile in less than four minutes. This was an epochal moment because, hitherto, the common belief was that it was an impossible feat to achieve. In the immediate few months after, inspired by Bannister’s feat, a number of other athletes emulated him. So much so what was until recently considered impossible became not just possible but commonplace.
In SaaS (software as a service) terms, reaching the $100 million ARR (annual recurring revenue) is the equivalent of running a four-minute mile. In mid 2018, Freshworks* became the first VC-funded Indian SaaS company to breach this milestone. Druva followed suit in 2019, and there are at least half a dozen Indian SaaS startups that are lined up to emulate the two over the next year or so.
For Indian SaaS startups, 2019 was Annus Mirabilis–a “year of miracles”. A perfect storm of ingredients along all dimensions—markets, capital, strategy, macro-trends—provided a platform for Indian SaaS companies to thrive like never before.
A look back at 2019
While Freshworks represents the totemic lightning rod that inspires several other Indian SaaS companies to follow its path, there were several other tailwinds that powered Indian SaaS startups in 2019.
2019 saw a rising SaaS tide all over the globe. According to global research firm Gartner, the global SaaS market is currently worth just under $215 billion and is poised to grow exponentially over the next three years. By 2022, it’s expected to clock in north of $330 billion. The Gartner study identifies strong tailwinds that could indeed propel the global SaaS market to these new heights. More than a third of surveyed organisations see cloud investment as a top-three investing priority, and that by the end of the year, over 30% of technology providers’ new software investments will shift from cloud-first to cloud-only.
Another Gartner survey estimated that spending on SaaS in customer relationship management (CRM) alone would reach approximately $42 billion in 2019. This represents 75% of the total software spend in the segment, continuing the rapid decline of on-premises deployments.
If “software is eating the world”, it is clear that in 2019, “SaaS is eating software”.
Next, perhaps for the first time ever, 2019 saw an abundant supply of capital for SaaS startups in India across the entire spectrum from seed funding to $100 million cheques. The first generation of Indian SaaS successes—companies like FusionCharts, Kayako, Zoho and Wingify—were all bootstrapped companies. The lack of a large funding treasure chest to fall back on meant that these companies grew slowly, investing money towards growth only from internal accruals, and more often than not, capped out at around the $10 million ARR mark.