'Valuation of Indian SaaS startups could increase 16-fold by 2025'

Image: Mexy Xavier

Google Vice President Rajan Anandan

Indian startups that are building business management software for pay-as-you-go customers worldwide could capture a good share of the demand for such products in 10 years, internet giant Google and Accel Partners, an early-stage venture capital firm, estimate. Demand for these products is expected to rise strongly in the US.

Collectively, Indian startups such as Zoho, Freshdesk, Capillary and Manthan, which make such Software-as-a-Service (SaaS) products, can raise the sector’s annual revenues in India to as much as $10 billion—or about 8 percent of the projected $132-billion global demand—by 2025. Global demand for such software today is about $60 billion.

SaaS is a licensing and delivery model in which software is provided on a subscription basis rather than installed on a customer’s PC. By 2025, Indian SaaS startups could be valued at as much as $50 billion, according to the study. That compares with $3 billion (about Rs 20,000 crore) today, based on the total revenue of $600 million of these Indian and ‘India-affiliated’ companies, Shekhar Kirani, a partner at Accel Partners told reporters in Bangalore on Friday, discussing the study. The market value in 2025, is being estimated at about five-times the revenues, he said.

“Companies from India are beginning to address global needs,” Rajan Anandan, a vice president at Google said at the conference. “There is also an emerging opportunity to sell to large enterprises in India.”

Catalysing this opportunity is the coming together of the demand around the world for such software, and the fortuitous leapfrogging in India towards mobile internet technologies.

As a result, in addition to the cost advantage of doing engineering in India—which helped the first wave of Indian tech companies such as today’s top IT services companies—a concentation of programmers building software for the mobile-first world in India gives the startups in the country a significant edge, Kirani said.

The Google-Accel study, estimates there are about 25,000 software developers in India who are already working on developing business software for the mobile internet era. The study projects this will rise to 1,30,000 by 2020.

“Customer behaviour is changing, there is massive demand online, we have a sizeable talent ... all the ingredients are here, and what is needed is that the quality of the products has to be world class,” said Accel’s Kirani.

“Cloud computing is one of the top technology investment trends of this decade,” Anandan said in a press release. Some $18 billion has been invested in building such Internet-based and custom-made business management software in the last four years, he said. “Indian startups have an edge, as mobility is becoming a key requirement” for businesses.