One thing today in tech — 5 takeaways on Indian SaaS companies from an early-stage VC investor

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Today, five takeaways on the future of India’s SaaS sector from the perspective of an early-stage VC investor, but first, a few headlines.

Headlines

India’s Aditya-L1 satellite, our first space-based solar observatory, was launched successfully on Sep. 2 at 11:50 a.m. local time, Isro said in an update.

Microsoft is ending WordPad, the basic word processor that’s been included with Windows since 1995, Thurrot reported over the weekend, citing a support page from the Windows maker.

Infosys has completed the acquisition of Denmark’s Danske Bank’s 1,400-person IT centre in India, the Bengaluru IT services company said in a press release on Sep. 1.

One thing today

There are optimistic projections about how India’s SaaS companies will become a $50 billion sector by 2030 and so on. But what are some of the obstacles they will have to overcome. Recently, I had a chance to sit down with Arun Raghavan, founding partner at Arali Ventures in Bengaluru, and this was one of the topics we discussed for a bit.

Here are some quick takeaways from Arun’s experience, which includes successfully backing multiple SaaS startups very early on in their journey and even some good exits.

1. The go-to-market playbook is heftier than five years ago. So how does one create a sales engine that can have people sit in India and develop relationships with enterprise customers in the US and Europe. You can only do that to a limited extent if you’re only trying from India. And if you really want to go after large customers, you need feet on street. More companies doing this much better today, but there’s ways to go.

2. How do you scale a company sitting in India to become a $100 million dollar business, especially if you're selling into the US? This is work in progress. Typically, a company that starts in the US, which gets good talent, is off to the races, but the pool of people who have the experience of playing the cross-border game is still limited. The numbers are big in tech services, but not yet in the products startup ecosystem.

3. You may disagree, but the real cutting-edge stuff is still mostly coming from Silicon Valley or Israel and such hubs. That proportion is still 80-90 percent, Arun says. Of course, there are very interesting companies coming out of India, but it's not widespread yet.

Can a startup find a critical mass of generative AI experts quickly in India, for example? Not really, says Arun. And the more deeper tech players from India, more often than not, while they may have centres in India, they will also tap talent in Eastern Europe, for example, or Israel or the US or all of the above.

4. We need to go way deeper than the application layer. Traditionally, we’ve been great at application software. We’ve got a $200 billion tech services industry to show for it. But anything that's at a more infrastructure level, or tooling level is something that we don't have a lot of experience in, Arun says.

He expects these are areas where we will develop some knowhow over the next four or five years. Why is this important? Well, the infra players are relevant to customers around the world. For example, can we think of a Snowflake emerging from India in the next ten years, asks Arun? Or a Databricks?

5. The money is there now. To end on a more optimistic note, funding isn’t a challenge anymore, Arun says, the current slowdown notwithstanding. Over the last five years, large investors from the US have taken note of the potential for software product companies to come out of India and they have been investing in this ecosystem. This will only increase.