The Software-as-a-Service (SaaS) space in the country is set for explosive growth in coming years with the sector churning out six new unicorns in 2021 only. According to a new report by Bain & Company, the aggregate revenues of SaaS players, including the SaaS revenues of regular IT companies, are expected to cross the $30-billion mark by 2025 against $7-8 billion now.
The report titled ‘Indian SaaS Revolution: Rising Trillion Dollar Global Opportunity’ says that the number of SaaS companies has doubled to 8,000-9,000 in 2021 from 4,000-5,000 five years ago. India’s SaaS industry revenues will grow eight times from $5.3 billion in 2020 to $42.2 billion in 2025, it adds.
As many as six unicorns including Eightfold, Gupshup, BrowserStack, Chargebee, Innovaccer and MindTickle emerged from this sector in 2021 taking the total number of SaaS unicorns in India to 13
Private equity investments in the sector are expected to more than double this year to $4.5 billion, according to Bain and Co. Indian SaaS companies raised about $1.7 billion last year and $1.3 billion in 2019, the global management consulting firm said in a report.
While investment in the sector grew by 170 percent year on year and is expected to reach $4.5 billion in 2021, the average value of investment in seed-stage SaaS companies as well as Series D-plus rounds has seen growth.
The report attributes growth in exits, high capital efficiency, creation of a talent pool and cascade effect of former employees from Indian SaaS companies starting up for the change in the SaaS landscape. The report says valuation multiples are set to grow from 12x in 2020 to 18x in 2025 based on aggressive growth estimates.
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The favourable conditions have also seen the number of SaaS companies growing, from nearly 5,000 companies in 2016 to about 9,000 companies in 2021. The number of investor backed companies in the SaaS sector has nearly doubled, with over 60 companies having raised growth funding beyond Series C.