SaaS is on fire

it took over headlines. all funding was about SaaS and fintech. even when Tiger Global plotted their re-entry into India, SaaS was on top of the list. 

now, it seems SaaS, as a sector, could be valued at $1 trillion by 2030, according to a report by SaaSBooMi, an ecosystem community platform. 

but wait, what is SaaS? SaaS, software as a service, or technology that allows users to connect to and use cloud-based apps. the report says that the sector accounted for $600 billion of the $3 trillion in global enterprise IT and communications spending last year. at 8% per annum, it’s growing twice as fast as the overall IT market.

who are the players?

Freshworks and Zoho, competing tools that offer CRM, accounting, and other online business services, are among India’s largest SaaS companies. Freshworks is going to list in the US market soon.

among other big names are Flock — the Slack alternative, Chargebee — subscription billing software, Leadsquared — marketing automation platform, and HackerRank — technical recruitment platform.

capital rolling in

as many as six Indian SaaS startups have turned unicorn ie. crossed $1 billion in valuation over the last year. recently, BrowserStack leapfrogged Freshworks to become India’s most-valued SaaS company at $4 billion with a $200 million fundraise. Zenoti, spa and salon management software, turned unicorn with a $160 million raise last December, and recently added $80 million to that round. Whatfix, which provides in-app guidance and performance support for web applications, raised $90 million from venture capital giant Softbank.

why is it hot now?

it’s important to understand how SaaS works. most services companies build products for a large selection of companies. let’s say, an HR management system, that, say, a DarwinBox built. here it helps HR companies across the globe manage their functions, which include everything from helping onboard employees to their leave policy and their exit. this is called horizontal SaaS. essentially, one solution across a breadth of companies. the more services you sell, the more money you make. but during the pandemic, a larger group of companies realised they had to use the internet. they couldn’t rely on being on-site to get important work done. for some functions, like say HR, there were options available but let’s what about very niche business-related functions? let’s imagine there is an upscale salon in Bengaluru. it needs to be able to manage not just customer appointments but also sales in the stores, there are very few software solutions available to help manage all of this. that’s why vertical SaaS companies such as Zenoti, suddenly became a rage. because it could target not just one salon but stores across the world who need these solutions. 

and now you know why SaaS is on fire.