With more enterprises prioritising digital transformation, the growth opportunities for Indian SaaS (software-as-a-service) startups only stand to widen. Add to it the increasing fervour around Web3 and the consequent scope that will emerge around building the necessary tech infrastructure, creating more room for SaaS players to deliver. Already, local SaaS startups have achieved combined revenues of over $8 billion in 2021. The industry is poised to touch as much as $100 billion in revenues by 2026, according to a recent report jointly published by Zinnov and Chiratae Ventures. Much of the sectoral growth is expected to be driven by rising demand for solutions around hyper intelligent automation, cloud security, Web3 and cloud native technologies. "The (tech) stack for Web3 is not fundamentally different. On the crypto side, India has already gained foothold but in the larger Web3 construct, if you think of the convergence of automation, AI and blockchain, I think there's enough and more opportunity for SaaS players," Praveen Bhadada, managing partner at Zinnov, tells Fortune India. "India is in a sweet spot in a sense given the talent pool we have," says Bhadada.

In fact, the availability of a sizeable pool of digital talent will be a big tailwind for the entire SaaS ecosystem. The size of India's digital workforce is estimated to reach 2.8 million by 2026 from about some 1.3 million—thanks to the pandemic-led remote working culture which has enabled companies to hire skilled talent from small cities and the adoption of edtech platforms which has democratised access to varied digital technology courses for all. Cities like Vadodara, Jaipur, Coimbatore and Nagpur are establishing themselves as the next 'hotbeds' of digital talent.

Analysts expect funding for SaaS players to touch about $6.5 billion this year, higher than investments of $4.2 billion the space garnered in 2021. This, despite a somewhat cautious approach assumed by investors and a subdued funding environment. After all, the SaaS momentum is only gaining pace—having surpassed the UK, India is estimated to leapfrog China and become the 2nd largest SaaS nation by 2026. "Regulatory crackdown on the Chinese tech sector has been detrimental to its reputation as the top investment destination for international funds," analysts said in the report. Analysts, however, say that the total yearly funding for SaaS could have touched $8 billion had the startup funding frenzy witnessed over the past year sustained.

Nevertheless, the Indian SaaS story is on a firm footing. "There are strong signals of the industry maturing, with growth in deal size across stages as well as a higher share of late stage deals," says Sudhir Sethi, founder & chairman at Chiratae Ventures. Being able to get large enterprises on board is where SaaS startups have been able to make a dent. Enterprise vertical contributes more than 40% to SaaS revenues. "We are seeing playbooks emerge where companies are catering to enterprise customers, where the SaaS contracted revenues are ranging like a million dollar plus on a ticket size basis," says Venkatesh Peddi, managing director at Chiratae Ventures. Enterprises globally are likely to increase spend on digital transformation, covering tech like intelligent automation, IoT, cloud and blockchain. If estimates are to be believed, spends on digital transformation will grow at a CAGR of 15%-20% between FY21 and FY26.

"If you look at the global market for SaaS adoption, that's been skyrocketing. If you look at some of the biggest names in cloud infrastructure... the likes of Microsoft, Google, despite their significant revenue base, they continue to grow at 30%, 40%, 50% on an annual basis. If those companies are any indicator of the cloud industry, they will only tell you that more and more enterprises are continuing to invest into that. The demand potential is there and now India is also raising its hand from a supply ecosystem standpoint," says Bhadada.

Bengaluru-based SaaS logistics tech startup Locus led by Nishith Rastogi remained ahead in the game by identifying upcoming market trends ahead of peers and developing routing systems and logistics intelligence services for larger enterprises. "That's really the sweet spot we focused on, helping us differentiate and acquire group level clients like the Nestles and Unilevers of the world," Rastogi had said.

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