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Home » Indian SaaS Sector to Hit $26B in Revenues by 2026: Report

Indian SaaS Sector to Hit $26B in Revenues by 2026: Report

Indian SaaS Sector to Hit $26B in Revenues by 2026: Report

Despite facing tight macroeconomic pressures and a challenging funding landscape, the Indian software-as-a-service (SaaS) industry is expected to experience significant growth.

According to the latest India SaaS report, jointly conducted by VC firm Chirate and management consulting firm Zinov, the industry is set to grow 2.5 times and reach $26 billion in revenue by the end of 2026.

The report highlights the remarkable resilience of the Indian SaaS industry, with 93 percent of founders projecting revenue growth over the next 12 months. Indian SaaS companies are focusing on revenue generation with an emphasis on operational and capital efficiency.

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In 2022, Indian SaaS equity funding saw a 30 percent increase, totaling $419 million across 2,780 deals, compared to $319 million and 2,605 deals in 2021. The stage funding saw a remarkable 1.6x increase in value during 2022. Notably, Indian SaaS start-ups received three times more funding in 2022 than in 2019, exhibiting a steady compound annual growth rate (CAGR) of 47 percent.

However, founders in the industry face challenges such as delayed sales cycles and cautious customer spending due to the need to optimize cloud costs. The report also highlights the potential risk of lower customer demand in 2023, leading to a contraction in gross margin.

Despite these challenges, the Indian SaaS ecosystem has demonstrated remarkable adaptability and resilience in the face of slowdown and disruptions. This “herd immunity” suggests that Indian SaaS companies not only have the ability to survive challenging times, but also adapt, grow and emerge stronger.

Looking to 2023, both founders and investors are optimistic about valuation multiples returning to pre-pandemic levels within the next 12 to 18 months. Investors are now focusing on entities that demonstrate efficiency, profitability and growth while making investment decisions.

The report also highlights key opportunity areas for the Indian SaaS industry, including DevOps, cyber security, and vertical SaaS, which are expected to lead the next phase of growth and innovation across various SaaS categories.

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