While it is clear that the Covid-19 pandemic and related lockdown / social distancing has affected almost all businesses worldwide, there are some sectors, especially within technology, that are experiencing tailwinds. Especially those who make the continuity of work or business from home more productive and secure, like cloud-based SaaS software companies, says Venkat Vallabhaneni, managing partner of Inflexor Ventures, an industry-independent early stage VC fund. “SaaS companies have an advantage in that they have low net worth by quickly and easily adopting DIY products, have recurring revenue models, and are also well suited to WFH,” he said in a recent interview with Sudhir Chowdhary. Extracts:
Why do you focus on deep tech and SaaS at Inflexor? Isn’t the SaaS room in India in full glory yet?
Jatin Desai (Managing Partner) and I both have strong technological backgrounds – they have set up and managed technology units for global banks and have historically scaled our own technology-driven businesses. Deep Tech / SaaS are an obvious choice for our investment ethos / ethos. SaaS companies also have an advantage in that they have low assets, are quick and easy to adopt, offer non-linear growth, and have recurring revenue models.
We are an industry-independent fund looking for products that use strong technology / intellectual property / innovation to differentiate and distinguish themselves in national and international markets. Our sweet spot lies in B2B company software platforms. However, we easily invest in selective B2C consumer technologies and products with differentiated business model and technology IP.
There are more than 1,000 companies in India’s SaaS industry with revenue of $ 3.5 billion in fiscal 20. Around 150 companies generated an ARR of more than $ 1 million. Around seven of them are unicorns like Zoho, Freshworks, Druva, Postman etc. And 75% of the demand for Indian SaaS products comes from overseas. If that is any indication, we can see great things happening in this area in the future.
Do you see challenges in SaaS startups after Covid?
While the pandemic and related lockdown has affected almost every company worldwide, there are some sectors, especially within technology, such as cloud-based SaaS software companies, that are seeing tailwinds. Especially those that make the continuity of work or business from home more productive and secure, or OTT platforms with their endless variety of content to keep people entertained.
Another SaaS-based industry that has seen a significant increase in Covid-19 times is edutech, with great interest from K-12 children as well as millennials who want to continue their education from the comfort of their own home. Our Fund-I portfolio companies, which offer SaaS solutions in the areas of EduTech, cybersecurity and automation, are seeing significant tailwinds with actual sales or inbound leads that are 3 to 4 times higher than before Covid-19 .
SaaS was a fairly new term / term in 2015 that was slow to be introduced in both B2B and B2C. However, as awareness of its benefits has increased, it has become a preferred business model. Covid-19 has given it the necessary boost to rapidly digitize and accelerate digital adoption by users.
Which industries do you focus on?
Few of the sectors that we focus more on in our Fund II are Fintech, Healthtech, Edutech, Consumer Tech and also opportunistic sectors such as Space Tech. From a SaaS perspective, we are observing the maximum occurrence of Healthtech with multiple startups, EMR maintenance, efficient distribution of drugs on the last mile, B2B platforms that help with scans for quick diagnosis of Covid-19 and other diseases, etc. to offer.
Another area would be Enterprise Tech, which offers B2B solutions not only to improve internal processes, but also to increase reach and sales.
What opportunities does SaaS offer in India and worldwide?
SaaS companies (from the midplayers to the global giants) have received immense appeal, especially in the past few months, and are likely to continue to do so. VCs investing $ 32 billion in SaaS companies worldwide in 2019 clearly show that they believe in their growth. India has the geographic advantage of being able to value its SaaS products significantly lower than its global competitors in order to attract customers.
India’s young population (which makes up a significant part of India’s vast user base) with their massive consumption of easily accessible internet content is becoming a magnet for businesses to locate and invest in India.
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