India’s B2B startups will be valued at $50 billion by 2025
Indian startups creating products and services for enterprises will generate revenue of $10 billion, and the companies would collectively be valued at $50 billion by 2025, says a study by Google India and venture capital firm Partners. Currently, these startups generate revenue of $600 million and have a combined valuation of $3 billion.The estimation is based on these startups around 500 in 2016 -growing revenue at 30% every year.
Among the better known Indian startups that deliver their software as a service (SaaS) are Zoho Corp, Fresh desk, Manthan, Browser Stack, Fashion Charts, and Wingify. The software products are delivered over cloud to mostly small and medium businesses (SMB) in the developed markets. These companies could generate revenue up to $2.5 billion by 2020, says the study .
“For enterprise startups most of them are privately-held — the global benchmark for valuation is to peg it at five times the revenue,” said Google India and South East Asia managing director Rajan Anandan, adding that the estimation is conservative and the potential for Indian startups is much bigger. Globally, the SaaS market is estimated to be $68 billion by 2020, out of which $24 billion is expected to be generated by SMBs. Indian startups are expected to garner 8% of the SMB market by 2025.
Most of the bigger firms are currently growing at 50% to 100%, said Shekhar Kirani, partner at Accel Partners, one of the early investors in companies like Flipkart and Freshdesk. “These are among the best startups in the country with real revenue, and making profits from every customer from the second or third year. You make money in every transaction and from every customer,” Kirani added.
The biggest factor in India’s success would be the SaaS-ready workforce, said Kirani. “There are 35,000 product managers and 25,000 SaaS-ready workforce in the country. Another one lakh just need a retuning to be SaaS-ready,” Kirani said, adding that Indian engineers are way ahead on mobile SaaS, especially on the Android platform.
“Our startups are already building world-class solutions for mobile-first users. This strength, combined with easy access to the global customer base online, will help India to become a very strong player in the global SaaS industry,” said Anandan.
The study has been done jointly with consultancy firm Zinnov. It used search data on Google’s platform, it spoke with SaaS companies and investors, and used information available with other market research firms like Forrester, IDC and Gartner.