‘2026 revenue forecast for SaaS startups plunges 74% to $26 billion’

Global management consulting and strategy advisory firm Zinnov and venture capital firm Chiratae Ventures on Tuesday marked down 2026 revenue projections of the Indian software-as-a-service (Saas) startups from $100 billion to $26 billion in its latest annual report on the space.

The report, titled India SaaSonomics: Navigating Growth and Efficiency, said that concerns of a recession loom large for the Indian SaaS industry, but that it has displayed remarkable antifragility to withstand turbulent times.

The report indicated three challenges plaguing the industry -- customer churn, customer demand slowdown and delayed sales cycles, and downward pressure on cash flows caused by macroeconomic headwinds.


“We still expect the companies to grow in 2023 as well. At an estimated level, the growth rate has certainly corrected taking into account the overall macroeconomics. We were expecting the ecosystem to grow at a 50% to 55% level based on what we’ve seen, but that has changed,” Venkatesh Peddi, managing director and partner, Chiratae Ventures told ET in an interaction.

Chiratae Ventures and Zinnov added that categories of DevOps, cybersecurity, and vertical SaaS will lead the next phase of growth and innovation.

A decline in SaaS company valuations in the public markets has greatly affected private markets, driving down late-stage funding. The report said that stable venture capital deal volumes in the first quarter of 2023 suggest that the funding slowdown for the sector has bottomed out and that a gradual recovery is expected in the near future.

SaaS startups are actively reevaluating their product and sales strategies to offset a loss in margins, customer churn and slowdown in overall sales cycle, ET had reported in April. Lengthening sales cycles due to involvement of finance teams in purchase decisions and continuing cost shedding by enterprise customers are posing challenges of falling revenue for Indian SaaS startups, which may lead to down-rounds, or funding at lower valuations than the previous round, founders and investors ET spoke had said.

The fineprint

India, the report added, houses over 1,650 funded SaaS startups currently. The figure has doubled since 800 in 2019. In the past three years, employees of 21 Indian SaaS unicorns have founded 186 SaaS startups, with 60% of them originating during this period.

“While it’s unlikely we will witness 2021 valuation multiples in the near term, we are seeing steady stabilisation and signs of a gradual rebound. Despite challenging circumstances, investors’ confidence and founders’ resilience remain unwavering,” Atit Danak, partner at Zinnov, added.

Global public valuation multiples, which were accelerated by the pandemic, underwent corrections in 2022. However, they have gradually recovered since October 2022, with the current median valuation multiple standing at 6.6X.

“Although slightly lower than the pre-pandemic median, this trend indicates that Indian SaaS valuation multiples have displayed higher resilience compared to their global counterparts and that the impact of macro-economic variables are less pronounced on them,” the report said.

Founded in 2006, Chiratae Ventures has invested over $160 million in over 35 SaaS companies, including Pixis, Uniphore, Hevo Data, Healthplix, Pando, and Deepfence.