Google Accel Report - SaaS India, Global SMB Market, $50B in 2025 #SaaSinIndia Public Version 1.1 - 7 March 2016

1. The SaaS Revolution from India Edition 1.1 updated as on 7 March 2016

2. A Joint Study by Google India & Accel Partners Objective: Identify key opportunity areas, business models and challenges for Indian SaaS companies in the global market Methodology: ●  Primary Interviews with Indian SaaS companies across segments (Oct-Dec 2015) ●  Primary Interactions with investors active in this space, SIs, educational institutes (Oct-Dec 2015) ●  Google India primary research for SMB consumers targeted to the US (n=200x4, Jan-Feb 2016) ●  Secondary Research by Zinnov conducted in India ●  Benchmark business metrics from Accel India SaaS portfolio ●  Google search trends data for the calendar years 2013, 2014 and 2015 # 1

3. Executive Summary Global SaaS Industry ●  Global SaaS to be a $132B revenue industry by 2020 driven by SMB demand ●  Purpose-built high quality SaaS products will replace generic B2B “single software providers” of today ●  Online discovery and adoption will increasingly reduce dependence on Feet-on-Street (FOS) sales ●  New and innovative monetization methods are emerging beyond basic software subscription models, driven by verticalization SaaS business from India ●  India will likely grow to be a $10B revenue industry by 2025 (8% of Global SMB SaaS) ●  Categories such as CRM, Data Visualization, HR, Marketing, Healthcare & Education are ripe for big SaaS companies to emerge out of India ●  As SaaS shifts to mobile, SaaS companies in India will have an edge - India being a mobile ﬁrst country ●  Cost advantage on engineering, inside sales, onboarding and support will allow Indian SaaS ﬁrms to aggressively enter and scale the SMB market ●  High growth SaaS companies from India need to build world-class products, size the market accurately, focus on competitive pricing and have a high CAC budget to fuel initial growth ●  India & other emerging markets’ enterprises starting to adopt Indian SaaS products Source: Based on analyses by Zinnov and Accel # 2

4. A.  The hyper-growing SaaS Industry B.  India’s place in the SaaS hyper-growth C.  SaaS for Emerging Markets D.  Key takeaways for the SaaS Industry & Entrepreneurs from India Contents # 3

5. A1. Fast growing Global Public Cloud Computing Market Approximate ﬁgures for ease of computation Key drivers for Public Cloud growth ●  2x growth in US SMB Cloud adoption by 20201,2 ●  Strong demand for Cloud Services in Europe & Asia ●  Strong demand for vertical speciﬁc solutions Global Public Cloud Computing Market1,2 Revenue in USD Billion 56 76 175 2020 2013 2015 # 4

6. A2. SaaS will be a key driver for total Public Cloud adoption a:: Others include IaaS, PaaS and BPaaS 51 68 5 8 43 2015 2013 2020 132 Othersa SaaS Public Cloud revenue split by sub segments1,2 Key drivers of SaaS adoption Revenue in USD Billion ●  Increasing availability of higher quality SaaS products ●  Faster time to market ●  Rapid growth in SaaS Cloud adoption by US and Europe SMBs ●  Increased visibility of business metrics leading to control over proﬁtability and costs ●  Shift of IT from Capex to Opex model >75% of Public Cloud revenues from SaaS1,2 # 5

7. ●  Instant Collaboration for SMBs on the go: 40% US SMBs currently use instant collaboration software ●  Mobile SMBs to increasingly adopt file sharing: 37% US SMBs currently use SaaS file sharing on the go ●  Cloud based accounting to optimize cash flows: 31% US SMBs currently use SaaS Accounting A3. Highly underpenetrated SMB markets for SaaS 10% SMB SaaS 90% Non-SaaS (Opportunity) Strong initial traction among SMBs1,2 Underpenetrated SMB software markets – 2015 1,2 Revenue in USD B SMB will overtake Enterprise SaaS Market before 20201,2 Revenue in USD B 2020 132 76 2015 24 44 68 56 SMB SaaS Enterprise SaaS $200B $24B #6

8. 4.3 2.1 1.9 1.9 1.3 1.2 1.1 1.0 0.9 0.9 0.5 0.4 0.4 0.3 0.3 0.3 0.1 0.1 0.0 A4. Purpose-built SaaS products gaining traction Adverti sing BPM Marketing Finance Sales BI/ Analytics Developers Collabor ation Identity HR Web Design Education IT (Mgmt, Automation) Vertical Speciﬁc SaaS (Travel, Retail, etc.) Health care File Sharing and Backup ERP Services and Support Productivity Opportunity for many specialized SaaS companies Global SaaS funding between 2011 and 20142,5 Funding in USD Billion # 7

9. A5. Online product discovery is critical for growth 100 120 180 2011 2013 2015 Online search interest growth for SaaS products4 3% 5% 9% 2011 2013 2015 Brand comparison searches4 5 7 9 2011 2013 2015 Time spent by users on review sites & marketplaces (mins)10 95% 5% Yes No Do you prefer to "silently" try before buying a product?6 More information seekers More comparisons of products Free trial and Freemium is a must More focus on features and user reviews than on FOS sales Customer behavior is changing Online is becoming the key driver # 8

10. A6. New monetization models to emerge Per User Most common and easy for enterprises to understand; pricing trends moving from annual to quarterly to monthly Aligning to usage, direct outcome or value-based: e.g. percentage of payments processed (Stripe), unit price X number of key interactions, percentage of savings realized Free for enterprises, revenue from suppliers to the enterprises e.g. Zeneﬁts Free for enterprises, revenue from services and premium products e.g. Cloudera, mongoDB Model Highlights Will amplify the growth of verticalized SaaS Source: Models are publicly abvailable on their respective websites Usage / Value / Outcome Based Monetizing Network Effects Freemium / Open Source # 9

12. ●  Demand is derived based on online search queries related to SaaS products originating from the specific region ●  Fulfillment determined by deducing the SaaS businesses’ webpage traffic from Google B1. Despite a global online SaaS demand, fulfillment continues to be from the US 40% 38% 37% 31% 28% 26% 21% 25% 25% 8% 9% 12% 2014 2015 2013 NA EU RoW India 65% 67% 70% 28% 25% 20% 5% 5% 2014 2015 4% 4% 2013 4% 3% Demand Fulfillment Mix: For all SaaS categories globally10 Demand Mix: For all SaaS categories globally4 # 11

13. ●  Demand is derived based on online search queries related to SaaS products originating from the specific region ●  Fulfillment determined by deducing the SaaS businesses’ webpage traffic from Google B2. However, in select categories, India has changed the global fulfillment landscape 39% 37% 37% 28% 27% 25% 23% 24% 25% 10% 12% 13% 2015 2014 2013 NA EU RoW India 77% 62% 52% 17% 33% 42% 2015 4% 2014 4% 2013 5% Demand Mix: For a category with strong Indian SaaS service providers4 Demand Fulfillment Mix: For a category with strong Indian SaaS service providers10 # 12

14. a:: A product manager may be from multiple backgrounds (eg. With US experience from the IT sector or consumer sector) ●  Enough skilled PMs from IT(MNCs) and consumer companies transitioning to entrepreneurship - over 500 SaaS startups in India currently3 ●  Institutionalization of product community is starting to show ●  MNC product managers skilled in operational aspects starting to move to business / P&L management ●  High quality product thinking from consumer/mobile companies inﬂuencing SaaS industry ●  Product learnings and insights from the US are seeing quick adoption among current SaaS companies B3. Indian ecosystem ready for product driven SaaS founders Product managers by Country2 Thousands Indian product managers’ background and experiencea; 2,3,4,7 Thousands Indicators of ecosystem readiness 202020152010 IT Consumer US 36 5 32 174 US UK Israel India 17 36 68 # 13

15. B4. India has the necessary developer horsepower to build SaaS 4xcost difference between India and the US By 2020, most of current UX developers will enhance skillsets to move towards UX design & aesthetics DevOps skills is on the critical path India 130 25 Israel 5 UK 28 US 120 Cloud oriented software developers2,3,7,8 Skill Ready SaaS Ready Thousands 5 India 40 6 Israel 1 UK US 22 Skill Ready SaaS Ready UI/UX designers2,3,7,8 Thousands SaaS Ready: Workforce that has working knowledge of / worked on cloud platforms for SaaS product development Skill Ready: Workforce that is ready to acquire an incremental skill with minimal effort and move to a new role/product # 14

16. B5. India poised to gain from a shift to mobile in SaaS Use of mobile/tablets for accessing SaaS6 Desktop SaaS users planning to use mobile/tablet to access SaaS6 2014 2016 40% 10% 80% 70% 40% Primary Device No 20% 80% Yes Mobile App/UX developers2 121 29 6 39 70 15 120 US UK Israel India 2015 2020 Thousands Strong Indian talent pool for mobile applications owing to the fast growth in consumer internet industry 210 # 15

17. Sales closure rates from qualiﬁed leads (%)3 Preferred mode of product walkthrough before online SaaS purchase6 Over the phone or internet chat with agent Can understand it online myself 12% In-person visit by salesman 71% 18% High quality products with inbound sales has a 3xpotential of growth than DIY B6. Inside Sales is critical for business 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% DIY With Inside Sales support 15% 6% 10% 40% 100% of interviewed companies indicated the need for inbound sales support for serious / non-free customers2 # 16

18. ●  A strong BPO workforce gives deep access to acquire talent and grow inbound sales in India ●  One of the most effective cost per sale / cost per incremental ARR ●  Potential for higher conversion from same number of leads due to availability of economical workforce 300 120 India 13 US Skill Ready Inside Sales Ready Workforce (Number) Cost/FTE ($K/annum) 6.0 15.0 2.2 India US Revenue $ Satisfaction Index Workforce and Cost/FTE2,3,7 Incremental ARR per $ spent on inside sales2,3,6,7 B7. India has the highest potential talent for Inbound Sales engine Thousands Revenue in USD Satisfaction on a scale of 1-550 3.5 500 # 17

19. A comparative analysis of different distribution models for a typical SaaS product of $10M revenue is depicted2,3 ●  Better gross margin opportunity for India based inside sales companies ●  Inside sales is more cost effective than FOS ●  Cost of inside sales model is less than half for firms with operations set up in India ●  Media cost is geo-agnostic, however highly elastic to scale with a higher per-unit cost ●  As US based companies move up pricing for growth, underserved SMB market can be targeted by Indian companies FOS Sales2,3 Inside Sales2,3 US US India Costs Residual Revenue Costs Residual Revenue Costs Residual Revenue Revenue 10.00 10.00 10.00 Opera&ng Costs Hosting 1.50 1.50 1.50 Support 1.00 1.00 0.25 Gross Margin 7.50 7.50 8.25 Sales & Marke&ng Media 1.00 3.00 3.00 Sales Reps 6.00 1.00 0.40 0.50 3.50 4.85 Built & Maintenance Prod Dev, Support + G&A 2.50 2.50 0.80 Profit (2.0) 1.00 4.05 B8. Strong unit economics from Indian SaaS companies, due to Inside Sales All figures in USD Million # 18

20. B9. Focus on CAC during $1M - $5M ARR critical for hyper-growth 800 1,050 750 600 400 325 250 200 150 150 150 150 5-15M 1-5M 1,350 < 1M > 15M 1,150 1,525 950 1,000 Support cost CAC Employee cost Evolution of normalized costs with business size2,3 Costs per million dollars revenue (USD k) Revenue mix (New/Existing customers) 80/20 70/30 50/50 40/60 Revenue churn2,3 ●  Cash negative initially with high churn and most cash outﬂow on CAC ●  CAC highest between $1M to $5M ARR range ●  Post $15M, recurring revenue from existing customers takes over 40% 25% 20% 15% 25% 15% 5% -5% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% < 1M 1-5M 5-15M > 15M Evolution of SaaS business metrics Revenue Revenue # 19

21. Segments with high demand fulfillment from the US and a higher cost arbitrage for India present big opportunities for Indian SaaS companies to be built Education Web / App UX Design HR / Identity Management Sales / CRM Data Management / Visualization Web Hosting Healthcare Software Marketing & Ecom Enablement Accounting, Billing & Collections IT Security/ Antivirus File Sharing & Backup Productivity & Collaboration BPM Online Survey Photo & Video Editing Events & Mtg Mgmt Services, Support & Helpdesk ERP Finance, Payroll & Expenses Retail Developer Softwares Logistics/Fleet/GPS BI Analytics Restaurant/ Hotel Mgmt. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110% 1 1.5 2 2.5 3 3.5 4 4.5 5 DemandFulfillmentbyUS Cost Arbitrage for Businesses in India (Low to High) Chart Legend: •  Size of the bubble: Online interest (search volumes) for the category in 20154 •  X axis: Cost arbitrage for businesses in India for the segment3 •  Y axis represents the traffic to SaaS businesses’ webpage10 B10. Market categories where big SaaS startups can emerge from India # 20

22. 0.6 2.5 10 2.6% 3.3% 8.0% - 2.0 4.0 6.0 8.0 10.0 12.0 2015 2020 2025 Global SMB SaaS Fulﬁlment from India Global Share of India ●  Currently, a few horizontal segments where big SaaS companies catering to a Global market have emerged out of India ●  Maturity and scale of most startups starting to happen now ●  By 2020, a good number of Indian companies will be targeting most opportunity areas ●  By 2025, many of them would have scaled and captured sizeable market share B11. Indian SaaS industry can touch $10Bn by 2025 Indian SMB SaaS industry projection2,3 Highlights Revenue in USD Billion A perfect storm of a) changing customer behavior, b) market accessibility & growth, c) talent availability and d) cost advantage has created an incredible setting for massive global SaaS companies to be built out of India # 21

24. Lack of legacy software •  Many large enterprises in EMs have adopted only basic software and are now open to new software that improves productivity and increases revenue making it much easier to adopt Cloud Product fit •  Products are being built to meet the unique needs in emerging markets (e.g. mobile-first) and at EM price points Costs & profitability for customer •  Cloud models for technology adoption are being accepted given low upfront costs •  Increasing cost of skilled labor driving productivity needs across enterprises •  Fastest adoption of SaaS in revenue generating functions Sales model •  Enterprises still need a “high-touch” selling model, however, the cost of in-market sales teams much lower in EMs Opportunities across verticals •  New age companies in EMs (e.g. ecommerce) are becoming the first to embrace SaaS products. Other verticals quickly catching up Source: Based on analyses by Zinnov and Accel C1. Emerging Markets could become large Enterprise SaaS markets over the next decade # 23

25. Source: Based on analyses by Zinnov and Accel Customize for local languages •  Local languages are the primary business language for most of the SMBs in EMs Mobile-first •  Be mobile first rather than mobile-enabled Offer value & innovate on pricing •  Use network effects to offer value based verticalized SaaS offerings - scaling quickly, becomes all the more important •  Align pricing to business objectives / outcome of the clients instead on purely relying on subscription based pricing Online-offline integration •  Build products that are able to work offline (cost of data still high) •  Build low data consuming products (connectivity unreliable) C2. Great SaaS products for EMs can learn from consumer products # 24

27. Build world-class products •  Simple, intuitive, feature-rich product for desktop and mobile is a must - exceed on feature parity by having strong engineering team •  Offer human led onboarding and support for high quality customer engagement •  EM enterprise SaaS companies should develop products to meet unique EM needs, at EM price points and take inspiration from consumer products in EMs Go after large and growing markets that are Inside Sales ready •  Online interest should be at a high base and on a growth trajectory - difﬁcult to create a fresh B2B category globally for a new startup •  High quality content marketing to build enough awareness to get into a consideration list Price for your advantage •  Know your competition and market needs Budget for high CAC and churn during initial growth phase •  Too much reliance on organic acquisition has drawbacks of slowing the growth •  Do not link CAC budget to a share of current revenues earned (can lead to revenue stagnation trap) Get to $1M ARR quickly •  Most business metrics can be established by $1M ARR •  Post $1M ARR, double down on things that work from a customer acquisition perspective Source: Based on analyses by Zinnov and Accel D. Key takeaways for the SaaS Industry & Entrepreneurs from India # 26

28. ARR : Annual Recurring Revenue BPO : Business Process Outsourcing BPaaS : Business Process as a Service CAC : Customer Acquisition Cost DevOps : IT Development and Operations DIY : Do-it-yourself – a product sale mechanism that does not involve inside sales representatives to help a customer in discovery, purchase, onboarding and usage of the SaaS product Enterprise SaaS : SaaS products / revenue linked with Enterprises (employee strength > 250 for this report) FOS : Feet on Street sales representatives (physical meeting and closure based sales) GCS : Google Consumer Survey IaaS : Infrastructure as a Service Inorganic acquisitions : Acquiring customers via paid advertising PaaS : Platform as a Service SaaS : Software as a Service SaaS from India, Indian SaaS startups / companies : SaaS products / companies that have development and major operations based out of India. It includes companies not headquartered in India but operating majorly via an Indian subsidiary SaaS Ready : Workforce that has a working knowledge of / worked on cloud platforms for SaaS product development SI : Systems Integrators Skill Ready : Workforce that is ready to acquire an incremental skill with minimal effort and move to a new role/product SMB SaaS : SaaS products / revenue linked with SMB customers (employee strength <=250 for this report) Region / Country of Demand : The region where the purchaser and end user of a SaaS product is based out of Region / Country of Fulﬁllment : The region where IT development and major operations of the SaaS service is based out of Glossary # 27

29. [1] Forrester Global Cloud Estimates (http://onforb.es/18dQ1zA) [2] Zinnov analysis conducted independently in 2016, based upon primary interviews and secondary research [3] Accel India estimates based on internal studies of global and Indian SaaS companies [4] Google search trends indexed data for calendar years 2013, 2014 and 2015 [5] Public data on SaaS industry funding (http://bit.ly/1oKYthM) [6] Google Consumer Survey for SMB consumers targeted to the US (Jan-Feb 2016) [7] LinkedIn secondary research conducted by Zinnov in 2016 [8] Glassdoor secondary research conducted by Zinnov in 2016 [9] Primary interviews of SaaS founders from India by Zinnov in 2016 [10] Comscore data for the calendar year 2013, 2014 and 2015 Sources # 28

30. Rajan Anandan MD & VP, Google India & South-East Asia Shekhar Kirani Partner, Accel India Amiya Adwitiya Accel India amiya@accel.com Arpit Jaiswal Industry Manager - Software as a Service, Google India arpitj@google.com Jayank Srivastava Analytical Lead, Google India Karan Gambhir Industry Head - Technology, Google India Nitin Bawankule Director – Google India & South Asia Frontier Contact # 29

31. The information and opinions in this Report have been prepared or compiled by ACCEL PARTNERS and are subject to change/modiﬁcation without any notice. The information contained in this Report is believed to be accurate at the time of date of issue of this Report, but no representation or warranty is given (express or implied) as to its accuracy, completeness or correctness. ACCEL PARTNERS accepts no liability whatsoever for any direct, indirect or consequential loss or damage arising in any way from any use of or reliance placed on this material for any purpose. The contents of this Report are the copyright of ACCEL PARTNERS. Nothing on this Report constitutes advice, nor creates any contractual relationship. Google does not take any responsibility on the ﬁndings of the research or any data/methods used by third parties in compilation of the report. Disclaimer # 30

Google Accel Report - SaaS India, Global SMB Market, $50B in 2025 #SaaSinIndia Public Version 1.1 - 7 March 2016

Accel Partners India

Google Accel Report - SaaS India, Global SMB Market, $50B in 2025 #SaaSinIndia Public Version 1.1 - 7 March 2016