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jointly by Signal Hill – iSPIRT
India SaaS Survey Results 2016
2
Foreword
Welcome to the Second edition of the India SaaS Survey by Signal Hill, India’s largest software investment bank...
3
Key Takeaways of India SaaS Survey 2016
2
4
Emergence of NCR as a new hotspot for SaaS companies in the Indian ecosystem...
4
Agenda
Respondent Set1
Business Focus2
Growth Rates3
Sales And Delivery4
Profitability5
Other Metrics6
Funding7
Signal H...
Respondent Set
Profiling Survey Respondents
1
6
2016 India SaaS Survey
• This report provides an analysis of the results of the survey of private SaaS companies in Indi...
7
Where Are Survey Participants Headquartered?
NCR has jumped up the list to 2nd position (25% of the India based players)...
8
Which City Has The Most Scaled (ARR >$1Mn) SaaS Players?
Reinforcing NCRs position, based on our sample, it now hosts mo...
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What Is The Distribution Of ARR Across Our Sample?
The relatively young Indian SaaS ecosystem has a median ARR of $0.75M...
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0
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4
6
8
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18
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<10 10-20 20-30 30-40 40-50 50-75 75-100 100-150150-250250-500 >500
What Is The Employee St...
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When Was Your Company Launched?
With just 9 respondents founded in the last two years, our survey is weighted towards c...
12
When Did Respondents Pivot? 1
Pure SaaS Players vs Partial SaaS Players1 Pivot To SaaS
26%
74%
Partial SaaS
Pure SaaS
1...
13
Key Takeaways From Respondent Profiling
1
2
3
Boasting ten $1Mn+ ARR respondents (out of a total of 35 $1Mn+ ARR respon...
Business Focus
Market And Product Focus Of The Respondents
2
15
What Is India’s USP In Competing With Global SaaS Companies ? 2
Reported USP1
NumberofResponses
Unique Selling Proposit...
16
How Long Does It Take To Develop a SaaS Product? 2
Most respondents built their product (likely referring to the first ...
17
Vertical vs. Horizontal SaaS 2
Vertical vs. Horizontal Focus Vertical and Horizontal Split By Product Launch Date
This ...
18
Which Is The Most Popular Vertical For A SaaS Product? 2
Vertical Focus Area1
While TMT focused SaaS dominated our samp...
19
Which Is The Most Popular Horizontal Focus Area? 2
Horizontal Focus Area1
The top three horizontal areas were broadly t...
20
Which Geography Contributes The Maximum Revenue? 2
Unchanged from last year, the US is the most favoured destination fo...
21
Customer Focus, SMEs vs. Enterprises 2
Customer Type
68%
32%
SMB/SME (Small and
Medium Business)
Large Enterprises
Our ...
22
Key Takeaways From Business Focus Section
1
2
3
Unlike in 2015, the 2016 survey hints that the Indian SaaS ecosystem is...
Growth Rates
Growth Profile Of The Respondent Set
3
24
5 5
11
5
6
3
5
11
9
4
0
2
4
6
8
10
12
10%-25% 25%-50% 50%-100% 100%-200% 200%-300%
How Fast Did/Will Respondents Grow T...
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How Fast Did/Will Respondents Grow Their ARR? (<$1Mn ARR only) 3
ARR Growth1
1Subset of 29 respondents
Interesting to n...
26
0
1
2
3
4
<=$0.25 Mn $0.25 Mn -$0.5 Mn $0.5 Mn -$1.0 Mn $1.0 Mn -$2.5 Mn $2.5 Mn -$5.0 Mn $5.0 Mn -$10.0 Mn >$10.0 Mn
H...
27
What Is The Distribution Of Respondents Growth Rate By Size? 3
While the sub $5M growth split is similar, >$5M split se...
28
Distribution Of Respondents’ Historical Growth Rate By Customer Focus 3
Regardless of scale, respondents focused on ent...
29
Growth Expectations (Business Confidence) By Customer Focus 3
Projected vs Actual Growth Rate - SMB/SME Focus Projected...
30
Where Do Respondents See Maximum Growth Potential? 3
~70% of respondents, regardless of size, look to the US and the Re...
31
2
5
7 7
6 6
1
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8
6
5 5
0
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<10% 10%-25% 25%-50% 50%-100% 100%-200% 200%-300%
Vertical
Horizontal
Distr...
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Distribution Of Respondents Growth Rate By Geographic Focus 3
Median ARR Growth By Geography1
1Subset Of 58 Respondents...
33
The Journey To $1Mn ARR 3
Time Taken To Reach $1Mn ARR1
1Subset of 34 respondents with ARR >$1Mn
The vast majority of r...
34
Key Takeaways From Growth Rates Section
1
2
3
50-100% annual growth rates are the benchmark in India, hopefully reflect...
Sales And Delivery
Channels & Delivery Methods
4
36
What Is The Most Used Sales Channel1? 4
While a trend over time would be useful, it is evident that inside sales is pre...
37
What Is The Most Productive Sales Channel1? 4
In addition to be being the most popular sales channel, inside sales prov...
38
30
22
7
2
0
5
10
15
20
25
30
35
<10% 10%-20% 20%-30% >30%
What Are The Sales Commissions For The Primary Sales Channel?...
39
0
1
2
3
4
5
<10% 10%-20% 20%-30% >30%
Do Sales Commissions Impact Growth Rates? 4
Median Growth Rate vs. Sales Commissi...
40
What Level Of Sales Commissions Do More Scaled Respondents Pay? 4
While no respondents at an ARR >$10Mn pays more than ...
41
Which Sales Model Have Respondents Tried At Least Once? 4
Sales Model Tried At Least Once
Sales Model
NoOfResponses
Mos...
42
What Is The Primary Sales Model Across Respondents? 4
Nearly 50% of our sample leverage the ‘try and buy’ model to driv...
43
What Sales Models Do The High Growth Respondents Use? 4
Growth vs. Sales Model Used
In line with previous survey findin...
44
How Do The Respondents Host Their SaaS Service? 4
3rd party hosting has grown vs. last year’s survey (83% vs. 68%). Sim...
45
10
20
8 8
12
6
12
0
5
10
15
20
25
<=2.5% 2.5%- 5.0% 5.0%- 7.5% 7.5%- 10.0% 10.0%-
12.5%
12.5%-
15.0%
>15.0%
What Are Th...
46
Key Takeaways From Sales And Delivery Section
1
2
3
Inside sales channels dominate our SaaS ecosystem, no surprise give...
Profitability
Costs and Margin Drivers of Respondents
5
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What Is The Revenue/FTE Across The Respondents?
Despite a small sample size at higher ARRs, our sample shows that more ...
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What Is The Typical CAC1 That The Respondents Incur? 5
Respondents with ARR >$1Mn incur higher median...
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How Does The CAC To ARR Ratio Vary With Scale? 5
1This metric has been calculated utilizing the middle value of the CAC...
51
In How Many Months Do The Respondents Typically Recover CAC? (>$1Mn ARR) 5
CAC Payback Period1
~2/3rd of our sample rec...
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What Are The Main Drivers Of Cost? 5
Top Driver Of Cost Where Does The Top Driver Of Cost Lie?
1Per Pacific Crest Priva...
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0
5
10
15
20
25
<40% 40%-50% 50%-60% 60%-70% 70%-80% 80%-90% >90%
How Profitable Are The Survey Respondents? (At GM lev...
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What Is The Profile Of The Gross Margin Generated By Respondents? 5
Neither vertical vs. horizontal focus nor customer ...
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In How Many Years Do Respondents Project EBITDA Break Even (From project launch date)? 5
Time To Breaking Even2
~50% of...
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In How Many Years Do Respondents Project EBITDA Break Even, By ARR1? 5
Breaking Even By Size2
The reported, projected t...
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Key Takeaways From Profitability Section
1
2
3
ARR/ FTE improves with scale, highlighting operating leverage available ...
Other Metrics
Common SaaS Metrics
6
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What Is The Customer Lifetime Of The Respondents’ Customers? 6
Customer Lifetime In Months
We see spikes at the 12, 24 ...
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What Is The Revenue Retention Rate1 Of The Respondents? 6
Revenue Retention
Median Range
No Of Respondents
RevenueReten...
61
What Is The Revenue Retention Rate1 By Customer Type? 6
Revenue Retention
Surprisingly, revenue retention is marginally...
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Which Contract Lengths Enable Better Revenue Retention1 Rates? 6
Revenue Retention By Contract Length
Unsurprisingly, d...
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What Is The Customer Churn1 Of The Respondents (>$1Mn ARR)? 6
Customer Churn 2
Scaled respondents in the US ecosystem3 ...
64
What Are Typical Contract Lengths? 6
Typical Contract Length Of Customers
Yearly and monthly contracts seem to be the m...
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What Do Contract Lengths Look Like By Customer Type? 6
Contract Length
More Than 70% of the contracts signed by large e...
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Which Kind Of Pricing Metrics Do The Respondents Use? 6
Distribution Of Pricing Metrics Used
This is in line with last ...
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What Is The LTV/CAC Of The Respondents? (>$1Mn ARR) 6
LTV/CAC Distribution1
126 out of the 33 respondents track their L...
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Key Takeaways From Other Metrics
1
2
3
Revenue retention is better amongst respondents with SMB/SME customers
Responden...
Funding
Funding And Valuation
7
70
How Much Funding Have Respondents Raised? 7
Funds Raised To Date
NoOfRespondents
Funding Raised
Median Range
Pointing t...
71
At What Revenue Multiple Have Respondents Raised Their Most Recent Round? 7
Funding Raised To Date1
NumberofRespondents...
72
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1
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3
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5
6
1 2 3 4 5
What Is The ARR Profile Versus The Funding Level Of Respondents? 7
As expected, funds raised co...
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Is The Customer Focus Determining The Level Of Funding ? 7
Out of respondents who founded companies post 2013 and were ...
74
Key Takeaways From Funding Section
1
2
Pointing to a young sample, 38% of respondents have raised <$5Mn and often at do...
Participants
Some Of Our Survey Participants
8
76
Some Of Our Survey Respondents 8
1 Subset of 19 respondents
77
Some Of Our Survey Respondents 8
1 Subset of 19 respondents
Signal Hill Credentials
A Leading Tech Investment Bank
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Overview Of Signal Hill
2/3rds Of Our Business Is Through Referrals & Repeat Clients
Signal Hill is the premier
advisor...
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Signal Hill Is A Recognized Premier Advisory Firm
Recent Awards & Accolades
2016 Awards:
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Deep Domain Expertise In Key Growth Sectors
Longstanding Relationships With Key Strategic Companies
Signal Hill works w...
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A Proven Track Record Of Performance: 50+ Transactions In The Last 6 Quarters
Signal Hill Has Completed 700+ Transactio...
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Equally Strong Momentum In India | 23 Transaction Closures Since We Started
Closed 3 Cross Border M&A Deals With NASDAQ...
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The Signal Hill Software Team - USA
Team Member Experience Background & Experience
Scott Wieler
Chairman & CEO
swieler@...
85
The Signal Hill Software Team - INDIA
Senior-level
involvement
throughout the
process is
critical to
driving
outcomes
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A Leading Advisor In Software Transactions
Signal Hill Has Won Numerous Awards In The Software Sector
Recent Awards And...
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Leadership In Enterprise Software Transactions Globally
Software Is The Largest Practice Area At Signal Hill And We Ran...
iSPIRT Credentials
A Leading Think Tank
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Public Tech Platforms APIs
India Stack, Impact of inflection points
on Government/PSUs/Private Sector
across verticals
Pla...
iSPIRT Brings Intensity to Building The Technology Ecosystem
30 yr
Architects
10 yr
Planners
5 yr Doers
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Impact made by iSPIRT for the Product Founders
Reviewed by:
Aneesh Reddy - Capillary Technologies, Avlesh Singh - WebEngage, Avinash Raghava - iSPIRT, Girish
Mathrubooth...
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Strictly Private & Confidential
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India SaaS Survey 2016 - Decoding our SaaS industry

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The India SaaS Survey is all about getting the pulse of the burgeoning SaaS ecosystem in our country. A survey of this kind is indispensable in drawing an insightful analysis and in getting credible benchmarking data about how the industry is shaping out. Though nascent, the SaaS industry has a lot of potential. The data from the survey is useful not only to help entrepreneurs and investors but also showcases the prospect of the industry to technically sound aspirants looking to step into the industry.

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India SaaS Survey 2016 - Decoding our SaaS industry

  1. 1. jointly by Signal Hill – iSPIRT India SaaS Survey Results 2016
  2. 2. 2 Foreword Welcome to the Second edition of the India SaaS Survey by Signal Hill, India’s largest software investment banking advisory practice, together with our partners iSPIRT, the Indian Software Product Industry Round Table. Applying the lessons learned from the first edition, we have changed the way we collect data and the way we present our results, but with the same objective in mind: to tap into the pulse of a burgeoning ecosystem by providing credible benchmarking data and insightful analyses. This year, we are proud to report that we received responses from 76 respondents (iSPIRT estimates indicate that this may represent 10% of the total SaaS ecosystem in India) up from 39 respondents last year including some of the most prominent SaaS companies operating in India. We sincerely thank all participants for their time and effort in completing this survey and look forward to ever increasing participation every edition going forward. As before, we are committed to refreshing the survey results on an annual basis. As the India SaaS ecosystem continues to grow, we fully expect to increase overall survey participation, as well as the insights and benchmarking data provided. If you have any suggestions to improve the survey or questions that you would like to see covered, please do write to us at indiasaassurvey@signalhill.in.
  3. 3. 3 Key Takeaways of India SaaS Survey 2016 2 4 Emergence of NCR as a new hotspot for SaaS companies in the Indian ecosystem. It has moved up three places to come to the second position this year 1 3 Increased interest in vertical focussed SaaS players with majority of respondents being vertical focussed this year; Vertical focussed SaaS players occupy majority share of the scaled and funded respondent pie Enterprise focussed clients have reported higher median growth rates compared to SMB/SME focussed players. That said, SMB/SME focussed players forecast better growth in the coming one year Though inside sales is by far the most preferred and effective sales channel, post the $1Mn ARR mark respondents do report an increased usage of feet on street (which is still #2 after inside sales) 7 The median CAC payback period (for >$1Mn ARR) is 6-12 months 5 ‘Try and Buy’ is the most preferred sales model (vs. sales channel) amongst respondents 6 Horizontal and Vertical SaaS players report similar median growth rates, however companies that focus on the US as their primary market (as against India or Asia) reported distinctively higher median growth rates
  4. 4. 4 Agenda Respondent Set1 Business Focus2 Growth Rates3 Sales And Delivery4 Profitability5 Other Metrics6 Funding7 Signal Hill Credentials9 Participants8 iSPIRT Credentials10
  5. 5. Respondent Set Profiling Survey Respondents 1
  6. 6. 6 2016 India SaaS Survey • This report provides an analysis of the results of the survey of private SaaS companies in India which Signal Hill India’s team in co-operation with iSPIRT conducted in Sept-Nov 2016 - This report is the result of the second annual SaaS survey conducted by Signal Hill & iSPIRT - The survey results include responses from senior executives of 76 SaaS companies in India • Representative statistics on the survey participants ‐ $0.5Mn-$1Mn Median ARR1 as of survey date, with 35 respondents having an ARR greater than $1Mn ‐ Median employee strength: 35 ‐ Median customer count: ~100; 28% with more than 1000 customers ‐ 51% of the companies were started in the last 5 years ‐ 67% of the companies started out as SaaS players 1 ARR – SaaS portion of ARR as reported by respondents during the survey period Sept’16-Nov’16. The same metric has been used throughout the report
  7. 7. 7 Where Are Survey Participants Headquartered? NCR has jumped up the list to 2nd position (25% of the India based players) versus the 4th position (9%) last year India Headquarters Distribution 1 * ROI - Rest Of India; A point not brought out by our sample: between Zoho and FreshDesk alone iSPIRT estimates ~$400Mn in revenue, >$100Mn in funding and 4,000+ employees in Chennai. This creates a massive ecosystem for many other SaaS startups to be created Chennai: India’s SaaS Hub 32% 25% 19% 15% 5% 4% Bangalore NCR Mumbai/Pune Chennai Hyderabad ROI
  8. 8. 8 Which City Has The Most Scaled (ARR >$1Mn) SaaS Players? Reinforcing NCRs position, based on our sample, it now hosts more “scaled” SaaS start ups than any other city - or has significantly higher survey fill rates… 1 1SaaS portion of ARR 2Considered a subset of 35 respondents meeting the criteria of >1Mn ARR for the this analysis Geographic Distribution of Respondents HQ (ARR1>$1Mn)2 Headquarter City NoofRespondents ARR Key 5 3 2 3 1 3 4 1 1 2 2 2 1 1 1 2 1 0 2 4 6 8 10 12 NCR Bangalore Chennai Mumbai/Pune Hyderabad >$10.0 Mn $5.0 Mn -$10.0 Mn $2.5 Mn -$5.0 Mn $1.0 Mn -$2.5 Mn
  9. 9. 9 What Is The Distribution Of ARR Across Our Sample? The relatively young Indian SaaS ecosystem has a median ARR of $0.75Mn2 compared to a median of ~$5Mn3 in the US SaaS ecosystem 1 1ARR reported by respondents during the months of September, October and November. ARR for SaaS portion of business 2The middle value of the median ARR range has been taken 3Median Revenue for FY15 per Pacific Crest Private SaaS Company Survey Results 2016 Distribution Of ARR1 Median Range 11 6 4 6 6 5 2 11 6 3 8 3 2 3 0 5 10 15 20 25 <=$0.25 Mn $0.25 Mn -$0.5 Mn $0.5 Mn - $1.0 Mn $1.0 Mn - $2.5 Mn $2.5 Mn - $5.0 Mn $5.0 Mn - $10.0 Mn >$10.0 Mn Horizontal Focussed Vertical Focusssed Journey to $1Mn ARR It typically takes a median of 2-4 years to reach $1Mn ARR
  10. 10. 10 0 2 4 6 8 10 12 14 16 18 20 <10 10-20 20-30 30-40 40-50 50-75 75-100 100-150150-250250-500 >500 What Is The Employee Strength Across Our Sample? Our sample shows a median employee strength of 35, likely reflecting higher survey participation rates amongst <$1Mn ARR SaaS startups 1 1Taking a subset of 35 respondents Employee Strength Median (35) Average number of employees NoofRespondents Journey to $1Mn ARR Companies with an ARR >$1Mn1 have a median employee strength of 100. We would reasonably expect a $1Mn ARR company to have ~50 employees
  11. 11. 11 When Was Your Company Launched? With just 9 respondents founded in the last two years, our survey is weighted towards companies started pre-2015. Younger companies may be busy figuring out their business and product... 1 Company Launch Date NoofRespondents Respondent Founding Year 6 11 9 13 8 5 4 0 2 4 6 8 10 12 14 16 18 20 Before 2010 2010 2011 2012 2013 2014 2015 2016 20
  12. 12. 12 When Did Respondents Pivot? 1 Pure SaaS Players vs Partial SaaS Players1 Pivot To SaaS 26% 74% Partial SaaS Pure SaaS 1Pure SaaS players are respondents with SaaS products contributing >60% ARR as of survey date 2Please note that there is a possibility of survivorship bias From 2011 onward the Indian product ecosystem appears to have embrace the SaaS model with ~90% of respondents starting out as SaaS businesses rather than pivoting2 Company Launch Date 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2003 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Started out as a SaaS business Pivoted Later
  13. 13. 13 Key Takeaways From Respondent Profiling 1 2 3 Boasting ten $1Mn+ ARR respondents (out of a total of 35 $1Mn+ ARR respondents), our sample shows that the NCR region is bubbling with activity The Indian SaaS ecosystem is dominated by young companies with a median ARR of ~$0.75Mn and median employee strength of ~35 While SaaS pivots are a feature of the Indian product ecosystem, the SaaS business model appears to have gained prominence from 2011 with founders starting pure SaaS businesses, rather than pivoting
  14. 14. Business Focus Market And Product Focus Of The Respondents 2
  15. 15. 15 What Is India’s USP In Competing With Global SaaS Companies ? 2 Reported USP1 NumberofResponses Unique Selling Proposition (USP) 1 Respondents were asked the following question - What do you see as India’s USP in competing with global SaaS companies?(respondents were given the option of choosing multiple criteria) Our sample appears to be betting on low cost (but high quality) talent and low cost inside sales to build world class SaaS businesses. Next year, it would be interesting to add ‘outright innovation’ to the list of USPs 62 48 25 23 21 15 4 0 10 20 30 40 50 60 70 Favourable skill to cost ratio Cost effective inside sales Huge talent pool Products more suited for developing markets Mature customer service capability Mobile first market & skillsets Other These two buckets are effectively the same and emphasize that our greatest strength is skill to cost, whether in sales or otherwise
  16. 16. 16 How Long Does It Take To Develop a SaaS Product? 2 Most respondents built their product (likely referring to the first commercially available version) within a 12 month window Time Taken To Build First SaaS Product 63% 30% 4% 3% <=12 months 12-18 Months 18-24 Months >24 Months We attempted various slices of this data set by year of founding, </> $1Mn ARR, vertical/ horizontal, etc. but found that this metric remained remarkably consistent
  17. 17. 17 Vertical vs. Horizontal SaaS 2 Vertical vs. Horizontal Focus Vertical and Horizontal Split By Product Launch Date This year 53% of our sample focused on vertical SaaS products vs. 37% last year. In particular, over the last 3 years vertical SaaS product launches have overtaken horizontal ones Product Launch Date NoOfRespondents 53% 47% Vertical Horizontal 1 2 3 5 4 2 10 7 6 1 5 4 3 6 7 6 4 0 2 4 6 8 10 12 14 16 18 2005 2006 2009 2010 2011 2012 2013 2014 2015 2016 Journey to $1Mn ARR 64% of $1Mn+ ARR respondents are vertically focused
  18. 18. 18 Which Is The Most Popular Vertical For A SaaS Product? 2 Vertical Focus Area1 While TMT focused SaaS dominated our sample this year we note that TMT itself could cover a diverse group of distinct verticals Vertical Sector 1 Includes a subset of 40 respondents NoofRespondents 13 9 5 4 3 2 2 1 1 0 2 4 6 8 10 12 14
  19. 19. 19 Which Is The Most Popular Horizontal Focus Area? 2 Horizontal Focus Area1 The top three horizontal areas were broadly the same as in last year’s survey, showing that India continues to favour ‘human focused’ SaaS vs. ‘machine focused’ SaaS NoofRespondents 1 Includes a subset of 32 respondents Horizontal Sector 7 7 6 4 4 2 1 1 0 1 2 3 4 5 6 7 8
  20. 20. 20 Which Geography Contributes The Maximum Revenue? 2 Unchanged from last year, the US is the most favoured destination for Indian SaaS startups. With that said, whilst companies are building for global markets, the first market for companies to get traction in is typically India Geography Contributing Maximum Revenue By Respondent Size1 1Subset of 76 respondents. ARR Range No. of Respondents:22 12 7 14 9 7 5 1 15 3 4 4 4 1 4 14 9 2 9 5 6 3 1 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% <=$0.25 Mn $0.25 Mn - $0.5 Mn $0.5 Mn - $1.0 Mn $1.0 Mn - $2.5 Mn $2.5 Mn - $5.0 Mn $5.0 Mn - $10.0 Mn >$10.0 Mn 5% 59% 33% 3% Europe India North America Rest of Asia Geography Contributing Maximum Revenue Key Ordinarily, we would expect to see more US prominence in this bucket…
  21. 21. 21 Customer Focus, SMEs vs. Enterprises 2 Customer Type 68% 32% SMB/SME (Small and Medium Business) Large Enterprises Our sample is split 2/3rd in favour of SME focused SaaS; We were surprised however to see a lower than anticipated median number of customers for SME focused players, likely due to a large number of small respondents… 100 50 0 20 40 60 80 100 120 SME/SMB Large Enterprises Median Number Of Customers By Type NoofCustomers Customer Type Key
  22. 22. 22 Key Takeaways From Business Focus Section 1 2 3 Unlike in 2015, the 2016 survey hints that the Indian SaaS ecosystem is increasingly focused on vertical SaaS offerings With regard to horizontal SaaS, we note a continued paucity of ‘machine focused’ SaaS in favour of ‘human focused’ SaaS While the US is still the largest market for Indian SaaS players (a point corroborated by our experiences in the market) there are a number of respondents that have achieved meaningful scale by focusing on customers in India
  23. 23. Growth Rates Growth Profile Of The Respondent Set 3
  24. 24. 24 5 5 11 5 6 3 5 11 9 4 0 2 4 6 8 10 12 10%-25% 25%-50% 50%-100% 100%-200% 200%-300% How Fast Did/Will Respondents Grow Their ARR? (>$1Mn ARR only) 3 ARR Growth1 1Subset of 32 respondents Median ARR Growth Rate NoofRespondents Median range for current and future growth If we consider only more ‘mature’ respondents with ARR >$1Mn the reported median historical & future growth rates remain unchanged
  25. 25. 25 How Fast Did/Will Respondents Grow Their ARR? (<$1Mn ARR only) 3 ARR Growth1 1Subset of 29 respondents Interesting to note that respondents in the <$1Mn bucket are growing more slowly than their scaled peers but are bullish on the future based on projected growth rates NoofRespondents Median ARR Growth Rate 3 5 10 2 4 5 0 4 6 7 6 6 0 2 4 6 8 10 12 Current YoY Growth Projected YoY Growth Median Range for current growth Median Range for projected growth
  26. 26. 26 0 1 2 3 4 <=$0.25 Mn $0.25 Mn -$0.5 Mn $0.5 Mn -$1.0 Mn $1.0 Mn -$2.5 Mn $2.5 Mn -$5.0 Mn $5.0 Mn -$10.0 Mn >$10.0 Mn How Fast Is Our Sample Growing Its ARR? 3 $1Mn+ ARR respondents reported higher median growth rates when compared to sub $1Mn ARR respondents. Its likely that the more nascent players still have to figure out their sales models Historical Median ARR Growth <10% 10-25% 25%-50% 50%-100% 100%-200% ARR Range MedianYoYARRGrowthRate Median (>$1Mn ARR) Median (<$1MnARR) No. of Respondents: 15 10 7 12 8 7 5
  27. 27. 27 What Is The Distribution Of Respondents Growth Rate By Size? 3 While the sub $5M growth split is similar, >$5M split seems very different, however it is hard to make a conclusion based on the size of the subset Profile Of ARR Growth By Respondent Size1 1Considering a subset of 35 respondents ARR Range Shareofrespondents No. of Respondents: 14 9 7 5 YoY ARR Growth Range 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% $1.0 Mn -$2.5 Mn $2.5 Mn -$5.0 Mn $5.0 Mn -$10.0 Mn >$10.0 Mn 100-300% 50%-100% <50%
  28. 28. 28 Distribution Of Respondents’ Historical Growth Rate By Customer Focus 3 Regardless of scale, respondents focused on enterprise accounts reported faster growth than those focused on SMEs, potentially reflecting the sales experience of the Indian SaaS ecosystem Historical Growth Rate For >$1Mn ARR1 Historical Growth Rate For <$1Mn ARR2 1Subset Of 35 Respondents 2Subset Of 25 Respondents 0 1 2 3 4 5 Large Enterprises SMB/SME (Small and Medium Business) 0 1 2 3 4 5 Large Enterprises SMB/SME (Small and Medium Business) <10% 10-25% 25%-50% 50%-100% 100%-200% 200%-300% <10% 10-25% 25%-50% 50%-100% 100%-200% 200%-300% Median MedianYoYARRGrowthRate MedianYoYARRGrowthRate Median 100% 50%-100% 50%-100% 25%-50%
  29. 29. 29 Growth Expectations (Business Confidence) By Customer Focus 3 Projected vs Actual Growth Rate - SMB/SME Focus Projected vs Actual Growth Rate - Enterprise Focus 0 1 2 3 4 5 Historical YoY ARR Growth Rate Projected YoY ARR Growth Rate 0 1 2 3 4 5 Historical YoY ARR Growth Rate Projected YoY ARR Growth Rate <10% 10-25% 25%-50% 50%-100% 100%-200% <10% 10-25% 25%-50% 50%-100% 100%-200% 25%-50% 50%-100% 50%-100% 100% MedianYoYARRGrowthRate MedianYoYARRGrowthRateBy splitting historical & future growth expectations by customer focus we see that respondents focused on SMB/SME appear to be more bullish on the future. Could SME SaaS be seeing a pick up?
  30. 30. 30 Where Do Respondents See Maximum Growth Potential? 3 ~70% of respondents, regardless of size, look to the US and the Rest of Asia as their key geographies to sell into Geography With Maximum Growth Potential 1Excluding respondents with an ARR of >$10Mn and <$1Mn ARR Range Geography Seen With Maximum Growth Potential By Respondent Size1 No. of Respondents: 14 9 7 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% $1.0 Mn -$2.5 Mn $2.5 Mn -$5.0 Mn $5.0 Mn -$10.0 Mn 45% 24% 21% 5% 5% North America Rest of Asia India Europe Middle East and Africa Key
  31. 31. 31 2 5 7 7 6 6 1 6 8 6 5 5 0 1 2 3 4 5 6 7 8 9 <10% 10%-25% 25%-50% 50%-100% 100%-200% 200%-300% Vertical Horizontal Distribution Of Respondents Growth Rate By Horizontal vs. Vertical Focus 3 ARR Growth, Horizontal vs. Vertical1 Both vertical and horizontal SaaS respondents show comparable distributions in their growth rates, i.e., one doesn’t grow any faster than the other Median Range 1Subset Of 62 Respondents NumberOfRespondents YoY ARR Growth Rate
  32. 32. 32 Distribution Of Respondents Growth Rate By Geographic Focus 3 Median ARR Growth By Geography1 1Subset Of 58 Respondents. Considering only the geographies of India and NA as these are the only two significant geographies 2Subset of 4 companies A good reason to focus on the US market: respondents focused on America have higher median growth rates; our experience in the market corroborates this finding 0 1 2 3 4 5 India North America Other <10% 10-25% 25%-50% 50%-100% 100%-200% 200%-300% MedianYoYARRGrowthRate Geography Generating Maximum Revenue 2 50%-100% 200% 50%-100%
  33. 33. 33 The Journey To $1Mn ARR 3 Time Taken To Reach $1Mn ARR1 1Subset of 34 respondents with ARR >$1Mn The vast majority of respondents at $1Mn+ in ARR took several years to get there. In our experience, start-ups that exceed 3-4 years to achieve a $1Mn+ in ARR are often questioned by investors Median NoOfRespondents 1 15 16 2 0 2 4 6 8 10 12 14 16 18 <1 year 1-2 years 2-4 years > 4 years Journey to $1Mn ARR Results show that the journey to $1Mn ARR is 2-4 years
  34. 34. 34 Key Takeaways From Growth Rates Section 1 2 3 50-100% annual growth rates are the benchmark in India, hopefully reflecting a young & healthy SaaS ecosystem While respondents targeting enterprise customers reported higher growth rates, SME focused respondents appear to be more bullish on their future prospects, projecting much higher growth in the coming year than in the year gone by Corroborated by our own experiences, the US is still the #1 market for the Indian SaaS ecosystem to sell into and companies focusing on the US are growing faster than their peers
  35. 35. Sales And Delivery Channels & Delivery Methods 4
  36. 36. 36 What Is The Most Used Sales Channel1? 4 While a trend over time would be useful, it is evident that inside sales is presently the most used sales channel across respondents of all sizes Most Used Sales Channel2 : >$1Mn ARR Most Used Sales Channel3 : <$1Mn ARR 1The question posed was – “Which of the following sales channels have you deployed? “ and respondents were given the choice to choose multiple answers. Hence the data should be interpreted as such 235 respondents; 341 respondents 42% 31% 27% Inside Sales Field Sales/Feet on street Channel Partners 48% 25% 27%Key
  37. 37. 37 What Is The Most Productive Sales Channel1? 4 In addition to be being the most popular sales channel, inside sales proves to a be a very effective sales channel irrespective of size of respondents Most Productive Sales Channel : >$1Mn2 Most Productive Sales Channel : <$1Mn3 1The question posed was – “Which of the following sales channels have you found most productive? “ 235 respondents 341 respondents 18 15 2 Inside Sales Field Sales/Feet on street Channel Partners 0 2 4 6 8 10 12 14 16 18 20 25 10 6 Inside Sales Field Sales/Feet on street Channel Partners 0 5 10 15 20 25 30 Journey to $1Mn ARR Although inside sales is #1, FoS seems to pick up for our $1Mn+ respondents NoOfRespondents NoOfRespondents Sales Channel Sales Channel
  38. 38. 38 30 22 7 2 0 5 10 15 20 25 30 35 <10% 10%-20% 20%-30% >30% What Are The Sales Commissions For The Primary Sales Channel? 4 Sales Commissions As % Of Sales Median Range Reported sales commissions in the Indian ecosystem are higher than in the US (reported at 9%2) Sales Commissions1 1As a percentage of Sales 2Per Pacific Crest Private SaaS Company Survey Results 2016 NoofRespondents
  39. 39. 39 0 1 2 3 4 5 <10% 10%-20% 20%-30% >30% Do Sales Commissions Impact Growth Rates? 4 Median Growth Rate vs. Sales Commissions1 <10% 10-25% 25%-50% 50%-100% 100%-200% 200%-300% Sales Commissions 1Subset of 50 respondents Median Range MedianYoYARRGrowthRate 23 21 7 2No of respondents: Although respondents paying commissions of 10%-20% reported the highest median growth rate its hard to make a determination about further increases in commissions due to the small sub-sample
  40. 40. 40 What Level Of Sales Commissions Do More Scaled Respondents Pay? 4 While no respondents at an ARR >$10Mn pays more than 10% in commissions, there doesn’t appear to be a relationship between scale and commissions paid 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% <=$0.25 Mn $0.25 Mn -$0.5 Mn $0.5 Mn -$1.0 Mn $1.0 Mn -$2.5 Mn $2.5 Mn -$5.0 Mn $5.0 Mn -$10.0 Mn >$10.0 Mn >30% 20%-30% 10%-20% <10% Sales Commissions vs. Size SaaS ARR Sales Commissions Range No. of Respondents: 22 12 7 14 9 7 3 PercentageofRespondents Increasing ARR
  41. 41. 41 Which Sales Model Have Respondents Tried At Least Once? 4 Sales Model Tried At Least Once Sales Model NoOfResponses Most of our sample (78%) has tried more than one sales model but rarely stepping outside of the four most common examples • Sales Model refers to the various approaches to conversion of prospects • Sales Channel refers to the various mediums being used to approach prospects 58 50 36 18 2 0 10 20 30 40 50 60 70 Try and Buy (subscription with trial) Enterprise Sales (potentially with a pilot) Freemium (Limited features with add on premium features) Revenue share/Outcome based Other
  42. 42. 42 What Is The Primary Sales Model Across Respondents? 4 Nearly 50% of our sample leverage the ‘try and buy’ model to drive sales with no clear variation by scale Which Is The Most Prevalent Primary Sales Model? What Sales Models Do Respondents Use, By SaaS ARR No. of Respondents: 22 12 7 14 9 7 49% 38% 10% 3% Try and Buy (subscription with trial) Enterprise Sales (potentially with a pilot) Freemium (Limited features with add on premium features) Revenue share/Outcome based 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% <=$0.25 Mn $0.25 Mn - $0.5 Mn $0.5 Mn - $1.0 Mn $1.0 Mn - $2.5 Mn $2.5 Mn - $5.0 Mn $5.0 Mn - $10.0 Mn >$10.0 Mn 5
  43. 43. 43 What Sales Models Do The High Growth Respondents Use? 4 Growth vs. Sales Model Used In line with previous survey findings, higher growth rates and enterprise sales models appear correlated in our respondent set YoY ARR Growth Rate 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% <10% 10%-25% 25%-50% 50%-100% 100%-200% 200%-300% Enterprise Sales (potentially with a pilot) Revenue share/Outcome based Freemium (Limited features with add on premium features) Try and Buy (subscription with trial)
  44. 44. 44 How Do The Respondents Host Their SaaS Service? 4 3rd party hosting has grown vs. last year’s survey (83% vs. 68%). Similarly, while AWS continues to dominate, its share too has grown (71% vs. 58%) Hosting Preference Type Of Third Party Hosting Service 71% 29% Amazon Web Services Rest 83% 17% Third Party Self Managed
  45. 45. 45 10 20 8 8 12 6 12 0 5 10 15 20 25 <=2.5% 2.5%- 5.0% 5.0%- 7.5% 7.5%- 10.0% 10.0%- 12.5% 12.5%- 15.0% >15.0% What Are The Costs For Hosting? 4 Hosting Costs NoOfRespondents Hosting Costs As A Percentage Of Sales Median Range(7.5%) Median hosting cost appear to have fallen YoY from ~10% of sales in last years survey to 7.5% this year
  46. 46. 46 Key Takeaways From Sales And Delivery Section 1 2 3 Inside sales channels dominate our SaaS ecosystem, no surprise given their cost efficiency, which is also something now well recognized in India ‘Try and buy’ seems to be the most popular sales model with no correlation with size 78% of respondents have tried more than one sales model. The dominant model, however, is clearly ‘try and buy’ with enterprise sales coming in second
  47. 47. Profitability Costs and Margin Drivers of Respondents 5
  48. 48. 48 What Is The Revenue/FTE Across The Respondents? Despite a small sample size at higher ARRs, our sample shows that more scaled up respondents have cracked the ability to drive revenues from their employee base 5 1Taking respondents having SaaS revenue contribution greater than 60% . Taking the Middle value for a particular ARR range since the data was collected in the manner of ranges ARR/FTE Efficiency (ARR>$0.25Mn)1 ARR Range 0 10 20 30 40 50 60 70 80 90 $0.25 Mn - $0.5 Mn $0.5 Mn - $1.0 Mn $1.0 Mn - $2.5 Mn $2.5 Mn - $5.0 Mn $5.0 Mn - $10.0 Mn >$10.0 Mn ARR/FTE(in$’000) No. of Respondents: 9 6 12 7 4 3 Journey to $1Mn ARR Post cracking the $1Mn ARR mark our respondents appear to see significant gains in productivity
  49. 49. 49 0 1 2 3 4 5 6 7 8 What Is The Typical CAC1 That The Respondents Incur? 5 Respondents with ARR >$1Mn incur higher median CAC perhaps due to higher mix of Enterprise Sales which has longer lead times and involves FoS CAC (<$1Mn ARR)2 CAC (>$1Mn ARR)3 0 1 2 3 4 5 6 7 8 9 10 1Customer Acquisition Cost 2Subset of 34 respondents 3Subset of 30 respondents Median Range Median Range NoofRespondents NoofRespondents CAC CAC
  50. 50. 50 How Does The CAC To ARR Ratio Vary With Scale? 5 1This metric has been calculated utilizing the middle value of the CAC value ranges and the middle value of the ARR ranges collected 2CAC to ARR ratio is the Customer Acquisition Cost divided by the ARR per customer CAC to ARR Ratio, by ARR (>$1Mn ARR) 38% 28% 25% 0% 5% 10% 15% 20% 25% 30% 35% 40% $1.0 Mn -$2.5 Mn $2.5 Mn -$5.0 Mn $5.0 Mn -$10.0 Mn ARR Range MedianCACtoARRRatio2 Respondents in the $1Mn-$2.5Mn ARR bucket spend more to acquire a customer than their larger peers. This is likely related to chasing growth with sales models that are yet to stabilize No. of Respondents: 15 10 7
  51. 51. 51 In How Many Months Do The Respondents Typically Recover CAC? (>$1Mn ARR) 5 CAC Payback Period1 ~2/3rd of our sample recover their CAC in <12 months, likely highlighting the low cost environment enjoyed by Indian SaaS businesses; A surprising 14% of respondents, however, didn’t even track CAC recovery… Median Range 1Subset of 35 respondents 17% 17% 29% 17% 6% 14% <3 Months 3-6 Months 6-12 Months 12-18 Months 18-24 Months Don't Track
  52. 52. 52 What Are The Main Drivers Of Cost? 5 Top Driver Of Cost Where Does The Top Driver Of Cost Lie? 1Per Pacific Crest Private SaaS Company Survey Results 2016 16% 84% Above Gross Margin Below Gross Margin While the US counterparts have sales and marketing as the top driver1 of costs Indian firms seem to have R&D as the top driver of cost, a finding unchanged from last year’s survey 4% 8% 56% 28% 4% Other Direct Delivery Staff Product Support Cost R&D/Product Development Sales & Marketing Third Party Software/licenses
  53. 53. 53 0 5 10 15 20 25 <40% 40%-50% 50%-60% 60%-70% 70%-80% 80%-90% >90% How Profitable Are The Survey Respondents? (At GM level) 5 Gross Margin The median gross margin range for our sample was 60-70% vs. 75-80%1 in the US market. A lower gross margin despite a lower cost base suggests some level of competitive pricing by Indian players vs their US counterparts Median Range NoOfRespondents 1Per Pacific Crest Private SaaS Company Survey Results 2016 Gross Margin Range
  54. 54. 54 What Is The Profile Of The Gross Margin Generated By Respondents? 5 Neither vertical vs. horizontal focus nor customer types drives the gross margin of respondents as visible from the graphs Gross Margin By Vertical/ Horizontal Gross Margin By Customer Type? 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Vertical Player Horizontal Player >90% 80%-90% 70%-80% 60%-70% 50%-60% 40%-50% <40% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Large Enterprises SMB/SME (Small and Medium Business) >90% 80%-90% 70%-80% 60%-70% 50%-60% 40%-50% <40%
  55. 55. 55 In How Many Years Do Respondents Project EBITDA Break Even (From project launch date)? 5 Time To Breaking Even2 ~50% of respondents project taking 3-6 years to breakeven at the EBITDA level post launch of product Median Range 1Breakeven for SaaS portion of business 2Subset of 51 respondents-excludes respondents who have already broken even for analysis 36% 50% 14% <3 Years 3-6 Years 6-10 Years
  56. 56. 56 In How Many Years Do Respondents Project EBITDA Break Even, By ARR1? 5 Breaking Even By Size2 The reported, projected time to break even does not show a significant trend with ARR range. Median Range PercentageShare ARR Range 1Breakeven for SaaS portion of business 2Subset of 71 respondents 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% <=$0.25 Mn $0.25 Mn - $0.5 Mn $0.5 Mn - $1.0 Mn $1.0 Mn - $2.5 Mn $2.5 Mn - $5.0 Mn $5.0 Mn - $10.0 Mn >4 years 2-4 years 1-2 years <1 year Already broken even
  57. 57. 57 Key Takeaways From Profitability Section 1 2 3 ARR/ FTE improves with scale, highlighting operating leverage available in SaaS businesses and focusing on cracking the Sales engine early in business’ lifecycle Indian SaaS startups recover CAC quickly – likely taking advantage of the low cost Indian ecosystem Respondents estimate that it takes them 3-6 years to break even at EBITDA level post launch of SaaS product
  58. 58. Other Metrics Common SaaS Metrics 6
  59. 59. 59 What Is The Customer Lifetime Of The Respondents’ Customers? 6 Customer Lifetime In Months We see spikes at the 12, 24 & 36 month marks, likely related to annual contracts NoOfRespondents No Of Months Median Range 0 2 4 6 8 10 12 14 16 18 2 3 5 6 9 10 12 13 14 15 18 20 22 24 26 28 30 33 36 >36
  60. 60. 60 What Is The Revenue Retention Rate1 Of The Respondents? 6 Revenue Retention Median Range No Of Respondents RevenueRetentionRate >50% of respondents2 have a revenue retention rate higher than 100% 1Revenue Retention Rate is defined as the revenues produced from customers acquired in period 1 divided into the revenues produced by the same customers in the next period expressed as a percentage 2Respondents who track their revenue retention rate 100%+NetRetentionNetChurn (Upsellsgreater thanchurn) (Churngreater thanupsells) 0 2 4 6 8 10 12 14 <80% 80%-90% 90%-100% 100%-110% 110%-120% 120%-130% 140%-150% >150%
  61. 61. 61 What Is The Revenue Retention Rate1 By Customer Type? 6 Revenue Retention Surprisingly, revenue retention is marginally better with SMB/SME customers even though enterprises typically sign more long term contracts 1Revenue Retention Rate is defined as the revenues produced from customers acquired in period 1 divided into the revenues produced by the same customers in the next period expressed as a percentage Median Range: (90%-100%) ($100%-$110%) PercentageShare 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Large Enterprises SMB/SME (Small and Medium Business) >130% 100%-130% <100%
  62. 62. 62 Which Contract Lengths Enable Better Revenue Retention1 Rates? 6 Revenue Retention By Contract Length Unsurprisingly, data shows that revenue retention is improving as we are moving towards respondents with longer period contracts 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Monthly Quarterly Half yearly Yearly Multi-year contracts Perpetual License >130% 100%-130% <100% PercentageShare 1Revenue Retention Rate is defined as the revenues produced from customers acquired in period 1 divided into the revenues produced by the same customers in the next period expressed as a percentage
  63. 63. 63 What Is The Customer Churn1 Of The Respondents (>$1Mn ARR)? 6 Customer Churn 2 Scaled respondents in the US ecosystem3 (>$2.5Mn ARR) display a median customer churn of ~10% Median Range 1Churn = # of Customers that dropped by year end/ # Customers at the start of the year 2Subset of 35 respondents 3Per Pacific Crest Private SaaS Company Survey Results 2016 No Of Months NoOfRespondents 7 4 6 4 4 7 0 1 2 3 4 5 6 7 8 <5% 5%-10% 10%-15% 15%-20% 20%-25% >25% Journey to $1Mn ARR Post the $1Mn ARR mark respondents see a median customer churn of 10%-15%
  64. 64. 64 What Are Typical Contract Lengths? 6 Typical Contract Length Of Customers Yearly and monthly contracts seem to be the most popular contract lengths for the respondents 28% 8% 7%38% 18% 1% Monthly Quarterly Half yearly Yearly Multi-year contracts Perpetual License
  65. 65. 65 What Do Contract Lengths Look Like By Customer Type? 6 Contract Length More Than 70% of the contracts signed by large enterprise customers of the respondent are 1 year and above PercentageShare 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Large Enterprises SMB/SME (Small and Medium Business) Perpetual License Multi-year contracts Yearly Half yearly Quarterly Monthly
  66. 66. 66 Which Kind Of Pricing Metrics Do The Respondents Use? 6 Distribution Of Pricing Metrics Used This is in line with last years results where 53% of respondents used number of employees as the primary pricing metric. This is the most popular pricing metric in the US1 as well 32% 1% 13% 45% 9% Based on usage Database size Number of transactions Number of users or employees Other 1Per Pacific Crest Private SaaS Company Survey Results 2016
  67. 67. 67 What Is The LTV/CAC Of The Respondents? (>$1Mn ARR) 6 LTV/CAC Distribution1 126 out of the 33 respondents track their LTV/CAC NoOfRespondents LTV/CAC The median LTV/CAC is 4-5 for respondents with an ARR >$1Mn 1 5 7 2 13 0 2 4 6 8 10 12 14 2-2.5 2.5-3 3-4 4-5 >5
  68. 68. 68 Key Takeaways From Other Metrics 1 2 3 Revenue retention is better amongst respondents with SMB/SME customers Respondents servicing large enterprises have more than 50% of their contracts with a period of greater than 1 year Respondents who sign contracts with a period of greater than a year have reported higher revenue retention rates
  69. 69. Funding Funding And Valuation 7
  70. 70. 70 How Much Funding Have Respondents Raised? 7 Funds Raised To Date NoOfRespondents Funding Raised Median Range Pointing to a young SaaS ecosystem, 38% of our sample is bootstrapped (perhaps by design?) with another 38% having raised less than $5Mn 29 12 16 12 4 3 0 5 10 15 20 25 30 35 Bootstrapped <$1Mn $1Mn-$5Mn $5Mn-$10Mn $10Mn-$20Mn >$20Mn
  71. 71. 71 At What Revenue Multiple Have Respondents Raised Their Most Recent Round? 7 Funding Raised To Date1 NumberofRespondents Revenue Multiple Given that our sample has a relatively low median ARR of $0.75Mn its no surprise to see a number of respondents raising money at double digit revenue multiples, although the gap at 12.5-15x is notable Median Range 1 Subset of 36 respondents 2 6 8 9 1 10 0 2 4 6 8 10 12 <5x 5x-7.5x 7.5x-10x 10x-12.5x 12.5x-15x >20x
  72. 72. 72 0 1 2 3 4 5 6 1 2 3 4 5 What Is The ARR Profile Versus The Funding Level Of Respondents? 7 As expected, funds raised correlates with ARR (but not necessarily with higher growth rates). Its also interesting to see that bootstrapped ARRs compare well to those having raised seed funding (<$1Mn) 1 Subset of 72 respondents 2 Subset of 60 respondents 0 1 2 3 4 5 6 1 2 3 4 5 <$0.25Mn $0.25Mn - $0.5Mn $0.5Mn - $1Mn $1Mn - $2.5Mn $2.5Mn - $5Mn $5Mn - $10Mn Bootstrapped < $1Mn $1Mn-$5Mn $5Mn-$10Mn $10Mn-$20Mn Median ARR vs Funding1 Median ARR Growth vs Funding2 Bootstrapped < $1Mn $1Mn-$5Mn $5Mn-$10Mn $10Mn-$20Mn $0.25Mn- $0.5Mn $0.5Mn- $1Mn $1Mn- $2.5Mn $2.5Mn- $5Mn $2.5Mn- $5Mn <$10% 10% - 25% 25% - 50% 50% - 100% 100% - 200% 200% - 300% 25%-50% 100%-200% 100%-200% 100%-200% 100% Funding Raised Funding Raised MedianARR MedianYoYARRGrowthRate
  73. 73. 73 Is The Customer Focus Determining The Level Of Funding ? 7 Out of respondents who founded companies post 2013 and were funded, 73% of them were vertical focussed SaaS players (in-line with the global trend of focus on vertical SaaS players) 1 Subset of 19 respondents Funding Raised VS Customer Type Focus (Companies founded post 2013)1 63% 37% Vertical Focussed Horizontal Focussed
  74. 74. 74 Key Takeaways From Funding Section 1 2 Pointing to a young sample, 38% of respondents have raised <$5Mn and often at double digit revenue multiples Interestingly another 38% of our sample is fully bootstrapped. This could be related to the age of our sample (i.e., they will raise funds as they grow), a preference for staying bootstrapped or just being capital efficient 3 Increasing focus on Vertical focussed SaaS players with major funding activity happening in these players
  75. 75. Participants Some Of Our Survey Participants 8
  76. 76. 76 Some Of Our Survey Respondents 8 1 Subset of 19 respondents
  77. 77. 77 Some Of Our Survey Respondents 8 1 Subset of 19 respondents
  78. 78. Signal Hill Credentials A Leading Tech Investment Bank 9
  79. 79. 79 Overview Of Signal Hill 2/3rds Of Our Business Is Through Referrals & Repeat Clients Signal Hill is the premier advisory boutique serving growth companies Winner of the 2016 Boutique Investment Bank of the Year award by the Global M&A Network’s M&A Atlas Awards  Established in 2002, Signal Hill has completed 700+ M&A advisory and financing transactions  Trusted strategic advisor to growth companies  More than 75 professionals  Dedicated teams with deep domain expertise  Day-to-day hands-on senior leadership  Deep, broad relationship network with corporate decision makers and private equity investors Emerging Growth Companies Are Our Focus Baltimore • Bangalore • Boston • Mumbai • Nashville • New York • Reston • San Francisco GREATER OUTCOMES® Signal Hill combines the judgment and transaction experience of bulge bracket firms with the focus and specialization of advisory boutiques 9 Strictly Private & Confidential
  80. 80. 80 Signal Hill Is A Recognized Premier Advisory Firm Recent Awards & Accolades 2016 Awards:  Private Equity Deal of the Year – Equity Investment in Internet Truckstop Group (ITG) from Bregal Sagemount 2016 Finalist:  Deal of the Year – Acquisition of a Majority Stake in Xcira LLC by Ritchie Bros.  Deal of the Year – Acquisition of Ixxus by Copyright Clearance Center  Deal of the Year – Divestment of Kaba Holding AG’s AuoTime to Kronos  Deal of the Year – Sale of Clipper Magazine to Valassis by TEGNA  Deal of the Year – Acquisition of Interactive Achievement by PowerSchool 2015 Awards: Dealmakers of the Year – David Dolan and Matt Fiore (Managing Directors) 2015 Finalist:  M&A Deal of the Year – Infotrieve / Copyright Clearance Center (CCC) 2014 Finanlist:  M&A Deal of the Year – Cyberoam / Sophos  Cross-Border Deal of the Year – Catapult / ChinaSoft  Equity Financing Deal of the Year – FireMon / Insight Venture Partners 2015 DEALMAKERS of the YEAR WINNERS Winner at the 2016 Global M&A Network’s M&A Atlas Awards:  Boutique Technology Investment Bank of the Year – Signal Hill  U.S.A Private Equity Growth Deal of the Year – Internet Truckstop Group (ITG) / Bregal Sagemount Winner at the 2015 Global M&A Network’s M&A Atlas Awards:  Boutique Technology Investment Bank of the Year – Signal Hill  U.S.A Private Equity Growth Deal of the Year – Primus Capital / Forte Software Winner at the 2014 Global M&A Network’s M&A Atlas Awards:  Boutique Investment Bank of the Year – Signal Hill  Private Equity Small Middle Market Deal of the Year – FireMon / Insight Venture Partners  Cross-Border Small Market Deal of the Year – Catapult / ChinaSoft Winner of the Raleigh/Durham Association for Corporate Growth’s 2014 Award:  Deal of the Year – Prometheus / TA Associates 9 Strictly Private & Confidential
  81. 81. 81 Deep Domain Expertise In Key Growth Sectors Longstanding Relationships With Key Strategic Companies Signal Hill works with companies to capitalize on promising trends and potential paradigm shifts in consumer and business behavior TMT / Software  Advanced Analytics  Enterprise / SaaS  Fintech  HCM  Infrastructure  Logistics & Mobility  Security Services  Behavioural Healthcare  Corrections  Education  Environment, Health & Safety  Healthcare  Knowledge Services  Tech Services & BPO  e-Commerce  Interactive Marketing  Internet Content / Services Digital Media Signal Hill Team has closed transactions with all the above mentioned companies 9 Strictly Private & Confidential
  82. 82. 82 A Proven Track Record Of Performance: 50+ Transactions In The Last 6 Quarters Signal Hill Has Completed 700+ Transactions Since Inception More than 700 M&A and financing transactions completed across Signal Hill’s numerous sectors 9 Strictly Private & Confidential
  83. 83. 83 Equally Strong Momentum In India | 23 Transaction Closures Since We Started Closed 3 Cross Border M&A Deals With NASDAQ /NYSE Listed Acquirers in Q1’17 2012 – 2013 2014 – 2015 2016 – Q1 2017One of the largest investment banking teams in the country focused on growth companies in the technology domain “The Signal Hill team guided us superbly through our first fundraise process and worked tenaciously to create a fantastic outcome for the Company. We are excited about partnering with TA Associates on our journey toward creating the world’s most valuable travel SaaS Company.” - Bhanu Chopra Founder & CEO, RateGain HAS BEEN ACQURED BY IS RECEIVING GROWTH EQUITY INVESTMENT Project Hazel Consortium of Intl. Investors Q1 2017 9 Strictly Private & Confidential HAS BEEN ACQUIRED BY MARCH 2017 HAS BEEN ACQURED BY HAS BEEN ACQURED BY FEBRUARY 2017 MARCH 2017
  84. 84. 84 The Signal Hill Software Team - USA Team Member Experience Background & Experience Scott Wieler Chairman & CEO swieler@signalhill.com +1 (443) 478-2405 30+  Has created more than $70+ billion in transaction value for clients through M&A, private placements, venture and growth capital, divestitures, fairness opinions/valuations, defense advisory and corporate restructuring  Prior to founding Signal Hill, was Head of the Global Telecommunications Group at DB Alex Brown  MBA from The Wharton School and B.A. from Boston College Chris Hastings Managing Director Head – Private Placements chastings@signalhill.com +1-917-621-3750 25+  25 years of experience in raising capital; leads the Private Placement group at Signal Hill, focusing on growth-stage companies across the technology space.  Prior to Signal Hill, was Principal at BerchWood Partners, with previous experience at Bear Stearns, Credit Suisse, Cantor Fitzgerald, Bank of America and Prudential Securities.  MBA from Wharton and a B.S. in Finance from the Pennsylvania State University. Christopher A. Hieb Managing Director chieb@signalhill.com +1-415-590-6891 20+  Focuses on Enterprise Software, Advanced Analytics, and Contact Center Infrastructure sectors.  Prior to joining Signal Hill, was with Pacific Crest Securities for more than seven years building the M&A practice  Began his investment banking career at SoundView Technology Group, continuing his career at W.R. Hambrecht as the Head of West Coast M&A, and then Oppenheimer as the Head of West Coast M&A  B.S. degree in Nuclear Engineering from Purdue University John Roediger Managing Director jroediger@signalhill.com +1 415 962-4558 20+  Extensive sell side advisory experience; covers Enterprise Software, E-commerce, Financial Techology, Healthcare IT, Software sectors at Signal Hill  Prior to Signal Hill, was a Founderr at Montgomery & Co., Managing Director at JPMorgan and Partner at Hambrecht and Quist  Degree in Biomedical Engineering from the University of Southern California and served in the U.S. Navy Senior-level involvement throughout the process is critical to driving outcomes 9 Strictly Private & Confidential
  85. 85. 85 The Signal Hill Software Team - INDIA Senior-level involvement throughout the process is critical to driving outcomes Team Member Experience Background & Experience Klaas Oskam Managing Director koskam@signalhill.in +91-80-3969-4701 20+  Extensive investment banking experience in Technology in last 10 years led & closed 30+ private placement & M&A transactions in TMT  Prior to Signal Hill, was a Director in the Investment Banking team of EY India, responsible for Technology M&A in the South of India.  Before moving to India in February of 2005, worked for eight years in Europe, primarily with Arthur Andersen / Deloitte in Technology M&A.  MSc in Economics / Finance from Groningen University Nitin Bhatia Managing Director nbhatia@signalhill.in +91-22-6712-8451 14+  Extensive investment banking experience in Technology, Media, Telecom & Education  Prior to Signal Hill, was an Associate Director at Edelweiss Capital and Head of TMT practice  Before Edelweiss, he was a VP (Corporate Finance) at Centrum Capital & has previously also worked with Inductis, ECS & iNautix  B.Tech. from IIT (BHU), Varanasi and MBA from IIM Ahmedabad George Anthraper Director ganthraper@signalhill.in +91-80-3969-4702 11+  Investment banking experience in Technology  Prior to joining Signal Hill, was Director and Head of India Operations for Technology Holdings  Before Technology Holdings, he was Associate Vice President at Avendus Capital; Began his career as an Associate at Price Waterhouse  MBA from the Indian School of Business and is a Chartered Accountant Nishant Malhotra Director nmalhotra@signalhill.in +91-80-3969-4712 10+  Investment banking experience in the Technology, Telecom, Enterprise Software and Internet & Digital Media sectors  Prior to Signal Hill, was Business Head for Wooqer, a retail-focused SaaS start-up. He was earlier an Associate at Standard Chartered Private Equity and have also worked with Avendus Capital and KPMG  BA from Brandeis University and MBA from The Wharton School 9 Strictly Private & Confidential
  86. 86. 86 A Leading Advisor In Software Transactions Signal Hill Has Won Numerous Awards In The Software Sector Recent Awards And Nominations Of Signal Hill’s Software Transactions Private Equity Deal of the Year, 2016 U.S.A Private Equity Growth Deal of the Year, 2016 U.S.A Private Equity Growth Deal of the Year, 2015 Deal of the Year, 2014 Finalist- M&A Deal of the Year, 2014 9 Strictly Private & Confidential
  87. 87. 87 Leadership In Enterprise Software Transactions Globally Software Is The Largest Practice Area At Signal Hill And We Rank Among The Top Banks In Mid-market Software Deals Signal Hill has deep experience and a rich history of working with enterprise software / SaaS companies 9 Strictly Private & Confidential FEB 2017 HAS BEEN ACQUIRED BYHAS BEEN ACQURED BY MARCH 2017 HAS RAISED $50 MILLION SERIES A FROM MARCH 2017 HAS BEEN ACQUIRED BYHAS BEEN ACQUIRED BY
  88. 88. iSPIRT Credentials A Leading Think Tank 10
  89. 89. Public Tech Platforms APIs India Stack, Impact of inflection points on Government/PSUs/Private Sector across verticals Playbook Market Catalyst Policy Technology Stack Enhanced Market Access Buy products vs unique solutions and services - B2C or B2B, Local or Global Events/Matchmaking/Deals Product Business Skill Building Services vs Product mindset Lifecycle of entrepreneurship Learn from peers/don’t reinvent Simplified Regulations Fund of Funds, Stay-in-India Checklist, List in India, Open APIs, Grand Challenges, Buying products not Projects, No Software Patents, Financial Inclusion, Healthcare Inclusion, Regulatory sandbox, Digital goods tax definition, Net Neutrality Policy, Open Source Policy, Privacy law, Civil society watchdogs. What we do...
  90. 90. iSPIRT Brings Intensity to Building The Technology Ecosystem 30 yr Architects 10 yr Planners 5 yr Doers • Think Tanks • Universities • Research Labs • VCs • Policy Makers • Missionary entrepreneurs • Bootstrapped entrepreneurs • Mercenary entrepreneurs Public goods • Market maker • Ecosystem builder • Mindset shaper iSPIRT: iSPIRT Brings Intensity to Building The Technology Ecosystem
  91. 91. Impact made by iSPIRT for the Product Founders
  92. 92. Reviewed by: Aneesh Reddy - Capillary Technologies, Avlesh Singh - WebEngage, Avinash Raghava - iSPIRT, Girish Mathrubootham - Freshdesk, Ritesh Arora - BrowserStack, Shekhar Kirani - Accel Partners, Sunil Patro - SignEasy Suresh Sambandam CEO, KiSSFLOW Krish Subramaniam CEO, ChargeBee Survey Co-Led by
  93. 93. 93 Disclaimer & Contacts Strictly Private & Confidential This preliminary document has been prepared by Signal Hill Capital Advisory India Private Limited (“SHI”) for discussion purposes only. The information and opinions contained in this document are derived from public and private sources which we believe to be reliable and accurate but which, without further investigation cannot be warranted as to their accuracy, completeness or correctness. This information is supplied on the condition that SHI and any partner, employee or affiliate of SHI are not liable for any error or inaccuracy contained herein, whether negligently caused or otherwise, or for loss or damage suffered by any person due to such error, omission or inaccuracy as a result of such a supply. SHI and its affiliates are also not liable for any loss or damage howsoever caused by relying on the information provided in this document. In particular any numbers, initial valuations and schedules contained in this document are preliminary and are for discussion purposes only and does not constitute an opinion. The credentials mentioned herein include those transactions concluded by senior employees prior to joining SHI or by entities which have since merged with SHI and its affiliates. Signal Hill is a leading independent advisory boutique serving the M&A and private capital raising needs of growth companies. Signal Hill’s experienced bankers provide deep domain expertise and an unyielding commitment to clients in our sectors: Internet & Digital Media, Internet Infrastructure, Services and Software. With over 700 completed transactions and offices in Baltimore, Bangalore, Boston, Nashville, New York, Reston and San Francisco, Signal Hill leverages deep strategic industry and financial sponsor relationships to help our clients achieve Greater Outcomes®. iSPIRT Foundation connects and guides software product entrepreneurs and catalyses business growth. It’s an enabler of a stronger ecosystem. We encourage buyers to improve performance by leveraging software products effectively. We advise policy makers on interventions that can set the industry on a higher growth trajectory. We are a not-for-profit industry think-tank founded by key participants and proponents of the Indian software product industry Klaas Oskam Managing Director Email: koskam@signalhill.in Mobile: +91 97403 32000 Direct: +91 80 3969 4701 Nitin Bhatia Managing Director Email: nbhatia@signalhill.in Mobile: +91 9920365756 Direct: +91 22 6169 5921 Nishant Malhotra Director Email: nmalhotra@signalhill.in Mobile: +91 9961820040 Direct: +91 80 3969 4712 Varun Potturu Analyst Email: vpotturu@signalhill.in Mobile: +91 7350123803 Direct: +91 80 3969 4702

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