Despite market headwinds, the world of SaaS (software as a service) continues to retain its growth momentum. The global SaaS market currently stands at approximately $3 Tn, with a potential to surge to $10 Tn by 2030. Homegrown SaaS companies are not lagging either, and the Indian SaaS market is estimated to reach $50 Bn by 2030.
Bessemer Venture Partners (BVP) is one of the global venture capital funds betting on India’s rapidly growing SaaS ecosystem. Although it began its India operations in 2005-2006, it started investing in internet and technology startups in 2010-11. Today, Bessemer is investing out of its 12th fund family of global funds and more than $9 Bn in assets under management and has been actively investing in Indian startups.
True to its focus on stage-agnostic companies, the firm has invested in Seed, Series A, Series B, Series C and beyond or above for more than a decade. In November 2021, it launched a ~$220 Mn India-focussed fund to double down on its early-stage bets.
“Bessemer has been investing in India out of our global venture fund and we continue to do so; that has not changed. However, the Indian market is growing rapidly and we see many early-stage opportunities. Hence, we raised a dedicated early-stage vehicle for India in 2021 to double down on our India efforts,” said Bessemer’s partner Anant Vidur Puri during a one-to-one with Inc42 as part of our ongoing Moneyball series.
Puri, an IIT-Delhi graduate and a postgraduate from Harvard Business School, found his way to BVP in 2014. While many of his college batchmates were looking to start their ventures, he worked as a consultant at Boston Consulting Group. The reason for not starting up? At the time, he thought he had no smart ideas worth working on. So, he started exploring opportunities in the venture capital ecosystem and BVP came along.
“It was a small team. I decided to join and spent the first two years as an analyst looking at consumer internet companies. I found some interesting ones for the firm, such as Swiggy and Urban Company. I also realised I would like to continue this work,” he said.
Over the past decade, Puri has become a partner, looking for high-potential opportunities in internet marketplaces and Indian SaaS companies. During his freewheeling chat, he shed light on Bessemer’s roadmap-based investments, what software startups from India catering to global customers should focus upon for long-term success and how the productisation of services with the help of software and AI may turn out to be the next big theme.
Here are the edited excerpts.
Inc42: How did Bessemer initially explore the Indian tech startup ecosystem in 2010-11? How have you evolved since?
Anant Vidur Puri: Bessemer follows a roadmap-driven approach, a kind of investment thesis but more specific and detailed. We started by exploring internet [online] marketplaces and invested in a vertical listing marketplace/platform, Bharat Matrimony, It went public in September 2017. Later, we funded Snapdeal, a horizontal ecommerce marketplace, and a vertical marketplace called TaxiForSure (a taxi aggregator and cab-hailing service). TFS was acquired by Ola in 2015.
By that time, we realised that we were looking at an evolution. Bessemer moved on to full-stack vertical marketplaces and invested in Urban Company (previously UrbanClap, a home services marketplace), Swiggy (food aggregator and delivery services), Cashify (recommerce), BigBasket (e-grocery) and more. We had that big roadmap around internet marketplaces and invested in 8-10 such companies. Fortunately, we also made some good exits along the way.
Since 2019, many internet-first D2C (direct-to-consumer) brands have emerged in India. So, the internet marketplace roadmap is evolving further and we have invested in brand houses like MyGlamm, now GoodGlammGroup. We continue to be excited about new D2C brands as well as B2B internet marketplaces, particularly in the services world.
Inc42: What are the other roadmaps Bessemer has added in the subsequent years?
Anant Vidur Puri: We added three more, including fintech software, digital health and global software from India. The timeframes differed in each case, but we have been prospecting digital health since 2010-11. The roadmap has been built gradually but has relied pervasively on in-depth research because this industry is huge and undergoing many changes. It is an industry that needs time to mature and the companies in this space also need to mature.
We have invested in companies such as Medi Assist, which recently went public. Then, there was a corporate wellness platform called DocStack, which was rebranded to MediBuddy. Others include Nova Benefits, a digital-first health insurance company for employees, and MediSage, a digital community for healthcare professionals. This is not an exhaustive list, but all the funding happened between 2010 and 2023. So, it’s an ongoing roadmap.
Inc42: Tell us more about Bessemer’s fintech software roadmap and how it has evolved.
Anant Vidur Puri: We started exploring financial services/fintech software in 2016 and saw the central government and various regulatory authorities pushing the technology across the startup ecosystem. With Aadhaar and UPI paving the way for the digital financial stack in India, we felt it was an excellent opportunity for companies to build a banking or financial services ecosystem. And that led to our fintech software roadmap.
In a span of three to four years, we invested in several companies such as Perfios (which was building an underwriting software programme at the time), Lentra (offering a loan origination system or LOS) and Innovati, an integrated payment technology provider. Most recently, I invested in Zopper, an insurtech company making relevant software. So, fintech software has become another interesting roadmap for us.
Our fourth roadmap – India and global software from India [companies building SaaS solutions from India for India and for the world]. We are trying to invest in companies building SaaS or cloud software for global customers. Our first investment in this space came in 2014 when we invested in Anunta technologies. More recently, we’ve invested in companies such as LeenaAI, EntropikAI, Zenskar amongst others
Inc42: Could SaaS startups from India cope with macroeconomic uncertainties globally and locally?
Anant Vidur Puri: We are actively investing in Indian software companies to help them get past these challenges at home and abroad. Not every market in India is large, but there are still large enough markets to build a successful SaaS business. The global software ecosystem has seen tough years due to macroeconomic instabilities. But these cycles are temporary and we are positive about the long-term success of Indian SaaS businesses.
Building software from India has many advantages and we think Indian companies can be more efficient than their global counterparts. There is long-term business potential and we are excited about that.
On the funding side, we assess industries and companies on revenues. If revenues in any industry are growing at 30-50% YoY, it means there are bound to be pockets of companies growing at more than 100% leveraging technology and often cloud or internet.
Inc42: What should be the key focus areas in the coming years?
Anant Vidur Puri: Our excitement for AI stems from the fact that we have many software developers and the maximum number of open-source AI projects are from India ie. nearly 25% of open-source projects. In addition, India has a vast population of 1.4 Bn. So, services remain a critical part of the Indian economy and we are leaders in services. When you combine both, we believe services in the future will get productized and more efficient – India is well positioned in this segment to productize services for the world using AI and cloud software
For example, Entropic is an AI-first customer research platform. Now, research is fundamentally a service done by people. But Entropic has introduced a workflow and AI support in the research process so that we can productise a large part of that job. Today, if researchers can do eight interviews daily, they can do 800 interviews using Entropic. It is still a service, but software and AI are working together to productise that service.
Going forward, more companies will emerge and productise services using AI. India has expertise in all three areas – software, AI and services. All three will come together to create one big theme and we are very excited about it.
Inc42: Will genAI play any specific role here?
Anant Vidur Puri: GenAI is just a term, a subset of AI. Entropic, LeenaAI, Pepper Content – there are all kinds of genAI-native companies, but we would not like to put them in that bucket. For us, genAI is more like a buzzword. Generative AI automates tasks to a large extent and speeds up services. It’s a natural part of service productisation. One can use software programmes to productise services.
Investments in AI/genAI are integral to our global software [from India] roadmap. We have also made global investments in this space. In fact, we announced last year that Bessemer would direct $1 Bn of its deployable capital for AI.
Today’s software companies have to figure out how to use AI by default, either for internal use or for developing software for customers. AI tool kits are out there, and your competitors will use it if you are not doing it. And if they do it, your customers will want it.
You should figure out how AI can disrupt your business. Use it to your advantage to reinvent your venture instead of waiting for others to do so and get ahead. Don’t ignore the power of AI as a new form of doing business. It may be a buzzword, but it has real value. AI is transforming how software is written, how sales are done and how customer support is provided. So, embrace AI and leverage it to innovate your business.
Inc42: In the current scenario, what roadblocks do you see for SaaS companies in India when it comes to scale and expansion?
Anant Vidur Puri: Globally, there are market headwinds, and many countries in the West, including the US, are experiencing a slowdown. The rise in costs is a crucial factor and we have seen layoffs. So, if you are a software business trying to sell globally, the return on investment for your product needs to be much higher than it was before.
At a recent event for Indian founders, I talked with a CIO of a public company in Silicon Valley. The company earns several hundred million dollars in revenue and has a market cap of $30 Mn. But he told me clearly: If you are not giving me a minimum ROI of 30% cost reduction and an absolute cost reduction of at least $1 Mn, please don’t approach our company.
That’s the real challenge. You can’t say you are improving things by 10% or reducing costs by INR 50K, especially when targeting the US market. People there don’t care about these numbers. Large enterprises want large materials and percentage cost savings. If you can give them that, then only they will be willing to try your product.
So, Indian companies should work on their ROI and ensure it is visible in the sales process.
Also, when companies scale up, the go-to-market motion should evolve. It could be inbound or outbound, PLG (product-led growth), partner-led, or feet-on-street sales. When a company gets started, it starts with one or two of these. But as it scales, it needs all of them. Companies must adopt various sales motions to cross $100 Mn in revenue.
Inc42: What are the essential metrics for investing in startups?
Anant Vidur Puri: As we follow a roadmap-driven approach, we have an evaluation framework in place for every roadmap we create. Details are available on our website, but here are some essential metrics we consider when evaluating startups. These may vary depending on the sector and include capital efficiency, profit margins, net revenue/ net returns, customer cohorts, expansion across target markets and more.
Additionally, we are driven by numbers – it’s part of the investment thesis here. We are mainly Series A, B and C investors. We write seed cheques occasionally, but that’s not the core.
Apart from these metrics, we seek a passionate team who understands the space. We call it the founder-market fit.
We also find out if the team can bring any unfair advantage, whether it can constantly upskill and eventually hire great talent. India has a large market, and no model can be perfect in one go. So, the team plays a really important role.
Inc42: Tell us about the critical areas where Bessemer adds value for its portfolio companies.
Anant Vidur Puri: We have been very focussed on our roadmap-driven investment strategy. Companies can benefit from our clear-cut vision and targeted approach when they build or grow their businesses. We are also stage-agnostic, and 40-50% of our funds are allocated for follow-on rounds, which can be helpful. For example, we led the Series A, B and C rounds in Perfios.
Conversely, we are very selective about investments and not under any pressure to deploy capital in a hurry. Over the past 10 years, Bessemer added around 35 companies to its India portfolio. We are always looking for great opportunities, whether they come in a single year or a span of four to five years.
Moreover, we have an operating advisor community of 50 to 60 people in India and abroad that helps portfolio companies implement their go-to-market strategies efficiently and effectively. All these measures should usher in long-term value for investee companies.
Inc42: What are your plans for FY25?
Anant Vidur Puri: We are very excited about the India opportunity. There will be more productisation of services within the global software space and more digital-first brands across internet [online] marketplaces. These brands could offer products or services, but both would be there.
We also think a lot of B2B service marketplaces will come up. Within the fintech software space, we are looking more at insurtech and wealthtech. But again, the focus is only on software, nothing else. So, our roadmaps remain the same, but there are newer and more interesting niches or sectors that we will be exploring in the new financial year.
[Edited by Sanghamitra Mandal]
