ETtechSaaS funding still trails 2022 levels as the US—the largest SaaS market—saw significant pullbacks in software spending, driven by constrained budgets and increased focus on operational efficiency, said Karan Sharma, managing director of Avendus Capital. Also, enterprises prioritised sustainable scaling over aggressive growth and valuations have corrected sharply, he said.According to data from Venture Intelligence, funding for Indian SaaS startups slightly improved to $1.8 billion in 2024 up from $1.3 billion last year. However, this pales in comparison to $4.4 billion raised in 2022.
ETtechThe number of deals in 2024 stood at 184, similar to the previous year, but significantly lower than the 274 deals in 2022.
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“AI-first startups have placed increased pressure on existing SaaS providers to provide smarter, more adaptive, and highly personalised solutions,” said Praval Singh, vice president of marketing and customer experience at SaaS major Zoho. “It’s a challenge that calls for consistent R&D and talent upskilling by vendors to determine how AI can revolutionise their line of business and enable innovative pivots to serve customers effectively.”Singh noted that while adopting AI presents immense opportunities, building own AI models requires large datasets, advanced machine learning (ML) models, and skilled talent pools—resources that smaller SaaS firms may struggle to access.
He suggested a phased approach to AI adoption, leveraging open-source platforms and pay-as-you-go cloud-based AI services in the short term, while aiming for in-house development in the long run.
Siva Rajamani, founder of SaaS startup Everstage, said Indian SaaS startups are increasingly focusing on the application layer of AI, leveraging OpenAI and other AI-driven solutions to enhance their end-user offerings.
“Because of the AI transition, there is an opportunity to disrupt some of the existing leaders in the (SaaS) market and that’s the opportunity that I think a lot of Indian startups should also go after,” he said.
Everstage raised $30 million in October 2024 in a funding round led by Eight Roads Ventures, with participation from Elevation Capital and 3one4 Capital.
Rahul Agarwalla, cofounder of SenseAI Ventures, attributed the overall funding decline in SaaS to a reduction in late-stage and growth-stage deals due to market uncertainties. However, he noted that early-stage funding remains intact.
SenseAI Ventures launched its maiden fund, SenseAI Fund I, with a corpus of Rs 200 crore last year, focusing on AI-first startups.
Freshworks, often hailed as the poster boy of Indian SaaS success, underwent significant restructuring this year. The Chennai- and San Mateo, California-based enterprise software company saw its founder Girish Mathrubootham step down as CEO in May 2024.
This was followed by a major layoff in November, affecting around 660 employees globally—13% of its workforce—as part of efforts to streamline operations.
In the latest development, ET reported that Mathrubootham sold Freshworks shares worth nearly $40 million, according to filings with the US Securities and Exchange Commission.
Indian public markets
Historically, SaaS companies domiciled outside India primarily targeted the US market for public listings. However, successful US initial public offerings (IPOs) now require substantial scale and strong analyst coverage, making the route more challenging for mid-sized firms, Sharma of Avendus Capital said.
Meanwhile, Indian public markets have surged, creating opportunities for tech businesses with robust valuations and strong investor demand, even for smaller-scale IPOs. This has created a compelling case for Indian listings and, in some cases, re-domiciling back to India, he noted.
Way ahead
Despite current challenges, the long-term outlook for Indian SaaS remains promising. Industry executives point to tailwinds such as cloud migration, workflow automation, AI adoption and digitisation across industries as key drivers of growth.
“The key lies in leveraging AI not as a standalone feature but as a core value driver to improve outcomes,” said Vipin Raghavan, cofounder and CEO of Haber, an industrial AI startup.
By leveraging innovation and opportunities in domestic and global markets, Indian SaaS companies are well-positioned to navigate challenges and chart a path for sustained growth, executives said.
