Arali Lens - June 22 Newsletter
Crystal ball gazing, M&A/exits in SaaS & the acceleration of B2B marketplaces in India
“So, how will the next 12-18 months pan out?” That’s pretty much been the buzz everywhere! Experts, as is their wont, have been unequivocally ambivalent.
If you ask me to summarise, I would borrow from Sir Humphrey who famously said -
“Well, if you ask me for a straight answer, then I shall say that, as far as we can see, looking at it by and large, taking one thing with another in terms of the average(s), then in the final analysis it is probably true to say, that at the end of the day, in general terms, you would probably find that, not to put too fine a point on it, there probably wasn't very much in it one way or the other as far as one can see, at this stage.”
In other words,
“We don’t know yet!”
Looking at a few proxies, however, gives us hope that things are not very bad after all.
For one, results of the top 10 global SaaS stocks with the highest multiples show that they are growing quite rapidly. The average previous 12-month revenue growth has been 70%+, and the next 12-month growth is projected to be upwards of 40%.
Neither the large behemoths like Salesforce nor smaller ones like Salesloft are seeing signs of slowing down yet, which emphasises the demand for acceleration to the cloud.
Clearly, B2B SaaS is seeing its own growth story unfold, despite and amid the overall economic gloom, demonstrating the value provided by the offerings.
It’s also been a strong month for Enterprise-tech exits!
Brightly getting acquired by Seimens is a landmark by itself. The development highlights the potential of SaaS businesses and how even traditionally laggard industries are adopting it. Brightly’s story denotes how SaaS can scale slowly, even without external capital (they only raised external capital 15 years into their journey! And it was relatively very little.). A 10X multiple, in keeping with the times.
Meanwhile, Zendesk is going private at a $10B valuation. While there might be a lot of angst about the valuation , Zendesk’s story of starting with SMBs and then successfully moving upmarket at scale is exemplary. Read details on Saastr.
Closer home, Pinelabs acquired API infrastucture provider Setu in a move to bolster its embedded finance capabilities. This is again validation that in emerging markets, digital infrastructure is lacking and that infra plays can be very interesting long-term bets.
And…our portfolio company Wingman has been acquired by Clari. As early investors, we have watched Wingman from the nascent pre-product days to quickly becoming a Gartner-cool vendor and a G2 favourite. This is yet another case of Indian SaaS going global, and global technology companies keenly looking at Indian SaaS as potential acquisitions.
The rise of Indian SaaS
BVP recently released a insightful report on the rise of Indian SaaS, reinforcing the potential of Indian enterprise-tech over the next decade. Interestingly, besides the traditional horizontal, vertical, and developer tool-focussed SaaS, it also covers B2B marketplaces, health-tech and fintech plays building digital infra & distribution solutions, and eCommerce enablers.
Meanwhile, a report on Series A funding from Venture Intelligence traced the progression of Seed to Series A funding in India over the last 6 years (2015-21). An engaging read as the whole, a few observations really caught our eye:
2021 seems quite an outlier year in terms of number of investments and value.
18% of the companies who raised seed funding during 2015-21 progressed to Series A, and 6% of them made it to Series B.
Series A firms participating in seed rounds were on the rise (Sequioa leads the list of seed investors), but with a clear intention of following on in Series A.
B2B still lags B2C in terms of Series A numbers.
Noteworthy Indian B2B action in June
Customer engagement platform MoEngage, an epitome of “build from India, for India, and then scale across the world” raised a $77 million round.
Bootstrapped firm Leadsquared raised capital to scale up and become a unicorn in the process.
B2B marketplaces Groyyo, Arzoo, and ReshmaMandi raised subsequent rounds of funding, highlighting the value that a B2B marketplace model drives in specific verticals.
Arali Perspectives
We recently wrote on the growing VC interest in India’s B2B tech startups and the main reasons behind the shift. Head over to our blog for more insights.
From Arali’s Portfolio
*June has been a big month for Arali!*
Arali notched a second portfolio exit: Wingman has been acquired by Clari! We are glad to be part of Wingman’s extraordinary growth journey and are super excited for the team! Read more.
FinBox raised $15 million in its Series A round led by A91 Partners where Aditya Birla Ventures, Flipkart Ventures, Arali Ventures also participated. Read more. The embedded finance company also announced its collaboration with Vyapar, an accounting app that allows businesses to raise and track GST invoices. Read here.
AI-powered travel operating system Pathfndr recently integrated Mystifly. This allows Pathfndr’s travel advisors to have a supplier network spread across 80+ Countries, airfare inventory of 750+ airlines including 180 LCCs, NDC and Non-NDC Airlines.
Signing off folks. Please reach out if you wish to chat anytime