5 minute read 27 Feb 2023
Indian SaaS report

How are Indian B2B SaaS companies balancing high growth with capital efficiency

By EY India

Multidisciplinary professional services organization

5 minute read 27 Feb 2023

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Indian B2B SaaS companies’ ecosystem is highly capital efficient and way ahead of the global SaaS benchmarks.

In brief

  • 8 out of 10 companies have a burn multiple of less than 1.5x which is way ahead of global SaaS benchmarks.
  • Indian B2B SaaS projects positive growth for 2023 despite troubling macro-economic trends.
  • One out of three Indian B2B SaaS companies are trailblazers and are targeting more than 50% ARR growth with very low burn.
  • Majority of companies are prioritizing product innovation, pricing change, and partner-led expansion as leading capital efficient growth strategies.

Capital efficiency has always been a key metric to evaluate growth stage start-ups, but abundant capital in the recent past and being growth focused led many start-ups to acquire customers at all costs. However, this is changing in the current macro environment as major economies are expected to go into recession in 2023 (as per IMF) and geo-political tensions are escalating. In such an environment, Indian B2B SaaS companies have shown high levels of capital efficiency, which bodes well for sustainable growth

Based on financial and operational prudence, most Indian B2B SaaS companies maintain a burn multiple under 1.5x, which is well below the global average of 2x to 3x. 8 out of 10 Indian B2B SaaS companies claimed an improvement or no change in key performance metrics like net dollar retention rate (NDRR), customer acquisition cost (CAC), customer lifetime value (CLTV) in 2022. This contributes to their overall bullish outlook, finds the EY-Upekkha report, Bellwethers of Indian SaaS: High capital efficiency underscores Indian B2B SaaS growth’, which draws insights from more than 140 survey respondents and over 30 in-depth interviews.


Maintaining capital efficiency – at the core of the growth strategy of Indian B2B SaaS 

Indian B2B SaaS companies have an inherent advantage, driven by lower labor cost and talent that is trained on remote customer engagement, inside sales and customer support, vis-à-vis global counterparts that aid in higher capital efficiency leverage. They have clearly displayed ingenuity in balancing aggressive growth with capital prudence. This, put together with a rapidly growing and maturing Indian B2B SaaS ecosystem, makes the segment extremely lucrative because of their potential to generate long-term value. Potential areas that can further propel growth and capitalize on the opportunity, include focusing on global markets, building depth within sectors and product innovation while maintaining financial discipline. In the near term, organizations need to address challenges related to optimizing sales closure cycle by streamlining sales operations, understanding client-end integration and mitigate skill-gap requirements.

top strategic properties by respondents of different ARR size

Four growth trends among Indian B2B SaaS companies

The majority of the Indian B2B SaaS companies fall under four types of personas, but a unique feature is that while one out of three is a trailblazer with either an ultra or a hyper-growth company, it still displays a low burn multiple. 


Trailblazers adopt product innovation strategies to win niche market opportunities and drive capital efficient growth. Dashers invest in sales leadership and build partner-led expansion strategies to scale enterprise accounts and optimize their sales and marketing operations. 

 Balancing growth and addressing key challenges 

Indian B2B SaaS is targeting a positive growth for 2023 despite some weakening macro-economic trends. In the survey, only 20% companies indicated ARR growth targets of less than 50%. As many as 80% companies are aiming higher; equally split between hyper growth (50% to 100% ARR growth) and ultra-growth (more than double growth). In other words, eight out of 10 companies are targeting 50%+ ARR growth.

CXOs are prioritizing a combination of business strategies that accelerate growth while being capital efficient. There is a high emphasis on product-centric adoption through approaches such as innovation in existing products, upselling and cross-selling as well as promoting partnerships and new products. In addition to that, pricing structures are customized to meet the parameters that small and medium enterprises demand.

Another key strategy that CXOs choose is quick product iterations and building differentiation through automation and AI/ML capabilities which improves customer experience while building a strong initial value proposition.

HCM, CRM/CDP, AI platforms and FinTech are the top sub-segments targeting ultra-growth. Planning for the next level, Indian B2B SaaS companies are at present targeting niche opportunities in small and mid-sized enterprises through product innovation, differentiated pricing and product modularity to optimize burn rates. 60% of the companies surveyed have reported these as their top strategic priorities. The trends in the survey also indicate that companies are shifting from product-centric growth to sales-centric growth as companies scale in size. However, there are challenges inhibiting capital efficient growth. One of the top challenges is delay in customer closure cycle and sales inefficiency. Here, sales transformation is a key challenge highlighted by the majority of respondents in the light of current macro environment.

"We have built a unique proposition in the BFSI industry in India and SEA, by leveraging advanced analytics...Currently we are seeking channel partners to accelerate growth in US, Australia and New Zealand to launch in travel sector (airline and hotels)"
- CXO of a Fintech company with >10Mn ARR

Hiring and retention continue to be an issue, but CXOs are adopting reskilling and training strategies to mitigate the talent shortage risk. The other challenge is increasing importance of alternative funding instruments such as convertible notes against a backdrop of lower access to equity funding due to rising inflation rates.


"Sales closure cycle has been a problem however we have focused on maintaining a low CAC by implementing strategic product partnerships, increasing product associations by building iend-to-end customer centric solutions "

-CXO, Leading CRM company

In the near term, organizations need to address challenges related to optimizing sales closure cycle by streamlining sales operations, understanding client-end integration and mitigate skill-gap requirements. India is poised to become the next SaaS capital and B2B segment has the potential to be the flag bearer, driving long growth and value.

What opportunities lie in the future

Given significant dry powder build-up due to a market pullback by leading SaaS-focused Indian VCs/PEs that are picky about their investments, the focus is on companies that have strong unit economics. For Indian B2B SaaS companies with a demonstrated path to profitability, this presents an opportunity to raise capital on favorable terms, and double down on growth.

Moreover, the high-growth, high capital efficiency signature of Indian B2B SaaS opens up significant M&A opportunities for it. While our report finds that M&A is the least favoured growth strategy of Indian B2B SaaS, the emerging class of capital efficient large Indian B2B SaaS companies can explore M&As to consolidate their market position and enhance their product capabilities. Indian B2B SaaS companies are also expected to emerge as attractive M&A targets for global software companies looking to augment their product capabilities in niche areas.

While Indian B2B SaaS companies navigate through the current global market outlook, it continues to be compared with the Indian IT services sector, on how soon it can overtake services and take a bigger slice of the GDP pie.

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The growth rate and ambitions of Indian B2B SaaS sector indicate that it has a potential to cross this milestone, and outgrow that comparison, much sooner than expected. The next phase of the Indian B2B SaaS will be pronounced global, building products from India for the globe.

About this article

By EY India

Multidisciplinary professional services organization