No new SaaS unicorns so far in 2023 as funding winter lingers: Bessemer Report

• ByStartupStory     |    August 8, 2023

In 2023, amidst challenging funding conditions and a constrained macroeconomic environment, no Software-as-a-Service (SaaS) startup has achieved unicorn status, in contrast to the approximately nine unicorns recorded at the same time last year. 

The report titled ‘Rise of SaaS in India 2023,’ released on August 8 by Bessemer Venture Partners, highlighted startups such as Amagi, Yubi, LeadSquared, ShipRocket, DarwinBox, Uniphore, CommerceIQ, and Hasura, which became unicorns in 2022. 

Anant Vidur Puri, Partner at Bessemer, noted that while no new unicorns emerged this year, there were three new Centaurs (businesses with $100 million in annual recurring revenue).

“While there are no new unicorns this year, there are three new Centaurs (a business that reaches $100 million of annual recurring revenue (ARR))… So the fundamental ecosystem is growing very strongly, and it should be noted,” Said Anant Vidur Puri, Partner at Bessemer, at a media roundtable.

The concept of unicorns is evolving and changing, Puri said.

“The term unicorn tries to link the fundamental business metrics to externalities that founders really have no control over… Nobody knows what will happen to interest rates tomorrow, and the math equation will completely change,” he said.

 The term unicorn is evolving and linking fundamental business metrics with external factors beyond founders’ control, Puri explained. The Indian SaaS industry faces funding deceleration, with investments dropping 81 percent to $635 million in H1 2023 from $3,406 million a year ago. 

The report predicts India’s SaaS market size to reach $50 billion in Annual Recurring Revenue (ARR) by 2030 from the current $13-$25 billion. The report also indicated growth in companies with over $100 million in ARR and $50-$100 million in ARR in 2023 compared to the previous year. Existing SaaS majors and unicorns are projected to add $22 billion in revenue this year, with both India-first and global-first companies contributing.

“The SaaS ecosystem is getting mature and growing… When interest rates rise, investors flock towards higher efficiency businesses, and efficiency is a proxy for sustainable growth,” Puri said.

The report also stated that the existing SaaS majors and unicorns will add $22 billion in revenue this year. “While India-first SaaS companies like Billdesk, Razorpay, DarwinBox, and Zeta will add around $5 billion in revenues, Global-first companies like Freshworks and Zoho will add about $17 billion in revenues,” it said.

Investors are choosing companies with high efficiency, and 2023 is the year of the most-efficient entrepreneurs, the report said. “We still think that Indian companies are more efficient than their global counterparts,” Puri said. The report highlighted the preference for highly efficient companies among investors and the growth potential brought by the Unified Payments Interface (UPI) for SaaS and infrastructure opportunities.  On the UPI front, the report said the growth of the Unified Payments Interface will create SaaS and infrastructure opportunities across the spectrum. “As UPI is growing to fuel Indian payments in a $1 trillion market… SaaS built on UPI infrastructure or credit from UPI firms like AdvaRisk, Card91, and M2P are poised to grow,” Puri said

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