The Software as a Service (SaaS) companies which are located in countries like US and Singapore are getting almost 90 per cent of their revenue generated from overseas, as compared to around 50 per cent overseas revenue for those companies which are based in India.
US contributes to a majority of the Annual Recurring Revenue (ARR), a metric used in SaaS, based on the defined contract length, while 32 per cent is from India.
According to the India SaaS survey conducted by investment bank DCS Advisory and iSpirt, the organisation of the software products companies in the country, for the year 2017, those who have set up headquarters outside India has seen almost 90 per cent of their revenue coming from overseas, while for the companies headquartered in India, the revenue mix between Indian and overseas business is 50:50.
"Given this result, its no wonder that VCs routinely push their portfolio companies to relocate to the US or Singapore, depending on whether they are looking West or East for growth," says the Survey.
The survey was conducted with 59 respondents with an aggregate ARR of $175 mn, including some of the most prominent SaaS companies operating in India. Of this, 44 are based in India while 15 have their headquarters overseas.
For the companies with an ARR of less than $1 million, almost 52 per cent of their business comes from North America and the rest from India, for those with an ARR of $1 million or beyond has 50 per cent of the revenue coming from North America, 32 per cent from India, 14 per cent from the rest of Asia and four per cent from Europe.
Regardless of ARR, more than 90 per cent of the companies it analysed see maximum revenue contribution from North America and India and with scale, overseas business start becoming more critical, it said.
"The survey shows that the SaaS companies are seeing an ARR of 7x to 12x of late," said Umesh Sachdev, co-founder and CEO of Speech recognition technology company Uniphore Software Systems.
While Chennai is said to be the hometown for many SaaS-based companies, many of them are headquartered in the US. Of the sample size of 59 companies, Bengaluru and Chennai together accounted for 58 per cent, with Bengaluru hosting around 12 companies with more than $1 mn ARR, which is more than for any other city.
The companies with less than $1 million ARR has more revenue coming from the Indian Small and Medium Enterprises. Over a third of the 59 companies has never raised external capital, while those that have, have raised $1-5 million as a median, at 7.5x-10x of ARR (median), it added.