Around 80% of customers of the top 30 product start-ups are based abroad, but there has been a growing local customer base for these software product companies, coming from very high-growth companies like retail chains, healthcare chains, and e-commerce companies that need logistics and workforce management software. Photo: Mint
Around 80% of customers of the top 30 product start-ups are based abroad, but there has been a growing local customer base for these software product companies, coming from very high-growth companies like retail chains, healthcare chains, and e-commerce companies that need logistics and workforce management software. Photo: Mint

Value of India’s top 30 software product start-ups crosses $10 bn

Some large recent funding deals in enterprise start-ups include $45 mn raised by Capillary Technologies; $60 mn raised by Manthan Software; and $15 mn raised by Vserv

Bengaluru: The top 30 software product start-ups in India are now valued at $10.25 billion, a 20% increase from October 2014, says the updated version of the India Software Products Industry Index–B2B, compiled by software products think tank iSPIRT.

In the updated version of the report, which doesn’t disclose the amount each company is valued at, there are six new entrants—Accelya Kale, BrowserStack, CRMnext, Indix, InMobi and Knowlarity. The list also features public companies such as Accelya Kale and Ramco.

The report aims to highlight that there is a software products industry that is growing in parallel, if not at the same pace, with the consumer Internet side. Venture capital (VC) funding for enterprise start-ups has also picked up; so has merger and acquisition (M&A) activity.

iSPIRT looked at more than 300 software product start-ups while compiling the index and spoke to more than 100 start-ups, investors and others for verifying valuations, which were estimated as of 30 June.

Some large recent funding deals in enterprise start-ups include $45 million raised by customer relationship management software products company Capillary Technologies; $60 million raised by analytics services company Manthan Software Services Pvt. Ltd; and $15 million raised by ad tech firm Vserv. Capillary said on Wednesday it bought multi-channel comme-rce solutions provider MartJack.

The report released by iSPIRT said that the top 30 start-ups employ about 21,200 people.

As many as 43% of the companies are bootstrapped, even though these were started earlier in the 1990s. The report, however, features 16 companies that were started after 2005—10 between 2005 and 2009—pointing to an increase in the creation of B2B companies. Enterprise software companies are much more cash-efficient than their consumer Internet peers, so they require fewer VC funds.

Within the next year, some of the start-ups in the index are likely to opt for an IPO, a move that will give a significant boost to the development of the software products ecosystem, according to Dev Khare, managing director of Lightspeed India Partners Advisors, and a fellow at iSPIRT, who helped in putting together the index.

“IPOs and M&A will happen perhaps in India or in the US stock markets. We are going to see a lot of smaller acquisitions, and the larger acquisitions will depend on companies successfully transitioning to global consumer bases," Khare said.

Around 80% of customers of the top 30 product start-ups are based abroad, but there has been a growing local customer base for these software product companies, coming from very high-growth companies like retail chains, healthcare chains, and e-commerce companies that need logistics and workforce management software.

Because of a shift in the buying pattern of B2B products—sales teams no longer need to go door to door, customers are signing up for products they find online—companies like Freshdesk, BrowserStack and Zoho are able to sell to customers from around the world even though they are based in India.

Khare also pointed out that India is seeing two new types of entrepreneurs who venture into enterprise start-ups: employees from high-growth start-ups who identify gaps in those companies and employees from MNCs with product mindsets.

“We are seeing a lot of people coming into the entrepreneurial ecosystem, perhaps energized by what they are seeing on the consumer side. There’s a little bit more VC available for them. They can sell globally sitting in India if they want to; they don’t need to raise a lot of capital to start selling globally," Khare said.

Manthan Software CEO Atul Jalan said he had seen a change in the mindset of people about software product companies over the past five years, and more people were expressing an interest in joining such firms.

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