Sramana Mitra: Let’s double-click down into some of these trends areas. Since you started talking about Freshdesk, we know that case study very well. Freshdesk is cloud-based customer support for small businesses.
If you look at that style of company out of India, what are some of the companies in your portfolio that have achieved that level of traction? Let’s say $5 million plus in annual revenue. What would be some of the examples? What specifically are the business problems that they are tackling?
Anand Daniel: Before we talk about other companies, if you look at Freshdesk itself, you can think of it as a platform. Then they’ve gone on to do other products or IT support. They have plans for building a whole slew of other products which you can discover on Google. One thing I want to point out is what’s unique about that model is it’s building and providing 2x or 3x value to your customer at the same price.
We have some other companies like ChargeBee which is in subscription billing. There’s a company called Zenoti which is in bookings. They started with spa. Most of these are seed-stage companies. Lately we invest in a company called Zarget which is going after the CRO space on the marketing side. If you take the broad spectrum of SaaS software, you can go vertical by vertical. You can go sector by sector. There are companies like Atlassian.
Sramana Mitra: Atlassian is an Australian company. It was bootstrapped to a very large stage. They had tens of millions of revenue before they took any venture capital financing. In the India-US model, the biggest success story that has emerged is Zoho. That is over $300 million in revenue at this point.
According to Sridhar Vembu, the company will hit a billion in revenue in 2018 to 2019 timeframe. It’s a major accomplishment. No venture capital at all. It was the first company that became successful in the India-US model. That case study has spawned a tremendous confidence in that model.
Anand Daniel: Absolutely. The key thing about SaaS companies is, as long as you’re solving a real problem, you can keep growing with very limited capital. Especially in a country like India where the costs are manageable.
Sramana Mitra: It’s a great model.
Anand Daniel: There are companies that have bootstrapped their way to north of $2 million. They don’t want to take venture capital money, which is a great place for them to be.
Sramana Mitra: We’ve covered many of them. Greytip is an India-facing B2B SaaS company. Let me ask you about how you are viewing the B2B SaaS. We’ve had several Indian investors talk about their reluctance to fund India-facing B2B SaaS. How are you looking at that opportunity?
Anand Daniel: People need to be able to discover on the web and maybe close the sales over the phone. It makes the B2B SaaS model scalable globally. In India, it’s early. People are not entirely comfortable searching and finding software on the web. The challenge is to figure out a business model that scales. Indian business is not going to pay anything more than the global businesses for the same software.
From a revenue perspective, it’s going to be the same but most likely, lesser revenue. From a cost perspective, it’s going to be slightly higher. That makes it a little bit more tricky to fund from a venture capital point of view. Having said that, I’m always an optimist. Especially with the mobile phone penetration going through the roof, everyone is now getting smartphone savvy. The small business owners are a lot more smartphone savvy.
For them, discovering apps or products that are helpful and purchasing them might be a business model that would work. It’s still very early stage. That’s something that we are watching. We have a whole slew of B2B companies, particularly on the logistics side. They use technology to solve problems that Indian businesses have. There are companies like Black Box which is into inter-city logistics.
There are companies that solve real business problems using technology. They are not necessarily selling software rather they are selling entire solutions. Those companies are getting good traction. They’re able to command reasonable revenues and profits by doing that.
Sramana Mitra: This trend of Indian businesses buying B2B SaaS sitting in India, what are you forecasting? You must have some hypothesis as to when it will flip. When will this model become viable where people search for a solution online and are comfortable with buying online by phone or web.
Anand Daniel: That’s probably going to flip in the next three to five years. With mobile phone penetration going up and people willing to download and try out new apps, that’s going to be the main inflection point here. The other trend is for these companies to collect subscription. It used to be only through app stores. Slowly, carriers might also get into payments. That solves some of the payment issues for subscription billing.