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iSPIRT – Indian Software Product Industry Round Table is a non-profit think tank formed by leading practitioners of the industry
to assist in the cause of building a healthy, globally-competitive and sustainable industry. Visit www.ispirt.in for more details.
India as Product Nation: 30 Year journey from zero to hero
Wings of Opportunity in Tech Startups
Topics
❏ ‘India as a SaaS’ Hub Theme❏ ‘Unlocking the Missing Middle’ Theme❏ 30 year journey from zero to hero
Software Renal Model - Software As a Service (SaaS)
Software can come from anywhere in the World
Software Sales is Moving from Field Sales to Online Sales
All of software is moving to Cloud
Global Software Product IndustryDisruption Ahead
4
Desk Marketing and Selling is to Indian SaaS as Global Delivery Model was it India IT Services
Early Demonstrated Success from India already happening (Zoho, Druva, Freshdesk, etc.)
Many Category winners are being created for SaaS targeting mid-and-small businesses (find them at PNgrowth and SaaSx bootcamps)
India can do in SaaS what China did in manufacturing
India Advantages
5
Thanks to MNCs, great Product/Engineering talent that creates 2X value at ½ the cost
Significant margin advantage
costs as % of total revenue for a typical SaaS company
Source: Google-Accel SaaS Report
Better EBITDA Margins by
3-4x
Expanded addressable market in SMB and Enterprise
$40per agent /month(1)
$100per agent /month(2)
$300-700per month(6)
>$1000per month(7)
Note: (1) Estate Plan billed annually (2) Enterprise Plan billed annually (3) Professional & Enterprise plan billed annually (4) Lightening Professional & Enterprise plan billed annually (5) Price comparison for a 100 room property billed annually (6) Pro & Advance plan billed annually (7) Base PlanSource: Company websites; Industry reports
$20-35per user /month(3)
for CRM
$75-150per user/month(4)
for CRM
$100-120per month(5)
for Channel Manager
$150per month(5)
for Channel Manager
$740 mn+ VC/PE Capital Invested In Last 2 Years (CY15 & YTD CY16) - 105% Growth Over Prior 2 years
Note: (1) YTD as of Nov’16
Source: Venture Intelligence
in USD mn
$360mn+ across 72 deals
$740mn+ across 74 deals
2x$90
$60
$55
$51
$50
$45
$30
$23
$15
$15
Top 10 India SaaS Deals in Past 2 Years (USD mn)
Global Majors taking notice
Chinese Investor Consortium
AcquiredAcquired Acquired Acquired Acquired Acquired
AcquiredAcquired Acquired Acquired Acquired Acquired
$900 mn$130 mn
$200 mn$136 mn
Elite (11M HHs, 4%)>$37k annual gross HH incomeWealthiest class in India
Affluent (26M HHs, 9%)$18.5k-$37k annual gross HH incomeTop 6-10% of highest income HHs
Aspires (66M HHs, 23%)$7.4k-18.5k annual gross HH incomeMiddle Class- Looking to trade up & aspire to upgrade (Disposable Income - 60%)
Next Billion (103M HHs, 500m, 36%)$3.3k-$7.4k annual gross HH incomeNew Consumers- HHs have some disposable income (33%), total spend $1 T
Strugglers (80M HHs, 28%)<$3.3k annual gross HH incomeHHs with the majority of spend on basic needs such as food, shelter, power & water
India 2020
India 1Elite, Affluent and Aspirers (Current Opportunity)
India 2 Next Billion (New Opportunity)
India 3 Strugglers
The Missing Middle
Large informal economy > 45% of GDP
Informal employment80% of workforce
Low per capita spending 97% of population
lives on < US$10 per day
Lack of data Only 3% of population pays taxes
Unlocking India 2 (Bharat) Potential in 3 Steps
India StackTechnology backbone for presence-less, paperless
and cashless economy
Financial InclusionPayments, Lending, Savings
2nd DerivativesHealthcareEntertainmentConsumer CleantechSupply Chain Tech…
Digital Identity1 Billion have Aadhaar
Mobile200 M smartphones350 M have internet25 M smartphones sold per quarter
India is changing
GST70 Mn entities with digital invoices. Pulling in smaller enterprises into the formal economy
PRESENCE-LESS LAYER Aadhaar AuthenticationUnique digital biometric identity with open
access of nearly a Billion users
CONSENT LAYER National Policy on Data SharingProvides a modern privacy data sharing
framework
PAPERLESS LAYERAadhaar e-KYC,
E-sign, Digital LockerRapidly growing base of paperless systems
with billions of artifacts
CASHLESS LAYER IMPS, AEPS, APB, and UPIGame changing electronic payment systems
and transition to cashless economy
COMMERCE(GSTn)
SUBSIDIES(DBT)
BILLS(BBPS)
OTHERS
I N D
I A
S
T A
C K
TOLLS(ETC)
JAM Jan Dhan, Aadhaar, Mobile
India Stack
Source: UIDAI, NPCI, TRAI Website, Conversations with NPCI, eMudhra, Deity officials. Updated 18th Nov 2016.
3 BnAuthentications of 500M unique ids
1.075 BnEnrolments In 6 years since launch
340 MneKYC in 3 years75 Mn unique ids
349 MnAPB Accounts Linked1.2 B Transactions worth 4.5 B USD in 3 years
>2.5 Mne-Sign in 15 months>0.8 Mn unique ids
2.9 MnDigilocker users & 15 months
4.8 MnUploaded Docs
2M+UPI VPA in Just under 2 Months
252 MnJan Dhan bank accounts
200 MnSmartphones
1060 MnPhone numbers
Jan Dhan Aadhaar Mobile
Time
Winning ‘Next Billion’ Consumers needs new mindset
Pene
tratio
nS-Curve 1 focused on India 1
S-Curve 2 focused on India 2 (Bharat)
Almost fully penetrated
Created winners like FK, Amazon India, HDFC Bank
Copy-paste business modelsSizeable discretionary spending power and appetite:
- Consumption Spend is $1T in 2020- Unrecognized profit pools
- China scale: 36% of population = ~500M people
Unknown and unverified business modelsChina or US Copy-paste business models won’t work
India 2 | Financial Inclusion
India StackTechnology backbone for presence-less, paperless
and cashless economy
Financial InclusionPayments, Lending, Savings
2nd DerivativesHealthcareEntertainmentConsumer CleantechSupply Chain Tech…
2.0x86% 690M
Payments
Currency in circulation withdrawn
Card base now activated. 2.5x card
transactions in 1 month
Digital transactions are up 2x. Share of
payments 3x
Total value of digital payments by 2020 is estimated to be USD 1 Trillion
Consumer Lending
Debt penetration remains low, with
<30% households having any form of debt
Overall household debt to GDP is < 20%, with banking sector consumer loans to
GDP at ~10%
High Degree of Financial Exclusion
http://pn.ispirt.in/ispirt-the-india-stack-pilot-commercialization-of-techno-creative-innovations/
● 79% of enterprises in India have < 10 employees
● Lending to smaller enterprises is at a significantly higher rate
● With increasing digitization, share of bank lending should increase and cost of lending should come down
● Consumer and SME loans to grow 5x over the next 10 yrs.
SME Lending
High Degree of Financial Exclusion93% of MSMEs are reliant on self
finance or no finance
Institutional Sources 5%
Non-Institutional Sources 2%
Self-Financed 93%
India 2 | 2nd Derivatives
India StackTechnology backbone for presence-less, paperless
and cashless economy
Financial InclusionPayments, Lending, Savings
2nd DerivativesHealthcareEntertainmentSupply Chain TechConsumer Cleantech…
Opportunity is large...Healthcare
India needs 4x doctors and 2x nurses to serve the population
EntertainmentLocal language internet users set to
cross 500 Mn by 2020
Supply Chain Stack
Use Cases
Public Platforms
Fleet / Remote Asset Monitoring
Aggregators
Engine Tech
Food/Dairy, Pharma/Medicines, Manufacturing
40m to the next Billion
Homegrown solutions are finding success tapping this opportunity and attracting capital
Technology unlock has raised India’s consuming class to ~ 350mn people vs < 60mn earlier
Inflection point in growth for solutions that leverage this tech infrastructure
Three types of ecosystem playersFor a long term sustainable ecosystem
30 yr Architects
10 yr Planners
5 yr Doers
• Think Tanks• Universities• Research Labs
• VCs• Policy Makers
• Missionary entrepreneurs • Bootstrapped entrepreneurs• Mercenary entrepreneurs
Interplay and
mutual respect
across these three of
players is important!
Public goods
Market Scalers- Playbooks- Thesis based Funds- M&A Catalysts
Arrival of Challengers- Evangelization (aka ‘WhatsApp
Moment in Banking’)- iStack Hackathons
Unlock transformational change- Drive Regulatory change- Catalyse through Grand Challenges
India Stack
Incumbents Wakeup- Embrace Non-Linear Change (aka FTLC)- Partner with startups (aka InTech50)- Adoption Sprints and Pilots (aka Alt.
Lending Pilot in Apr’16)
Public Goods at work: New Sector JourneyFinancial Inclusion