Note: SaaSForward is a fortnightly in-depth analysis of global SaaS trends.
It's raining M&As: 0:16
Why is the quantum of M&S so high? 0:43
What is causing growth hyper-acceleration in SaaS? 1:25
The cost of RBI recurring payment norms: 2:15
It has been raining SaaS M&As.
About 126 deals have happened globally over the last 90 days, of which two are large deals.
Medallia was acquired by a PE Thoma Bravo and Cornerstore OnDemand was acquired by another PE. What was most talked about in the Indian sub-continent was the acquisition of Ally.io by Microsoft. A relatively young startup, they had raised about US$ 80 million plus, had established a strong brand presence, and were featured in Gartner. While the deal price is not known, it is rumored to be about a couple of hundred million dollars. Another acquisition that was much talked about is a company called Slintel that was acquired by another SaaS Unicorn 6sense.
Last year, there were less than a 100 deals.
Why is the quantum of M&A deals so high?
One is that post-COVID discovery is no longer a problem. As SaaS companies are figuring out that you can close multi-million dollar deals, multi 100K deals over Zoom call. Corp Devs are finding SaaS companies that they'd like to partner with beyond the geography that they used to operate in.
Over the last couple of months, many SaaS deals have happened through LinkedIn and direct email. And that's how discovery has happened. Earlier, discoveries happened over coffee shops, local meet ups and conferences.
Why are SaaS companies turning into unicorns so fast?
The other one is, everywhere hyper-acceleration of growth. If you see, many SaaS companies are becoming SaaS Unicorns really fast. In fact, a hyper-growth company used to have a very simple formula, which was called T2D3 triple triple - double, double, double, the five years of their growth.
But now fast-growing companies are not going from 1 million to 3 million, but they are going from 1 million to 5 million in 12 months. This means if these companies are looking for further growth, they have to look at the inorganic option. And wherever they find fit in terms of product, adjacency and team, they are talking to younger startups that are either growing fast or growing only 2X, and asking if they can join hands.
The true cost of RBI recurring payment norms
The third news is something very relevant to founders in India. Starting October 1 2021, the Reserve Bank of India (RBI) notification around recurring payments has been activated.
It is well known that founders from India don't focus on the India market, but the very few who still do are facing a lot of problems. Some startups that have painstakingly built their subscriber base in India have seen a fall of 70%.
But the bigger problem for many startups - not just startups but even businesses and consumers - has been on the payment side. Today the reality is that everybody uses at least 20, maybe 50 SaaS tools in their day-to-day life, whether it is for Bitbucket, whether it is paying for Asana or Slack, or any other software that they're using in their day-to-day operations. One startup founder lamented that he may even have to hire one full-time person to make all the monthly payments which now have to be done manually.
I hope some sense prevails and the regulator makes the recurring payment-related regulation a lot more easier for businesses and consumers alike, and more subscription services can continue to go back to the regular growth in the Indian subcontinent.
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