many brackets software as a service ,mother-in-law, deal Expected to close in next few months as risk investors Continue to support Indian cross-border enterprises manufacturing products that appeal to global customers.

Two people familiar with the matter told ET that with dual bases in India and the US, Chargebee is in talks to raise fresh funds at a valuation of around $3-3.5 billion.

Existing investor Tiger Global as well as Sequoia Capital are expected to support Chargebee, which helps companies with billing, subscriptions and revenue management.

A similar hike is expected in the valuation of San Francisco-based healthcare SaaS firm Innovaccer, which is also in talks to raise funds at a valuation of $3-4 billion, sources told ET.

In addition, SoftBank Vision Fund is finalizing an investment in Sense, an artificial intelligence-powered talent engagement and communications platform valued at about $500 million, several people aware of the talks said.

“We are in constant discussion with our investors regarding the future of the company, but no funding has been announced at this time,” a Chargebee spokesperson said in an emailed reply to ET.

Emails sent to SoftBank India, Sequoia Capital and Tiger Global did not elicit any response. Sense cofounder and CEO Anil Dharani did not respond to mail seeking comment on the SoftBank-led funding, while Abhinav Shashank, cofounder and CEO, Innovakar, said he would not comment.

Freshworks IPO

Deals at such valuations draw investor attention to SaaS companies and their allure was further ignited by FreshWorks’ Nasdaq public offering. While the company led by Girish Mathrubhumi
Loss of over $5 billion in market value in one month On weak earnings guidance, investors say SaaS companies are commanding a valuation of 25-40 times annual recurring revenue (ARR). SaaS firms are generally valued as a function of ARR.

“The average ARR for SaaS companies is now 30-35 times,” said one industry investor on condition of anonymity. “SaaS multiples have also seen a similar increase in public markets. In 2017, the multipliers were around 6-8x, but if you look at the last two years, they jumped to 9-15x. That’s because originally The models from are very impressive.”

Freshworks, the first Indian mother-in-law unicorn, has been joined by many others. Postman, BrowserStack, Innovaker, Genoty, Druva, iCurtis, Mindtical and HiRadius all have valuations of $1 billion over the past two years.

To be sure, the decline in Freshworks’ valuation can be attributed to a focus on ‘value’ stocks neglected by US investors.

“US markets move between pricing value stocks and growth stocks. Value stocks have been underperforming for some time, while growth stocks have thrived,” said one venture capitalist. “If the market thinks growth guidance isn’t promising, stocks go through a ruthless correction, sometimes by 30-40%. But we don’t worry too much as long-term SaaS investors.”

scale and investors

The emphasis on digital play and the emergence of a new class of investors have helped boost valuations in the recent past.

As one investor cited above said, “If you grow revenue from $10 million to $50-60 million, the risk of investors coming in keeps going down. Scale has given Indian SaaS firms attractive valuations over the years.” helped to do so.”

New York-based Insight Partners, which is raising a $16 billion fund according to Silicon Valley tech news site The Information, is betting here. The fund has backed Checkout.com, Wiz, Monday.com, Shopify and Alibaba. It started picking up Indian cross-border mother-in-laws startup few years ago.

New York-based Tiger Global, since its big bet on ecommerce marketplace Flipkart in 2009, has been pursuing the SaaS platform since 2018-19. This coincided with the departure of Lee Fixel from Tiger Global, an early proponent of India’s consumer internet story. Simultaneously, SoftBank Vision Fund, Sequoia Capital and Steadview Capital became active in this area. Early-stage venture firm Accel, the first investor in FreshWorks, has been one of the first to find SaaS and cross-border opportunities.

Deven Parekh, Managing Director, Deven Parekh, said, “We have seen a shift in the market from companies serving domestic businesses to best-in-class product-led companies that have global demand. We feel that India is a global SaaS. I am well positioned to be the next leader.” Insight Partners told ET. “Their ecosystem is already a leader in areas such as developer tools, infrastructure and analytics and has strong structural advantages such as high quality talent and customer success capabilities. Our investments in BrowserStack, Chargebee, Postman and other Indian SaaS companies have seen tremendous growth. , and we are excited to continue investing in this area.”

profitable growth

Funds are pulled out due to thick margins and high revenue growth. “Great enterprise SaaS startups have real revenue, high growth, and gross margins,” said Sameer Bodas, cofounder and CEO of Icertis. “And if metrics such as the Rule of 40 and Customer Acquisition Cost (CAC) show that profitability is achievable and revenue growth is efficient, enterprise SaaS startups can become profitable by slowing their growth rate.”

As India now has a significant group of great enterprise SaaS startups, India-focused venture investors can deploy a lot of capital quickly, Bodas said.

Earlier this year, Bellevue, Washington and Pune-based iCertis said it reported a 60% increase in revenue from January to June 2021. The SoftBank Vision Fund recently purchased secondary shares from eight Rhodes, an existing investor in the software company, at a valuation of approximately $5 billion. However, Bodas did not confirm the development to ET.

One investor quoted above said, “The unit economics is very healthy because these companies have a gross margin of 80%. For most of them, the burn is really sales and marketing, which means that if they cut down on that, then They can be profitable.”

Another senior founding partner at SaaS and B2B-focused investment funds said recent founders of SaaS firms understand how to grow and grow 50-200% year-on-year. “Many of them will be growing rapidly, generating significant EBITDA and generating a lot of cash,” he said. “Many of them don’t require capital and investors have to pay to get involved.”

San Francisco- and Bengaluru-based Sense is said to be looking at an ARR of around $20 million, a move that benchmark investors like SoftBank believe is an indication of the scalability of the model.

Industry executives told ET that while India has always had building blocks such as good talent, low cost and expertise in customer service, the Indian SaaS story is becoming truly global.

“Entrepreneurs are no longer focused only on cost benefits, but on the power of the product to emerge as category leaders. For investors, the results are proven with more than 10 SaaS unicorns, including US-listed Freshworks. are,” said another investor, top SaaS startup.