Tiger Global is silver lining for Indian startups in gloomy SaaS sector

Photo by Venveo on Unsplash

Tiger Global Management is pumping money into software as-a-service (SaaS) startups in India at a time the sector is grinding through a funding slowdown.

The American hedge fund, one of the most prolific startup investors in India, has made a contrarian bet by scooping up stakes in several SaaS startups that provide software services to enterprises and SMEs on a subscription basis.

According to Venture Intelligence data, investors deployed $61 million in 17 SaaS startups in the March quarter, a six-quarter low in both value and volume. The deal value is a sharp 75% lower than the record $251 million clocked in the September quarter.

However, Tiger doubled down on business-to-business (B2B) and software firms in this period, making four SaaS deals totalling about $90 million in the past six months. These include expense management software Fyle, facilities management software startup Facilio, connected workforce platform Innovapptive, mobile marketing startup CleverTap and salon and spa software provider Zenoti.

Mint reported on 29 April that Tiger is looking to make as many as five software investments in the coming weeks from its $3.75 billion fund— Tiger Global Private Investment Partners XI—which intends to focus on consumer internet, cloud computing, industry software and direct-to-consumer companies in India, China and the US.

According to investors, the slowdown in the space is a global phenomenon.

“Early-stage SaaS and B2B deals have flattened somewhat in terms of capital allocation, while late-stage deal allocations have gone up. This is a global phenomenon that we are seeing in India as well. As the winning playbook in an emerging category gets written, everyone—founders and investors—get smarter and capital allocation becomes more efficient especially in winner-take-all categories,” said Hemant Mohapatra, partner at Lightspeed India.

Niren Shah, managing director, Norwest Venture Partners India, added that Indian SaaS startups have gone through an evolution in their business models in recent years and are now emerging as attractive companies for investors. Norwest’s portfolio company Zenoti raised $50 million from Tiger earlier this month.

“Indian SaaS companies initially commenced serving the Indian market but realised that the Indian market was growing slowly. Many such companies pivoted to serve global customers and took a few years to perfect that product-market fit. We are now seeing these companies in the Norwest portfolio coming of age in terms of scale, resulting in larger rounds of late stage funding,” Shah said.

The focus on SaaS startups in India mirrors Tiger Global’s global approach, with investments in companies such as China’s Udesk, an enterprise platform for intelligent customer service, and US-based Green Bits, a company that makes point-of-sale software for cannabis retailers.

Industry experts point out that there are similarities between Tiger’s old and new strategy. When it first backed Flipkart and Ola, now consumer internet giants in India, it also backed nearly 50 other companies, many which did not scale as well. But its outsized returns from Flipkart, where it made $3 billion after investing over a billion, dwarfed its failures.

“Tiger is not betting on SaaS companies. It is betting on the market. If even one of these companies manages to take off and give a good exit, it will more than make up for the others,” said an investor in one of Tiger’s recent portfolio companies, on the condition of anonymity.

This article was first published on livemint.com.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.