At the outset of 2024, things appeared bleak for India’s SaaS sector. SaaS startups experienced a massive funding decline in 2023, dropping to 2019 levels at $1.6 Bn. This sharp decline came after the funding boom of 2021 and 2022, when Indian SaaS startups raised a whopping $5.3 Bn each during the two years.

While things are still a far cry from the funding boom era, it appears that the sector is now on the recovery path, much like the broader Indian startup ecosystem. In 2024, SaaS startups in India raised a cumulative $2.1 Bn in funding, marking a year-on-year (YoY) growth of 31.25%, according to Inc42’s ‘Indian Tech Startup Funding Report 2024’. Alongside the funding increase, the deal count also rose 5% YoY to 207 deals.

So, what fuelled the uptick in funding numbers? The rise of artificial intelligence (AI) disrupted the sector as VCs rushed to invest in AI-driven startups and companies. In addition, Indian SaaS players have always been a mainstay of investors on account of their offerings catering to global audiences as well as a high-quality and affordable talent pool in the country.

However, the recovery remains modest. The caution in SaaS funding stems from the lessons learnt by investors from the market correction after the boom of 2021. At the height of the capital-fuelled era of 2021, SaaS startups were often valued at inflated multiples, leading to bloated valuations.

According to Sanjay Swamy, managing partner at Prime Venture Partners, SaaS is at an inflection point........

© Inc42