New Delhi: A recent report by SaaS accelerator fund Upekkha highlights the imperative for Indian Business-to-Business (B2B) Software-as-a-Service startups to integrate generative AI into their operations to stay relevant and secure funding in 2024. The report emphasizes the changing funding landscape, signaling a shift away from easy capital access and underlining the significance of product-market fit for early-stage startups. Thiyagarajan Maruthavanan, Managing Partner at Upekkha, warns that Series A investments may see a dip, with investors scrutinizing metrics and prioritizing product-market fit.

The report identifies the crowded and commoditized nature of the SaaS industry, particularly in segments like MarketingTech and Healthtech. Maruthavanan advises entrepreneurs to innovate within the space or introduce entirely new ideas to stand out. Against the backdrop of increasing investor support for SaaS AI firms, the report notes the rising popularity of generative AI and the doubling of GenAI-based SaaS startups in India, raising $590 million in funding as of May 2023.

Upekkha’s focus on investing in startups developing innovative generative AI software applications aligns with the growing trend. Notable Gen AI SaaS startups include Composio, Workhack, and Rapidclaims. The report underscores the need for founders to allocate marketing resources wisely and build a distinct brand in preparation for 2024.

Maruthavanan expresses optimism for long-term investments, citing the positive trend from zero unicorns in 2017 to around 19 in 2023. The report identifies AI SaaS as the standout sector in 2023, followed by healthtech, marketing tech, and fintech SaaS firms. While no SaaS companies entered public markets in 2023, the possibility of SaaS companies listing in India is suggested for 2024, providing opportunities for smaller firms with a lower ARR threshold compared to Nasdaq.