Expert:
Upekkha Partner, Prasanna Krishnamoorthy, shares why he thinks the US is the ultimate goldmine for B2B SaaS. With a more mature market that prioritizes efficiency, the US values time and productivity. Early adopters in every segment make it easier for a startup to get a foothold. Higher purchasing power, faster decision-making processes, and a culture that welcomes innovation make the US an ideal space for SaaS companies to thrive.
Having worked with 100s of B2B SaaS startups, I’ve seen that the US continues to dominate the world SaaS ecosystem! In fact, more than 50% of the revenue generated by the top 20 Indian SaaS companies is from the US market. The incredible stories of Zoho and Freshworks aren’t hidden from the world. By serving the US market, they have scaled higher.
Almabase Co-founder and CEO Kalyan Varma shares, “One of the pivotal moments for us was when we learned that we should actually shift focus from selling to Indian colleges to selling to global universities and colleges, especially the US.”
Several other Upekkha startups, like iMocha, were also able to expand their business by venturing into the global market.
Let’s examine the reasons why the US is the primary growth driver for SaaS.
Money rich-time poor Vs. time rich-money poor
Optimization and efficient use of time are some of the top benefits listed by every SaaS company. People in the United States are money-rich but time-poor. US organizations are more likely to pay for SaaS products if it saves person-hours. In a place where people lead busy lives and value their time, products that can help them save time are sought after. This is also one of the reasons why it’s easier to earn a dollar than to earn a rupee.
In contrast, the "sell saving time" marketing doesn’t appeal to businesses in countries like India. Instead, they want frugal solutions. Since talent is available abundantly at a low cost, Indian companies would rather hire inexpensive labor than bear the cost of automation.
Eager early adopters and DIY attitude
Early adopters are plenty in the US. People are quick to adopt innovation and technology earlier than in other regions. For instance, many small-medium-sized businesses in India continue using paper documentation. In contrast, the US was one of the first economies to favor paperless digital documentation. Such acceptance makes the US a great market for B2B SaaS. Employees of a US organization, irrespective of the tier in the hierarchy, are comfortable with new technology solutions.
US customers have a DIY (Do-It-Yourself) attitude, which favors SaaS. Indian customers need more hand-holding and want DIFM (Do-It-For-Me) even in SaaS!
Since the US market is more competitive, there is a race to get earlier access to disruptive technology. If you don’t adopt the latest tech, your competitor might steal your market share.
A B2B SaaS business can also benefit from partnerships with other startups in related industries. These partners can help you find more early adopters.
More capital, more disposable income
Globally the US has continued to be the largest economy! The dominance of the US dollar automatically translates into higher purchasing power of customers. Customers can afford the product/service and are willing to pay more. The greater the affordability, the greater the scope to price the product higher and generate more revenue.
An affluent customer base means it's easier to get a larger ticket size and drive greater growth. How much customers can pay determines how many you need to reach your revenue milestones. For instance, to reach an MRR of $10,000, a company would require 1000 customers to pay $10, or 100 customers to pay $100, and so on. In the US, due to the higher purchasing power, you can easily get 100 customers willing to pay you $100. Due to the large ticket size, you can achieve your revenue milestones.
An additional benefit is a well-developed capital market, providing entrepreneurs access to a vast pool of funding sources. This, coupled with the high concentration of venture capitalists in the US, makes it easier for startups to secure funding when scaling.
Conducive cultural ethos
Right from education to work, the USA has a culture of exploration and creativity. Technology has been integrated into every aspect of American life. From the development of the Internet to the rise of AI, the US has a strong tradition of embracing and rewarding new ideas. This, in turn, leads to high demand for technology solutions across industries.
Qualities like entrepreneurship and risk-taking are ingrained into the fabric of the country. This has been a driving force behind the success of some of the world's most prominent companies. Be it Amazon, Google, or Tesla, people have always accepted disruptive and out-of-the-box ideas. The US is a land of opportunity, and if you have a disruptive idea that can solve a problem, you will find a foothold in the market.
The US culture of entrepreneurship has made it the hub and home to most of the world’s best startups.
Additionally, the American government’s policies, incorporation, IP protection, and taxation laws favor startups.
Conclusion:
The US will continue to be the hottest market for B2B SaaS due to:
- High market maturity
- Greater willingness to accept disruptive technology
- Higher risk appetite
- Faster and more empowered decision-making
- Greater purchasing power
The verdict is simple and straightforward. Any SaaS founder who can crack the US market will rule. Take, for instance, Salesforce’s (largest B2B SaaS company globally) revenue by geography. 69% of their revenue comes from the US, and 31% from rest-of-the-world.
In reality, it’s not difficult for most startups to replicate the same story. In the US, there will always be more B2B buyers with larger budgets willing to buy software, both as early adopters and as large late adopters. Buyers across the organization- at the functional user, team, department, or larger company level- are all prepared to try new products. Consequently, the US far outweighs any other market from a scale and growth perspective.
While unfamiliar markets seem intimidating, founders must overcome the fear of the ‘known unknown’ to unlock their true potential.
SaaS industry leader, Prasanna Krishnamoorthy has helped hundreds of founders build and scale businesses globally as the Co-founder and Partner at Upekkha (B2B SaaS Accelerator and Fund.) Being an investor and entrepreneur with 20+ years of experience and previous stints at Amazon and Microsoft Accelerator, Prasanna is on a mission to create a winning ecosystem in India for both investors and founders.
