SaaS for Impact in Emerging Markets

Next Billion Tech

I am fascinated by SaaS, platforms, and marketplaces, and I want to build and invest in SaaS in the context of Indonesia and emerging markets. Especially, seeing the landscape, SaaS, as well as Marketplaces can create impact for M/SMEs.

Why not replicate the success of SaaS to the impact space in emerging markets, creating access to products and services, reducing friction, improving efficiencies, and productivity?

A few weeks ago, I attended the report launch on SaaS Wave in Indonesia, created by Innovation Factory and ravenry. I made my notes, which are as follows:

• Comparison to B2C: In Indonesia, businesses and M/SMEs compare SaaS products with consumer products - need to have similar UI/ UX to consumer apps. The expectation is high now. But this consumer apps wave is helping to adopt mobile SaaS solutions. 

• Lower value per client in Indonesia and emerging markets comparing it with the US and many times here they prefer it for free.

• Pay on Demand and Pay as you go - SaaS model works here. The business consumer is learning about the subscription model from the consumer apps, so it is making SaaS adoption easy. 

• Labor costs are low, and businesses like spoon-feeding in Indonesia. Hence, companies like to either use a cheap human resource or want extensive support and services. 

• Customer Value Creation: Clarity on business customer value is not there for most of the SaaS solutions 

• M/SMEs or Big Enterprise Customers: Fertile ground to sell mobile SaaS to M/SMEs, Koperasi, and Warungs. Big banks, conglomerates have their legacy systems - tough to move them. Hence, it is preferred to sell to M/SMEs and startups  

• Product Packaging needs affordable and accessible - make sense for unit economics but need to design it differently.

• Modularising it vs. bundled type of service: Modularising is a preferred way to sell the SaaS to M/SMEs as the capacity to pay bundle services/products is low 

• Bundle it with physical and hardware products - like iPad. As the M/SME owners find hardware product more relatable and tangible, so bundling up with hardware products can help accelerate the sales 

• Free software: It is important to note that trust is low for free software in Indonesia, as the M/SMEs are protective of their work 

• What's the potential in SaaS in Indonesia and emerging markets?

  • SaaS businesses have a 70-80% margin and have recurring nature. So, by the kind of the company, it looks impressive on paper 

  • SaaS is much better than marketplaces in terms of ARR and ACV 

  • M/SME space is exciting and a lot to grow - on-premise solutions. - healthcare and education in terms of verticalisation (not sure it's a word) 

  • CAC and LTV problem - very little value that customers can add here. CAC: LTV needs to be above 1:3 

  • Go to Market Fit is more critical than product-market fit, i.e., How secure is your sales, pricing, and product, GTM 

  • Platform solution vs. Point solution - compare it with Uber in the US and Go Jek in Indonesia - start with one niche, build the capabilities and creativity to enter into the adjacent markets  

Please use this link to read the full report.

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I am continuously looking for SaaS solutions that can solve inefficiencies and productivity issues in the M/SMEs. If you are building one or investing in one in Indonesia or SEA, please do write to me, I would love to learn more from you.

With Love,

Sagar

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About

"first followers" is founded by Sagar Tandon, a founding member at Moonshot Ventures. You can reach him at sagar@moonshotventures.org.

Occasionally, he blogs about the responsible investing, tech for good, venture capital, investment thesis, conscious capitalism, collaborative consumption, community, and humane lifestyle.