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`US offers a $500-bn mkt for software products'

Away from the e-commerce euphoria, there's a bunch of Indian software product firms which is bolstering the domestic startup ecosystem with impressive valuations of their own.

The top 30 software product firms -catering largely to businesses -have an estimated enterprise valuation of $6.2 billion (Rs 37,500 crore),

according to a new index by Bengaluru-based software product think tank, iSpirt. TOI has accessed the findings.

These companies, including Eka, Pubmatic, Freshdesk, Druva, Zoho and Quick Heal, have been growing rapidly at a time when most of the spotlight is on the astronomical valuations of a few domestic consumer tech firms.

According to iSpirt's India Software Products Industry Index, as many as 27% of the top 30 most-valued companies were headquartered in Bengaluru, 20% in Delhi-NCR and the rest spread across Mumbai, Kerala, Pune, Silicon Valley, London and Singapore. Together, these companies, mostly privately held, have 18,250 employees. About 37% of these companies, started in the 1990s and 2000s, were bootstrapped without any institutional funding. Most of the funded companies got growth, rather than early-stage venture financing enjoyed by tech firms. Just over 50% of the ventures provide end-user business applications in segments such as CRM, trading, business intelligence and banking, while 20% are ad vertising tech companies, says the report by iSpirt, which was founded last year when some felt the need for a dedicated software product association distinct from IT industry body Nasscom.

“After the IT wave, the internet and e-commerce companies came. The value creation will now happen in the software product sector,“ said Dev Khare, MD of Lightspeed Venture and fellow at iSpirt. The size of the US market alone for enterprise software products is estimated at $500 billion. There is a huge potential for creating many billiondollar companies in this space,“ added Dev Khare. He saw a huge opportunity to develop India-centric applications and software businesses that leverage on the proliferation of smartphones.

Eighty-five companies are part of the index. Some like mobile ad network InMobi chose not to participate. If InMobi was part of the index, it would have added significantly to the overall valuation figure, considering it had an estimated $1-billion valuation when it raised $200 million from Japan's Softbank in 2011. Different valuation yardsticks were employed in the survey: market cap for public firms, previous round of funding for VC-backed companies, and revenue growth and market comparables for bootstrapped ventures.

Bengaluru-based retail analytics firm Manthan Systems, another of the top 30, has had multiple rounds of funding, the last one of $15 million two years ago from Norwest Venture Partners. Its revenue is over $30 million, it has over 175 customers, including McDonald's, Lowe's and Haggen, and has over 700 employees. “Our solutions help retail customers in decision-making,“ said Atul Batra, CTO of Manthan Systems.

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