Global-ready SaaS subscription businesses are rising rapidly in Southeast Asia

North Ridge Partners’ Michael Gethen sets out how the US is no longer the sole domain of global SaaS businesses. Southeast Asia is now building its own cadre of global-ready SaaS companies like Trax and Deskera.

-----

Global-ready SaaS subscription businesses are rising rapidly in Southeast Asia

In its pure form, the Software-as-a-Service (“SaaS”) business model derives its revenues from the licensing of a software platform via subscriptions. It’s a distinctly different business model from the use of software to drive revenues from transaction flows through marketplaces, ecommerce platforms, payments and advertising.

The burgeoning tech ecosystem in Southeast Asia has seen the emergence of a handful of Unicorns (companies with valuations exceeding US $1 billion) in categories such as ride-hailing “super apps”, ecommerce marketplaces, travel booking engines and financial services such as payments and P2P lending.

With few exceptions, these unicorns are typically succeeding in their large domestic markets, but not on a regional or global scale. This is due to their focus on delivering a valuable service to consumers at a local level.

However, we are now seeing “pure” SaaS companies emerging from Southeast Asia. Their underlying business model is the licensing of and subscription to their software technology, often driven by Artificial Intelligence and Machine-Learning software, and in some cases connected to sensors and hardware.

These emerging businesses are gaining scale across an interesting and diverse range of sectors; everything from retail, stakeholder management, customer service and chat to enterprise resource planning, logistics and distribution, human resources and event management, to name just a few prominent categories.

We see several companies now in the ‘Centaurs’ level (company valuations between US $100 million and US $1 billion), including Deskera, and many more with valuations heading towards ‘Centaurs’ territory, such as TSC.ai. These companies have typically evolved in a very lean Asian manner, with the lower salary cost base of Southeast Asian tech talent often contributing to a shorter path to profitability than their equivalents in the US and EU, suggesting these companies will achieve scale economics with a faster growth trajectory.

Investors who have been watching the emergence of the US SaaS giants such as SalesForce, DocuSign and Dropbox, and innovators from Down Under like Xero, should begin to pay close attention to the emerging SaaS sector in Southeast Asia.

It’s coming, and it’s going to be big.

-----

If you would like to know more about technology-related investment in Southeast Asia, please contact North Ridge Partners here.