Brazil has more than 400 Startups Specializing in SaaS

Brazil has more than 400 specializing software as a service (SaaS) startups, 71% of which are created and maintained by their own investments. The vast majority of these companies are in the Southeast region and have fewer than 50 employees. The data are from the first edition of the study “Brazil SaaS Landscape Research” conducted by SaaSholic, Rock Content, Signal Hill and Redpoint eVentures.

The survey reveals that almost 50% of SaaS startups are based in São Paulo, and 41% of those that exceed R$1 million in ARR (or the average annual revenue divided by the initial investment) are also based in São Paulo State. Next, comes Santa Catarina State, with a fast pace of growth, and Minas Gerais State, in third place.

In terms of the value of startups, the average AAR factor for SaaS rounds is of six times, according to the study. But what really stands out is the fact that more than 71% of SaaS companies in Brazil are created and maintained by their own investments. Research shows that of those who chose to seek capital, only 10% raised more than R$10 million — about $3 million.

The study also found a strong interest in venture capital firms by SaaS companies. Funds such as Redpoint, Monashees+ and Ebricks are betting high on the SaaS market. This interest is explained. According to the Brazilian SaaS Landscape Research report, Brazilian companies are increasingly open to adopting IT solutions in the SaaS model, now the most used to deliver cloud services — 92% of companies already adopt at least one SaaS solution.

Another interesting fact is that when looking at an already mature SaaS business in the US, it turns out that several companies take more than 12 months to recover their cost of customer acquisition (CAC). “In Brazil, according to the survey participants, more than 60% of companies recover their CAC in less than six months. In addition, local startups have healthy finances. 67% of them have a LTV [customer lifetime value] and CAC ratio slightly over three months,” said Diego Gomes, co-founder of RockContent, in a post published in Medium.

The report also indicates that, apparently, the Brazilian SaaS startups embraced the inside sales as their main distribution channel, being used by 52% of the companies. Field sales (42%) and self-service sales (37%) are the most used channels in Brazil (see chart below).

The phenomenon of SaaS enabled marketplace is also happening in Brazil. Twenty-six percent of the companies surveyed have some marketplace component in their offerings. “Some companies have adopted marketplace features in their SaaS products, and they seem to succeed with that,” says Gomes.

For the research, 597 interviews were made in May of this year. Almost half of the participants (49%) were CEOs of SaaS startups. The results, according to Gomes, are strong indicators that the Brazilian SaaS market has reached an inflection point, the stage where, from now on, market growth is inevitable.

Billy is also a Digital Monetization Strategy consultant and exclusively works with Latin America’s largest media groups, such as Editora Abril (Brazil), Grupo Globo (Brazil) as well as Grupo Copesa (Chile).

He also serves as Board Advisor & Angel Investor for adtech & martech startups such as Start-up Chile, Start-up Peru, Parallel18 (PR) Admetricks and Starter Daily.

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