A CFO's Musings

May, Edition 3

Dear entrepreneur,

India's manufacturing sector has grown tremendously over the past few decades, and is now one of the largest contributors to India's economic growth story, contributing ?17% to India's current GDP. This level of contribution is only going to be increasing in the coming future, as technology drives efficiency in the sector. Critics have always been concerned about India jumping from a primarily agrarian society towards becoming a service based economy, skipping the "industrialization" phase that many developed economies went through in the 20th century. They argued that transitioning into a services-based economy leaves creates a major unemployment and technological gap that only widens as the dependency on services increases.?

India's case has been an exception of sorts as technocrats have found a way to integrate the services sector and the manufacturing sector through technology. There is no dearth of technology talent in India, and this talent has been key in creating technologies and businesses that integrate the two sectors. Software has been key in creating this link as it has helped in creating simpler processes and workflows thus streamlining operations, automated repetitive tasks, and has even made the management of workforce simpler. Moreover, the government has also worked closely with the private sector to create jobs in manufacturing, thus enabling a greater contribution to India's GDP from the sector.

Our deep-dive today covers how software implementation in manufacturing has changed its landscape, and some of the upcoming technology trends that we are likely to see shape up in coming years. Additionally, we look at some major segments within manufacturing technology that have become prominent in the last few years. We hope you find our newsletter useful.

Happy reading!

Manufacturing: A brief introduction?

In the dynamic world of manufacturing SaaS, technology serves as the foundation for innovation and success. From data analytics to automation, cloud computing to IoT, the integration of sophisticated technologies is redefining the industry, increasing efficiency, agility, and competitiveness to new heights.?

At the heart of this shift is the power of data. Manufacturers can use advanced data analytics capabilities to gain real-time insights that guide strategic decisions throughout the production cycle. Automation technologies, such as robotics and AI-powered systems, are transforming manufacturing processes, streamlining operations, and increasing productivity while lowering costs. Furthermore, the use of cloud-based solutions has increased access to crucial tools and resources, allowing firms to scale operations effortlessly and respond to changing market demands. Meanwhile, the convergence of IoT and connectivity has brought about a new era of linked production, allowing for real-time monitoring of equipment performance, predictive maintenance, and proactive issue resolution.?

The emergence of software has played a critical role in propelling the manufacturing industry forward, converting it from old, labor-intensive procedures to highly efficient, technologically driven operations. Early software programs aimed to automate repetitive operations like inventory management, scheduling, and payroll. This automation greatly reduced manual work and human error, resulting in increased efficiency and cost savings. As technology matured, software solutions emerged to digitize entire manufacturing processes, including design and development, production, and quality control.?

Computer-Aided Design (CAD) and Computer-Aided Manufacturing (CAM) technologies have transformed product design and manufacturing processes. Engineers may use these tools to construct complex designs, simulate manufacturing processes, and provide precise blueprints for production. By reducing design iterations and optimizing manufacturing processes, CAD/CAM software sped time-to-market and improved product.?

ERP systems are complete software solutions for integrating and managing fundamental business activities such as manufacturing, supply chain management, finance, and human resources. ERP systems helped factories optimize resource allocation, improve decision-making, and promote cross-departmental communication by offering a uniform platform for data management and workflow automation.?

Another program, Manufacturing Execution Systems (MES), bridged the gap between the shop floor and the top floor by offering real-time visibility and control over manufacturing operations. MES solutions tracked production activities, tracked work-in-process, and collected data from equipment and sensors to improve production efficiency and assure compliance with quality standards and regulatory requirements. As global supply chains got more complicated, Supply Chain Management (SCM) software was developed to improve transportation, inventory management, and supplier collaboration. These software solutions allowed producers to synchronize supply and demand, shorten lead times, and cut costs by streamlining procurement, warehousing, and distribution processes.?

With the abundance of data created by sensors, IoT devices, and networked systems, manufacturers have used advanced analytics and machine learning algorithms to generate actionable insights and predictive models. Predictive maintenance software, for example, analyzes equipment performance data to predict maintenance requirements, avoid unplanned downtime, and extend asset life. Manufacturers used digital twin technology to construct virtual reproductions of physical assets, processes, and systems. Manufacturers could improve manufacturing efficiency, shorten time-to-market, and reduce error risk by simulating numerous situations and undertaking predictive analysis.?

In recent years, SaaS has emerged as a game changer in the manufacturing sector, providing cost-effective, scalable, and accessible solutions that meet manufacturers' increasing needs. SaaS allows manufacturers to subscribe to software solutions on a pay-as-you-go basis, avoiding large upfront investments in licenses and infrastructure. This cost-effective methodology provides greater flexibility and scalability, allowing firms to respond to changing market conditions and extend their operations without financial restraints. SaaS solutions provide manufacturers exceptional accessibility and collaboration capabilities. SaaS encourages real-time communication and cooperation across scattered teams, partners, and suppliers by enabling users to access crucial tools and data from any location with an internet connection. This accessibility improves operating efficiency and allows firms to react quickly to market demands and consumer wants, resulting in increased agility and competitiveness.?

Furthermore, the combination of SaaS with future technologies like IoT and AI is revolutionizing manufacturing processes. Manufacturers can use IoT sensors and linked devices to collect real-time data from equipment and production systems, allowing for predictive maintenance, process optimization, and quality control. Furthermore, SaaS companies spend extensively in strong cybersecurity measures to protect sensitive data and comply with industry requirements. In essence, SaaS adoption in manufacturing allows companies to focus on core capabilities, promote innovation, and prosper in a quickly changing digital market.?

Trends Shaping the Manufacturing SaaS Industry??

India is actively contributing to the expansion of the manufacturing business and extending its market share through a variety of initiatives, policies, and advancements. One of the primary drivers of this expansion is the government's "Make in India" initiative, which aims to boost domestic manufacturing, attract international investment, and nurture innovation in the industry. Furthermore, programs such as the "Production Linked Incentive (PLI)" have been implemented to encourage manufacture in critical industries such as electronics, autos, and medicines.?

Investments in infrastructure development are another critical component of India's manufacturing strategy. The country is actively investing in transportation networks, industrial parks, and special economic zones (SEZs) to support production and foster growth. These infrastructure expenditures are intended to lower logistical costs, improve connectivity, and attract domestic and foreign firms to establish operations in India.?

Furthermore, Indian manufacturers are increasingly using Industry 4.0 technologies like automation, robots, IoT, and data analytics to improve productivity, quality, and efficiency. This digital shift is propelling innovation and competition across the manufacturing industry. Furthermore, India's enormous pool of talented and technically adept workers increases its appeal as a manufacturing destination. The government, with industry stakeholders, is also focused on skill development efforts to improve workforce capabilities and meet the changing needs of the industrial sector. The industrial SaaS business is undergoing a dramatic transformation, fueled by technical improvements and changing consumer expectations. Several trends are emerging as critical drivers transforming the manufacturing SaaS market, including visualization, operational streamlining, and labor management.?

1. Visualization Technologies: Visualization tools are transforming the way manufacturers plan, design, and optimize their operations. Advanced 3D modeling, simulation, and virtual reality (VR) technologies allow manufacturers to see their manufacturing processes in immersive digital worlds. This enables better design validation, process optimization, and troubleshooting, ultimately leading to increased productivity and shorter time-to-market.?

1. Operations Streamlining: SaaS solutions improve manufacturing operations by offering end-to-end visibility and control over the whole production process. Integrated MES allows for real-time monitoring of shop floor activity, tracking of work-in-progress, and data collecting via IoT sensors and connected devices. This visibility enables producers to identify bottlenecks, maximize resource use, and improve overall operational efficiency.?

1. Workforce Management Solutions: As remote work and distributed teams become more prevalent, manufacturing businesses must prioritize workforce management solutions. SaaS platforms provide solutions for workforce scheduling, time tracking, skill management, and performance monitoring, which aids in workforce planning and resource allocation. Furthermore, these technologies facilitate seamless collaboration and communication among scattered teams, resulting in increased productivity and employee satisfaction.?

1. Predictive Maintenance and Asset Management: Predictive maintenance software is gaining popularity in the manufacturing SaaS business, letting manufacturers to track equipment health in real time and identify probable breakdowns before they happen. Manufacturers may use IoT sensors, data analytics, and machine learning algorithms to improve maintenance schedules, reduce downtime, and extend asset lifespan. Furthermore, asset management solutions help manufacturers track and manage their equipment and facilities more efficiently, assuring optimal use and compliance with maintenance rules.?

1. Sustainability and Environmental Management: As environmental concerns gain traction; manufacturers are turning to SaaS solutions to manage sustainability issues and reduce their environmental imprint. Environmental management software allows manufacturers to monitor and report on key sustainability parameters such as energy use, carbon emissions, and trash generation. Manufacturers can increase brand reputation and attract environmentally sensitive customers by implementing sustainable practices and monitoring their environmental impact, in addition to meeting regulatory obligations.?

To summarize, the manufacturing SaaS business is rapidly evolving due to themes such as visualization, operations efficiency, workforce management, predictive maintenance, and sustainability. As manufacturers continue to embrace digital transformation and use SaaS solutions to enhance their operations, they will be better positioned to handle the challenges of the current manufacturing landscape and create long-term development.?

Segmentation of SaaS in Manufacturing Supply Chain?

1. Product Lifecycle Management (PLM) Software: PLM software enables firms to manage the whole product lifecycle, from conception and design to manufacturing, distribution, and disposal. It has capabilities including product data management (PDM), CAD integration, version control, and change management.?

1. Enterprise Resource Planning (ERP) Systems: ERP systems combine fundamental company activities including manufacturing, supply chain management, finance, and human resources on a single, unified platform. They provide real-time visibility into operations, streamline procedures, and allow for data-driven decision making.?

1. Manufacturing Execution Systems (MES): MES software connects the shop floor and the top floor, enabling real-time visibility and control over manufacturing processes. It has capabilities including production scheduling, work-in-progress tracking, quality management, and performance statistics.?

1. Supply Chain administration (SCM) Solutions: SCM solutions improve the administration of the whole supply chain, from procurement and logistics to inventory management and distribution. They make it easier to collaborate with suppliers, cut down on lead times, and allocate resources efficiently.?

1. Predictive Maintenance and Asset Management Tools: Predictive maintenance software uses IoT sensors and data analytics to monitor equipment health in real time, allowing manufacturers to forecast and avoid breakdowns before they occur. Asset management systems monitor and manage physical assets, optimizing maintenance schedules and guaranteeing maximum utilization.?

1. Quality Management Systems (QMS): QMS software assists manufacturers in maintaining quality standards and complying with regulatory regulations. It has features like document control, nonconformance management, corrective and preventative actions (CAPA), and audit management.?

1. Workforce Management Solutions: Workforce Management Solutions?improve staff planning, scheduling, and performance management. They provide features including time monitoring, labor scheduling, skill management, and employee engagement tools.?

1. Environmental Management program: This program allows manufacturers to track and manage their environmental effect, such as energy use, carbon emissions, and waste generation. It promotes environmental compliance and sustainability activities.?

Term sheet terms

A share-subscription agreement (SSA) is a must have for any company that has raised funds recently. Having a SSA document handy is good corporate governance practice as it documents all the rights and obligations of all parties. Read on more to find out more about the importance of a SSA below.

Understanding SSAs and Their Impact on Fundraising?

A Share Subscription Agreement (SSA) is a legal agreement between a firm and an investor that specifies the terms and conditions of the investor's acquisition of shares in the company. This agreement usually specifies the number of shares being subscribed for, the price per share, any rights or restrictions related to the shares, and the time frame for completing the transaction. SSAs are frequently used in fundraising rounds, such as seed rounds, Series A, B, and C, in which companies seek external investment to fuel their growth and expansion.?

For entrepreneurs, SSAs are critical components of the fundraising process and can have a substantial impact on their ability to get funds and negotiate favorable investor terms. Here is how SSAs can impact the fundraising process:?

1. Legal Protection: SSAs protect both the company and the investor by specifying each party's rights and obligations. By detailing the terms of the investment in writing, SSAs assist in avoiding future misunderstandings and disagreements, resulting in a smoother and more transparent fundraising process.?

1. Valuation and Dilution: The parameters of the SSA, such as the price per share and percentage of ownership sold to the investor, have a direct impact on the company's valuation and the amount of dilution suffered by existing shareholders. Entrepreneurs must carefully negotiate these terms to strike a balance between generating enough finance while maintaining appropriate ownership and control over their company.?

1. Investor Confidence: Well-drafted SSAs can boost potential investors' trust by exhibiting professionalism, transparency, and clarity in the company's fundraising activities. Clear and comprehensive conditions, including provisions for governance rights, dividends, and exit alternatives, can entice reputable investors and aid in successful fundraising campaigns.?

1. Compliance and Regulatory requirements: SSAs must follow all applicable regulatory regulations and securities laws regulating private placements of securities. Entrepreneurs must guarantee that their SSAs follow these requirements to avoid legal and financial consequences. Working with a competent legal counsel can assist entrepreneurs in navigating complex regulatory frameworks and ensuring compliance with relevant legislation.?

1. Negotiation and Relationship Building: The negotiation of SSAs allows entrepreneurs to develop connections with investors and align their interests with those of the company. By engaging in open and constructive discussions, entrepreneurs may address investors' concerns, clarify expectations, and form strong relationships that support the company's long-term growth goals.?

In summary, SSAs are an essential part of the fundraising process, offering a structure for organizing investments, preserving legal rights, and establishing trust and confidence with investors. Understanding the significance of SSAs and carefully negotiating their conditions can help entrepreneurs increase their prospects of obtaining capital on favorable terms and driving the growth of their businesses.?

Key provisions in a share subscription agreement?

• Identification of parties: Clearly identify the company issuing shares and the parties that have subscribed to those shares?
• Subscription details: Specify the number of shares subscribed to, price per share and the total subscription amount?
• Terms and conditions of the subscription: Lay out the specific terms and conditions related to the subscription such as the payment schedule, payment method, and any conditions precedent to the subscription.?
• Representations and Warranties: Both parties typically provide representations and warranties about their legal capacity, authority to enter into the agreement, and other relevant matters.?
• Subscription Procedure: Detail the procedure for completing the subscription, including any required documentation or regulatory filings.?
• Closing Conditions: Specify conditions that must be met before the subscription can be completed, such as regulatory approvals or shareholder approval.?
• Use of Proceeds: Describe how the proceeds from the subscription will be used by the company.?
• Rights and Obligations: Outline the rights and obligations of both parties, including voting rights, dividend rights, anti-dilution protections, and any restrictions on transferability of the subscribed shares.?
• Indemnification: Specify any indemnification obligations of either party in case of breach of the agreement or misrepresentation.?
• Confidentiality: Include provisions to maintain the confidentiality of any sensitive information disclosed during the negotiation and execution of the agreement.?
• Governing Law and Jurisdiction: Determine the governing law of the agreement and the jurisdiction for resolving disputes.?
• Miscellaneous Provisions: Include other miscellaneous provisions such as notices, amendments, waivers, and the entire agreement clause.?

It’s imperative for founders to create a share subscription agreement once they have reached an agreement with prospective investors, as the agreement lays out all the rights, duties and obligations of all parties involved, and creates a strong framework for dispute resolution.?

Closing Note

We hope that the content from our newsletter will continue to assist you in staying on top of all the developments in the Indian startup ecosystem and will act as a catalyst for your startup’s development.

Thank you, and see you again next week with more insights.