Capillary Technologies — A Playbook for US Market Entry for Indian SaaS Companies

Congratulations Capillary Technologies on completing your third US acquisition! Capillary has developed a unique playbook for US market entry which can be followed by other Asia-focused SaaS companies with aspirations, but perhaps not yet the strategy, to expand to the US:

1. Achieve sufficient scale in Asia before embarking on US diversification: The US will consume precious capital and management bandwidth. It may not make sense to “bet the farm” on the US when a company is smaller and therefore at the risk of jeopardizing a reasonably good Asia business (recognizing that the addressable market in Asia needs to be large enough to begin with, which is increasingly true in “mission critical” software categories such as loyalty, CRM, HRMS, etc). When the company is larger it can absorb the risk, and a clear value creation strategy in Asia will be in place in case the US diversification does not succeed.

2. Explore small organic and inorganic growth initiatives before taking the “big bet”: Success in Asia will not translate into success in the US without hard work, A/B testing, and some pivots along the way. Capillary opened its US office and made its first US acquisition in 2021, giving it two years of valuable US experience to test product-market fit, go-to-market strategy, and competitive positioning, before doubling down with the Brierley and Digital Connect acquisitions in 2023.

3. Develop a comprehensive M&A strategy to maximize likelihood of success: Inorganic growth is fraught with risk. Ensure there is a clear strategic objective, tight integration plan, and continuous senior management oversight. Capillary’s strategy of acquiring boutique loyalty software and services companies with established go-to-market and solutioning capabilities, married with its best-in-class loyalty platform, is a compelling strategic approach. A customer migration plan is in place and senior Capillary executives have been tapped to oversee the integration and may move to the US as required.

4. Lastly, external validation goes a long way in reassuring the customers and employees of the acquired entities. Capillary’s recent addition to the Forrester Wave as a leader in loyalty technology solutions, its onboarding of well-known loyalty executives in the US as advisors, and its recent fundraise from global investors, in addition to its established leadership in Asia, strengthens its case for “winning” the US market.

Best wishes to the Capillary team and we are glad to be a part of your journey!

Your Friends at Filter Capital