Software-as-a-Service

What is Software-as-a-Service (SaaS)?

Software-as-a-Service (SaaS), as Dealroom.co defines it, is a method of software delivery and licensing in which software is accessed online via a subscription, rather than bought and installed on individual computers.

Well known unicorns that use a SaaS business model include the likes of: Netflix, Salesforce and PayPal. For an extensive list of SaaS companies and startups, visit the Dealroom.co platform.

How did SaaS startups fare in 2022?

SaaS has steadily become the most prominent investment category in venture capital. In 2022, a record setting proportion of 45% of venture capital was invested in startups with a SaaS business model, a rising trend over the past decade which can be observed in the below chart and on the Dealroom.co platform.

Early stage VC into SaaS startups

The rise of SaaS has been especially pronounced in early-stage investing, with SaaS companies receiving over half of the total early stage VC investment in 2022.

There have been both increases in total investment and round count into SaaS startups with a 30% increase in total VC investment between 2021 and 2022 as well as a 6% increase in the number of Early-stage SaaS investment rounds during the same period.

B2B vs B2C Saas Investment

For 2022, approximately 88% of all SaaS investment goes to startups with a business (B2B) client focus (including both enterprise and SME). The remaining 12% are startups focused on consumers (B2C).

So SaaS is primarily B2B, but there is a grey area between B2B and B2C. Examples of notable B2C-ish SaaS companies include 1Password, Epic Games, and Taxfix. B2C can also be a bottom-up enterprise sales model in disguise.

Key verticals in B2B SaaS


In 2022, the top three sectors for B2B SaaS investment were Fintech, Security, and Marketing . Meanwhile, the top three industries with the highest positive growth over the past 12 months were Fashion, Sports, and Media.

 

B2B SaaS Sub verticals analysis

In 2022, the top three sub vertical sectors for B2B SaaS investment were Payments, Crypto & Defi, and Health platforms . Meanwhile, the top three sub vertical sectors with the highest positive growth over the past 12 months were Apparel, Footwear, and Accessories.

Early stage VC investment into SaaS startups

Over the past 5 years, despite the pandemic and challenging economic climate, early stage VC investment into SaaS startups have been on the rise, with total investment doubling between 2019 and 2022.

Breakout stage VC investment into SaaS startups

Despite the challenging economic period over the past twelve months, breakout stage sized VC rounds into SaaS startups actually increased in 2022: both in terms of total investment and number of rounds by 10% against the previous year.

Late stage VC investment into SaaS startups

 

Late stage SaaS in the Bay Area possibly the most overheated segment of 2021 with a 56% drop in VC investment into SaaS companies for rounds over $250 M and a 30% drop in VC investment into SaaS companies for rounds between $100-250 M as seen in the graphic above.

To find out more details about this breakdown of venture capital investment flows into SaaS startups, open this query on the Dealroom.co platform.

 

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