Software as a service – long a favored sector among startup investors – has seen a cooling in recent quarters, whilst U.S. Venture funding overall has increased somewhat.
So far this 12 months, SaaS and enterprise software firms have raised $4.7 billion in seed funding, in response to Crunchbase data. That puts 2024 on track to be well below last 12 months’s figure of $17.4 billion per 12 months, which itself was the lowest total in years.
For perspective, we have presented the variety of financings and transactions from 2019 to 2024.
A tricky week for enterprise software stocks
The decline in startup funding comes amid a difficult period for publicly traded SaaS and enterprise software firms.
Thursday, Sales force 1 shares fell by over 20% after the company lowered its forecasts for the current quarter, referring to cooling demand from customers who took longer to finish orders.
At the same time, shares of a process automation software provider Uipath fell about 30% after a disappointing earnings report and downwardly revised quarterly forecast.
More broadly, it was a difficult month for enterprise software. The Bessemer Cloud Indexwhich owns many of the most significant public SaaS firms, performed much worse Nasdaq and the S&P 500 and are currently in negative territory for 2024. The Bessemer Index saw a particularly steep decline starting in late May.
Some large startup rounds are still wrapping up
Even in a tougher fundraising environment, we’re still seeing strong funding for SaaS and enterprise software this 12 months.
The largest by far is the cloud security provider Wizardbillion-dollar Series E earlier this month, which he co-led Andreessen Horowitz, Partners of the Lightspeed enterprise AND Develop capital. The round valued the 4-year-old Israel-founded, New York-based company at $12 billion.
Another large financing went to a company from Silicon Valley Collect, which offers corporate clients work assistants based on artificial intelligence. The company raised $200 million in a Series D round in February.
Meanwhile, in the food service market based in Irvine, California Restaurant365 raised $175 million in financing conducted in early May Iconiq growth. The company sells software for restaurant operators to administer and optimize funds and personnel.
Not prefer it was
While funding hasn’t evaporated, we’re seeing far fewer mega deals in the SaaS and enterprise software space than we did a few years ago.
Over the past 12 months, 21 deals of $100 million or more have closed, per Crunchbase data. For comparison, in the peak deal 12 months – 2021 – there have been 147 such financings.
For 2024, year-over-year investment totals are also barely lower because of one large round in 2023: an amount of $6.5 billion Series I for Fintech unicorn Stripe. This is the largest funding in the space, for Crunchbase data, and due to this fact obviously a difficult computer to match.
Going forward, we’ll be watching the public markets to see if the earnings prospects for the biggest SaaS players improve and if investors regain enthusiasm for the space. Meanwhile, in private markets, investment stays limited, although regular deals are still being made.