Europe’s SaaS evolution
In November 2017, the US accounted for 63% of the world’s SaaS companies and 89% of funding, with Silicon Valley, New York, and Boston the leading hubs. Across the pond, Europe had 22% of the SaaS companies and just 5% of the world’s funding with London dominating the SaaS scene. However, the average fundraising round for London-based companies ($655,000) was still less than a quarter of the average San Francisco-based company ($3 million).
Fast forward to today and the European scene is unrecognizable. According to Atomico’s extensive State of European Tech 21 report:
“Europe is firmly positioned as a global tech player in 2021, with a record $100 billion of capital invested, 98 new unicorns, and the strongest ever startup pipeline, now on par with the US.”
While Atomico’s report doesn’t focus exclusively on SaaS companies, Accel’s 2021 Euroscape report does and the figures are equally impressive. Europe and Israel produced 44 SaaS unicorns in 2020 compared to 81 in 2021, including three SaaS decacorns ($10 billion+): Checkout.com, Talkdesk, and Celonis (the latter’s $1 billion Series D was also the largest ever SaaS round in Europe). 11 European and Israeli SaaS companies also went public last year, up from three in 2020.
What’s more, all parts of Europe are getting in on the act. The region’s 321 tech (not SaaS) unicorns come from 28 countries, while the 81 SaaS unicorns hail from Israel (27), France (10), the UK (7), Germany (7) and 30 from other European countries. You only have to look at some of the year’s biggest SaaS IPOs to see the continent’s strength in depth:
- Romanian-founded UiPath ($35.8 billion)
- Ukrainian-founded Gitlab ($15 billion)
As a recent article in the Financial Times states, Europe had all the ingredients to be a tech hub, such as hosting three of the top five global computer science programs - Cambridge, Oxford and ETH Zurich - and high levels of coding literacy - 5.5 million developers compared to 4.4 million in the US - it just needed investors to wade in. In 2021, that’s exactly what they did.
The current aggression of the Russian State against Ukraine brings with it a lot of uncertainty for the region that inevitably impacts the SaaS community based there. It’s too soon to tell what the longer-term implications will be for the industry.
Closing the US funding gap
The stats speak for themselves. In 2020, the average European SaaS startup raised €1 million at seed. In 2021, it raised €2.2 million. For Series A and Series B, average investment rounds followed a similar trajectory rising from €6 million to €7.2 million (+20%) and from €12 million to €16 million (+33%) respectively (Serena Capital).
As Accel’s report succinctly shows, the European SaaS market attracted $9-9.5 billion investment in 2020, but last year netted triple that figure ($29-30 billion). Interestingly, the investment into private SaaS startups was three times higher than funds raised publicly ($11 billion), while the growth in private cloud funding (3.2x) also outstripped the growth in US private cloud investment (2.4x), despite the total US pot remaining larger at $48 billion.
Much of this rise is attributable to VC confidence. According to Atomico, a whopping 88% of VCs are feeling more confident investing in European tech in 2021 than 2020. Given the proven SaaS success, innovation and opportunity shown in the last 12 months, this confidence is only expected to increase.