Fundraising, growth, mergers and acquisitions… Europe’s SaaS market challenges the economy

SaaS (software as a service), which is software installed in the cloud and sold to subscription companies, is doing great in Europe, according to GP Bullhound research. The technology investment and advisory bank partnered with Sage to survey more than 100 SaaS executives of all sizes across Europe.

Several new unicorns

Median annual recurring revenue (ARR) growth, a key indicator of the industry, doubled from 20 percent to 40 percent for companies that doubled their ARR from €20 million to €40 million, which the bank interprets as a sign that European companies are growing efficiently. in particular thanks to the fundraising they held.

She also notes that this growth in revenue is accompanied by a proportionate decline in investment in research and development and an increase in marketing budgets, which means that companies are becoming more mature and focused on their commercial strategy. “Companies are increasingly focusing on profitability and capital efficiency,” says Guillaume Bonneton, French partner at GP Bullhound.

In support of its demonstration, the report points out that the industry has never seen so many new unicorn creations, despite a drop in fundraising in 2022 overall. More unicorns appeared in the first three quarters of 2022 than between 2018 and 2020. Among them is the French Ecovadis.

A third of companies plan to raise funds in 2023

Achieve revenue growth, the top goal of 80% of executives surveyed, with more than a third planning to raise funds in 2023. So far, they’re all good. Fundraising in this sector has slowed down in recent months, but the total amount of funds raised in 2022 is higher than in 2021.

I must say that the average round table is increasing. It has more than tripled since 2019. In 2022, we saw several fundraisers of over €500 million, including from Contentsquare and Ecovadis. The report also highlights that France was the most resilient country in terms of fundraising last year. France represented more than 17% fundraising by value in Europe.

Mergers and acquisitions remain dynamic in France

At the same time, the sector is seething with M&A, even if this phenomenon starts to slow down at the end of 2022 (with the exception of France and Sweden). €32.3 billion worth of M&A transactions were completed in 2022, thanks to an increase in the average deal size of around 90% in 2022 compared to 2021.

In 2022, France accounted for 16% of transactions by volume (+7.4%), behind the UK and ahead of Germany.

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