SaaS kicks off 2020 with an extra billion in VC funding as round count halves

More capital and fewer deals means larger venture-backed investments

The venture capital world is investing more capital into software-as-a-service companies (SaaS), despite cutting the number of deals it executes within the startup category, according to Crunchbase data. The results echo other venture data we’ve explored recently, including a look into early-stage dealmaking that shows a rise in invested venture dollars inversely correlating with a boost to the number of total deals recorded.

More capital and fewer deals means larger venture-backed investments, implying a general tilt toward the later-stage market. Instead of looking at things by stage, however, this afternoon we’re exploring a startup category. And SaaS is a key category in the startup world, making the inspection worth our time.

As the venture capital world’s seed investors focus more on enterprise deals than consumer investments, seeing SaaS perform well is not surprising. How well it is doing this year might be.

But let’s get the data in front of us before we get ahead of ourselves. Strap in, we’re digging into the numbers.

2020 SaaS funding is robust

We’re just shy of the halfway mark of the first quarter of 2020, meaning that we’ve recorded the fewest number of days possible to have allowed sufficient data to pool to allow for trend extraction. It’s always better to look early and twice than to wait, so let’s get started.

Using a relatively simple run of Crunchbase’s startup data1, I’ve pulled equity-only funding rounds for SaaS companies from the start of the year to today, and the same time frame from 2019.

The data is a bit surprising, but before we share numbers, two quick caveats. First, we’re not trying to be precise; instead, we’re trying to be directional. That’s to say that perhaps we could have come up with a slightly more refined data query if we got wild in the spreadsheets. But that was not necessary for reasons you’ll see shortly. And, there’s always temporal lag in the reporting of recent rounds, so expect our 2020 data to be shy a few entries that will come along. However, again, the caveat isn’t material for reasons that will prove obvious.

Now, the data! Here it is:

  • 2019 SaaS equity funding through February 10: $1.58 billion
  • 2019 SaaS equity rounds through February 10: 199
  • 2020 SaaS equity funding through February 10: $2.55 billion
  • 2020 SaaS equity rounds through February 10: 94

You can quickly see the directional trends that we outlined above: fewer rounds in 2020, but larger dollar results.

The scale of the difference between 2019 and 2020 in terms of deal count (making our venture data lag point moot) and dollar volume (making our point about directional instead of precise all the more valid) provide good comfort with our data; the results’ gaps make the directions plain.

Inside the top-line numbers, however, there’s a lot more to unpack.

Inside the rounds

As you have already calculated, the average round size in 2019 for SaaS deals in the first half of Q1 was far smaller than what has been recorded in 2020 thus far. The discrepancy’s scale still proved surprising, however, with 2019’s average coming in at around $11.7 million while 2020’s comparable figure was nearly three times higher, at $31.1 million.

Helping drive the two years apart is sharp difference in their largest deals. At times, single deals can skew whole categories of metrics, something that has happened more frequently in recent years as super-sized rounds became more prevalent. In 2020, one round made a huge impact, namely the Snowflake Computing Series G. Snowflake, a company that literally helps explain what SaaS is on its website before pitching potential customers on whether “SaaS data analytics [is] right for [them],” raised a monster $479 million round last week.

The round, valuing the analytics software shop at around $12.5 billion, shakes up our math quite a lot. But it’s not alone, as the whole year’s tally is very top-heavy. Framing that, 2020’s SaaS market has already recorded five rounds of $200 million or more in the year. By this data in 2019, there were zero by this date.

So what we can see is that without a few late-stage rounds, 2020’s SaaS market would go from looking quite good (up a billion dollars on last year so far!) to appearing pretty shit. More to the point for us today, the late-stage SaaS market is making all SaaS investment look good, even if that may not really be the case for early-stage SaaS.

That mirrors our reporting from this morning on the potential for an early-stage slowdown. It’s still too soon to truly call anything, but the late-stage boom is at least covering up for some weaknesses in the market, SaaS shows us.


1I am a former Crunchbase employee. However, I’ve been a Crunchbase user for around 100 million years. I’d use its website even if I didn’t have stock in the firm that was part of my comp during my employment. All this is to say that I’m not wasting your time by citing this particular data set.