On the heels of news that the U.S. venture capital market’s third quarter was far from catastrophic, it’s becoming clear that while startup investment has slowed, it’s still a great time to build a software company.
Thanks to a new sheaf of data from SVB, we can see quite clearly that the macro picture for IT is robust and venture capitalists have an ocean of capital to put to work. The combination appears to be supporting investment into software startups — software as a service, or SaaS, in the modern context — that will make 2022 the second-best year on record in the United States.
Some declines are evident; you won’t get 2021’s venture capital results again for some time. But that’s not stopping valuations and deal sizes from ticking higher at most well-trod startup stages. Down rounds are also in decline as venture investors react, perhaps somewhat surprisingly, to a rising interest rate environment and a general selloff in the value of tech stocks.
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Not all the data is sunny. SaaS startups may see some of their valuation gains between rounds moderate somewhat if they are busy raising today, and, yes, we will see fewer U.S. SaaS deals this year. But if you thought that 2020 was an OK year for overall startup investment, you are going to love 2022.