Macroeconomic forces hit the SaaS market hard and slows funding,

SaaS Funding has slowed but market volume is expected to grow to $374.50 Billion by 2028.

Even though SaaS (Software as a Service) funding has slowed down the market for SaaS, the market is still growing. The appeal is still (and has always been) the low overhead and high margin but investors are cracking down on metrics to raise.

According to Statista, The SaaS market is forecasted to achieve a revenue of US$282.20 billion in 2024, with an anticipated annual growth rate (CAGR 2024-2028) of 7.33%. This trajectory is expected to lead to a market volume of $374.50 billion by the year 2028. With Salesforce’s market cap of $252.2 Billion, many companies have seen the potential for the SaaS market and are trying to raise funding.

Looking at the chart above we see B2B SaaS owns the majority of the funding since it helps businesses in any industry improve efficiency and stay competitive. But the funding of SaaS has changed, it used to be simple metrics like revenue growth, MRR, and TAM, but now the game has changed, and with more SaaS companies hitting the market investors are looking for more cost-efficient metrics like the Rule of 40, Logo Churn Rate, Customer Acquisition Cost, and CAC Payback.

Macroeconomic changes have hit the SaaS market hard as budget cuts have been put in place and SaaS companies have felt the damage of the 260,000 tech layoffs this past year that have left super talented, revenue-generating employees jobless.

But with more players hitting the market now, smaller SaaS companies have been hit hard as there are more substitutes. SaaS startups have needed to show a way to edge out marketplace oversaturation in order to raise money from top SaaS investors like SaaStr Fund, a16z, and Sequoia Capital.

AI has become the biggest disrupter to VC funding in general but it gives an advantage to SaaS companies looking to raise. Companies actually implementing AI (not just throwing it into a pitch deck) into their software have seen funds and valuations skyrocket in both public and private markets, Nvidia has seen its stock triple, and private companies like OpenAI hold a valuation of nearly $100 Billion.

Sources: Pitchbook, Nerdwallet, Techcrunch