Investors are still Bullish about SaaS Startups. Here's Why
Right from the beginning, there has been a huge uproar for Cloud-based businesses within investing circles. Recent stats show the current upward trajectory of SaaS businesses which is not expected to subside anytime soon.
Studies from reliable sources show how SaaS will continue to transform every area of business in the coming years. Read more to know how impactful SaaS has been and why investors consider them to be a safe bet.
How strong is the SaaS trend?
In any industry, knowing that the products being built are dynamic and no real winner has either established or monopolized features is a great time for investors to fund exciting ventures.
Research from Gartner has revealed the current and expected growth rates of Software, cloud, and Infrastructure as a Service enterprise.
While IaaS and PaaS have seen tremendous growth in recent years, most new businesses are now catching up on the trend of lighter infrastructure and reduced operation costs. SaaS in this sense is the most convenient solution for this huge market. Rightfully, Gartner shows a steady 12% growth for SaaS implying a stable customer base that is into cloud-based solutions.
The 2019 Annual SaaS trends report by Blissfully reveals a stomping 78% growth of SaaS in 2018 compared to 2017. Furthermore, SaaS spending has seen a rise in every company size segment.
One interesting find they mentioned in their report is that companies now spend more on SaaS than for laptops-meaning a lesser dependence on hardware to run their business.
Source: Clockwise Software
Yet another report on the growth of Cloud businesses by Gartner indicates an expected revenue growth of over 6.3% in the Public Cloud segment in 2020 alone. The revenue forecasts for 2022 are even more encouraging, as Cloud application Services are expected to grow from $104B to $140B within a span of two years.
If anything, it would be an understatement to state that investors are interested in SaaS-based startups. As more competitive products hit the market, the SaaS landscape is yet to see its full potential unveiled into the consumer market.
SaaS becoming a mainstay for many
The SaaS landscape is going through a period of acquisitions and immense profit generation, with Atlassian, Square, Sweagle, and Zoom being some of the most notable acquisitions in the summer of 2020.
Popular SaaS platforms including Zoom, Slack, PageDuty, CrowdStrike, and DataDog went public in 2020, indicating the reach and acceptance of SaaS in every tech domain there is.
The reduction of onboarding time for products into companies has also helped in making SaaS a hassle-free solution for many. Onboarding times are expected to go down even more as new players enter the market with an even better customer experience than their competition.
Although the resultant competition is much higher, the SaaS domain is still considered to be in its adolescent stage. As features are becoming more and more common, businesses are now focusing on building combined solutions for industries to become stable players in a given market.
Why should investors be interested in this?
SaaS is here to stay
Due to its ease of deployment, SaaS is getting universal acceptance across industries compared to on-premise app development. Recent studies suggest around 73% of organizations will switch to SaaS by the end of 2021.
Being highly cost-effective and easy to adopt, small businesses are also adopting SaaS fairly quickly. It is estimated that by the end of 2020, at least 85% of small businesses will have invested in SaaS.
On-premise development is slowly getting replaced by Cloud-based players
Although the SaaS market is getting hyper-competitive by the day, enterprises that differentiate and specialize their offering to the right customer are still making big dollars with a lower churn rate.
Sid Nag, the research VP at Gartner, says “CIOs can invest significantly less cash upfront by utilizing cloud technology rather than scaling up on-premises data center capacity or acquiring traditional licensed software.”
More accessible Cloud-based development
Any doubts or objections to Cloud-based deployment were quickly folded during the pandemic when thousands of businesses quickly pivoted to ensure success by utilizing Cloud-based servers.
Source: Forbes SaaS Market Research 2021
A recent Forbes research estimating the growth of SaaS shows how the adoption cycle is yet to climb to around $369B by the end of 2024. It's the seemingly easy adoption of complex tech like AI, VR, etc. that helps SaaS to still maintain this trajectory.
The software development market is ever-evolving
Personalized, fast, and secure apps will continue to rule the market no matter what the conditions are. It is therefore a safe bet to invest in SaaS companies that heavily rely on customer feedback to stay relevant for longer.
More and more SaaS apps are providing flexibility to integrate with all major platforms needed by teams to function well. Fast-growing companies never hesitate to adopt new technologies if they serve them well. Studies have shown that typical agencies changed around 39% of their apps in the last two years alone.
Mobile-friendly apps by default
Almost every traditional enterprise-level solution was channeled towards a desktop-only version that worked with some kind of access control. Coming to the post-pandemic marketplace, the customers that use a mobile app to log in have a 41% retention rate. SaaS offerings, already run from cloud-based servers are by default accessible on any device.
SaaS has opened up a world of possibilities to occupations that do not primarily use desktops for their operation. landscaping, queue management, construction, hospitality, and even the mortgage industry are just some areas that will immensely benefit from having a mobile app to quickly get notifications and manage work on the fly.
The trend of new technology adoption will continue
This is perhaps one of the greatest advancements that SaaS has brought into the technology domain. As technology gets more democratized to more areas, entirely new models of business can sprout that could disrupt industries as we know them. Take for example the impact Salesforce brought into the sales and marketing industry.
Studies also show on average employees use at least 8 apps to get things done at work or at home. While the pandemic helped galvanize the cloud transformation, developments in high-tech devices could open up even more unforeseen opportunities for businesses to specialize in.
We link companies with today's tech
Like all businesses, SaaS businesses have their own growth trajectories which they try to correct at every step of the way. At Undaku, we help companies transform their operations into a fully paperless form of business. Our effort is in bringing businesses up to speed with current technology by managing and organizing every aspect of their business from a cloud-based UI.
If you are interested in how we help companies, take a free demo of our platform.