VC landscape in Q1 2024
In the first quarter of 2024, the global venture capital (VC) funding recorded was notably lower than previous years, continuing a downward trend. According to Crunchbase, VC funding totaled approximately $66 billion in Q1, marking a decrease of about 20% year-over-year from Q1 2023. This is the second-lowest funding level recorded since early 2018. Despite a slight quarter-over-quarter increase of 6%, the funding landscape remains cautious, reflecting a more subdued investment climate compared to the peaks of recent years.
Looking forward
While it's still early in the year, the outlook for 2024 suggests that the VC market may remain cautious, with potential stabilization later in the year if economic conditions improve. The sectors showing relative strength, such as AI, may continue to attract significant investments, albeit at potentially lower valuations than seen in the peak years of 2021 and 2022.
SaaS companies in Q1 2024
Public SaaS companies in Q1 2024 have shown mixed performance, with the BVP Nasdaq Emerging Cloud Index experiencing minimal growth at the start of the year but facing a slight decline already by mid of April, demonstrating a cautious market sentiment.
Despite these challenges, the median revenue multiple for companies tracked by the BVP Nasdaq Emerging Cloud Index remained relatively high at 6.84x as of the end of Q1, indicating that investors continue to value growth prospects in the SaaS sector. This figure aligns with the industry's focus on maintaining robust revenue streams even amidst broader economic uncertainty.
Moreover, SaaS expenditure is expected to continue growing, with a significant increase projected for 2024. This growth is partly driven by the adoption of digital tools and technologies, which enhance operational efficiencies and user experiences through multiple API integrations. Such integrations enable SaaS companies to offer more flexible and competitive solutions, crucial for multiple sectors, where companies are increasingly relying on advanced SaaS applications to maintain an edge.
CEE SaaS Index updates for March 2024
CEE SaaS Index is a simple tool for startups and investors to value SaaS companies in Central & Eastern Europe based on revenue multiples from publicly traded SaaS companies from the CEE region, developed by Vestbee and Warsaw Equity Group.
While revenue multiples from publicly traded SaaS companies can provide a helpful starting point for valuation, currently available indexes are only based on US-listed SaaS companies, leaving the CEE region without relevant benchmarks, despite the region's thriving startup ecosystem and quadrupled VC funding over the last three years.
With projected growth and increased investment in CEE tech companies, a more appropriate valuation benchmark for regional startups and investors is required. To meet this need, Vestbee and the Warsaw Equity Group have collaborated to develop the CEE SaaS Index, providing a relevant benchmark for both regional and international investors.
Here are the key updates from the Index performance for March 2024:
- The median CEE revenue multiple at the end of Q1 2024 decreased slightly to 3.85x annualized revenues (up 13% since the end of 2023), and remained stable YoY (3.86 at the end of Q1 2023)
- Market capitalization of all companies included in the CEE SaaS Index raised to EUR 1.9B — up 8% since the beginning of the year (EUR 1.76B at the end of 2023).
- For comparison, the median US revenue multiple at the end of Q1 2024 increased to 6.84x annualized revenue — up 6% compared to 6,44x at the end of 2023) and is 63% lower than its record high of 18.34x in December 2021.
- US multiples have seen a slower pace of growth than ones in the CEE over the last quarter, and they are now 78% higher than CEE multiples (down from 90% at the end of 2023).
- CEE-based companies are growing slower than their US counterparts — 10.3% vs 18% YoY median revenue growth rate.
