Generative AI is fuelling European software-as-a-service (SaaS) and cloud services startups, according to the latest report published by VC firm Accel.
The 2023 Euroscape report says that although investment into the sectors has returned to levels similar to 2019 (prior to the pandemic), there are signs of recovery from the downturn.
“Following the global tech reset of the past 12 months, it’s reassuring to see the cloud ecosystem’s resilience and early signs of a new normal settling in,” says Philippe Botteri, partner at Accel.
“Valuations, investment levels and unicorn creation are now back in line with 2019 levels.”
The new normal
Funding in cloud services in Europe and Israel was $11bn in 2023, down from $31bn in 2021, but Botteri says that the 2021 figure was a “huge distortion” due to inflated valuations and the Covid tech boom.
The report also sees reasons for optimism, including the strengthening Nasdaq, which has returned to 80% of an all-time high in 2023. After the 2000 financial crisis, it took the exchange 14 years to hit the same milestone.
It said that GenAI is fuelling innovation, funding and new unicorn creation in Europe.
The GenAI effect
GenAI is the trend to watch in 2023 — and in the next couple of years — as it transforms the software paradigm and creates new opportunities.
Of the SaaS and cloud unicorns created in Europe and Israel in 2023, 45% are GenAI native, including AI21 labs, Stability and Synthesia.
Although Europe is on par with the US when it comes to the largest rounds in non-GenAI companies in SaaS or Cloud, it is doing a lot worse when it comes to GenAI investments.
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https://sifted.eu/articles/euroscape-2023-report-saas