SaaS businesses enjoying massive funding growth

Software as a Service (SaaS) is one of the biggest technology growth areas at the moment. That's reflected in the amounts of capital being pumped into the sector by investors.

A new SaaS Trends Report by Tibco Analytics and venture capital tracker CB Insights shows that funding for SaaS companies was $11.7 billion (£7.7 billion) in 2014, up 70 per cent over the past year. SaaS funding has tripled since 2011.

The biggest deal of the last year was Dropbox which received $350 million (£231 million) in extra funding. SurveyMonkey raised $250 million (£165 million), with online publishing and development specialist Automattic third on $160 million (£105 million). Cloud storage company Box and security provider Lookout each received $150 million (£99 million).

Broken down by industry most funding between 2011 and 2014 went to SaaS businesses in the area of business intelligence and analytics (838 deals totaling $6.6 million(£4.3 million)), followed by CRM and marketing each with around 400 deals totaling over $2 million (£1.3million) for each area. Monitoring and security comes next with fewer deals (226) but over $2 million (£1.3 million) of investment.

Also interesting are the figures for the number of companies exiting venture capital funding, either via mergers and acquisitions or IPOs. Total exits in 2014 were up 66 per cent year-on-year. The last quarter of 2014 also saw the highest number of SaaS IPOs in the last four years, companies floating including New Relic and Hubspot. But whilst it's the really big deals that make the news it's important to note that 49 per cent of SaaS companies exiting VC funding raised less than $10 million (£6.6 million).

Of the companies snapping up SaaS businesses the most acquisitive is Oracle, which went on a $700 million (£463 million) shopping spree to snap up BlueKai and Virtue among others. Next come IBM, Google and Saleforce each of which have made five or more SaaS acquisitions between 2011 and 2014.

The full report with much more information is available to download from the CB Insights website.

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