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18 October 2023·4 min read

Ewa Chronowska & Paweł Maj

CEE SaaS Index - September 2023 update

Global Markets in Q3 2023

The third quarter of 2023 continued to reflect the ongoing global and regional slowdown in VC investments. Despite a few major late-stage funding rounds and a slight quarter-over-quarter uptick in funding, the VC sector was still faced with notable headwinds.

According to Crunchbase, global venture funding for Q3 reached $73 billion, showing a modest improvement from the previous quarter's $65 billion but still marking a 15% decline compared to the $86 billion invested in Q3 2022. In a broader perspective - this is the second-lowest quarter since the decline in funding began in 2022. 

In the first three quarters of 2023, global funding amounted to $221 billion, reflecting a 42% year-over-year decline from the $381 billion invested in the same period in 2022. Year-to-date global venture funding in 2023 is also down from the $501 billion invested between Q1 and Q3 in 2021.

When it comes to Europe, according to the PitchBook-NVCA Venture Monitor First Look for Q3 2023 the funding in the continent also took a nosedive. In 2023, VC funding in Europe has reached €43.6 billion, a clear indication that it may not match the €109 billion invested in 2022. Furthermore, quarter-to-quarter, funding in Europe declined by 22.5% from €20.4 billion in Q2 2022 to €15.8 billion in Q3 2023.

SaaS Companies Performance in Q3 2023

Amid these economic challenges, software companies have faced their own struggles, as exemplified by the decline of The BVP Nasdaq Emerging Cloud Index, which fell by 7.7% over the last three months. This decline aligns with the broader market trend, as NASDAQ decreased by 0.7%, and Dow Jones also dropped by 1.3%. The median US revenue multiple for the BVP cloud index at the end of September 2023 was at 5.84x, down from  6,93x at the end of the last quarter in June. The median revenue growth rate for US cloud companies at the end of September was steady at around 19%. 

On a more positive note, the third quarter saw three highly valued venture-backed tech companies - Instacart, Klaviyo, and ARM - make their IPOs in the US market after a dry spell of 18 months. This signals a potential opening up of capital markets for more VC-backed tech listings.

CEE SaaS Index Updates for September 2023

The CEE SaaS Index is a tool developed by Vestbee and Warsaw Equity Group for startups and investors to evaluate SaaS companies in Central & Eastern Europe using revenue multiples from publicly traded CEE SaaS businesses. It tracks the performance of emerging public companies providing cloud software in the CEE region and compares it to the BVP Nasdaq Emerging Cloud Index in the US.

Here are the key updates from the Index performance for September 2023:

  • The median CEE revenue multiple at the end of Q3 2023 decreased slightly to 3.78x annualized revenues, marking a 10% drop since the end of Q2 2023, with no significant change year-over-year (3.78 in Q3 2022).
  • The market capitalization of all companies included in the CEE SaaS Index remained stable at EUR 1.75 billion, a 22% increase since the beginning of the year (EUR 1.43 billion in January).
  • In comparison, the median US revenue multiple at the end of Q3 2023 decreased more sharply to 5.84x annualized revenue, representing a 16% decrease from Q2 2023 and a 68% drop from its peak of 18.34x in December 2021.
  • US multiples have seen sharper declines than those in the CEE over the last quarter, and they are now 54% higher than CEE multiples, down from 66% at the end of Q2.
  • CEE-based companies are showing more robust growth compared to their US counterparts, with a 37.1% year-over-year revenue growth, significantly outpacing the 20.3% growth seen in the US.

Interested in learning more? Check out our CEE SaaS Index and stay tuned for the updates!

Related Posts:

CEE SaaS Index - June 2023 update (by Ewa Chronowska, CEO, Vestbee & Paweł Maj, Partner, Warsaw Equity Group)

Vestbee and WEG launch CEE SaaS Index valuation tool for startups (by Konrad Koncerewicz, Head of VC & Startups, Vestbee)



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