SaaS Funding - As Equity Investment Declines Revenue Based Funding Flourishes

By Filippa Dahlgren
Research Associate
Last update: 20 July 20221 minute read

Findings from a detailed analysis of 656 equity funding rounds from 319 Scandanavian SaaS companies since January 2015

In the most comprehensive research carried out to date, Rangewell working with Filippa Dahlgren, a final year student at Richmond University completing her BA in Finance and Investment, recently completed a detailed research project on equity funding in the Scandinavian SaaS (Software as a Service) market and identified how new external sources of finance, including revenue-based lending, are becoming more prevalent in the sector as equity appetite is declining.

Table of Contents

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SaaS Funding Explained

  • The past decade has seen a massive change in digitalisation and the adaptation of new technologies across industries with some of the largest growth rates being seen in eCommerce and Software as a Service (SaaS).
  • SaaS is a software licensing and delivery model in which software is centrally hosted and licensed on a subscription basis.
  • These solutions are among the fastest-growing segments in the IT industry for a variety of reasons, including flexibility and affordability. Consequently, an increasing number of firms are turning to SaaS models rather than more traditional on-premise software solutions. 

Growth in the SaaS Market

  • The increase in the construction of data centres has contributed to the rapid adoption of SaaS solutions among businesses
  • The prevalence of an ideal business environment is leading to a rising number of startups across the Scandinavian countries – an average of 50 new market entrants each year since 2015, amounting to a total of 349 new SaaS enterprises. 
  • The IT expenditure by different industry verticals in order to remain competitive in the global market is increasing steadily, while many firms have begun to implement newer methods and processes, which have increased the adoption of emerging technologies, like AI, IoT, machine learning, and many more – provides further revenue generation opportunities for the SaaS providers, as emphasised by the median revenue growth of 30.27%.

Impact of the Covid-19 Pandemic

  • The SaaS market has boomed due to the increased demand for software tools as businesses accelerated their digital transformations and shifted to remote working. 
  • In 2020, the number of equity funding rounds in Scandinavia peaked at 116, estimated at a total value of £1.106bn – an increase of 119% in funding rounds and 755% in capital raised since 2015.
  • However, the recent tech crash on the stock market has significantly impacted the current investment climate and, subsequently, the amount of funding raised among startups – among those startups that have been hit the most severely are firms operating in the SaaS market.

Key Takeaways

SaaS Equity Funding Freeze Becoming Ever More Pronounced

  • Pronounced downward trend in equity funding since mid-2021. Of companies that have raised more than one funding round - 64% have not raised in the last 18 months  and of these just over 30% have not raised equity funding in over 36 months.
    • SaaS businesses have historically raised funding every 18 - 24 months – our data shows that the funding freeze is disturbing this cycle.
  • Flight to quality very pronounced. Established companies raising large rounds but the number of announced funding rounds down 86% since 2020 and the total amount of funding raised down 78% since 2020.
    • Funding Rounds
      • 116 funding rounds announced in 2020
      • 73 funding rounds announced in 2021
      • 16 funding rounds year to date in 2022 (for comparison 64 funding rounds were announced in H1 2020 and 46 funding rounds were announced H1 2021)
    • Funding Raised
      • £1.106bn raised in 2020
      • £1.732bn raised in 2021
      • £248.468m raised year to date in 2022 (for comparison £336.500m was raised in H1 2020 and £1.260bn was raised in H1 2021)
    • Quarterly analysis of 2021 highlights weakness setting in during Q3 and Q4
      • Q1 - £127.144m
      • Q2 - £1.133bn
      • Q3 - £357.939m
      • Q4 - £113.486m
    • As more startups have entered the market over the last couple of years, the intensity of competition has increased rapidly and venture capitalists have, therefore, been eager to invest in the most prominent firms at an earlier stage, resulting in an additional funding round referred to as a “pre-seed round”. 
    • Consequently, valuations have begun to increase with each funding round – an investment that was previously large enough to be considered an A-round would, in some cases, be raised in a pre-seed round.
    • As a result, firms that raised private equity based on high valuations in 2020-21 are now struggling to raise funding, considering that investors are unwilling to invest an amount that will meet those high valuations
    • Those SaaS Businesses that have managed to raise funding Year To Date in 2022, are primarily well established companies that have raised at least one round of funding previously, accounting for 75.61%.
      • Out of the £248.458m raised in 2022, £219.384m (88.29%) has come from three companies:  
  1. Cognite AS - Feb - £89m - 3rd fund raise
  2. Ardoq AS - March - £90m - 5th fund raise
  3. Occtoo AB - Apr - £40m - 1st fund raise 
  •  The lack of funding suggests that those companies who experienced significant growth in 2020-21 will be unable to maintain those same growth levels in 2022 

Demand for Debt Financing

  • As equity rounds take longer to close and valuations compress, debt rounds are becoming much more frequent - with a number of new debt and revenue based funders showing strong interest in the Scandinavian market.
    • The recent tech crash in the public equity markets has resulted in an investment climate that is highly unfavourable toward the market entry of SaaS companies.
    • Looking at the Bessemer Cloud index, the curve emphasises a tremendous decline in market value, down more than 53% compared to June last year.
    • Last year in June, the median forward revenue multiple was trading at 14.44 times earnings, while this year’s equivalent is down to 4.77, emphasising that prices have declined by almost 70%.
    • Venture capitalists in Stockholm have emphasised that many financing rounds are taking longer than expected to close and that company valuations made at a later stage have fallen by some 50% compared to the previous year.
    • For those companies that have entered the market with unfortunate timing, cash might already be tight, and there may not be enough time to make significant changes to preserve adequate levels of capital until the next funding round can be raised.
    • In those cases, cuts will be insufficient, and alternative funding is required. Thus, there is arguably a strong demand for debt financing in the Scandinavian SaaS market.


  • The research has been collected from a data sample comprising 319 SaaS companies incorporated in Sweden, Norway, and Denmark.
  • The data only considers equity funding and does not account for debt funding or grants.
  • In some funding rounds the amount has been undisclosed, so there is a discrepancy in the total amount of funding raised and by its very nature the information is not complete.
  • Out of the 656 funding rounds, 526 had a disclosed amount while 130 had an undisclosed amount.
  • Funding rounds exceeding £20m have been excluded from the graph of the number of funding rounds per month for aesthetic purposes but are included in the underlying data.


  • The data is based on publicly available information from a variety of sources, including specialist websites and resources (including Vainu, Crunchbase and CB Insights) , as well as local newspapers (including Øresund Startups, ArcticStartups and EU-Startups) as well as national newspapers (Svenska Dagbladet, Dagens Industri, Børsen and Dagens Næringsliv) and specialist blogs (including Finovate, Pitchbook and Finextra).

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