At SaaStock 2016, we unveiled the inaugural Accel Euroscape report. Back then, the SaaStock conference was just a year old, bringing together 700 founders, VCs and execs in Dublin to learn and discuss how to build a category-leading SaaS business. Since then, the conference has scaled to bring together more than 3,000 SaaS founders and their teams and the European SaaS landscape is soaring.
Spending the last few months delving through the data to produce the 2021 Euroscape, it’s clear that over the last year Europe and Israel have hit a special tipping point. In fact, we’re now in a position to ask the question:
Are Europe and Israel on the path to global dominance and stepping out of the U.S.' SaaS shadow?
Ahead of next week’s SaaStock 2021, we joined SaaStock founder and CEO Alex Theuma on the SaaS Revolution Show podcast to provide a bit of insight into what we’ll be unveiling in next week’s Euroscape and discuss just how far Europe and Israel have come when it comes to building SaaS giants.
Alex Theuma (AT): Welcome to the SaaS Revolution show, Philippe and Varun. Before we head into this SaaS Euroscape special, tell us one fact about yourselves that the audience may not know
Philippe Botteri (PB): Well, one of things I like to do is spend time on boards...beyond company boards! I’m a surfer, snowboarder and used to skate too. In 2006, after McKinsey and before I started my career in VC, I went to Hawaii and ended up surfing with Derek Donner - one of the pioneers of Hawaiian big wave surfing. The surfboard is still in my office today.
AT: That’s great! I prefer to steer well clear of both sharks and the waves! How about you, Varun?
Varun Purandare (VP): I actually played tennis at a state level and briefly at a national level when growing up, but soon realized I was no Federer or Nadal. I do still play whenever I get the chance now though.
AT: Great stuff! Moving on from your sporting endeavours, let’s discuss the latest edition of Euroscape. Now in its sixth year, Philippe, tell those who haven’t come across Euroscape a bit about it.
PB: Yes, so back in 2006, I’d just started working in venture capital in the US. Over the next five years, the cloud and SaaS ecosystem really started to gain momentum and I was spending a lot of my time looking at relevant companies. However, the same couldn’t be said for Europe when I moved back here in 2011. My first investments were in marketplaces such as BlaBlaCar in France and Fiverr in Israel and it would still take around two years to see Europe’s first cloud companies emerge. My first European cloud investment was PeopleDoc in 2014, then came Doctolib and Algolia in 2015 and we really started to see traction in the European cloud ecosystem accelerating. It was time to start mapping out the top 100 European and Israeli cloud and SaaS companies, highlighting that the regions were active in the global cloud ecosystem and not all successful software companies come from the US. And so Euroscape was born. The report at SaaStock 2016 revealed that:
- 50% of Accel’s 10 most recent investments in Europe were SaaS companies
- The number of SaaS and cloud companies had grown 4x between 2007-09 and 2013-15
- The amount raised by European SaaS companies had more than doubled
- The 100 companies in the Euroscape list had raised $2.5 billion
But there were still a lot of questions around whether Europe and Israel could generate billion dollar software companies and all of the activity had yet to produce exits. While the US had seen 60 SaaS IPOs with a combined market cap of close to $140 billion, Europe had only seen four major exits (Qlik, Wix, Zendesk and Mimecast).
We've now seen exponential growth and the ecosystem has radically changed. The title of last year’s report was Decacorn Unleashed as this was the first year we’d seen a private Cloud decacorn emerging from Europe - UiPath. Evidence of just how far we’d come since the early days! This year, we’re going a few steps further and asking: are Europe and Israel on track for global SaaS dominance? We’ll let the audience on 12 October decide whether that’s too bold a question!
AT: That’s an exciting question - I look forward to hearing the answer! Varun, tell us a bit about the methodology Accel uses to create the Euroscape 100 list
So firstly there’s the universe of companies that have applied to be considered by our submission process. Then, we pull together a detailed map of all the cloud companies in Europe and Israel that have more than a million in revenue and yet to hit unicorn status. This is the subset of companies that we really hone in on and try to identify the next breakthrough companies. To do this, we take into account the following:
- Company growth, team and momentum
- Market attractiveness and size
- Category growth
- Company differentiation from a commercial as well as technical point of view
- Customer reviews thanks to data from our partners at G2
- Founding team and their ambition levels
It gets tougher and tougher every year to decide who makes the cut due to the explosion of the European and Israeli cloud ecosystem.
AT: And what does it mean for the companies that do make the Euroscape list?
VP: Due to the report being widely circulated, increased recognition and increased interest from investors are key benefits. It also helps generate leads for the companies listed as many organizations - large and small - refer to the report when looking for new products. We’ve also seen a high percentage of the Euroscape Top 100 eventually make it to unicorn status, so we like to think that if you’ve made the list you're well on your way onto the path to success.
AT: Philippe, what are some of the key learnings that the SaaStock EMEA attendees will get from Euroscape that could apply to their businesses?
PB: Well, we know that being a founder of a cloud business is tough and requires 200% commitment. This means you have very little time to get insights into where the broader ecosystem is heading and the areas that aren’t core to your business. This is where Euroscape comes in. It provides a detailed view of the cloud landscape globally, with a magnifying glass on Europe and Israel. We hope this will give founders a different perspective on what’s happening in the ecosystem and will get them thinking about what success looks like and how they can accelerate their company’s journey. And of course, they’ll find out if they’ve made the Euroscape top 100!
AT: Let’s go into some of those insights now. Varun, a few years ago Euroscape called out London, Paris and Tel Aviv as the main cloud tech hubs in Europe and Israel. Is this still the case or have we seen a decentralization of SaaS companies?
VP: Yes, so decentralization is definitely underway and it’s certainly accelerated in the last 18 months. This decentralization is actually one of the key strengths of the European tech ecosystem. Back in 2016, the UK, France and Israel dominated the list, with each country boasting around 20 Euroscape companies and - as you mentioned - London, Paris and Tel Aviv the key cloud and SaaS hubs. The 2020 report clearly showed that SaaS talent was no longer confined to just traditional tech hubs. The top 100 companies stemmed from 34 cities and 21 countries, showing that success really can come from anywhere in Europe and Israel. This decentralisation looks set to continue as the ecosystem matures, more interconnecting hubs spring up and global lockdowns have underpinned a more distributed workforce
AT: Philippe, who are some of the rising stars in European SaaS? What is it about them that makes them the rising stars?
PB: What’s remarkable right now - and this is something we just didn’t see 10 years ago - is the fact that Europe and Israel have really shown they can generate global category leaders. Back in 2010-2012, a lot of companies emerging from Europe were e-commerce / marketplace businesses and many were trying to replicate US success stories. Now, Europe and Israel’s cloud giants are worth multiple billion dollars and creating their own categories - Hopin, Melio, Snyk, UiPath. The list goes on and it’s exciting to see we’re now at the forefront of cloud innovation.
AT: The market seems to be really healthy in terms of capital available right now. Is it true that VCs can't deploy this fast enough? Philippe, what are your thoughts around that?
PB: It’s true that there’s a lot of capital around at the moment - funding has hit exponential levels. Five or six years ago, $70 million was considered a very big round, but now we see rounds soaring beyond the $100 millions and even across the billion mark. As a result, cloud companies’ perspectives are completely shifting and new opportunities have sprung up. For example, when a company starts to mature and hit the hundred million dollar revenue range, the way to drive your net retention rates and grow your existing cohort is to continue to develop new products and integrate them into your platform to drive upsells. This was the past roadmap for SaaS companies - organic growth, hiring talent, building new features and capabilities onto your platform internally. Now, with $300 or $400 million on their balance sheets, companies can consider sizable acquisitions. They can acquire a product that can be integrated into their platform and, if it's a good fit, can upsell it very quickly to their customers. As examples, Hopin has made five acquisitions since the beginning of 2020 (StreamYard, Streamable, jamm, and Boomset), Snyk has made several, including FossID and DeepCode, and Algolia announced its acquisition of MorphL a few months ago. The acquisition route of accelerating cloud companies’ roadmaps was something that we just didn’t see in the past.
AT: Thanks both for providing some insights into what we can expect to see on 12 October at 1:35pm BST. Are Europe and Israel on the path to global SaaS dominance? Tune into SaaStock EMEA to find out!