November 22, 2021
When the COVID-19 pandemic first began, investment in the Canadian software as a service (SaaS) industry sharply declined. With uncertainty at an all-time high, many investors chose to focus on their existing portfolios, seeking to survive rather than expand. Consequently, the total amount of capital invested in Canadian SaaS startups plummeted to just $1.17 billion in 2020, down from $5.13 billion in 2019.
Fortunately, it appears the pandemic has now come full circle; many investors now cite the pandemic and subsequent increase in demand for remote services as being an accelerant for SaaS investments.
In their latest 2021 State of SaaS Report, L-Spark, a community of SaaS founders, investors and partners, announced there has been $9.16 billion total capital invested in Canadian SaaS in 2021 to date. This substantial jump solidifies what many in the industry saw as a trend throughout the year – SaaS start-up companies are securing their place in the Canadian market.
Not only has the sum total invested increased this year, but the average deal size has also spiked. As reported by Betakit, from 2020 to 2021, the number of $50 million-plus funding rounds doubled from eight to 16. Additional trends include an increase in amount of investors (including from the U.S.), as well as a shift towards later-stage investments, with more growth-stage funding taking place at the Series B and Series C stage, as opposed to Series A investments.
Willingness to invest in SaaS start-ups in Canada undoubtedly stems from an increased reliance and demand for remote, digital solutions to many common services that previously required in-person services. The pandemic has permanently altered the landscape of business worldwide, and startups that offer remote solutions are well positioned to take advantage.
As 2022 approaches, SaaS start-ups will certainly be a particularly exciting subset of the Canadian market to watch.
By: Brittni Tee