In the most comprehensive research carried out to date, Swedish student Filippa Dahlgren, currently in the final year of her BA in Finance and Investment at Richmond, and now doing an internship with business finance experts Rangewell, recently completed a detailed research project on equity funding in the Scandinavian SaaS (Software as a Service) market. Filippa’s research identified how new external sources of finance, including revenue based lending, are becoming more prevalent in the sector as equity appetite is declining.
SaaS is a software licensing and delivery model in which the software is centrally hosted and licensed on a subscription basis. Due to the predictability of the revenue the sector has proved popular with private equity, venture capitalists and business loan providers looking to provide new business loans.
The Scandinavian SaaS sector for both equity and loan providers has experienced significant growth in recent years, boosted, like the e-Commerce finance sector by the Covid-19 pandemic, and the increased demand for software tools as businesses accelerated their digital transformations and shifted to remote working. However, the recent tech crash in the public equity markets has significantly impacted the current investment climate and, subsequently, the amount of equity funding raised among start-ups. Among those start-ups that have been hit the most severely are firms operating in the SaaS market.
To analyse the downward trend in equity funding in the Scandinavian SaaS sector, Filippa worked with Rangewell – a business finance specialist headquartered in London who works with businesses looking for external sources of finance including business loans, commercial loans and all types of business finance solutions.
From a sample of 656 equity funding rounds across 319 SaaS provided based in Sweden, Norway and Denmark, since 2015 the research highlighted:
- 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 52 have not raised equity funding in over 36 months
- 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
- 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 full research article has been published on Rangewell’s website and in the Scandinavian and specialist technology and debt finance trade press.
Associate Professor in Finance and Economics at Richmond Business School, Dr Ivan Cohen, who has been Filippa’s faculty supervisor during the internship, commented, “Majoring in Finance and Investment, Filippa has always shown a consistently high level of academic performance, bringing together excellent quantitative skills with a superb writing style. Her professors describe her as a “very high achiever”, a perfectionist with the talent to match her ambition. Her academic advisor says that she possesses the gift of insight into Finance. Definitely one to watch!”
Cecile Loyen, Head of Careers and Internships at Richmond said, “The Internship team is extremely proud of Filippa’s accomplishments. She was already standing out academically prior to her internship, but this experience at Rangewell has given her a chance to also prove herself professionally and we wish her all the best in her future career.“