IT Spending Slowdown🔻

And also: Data on Japan's cloud adoption 🍱, SaaS IPO Benchmarks 📝 , Cybersecurity funding decreases 📉....

This is the Cloudly Update. Helping you stay above the Clouds.

Today we bring you:

  • Slowdown in IT spending

  • Japan behind in Cloud adoption

  • What is needed at IPO for SaaS companies

  • Cybersecurity funding on downhill

  • Toast announces integrated invoicing service

The latest macro survey from Enterprise Technology (ETR) Research quantifies spending is decelerating and forecasts that it will grow by 5.5% in 2022, which was 8.3% in December 2021 and declined steadily in March & June polling.

  • Freezing projects - In Q1 2020, the top line was at 12% versus 25% today, and project freezes were at 22% versus 13% today.

  • Cost-cutting strategies

  • 45% looking at reducing their on-demand spend

  • Eliminating redundant vendors

  • Prioritizing Cybersecurity

Interest rates, Ukraine, oil supply, and wages are “out of our control” factors and causing a conscious approach. But leading tech companies are well-managed and are flexible to adjust the costs associated with it.

Japan's cloud computer investments are at 4% in 2021, one-third of North America.

  • According to Gartner, this gap is expected to widen in 2025 to 8% in Japan, and 22.2% in North America

  • 76.4% of IT Japanese budgets are on the maintenance and management of existing systems

  • Only 31% of Japanese companies use cloud services

  • In IMD's 2021 World Digital Competitiveness Ranking, Japan ranked 28th at 73.0 point

In his excellent blog article, Sammy over at Blossom Street Ventures showed data on the revenue levels and growth levels of 73 SaaS IPOs from October 2017. We see this as a good benchmark on what fundamentals need to be reached before considering an IPO.

  • The median IPO company had a revenue growth of 43% from the prior year.

  • The median overall revenue was $168m at the point of the IPO.

Key observations

  • Triple-digit growth was recorded by Snowflake at 174%, Livongo at 122%

  • Only ten were below revenue of $100mm+ at the time of IPO. (BackBlaze being the lowest at $54mm)

  • Slow growth is allowed if you are big. Survey Monkey, McAfee, and Informatica have larger revenues but are lower in revenue multiples relative to peers but can go public.

  • An average of 11% of revenue was considered as non-recurring such as services, implementation, and other non-recurring revenue. And every SaaS company has some level of it.

  • Public company data is the most transparent and honest data but is not comparable to private M&A exits.

For the fourth straight quarter, funding to VC-backed cybersecurity start-ups decreased. Only 124 funding deals were announced, the lowest since the third quarter of 2014

According to Crunchbase,

  • Q3 2022 saw only $2.6 billion in investments in Cybersecurity start-ups, the lowest total since the same quarter in 2020, which saw $1.6 billion.

  • There were 49 rounds of $100 million or more through three-quarters last year, compared to only 39 in the same period this year.

Although the lowest quarter since 2020, nearly $13 billion of funding has been recorded, surpassing the total amount of venture capital raised in 2020 of $8.9 billion.

Investor interest grew in application security, security automation, cloud data security, identity and access management, and the SaaS security space.

Toast, the all-in-one digital platform built for restaurants, announced the launch of the Toast Invoicing System for simplifying payments for all types of orders and events with no additional cost to existing customers.

Customers can set payment due dates and reminders and collect and redeem deposits.

Toast Point of Sale and Toast Kitchen Display System (KDS) captures orders online, sends estimates, prints full-page prep sheets, and tracks orders.

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