Have investors preferred to back SaaS over ecommerce as the downturn deepens?

Two of the tech sectors that attract the most investor interest are enterprise SaaS and ecommerce. While it is possible to build strong companies in either category, many investors believe that the first sector is more recession-proof than the latter.

Because enterprises purchase software on a subscription basis, revenue from these customers tends to be “sticky.”  As for ecommerce, consumers can ditch their online shopping habits at any time.

“Consumer [startups] can grow from zero to 100 very quickly. But they can also go from 100 to zero very quickly,” said Atul Rustgi, partner at Accolade Partners, a venture, growth equity and crypto fund-of-funds.

Rustgi is much more confident in the resilience of B2B software companies. “Once you get a good product-market fit on the enterprise side, the flywheel effect is just beautiful.”

Despite concerns about the potential instability of ecommerce businesses, investors so far seem equally interested in backing enterprise SaaS and ecommerce startups in this downturn.

In Q2, VCs invested in 211 ecommerce startups, down from 330 the previous quarter, a 36% drop, according to PitchBook data. Similarly, VCs participated in nearly 30% fewer enterprise SaaS deals over the same period.
 

 

 
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