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Generative AI Drives the Revival of European SaaS

Last year, the global cloud market hit a wall, with a massive $1.6 trillion wiped off the public market cap and a 40% nosedive in private funding. While innovation continued to emerge across Europe’s and Israel’s cloud ecosystem, the tech world held its breath as everyone wondered how far things could keep falling.

Today, a new normal is beginning to emerge in the cloud landscape, and a tentative SaaS recovery is underway, with Accel’s data showing that the bounceback is happening faster than post-2000. The Nasdaq Index took 14 years to return to 80% of its peak. Today, it’s taken just 18 months to reach the same milestone due to solid balance sheets, the exponential growth of AI, and the resilience of the U.S., European, and Israeli cloud ecosystems.

At Accel, we recently launched our 2023 Euroscape Report, an annual in-depth analysis of the top companies and trends in the SaaS market across Europe and Israel. This year’s report — Generation AI — reveals that the SaaS ecosystem may recover following last year’s market reset, driven by the growth in generative AI (GenAI).

So, what is the roadmap for software founders now? Let’s dive into the data.

GenAI has fueled the market’s recovery

The latest data paints a clear picture: We’re returning to the market pulse of 2019, carving out a steadier state in the process.

The latest data paints a clear picture: We’re returning to the market pulse of 2019, carving out a steadier state in the process.

The global Euroscape multiples are reverting to the 10-year pre-COVID average. Venture capital is being invested at 2019’s pace, with private cloud companies across Europe, Israel, and the U.S. attracting $31 billion in investments this year — not far from 2019’s $27 billion mark. The birth of cloud unicorns is keeping pace with the past, too, with 11 unicorns created in H1 2023, nearly matching the 12 from the first half of 2019.

GenAI is not just part of the landscape; it’s driving it. About 60% of the new cloud unicorns created over the past 12 months are GenAI native, with power players like Synthesia, AI21 Labs, and Stability AI at the helm. Investment trends are just as telling, with over 20 hefty rounds of over $100 million in the GenAI space across Europe and Israel and nearly 40 in the U.S. Nvidia’s jump into the trillion-dollar valuation club? That’s GenAI at work, too.

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