Marc Andreessen, Co-Founder of Andreessen Horowitz, famously said in 2011 that “software will eat the world.” 

Over a decade later, this statement rings true. 

Software, especially through the rise of Software-as-a-Service (SaaS), has become a key driver of business success and competitiveness.

But, What’s Happening in the SaaS Funding Landscape?

The U.S. SaaS market, once a favorite among investors, is seeing some shifts.

Crunchbase data shows that SaaS and enterprise software companies raised $4.7 billion in 2024 through various funding stages. However, this marks a decrease compared to previous years, with fewer deals being made.

Other industry leaders believe that even though funding is slowing down, SaaS remains as important as ever; and that the market is simply adjusting and expecting significant growth.

As a result, investors are now more focused on companies that are profitable, demonstrate a low burn rate, and have strategic growth plans—rather than businesses that are expanding at any cost.

Maximize investment opportunities

AI-Powered? Game-Changer!

AI is not only changing the business world, it’s also affecting SaaS funding. As AI tools and solutions grow, SaaS companies using AI are becoming top choices for investors, making this technology a key factor in funding decisions.

In 2024, the SaaS companies securing the biggest investments all had one thing in common: They were all leveraging AI. While not every company is a pure AI play, integrating modern, “AI-infused” capabilities provides a significant competitive advantage—and potentially a $5 billion investment from Alphabet, as seen in the case of Waymo.

In the biotech realm, Xaira Therapeutics secured $1 billion in funding, aiming to translate AI findings into transformative new medicines. However, many believe that the increasing focus on AI will eventually lead to a SaaS marketplace where product uniformity, as opposed to differentiation, reigns.

Differentiate to Win

Product differentiation is a concern for well-established companies; new market entrants will also face this challenge. 

BCG’s survey reveals “differentiation” to be the second most pressing concern for SaaS companies. As an industry professional, you doubtlessly understand that appealing to everyone often hinders value creation and delivery. Without a clear differentiator, resources will be stretched thin, and competitors with a clear objective will prevail.

Borrowing insight from Stijn Hendrikse (Founder and CxO | Author of T2D3 | Board Director), you don’t need a massive customer base; “It’s about being irreplaceable to a specific audience”.

Moreover, building a modern marketing function is essential in communicating your company’s unique value proposition. Gartner recently revealed that 75% of B2B buyers prefer a rep-free sales experience, stressing the need to clearly showcase the business’ unique, differentiating features. Consider leveraging a hybrid approach to selling and client success. 

In a nutshell:

• Stay true to your niche

• Combine digital and human elements

• Communicate key differentiators clearly

How Will You Do in a Few Months?

Building a business model that can handle growth is essential for VCs to even consider funding, as scalability is a major factor when it comes to their profitability.

In fact, decision-makers strive to go beyond the total addressable market (TAM) metric, and rightly so. Today, your fellow professionals are focusing on demonstrating their ability to scale success. If you’re considering following suit, hone in on:

• Improving annual revenue (ARR) per employee

• Customer acquisition cost (CAC) payback and lifetime value (LTV)

• Customer and monthly recurring revenue retention rates

Moreover, Net Revenue Retention (NRR), otherwise known as net dollar retention (NDR), remains top-of-mind for your peers who seek funding, enabling them to clearly demonstrate that you’re able to grow revenue cost-efficiently and have loyal customers.

While there are many ways to improve NRR, the most methods that stand out are:

• Lowering customer turnover

• Enhancing training and onboarding

• Identifying customer needs and providing value

• Increasing upselling and cross-selling opportunities

Also, What’s Your Global Potential?

With SaaS markets growing, having an international presence can be key for companies looking for funding.

Investors are drawn to big market potential, and worldwide expansion shows strong growth opportunities. It also means the businesses can scale by reaching more customers without huge cost increases. Go international to acquire customers in a less saturated market.

Expanding internationally helps reduce risks by spreading out revenue across different markets and tapping into various, new economic and regulatory environments. Going global also opens up chances for strategic partnerships and access to specialized talent, making the company more competitive.

Though it can be challenging, having a clear plan for international growth makes a SaaS company more attractive to investors by showing its ability to succeed long-term.

This was the case for TrusTrace, a Stockholm-based SaaS company specializing in product traceability and compliance. With a goal to improve its global expansion ambitions and expand collaborations worldwide, the company garnered $24M in funding led by Circularity Capital. 

The Gold Standard … of Customer Experience Metrics

The advent of Net Promoter ScoreSM (NPS®) enabled industry professionals to rethink how they measure, approach, and improve their customer experience efforts. First developed in 2003 by Bain and Company, NPS is now used by millions of your peers to elevate customer perception.

Respondents rate from 0 (not likely at all) to 10 (very likely). Based on their score, customers are placed into one of three groups (detractors, passives, and promoters) to calculate the NPS score.

VCs appreciate the insights provided by this metric and consider it an important aspect of a robust pitch. Bain & Company details how you can make the most of NPS and transform customer and employee loyalty.

Ensure SaaS Fundability

As it turns out, SaaS isn’t just “eating the world”—it’s evolving, and AI is leading the way.

Investors are focusing on businesses that stand out, have sustainable growth, and use AI to drive innovation. SaaS companies that show strong customer loyalty, global expansion plans, and a clear value proposition will continue to attract funding. 

As the market settles, success will come to those who are strategic, innovative, and focused on scaling without losing sight of their strengths. Stay focused on your niche and improving customer experiences to drive long-term success.