Published on November 28, 2023, 12:57 pm

Last year, the global cloud market faced significant challenges, experiencing a staggering $1.6 trillion decline in public market capitalization and a 40% decrease in private funding. This downturn left the tech industry wondering how far the cloud landscape could plummet. However, a new normal is beginning to emerge, marking the tentative recovery of Software-as-a-Service (SaaS), which is happening at a faster pace than the recovery following the dot-com crash in 2000.

Accel recently released its 2023 Euroscape Report, an annual deep dive into the leading companies and trends in the European and Israeli SaaS markets. This year’s report, titled “Generation AI,” sheds light on how generative AI (GenAI) is driving the rebound of the SaaS ecosystem following last year’s market reset.

The latest data indicates that we are returning to a more stable state resembling that of 2019. Global Euroscape multiples are reverting to their pre-COVID ten-year averages, while venture capital investments are keeping pace with 2019 levels. Private cloud companies across Europe, Israel and the U.S. have attracted $31 billion in investments this year, approaching 2019’s mark of $27 billion. Additionally, the establishment of cloud unicorns is progressing as usual, with 11 unicorns created in H1 2023 compared to 12 during H1 2019.

However, what truly stands out is GenAI’s role in shaping this landscape. Approximately 60% of new cloud unicorns created over the past year are GenAI native enterprises. Leading players like Synthesia AI21 Labs, and Stability AI have leveraged GenAI capabilities to achieve remarkable success. Investment trends further highlight this momentum with over twenty substantial funding rounds exceeding $100 million taking place in Europe and Israel’s GenAI sector alone; while nearly forty such rounds occurred within the United States market. Even Nvidia’s recent ascent into the trillion-dollar valuation club can be attributed to GenAI’s impact.

As the cloud market continues its recovery, software founders should keep a keen eye on GenAI. It is not merely a part of the landscape; it is a driving force behind it. With significant investment and substantial unicorn creation in the GenAI space, this emerging technology has shown formidable potential for growth within the SaaS industry. As we navigate towards a post-pandemic future, embracing GenAI could hold promising opportunities for software entrepreneurs looking to make an impact in the cloud ecosystem.


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