SaaS follow-on rounds see a slowdown, but it won’t last forever

Global venture funding has been rather gloomy as of late, with data from Crunchbase showing that investments fell in Q3 despite a late-stage rebound led by large AI deals.

And the story’s no different for SaaS startups.

In May, net new SaaS sales came down from a spike in Q1 while churn worsened, spurred by reduced business-to-business budgets and higher borrowing costs. At the same time, extension rounds — an important indicator of a sector’s overall health — declined.

PitchBook data compiled for TechCrunch shows that U.S. VC follow-on activity in SaaS dropped from a high of $9.7 billion across 270 deals in March to a low of $1.5 billion across 131 deals in October. The decrease in deal count has been consistent: Each month since June, the total number of SaaS follow-on deals has dipped by around 10 to 40 deals month-to-month.

The caveat is that total SaaS extension deal value has been holding steady at between $1.5 billion and $2.9 billion from April to October. But that simply indicates that a smaller cohort of startups has been securing disproportionately larger extension rounds.