Software: Follow the Money

Written by IQ500 | Sep 28, 2022 9:11:51 AM

It is hard to disagree that 2021 was an unprecedented year for capital markets. Every risk asset was hot, from SPACs, and M&A, to the private market. One place capital, and attention, flocked to was growth technology. VC investments in Software would fit that description, and the numbers speak for themselves.

Global VC Deal Size in Software, by Stage

2020

2021

Source: S&P Capital IQ

Big Picture Numbers

The median deal size and upper and lower bound ranges saw a clear and significant upward shift in 2021 compared to the previous year.
From early- to late-stage, VC median deal size jumped for most Series by almost double.
Software companies were raising between $8 million to $18 million and $12 million on average for their Series A. A year later, the range has jumped from $14 million to $26 million, with the median round size jumping to $20 million.

A Software Banker's Perspective

by David Loucks, Managing Member of Third500 LLC

"Investors coming out of COVID had expected a massive shift in consumer behavior. Work-from-home, online shopping, home fitness, and so on had risen before COVID lockdowns, and the pandemic has only pulled that trend forward. Or at least that was the narrative. These narratives have led to sky-high valuations in the public market for stocks that fit the bill; hence, that enthusiasm has trickled down to the private market. Therefore it is not a surprise to see massive shifts in capital funding companies in the space and deal sizes growing; not to mention 2020 was during the midst of COVID, and as such, investors were more defensive in writing checks."

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