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The amount invested in private cloud computing companies in Europe, Israel and the US fell by 42% in the third quarter of 2022.
According to Accel’s 2022 Euroscape report, 51 cloud software developers raised capital at valuations above $1 billion in the first quarter of 2022, compared to three in the third quarter. It was only
Valuations of publicly traded cloud companies have also fallen from $2.8 trillion to $1.2 trillion over the past 12 months, Accel said.
Various software companies such as Microsoft Corp and Shopify Inc have been underperforming in areas such as data analytics, security and collaboration.
Among software-as-a-service (SaaS) companies, US data analytics software maker Snowflake Inc achieved the highest enterprise value-to-revenue multiple over the next 12 months.
However, the report shows that the multiple last month was 20x compared to 61x last September.
Philippe Botteri, partner at Accel, said:
“However, we firmly believe that strong long-term trends such as migration to the cloud will continue to drive SaaS in Europe and Israel forward.”
Still, the move of local software operations to the cloud hasn’t lost momentum, and spending on automation and digital transformation is likely to grow from $1.8 trillion in 2022 to $2.8 trillion by 2025. Accel said.
The company’s low valuations have also made mergers and acquisitions more likely, with software deals likely to hit $101 billion on an annualized basis this year, the company said.
There is about $770 billion available to buy cloud companies, $440 billion in cash on the strategic investor balance sheet, and $330 billion in technology-focused private equity funds. This venture capitalist estimates.
Reuters
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