The state of Euro SaaS
Evaluating SaaS businesses in Europe and in relation to other regions.
Have you ever wondered how big the SaaS business is in Europe? And how healthy is it compared to North America and other regions? There are multiple sources that analyze and advise SaaS businesses, but very few focus on the European side of the Atlantic.
The newsletter Euro SaaS Edge is dedicated to the European SaaS market. In addition to performing market analysis, I write about my experiences managing products and product-led growth in B2B SaaS, keeping in mind the unique characteristics of Europe, such as language, culture, and payment methods.
Euro SaaS sizing
To start with, let’s take a look at the size of the European SaaS market. The European SaaS survey conducted by investment bank GP Bullhound and released in December 2024 is a good place to start. Since there are only 100+ respondents in this dataset and more than half of them fall into the €5m to €25m ARR cohort, I will only focus on this cohort.
Key findings:
Euro SaaS businesses are expanding at a reasonably healthy rate. For a period ending in December 2023, the median 2-year CAGR is 35%.
As profitability has grown in importance, ARR per head has increased, rising from 95k€ in 2022 to 143k€ in 2024.
The median payback period for companies targeting the SME market is 13.3 months.
It is interesting to see how these metrics stack up against global benchmarking values. With over 1000 companies surveyed, High Alpha's SaaS Benchmark provides good benchmark values globally.
Globally, the two-year median CAGR was 47%, while in Europe, it was 35%. Global growth in 2022 of 61% explains a large portion of the discrepancy.
Globally, the median efficiency is $151k per employee, which is nearly the same.
The SME segment's payback period, which is 14 months instead of 13.3, is also comparable to the European median.
The global and European SaaS markets are largely comparable, with the exception of 2022, when global growth is noticeably faster than European growth. The quicker uptake of SaaS, particularly in North America, could be one factor. Macroeconomic factors are likely to also be involved, such as Russia's war with Ukraine, the resulting energy crisis, and a slower recovery from COVID in Europe.
Characters of Euro SaaS
In addition to the region-wide numbers, let’s dig deeper into what the SaaS companies in Europe are. One way to approach this is to query a LinkedIn listing of companies in the region and filter then with the keyword “SaaS” and software development as industry. Although this analysis is not "scientifically" accurate, it provides a good estimate of the businesses' sizes and locations.
Firstly, examine the business sizes using the number of employees as a proxy. The distribution shows clearly that the majority of the businesses are small; 84% have less than 50 employees in Europe. In comparison, globally, 85% are in this category, and in the USA, this cohort is clearly smaller, 77.5%. Additionally, there is a significant disparity between the next cohort of 51 to 200 employees, which comprises 14% of U.S. companies, 11.8% of European companies, and less than 10% of companies worldwide. However, it should be highlighted that even small teams can be successful today when using AI tools for software and business development; the number of employees does not always translate into revenue or growth potential.
The locations of the businesses are plotted below. The dominance of the UK, France, and Germany in the market is intriguing, but it should be remembered that these are the nations with the largest populations.
Let us finally examine the same data in light of the population of the nation. The ultimate truth is revealed by this SaaS per Capita index. Estonia emerges as the clear winner.