{"id":9383,"date":"2023-08-14T09:53:48","date_gmt":"2023-08-14T09:53:48","guid":{"rendered":"https:\/\/mysourcefunding.com\/startups\/europes-business-software-startups-prove-resilient-why\/"},"modified":"2023-08-14T09:53:49","modified_gmt":"2023-08-14T09:53:49","slug":"europes-business-software-startups-prove-resilient-why","status":"publish","type":"post","link":"https:\/\/mysourcefunding.com\/?p=9383","title":{"rendered":"Europe\u2019s Business Software Startups Prove Resilient: Why?"},"content":{"rendered":"
\n

By some measures, Europe\u2019s business-to-business software startups and scaleups are outperforming their peers in the wider tech sector.<\/p>\n

According to new data published by London-based VC, Notion Capital, business software companies accounted for 30% of the value of Europe\u2019s tech sector in 2022. In monetary terms, businesses in this segment were worth $1.1 trillion against a value of $3.3 trillion for the technology sector as a whole.<\/p>\n

And perhaps surprisingly in the current climate, the value of the sector increased by 18 percent year-on-year, rising from $721 million in 2021. And while investment in the wider tech sector fell by 19 percent, business software businesses attracted $40 billion in VC capital, a rise of 7.4 percent.<\/p>\n

Employment in the sector remained stable. At a time when many technology businesses were considering or implementing layoffs, the collective payroll of business software companies came in at 2.8 million people, roughly the same number of people employed in 2021.<\/p>\n

So what does this tell us about a corner of the technology sector that doesn\u2019t always enjoy the highest of profiles? The business software market may be widely discussed in specialist publications and the business pages of newspapers, but even relatively big and successful players tend to be little known by the public at large.<\/p>\n

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And yet, as Notion Capital\u2019s European Business Software Report highlights, they attract considerable investment and the sector does appear to be growing in the face of economic adversity.<\/p>\n

Can Europe Compete?<\/h2>\n

But here\u2019s the question. This is a market that has – with a few exceptions – traditionally been dominated by U.S. companies. So has something changed in Europe? What does this report say about the ability of European companies to compete?<\/p>\n

George Windsor is Director of Research at Notion Capital. As he explains, The intention of the report was to provide insights into the progress of the European tech ecosystem, particularly the business software segment. \u201cWe wanted to see how European companies were faring in comparison to those in the U.S.,\u201d he says. And rather than be compiled for internal business intelligence reasons, Notion hopes the data will be useful to those with an interest in the development of the European business software space.<\/p>\n

A Maturing Ecosystem<\/h2>\n

So what are the factors underpinning the resilience of Europe\u2019s business software sector. One key element of the picture is demand from other tech companies. \u201cEurope\u2019s tech ecosystem is maturing, ” says Windsor. \u201cAnd as the sector matures, companies need tools. Those tools are being supplied by business software companies.\u201d<\/p>\n

And of course, there is demand from companies outside the tech sector. From banking and financial services to manufacturing, digital transformation is continuing across the economy as a whole creating opportunities for new B2B software providers.<\/p>\n

But how do European companies take advantage of those opportunities in a market that has been dominated by North American rivals? This isn\u2019t captured in the data, but Windsor sees a home market-first approach, widening out to include new countries and territories as businesses grow.<\/p>\n

\u201cAnecdotally companies start by selling to their domestic market, then they look at the continent. After that, they expand to other regions.\u201d There is, Windsor adds, a preference for the Asia Pacific. The U.S., on the other hand, remains a difficult market.<\/p>\n

Wherever the sales opportunity happens to be, persuading customers to come on board is probably the biggest challenge facing business software providers. And for relative newcomers – the startups and scaleups – there is the question of how you match the sales and customer support operations of major players.<\/p>\n

One way forward is product-led growth. Or to put it another way, the creation of compelling software products that can be tried out easily within a customer organization. If the software pushes all the right customer buttons, more subscriptions are sold. To over simplify, sales snowball through recommendation, endorsement and word of mouth. It\u2019s a model that really depends on building a good product and then making it better over time. Another approach is Customer Success, which tends to involve large customer-supporting teams.<\/p>\n

Notion\u2019s data doesn\u2019t capture the marketing trends with European business software, but the firm does see an opportunity for vendors to bring together the benefits of the customer success and product-led models.<\/p>\n

Headwinds for the Sector<\/strong><\/h2>\n

As Windsor sees it, the report should foster a degree of optimism among founders working in the business software sector. Not only are valuations holding up, but there is also investment pouring into Europe from the U.S. VCs. Indeed, American firms accounted for 40 percent of capital raised by European startups in 2022.<\/p>\n

There has been a pattern. \u201cEuropean VCs invest at the early stage. This creates opportunities for U.S. investors to come in at the later stages,\u201d says Windsor. That pattern may evolve. \u201cIt may be that the U.S. investors will begin to come in at the earlier stages,\u201d he adds.<\/p>\n

On the whole, Windsor sees this as a good thing. \u201cWe are seeing that there is a complement between U.S. and domestic investment,\u201d he says. \u201cI don\u2019t think this is something we should be concerned about.\u201d<\/p>\n

But there is a Caveat to the optimism. The sector has been resilient overall, but these are not buoyant economic times. \u201cThere does seem to have been a downturn in 2023. We are not quite out of the woods,\u201d Windsor says. Investment is continuing, but perhaps more cautiously and with our old friend \u201cthe flight to quality\u201d as an emerging theme. Businesses working in the sector should focus on efficient growth.<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By some measures, Europe\u2019s business-to-business software startups and scaleups are outperforming their peers in the wider tech sector. According to new data published by London-based VC, Notion Capital, business software companies accounted for 30% of the value of Europe\u2019s tech sector in 2022. In monetary terms, businesses in this segment were worth $1.1 trillion against […]<\/p>\n","protected":false},"author":1,"featured_media":9384,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[77],"tags":[],"class_list":{"0":"post-9383","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-startups"},"yoast_head":"\nEurope\u2019s Business Software Startups Prove Resilient: Why? | Brandiary<\/title>\n<meta name=\"description\" content=\"By some measures, Europe\u2019s business-to-business software startups and scaleups are outperforming their peers in the wider tech sector. 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