3 Leading VCs’ View of SaaS in Europe

Via SaaScribe: With big SaaS names like Zendesk, Intercom, Teamwork, New Voice Media, and many more besides emerging out of Europe in recent years, it is clear that SaaS in Europe is on the up.

As these breakout success stories blaze a trail for further innovative SaaS entrepreneurs to follow, the SaaS ecosystem in the region is developing apace around them – with not only great founders and products but an ever-improving mix of talent, capital, networks, and resources that make for an exciting growth industry. Nonetheless, with a heritage stretching back to the beginning of time (in tech terms at least), Silicon Valley remains the centre of the SaaS universe, and Europe has a lot of catching up to do.

In order to get a feel for the current status of SaaS in Europe, I spoke to three SaaS-focused VCs for whom the software industry on the eastern side of the Atlantic is priority number one. I was interested in their perspective on the future of SaaS in Europe and how the ecosystem stacks up against the US but also in picking their brains on what characteristics they look for in SaaS start-ups and the European investments they’re most excited about.


Conor Stanley is founder of Tribal VC, a Dublin-based firm which specialises in enterprise SaaS and counts Intercom, Boxever, and NewsWhip amongst its impressive list of early-stage investments.


Will Prendergast is a founding partner at Frontline Ventures, a firm which in breakout SaaS start-ups across Europe and has seen notable investments like Logentries and Orchestrate acquired in 2015.


Jos White is a partner at Notion Capital who in July of last year announced a $150m fund to continue its mission of identifying, investing in, and supporting the best B2B SaaS entrepreneurs in Europe.

Europe and the US: Is SaaS town big enough for both of us?

It’s a fact of tech life that the US is by far the biggest and most influential market in every way that matters – be that in terms potential customers, investors, partners, or employees. Silicon Valley remains the spiritual home of the software industry and that is unlikely to change for the foreseeable future. However, with some of the aforementioned European SaaS start-ups leading their categories globally, is it still obligatory to establish a presence (if not your HQ) in the US at an early stage in order to optimise your chances of success? The answer lies in the current gaps between the US and Europe as environments conducive to scaling a SaaS business and these can be broadly categorised under talent, customers, and capital.

“Recycling of skills and experience will close the gap.”

1. Talent Gap

“It’s becoming increasingly possible for founders not to have to make that move”, says Stanley, “but ultimately, once the core team is established in Europe, in order to bring in the next layer of expertise at VP level that’s needed to scale a business, that experienced talent is harder to come by in Europe.” However, Stanley does see the talent gap closing rapidly in the coming years as he has seen the proliferation of senior SaaS executives coming out of the US SaaS companies operating out of locations like London and Dublin seeping out into the local ecosystem – “what we’re experiencing in Dublin is the very senior sales and marketing people in the big US tech companies increasing the local talent pool and people moving from Twitter and Facebook’s EMEA HQs into companies like Intercom”.

This view of the talent gap is shared by Prendergast, who believes that “out of the three gaps, the one that is going to disappear quickest is talent”, and likewise by White who reiterates the need for talent who have built and scaled a SaaS business – “Experience is being gained in Europe but it’s at an earlier stage. Recycling of skills and experience will close the gap.”

“The sooner you’re in the US market the better. For most markets it’s where the buying customers are.”

2. Customers Gap

It’s when it comes to market opportunity and gaining access to the largest pool of potential customers that the requirement for a US presence becomes abundantly clear. As Prendergast says of the advice he offers to the founders he works with, “Unless there is some exception that means it makes sense to keep everything in Europe, the sooner you’re in the US market the better. For most markets it’s where the buying customers are” and as Stanley puts it, “having that US badge is important when you want to sell in the US.”

White points the experience of a number of his investments like TradeShift and New Voice Media who have established significant operations in the Valley but also notes that Move Guides (relocation management) and Currency Cloud (international payments) have remained more focused in Europe by the nature of what they do. In a relatively small geographic area, Europe is home to a vast array of diverse cultures, languages, currencies, legal systems, and business environments – this lends itself to providers like Move Guides and Currency Cloud who specialise in helping their customers do business easily across borders. A SaaS provider may also decide on a location based on the concentration of the traditional industry it is aiming to disrupt – as White explains “Every industry is being disrupted by tech. It makes sense for a SaaS business to locate where the traditional industry it’s trying to disrupt is located, like finance, advertising, and fashion in London, for example.”

Ambition is nothing without aggression and aggression requires capital”

Capital Gap

“It is incumbent upon early-stage investors to ensure that the capital base of the start-up is sufficient to fuel ambitious growth. Ambition is nothing without aggression and aggression requires capital” – Prendergast is unequivocal in his thoughts on the role of a VC in ensuring that start-ups have the fuel required to go the distance. So how easy is it to raise the requisite capital in Europe as opposed to in the US?

Prendergast feels that Europe is doing pretty well in terms of capital but that beyond seed and Series A, the options become more limited – “If you’re looking for a Series B cheque, there’s a relatively small number of people you can talk to. You probably need to talk to 20 funds and you might find 10 in Europe but you will most likely need to look to the US for the remaining 10.” It would appear then that looking to the US will remain a necessity for the foreseeable future when it comes to raising capital to fund large-scale growth. With this in mind, the guys at Frontline Ventures compiled the ‘Setting up in the US Playbook’ to guide European SaaS founders through that complex process.

What one killer metric do these European VCs look for in a SaaS start-up?

SaaS Metrics are a powerful tool for investors and founders alike when it comes to understanding and optimizing a business. The key variables that drive SaaS businesses are often unique to the subscription-based model and analysis of the business’ core metrics aims to answer questions of profitability, areas for improvement, and levers for management to focus on. So what metrics do these VCs look for in potential investments?

Conor Stanley: ACV

“ACV is pretty damn important. Unit economics is what it all comes down to and can those unit economics scale? We see a lot of businesses that would be difficult to scale because their price points can’t justify an inside sales or field sales team.”

Will Prendergast: ACV

“ACV dictates a lot about the sales model you can use. High ACV cures a lot of things in relation to the sales cycle. The idea that you can build cheaply and sell cheaply has come under pressure. What does the price point mean for the sales model?”

* for more on how ACV relates to CAC and influences the sales model (and all other SaaS metrics worth knowing) see David Skok’s extensive blogs on the topic.

Jos White: CAC:LTV

“We like the margins to be high as this points to a highly-automated, self-serve, SaaS model. We also like to see rapid growth – obviously. CAC should be paid back within the first year and CAC:LTV should be at least 3.”

What are some of the European SaaS companies our VCs excited about?

These VCs love all of the companies they’re invested in equally and each provided a long list of European SaaS companies from whom they expect big things so it was this author’s unenviable task to shorten their lists – so let’s not fall out over any omissions!

Conor Stanley:

“Intercom are probably top of the list in terms of an angel investment that I made – they’re on an incredible trajectory. Where Intercom could become even more successful is as a platform – not focussing on one single product but on a much broader concept of communication and conversational commerce.”

“NewsWhip are close to our hearts, sharing our co-working space here and they will be moving out shortly because they’re packing every available desk hiring new people – they have tripled team size in the last year and are layering on new products.”

“Barricade have created an amazing security product. They’re a product-first company that remind me of Intercom in a lot of ways.”

Will Prendergast:

“Moltin are going for a pretty big play. There is a SaaS playbook and a lot has been learned but someone needs to be at the learning edge and what I like about the Moltin guys is that they understand what’s been learned in the SaaS playbook to-date but they are innovating outside of that and doing things their own way.”

“Signal – we led the seed round and their metrics are starting to get pretty interesting. They’re moving into the US now just 6 months in.”

“Pointy is a really interesting product that allows people to discover physical products that are in physical stores.”

Jos White:

“New Voice Media provide cloud-based contact centres and are one of our biggest success stories out of fund 1 – they have raised more than $100m and, not giving too much away, they are valued in the multiples of $100m.”

“TradeShift provide invoicing and supply-chain management that is socially integrates and enables businesses to manage their supply-chain in a much more efficient manner. They have also raised more than $100m”

“Workable is an applicant tracking system for recruitment that provides everything you need to hire in one place from posting the job to managing candidates and collaborating on the decision-making. It’s a very solid, engineering-led team and an exciting prospect.”

What value do you see in a dedicated European SaaS event like SaaStock?

SaaStock is Europe’s first enterprise SaaS conference dedicated to helping SaaS founders learn how to build a category-leading SaaS business. It also provides an opportunity for SaaS investors to meet with SaaS start-ups so what value do our VCs see in such an event?

Conor Stanley:

“Networks coming closer together is always a good thing. The European SaaS network is young and growing and there is a lot potential for more collaboration and cooperation and good contacts and friends. From a VC point of view, working with other European investors in SaaS is a big attraction so I think it will work well for the industry and I’m excited about the event. I’m more of a fan of events that have a focus.”

Will Prendergast:

“One of the main reasons we set up Frontline is that we felt that the entrepreneurs in Europe deserved a specialist fund that just did SaaS and, therefore, could be highly-relevant to that group. We also thought that we had come to a point in time where there was enough critical mass of companies to build a fund. So specialised anything becomes highly-valuable to companies – specialised funds, specialised events, are all more relevant. We were the first SaaS fund and this will be the first SaaS event.”

Jos White:

“Anytime that you can bring together like-minded people and the ecosystem, good things will come out of that. The software industry is turning into the SaaS industry and there will come a time where we will stop using the word SaaS because we will take it for granted that all software is online. This is the future for the software industry.”

Conor Stanley, Will Prendergast and Jos White will all be speaking at SaaStock in September. Early bird tickets for SaaStock are on sale now. NB: Buy a ticket before 18th March and you’ll save €200.

Privacy Policy
Cookie Policy
Terms of Use