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Showing working software. Significant investments from VCs, reflecting the ongoing trend towards digital transformation and remote work.
According to Deloitte’s Road to Next report released on Tuesday, even though overall career software companies have fallen short of the lofty heights they reached in 2021, the segment is still expected to grow in 2021. By 2022, it will account for 15 percent of the total value of the expansion phase agreement (per Pitchbook). Venture-development software deals remained steady, down from $35.4 million in 2021 to $35 million in 2022.
Deloitte’s co-authors said, “While market trends are relatively volatile, qualitative data shows that the demand for innovation among the workforce is strong.”
The drivers of recovery are “many”, according to the co-authors, but they highlight some of the main ones in the report.
First, VCs, rightly or wrongly, haven’t given up on the idea that work software can boost productivity, to increase overall return on investment—an attractive prospect during an economic downturn.
Second, weak macroeconomics—as well as the uncertainty of recent events like the Silicon Valley bank collapse—have encouraged VCs to turn to sustainable growth paths, which are centered around long-term, iron-clad business-to-business software toolkits. .
There is truth to that second point.
In an IDC poll earlier this year, 62 percent of corporate technology managers in the U.S. said technology spending at their companies will remain the same or increase compared to 2022. This is despite 82% saying they expect this to fall. year.
Gartner reported similar findings in its January forecast. The firm predicted that worldwide software spending would grow 9.3 percent and reach $1 trillion by the end of the year.
2022 will see the most completed business software start-up rounds in history in the $5 million to $10 million range, according to PitchBook (cited by Deloitte). And by 2022, the average exit rate for business software companies was $100 million.
“Working software vendors are improving their product and service offerings and reorganizing the workplace, workforce, organizational structure and operating models along new lines that can improve overall productivity and security,” Deloitte co-authors wrote.
But while the overall business software market remains strong, not every category is performing equally well.
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