Why is the SaaS Sector Growing So Fast?

By Gaia Freydefont

In the decade between 2011 and 2021, the Software as a Service (SaaS) industry has taken an astonishing £11.8b of equity investment, and 2021 is on course to be the biggest year by investment volume yet.

With 3,237 active and ambitious SaaS companies currently working within the UK, the SaaS sector and investment into SaaS businesses is constantly expanding, as SaaS businesses continue to create, innovate and provide disruptive models within prominent sectors.

Interest and innovation in SaaS businesses has been frenetic, as shown by the number of early-stage high-potential companies continually launching their new ideas and models in an effort to disrupt the norm and innovate.

Growth of SaaS models has also been widespread, with SaaS businesses cropping up in various regions across the UK. While London continues to be the center of the SaaS sector within the UK, with 51% of SaaS business in the UK calling it home, there is also important activity in other regions, in particular Edinburgh, Manchester and Bristol, all of which are helping to drive the SaaS sector forward.

Increasing variety within the most prominent sectors of SaaS, most notably Fintech, cyber security and EdTech, has also pushed innovation within the SaaS ecosystem forward with new ideas, ultimately widening the scope of the SaaS space.

Within the Fintech space, six out of the ten SaaS companies with the highest volume of secured equity, operate in this sector, disrupting the financial services industry through new developments in technology and putting forward innovative payment processing services, business banking platforms and online branchless banks.

Another major area for investment has been cybersecurity, as the need for protection of digitally stored sensitive information and data is constantly expanding.

This ever-growing demand within the cybersecurity space will mean innovation in the field will become increasingly sophisticated and modern, constituting very high potential for SaaS business models.

With such fast growth, the SaaS sector has experienced increasing interest from investors, with the volume of equity investment secured by SaaS companies increasing every year since 2011; peaking at £3.16b in 2020, when it constituted 27% of all SaaS investment in the past decade.

Overall, the SaaS sector has certainly shown significant growth over the past decade, as a result of SaaS businesses forming throughout the UK, operating within some of the most prominent sectors and securing incredible levels of investment.

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