VC Funding for SaaS Solutions on the Rise

I just got an email with a link to an article on the Information Week Cloud Computing page indicating that venture capital investment in Software-as-a-Service (SaaS) based solutions is on the rise. The article Posted by Mary Hayes Weier @ 10:49:AM on Sep,18, 2009, titled, "VC Funding Is Dead? Tell That To Eight Newly Wealthy SaaS Startups," states that more than $60 million has been pumped into SaaS startups in the past couple of week.

For anyone that reads my Blog on a regular basis knows that I am a SaaS bigot of sorts (http://ediscoveryconsulting.blogspot.com/2009/09/ediscovery-saas-continues-to-gain.html) and therefore beleive that most investments in solid SaaS based technology are going to provide above market returns in the coming years. And, with the accellerating increase in the volume of ESI and the subsequent emergance of the eDiscovery market, I beleive that the investment with the highest returns are going to be SaaS based solutions in the eDiscovery and/or GRC (Goverance. Risk and Compliance) space.

Having spent that last year examining all of the SaaS based solution startups or restarts in the eDiscovery market in detail, I can tell you that there are some very exciting SaaS based eDiscovery solutions that are going to turn this industry upside down, give the legacy vendors a run for their money (literally) and provide some tremendous opportunities for investors.

I have already begun to work with several SaaS based vendors with new technologies in legal hold, chain of custody mangement, next generation file transfer security, project/case/matter management and workflow, Early Case Assessment (ECA), EDD processing and of course online review tools. Over the next twelve months, I am planning to either find or develope a SaaS based solution that seamlessly covers the entire EDRM model and maybe even pushes left into document retention and archiving. Further, as you have also heard me contend on this Blog, I beleive that the ultimate SaaS based solution for ESI management will actually be within the GRC space with eDiscovery as a subset of the requirement (http://ediscoveryconsulting.blogspot.com/2009/08/about-month-ago-i-had-opportunity-to-be.html.)

The full text of the post by Ms. Weier is as follows:

Venture capital funding is at a historic low, yet at least eight software startups announced VC funding in the past two weeks for a total of more than $60 million. Their products are all very different, but they have one thing in common: they're delivered in a software-as-a-service model.

This is significant, because it shows that when VCs are thinking about what software companies to fund, they recognize value in the SaaS model. Some apps are just easier to sell and deploy as a SaaS, and are likely to gain better traction in a tough economy.

And $60+ million in two weeks is impressive, considering the National Venture Capital Association reports that VC investments in the second quarter of this year dropped to levels not seen since 1996.

Here are eight SaaS companies that have publicly announced VC funding so far this month; certainly there are others:

1) Accept, a SaaS for idea and portfolio management, designed to help businesses quickly bring their best product ideas to market, raised $17 million in Series B financing from StarVest Partners, Jefferson Partners and the Entrepreneurs Fund.

2) Apptio, a SaaS for IT financial management, raised $14 million in Series B financing from Andreessen Horowitz Fund, Shasta Ventures, Greylock Partners and Madrona Venture Group.

3) Jobvite, a SaaS for job recruitment, raised $8.25 million in Series B financing from ATA Ventures and CMEA Capital.

4) NextBio, a SaaS used by life science researchers at universities, and businesses such as Eli Lilly, Merck, and Johnson & Johnson, to find and share information, raised $8 million in Series C financing in a round led by Newbury Ventures.

5) Sonian, a SaaS for data management, raised $5.6 million in Series A funding from Prism VentureWorks and Summerhill Venture Partners.

6) HealthHiway, a Bangalore, India-based SaaS for hospital patient data and billing, raised $4 million from Greylock Partners.

7) OptionEase, a SaaS for fair market value accounting and compliance, raised $3.5 million in Series A financing from Miramar Venture Partners and others.

8.) A marketing-related SaaS provider has completed a round of Series C financing. The company and its VC will announce details on Sept. 22.

Labels: 2009 eDiscovery Predictions and Trends, Cloud Computing, eDiscovery, Venture Capital

posted by Charles Skamser @ 9:45 AM