After the euphoria felt in French Tech circles, the tsunami of major fundraising and new unicorns seems to be dying down in 2024. Faced with this economic context, startups are adapting as investors switch focus to different financial data. SaaS financial reporting is essential for both bootstrapped companies and those backed by investment funds. Let’s see why.
Contents:
1. Fundraising in 2024: a return to normal after the euphoria?
2. Why is performance monitoring even more crucial in 2024?
1 - Fundraising in 2024: a return to normal after the euphoria?
France’s startup scene has just experienced two crazy years in terms of fundraising. The target number of unicorns for 2025 was reached in 2024. However, the boom seems to have come to a halt since the beginning of 2022. What are the main causes of this downturn? And what are the prospects for companies, including SaaS startups, in the months ahead? Here are some answers.
1.1 - 2020-2021, the financial bubble of French Tech
French Tech presented record fundraising in 2021 of over 10 billion euros—double the level achieved in 2020. Twelve new unicorns joined the 14 already in existence in 2021, bringing to 26 the number of startups valued at over a billion dollars. This surpassed the government’s 2019 target of 25 unicorns in less than two years.
1.2 - 2022 slowdown for unicorns and fundraising
From the very first weeks of 2022, the financial landscape tightened up. The change began in the United States before spreading to Europe and France. The Fed tightened monetary policy, big tech names failed to live up to expectations, and tech valuations fell in the face of the crisis in Ukraine.
In the first half of 2022, the only new unicorn was Ecovadis. It raised $500 million, an exceptionally high amount in the current economic climate. This translates into a 19% reduction in global fundraising in Q1 2022 (only $144 billion) compared to Q4 2021.
1.3 - Current fundraising landscape in in French Tech
Series B, C, and D fund-raising, i.e. late-stage financing is becoming increasingly rare in France. As shown by the French venture capital barometer (EY, 1st half 2022), the number of fundraisings has fallen by 13%. Against this backdrop, only the very best projects have access to equity financing, as investors are more selective.
1.4 - French startups in the new global context
This turnaround represents a return to normal—in France as in Europe—after two exceptional years. French Tech is faring no worse than other countries. It can also count on strong support from Bpifrance, notably through their co-investments in startups alongside investment funds or sovereign wealth funds. Indeed, BPI is a key player in funding early-stage startups through their Bourse French Tech grants and startup loans.
In addition, European funds continue to provide good financing for French startups.
A - Falling startup valuations and unavoidable savings
The immediate consequence of this slowdown can be seen in the sharp drop in valuations for startups and tech companies in the US. However, for the time being, few of these French companies are seeing their valuations severely impacted, unlike the US market. Uncertainty over their ability to raise new rounds of financing is prompting companies to take it rein in their runways to hold out as long as possible.
However, they all need to adopt new behaviors to save cash and get through the crisis. Downsizing plans are reportedly under consideration at several entities.
Some companies may find their salvation in a takeover by large groups or scale-ups (e.g. Doctolib’s acquisition of Tanker or Swile’s of Okarito). In fact, their interest is growing as rising startup and scale-up valuations come to an end.
B - Importance of profitability and value creation
Other criteria and financial data are back in the spotlight for investors. Capital efficiency is now essential, as is the achievement of long-term profitability. Knowing what value is being created with the money invested, and confirming the viability of the business model, is becoming essential at a time when startup valuations fall. Having prioritized growth, startups are now focusing on optimized management. And there’s no better of doing that than with a performance monitoring and optimization solution!
2 - Why financial reporting is more crucial in 2024
In this new context, rapid adaptation is essential. Financial reporting, including SaaS financial reporting, provides a clear and regular view of business activity through appropriate management indicators. Here are a few concrete examples of the importance of structuring your business monitoring through dashboards and making the most of your management data.
2.1 - Fundraising and financial reporting
Whether you’ve already raised funds or are in the process of doing so, financial reporting is an indispensable tool. Periodic dashboards with KPIs and graphs enable you to quickly analyze your business results and overall company performance.
A - Convincing investors when raising new funds
In the turbulent landscape of 2024, you may need new financing, particularly if your costs are rising, cash runway is shrinking, or the growth of your business requires additional resources. Without financial reporting, convincing investors to place their trust in you can prove complex. Indeed, good reporting is the sign of sound management. It shows that you have the business data to make the right decisions (💡 structured data reporting has become a prerequisite for many investors).
B - Reassuring investment funds about return on capital invested
Startups that have raised funds are accountable to their investors. Now more than ever, it’s important to demonstrate return on investment through relevant financial reporting.
C - Managing investors who want you to lower cash burn
Are your shareholders encouraging you to reduce your cash burn to last several months without reinjecting cash? The dashboard is an essential tool for monitoring this indicator over time, drawing up appropriate reports, and communicating the required accounting and financial information. Have you decided to freeze recruitment or reduce marketing expenditure compared with the initial budget? Your reporting will enable you to measure the results of your operational decisions every month.
2.2 - A more demanding environment for financial management
When costs are rising and money is scarce, measuring your company’s use of its money and return on investment is crucial. Financial reporting is also an essential steering tool in this changing environment, with SaaS companies being no exception.
A - Rising sales and profitability indicators
Finally, this bursting of the financial bubble may be good news for French Tech. After a period when easy money allowed you to spend at will, even if it meant meeting expenses and burning a significant part of your cash flow without measuring the returns, a new era is dawning. Startup managers and their investors now focus on measuring business performance, notably sales and profitability, rather than amounts raised and valuation levels. They are trying to make their business sustainable, by ensuring that they have a viable business model in the long term.
B - Bootstrapped startups have the wind in their sails
We’re all familiar with startups managing their growth through successive rounds of fundraising. But now bootstrapped startups are coming to the fore. Their business model is to finance their development with their own funds, and in particular with the profits they generate.
In these complicated times for financing, they represent a salient example. Of course, a financial structure such as theirs demands that they keep an even closer eye on revenue. The goal is still to maximize financial income and manage costs and cash flow wisely.
C - Financial reporting helps you weather the storm
The race to raise funds and achieve unicorn status is no longer necessarily a priority. Innovating, monitoring performance, and controlling expenses—these are the new challenges for saving cash and putting it to good use. With the right KPIs in their financial reporting, startups, be they SaaS companies or others, can manage these new challenges in 2024 and beyond.
The year 2024 represents a real turnaround in the financial context for startups. To get through the crisis, whether by saving money even if it means cutting back on growth, or by continuing to raise funds, startups need to harness their management data with the right tools. They need to think carefully about how they monitor performance, using dashboards and key indicators tailored to their business.
At Fincome, we help companies in the digital ecosystem to optimize their performance monitoring, profitability, and cash management. Contact us for an online demo of what financial reporting and the right KPIs can do for your SaaS.
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