Year-over-year venture capital deal activity to platform-as-a-service startups has declined as consolidation among smaller players grows.
Within the cloud computing industry, platform-as-a-service (PaaS) emerged with the promise of offering a fast and scalable method to host and deploy applications in the cloud. Specifically, PaaS providers offer a collection of services including application development platforms, managed hosting, database and computing resources with the aim of helping customers develop and deploy applications without the time and costs of managing underlying software and hardware.
In the last four quarters, PaaS-related startups raised $196M across 34 deals. But while VCs continue to bet that emerging private PaaS vendors can coexist with offerings from larger tech corporations, deal activity in the PaaS space has been nearly flat on a year-over-year basis. Amid a flurry of smaller acquisitions in the space including CenturyLink’s acquisition of AppFog and AppDirect’s acquisition of Standing Cloud, YoY funding activity has dropped over 25% and YoY deal activity has fallen 5%. The large spike in Q1’12 funding was on the back of an $85M round to Intel Capital-backed Joyent, which provides both PaaS and Infrastructure-as-a-Service (IaaS) services.
In the past two years, nearly 50% of deals in the PaaS space took place at the Seed/Series A stage, while mid-stage financing activity (Series B/Series C) took over 30% of deals including CloudBees, which raised an additional $2M from investors including Lightspeed Venture Partners and Matrix Partners in July. More recently Apprenda raised a $16M Series C round from NEA, Ignition Partners and Safeguard Scientifics earlier this month.
Deal activity at the Series D and Series E+ stages combined to take fewer than 1/5 of deals in the PaaS market over the past two years.sign up for a free trial to learn more about our platform.