The following is an excerpt of findings from the SaaS and Cloud Startup Report 2018 published by Crozdesk.

The Crozdesk team analyzed some 20k SaaS, software and cloud companies operating in 2017 to determine the size, funding and relative growth speed of startups and established companies across the world’s startup ecosystems. The extreme differences between locations in terms of funding availability, growth speed of companies and chances of success were staggering. The United States dominates the world’s SaaS, cloud and software economies. Outside of the US, only London and Tel Aviv made it into the top 10 of largest startup clusters, but face greater challenges due to much lower funding availability.

8 of the 10 largest SaaS and cloud startup ecosystems are in the United States.

The largest US tech clusters by headquarters location are Silicon Valley at 16.14% of the world’s companies operating in the space, New York at 5.67%, Southern California at 5.11%, Boston at 4.20% and the North West Cluster (Portland, Seattle and Vancouver) at 3.51%. Other interesting clusters include the Washington DC / Arlington (VA) metro area with 1.88% of companies and the fastest average company development of any cluster measured. And, Chicago and Denver at 1.80% and 1.73% respectively are two areas of increased velocity in current SaaS development.

Top 25 SaaS and Cloud Startup Ecosystem Ranking

#% of global companies% of global fundingAverage growth speed*Cluster score**
1.Silicon Valley16.14%38.68%0.972.97
2.New York5.67%8.38%0.501.07
3.Southern California5.11%4.73%0.500.94
4.Boston Area4.20%8.40%0.761.24
6.North West Cluster***3.51%3.33%0.340.64
7.Texas Triangle****3.30%3.52%0.420.72
8.Tel Aviv / Israel1.93%1.27%0.680.83
9.Washington DC1.88%2.61%1.001.18
15.Amsterdam / Netherlands1.15%0.30%0.160.24
21.New Delhi0.78%0.12%0.370.42
* Average growth speed = function of age, total capital raised and employee growth of a company (1.00 = fastest)
** Cluster score = sum of all 3 relative factors (3.00 = maximum)
*** North West Cluster = Seattle, Portland, Vancouver – bundled due to regional proximity and shared startup / funding infrastructure
**** Texas Triangle = Dallas, Houston, San Antonio – bundled due to regional proximity and shared startup / funding infrastructure

The European cloud services and software economies have been dominated by the United Kingdom – home to 6.42% of global companies in the sector and $2.34B in funding within the sample group. 65.37% of UK cloud services and software companies are located in the Greater London area operating with 73.16% of the country’s sector funding. The UK ecosystem has grown steadily in recent years and SaaS has become one of the primary drivers of startup growth, rivaling its still dominant FinTech sector.

While London has a large SaaS ecosystem it can’t keep up with its US counterparts in terms of funding and growth opportunities. For instance, the average funding round of London-based companies was just one quarter the size of their San Francisco-based rivals. The median round size was $654,500 – in comparison to $3M in San Francisco. Consequently, this likely caused the average growth speed of London companies in the sector to be one-third of their US West Coast counter-parts.

SaaS and cloud startup
World map of SaaS and cloud startups

Outside of North America and Europe, Israel and its hub Tel Aviv have shown significant traction in its SaaS development and come in at 1.93% of records. Average growth speed of Israeli companies in the sector was more than twice that of London-based competitors and it is the only ecosystem outside of the US, that can rival the development speed of some US ecosystems. Tel Aviv is followed by Bangalore at 0.95% of records, New Delhi at 0.78%, Sydney at 0.78% and Singapore at 0.76%.

The full report is available for free here: SaaS and Cloud Startup Report 2018


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