Constanza’s SaaS predictions for 2025

With the new year now firmly under way, it’s a good time to reflect on the lessons of the last, and to try to predict what the next 12 months have in store. While 2024 saw an extension of the 2023 VC dealmaking lull, it certainly wasn’t materially worse. The final verdict on whether start-ups managed to raise more capital in ’24 than ’23 has yet to come in – the data is still being gathered and aggregated – but anecdotally, Q4 felt like the busiest quarter we’ve seen in European VC for some time, with a host of companies setting out to raise funds. At Octopus, we remain very excited about all things SaaS and meeting founders looking to disrupt industries and empowering users through new software products.

Unfortunately, throughout 2024, the IPO window mostly stayed shut, keeping much-needed distributions to paid-in capital (DPI) out of the ecosystem. Investors and founders alike found themselves navigating the same, slow-moving tide, waiting for bigger waves of opportunity to roll in.

As we look ahead to 2025, economic uncertainty will remain, with geopolitical tensions, shifting trade policies and the balancing act of central banks tweaking interest rates keeping everyone on alert. But there’s reason for cautious optimism. US corporate taxes are set to dip and with most businesses’ SaaS optimisation behind us, I expect companies to start investing in software again – beyond AI. Here are the trends I think are set to move the needle and inform the ecosystem in 2025.

1. Tech IPOs will return to 2019 levels

It wouldn’t be a proper VC predictions blog without a bit of speculation around when the IPO window will finally open. Last year, we saw a host of 2024 forecasts confidently announcing a big comeback that didn’t quite happen. But here’s the silver lining: the lineup of tech companies primed and ready to go public has grown significantly, with much-awaited companies expected to IPO such as Databricks, Wiz, and Snyk, to name a few. While some management teams are trying to lower expectations, suggesting 2026 as the chosen time to go public, on aggregate, I expect tech IPOs to make a solid return to 2019 levels, signalling a rebound.

On the M&A front, strategics have been sniffing around but mostly sitting on their hands, hesitant to pull the trigger on new acquisitions. But in 2025, US-based corporates in particular will be incentivised to invest in inorganic growth as lower taxes free up resources. So even if the IPO window doesn’t fully open, we could see a much-needed mix of public listings and acquisitions bringing DPI to investors and founders.

2. Cybersecurity will stay resilient

When it comes to sectors, cybersecurity will maintain its position front and centre. Over the past couple of years, the demand for cybersecurity SaaS solutions has surged, with companies’ cybersecurity budgets proving more resilient than other software spending. In fact, the latest G2’s Buyer Behaviour report suggests that cybersecurity is the top consideration when buying software. Cyber threats will continue to ramp up, fuelled by cyber warfare and increasingly sophisticated AI-driven attacks, and while many corporates have tried to consolidate their cyber tech stack, I believe there’s still plenty of room for start-ups to stand out against the incumbents as new forms of attack are born and there is a need to further optimise and orchestrate current systems. I’m particularly interested in solutions that focus on discovering and protecting valuable data in cloud environments, upskilling and empowering employees, and accelerating remediation of security gaps.

At the same time, regulation is set to reignite demand in certain verticals. For example, the UK’s Payment Systems Regulator introduced new rules in October 2024 requiring payment service providers (PSPs) to reimburse victims of authorised payment fraud up to £85k per transaction. This will drive a surge in demand for payment fraud prevention and detection tools, such as our newest addition to the portfolio, ThreatMark. The solutions that will thrive are those that, like Threatmark, harness AI and machine learning models to analyse data from the entire payment chain and automate effective fraud prevention.

3. AI will grow up

I expect rumours about corporates cancelling their CoPilot or ChatGPT subscription to intensify this year, as many realise that the anticipated cost savings previously estimated won’t fully materialise. Many organizations are currently stuck in the Proof of Concept (PoC) stage, testing solutions without a clear path to scaling them. In the coming year, AI solutions will need to evolve into fully integrated products that work seamlessly within existing workflows and tech stacks. This will further fuel demand for tools that help to optimise the infrastructure to scale these solutions and that support model evaluation and monitoring in production.

For founders, building horizontal solutions here will be very costly and time-consuming. They will also struggle to compete with the heavily capitalised hyperscalers that are currently building fast across all AI layers (infrastructure, foundational models, and apps), and so I am interested in meeting founders building verticalised products, focusing on specific industries or functions. This will create a significant opportunity: slower to digitise industries, rich in data (especially unstructured data), will start adopting vertical software in innovative ways.

4. Refocus on the modern data stack

Corporate dissatisfaction with failed AI PoCs often comes down to one persistent, fundamental issue: poor data. Business leaders will realise (again) that successful AI systems still need quality data at the right place and time. There is no way to escape building the necessary pipelines and storage capabilities. And so, this year, I anticipate a shift back towards businesses revisiting their data tech stack. Solutions capable of leveraging both unstructured and structured data, integrating sources from disparate systems, and accelerating the implementation of architectures such as data lakehouses and data vaults will be pivotal.

Similarly, addressing the integration problem will be crucial, as highlighted in the G2 buyer behaviour report (linked above), which identifies integration functionality as the other key buyer criteria, alongside security. I’m excited to see more companies building in this space (e.g. through unified API and other similar approaches) trying to solve this problem. 2025 will be the year business leaders go back to focus on data and ensure their data architecture and systems are aligned to maximize the potential of AI-based solutions.

5. Boards embrace a growth mindset

In the boardroom, I expect the efficiency mindset that took root over the last 24 months to remain, although with a greater emphasis on growth. More shareholders and founders will begin to see the value in optimising the rule of X (rather than the rule of 40) as they realise that ultimately, growth is needed to secure adequate exit valuations. However, VCs won’t revert to the growth at all cost mentality of 2021 and will continue to prioritise investments in companies that can truly demonstrate sustained product-market fit. The consequence for seed-stage companies is likely to be that raising a Series A will remain challenging, unless start-ups can demonstrate strong retention, solid unit economics, and a higher ARR. Overall, I don’t expect Series A valuations to materially increase vs 2024 on a relative basis to ARR.

In the scaling stages, with a renewed focus on growth, more Boards will look to raise funds in 2025, compared to 2024, to play offence vs the competition. Now many companies can show good metrics over several quarters, following the challenging environment of 2023-24, when corporate buyers heavily optimised and reduced their SaaS spending, leading to high churn and diminished sales efficiency. The Series B space will get busier as more companies go to market looking for growth-boosting funding as optimism returns to the market. The next few weeks will offer a key indication – I’m expecting Q1 to be very busy indeed.

2025 will be a dynamic year for SaaS, and whilst we’re not out of the woods yet, opportunities are out there for the pioneers who recognise them. If you’re building in any of the spaces I outlined above, or think I missed a key B2B SaaS trend for the year ahead and want to tell me about it, get in touch. We’re looking forward to backing future-shaping B2B SaaS founders in the year to come. Reach me on [email protected] or learn more about pitching us here.