Notion Capital: Cloud Challenges 2024 Report & Cloud Challengers 100 

The majority of top Cloud startup founders are already seeing improved appetite from VCs to allocate capital in 2024, according to Notion Capital research, despite a sharp fall in overall European business software investment last year.

Of the startups in Notion Capitals CC100 list, 55% of founders surveyed said VC appetite to allocate capital has increased compared to six-to-12 months ago.

Meanwhile, 62% believe 2024 will be better than 2023, reflecting a sense of underlying opportunity across the top segment of startups in the face of a broader market decline.

The survey comes as part of Notion Capital’s Cloud Challengers 2024 report, which tracks the European business software early-stage market annually. The report also returns with its third edition of the Cloud Challengers 100 list, revealing trends among the top 100 startups.

A market downturn

The prolonged downturn in European tech startup investment as a whole grew steeper last year, with a 39% drop to £61.51 billion in 2023, compared to a 19% drop in the previous 12 months.

Business software startups were resilient against this in 2022, enjoying a 7.4% uptick to more than $40 billion. But 2023 saw investment in the sector fall by 59% to £17.25 billion.

Nonetheless, exits were strong, at £39.78 billion across 780 deals, compared to £16.35 billion across 828 exits the previous year. Notable acquisitions included Webhelp (France, $4.8 billion), and Reward Gateway (UK, $1.5 billion).

Business software also marginally increased its share of value in the European ecosystem, rising to $1.2 trillion from $1.1 trillion last year, with European tech in aggregate staying at the same value at $3.7 trillion.

And down markets also bring opportunity. The Cloud sector is still growing by more than 20% a year globally, and it is expected to have 70% market share of a trillion-dollar market by 2027, showing there is still significant headroom for the best startups – such as the Cloud Challengers 100 to take advantage of.

More Cloud Challengers 100 insights

The most common sectors for this year’s startups were sustainability (15%), developer tools/ infrastructure (12%), and fintech (12%). On sustainability, especially, that represents a shift in focus from last year’s report, and reflects the growing emphasis on this field globally.

Artificial intelligence was already a regular fixture in the industry, but its presence only continued to grow.  Of the CC100 companies, 61% have built GenAI features into their products indicating a strong trend towards leveraging this new platform.

Other key findings:

  • The majority of companies in the top 100 are from the UK (26%), France (24%), and Germany (23%).
  • Tier One investors are clustered around fintech, sustainability, and sales and marketing support firms. 
  • Fintech companies in the top 100 have the most Tier One investors each with an average of three, followed by marketplaces with an average just over two.

Of Notion Capital’s top 100 companies last year, 29 raised follow-on funding since they were showcased, and many of this year’s cohort are staying resilient on headcount amid a white-hot competition for talent globally. In this environment, the ability to attract, nurture, and retain top-tier talent is a strategic imperative.

Jos White, General Partner of Notion Capital, said: “I'm delighted to announce the third edition of our Cloud Challengers Top 100 list that aims to identify the very best early emerging business software startups in Europe. We believe these are the companies that have what it takes to challenge the established order and go on to become major success stories in the European ecosystem.

“Business software is our all-encompassing term that includes data, infrastructure, developer tools, SaaS, and also Fintech. We believe this captures the dynamic development and evolution of the B2B tech landscape.

“As has been the case for the last two reports, our approach to evaluating and ranking these companies is rooted in data and works from a total universe of early stage companies in Europe. Three pillars form the foundation of our assessment: founders, funding, and product. We firmly believe that especially for early-stage companies these elements provide the most telling signals for future success.

“We are thrilled to see the classes of 2021 and 2022 performing strongly, with 53% of the 2022 cohort having raised follow-on funding since the report was launched, compared to an industry standard of 19%. The 2023 companies are well on their way to this position, with 29% having raised funding over the last year.

“Not only this, but the class of 2022 are raising serious rounds, 37% of firms are at series A, and 14% at Series B. This has led to a number of exits, 11 companies have been acquired, including some household names like Otta.

“The founders we interviewed are generally optimistic about the year to come, one that will be laced with AI driven innovation, a flight to quality and efficiency, and a doubling down on culture management – steadying the ship after a few years of rockiness.

“Congratulations to every company that made it onto the list.”