2013 was a banner year for PE investment in SaaS, logging an impressive 247 deals according to the PitchBook Platform. 2014's pace is just as strong, with almost 190 deals thus far. The rapid surge in investment since 2012 makes sense, as SaaS complements PE's investing style quite well. SaaS models can feature faster implementation and customization, cheaper third-party maintenance, control over oft-iterative upgrades and low entry costs. For investors, recurring revenues and easy scalability with operating costs reducible through outsourcing are all attractive attributes.
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Buying-and-building SaaS is in vogue: growth and add-on deals comprised about 53% of all PE investments in 2013, and 55% of 2014 deals to date. Geographically, U.S. companies account for most of the activity; of 2014 U.S. deals, the West Coast grabs 22%, the Great Lakes 13.5%, New England 12% and the South and Southeast nearly 13% apiece. Top investors since 2007 include: Vista Equity Partners, with 28 deals; HgCapital, 16; and The Carlyle Group, also at 16.
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