The State of SMB Software: Q2 2019
State of SMB Software Report
A look at all the VC, private equity, M & A and IPO deals in the SMB software space in North America for Q2 2019
Every quarter we publish our State of SMB Software Report, looking at venture capital, private equity, merger & acquisition + IPO deals in the Small and Mid-Sized Business (SMB) software space in North America.
We track SMB software companies across three broad categories: Grow my Business (front office), Run my Business (middle office) and Track my Business (back office). For both VC and PE deals, run my business was the most popular category in Q2.
The second quarter of 2019 saw 247 venture deals, 6 PE Growth and Buyout/LBO deals, 17 M&A deals, and 4 IPOs representing ~$17B in deal proceeds to SMB software companies.
The full report is below, but here are the key takeaways:
Total deal value down over 50% from Q1 but up ~2.5x over Q2 2018. Deal volume was consistent across both quarters in the first half of 2019 recording more than 240 transactions in each.
A historic quarter for SMB Accounting/Invoicing software: The Accounting/Invoicing vertical attracted ~7x more VC funding than the average total deal value over the past 5 quarters and had ~$2.1B of M&A activity across 4 deals. This included H&R Block’s $405M acquisition of Wave. Although frequently overshadowed by front office solutions, the back-office problems of SMBs present an opportunity that investors can’t pass up.
Restaurant tech continues to gain momentum: The most prominent vertical theme across the State of SMB Software reports since inception has been the funding magnet that is the Restaurant Tech vertical. The amount of investment fuelled innovation within this age-old industry is head and shoulders above any other vertical in the SMB space yet again in Q2 2019.
4 IPOs completed – 1 more filed: 18-year-old customer intelligence powerhouse Medallia is set to IPO in early Q3 2019, riding the coat tails of a star-studded first half of the year including public offerings from Slack, Zoom, PagerDuty, Lightspeed and Pinterest.
BI/Analytics deal activity is alive and well: There are several enterprise/mid-market business intelligence exits happening in 2019, primarily through strategic M&A, including powerhouses like Looker, Tableau and Periscope Data. With this amount of consolidation in 1H 2019, companies on the SMB side of the BI spectrum should be thinking about where they fit into the altered landscape and what an exit looks like for them.
Bulge bracket banks make bets on SMB software: Both Morgan Stanley and JPMorgan made significant investments in SMB software companies in Q2 2019 spending over $1.4B USD together.
About SurePath Capital
Based in Toronto and San Francisco, SurePath Capital Partners is the only investment bank focused exclusively on the global SMB software market. We work with sellers in this market to ensure they are funded for growth and positioned for meaningful exits. In addition, we work with buyers in this market to help shape their strategy and execute acquisitions.