China’s cloud software vendors are feeling the brunt of the sharpest drop in venture capital (VC) investment in the sector in a decade, with many rushing to cut prices or costs to tide them over, reports Caixin. The country’s current 13 software as a service (SaaS) unicorns—startups valued at more than $1 billion—raised just RMB 495 million ($69 million) from investors last year, the lowest amount since 2014, according to ITjuzi, a domestic provider of data on tech companies and investments, based on announced deals.
The amount pales in comparison to the peak of RMB 9.3 billion they raised in 2021, when the Covid pandemic boosted demand for digital services.
SaaS is a software delivery model that allows customers to use cloud-based applications such as email and office tools over the internet, usually on a subscription basis. Investors were drawn to SaaS as it became increasingly popular due to its benefits such as time and cost savings for business customers, while industry leaders such as U.S.-based Salesforce Inc. and Adobe Inc. offered enticing success stories.