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December 18, 2023
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Sapphire and KeyBanc Survey: SaaS Companies Shift Toward Efficient Profitability

KeyBanc Capital Markets and Sapphire Ventures have released the results of their 14th annual Private Software as a Service (SaaS) Company Survey. The report reveals trends of slowed growth and a move towards profitability in the industry.

  • The macroeconomic climate is predicted to continue impacting Annual Recurring Revenue (ARR) growth and profitability in 2024.
  • Despite perceived lags in sales and marketing, there is optimism around go-to-market (GTM) teams becoming more productive.
  • Conservative buying patterns and budget cuts have resulted in customer churn, longer deal cycles, and reduced contract values, leading to lower growth rates.
  • GTM teams are focused on driving revenue efficiency, despite expected reduced conversion rates across the marketing funnel.
  • Software valuations are becoming more normalized, with the ‘Rule of 40’ factor becoming more significant for valuation.
  • Despite macroeconomic issues, private market financing activity remains strong.

Only 15% of private SaaS companies operated at or above the ‘Rule of 40’ benchmark, a measure of efficient growth, compared to over a third in the previous year. This suggests a decrease in efficiency or failure to meet growth targets.

The survey informed senior executives from more than 100 privately held global SaaS companies, which spanned multiple sectors, providing operational and financial benchmarking data for companies of all sizes. KeyBanc Capital Market’s Scott Peterson and Sapphire Venture’s Steve Abbott both commented on the findings of the report, emphasising the continued promise for long-term growth within the sector.

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