SaaS Capital Blog

Bootstrapped Companies - Growth Rates and Profitability

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Growth, Profitability, and the “Rule of 40” for Private SaaS Companies

The Rule of 40 is not a perfect metric, but it remains a useful lens on SaaS company performance. Growth continues to be the dominant driver, though profitability trends are shifting as equity-backed companies reduce burn. Bootstrapped companies still hold the edge on this metric, but the gap is narrowing.

Three Observations on AI Developments at the Start of 2026

The three most brain-tickling bits of news or commentary on AI I’ve come across recently all challenge the “race to AGI between the hyperscalers” consensus on AI investment, but in potentially quite different ways. Two are based on relatively “hard” research publications, and one is based more on “vibes.”

Valuations, Growth, and Control: What Founders Should Know About SaaS Financing

Rob Belcher joined the SaaS Backwards podcast to discuss how SaaS financing has evolved and why many founders give up more equity than they need to. This summary highlights the major points from that conversation, including valuation trends, funding options, and the growing role of AI.

SaaS Has Evolved and Its Definition Should Too: Subscription-ai-and-Software

SaaS has long meant Software-as-a-Service, but the rise of AI tools and AI-enabled products signals a shift in how modern software is built and delivered. In 2025, SaaS increasingly looks like Subscription-AI-and-Software, a natural evolution in the broader B2B technology model.

A Weird Summer of AI Deals

Midyear 2025 has been the first time that AI has truly affected the daily work on this author’s desk. Prior to this, we spent a lot of time periodically researching, reviewing, prognosticating, writing, and inquiring – but it was about possible futures, not the effect in the present. Not so today: the summer of 2025 has seen AI take effect day-to-day, and even hour-to-hour.

What is a Good Retention Rate for a Private SaaS Company in 2025?

As we have noted for many years, revenue retention is one of the most important metrics for ensuring medium- to long-term business health due to its compounding effect on growth. The relationship of new sale bookings to revenue retention is the SaaS version of “offense wins games, defense wins championships.” Here, we summarize the findings relating to retention in our 2025 survey of private SaaS companies.

SaaS Valuation Multiples: Understanding the New Normal

This post examines the distribution of SaaS company ARR multiples at various points in time. We find that both the overall spread of the multiples, and the “shape” of that spread, have varied distinctly over time, in ways that correspond to different phases of the industry’s lifecycle. While SaaS valuations in 2025, on average, have returned to the “low normal” level seen in 2016-2017, today the highs are higher, the lows are lower, and the “long tail” stretches to the right.  It’s a “rich get richer” valuation environment, and merely being a SaaS company is no longer a ticket to premium ARR multiples.

2025 Revenue Per Employee Benchmarks for Private SaaS Companies

A common metric by which SaaS companies track their performance is annual recurring revenue (ARR) per employee. This 2025 update explores the median ARR per employee broken down by company size and funding type, equity-backed or bootstrapped.

Back to Normal: Section 174 Finally Fixed

The U.S. government has “fixed” Section 174 as of July 4, 2025, reversing the rule that forced companies to capitalize software development costs from 2022–2024. This update could have meaningful cash implications for SaaS businesses that paid income taxes or hope to qualify for QSBS treatment at exit. The blog breaks down the changes with a choose-your-own-adventure format to help founders quickly assess what, if anything, they need to do.

How SaaS Companies Should Report Multi-Year Contract Value on the Balance Sheet

It is okay to record total contract value as Deferred Revenue to keep track of future invoices, especially for companies that do not use a contract management tool. However, this should be done for internal tracking purposes only and it should not impact reporting on the Balance Sheet.  That said, for SaaS companies with even slightly complicated contracts, we highly recommend a subscription revenue management platform.