SaaS Capital Blog

Comparing Public and Private SaaS Growth Rates


Comparing Revenue Growth Trends in the Public and Private SaaS Sectors

Median revenue growth rates have been decelerating steadily for public SaaS companies over much of the past decade. SaaS Capital recently completed our annual survey of private, B2B SaaS companies. With the most recent data in hand, we thought it timely to look at revenue growth rates for private SaaS companies and examine whether any of the above trends identified in public companies are also present in the private sphere.

2024 Benchmarking Metrics for Bootstrapped SaaS Companies

SaaS Capital works with both VC-backed and bootstrapped SaaS companies and has seen the advantages of both approaches. However, one situation that is especially interesting is bootstrapped SaaS companies with $3M to $20M in Annualized Run Rate Revenue (ARR). Growing from a pre-revenue startup to $3M (scale-up phase) marks a significant shift and bootstrapping from $3M to $20M creates enormous value for owners. To help support bootstrappers during their scale-up, we wanted to focus on 2024 benchmarking metrics for scale-up stage bootstrapped SaaS companies.

2024 Private SaaS Company Valuations

Valuing private SaaS companies can be a fraught and confounding process in which two groups can look at the same numbers and arrive at widely different results. As our long-time readers know, we have sought to provide an objective, data-driven reference point to help overcome the challenges presented by valuing private SaaS companies. Using data from SaaS Capital’s recently completed 13th annual SaaS benchmarking survey with the model from the white paper and the current SCI of 6.8, yields a predicted private SaaS company valuation multiple of 4.1x.

The Rule of 40 is Dead... Long Live the Rule!

The Rule of 40, which suggests that a SaaS company's growth rate plus profitability percentage should equal at least 40, has been a benchmark for assessing the health of SaaS companies. However, this rule has come under scrutiny for being overly simplistic and not accurately reflecting the nuances of company performance in different contexts. This article further elaborates on the shortcomings of the Rule of 40, suggesting that it doesn't account for the vast differences between companies that might achieve the same "score" through vastly different means.

Why Long-Term SaaS Revenue Growth Rates are Slowing; and What it Means for Your Private B2B SaaS Company

Median revenue growth rates of publicly traded Software-as-a-Service (SaaS) companies in the SaaS Capital Index™ (SCI) are decelerating, and have been for much of the past decade as these companies grew bigger. The more recent development is that growth rates are now decelerating for all company sizes, including smaller public companies, which historically had the highest growth rates in the Index.

AI Risks to B2B SaaS Companies: A Framework for Estimating Risk

Artificial Intelligence will affect B2B SaaS very unevenly. Most companies will be affected only marginally, as AI becomes another tool in the toolbelt for technologists to deliver business value. However, there are some parts of the B2B SaaS ecosystem that will be utterly hollowed out by AI, as entire departments or functions disappear. We suggest here some mental models to use to help you estimate the risks to your SaaS business from the rise of AI.

Private B2B SaaS Company Growth and Profitability Update: Q3 2023

In November 2023, SaaS Capital launched a short survey to compare intra-year data against our long-running annual B2B private SaaS company metrics survey. We focused on just two areas: growth rates and profitability. Key takeaways include: growth rates have slowed considerably through 2023, companies have responded by cutting costs, and the Rule of 40 number has increased for most companies through 2023.

Exploring the Cost of Capital for SaaS Companies - Part III: Cost of Equity Simplified?

In Parts I and II, we looked at public company data and private company valuation models (backed by data) in order to come up with some empirical guesses for the cost of equity capital for SaaS companies. In this part, we step back from the data for a moment in order to examine the theory. The result may surprise you.

Exploring the Cost of Capital for SaaS Companies - Part II: Closing the Public-Private Gap

In Part I, we estimated the cost of equity for public SaaS companies at 14.9% as a long-term average. However, you can’t just use numbers from public companies and apply them, unadjusted, to private companies. Private companies tend to have lower valuations than their public counterparts due to less liquid markets for their shares.

What is the Average Deal Size for Private SaaS Companies in 2023?

Due to their compliance reporting requirements, there is plenty of data available about public SaaS companies. However, due to the size and funding of those companies, their metrics are typically not a good benchmarking metric for smaller, private SaaS companies. In order to provide peer-based benchmarking, SaaS Capital conducts a survey of private, B2B SaaS company metrics in the first quarter of each year. This post summarizes benchmarking data around the topic of Annual Contract Value (ACV).