Private SaaS Companies Shift Focus to Growth and AI Adoption, Survey Reveals

PRIVATE SAAS COMPANY SURVEY REVEALS SHIFT TOWARDS FUTURE GROWTH WITH A CONTINUED FOCUS ON OPERATIONAL EFFICIENCY AND PROFITABILITY By Investing.com

15th annual report suggests AI and macro-economic optimism as drivers of growth in 2025 and , /PRNewswire/ -- KeyBanc Capital Markets (KBCM), the corporate and investment banking unit of KeyCorp (NYSE:KEY), in partnership with Sapphire Ventures, a global software venture capital firm backing companies of consequence, released results from its 15 annual Private SaaS Company Survey, the benchmarking report by which the SaaS industry measures financial and operating performance. This year's survey included more than 100 private software as a service (SaaS) companies revealing a continued focus on efficient execution and profitability " a resounding theme throughout the report. The report also suggests that private SaaS companies have an opportunity to shift their focus from dealing with uncertainty to pursuing future growth, with artificial intelligence (AI)-first SaaS companies in particular expecting to experience growth acceleration in the next 12 months. TOP TRENDS AND INSIGHTS: Annual Recurring Revenue (ARR) growth and retention remain consistent. Anticipated increase in sales quotas and attainment rates for Go-To-Market (G™) teams as companies adopt AI and learn how to further improve G™ efficiency. Companies remain focused on successful execution and improving profitability. Both public and private markets are showing signs of improvement--primarily driven by recent AI developments and a more optimistic view of the macro environment "Primarily driven by the availability of capital and a positive economic outlook, companies invested to pursue aggressive growth targets in 2021-2022. However, many companies scaled back operations and shifted their focus from growth to profitability as we entered 2023," says Scott Peterson, Managing Director, Software Investment Banking at KeyBanc Capital Markets. "Despite this trend continuing into 2024, we see strong long-term prospects for the sector, due to factors such as the continued transition to the cloud and increased adoption of artificial intelligence." "Over the past year, we saw companies become even more efficient as they learned to do more with less and refined their ideal target customer profiles," said , Partner at Sapphire Ventures. "Moving forward, we see private company SaaS growth inflecting higher as the macro economy improves and as companies take advantage of AI tailwinds." Rule of 40 benchmarking, a "best-in-class" SaaS company performance calculated by adding a company's growth rate and profitability margin, is showing signs of improvement amongst private SaaS companies. While none of our surveyed companies are expected to achieve or exceed the Rule of 40 this year, many of them are getting closer to it, primarily due to EBITDA margin improvements. The KBCM and Sapphire Ventures Private SaaS Company Survey provides credible operational and financial benchmarking data for executives and investors in SaaS companies of all sizes. This includes everything from G™ selling strategies, historical and projected growth, and retention rates, to operational management and margin structures, as well as proprietary data on valuation and exit expectations. This year's survey polled senior executives at more than 100 privately held global SaaS companies with a median 2023 ARR of ~$26 million in several sectors including Infrastructure Management, FinTech, Cybersecurity, Communications, Vertical Market Applications and Horizontal Applications. To view the full survey results, methodology and to see a deeper analysis of the findings, visit us at http://www.key.com/saassurvey. The information contained in this report has been obtained from sources deemed to be reliable but is not represented to be complete, and it should not be relied upon as such. This report does not purport to be a complete analysis of any security, issuer, or industry and is not an offer or a solicitation of an offer to buy or sell any securities. This report is prepared for general information purposes only. About KeyBanc Capital Markets KeyBanc Capital Markets is a leading corporate and investment bank providing capital markets and advisory solutions to dynamic companies capitalizing on opportunities in changing industries. Our deep industry expertise, broad capabilities and unique ideas are seamlessly delivered to companies across the Consumer & Retail, Diversified Industries, Healthcare, Industrial, Oil & Gas, Real Estate, Utilities, Power & Renewables, and Technology verticals. With over 800 professionals across a national platform, KeyBanc Capital Markets has more than of capital committed to clients and an award-winning Equity Research team that provides coverage on nearly 600 publicly traded companies. Securities products and services are offered by KeyBanc Capital Markets Inc., member FINRA/SIPC, and its licensed securities representatives, who may also be employees of KeyBank N.A. Banking products and services, are offered by KeyBank N.A. About KeyCorp KeyCorp's roots trace back nearly 200 years to . Headquartered in , Key is one of the nation's largest bank-based financial services companies, with assets of approximately at . Key provides deposit, lending, cash management, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of approximately 1,000 branches and approximately 1,200 A™s. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC. About Sapphire Sapphire is a global software venture capital firm with more than in AUM(1) and team members across , , , and . For over a decade, Sapphire has partnered with visionary management teams and venture funds to back companies of consequence. Since its founding, Sapphire has invested in more than 170 companies (2) globally resulting in more than 30 public listings and 45 acquisitions(3). The firm's investment strategies " Sapphire Ventures, Sapphire Partners, and " are focused on scaling companies and venture funds, elevating them to become category leaders. Sapphire's Portfolio Growth team of experienced operators delivers a strategic blend of value-add services, tools and resources designed to support portfolio company leaders as they scale.

PRIVATE SAAS COMPANY SURVEY REVEALS SHIFT TOWARDS FUTURE GROWTH WITH A CONTINUED FOCUS ON OPERATIONAL EFFICIENCY AND PROFITABILITY - KeyCorp (NYSE:KEY)

15th annual report suggests AI and macro-economic optimism as drivers of growth in 2025 SAN FRANCISCO and MENLO PARK, Calif., Oct. 23, 2024 /PRNewswire/ -- KeyBanc Capital Markets (KBCM), the corporate and investment banking unit of KeyCorp KEY, in partnership with Sapphire Ventures, a global software venture capital firm backing companies of consequence, released results from its 15th annual Private SaaS Company Survey, the benchmarking report by which the SaaS industry measures financial and operating performance. This year's survey included more than 100 private software as a service (SaaS) companies revealing a continued focus on efficient execution and profitability -- a resounding theme throughout the report. The report also suggests that private SaaS companies have an opportunity to shift their focus from dealing with uncertainty to pursuing future growth, with artificial intelligence (AI)-first SaaS companies in particular expecting to experience growth acceleration in the next 12 months. TOP TRENDS AND INSIGHTS: Annual Recurring Revenue (ARR) growth and retention remain consistent. ARR growth is expected to slightly decelerate year-over-year to ~19% in 2024; however, this is still nearly twice as fast as public software companies, which have an estimated median growth rate of ~11% in 2024.Both gross retention and net retention have remained, and are expected to remain, relatively consistent at ~90% and ~101%, respectively. Anticipated increase in sales quotas and attainment rates for Go-To-Market (GTM) teams as companies adopt AI and learn how to further improve GTM efficiency. Sales team quotas increased by more than 10% in 2023 and have remained elevated in 2024 with quota attainment expectations also having expanded from ~70% to ~75% this year, two positive signs that highlight how private SaaS companies are able to navigate today's changing market.Recent headcount additions to GTM teams indicate optimism moving forward as companies anticipate and prepare for a rebound in 2025. Companies remain focused on successful execution and improving profitability. Major profitability metrics saw a slight improvement in 2023; however, there is an even more pronounced improvement in 2024 as companies continue to focus on operating efficiency and improving their EBITDA margins instead of aggressively pursuing top-line growth.Continued budget cuts and a more conservative approach to expense management are anticipated, especially for larger-sized companies with >$50 million ARR. Both public and private markets are showing signs of improvement--primarily driven by recent AI developments and a more optimistic view of the macro environment Public market software valuations are returning to near-normalized levels at ~5-6x next twelve months (NTM) revenue, compared to the all-time highs of ~17x in 2021.Private market financing activity and multiples are beginning to show strength, with high growth companies growing more than 50% commanding super premium multiples of ~14x ARR. "Primarily driven by the availability of capital and a positive economic outlook, companies invested to pursue aggressive growth targets in 2021-2022. However, many companies scaled back operations and shifted their focus from growth to profitability as we entered 2023," says Scott Peterson, Managing Director, Software Investment Banking at KeyBanc Capital Markets. "Despite this trend continuing into 2024, we see strong long-term prospects for the sector, due to factors such as the continued transition to the cloud and increased adoption of artificial intelligence." "Over the past year, we saw companies become even more efficient as they learned to do more with less and refined their ideal target customer profiles," said Steve Abbott, Partner at Sapphire Ventures. "Moving forward, we see private company SaaS growth inflecting higher as the macro economy improves and as companies take advantage of AI tailwinds." Rule of 40 benchmarking, a "best-in-class" SaaS company performance calculated by adding a company's growth rate and profitability margin, is showing signs of improvement amongst private SaaS companies. While none of our surveyed companies are expected to achieve or exceed the Rule of 40 this year, many of them are getting closer to it, primarily due to EBITDA margin improvements. The KBCM and Sapphire Ventures Private SaaS Company Survey provides credible operational and financial benchmarking data for executives and investors in SaaS companies of all sizes. This includes everything from GTM selling strategies, historical and projected growth, and retention rates, to operational management and margin structures, as well as proprietary data on valuation and exit expectations. This year's survey polled senior executives at more than 100 privately held global SaaS companies with a median 2023 ARR of ~$26 million in several sectors including Infrastructure Management, FinTech, Cybersecurity, Communications, Vertical Market Applications and Horizontal Applications. To view the full survey results, methodology and to see a deeper analysis of the findings, visit us at http://www.key.com/saassurvey. The information contained in this report has been obtained from sources deemed to be reliable but is not represented to be complete, and it should not be relied upon as such. This report does not purport to be a complete analysis of any security, issuer, or industry and is not an offer or a solicitation of an offer to buy or sell any securities. This report is prepared for general information purposes only. About KeyBanc Capital Markets KeyBanc Capital Markets is a leading corporate and investment bank providing capital markets and advisory solutions to dynamic companies capitalizing on opportunities in changing industries. Our deep industry expertise, broad capabilities and unique ideas are seamlessly delivered to companies across the Consumer & Retail, Diversified Industries, Healthcare, Industrial, Oil & Gas, Real Estate, Utilities, Power & Renewables, and Technology verticals. With over 800 professionals across a national platform, KeyBanc Capital Markets has more than $50 billion of capital committed to clients and an award-winning Equity Research team that provides coverage on nearly 600 publicly traded companies. Securities products and services are offered by KeyBanc Capital Markets Inc., member FINRA/SIPC, and its licensed securities representatives, who may also be employees of KeyBank N.A. Banking products and services, are offered by KeyBank N.A. About KeyCorp KeyCorp's roots trace back nearly 200 years to Albany, New York. Headquartered in Cleveland, Ohio, Key is one of the nation's largest bank-based financial services companies, with assets of approximately $190 billion at September 30, 2024. Key provides deposit, lending, cash management, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of approximately 1,000 branches and approximately 1,200 ATMs. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC. About Sapphire Sapphire is a global software venture capital firm with more than $10 billion in AUM(1) and team members across Austin, London, Menlo Park, and San Francisco. For over a decade, Sapphire has partnered with visionary management teams and venture funds to back companies of consequence. Since its founding, Sapphire has invested in more than 170 companies (2) globally resulting in more than 30 public listings and 45 acquisitions(3). The firm's investment strategies -- Sapphire Ventures, Sapphire Partners, and Sapphire Sport -- are focused on scaling companies and venture funds, elevating them to become category leaders. Sapphire's Portfolio Growth team of experienced operators delivers a strategic blend of value-add services, tools and resources designed to support portfolio company leaders as they scale. Notes: (1)AUM (Assets Under Management) represents Sapphire's Regulatory Assets Under Management as of 12/31/2023 per ADV filed March 2024; (2)Figures represent all Sapphire direct growth investments made since the firm's inception in January 2011 through June 2024.(3)Figures represent all Sapphire direct growth investments that have had an IPO or public listing from the firm's inception in January 2011 thru June 2024.The specific companies identified may not be representative of all of Sapphire's investments and no assumption should be made that the investments identified were or will be profitable. A complete alphabetical list of Sapphire's investments made by its direct growth investing funds is available here. View original content to download multimedia:https://www.prnewswire.com/news-releases/private-saas-company-survey-reveals-shift-towards-future-growth-with-a-continued-focus-on-operational-efficiency-and-profitability-302284711.html SOURCE KeyCorp Market News and Data brought to you by Benzinga APIs