SaaStr

MARCH 31, 2021

UiPath is one of the most amazing not-really-an-overnight success stories in Cloud, SaaS and software. It was founded way back in 2005 as an outsourcing company, then developed Windows software to automate scripts and more, and turned this into a powerhouse for automating complex functions integrating Cloud and on-prem. 2016: $3.5m

Outsourcing Services 362

Outsourcing Services Outsourced Development Payment Features Cloud 362

Tom Tunguz

DECEMBER 12, 2021

Since 2016, public software has witnessed four corrections. Also, 2014 to 2016 saw a 57% reduction in multiples and of course after 2008. In fact, the 75th percentile multiple has appreciated 25% annually since 2016 and the median has increased by approximately 20%. Today, we’re in the midst of the fifth.

SaaS 361

SaaS Cloud Enterprise Software 361

Tom Tunguz

OCTOBER 12, 2022

The public software market continues to compress. Enterprise-value-to-forward-revenue multiples are now below 2016 levels for the first time in 6 in years. But it does illustrate the impact of rates on software valuations. It happened in Feburary 2016. The 25th percentile of companies trade at 3.3x today compared to 4.0x

Banking 325

Banking Enterprise Software Revenue 325

SaaStr

JANUARY 4, 2022

Braze was early to taking a next-generation approach to marketing automation software, focused on being mobile and messaging first. 2016 customer cohort spends 3.2x Blaze’s 2016 customers spend 3.2x more today than they did in 2016. 60% still “counts” as software. more today. 60% Gross Margins.

New CTO 69

New CTO CTO Software Review B2B 69

Tom Tunguz

OCTOBER 29, 2022

We can examine the sales efficiency of public software companies to get a sense. Since 2016, the average public software witnessed its sales efficiency winnowed from 52% to 47%, a decline of about 10%. This chart segments the public software companies into the 25th, 50th & 75th percentiles. I observe a few trends.

Sales Hiring 317

Sales Hiring Sales Startup Acquisition 317

Tom Tunguz

OCTOBER 18, 2020

Most high-growth software investors value public companies on enterprise value to forward revenue multiple. What if we could compare the relative valuation multiples of public and private high growth software companies? What if we could compare the relative valuation multiples of public and private high growth software companies?

Software Review 363

Software Review Finance Enterprise Acquisition 363

Hitenism

DECEMBER 26, 2016

2016 has been a year where knowledge has become freely available for anyone interested in knowing about all things SaaS. This slide deck comes from Brian’s brilliant SaaSFest 2016 presentation. In 2017, companies will find success by getting back to basics and focusing on the “service” part of Software as a Service.

Scale 152

Scale SaaS Marketplace as a Service SMB 152

SaaStr

APRIL 24, 2021

50% revenue from software (recurring), 50% from payments (not-recurring). . Half of its revenues comes from its software. Well, if it were 2016, we’d say no. And yes, it’s a software company. Fast forward to day, Merchant Solutions is a much larger share of revenue than software subscriptions.

Merchant Services 360

Merchant Services SaaS Payments Payment Solutions Payment Services 360

Tom Tunguz

MARCH 10, 2022

Both startups provide database software to developers to build applications. In 2016, each company recorded less than $50m in revenue. Both of these businesses are publicly traded. Both have grown very fast. In fact, their revenue trajectories through 2020 are nearly identical. In two years, both would near $200m in revenue.

Startup 338

Startup Pricing Revenue Development 338

Tom Tunguz

NOVEMBER 29, 2015

In 2016, I believe they will enjoy a very active acquisition environment. The roughly 60 or so publicly traded software companies hold more than $380B in cash and short term investments on their balance sheets. In 2015, startups benefitted from a vibrant fund raising market.

Software 100

Software Acquisition Startup Investment 100

SaaStr

MAY 6, 2022

Update on cloud software multiples, charted alongside the 10Y and 5 year pre-covid NTM rev multiple average. January 2016, SaaS stocks were riding high. It was called 2016: * Everyone panicked * Seemed like multiples would never recover * LinkedIn sold to Microsoft for 7x ARR. pic.twitter.com/JNnzizB82v. But it was just a panic.

SaaS 348

SaaS Azure Cloud AWS 348

Tom Tunguz

JUNE 11, 2018

2018 is a blockbuster year for software M&A multiples. The growing sizes of the software market. The pace of innovation within software. As I wrote earlier this week, forward software multiples have reached eight year highs at 8.5x Billion-dollar plus acquisitions in 2018 have commanded a median 17.7x EV/NTM revenues.

Software 173

Software Marketing Scale Acquisition 173

The Angel VC

JANUARY 10, 2017

In less earth shattering news, the fact that it's 2017 also means that my "SaaS Funding in 2016" napkin needs an update. As a reminder, in the original post I tried to give a "back of a napkin" answer to this question: What does it take to raise capital, in SaaS, in 2016?

SaaS 262

SaaS Marketplace as a Service Machine Learning Artificial Intelligence 262

Tom Tunguz

JANUARY 2, 2016

Which of the 16 major start of categories in information technology will reap disproportionate share of investment dollars in 2016? This may be a breakout category in 2016 for Series A investments. Given the amount of seed investor interest, I expect many of these marketplaces to raise series A dollars in 2016.

Startup 113

Startup Marketplace as a Service Social Media Advertising 113

SaaStr

JUNE 1, 2022

I don’t do a lot of predictions, but I very strongly believe enterprise software companies are going to do really well over the next 18/24 mos…. It’s not slowing down Salesforce, Snowflake, or almost any other SaaS or Cloud leader. Salesforce Growth: 2023 $31.8B (guidance) 2022 $26.5B 2021 $21.25B 2020 $17.1B 2014 $4.1B. Thank you Ohana!

Sales Hiring 347

Sales Hiring Acquisition Cloud Enterprise 347

Tom Tunguz

MARCH 28, 2021

UIPath offers software to build robots, programs that automate repetitive work. The UIPath suite includes the software to write, execute, monitor, and maintain these robots. The company also mentions the 2016 cohort of customers expanded 51x in the last 5 years. Some examples include streamlining customer onboarding.

Payment Services 359

Payment Services Metrics Payment Solutions Payments 359

SaaStr

SEPTEMBER 22, 2021

And they are both incredibly impressive — 118% growth at $3B run-rate and $500m in ARR in software alone may be an all-time record — but also, perhaps not SaaS? #1. With gross margins of only 21%, is Toast really a software company? Wix just has more software revenue to blend the total margins higher.

Payment Methods 328

Payment Methods Payment Solutions Payments Cloud 328

SaaStr

MAY 1, 2023

UiPath has had an incredible history, taking 10 years to get to that first $1m in ARR … and then turning into one of the fastest growing software companies to $1 Billion in ARR ever ! 2016: $3.5m 2016: $3.5m UIPath History 2005: Started as a tech outsourcing company 2014: $500k rev. seed round 2015: $1m rev.

Company Culture 291

Company Culture Innovation AI Enterprise 291

Tom Tunguz

JUNE 20, 2022

From 2007 to 2016, $1.5b marked the upside case for most VC software and infrastructure investment memos. The silver lining: the median public software company in 2022 is three times as valuable as in 2015, which suggests valuations should settle higher than that era. Fewer than 15 SaaS companies traded on public exchanges then.

Startup 295

Startup Software Investment SaaS 295

SaaStr

APRIL 29, 2021

Shopify’s first quarter revenue: Q1 2021: $989 million Q1 2020: $470 million Q1 2019: $321 million Q1 2018: $214 million Q1 2017: $127 million Q1 2016: $73 million Q1 2015: $37 million Q1 2014: $19 million Q1 2013: $9 million. Shopify doesn’t call its non-software revenue “MRR” A small but interesting note.

Merchant Services 316

Merchant Services Payment Methods SaaS Payments Payments 316

SaaStr

JANUARY 11, 2023

But importantly, it’s raised its ACV 4x since 2016. Example: quiet SaaS learning software Docebo: pic.twitter.com/jtGwErBPu6. Docebo’s pricing is on the “corporate” side of LMS. It doesn’t compete at the bottom of the market, and targets top logos with a reasonably priced product. Yes, you can.

Scale 351

Scale Pricing Scaling Enterprise 351

Tom Tunguz

DECEMBER 20, 2016

2016 was a year of change for SaaS, and most of the story was the public market. The Hottest Startup Sectors In 2016 - published on January 3rd, this post reviewed the patterns of investment in startups, and in particular, the sectors where investors were increasing their investment the fastest. The end of the year is fast approaching.

Software Review 100

Software Review Systems Review Startup Pricing 100

SaaStr

JUNE 5, 2020

“Salesforce’s IPO is also seen as a test of a new business model that could shake up the software industry. The company is the poster child for subscription-based software, a model that’s gaining popularity among corporate buyers. In 2016, Digital Ocean opened a $130m credit facility with Keybanc. .

Venture Capital 299

Venture Capital Technical Review SaaS Scale 299

SaaStr

JANUARY 20, 2020

A massive amount of IT spend has not just moved to SaaS over the past decade, but almost as importantly, the % spent on business software by IT has also gone up. This will be the start of the end of the sweetheart run for SaaS from 2015–2016 through today. “No No code” enables much better software. “No But this can’t last.

SaaS 271

SaaS Engineering Software Revenue 271

SaaStr

NOVEMBER 22, 2023

There are several big leaders in property management software, and AppFolio is one of them. At $660m in “ARR” (a lot of that isn’t software, as we’ll see below), it’s trading at a $7.2 AppFolio is what the markets want in a software+ company, at least in 2023. Let’s dig in.

Payment Services 291

Payment Services Payment Solutions SaaS Payments Payments 291

SaaStr

MAY 22, 2023

Not easy, but easier and easier: There was a bump in 2016, a Flash Crash in SaaS, when budgets were slashed, but it didn’t last long enough to really impact renewal cycles.

SaaS 319

SaaS Churn Sales Software 319

SaaStr

SEPTEMBER 23, 2022

To illustrate the turbulence, consider the following metrics: The BVP NASDAQ Emerging Cloud Index (the public benchmark of software performance) has contracted by more than 40%. Cloud 100 multiples have fallen in 2022 –– ARR multiples rose nearly fourfold from 9x in 2016 to 34x in 2021 and down to 30x in 2022.

Cloud 310

Cloud Benchmarks Trends Business Model 310

Clouded Judgement

APRIL 26, 2024

Every week I’ll provide updates on the latest trends in cloud software companies. For software, all eyes were on Azure - which grew 31% YoY (ahead of expectations closer to 29%). This is good news for the broader infrastructure software universe. Follow along to stay up to date! I have to “swag” this a bit.

Azure 184

Azure Cloud Software AI 184

SaaStr

JANUARY 12, 2023

Founded in 2016, Lark effectively combines messaging, schedule management and online collaborative documents in a single platform. Our mission at Vanta is to be a layer of trust on top of cloud services, to secure the internet, increase trust in software companies, and keep consumer data safe.

Payment Features 55

Payment Features Payment Services SaaS Payments Payments 55

SaaStr

JANUARY 27, 2024

As a core part of Matt’s philosophy, people need to have their own domain and run open-source software because it allows them to control the entire stack of what they’re putting online. Automattic was started in 2005 to democratize publishing, and WooCommerce was purchased in 2016 to democratize e-commerce.

Underperforming Technical Team 333

Underperforming Technical Team Social Media Government Payment Features 333

Tom Tunguz

JULY 28, 2016

Through the end of July in 2016, $70B worth of SaaS companies sold. First, 15 of the 22 US software acquisitions worth more than $0.5B The largest private software acquisition is Transfirst, a payment software business founded in 1995. Perhaps the fastest growing software companies aren’t interested in selling, yet.

Payment Solutions 100

Payment Solutions Payments SaaS Acquisition 100

SaaStr

DECEMBER 27, 2019

You could spend days reading about pricing and pricing strategies in software on the web, but a lot of this content doesn’t really hit one, basic fundamental point — there is no real reason any particular piece of software should cost anything in particular. Real software has basically zero core cost to deliver.

Pricing 339

Pricing Enterprise Software Sales 339

Tom Tunguz

SEPTEMBER 16, 2019

The chart above shows the most recent enterprise value to forward multiple for a basket of next-generation software companies. The worst of them was in February 2016 when multiples fell by approximately 60%. Last week, SaaS stocks fell by about 18% on average. As of Friday, the median forward multiple is 9.3x

SaaS 254

SaaS Pricing Enterprise Startup 254

Clouded Judgement

NOVEMBER 3, 2023

Every week I’ll provide updates on the latest trends in cloud software companies. Some of these drops rival one of the worst ever software earnings reaction of Tableau in 2016! On Thursday the software index (WCLD) was up ~3%! So what’s holding up software stocks valuations?? Atlassian was down ~10%.

Software Review 167

Software Review Cloud Software Azure 167

Tom Tunguz

NOVEMBER 6, 2016

The increasing focus on vertical software startups shouldn’t be surprising. Many of the most of apparent and immediate opportunities in the software market have been filled by now SaaS incumbents. Artificial intelligence is to be a big trend in the SaaS world, a theme that matured in 2016 but will very much continue through 2017.

Artificial Intelligence 100

Artificial Intelligence Trends Marketing SaaS 100

Tom Tunguz

JUNE 11, 2017

When I analyzed the SaaS fundraising market in 2016 , three trends emerged. Across all rounds, both lines are up into the right, despite some volatility in 2016. In 2016, venture capitalists reduced their investment in staff companies by 1 ⁄ 3 , falling to $2.8 Meanwhile, round sizes swelled. billion from $4.2

Venture Capital 203

Venture Capital SaaS Trends Startup 203

Tom Tunguz

APRIL 25, 2016

As the overall venture market environment evolves in 2016, so too does the SaaS and Software segment. The number of Series A, B, C, and D investments in software companies stabilized at roughly 170 per quarter from mid-2013 through mid-2015, before falling 17% in Q4 2015 to a two year low.

Marketing 100

Marketing SaaS Investment Startup 100