Is SaaS going into a growth downturn? We took a look at YOY SaaS growth trends of 117 publicly traded SaaS companies going back to Q4 2020. The data and observations are below.
Current YOY growth. As of Q4 2022, SaaS companies are growing 26% on median with $576mm of LTM revenue (last twelve months). That’s a nice level of growth given the size of these firms.
The average is similar. Average YOY growth is 28%.
Growth jump. Q4 2022 didn’t see a big slowdown of any kind in SaaS growth and in fact was pretty steady with the prior 8 quarters. We’ll see how Q1 goes as the layoffs and anecdotes of slow downs continue.
Data sources. Note that when available, we got growth figures directly from the Q4 annual reports. In some cases, we had to pull growth data from Yahoo Finance.
In your own SaaS business, watch out for elongating sales cycles, increased sales process complexity/hoops, reductions in customer budgets, and reductions in sales and marketing efficiency (measured as New ARR/S&M spend) as warning signs. If the warning signs are there, hunker down, find ways to cut costs, and pull back on the S&M spend. It’s ok to grow slower while staying cash efficient; save your cash for when the environment improves. It’s not ok to become less efficient to maintain growth. At some point that’s unsustainable.
Sammy is the Managing Partner and Co-Founder of Blossom Street Ventures. Visit us at blossomstreetventures.com and email directly at firstname.lastname@example.org. We invest in companies with run rate revenue of $3mm to $30mm, with year over year growth of 20% to 100%+ depending on revenue. We lead or follow in growth rounds and special situations like inside rounds, small rounds, rushed rounds, corralling investors with our term sheet, cap table clean up, and extensions. We can commit in 3 weeks and our check is $1mm to $4mm. Also visit https://blossomstreetventures.com/metrics/ for always up-to-date SaaS metrics.