For SaaS companies, profitability has received a renewed focus, but we would caution against sacrificing too much growth to achieve it. The punchline: a SaaS company will drive far more value if they grow high quality ARR (100%+ NDR) in a cash efficient manner (generate $0.70+ of net new ARR for every $1 of operating loss). The data below proves that view out.
Of the 87 publicly traded SaaS companies we follow, the 30 most profitable but slowest growing companies have average and median revenue multiples of 10.28x and 6.5x respectively. Alternatively, the 30 fastest growing but least profitable companies have average and median revenue multiples of 14.7x and 9.8x. That’s a very material gap. The data is clear on this: if you’re a SaaS company with high quality ARR (100%+ NDR), do not sacrifice cash efficient growth for profitability.
Below we show the 30 most profitable but slowest growing companies. To put the list together, we sorted by slowest growth first and most profitable second.
Below we show the 30 fastest growing but least profitable companies. To put the list together, we sorted by least profitable first and fastest growing second.
Thank you for your readership. Visit blossomstreetventures.com for more SaaS data and blogs. Email the author directly at sammy@blossomstreetventures.com or connect on LinkedIn
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