This week, martinwolf M&A Advisors released its annual report on leading SaaS companies by valuation multiples, comparing the Top Ten (The "SaaSiest") with the Next Ten (The "SaaSy"). The report, previewed on Friday in SaaS in the Enterprise, showed four main trends:
Valuations are Record Highs
The SaaSiest companies have a median multiple of 21.2x, 160% higher than last year. The SaaSy list has seen even larger growth, with a median multiple that, at 10.4x, is 250% higher than it was last year. As with 2013, this meteoric rise is fueled by massive revenue growth rates.
Seven of Top Twenty SaaS Companies are Recent IPOs
In our 2013 edition of our SaaS report, we noted that six of the Top 20 SaaS companies identified in our 2012 report had been acquired. In this report, the main driver for change was displacement by higher value newcomers. Seven of our Top 20 SaaS companies experienced an IPO during the last year. Only ExactTarget was acquired from last year's Top 20.
Market Penetration Remains Low
To put the SaaS sector in context, we totaled the collective annual revenue of the 40 SaaS companies in the MW IT Index® and compared it with the annual revenue of the top 10 enterprise software companies.
According to
Sunil Grover, Executive Vice President at
martinwolf, "SaaS companies amount to $13.4 billion in revenue-compared to $334 billion for traditional software companies -- a market penetration of less than five percent. It's clear that SaaS companies have substantial room to grow."
SaaS Success Lies in Horizontals
Some smaller SaaS companies distinguished themselves through vertical specialization, but the most successful and highest valued SaaS companies remain those that offer broad appeal across multiple industries due to their greater growth potential.
For more detailed analysis, and to see which companies made it into our SaaSiest and SaaSy lists this year, click here to read the complete report.
