How to be one of the ‘haves’ of SaaS

Sean Fanning Contributor

Sean Fanning is a vice president on OpenView’s Investment team. Before that, he led the firm’s Proactive Portfolio Management function and acted as director of corporate development, supporting the portfolio on inorganic and balance sheet related initiatives.

The flow of capital in SaaS is becoming increasingly bifurcated. There are the “haves” (public companies with revenue growth of over 30%) and the “have nots” (everyone else) of B2B software.

The chart below demonstrates just how drastically the “haves” separated themselves from the rest. With average EV/revenue multiple up +28.5x for companies that grew over 50% and +9.9x for companies that grew 30%-50% since 2019, compared to just +2.9x for those that grew by 10%-30%.

The real trick is identifying why certain companies are “haves” and how they remain that way. Put differently, what is it about companies like Zoom, Datadog, Monday.com and Asana that drive their outsized valuations? More importantly, are there strategies or tactics that management teams can employ to optimize for this type of outcome?

Growth in EV/revenue over time. Image Credits: OpenView Partners

Recent research shows that there are three key steps to becoming a “have”:

• Continued execution against large and growing market opportunities.