Navigating the SaaS Market Downturn : A Study on Shifts in KPI Focus

Detta är en Master-uppsats från KTH/Skolan för industriell teknik och management (ITM)

Sammanfattning: The 2021 - 2022 decline in the Software as a Service (SaaS) market is a novel occurrence, as previous recessions and market downturns took place before the emergence of SaaS. The decline in SaaS valuation signifies changes in valuation criteria and with that, a shift in the weighting of the Key Performance Indicators (KPIs) profitability and growth. While growth has historically been one of the most important KPIs for SaaS valuations, there are indications that profitability is gaining significance as investors prioritise safer investments in a volatile market. To investigate the weighting of KPIs in the new market landscape and the valuation multiple development, a quantitative exploratory approach was adopted, where 43 B2B SaaS companies in the Nordic region and 57 B2B SaaS companies in the US were analysed. Four main findings was established in the report: (1) a clear downturn in both the Nordic and US median revenue multiple was observed, where both markets’ multiples more than halved from 2021-2023; (2) In the US market, a strong negative correlation was found between the profitability and growth multiples, and between revenue growth and EBITDA margin. For the Nordics a moderate correlation was observed between profitability and growth multiples; (3) A shift in the KPI relation has occurred during the downturn, where the median profitability has increased for US and Nordic SaaS companies. Growth declined for the US SaaS companies, while increased in the Nordics; (4) The interquartile range (IQR) among top performers in the US have shifted towards increased profitability and a decrease in growth. Meanwhile, the top performers in the Nordics maintained the same median profitability after the market downturn and the IQR decreased.

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