E-Spring SaaS Index 2024 H1

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The E-Spring B2B SaaS Index has seen a gradual decline in valuation multiples over the last six months. Despite the strong performance of the global equity market, the B2B SaaS market has faced more challenging conditions. It decreased from 7.29x to 6.16x EV/Sales.

Key factors contributing to the downtrend:

The SaaS market has experienced a steady decline in valuation metrics, falling from 7.29x in January to 6.16x by the end of June 2024. This decline stands in sharp contrast to the highs in the US public equity markets, which have been driven primarily by a small group of big-cap tech companies and AI-related firms. We are seeing quite a divergence in the evolution of valuation multiples between the E-Spring B2B SaaS Index and traditional indexes such as the S&P500 and NASDAQ.1

There could be three reasons for this divergence:

Market concentration: The recent surge in stock markets has been concentrated in a few large tech companies (e.g., Microsoft, Facebook, Netflix, Amazon) and AI firms like NVIDIA, rather than a broad-based rally including B2B software companies.2

Bid-ask spread: The wide bid-ask spread between sellers and investors has hindered transactions. Sellers are still anchored to high valuation multiples from a few years ago, while investors are cautious, mindful of declining multiples and potential economic downturns.

IPO drought: There has been a notable lack of initial public offerings (IPOs) over the past two years, leading to stagnation in the public SaaS market. While some deals have occurred, overall activity remains sluggish.1

In & Out in our Index:

There have been notable changes in the E-Spring SaaS Index Since end of 2023. Three companies have exited the Index:

GK Software: GK Software acquired by Fujitsu for €432 million in July 2023.

New Relic: New relics has been acquired by Francisco Partners & TPG for $87 per share, totalling a $6.5 billion acquisition value.

Alteryx: Insight Partners & Clearlake Capital Group agreed to a complete acquisition of Alteryx for $4.4 billion at the end of 2023.

Those companies have been replaced by three B2B SaaS companies:

Temenos: Temenos provides a cloud-based platform with a comprehensive set of banking capabilities for retail, corporate, wealth, business, and fund administration.

Docebo: Docebo specializes in learning management systems as a software as a service company.

JFrog: J Frog offers a supply chain platform that ensures end-to-end visibility, security, and control for automating the delivery of trusted releases.

References:

1. .          SaaS Capital. (2024). 2024 Private SaaS Company Valuations.  Retrieved from:  https://www.saas-capital.com/blog-posts/private-saas-company-valuations-multiples/

2.             Adventis Advisors. (2024). SaaS Valuation Multiples: 2015-2024. Retrieved from:  https://aventis-advisors.com/saas-valuation-multiples/

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SAAS-H1-2024
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