The E-Spring B2B SaaS index is based on 40 international B2B SaaS companies. We focus on the EV/Sales multiple as it is the most commonly used valuation metric for SaaS companies. Since many SaaS companies are not yet profitable, other valuation multiples are less suitable. Additionally, the SaaS business model typically generates a significant percentage of recurring revenue, which is best captured by the EV/Sales multiple.

Global Market:
The global financial market performed exceptionally well in 2024, driven by the tech sector’s strong performance. The NASDAQ 100 ended the year with a 27.62% return despite a 10% pullback in July, while the S&P 500 rose by 25%. The tech industry continues to be a key driver of global markets^{1 & 2}.

This trend was also evident in the SaaS index. After experiencing a downward trend and bottoming out at 6.08x EV/Sales in August, the index rebounded to 7.97x by December 2024. This recovery was largely attributed to the U.S. presidential elections in November, which sparked a strong rally in financial markets.

Notable Trends in 2024:
The average churn rate in the SaaS market increased over the past year. An increasing number of SaaS companies reported net positive monthly revenue churn. In 2022, 20% of SaaS companies experienced net negative monthly revenue churn, compared to just 6.2% in 2024³. Additionally, Vertical SaaS outpaced Horizontal SaaS in terms of growth, highlighting challenges for Horizontal SaaS in retaining customers and competing in a saturated market. Meanwhile, AI-driven SaaS companies demonstrated stronger growth, with a median growth rate 5% higher than Vertical SaaS and 22% higher than Horizontal SaaS⁴.

Notable Trends for 2025:

1. AI Implementation:
A prominent trend in 2023 was the widespread adoption of AI-enhanced tools. Most SaaS businesses integrated AI through applications like chatbots, AI shopping assistants, and AI-driven management processes, streamlining manual tasks and boosting overall team efficiency.

83% of businesses reported that incorporating AI into their business strategy is a top priority⁵. AI is transforming the SaaS industry through three main drivers: Machine Learning (ML), Generative AI (GenAI), and Chatbots ^{5 & 6}.

• Machine Learning (ML): ML enables a deeper understanding of customer behaviors and preferences. It increases flexibility and enhances user-friendly, intuitive aspects of services. Additionally, ML improves internal workflows, automates easy and repetitive tasks and boosts customer engagement, and strengthens data security through review processes and pattern analysis.
• Generative AI (GenAI): GenAI is revolutionizing creative processes within SaaS companies by providing unmatched speed and precision. It significantly enhances personalized customer experiences and accelerates product design and development.
• Chatbots: Chatbots have transformed customer interactions by providing 24/7 support, quickly resolving inquiries, and handling FAQs. This technology optimizes human resource allocation by managing repetitive and simple requests, allowing employees to focus on more complex tasks.

2. Niche SaaS Solutions:
The growth of micro-SaaS in 2024 has continued and is expected to persist into 2025. Micro-SaaS solutions are experiencing faster growth than horizontal, broad-focused SaaS companies. These highly flexible, specialized, and customizable solutions effectively meet specific customer needs.

3. Data-as-a-Service (DaaS):
The evolution of SaaS, combined with AI implementation, has created new demands for companies. Data handling, analysis, and management are increasingly outsourced to third-party providers. Accessible via the cloud, DaaS enhances flexibility and agility in managing data needs. This model also partially alleviates the burden of data security and privacy, contributing to cost reductions.

In & Out:

Market consolidation has been a prominent topic in 2024.
In fact, several companies from the E-Spring B2B SaaS Index have been acquired:

Out Companies:

• Splunk (18th March 2024): Splunk was acquired by Cisco to deliver unparalleled visibility and insights across an organization’s digital footprint.
• Smartsheet (24th September 2024): Smartsheet is being acquired by Blackstone and Vista Equity Partners for approximately $8.4 billion. The transaction is expected to conclude on 31st January 2025.
• Zuora (17th October 2024): Zuora was acquired by SilverLake and GIC.

In Companies:

• Autodesk (ADSK): A US-based PaaS provider for the architecture, engineering, construction, manufacturing, media, education, and entertainment industries.
• Paylocity (PCTY): A US-based SaaS provider specializing in payroll and human capital management.
• PTC (PTC): A US-based SaaS and software provider specializing in computer-aided design and product lifecycle management, the backbone of product development.

Conclusion:

2024 has been an eventful year for the SaaS market, marked by significant fluctuations. The year began with volatility, as the index dipped during the first half, bottoming out at 6.08x in August, before recovering to 7.97x by December. The SaaS market is expected to follow a trajectory similar to previous years, driven by key trends such as cybersecurity threats, low-code platforms, and the ongoing transition towards PaaS (Platform as a Service). However, AI implementation stands out as the most critical factor shaping the future of the industry.

References:

1. Aventis Advisors (2024). SaaS Valuation Multiples. Retrieved from: https://aventis-advisors.com/saas-valuation-multiples/
2. GP BullHound (2024), European SaaS Survey 2024. Retrieved from: https://www.gpbullhound.com/articles/european-saas-survey-2024/
3. Omnius (2024). SaaS Industry report 2024: A Comprehensive Overview. Retrieved from: https://www.omnius.so/blog/saas-industry-report-2024
4. Growth Unhinged. (Nov. 2024). Your guide to the 2024 SaaS benchmarks. Retrieved from: https://www.growthunhinged.com/p/your-guide-to-the-2024-saas-benchmarks
5. Keywords Everywhere. 83 AI Stats & Trends to know in 2024. Retrieved from: https://keywordseverywhere.com/blog/artificial-intelligence-stats/#:~:text=Over%2080%25%20of%20companies%20have,combination%20of%20AI%20and%20automation.
6. Denovers (November, 2024) Top 8 SaaS Trends in 2024. Retrieved from: https://denovers.com/blog/top-8-saas-trends/