B2B SaaS: 2023 Valuation Multiples

24 January 2023

Revenue multiples for B2B SaaS companies declined rapidly throughout 2022, with median multiples for Q4 below pre-pandemic levels, at 5.8x.

reports : Exit, Investment, Tech and Valuation

Software-as-a-Service companies – and B2B SaaS in particular – have benefitted from the increased digitalisation of the workforce brought about by the pandemic, leading to a huge number of companies adopting cloud or subscription based solutions to manage their operations and people.

On the public markets, SaaS stocks are popular among investors, and that popularity has shifted into overdrive as a result of the COVID emergency. Perhaps most notably, B2B SaaS solutions achieved stellar valuations driven by the mass shift to remote working.

B2B SaaS refers to companies that provide software (app, extensions, add-ons etc.) directly to other businesses as a service, as opposed to B2C, which sell their software directly to individual consumers.

The seemingly relentless growth of the sector, however, came to a halt at the end of 2021—together with public markets and the broader tech sector—with industry giants announcing layoffs and market caps in the SaaS space slashed by 57% on average, which led many to call 2022 the year of the SaaS Crash.

According to Software Equity Group, this is largely a correction due to an incredibly strong demand for riskier stocks brought by a favourable macroeconomic outlook and amplified by the pandemic-induced rate of digitalisation. “As macroeconomic indicators began to decline in 2022—they write in their 2023 SaaS report—the flight to safer investments and aversion to risk has caused the multiples for cash burning SaaS companies to falter.”

But in order to understand just how much these conditions influenced B2B SaaS company valuations, we analysed public market data going back three full years, which enabled us to compare current valuation multiples with their pre-pandemic counterparts.

Our research is based on the SEG SaaS Index, which lists over 100 publicly traded companies that “primarily offer solutions via the cloud and/or through a subscription or transaction-based model”.

After screening for organisations that record 100% of their revenues from business-to-business sales, 66 companies within the SEG SaaS Index were identified as part of the B2B SaaS cohort.

Click to see the full cohort and data
    Revenue Multiples EBITDA Multiples
Sector Company 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22
Education 2U 2.3x 3.7x 3x 3.4x 3.7x 3.2x 2.9x 1.9x 1.6x 1.5x 1.4x 1.3x 130.4x 224.3x 196.4x 43.8x N/A N/A N/A N/A N/A N/A N/A N/A
Payments ACI Worldwide 3x 3.2x 3.2x 4.2x 4.3x 4.3x 3.7x 3.6x 3.5x 2.9x 2.7x 2.3x 13.8x 12.9x 13.1x 17.2x 17.5x 16.3x 14.8x 15x 13.2x 10.4x 9.8x 7.9x
Analytics Altery 13.8x 23.3x 15.4x 16.4x 15x 10.7x 9.6x 9.3x 7.5x 7.5x 7.3x 5.2x 375.4x 955.3x 214.6x 358.9x 329.4x 339.3x N/A N/A N/A N/A N/A N/A
Analytics Amplitude N/A N/A N/A N/A N/A N/A N/A 43.8x 20.1x 9x 7.2x 6.1x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Other Anaplan 11x 15.8x 21.2x 23.4x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Other Appian 9.2x 11.9x 14.7x 36.9x 39.6x 25.8x 22.4x 17.4x 10.5x 8.8x 8x 6x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Other Asana N/A N/A 23.9x 22.9x 24.5x 21.6x 46.2x 58.5x 24.8x 9.6x 7.8x 6.6x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Planning Atlassian 21.4x 26.9x 25.7x 31.9x 31.7x 28.8x 40.3x 44.2x 31.4x 18.9x 20.9x 11.8x 75.4x 83.1x 84.3x 110.2x N/A N/A N/A N/A N/A N/A N/A N/A
Software AvidChange N/A N/A N/A N/A N/A N/A N/A 18.1x 6x 4.6x 4.2x 4.4x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Communications Bandwidth 5.5x 10.5x 13.6x 11.7x 12x 8.5x 6.7x 4.4x 3.2x 1.7x 1.4x 1.5x 3399.7x 537.9x 311.6x 493x 504.8x 195.7x 119.5x 71x 39.1x 24x 26.9x 32.4x
Healthcare Benefitfocus 1.3x 1.5x 1.6x 2x 2x 2x 1.8x 1.7x 1.8x N/A N/A N/A 90.4x 55.9x 27x 22.9x 22.6x 16.5x 16x 28.4x 42x N/A N/A N/A
Payments Bill.Com 14.3x 41.2x 44.1x 56.4x 60.8x 60.3x 81.7x 92.3x 50.7x 23.4x 21.8x 15.7x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Other Blackbaud 3.6x 3.6x 3.6x 3.6x 4.3x 4.4x 4.4x 4.6x 4.6x 4.1x 3.9x 3.8x 26.3x 25x 24.2x 25.1x 29.5x 31.6x 34.2x 36.8x 39.4x 39.2x 39.9x 44.2x
Payments Bottomline 3.5x 4.8x 4x 5x N/A N/A N/A N/A N/A N/A N/A N/A 28.9x 48x 35.8x 44.9x N/A N/A N/A N/A N/A N/A N/A N/A
Customer Engagement Braze N/A N/A N/A N/A N/A N/A N/A 31.5x 18.2x 10.8x 11.8x 6.5x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Human Capital Management Ceridian 9.1x 14.4x 15x 19.4x 17.2x 16.5x 18.3x 18.9x 11.3x 8.7x 8.6x 8.8x 64.5x 117.1x 131.5x 286.7x 254.8x 479.5x 1853.4x N/A 500.8x 542.4x 311.3x 250.9x
Analytics Clearwater Analytics N/A N/A N/A N/A N/A N/A N/A 16.7x 12.8x 10.7x 9.5x 11.1x N/A N/A N/A N/A N/A N/A N/A N/A N/A 196.1x 1901.2x N/A
Human Capital Management Cornerstone 3.1x 5.7x 5x 5.3x N/A N/A N/A N/A N/A N/A N/A N/A 32.4x 61.5x 39.8x 41.7x N/A N/A N/A N/A N/A N/A N/A N/A
Analytics Definitive Healthcare N/A N/A N/A N/A N/A N/A N/A 28.3x 17.9x 16x 15.2x 8.8x N/A N/A N/A N/A N/A N/A N/A 92.6x 90.8x 105.5x 163x 100.2x
Software DigitalOcean N/A N/A N/A N/A N/A N/A N/A 23.6x 13.9x 9.7x 8.9x 6.6x N/A N/A N/A N/A N/A N/A N/A 133.2x 80.8x 69.9x 68x 43.1x
Other Domo 1.6x 5.2x 6x 9.7x 9.4x 9x 11.7x 10.9x 5.8x 4.2x 3.5x 1.9x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Ai Dynatrace 12.8x 20.2x 19.1x 18.8x 21.7x 21x 24.2x 24.4x 15.3x 12.2x 10.9x 9.8x N/A N/A 95.4x 87x 100.3x 96.4x 121.6x 135.8x 96.3x 81.6x 81x 78.1x
Other Fastly 7.9x 34.8x 36.1x 33.5x 31.2x 20.6x 16x 15.1x 9.4x 5x 4x 3x -111281x -553209.4x -621436.2x -662.6x N/A N/A N/A N/A N/A N/A N/A N/A
Ai Five9 13.3x 19.4x 21x 26.8x 26.3x 24.5x 24.1x 18.4x 13.9x 11.1x 10.1x 6x 162.1x 328.3x 367.8x 745.2x 785.8x 951.4x 835.4x 7002.6x N/A N/A N/A N/A
Customer Engagement Freshworks N/A N/A N/A N/A N/A N/A N/A 25.8x 11.7x 8.1x 6.4x 6x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Healthcare Health Catalyst 5.1x 5.5x 8x 9.5x 10.7x 11.5x 11.9x 9.4x 5x 2.5x 1.9x 1.4x -36.8x -41.5x -63.4x -131x N/A N/A N/A N/A N/A N/A N/A N/A
Healthcare Healthstream 2.5x 2.3x 2x 2.6x 2.9x 3.1x 3.5x 3x 2.7x 2.2x 2.5x 2.7x 13.8x 11.8x 10.3x 13.9x 15.3x 17.5x 19.3x 17.1x 15.4x 12.3x 14.2x 15x
Other Hubspot 7.1x 12.5x 15.5x 19.8x 21.9x 23.9x 28.2x 30.6x 16.9x 11.4x 9.3x 7.9x 50.4x 93x 123.6x 114.8x N/A N/A N/A N/A N/A 1583.4x N/A N/A
Software Informatica N/A N/A N/A N/A N/A N/A N/A 8.2x 5.9x 4.7x 4.9x 4.1x N/A N/A N/A N/A N/A N/A N/A 29.8x 26x 23.9x 28.9x 30.7x
Software Intapp N/A N/A N/A N/A N/A N/A N/A 6.8x 5.3x 5x 3.4x 4.6x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Supply Chain Management Kinais 9.3x 16.5x 16.7x 16.2x 14.5x 12.6x 16x 16.4x 12.9x 9.7x 9.4x 8.8x 43x 66.9x 74.8x 100.2x 88x 97.7x 193.5x 201.3x 146x 61.8x 72.2x 68.4x
Ai Medallia 6x 7.6x 8.5x 10.4x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Security Mimecast 5x 5.7x 6.2x 7.3x N/A N/A N/A N/A N/A N/A N/A N/A 31x 32.9x 32.2x 34.8x N/A N/A N/A N/A N/A N/A N/A N/A
Payments Model N 4.9x 7.2x 7.1x 7.4x 8x 7.2x 6.3x 5.8x 4.5x 4.2x 4.9x 6.2x 38.2x 57.9x 74.8x 80.2x N/A N/A N/A N/A N/A N/A N/A N/A
Analytics New Relic 4x 6x 4.7x 5.8x 5.6x 5.6x 6.7x 8.9x 5.8x 4x 4.5x 4.2x 49.3x 77.4x 62.6x 78x N/A N/A N/A N/A N/A N/A N/A N/A
Security Okta 24.8x 38.4x 37.8x 41.9x 38.9x 38.2x 36.6x 30.8x 21.5x 10.3x 9.3x 4.9x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Other Pagerduty 6x 10.6x 9.3x 15.4x 15.9x 13.7x 13.3x 12x 9x 7.1x 6.5x 5.5x -61.7x -117.9x -109.4x -190.6x N/A N/A N/A N/A N/A N/A N/A N/A
Security Palo Alto Networks 4.7x 6.6x 6.6x 9.6x 9.2x 8.8x 9.2x 11.2x 10.7x 9.8x 9.3x 8.4x 118.3x 211.3x 204.1x 295x 414.2x 935.3x N/A N/A N/A 4120.8x 535.6x 218.9x
Human Capital Management Paycom Software 14.7x 22.4x 21.9x 30.9x 27.4x 24x 29.9x 28.8x 18.5x 15x 16.9x 14.5x 38.6x 64.6x 68.2x 108.6x 96.2x 83.9x 102.2x 100.3x 60.5x 47x 52x 43.1x
Human Capital Management Paycor N/A N/A N/A N/A N/A N/A N/A 14.7x 11.8x 10.5x 11.7x 10.4x N/A N/A N/A N/A N/A N/A N/A 182.6x 339.6x N/A N/A 1282.4x
Human Capital Management Paylocity Holding 8.3x 13.7x 15x 18.9x 17.7x 16.1x 21.2x 21.3x 15.2x 12.6x 15.5x 12.8x 42.9x 73.6x 83.1x 105.8x 98.9x 98.8x 133.7x 133.6x 99.5x 81.3x 98x 87.9x
Customer Engagement Pegasystems 5.9x 8.3x 9.9x 10.7x 10.6x 9.6x 9.4x 8.3x 6.4x 3.6x 2.9x 2.6x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Security Ping Identity 6.2x 10.2x 10.1x 9.6x 9.8x 7.6x 7.3x 7.6x 5.9x N/A N/A N/A 47.7x 109.3x 120.1x 173.4x 176.8x 1065.6x N/A N/A N/A N/A N/A N/A
Security Proofpoint 6x 6.3x 5.7x 7.3x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 1634.4x 5826.1x N/A N/A N/A N/A N/A N/A N/A N/A
Insurance PROS Holdings -1.5x -1.9x -1.9x -1.9x 7.4x 7.8x 7.5x 6.1x 5.8x 5.3x 4.5x 4.4x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Analytics Qualtrics N/A N/A N/A N/A N/A N/A N/A 22x 14.7x 6.9x 5.1x 3.9x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Security Qualys 9.2x 10.9x 10x 12.2x 10.4x 9.7x 10.2x 12x 11.1x 10.8x 11.3x 9.3x 26.1x 29.7x 27.1x 32.8x 28x 32.6x 33.9x 39.5x 36.5x 28.8x 31.2x 26.5x
Communication Ringcentral 19.5x 24.8x 22.9x 29.6x 29.3x 21.4x 17.8x 14.7x 10x 4.4x 3.3x 2.6x N/A N/A N/A 818x 808.9x 225.8x 1176.2x N/A N/A N/A N/A N/A
Software Salesforce.com 7.2x 8.9x 11.5x 9.7x 9.1x 9.1x 10.5x 11.3x 8x 6.2x 5.7x 4.8x 47.6x 65.5x 84.9x 69.6x 58.6x 53.3x 61.1x 67.9x 55.1x 46.1x 44.5x 34.5x
Software Servicenow 14.4x 19.2x 22.1x 23.5x 22.5x 20.3x 22.3x 23.3x 19x 14.9x 13.4x 11.1x 123.5x 142.4x 180x 205.3x 196x 164.1x 186.9x 184.5x 149.6x 127.5x 127x 107.2x
Software Smartsheet 16.1x 18.5x 16.6x 22.7x 20.9x 17.4x 19.1x 16.6x 12.4x 7.7x 6x 5.6x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Security Solarwinds 6.8x 7.2x 7.8x 6.1x 7.9x 7.9x 4.9x 4.2x 3.7x 4.2x 3.7x 3.5x 16.4x 17.4x 19.1x 16.2x 22.3x 24.7x 17.8x 16.2x 15.2x 15.5x N/A N/A
Analytics Sprinklr N/A N/A N/A N/A N/A N/A N/A 8.1x 5.1x 4.9x 4.3x 2.9x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Communication Sprout Social 6.1x 10.7x 15.1x 17x 23.9x 23.4x 35.1x 35.1x 18.6x 14.4x 14.1x 12.9x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Software Sps Commerce 4.9x 8.2x 8.2x 11.7x 11.5x 10.1x 11.7x 13.7x 11.1x 9.5x 10x 10.2x 23.7x 39x 38.1x 53.3x 52.3x 46.4x 53.2x 64.8x 53.3x 45.4x 47.9x 46.9x
Analytics Teradata 1.2x 1.2x 1.3x 1.3x 2.4x 2.7x 2.8x 2.6x 2.4x 2.1x 1.9x 1.8x 13.7x 13.8x 15.8x 13.6x 24.7x 19.5x 17x 14.9x 12.7x 11.5x 12.5x 12.4x
Analytics The Trade Desk 12.3x 27.3x 32.6x 44.6x 43.5x 33.2x 34.9x 37.7x 28.5x 18.9x 20.2x 15.5x 60.9x 195.2x 202.9x 215.8x 210.2x 171.5x 141.7x 143.5x 204.2x 169.3x 327.2x 606.9x
Education Tyler Technologies 10.3x 12.2x 12x 15.2x 14.9x 14.8x 16.4x 15.6x 12.2x 9x 8.9x 7.9x 48.7x 56.3x 53.7x 66.9x 64.8x 64.3x 74.6x 74.7x 61.1x 44.9x 44.1x 38.1x
Security Varonis Systems 7.5x 10.4x 13.2x 17.5x 19.4x 16.1x 17.7x 16.2x 9.8x 7.7x 6x 4.3x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Biotech Veeva Systems 20.2x 28.3x 31.9x 28.7x 27.9x 25.8x 28.1x 23.9x 17.2x 13.6x 14.5x 11.2x 72.9x 103.6x 118.2x 107.1x 100.2x 90.2x 97.3x 82.4x 59.7x 49x 57x 46.5x
Customer Engagement Verint Systems 1.4x 1.5x 1.6x 2.1x 3.8x 3x 2.7x 2.8x 3x 4.3x 3.8x 3.3x 10x 10.9x 10.4x 13.7x 27.7x 24.3x 21x 22.2x 22x 31.8x 31.3x 27.5x
Software Weave N/A N/A N/A N/A N/A N/A N/A 10.5x 4.2x 1.7x 1.7x 1.4x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Customer Engagement Zendesk 8.4x 11.1x 12.4x 16.4x 16.7x 15.3x 13x 10.2x 10.3x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Security Zi 2.7x 3.3x 2.9x 3.7x N/A N/A N/A N/A N/A N/A N/A N/A 19x 22.6x 18.6x 21.6x N/A N/A N/A N/A N/A N/A N/A N/A
Security Zscaler 20.8x 35.5x 42.2x 54.7x 49.3x 42x 49.6x 57.4x 39.7x 22.8x 20.7x 15.7x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Payments Zuora 2.8x 4.6x 3.6x 5x 5.2x 5.5x 5.9x 6.9x 5.1x 3x 2.4x 1.9x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

The most represented sector was Cybersecurity (10 companies), followed by Payments (5), Analytics (4) and Human Capital Management (4).

Source: SEG

“Other” is comprised of 12 companies, which included Biotech, Insurance, Supply Chain Management and Planning, among others.

To calculate the median multiples across the cohort, and how these are distributed, we used Enterprise Value, Revenues and EBITDA data extrapolated from YCharts.com.

B2B SaaS Valuation Multiples

The median EV / Revenue multiple for public B2B SaaS businesses more-than-doubled throughout 2020, from 6.5x (Q1 2020) to 15x (Q1 2021). This refers to the Trailing Twelve Months (TTM) Revenue of the companies in the cohort.

However, after stalling between 12x and 15x throughout all of 2021, Revenue multiples for B2B SaaS companies declined rapidly and across the board throughout all of last year, with the data-point for Q4 2022 well below pre-pandemic levels, at 5.8x.

Source: SEG

B2B SaaS revenue multiples followed a trend comparable to that of its counterparts in the broader SaaS sector.

The quartiles analysis shows how the increase of variance, especially in the upper quartiles, goes hand in hand with positive economic conditions and investor sentiment. As soon as 2022 starts, along with high-inflation, looming recession indicators and skyrocketing energy prices, the top performers in terms of multiples can no longer command such a high valuation premium compared to their revenue, with variance decreasing tenfold by Q4 2022.

Source: SEG

In the chart above, the lines indicate the range of EV/Revenue multiples in our cohorts, while the boxes highlight the Interquartile Range (IQR), which is where the median 50% of the cohort ranks based on their valuation multiple.

The SaaS space—and the B2B subsector in particular—are known for highly rewarding profit-making companies, which are still only a fraction of the total: about a third of the cohort used for this analysis.

Shooting up from just over 40x to nearly 100x between Q1 2020 and Q1 2021, median EBITDA multiples anticipated their Revenue counterparts, beginning to decrease steadily from the second quarter of 2021.

In Q4 2022 the median EBITDA multiple for B2B SaaS companies in the cohort was 44.2x, just over pre-pandemic levels.

Source: SEG

Differently from what we saw with Revenue multiples, however, overall variance of EBITDA multiples has actually grown throughout last year, especially in the upper quarter of the cohort.

This goes to show how companies that are able to prove their profitability even through unfavourable macroeconomic conditions can still command a premium on their valuation.

Source: SEG

In the chart above, the lines indicate the range of EV/EBITDA multiples in our cohorts, while the boxes highlight the Interquartile Range (IQR), which is where the median 50% of the cohort ranks based on their valuation multiple.

The information available on this page is of a general nature and is not intended to provide specific advice to any individuals or entities. We work hard to ensure this information is accurate at the time of publishing, although there is no guarantee that such information is accurate at the time you read this. We recommend individuals and companies seek professional advice on their circumstances and matters.