Capchase, which claims to be the leading provider of non-dilutive capital to SaaS companies, recently shared its Pulse of SaaS report “to provide the most comprehensive view of SaaS startups’ performance following recent economic changes.”
The Pulse of SaaS Report “found, when compared to the second half of 2021, SaaS companies were resilient despite the market downturn; however, performance differed significantly based on geography, funding stage and company size.”
The report is “based on data from more than 500 Capchase portfolio companies across six key metrics: year-over-year growth, rule of 40 (R40), net margin, expenses/annual recurring revenue (ARR), runway, and customer retention. ”
It compared data “from August – December 2021 to that of April – August 2022 in order to assess how recent economic factors have affected SaaS startups, and looked at them by geography, funding type and size.”
The key findings of the report include:
- Geography: Throughout the downturn, European companies have opted to maintain their cash runways and customer retention to ensure stability, and have done so more effectively than their US counterparts. US companies have focused on revenue growth, which decreased from 70% to 51%, but stayed above European companies that saw their growth drop to 43% post-downturn. However, the top quartile companies in both geographies continued to show healthy growth (126% in US and 90% in Europe).
- Funding: Bootstrapped companies have more experience operating in a cash-strapped environment. As a result, these companies have shown resilience because they invested in a longer runway before the downturn and spent efficiently to maintain metrics similar to their venture capital-backed counterparts.
Despite the macro economic environment, bootstrapped companies “continue to perform well, in particular with strong median R40 (24%) and median net margin (-20%) post-downturn (compared to R40 of -13% and -66% for venture-backed companies).”
Top quartile bootstrapped companies “fared even better, with R40 of 91% and net margin of -4%. Across all segments, top quartile companies by performance (R40) increased their spend on customer acquisition during this time, while reducing expenditures as a percent of ARR in other areas.”
- Size: In an environment where potential customers tend to drift towards more experienced players, smaller companies have struggled to thrive. Small companies fared worse than their larger counterparts across net margin, retention, runway, and expenses/ARR, and their median YoY growth has been hit – dropping from 72% pre downturn to 54% post downturn.
Miguel Fernandez, co-founder and CEO of Capchase said:
“While a large part of the narrative has focused on public tech companies dropping in valuation, data from more than 500 SaaS startups we have worked with paints a different and more detailed picture of how these companies have performed over the past several months. Startups continue to benefit from the automation and use of software in various sectors, and the companies that navigate the current slowdown well have an opportunity to consolidate and capture market share from their competitors.”
Based on the findings in The Pulse of SaaS report, Capchase provides the following recommendations to companies looking to improve or maintain their performance during times of economic uncertainty:
European companies that seem to “have focused on maintaining runway should seek opportunities to invest in growth and win market share.”
Venture capital-backed startups with a low R40 should “focus on improving efficiency and diagnosing areas of spend with inadequate returns and reallocating spend.” This should “be done while continuing to maintain a strong cash runway.”
Earlier this year Capchase “secured $400 million in debt financing and plans to deploy more than $1 billion in non-dilutive financing to SaaS companies in the next few years.”
Following a recent expansion to Germany, startups in 10 countries across Europe and North America can now “access Capchase’s non-dilutive funding and market-leading services, including Capchase Grow, Capchase Analytics, and tailored financial insights through its Growth Advisor service.”