Sapphire Ventures
Partnering with expansion-stage, enterprise software companies that we believe can become category leaders.
Sapphire Partners
Limited partner investing in exceptional early-stage venture fund managers.
Sapphire Sport
Partnering with early-stage companies at the nexus of technology and culture.
Menu close
Press Release

KeyBanc Capital Markets and Sapphire Ventures Private SaaS Company Survey Reveals Pivot to Efficient Growth and Profitability

KeyBanc Capital Markets and Sapphire Ventures Private SaaS Company Survey Reveals Pivot to Efficient Growth and Profitability
December 18, 2023

14th annual report suggests that the macroeconomic climate is likely to continue to impact ARR growth and profitability in 2024

SAN FRANCISCO and MENLO PARK – December 20, 2023 – KeyBanc Capital Markets (KBCM), the corporate and investment banking unit of KeyCorp in partnership with Sapphire Ventures, a global software venture capital firm backing companies of consequence, released results from KBCM’s Technology Group’s 14th annual Private SaaS Company Survey, the benchmarking report by which the SaaS industry measures financial and operating performance.

This year’s survey revealed trends of decelerated growth and a transition towards profitability in 2023, a resounding theme throughout the report’s findings. In addition, the report uncovered that sales and marketing could potentially see some lagging effects although, in the near term, there is an overall feeling of optimism in more productive go-to-market (GTM) teams after industry wide-adjustments.

Key trends identified in this year’s report include:

  • Continued budget cuts and conservative buying patterns are driving customer churn, longer deal cycles and reduced contract values, leading to lower growth rates.
    • Annual Recurring Revenue (ARR) growth decelerated from 35% in 2022 to 26% in 2023
    • Net Revenue Retention declined from 108% in 2022 to 104% in 2023
  • While conversion rates are expected to drop across the marketing funnel, GTM teams are striving to drive revenue efficiency.
    • Gross and Net Magic Numbers of 0.7 and 0.5, respectively, along with a median ~23-month customer acquisition cost (CAC) payback period in 2022
    • The tight spending environment is forcing teams to be more accurate with their efforts given limited resources
  • Public market software valuations are returning to more normalized levels in 2023 at ~6x Next Twelve months (NTM) revenue compared to the all-time highs of 2021.
    • The Rule of 40 is more important to valuation than it was in the free money era, but growth still matters as investors underwrite future cash flows at scale
  • Private market financing activity and multiples continue to show strength despite macroeconomic headwinds.
    • Lower growers (<50%) have seen private market multiples compress toward normalized public market multiples, but higher growers (>100%) have been more resilient, still commanding super premium multiples (29.9x NTM median)

“Primarily driven by the availability of capital and a positive economic outlook, companies invested to pursue aggressive growth targets in 2022. However, as the market became more challenging and growth did not play out as expected, many companies were forced to scale back operations and shift their focus from growth to profitability,” says Scott Peterson, managing director, Software Investment Banking at KeyBanc Capital Markets. “Despite this, we continue to see strong long-term prospects for the sector, due to factors such as a continued move to the cloud and increased adoption of artificial intelligence.”

“Sapphire Ventures is pleased to partner with KeyBanc Capital Markets on this invaluable report and reference point for the start-up SaaS industry. As 2023 comes to a close, the findings are no surprise as we saw B2B software companies adjust to a new normal amidst difficult economic times,” said Steve Abbott, partner, Sapphire Ventures. “Over the past year, we saw the cost of capital rise significantly, which resulted in the top companies focusing more than ever on achieving efficient growth metrics. We see this trend continuing into 2024.”

Among private SaaS companies, only 15 percent of this year’s respondents operated at or above The Rule of 40, a key benchmark of “best-in-class” SaaS company performance, which is calculated by adding a company’s growth rate and profitability margin. Last year, more than one third of respondents noted that they operated at or above The Rule of 40 in 2021, an indication that companies were less efficient with their spending and/or did not achieve their growth targets in 2022.

The KBCM and Sapphire Ventures Private SaaS Company Survey provides credible operational and financial benchmarking data for executives and investors in SaaS companies of all sizes. This includes everything from GTM selling strategies, historical and projected growth, and retention rates, to operational management and margin structures, as well as proprietary data on valuation and exit expectations. This year’s survey polled senior executives at more than 100 privately held global SaaS companies with a median 2022 ARR of $25.5 million in several sectors including infrastructure management, fintech, cybersecurity, communications, data infrastructure, vertical market application and horizontal application. To view the full survey results, methodology and to see a deeper analysis of the findings, visit us at


About KeyBanc Capital Markets

KeyBanc Capital Markets is a leading corporate and investment bank providing capital markets and advisory solutions to dynamic companies capitalizing on opportunities in changing industries. Our deep industry expertise, broad capabilities and unique ideas are seamlessly delivered to companies across the Consumer & Retail, Diversified Industries, Healthcare, Industrial, Oil & Gas, Real Estate, Utilities, Power & Renewables, and Technology verticals. With over 800 professionals across a national platform, KeyBanc Capital Markets has more than $50 billion of capital committed to clients and an award-winning Equity Research team that provides coverage on over 600 publicly traded companies. Securities products and services are offered by KeyBanc Capital Markets Inc., member FINRA/SIPC, and its licensed securities representatives, who may also be employees of KeyBank N.A. Banking products and services, are offered by KeyBank N.A.

About KeyCorp

KeyCorp’s roots trace back nearly 200 years to Albany, New York. Headquartered in Cleveland, Ohio, Key is one of the nation’s largest bank-based financial services companies, with assets of approximately $188 billion at September 30, 2023. Key provides deposit, lending, cash management, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of approximately 1,000 branches and approximately 1,300 ATMs. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit KeyBank is Member FDIC.

About Sapphire

Sapphire is a global software venture capital firm with more than $11 billion in AUM(1) and team members across Austin, London, Menlo Park and San Francisco. For over a decade, Sapphire has partnered with visionary management teams and venture funds to back companies of consequence. Since its founding, Sapphire has invested in more than 170(2) companies globally resulting in more than 30 Public Listings(3) and 45 acquisitions(4). The firm’s investment strategies — Sapphire Ventures, Sapphire Partners and Sapphire Sport — are focused on scaling companies and venture funds, elevating them to become category leaders. Sapphire’s Portfolio Growth team of experienced operators delivers a strategic blend of value-add services, tools and resources designed to support portfolio company leaders as they scale.



(1) AUM represents Sapphire’s Regulatory Assets Under Management as of 12/31/2022 per ADV filed March 2023 as well as all assets under management acquired and new commitments made during calendar year 2023 (2) Figure represents all Sapphire direct growth strategy investments made from the firm’s inception in 2011 to September 2023 (3) Figure represents all Sapphire direct growth strategy investments that have had an IPO or public listing from the firm’s inception in 2011 to September 2023 (4) Figure represents all Sapphire direct growth strategy investments that have had an exit via M&A from the firm’s inception in 2011 to September 2023

Nothing presented within this article is intended to constitute investment advice, and under no circumstances should any information provided herein be used or considered as an offer to sell or a solicitation of an offer to buy an interest in any investment fund managed by Sapphire. Information provided reflects Sapphire’s views as of a time, whereby such views are subject to change at any point and Sapphire shall not be obligated to provide notice of any change. Due to various risks and uncertainties, actual events, results or the actual experience may differ materially from those reflected or contemplated in these statements. Nothing contained in this article may be relied upon as a guarantee or assurance as to the future success of any particular company. Past performance is not indicative of future results.