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SaaS Decacorn Returns: A New Era Begins

Exceptional companies with nine-figure ARR have fared slightly better, yet the environment remained challenging
February 26, 2024

In the whirlwind era of 2021, the rise of unicorns painted a picture where virtually any company could aspire to become a decacorn. However, the landscape shifted dramatically in 2022 as SaaS markets endured a severe crash.

Since then, SaaS valuations have remained relatively modest, averaging at 6 times Annual Recurring Revenue (ARR) for public SaaS firms. Yet, exceptional companies boasting nine-figure ARR have managed to command higher multiples.

The tide began to turn in 2023 and continued into 2024, driven by three key factors:

Firstly, companies honed their operational efficiency, with many achieving robust positive operating margins, often nearing 20% or more.

Secondly, growth persisted, albeit sometimes at a slightly slower pace compared to the frenetic expansion witnessed in 2021. Nevertheless, stalwart companies like HubSpot, Monday, and Confluent surged past significant ARR milestones.

Consequently, a select group of SaaS and Cloud leaders embarked on an upward trajectory in the public markets. While not every company experienced this surge, top performers began trading at multiples of 10 to 15 times ARR, or even higher.

With three years of sustained growth and premium valuations for top-tier SaaS firms, the decacorn phenomenon is making a resurgence. Companies such as Monday, Confluent, Procore, and Gitlab have soared past the $10 billion mark, while others like Samsara, UiPath, and Elastic have witnessed remarkable rebounds.

Achieving decacorn status in today's landscape demands not only exceptional growth but also operational efficiency and profitability. It's a challenging trifecta, far more demanding than in 2021.

Nonetheless, the SaaS and Cloud sectors continue to expand, propelling market caps upward once again. While the euphoria of 2021 may never be fully replicated, a new era of the SaaS decacorn is dawning.

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