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Amidst the ongoing slump in the tech industry, a newly released report from Indianapolis venture studio High Alpha offers some reasons for optimism in the software-as-a-service sector.
The 2024 SaaS Benchmarks Report, released this week, is largely based on survey responses from more than 800 people working in the software-as-a-service, or SaaS, sector in the U.S. and beyond. The report also includes data from some other sources such as the investment data firm PitchBook.
Among the more intriguing findings: Companies whose employees are in the office at least three days a week report stronger revenue growth than those that operate mostly or fully remotely.
In the survey, 30% of respondents said their company’s employees were in the office at least three days a week. The other 70% identified their company’s operations as mostly or fully remote, with employees in the office fewer than three days a week.
The companies whose employees were in the office at least three days a week had a median year-over-year annual recurring revenue growth rate of 50%, as compared with a median of 39% for the mostly or fully remote companies. Annual recurring revenue is a standard financial metric among SaaS companies.
“That was a really interesting, and kind of exciting, finding,” High Alpha Partner and Chief Financial Officer Blake Koriath said during a webinar held Tuesday to preview the report.
Another speaker during Tuesday’s webinar was Kyle Poyar, co-founder of Boston-based tech investment firm Tremont.
Poyar said he expects the percentage of office-focused companies to grow over the next year, especially among early-stage businesses. “Many of the next-generation businesses are going to think about, ‘How do we collocate together to really build out a strong foundation of company culture and execution before we maybe move to a hybrid model as we scale?’”
Also in the report, 63% of company founders said they are currently more optimistic about the future of their company than they were last year. Another 29% reported their optimism level is about the same as last year’s, and 8% reported being less optimistic than a year ago.
The report also revealed the growth boost that artificial intelligence is offering to startups.
“We’re starting to see some really fascinating data where AI-native companies are actually growing more efficiently than past early-stage companies,” said High Alpha Managing Partner Scott Dorsey, the third presenter during Tuesday’s webinar.
According to the report, AI-native companies—the newest wave of startups—are seeing median annual recurring revenue growth of 50%. In comparison, vertical SaaS companies, or those with software targeted at a particular industry, reported median growth of 45%. Horizontal SaaS companies, or those whose software could be used across a range of different industries, reported median growth of 28%.
The report also covered a range of other topics, including revenue growth trends for companies of various sizes; software pricing models; staffing statistics; founders’ mental and physical health habits; and more.
A full copy of the report can be found here.
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