I first met Topline’s hosts in New York in December 2021. Sam Jacobs had asked me to speak at Pavilion’s inaugural CEO Summit about SaaS valuations and benchmarks. The timing was… interesting.
Back then, the average public SaaS company was trading around 20x revenue and growing 35% or more. It was the age of GAAC (Growth-at-any-Cost), and profitability was mostly an afterthought.
That morning, I spent less time pontificating about valuation directly, and instead focused on the underlying operating performance of the companies. I shared my thoughts on what these companies would need to achieve in the future to “earn” the valuations — the old “priced to perfection” argument.
Fast forward four years and we know how this plays out. Not just with the valuations (over 80% of these SaaS companies are still trading below their 2021 prices!). But also, and perhaps more importantly, the underlying performance of the companies themselves has suffered significantly.
Meanwhile, AI-Native companies are growing at rates that traditional SaaS never saw — Q2T3 instead of T2D3 (Q for “quadruple”). That’s real. But they still measure success the same way: ARR, growth, NRR, GTM efficiency. Their benchmarks may differ wildly right now, but the metrics are identical. And as both groups evolve — AI-Natives scaling up, traditional players adding AI — we’ll see more overlap than people think.
Here’s the thing, though: If you study benchmarks — especially, if you expand your perspective beyond the here and now — you won’t just come away with a better understanding of today, but also a view of opportunities for the future.
Let me show you!
The State of Public SaaS
Three things jump out very quickly when you study public SaaS benchmarks:
1. ARR growth declined sharply and broadly.
Not just at the bottom. Almost everywhere. Median growth fell from 34% in late 2021 to about 15% today.
2. Profitability improved.
This part is real and meaningful: Free cash flow margins went from near-zero to pushing 20%.
3. GTM efficiency, when measured properly, deteriorated.
Sales and marketing spend as a percent of revenue went down, which looks good until you look at the cost to generate net new ARR.
On that basis, the numbers moved in the wrong direction in a big way, from $1.24 per dollar of net new ARR in 2021 to $2.23 today.
Though their GTM efficiency took a hit in 2023, vertical SaaS companies are roaring back... even better than 2021.
Drill Down and For Some, a Different Story Emerges
For example, between 2021 and 2025, growth has actually held steadier among vertical SaaS companies than the broader market. And even though their GTM efficiency took a hit in 2023, it’s come roaring back. Now it’s actually better than it was in 2021, while the broader market’s efficiency keeps deteriorating.
Other cuts of the data also look more appealing. For example, higher ACV companies (e.g., >$250K) have weathered the GTM efficiency issues much better these past few years than companies selling lower ACV products (e.g., <$10K). Similarly, companies in the Security software segment have seen much better economics and growth.
I’ve said it before: There are riches in the niches.
If you’re a founder, this data suggests that there’s still something to think about in building SaaS, and particularly, solutions that meet the needs of specific verticals.
And if you’re a GTM operator on the hunt for a new gig, the lesson is that efficient growth is easier to deliver in vertical SaaS than in the horizontal subsector.
As AI pervades the tech ecosystem, it’ll be interesting to see how these trends evolve in 2026 and beyond.
Time will tell…
To really benchmark, you need more companies of different sizes, different business models, different stages. You need to be asking the right questions. And, you need a view over a long-enough period. Compare your company’s benchmarks with those of the market with BenchSights Public SaaS Metrics — a free interactive tool where you can run these analyses and more yourself.
Agree? Disagree? Have an opinion?
This Made Us Think
Andrea Bumstead built a 5-step framework for when your career feels stagnant. Will you continue to be successful, or not? She explores ideas such as financial responsibilities, your energy, and professional goals to name a few. It’s a quick read to gut-check your current position. Here’s the framework to self-assess.
Does everything that once felt easy, feel heavy now? That’s what Sam Jacobs explores in his article, Designing a System To Play an Infinite Game. He unpacks the creeping lows that come with an ever-expanding business, and what the point of building should be about. Check it out here.
This is an inside look at what work feels like behind the polished B2B headlines for independent operators, founders, and GTM leaders navigating the uncertainty many people may never see. He shares a new initiative to help the less-fortunate out inside as well. I highly recommend reading it. Read the article here.
This Week across Topline
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