Allied Advisers updated our previously published report on SMB SaaS, a sector that has been growing with notable outcomes such as the IPO of Freshworks ($1.03B), Digital Ocean ($780M) and the recent IPO of Klaviyo ($576M), as well as notable exits such as Mailchimp’s acquisition ($12B+, one of the largest boot-strapped exits) and growth of private SMB SaaS companies like Calendly (last valued at $3B), Notion (last valued at $10B). Other success stories such as GoDaddy, Gusto, Paycom, PipeDrive, Shopify, SquareSpace, Zoho etc. have also helped bolster interest in this space.
SMB is the backbone of the US economy; 99.9% of all US businesses are in this segment. With rising SaaS adoption by small businesses for enhancing productivity, we remain optimistic on the long-term view of this sector. While not surprisingly, SMB SaaS has higher churn than Enterprise SaaS, SMB SaaS has significantly better operational metrics when it comes to sales and marketing expense, R&D expenses, EBITDA margins and less sector competition. Our report covers nuances of SMB SaaS and we believe that SMB SaaS businesses continue to offer compelling opportunities for investors and buyers.