Alessandro Casartelli, Executive Director at GP Bullhound, said: “In Q1, we’ve seen a continuation of several trends. Online pharmacy delivery services are growing as the healthcare industry becomes more digitised; immersive shopping experiences keep rising, enhanced by artificial intelligence; and pressure to become carbon neutral mounts on digital commerce businesses. Despite the challenging dealmaking environment, ecommerce offered investors pockets of opportunities in a relatively quiet first quarter.”

Online pharmacy delivery services are growing

  • The healthcare industry is digitising, and e-prescriptions are driving demand for pharmacy delivery services.
  • The global prescription delivery service market was $157.1m in 2022 and is likely to hit $396.5m by 2029.
  • Global players are facing intense competition from innovative startups offering same-day delivery; North America is the largest market with a share of 55% followed by Europe with over 23% market share.

Customer experience and merchandising undergoing a revolution

  • Enhanced by AI, immersive shopping is growing, improving customer conversion and sustainability.
  • A Shopify study showed that implementing AR and 3D visualisation tools resulted in a 94% higher conversion rate for online retailers in 2023 and 80% of customers reported higher levels of satisfaction versus traditional online shopping.
  • With returns reduced by over 40% due to accurate product visualisation, immersive shopping helps retailers save costs and reduces CO2 emissions and packaging waste.

Pressure is on to become carbon neutral

  • Ecommerce is going carbon-neutral with offset programmes and carbon-neutral shipping; the Climate Neutral Network expects the voluntary carbon market to increase from $300m in 2005 to $50bn by 2030.
  • Consumer demand for carbon-neutral goods and practices is increasing along with consumer awareness of climate change, and consumers are willing to pay a premium for sustainable products.
  • Carbon neutrality is fuelling sustainable tech with ecommerce promoting renewable energy, EVs, and eco-friendly packaging.

Enquiries
For enquiries, please contact:
Alessandro Casartelli, Executive Director, at alessandro.casartelli@gpbullhound.com

About GP Bullhound
GP Bullhound is a leading technology advisory and investment firm, providing transaction advice and capital to the world’s entrepreneurs and founders. Founded in 1999 in London and Menlo Park, the firm today has 13 offices spanning Europe, the US and Asia. For more information, please visit www.gpbullhound.com.

This handbook aims to provide a comprehensive overview for CFOs and software companies on how modern B2B SaaS organizations can be run to ensure high performance and a culture of continuous improvement. It covers both standard and industry-specific metrics used in a subscription software company, with a focus on understanding how to best leverage these metrics to measure a business performance and growth. Additionally, it provides benchmarks for various performance levels to give context to a company’s performance.

Through interviews with high-performing B2B SaaS businesses, the handbook highlights how their CFOs, finance teams, and organizations leverage the above to operate at the highest level. In addition, examples of software products for companies at different stages of development are included to inspire CFOs and their finance teams should they need assistance in building their tech stack.

Gustav Fridell, Associate at GP Bullhound, commented: “The CFO’s role is vital for a software startup’s success, yet it is demanding and ever-changing. The idea with the handbook is to provide CFOs and finance teams a concise reference, addressing key topics, best practices, and strategies to help the entire organization achieve the highest performance and foster a culture of continuous improvement.”

Chee Meng Ng, Analyst at GP Bullhound, commented: “Having spoken with various CFOs in our network, we noticed that there were various common themes and concerns raised in our discussions. This provided us the opportunity to pool our resources and knowledge, leveraging our GP Bullhound platform to compile this handbook that we hope will be able to guide CFOs and finance teams.”

In this comprehensive guide, the structure and components of a software company’s income statement and balance sheet are explained, as well as the connection between industry-specific metrics and traditional revenue and cost reporting. Furthermore, the processes of a software company’s sales organization are discussed in detail as they are inherently linked with the finance organization. Lastly, an appendix is included with templates for effective reporting of the metrics discussed, ensuring consistency for all stakeholders in a B2B SaaS company.

Enquiries
For enquiries, please contact:
Gustav Fridell, Associate, at gustav.fridell@gpbullhound.com
Chee Meng Ng, Analyst, at cheemeng.ng@gpbullhound.com

About GP Bullhound
GP Bullhound is a leading technology advisory and investment firm, providing transaction advice and capital to the world’s best entrepreneurs and founders. Founded in 1999 in London and Menlo Park, the firm today has 13 offices spanning Europe, the US and Asia. For more information, please visit www.gpbullhound.com.

The contents of this document (the “Presentation”) shall not be deemed to be any form of offer or binding commitment on the part of the GP Bullhound Entity and is: (i) provided for use by the intended recipient(s) (“Recipient”) for information purposes only; and (ii) prepared on the basis that the Recipient is a Sophisticated Investor. This Presentation and its information and contents (“Information”) are not intended for, and must not be used or relied upon by, private or retail investors in the UK, EU, United States of America or any other jurisdiction where access, use, reliance upon, or availability of this Presentation or the Information would be unlawful. No representation or warranty, express or implied, is or will be made in respect of the Information and no responsibility or liability is or will be accepted by the GP Bullhound Entity, its Affiliates, Associates, or agents. In particular, but without prejudice to the generality of the foregoing, no representation or warranty is given as to the accuracy, completeness or reasonableness of any projections, targets, estimates or forecasts contained in this Presentation or in such other written or oral information that may be provided by the GP Bullhound Entity from time to time. Further details about GP Bullhound’s regulatory status can be obtained here: www.gpbullhound.com/regulatory/.

Jonathan Cantwell, Partner & Head of Software at GP Bullhound, said: “In the latest report, we have highlighted key trends that have dominated Q4 2022. ChatGPT drove accessibility into previously difficult to penetrate markets, allowing for the democratisation of content, regardless of S&M budget; SaaS businesses are providing more customisable pricing models as customers lose interest in bundled offerings; the business intelligence ecosystem continues to develop and scale; customer experience software is notably resilient in the face of uncertain economic conditions as it allows brands to differentiate and win consumer dollars.”

Matt Stamp, Partner in the Software team at GP Bullhound, commented: “While global dealmaking pulled back from a strong H1, Q4 saw a record level of quarterly buy-out activity as investors took advantage of comparatively cheap public markets. Both M&A and fundraising were characterised by trends we expect to continue with a focus on resilience, unit economics and profitability. Given attractive secular dynamics, we see significant capital continuing to be available to drive further M&A, buy-outs and P2Ps in 2023.”

What’s trending this quarter in Software?

Current headwinds impacting valuations

  • Private market valuations have taken a lesser hit, with focus shifted to gross margin and gross revenue retention
  • Strong secular growth continues to underpin the long-term value of the sector, which is likely to reach $716bn by 2028

ChatGPT headlines generative AI vertical

  • ChatGPT is driving accessibility into previously difficult to penetrate markets
  • ChatGPT will allow for the democratisation of content, regardless of S&M budget
  • The Generative AI market size is likely to reach $110.8bn by 2030

Business and end-to-end (CX) consumer intelligences

  • Business intelligence is gaining popularity through easy-to-use self service tools, and citizen developers are another major driver of rapid growth in this market – the ecosystem continues to develop and scale, set to reach $43bn by 2028
  • CX software is notably resilient in the face of uncertain economic conditions as it allows brands to differentiate and win consumer dollars; brands want fewer software solutions that have integrated end-to-end solutions, in CX that means strategic insights down to implementation in one platform

Enquiries
For any enquiries, please contact:
Jonathan Cantwell, Partner (US), at jonathan.cantwell@gpbullhound.com
Matt Stamp, Partner (Europe), at matt.stamp@gpbullhound.com

About GP Bullhound
GP Bullhound is a leading technology advisory and investment firm, providing transaction advice and capital to the world’s entrepreneurs and founders. Founded in 1999 in London and Menlo Park, the firm today has 13 offices spanning Europe, the US and Asia. For more information, please visit www.gpbullhound.com.

Oliver Schweitzer and Ravi Ghedia, Executive Directors at GP Bullhound, said: “In the last quarterly report on 2022, we have highlighted several key trends driving the sector: social commerce continues to expand as social media usage continues to rise; desire to create continuous transformation processes are creating opportunities for cloud consultancies; and Managed Service Providers are becoming increasingly crucial to the long-term IT strategies of large enterprises. H2 2022 deal volumes were in line with H2 2020, but overall 2022 annual volume was in line with a highly active 2021. After a decline in Q3 2022 reflecting macroeconomic conditions, Q4 2022 saw an uptick in deal volume from Q3, potentially indicating a rise in optimism and need to deploy capital.”

What’s trending this quarter in Digital Services?

Social commerce a major digital services opportunity

  •  Global value of social commerce will likely reach $2.9tn in 2026, up from $992bn today
  •  In 2019, about half of US Millennials and Gen Z consumers shopped on social media, making it a key focus for brands

Continuous growth in digital maturity possible with cloud-enabled transformation processes

  • Digital transformation has become a top strategic priority for senior business leaders, initially driven by the pandemic which accelerated the need for digital initiatives, but now considered a fundamental practice
  • Strong M&A demand in cloud consulting with particular focus on ServiceNow and Salesforce implementation

Managed service providers market is rapidly growing and primed for consolidation

  • MSPs are becoming increasingly crucial to the long-term IT strategies of large enterprises
  • A market poll showed existing MSP providers are highly active, with over a quarter of them indicating they are seeking to make an add-on acquisition in the next 24-36 months
  • Market leaders are utilising consolidation to further cement their market share and investors are taking notice

Enquiries
Simon Nicholls, Partner (US), at simon.nicholls@gpbullhound.com
Oliver Schweitzer, Executive Director (US), at oliver.schweitzer@gpbullhound.com
Ravi Ghedia, Director (Europe), at ravi.ghedia@gpbullhound.com

About GP Bullhound
GP Bullhound is a leading technology advisory and investment firm, providing transaction advice and capital to the world’s entrepreneurs and founders. Founded in 1999 in London and Menlo Park, the firm today has 13 offices spanning Europe, the US and Asia. For more information, please visit www.gpbullhound.com.

Claudio Alvarez, Partner at GP Bullhound, commented: “In Q4, we have seen several key trends: more banks are innovating ACH payments – with or without fintechs – to remain competitive; increasing number of countries globally are exploring central bank digital currencies; and AI/ML adoption in credit scoring processes is on the rise. On the dealmaking side, online lenders and credit providers successfully raised capital. Fintech equities remained stable, with Financial Data & Analytics the best performing sub-sector.”

What’s trending this quarter in Fintech?

Banks innovate automated clearing house payments to remain competitive

  • Pay by Bank leverages open banking to facilitate payments between trusted parties without the need for a card. The payment method has several benefits including improved security, automated customer onboarding for merchants and reduced processing costs
  • Recently, banks have established partnerships, with and without fintechs, to roll-out a Pay by Bank solution to ensure their payments offering remains competitive

The future of central banks – is it digital?

  • 114 countries globally, representing over 95% of global GDP, are exploring Central Bank Digital Currencies
  • Increased adoption of blockchain-enabled solutions and mass transition to a cashless ecosystem is catalysing the proliferation of digital currencies
  • With multiple pilot programmes being held by both the Bank of England and the European Central Bank, implementation and dynamics are under question

AI and ML adoption in credit scoring processes on the rise

  • Artificial intelligence and machine learning have become increasingly popular in credit scoring processes within the fintech industry in recent years
  • By using alternative data sources, improving efficiency and speed, and personalising credit decisions, fintech companies can make more accurate and efficient credit decisions and improve the customer experience

Enquiries
For enquiries, please contact Claudio Alvarez, Partner, at claudio.alvarez@gpbullhound.com

About GP Bullhound
GP Bullhound is a leading technology advisory and investment firm, providing transaction advice and capital to the world’s best entrepreneurs and founders. Founded in 1999 in London and Menlo Park, the firm today has 13 offices spanning Europe, the US and Asia. For more information, please visit www.gpbullhound.com.

Alec Dafferner, Partner at GP Bullhound, said: “We have seen various trends shaping the Digital Media landscape in Q4. While Twitter deals with dysfunction following Elon Musk’s takeover, new players are vying to lure its users over to their platforms. Some big digital media companies are facing US government crackdowns, as national security and monopolisation concerns rise. Hypercasual games are enjoying a revival, with several notable transactions closing in Q4. There was an uptick in equity performance in Q4, with Western gaming an obvious leader. As inflation fears calm, digital media indices will benefit, though the macroenvironment remains uncertain.”

What’s trending this quarter in Digital Media?

US agencies tighten regulations

  • US regulators and government officials have begun cracking down on major digital media companies
  • Increasing concerns over user privacy, homeland security, and anticompetitive transactions have caused backlash
  • While the FTC has fined Epic Games and seeks to block the Microsoft / Activision deal, several government officials call for a ban on TikTok

New players vye for Twitter’s spot

  • Elon Musk’s takeover of Twitter was a rocky process filled with legal battles and a shake-up in the tech firm’s culture
  • A number of competitors have risen to take advantage of Twitter’s challenging period – seeking to capture its market share
  • Its biggest rival, Mastodon, has grown eight-fold but Twitter remains far larger at almost 100x Mastodon’s size

Hypercasual gaming remains active

  • Hypercasual games have become a staple on the mobile app stores
  • While activity in the space has fluctuated, 2022 saw increased global revenue growth of 21% and ~200 M&A deals worldwide
  • Factors like lower development costs, high user acquisition, and engagement make hypercasual games an attractive advertising medium

Enquiries
For enquiries, please contact Alec Dafferner, Partner, at alec.dafferner@gpbullhound.com

About GP Bullhound
GP Bullhound is a leading technology advisory and investment firm, providing transaction advice and capital to the world’s best entrepreneurs and founders. Founded in 1999 in London and Menlo Park, the firm today has 13 offices spanning Europe, the US and Asia. For more information, please visit www.gpbullhound.com.

Alessandro Casartelli, Executive Director at GP Bullhound, said: “Several trends emerged across the digital commerce space in Q4. Generative AI is redefining the industry as businesses opt for high quality content generated by the technology; mobility sector companies are taking advantage of the metaverse, focusing efforts on sales, engagement and car design activities; and UGC continues to engage audiences more than influencer content, with authenticity a major differentiating factor. Despite a slowdown in M&A activity in Q4, megadeals like Trimble’s acquisition of Transporeon, and Getir’s takeover of competitor Gorillas, stood out. We see continued consolidation in digital commerce players.”

What’s trending this quarter in Digital Commcerce?

Generative AI redefining the Digital Commerce industry

  • AI usage by businesses increased by 2.7x in the last four years and its adoption accelerated with the advent of ChatGPT in Q4 2022
  • Generative AI already has a strong impact on Digital Commerce with automated higher-quality content generation and personalisation being some of the few benefits for businesses
  • Investors are recognising the momentum of AI with several transactions in the space in Q4 2022

Metaverse attracting increasing attention from mobility sector companies

  • Mobility sector companies are taking advantage of early incarnation of the metaverse, focusing efforts on sales, engagement and car design activities
  • Recently introduced novelties include virtual showrooms for cars, allowing customers to discover their ideal automobiles from home
  • Innovation is also taking place in the automotive design domain, with some car designers using 3D renderings that are viewable with headsets to lead a more hands-on engineering process

Authenticity driving rapid shift in marketing techniques and consumer engagement

  • 74% of consumers now rely on social media to inform their purchasing decisions
  • User-generated content is considered 10x more impactful than content from influencers, which is becoming increasingly more expensive as influencer marketing gains traction
  • 90% of consumers today cite authenticity as a key factor in deciding which brands to favour

Enquiries
For enquiries, please contact:
Alessandro Casartelli, Executive Director, at alessandro.casartelli@gpbullhound.com

About GP Bullhound
GP Bullhound is a leading technology advisory and investment firm, providing transaction advice and capital to the world’s entrepreneurs and founders. Founded in 1999 in London and Menlo Park, the firm today has 13 offices spanning Europe, the US and Asia. For more information, please visit www.gpbullhound.com.

GP Bullhound surveyed over 100 SaaS companies across Europe in partnership with Sage, from startups to late-stage scale-ups. We analyse the trends and benchmark the key metrics including growth, capital efficiency, and revenue retention, which are critical to navigating today’s macro environment. Despite the market uncertainty, 80% of CEOs we surveyed list revenue growth as their most important objective in the next 12 months, with over one-third planning to raise capital next year.

The report also explores M&A and fundraising activity in the European SaaS sector, including the quarterly evolution of transaction volumes and value, as well as a country-specific breakdown of what’s trending.

Alexis Scorer, Partner at GP Bullhound, commented: “Given the macroeconomic headwinds that have significantly impacted public market SaaS valuations, there is an increasing focus on capital efficient growth for both public and private companies. There are reasons to be optimistic about the outlook for European SaaS, and our survey indicates strong levels of resilience amongst a significant proportion of European software companies.”

Key takeaways from GP Bullhound’s European SaaS survey

  • Emerging champions: Median ARR growth doubles from 20% to 40% as businesses scale from €25m to €50m+ ARR
  • Scale efficiencies: ARR per FTE typically reaches €100k once a business exceeds €5m ARR, growing to c.€140k over €50m ARR
  • Highly resilient: While net revenue retention for Enterprise and SME-focused SaaS is comparable, gross revenue retention for Enterprise is much higher at 95%
  • Investing for growth: Sales & Marketing costs overtake R&D costs as a proportion of revenue at c.€5m ARR, peaking at 40% of revenue
  • Optimism remains: Despite macroeconomic uncertainty, over one-third of CEOs surveyed are planning to raise capital in the next 12 months

Key takeaways from European SaaS deal activity

  • Despite the recent slowdown in European SaaS M&A activity, deal volumes remain above both 2019 and 2020
  • While fundraise activity declined sharply in Q3 2022, the size of the average fundraise has tripled from 2019 to 2022 YTD
  • Publicly listed SaaS valuations in Europe and the US have recently converged following a significant divergence since the start of the pandemic

Enquiries
For any enquiries, please contact:
Alexis Scorer, Partner, at alexis.scorer@gpbullhound.com
Joe Tabberer, Director, at joe.tabberer@gpbullhound.com

About GP Bullhound
GP Bullhound is a leading technology advisory and investment firm, providing transaction advice and capital to the world’s entrepreneurs and founders. Founded in 1999 in London and Menlo Park, the firm today has 12 offices spanning Europe, the US and Asia. For more information, please visit www.gpbullhound.com.

Per Roman, Managing Partner, and Alec Dafferner, Partner at GP Bullhound, commented: “Although we are in an economic downturn, technology has not failed us, and it is never as good or as bad as valuations may imply. What we’re seeing is a correction and a return to looking at company fundamentals. For 2023, we are bullish on cloud and artificial intelligence, energy efficiency, enterprise software, and digital consumption to accelerate technology’s progress in building the future with revolutionary products and solutions.”

Through our experience in working with the world’s leading entrepreneurs, cutting-edge technologies, and our unique market insights from across our global network, GP Bullhound is proud to present its Technology Predictions 2023:

Prediction 1: Natural language processing a watershed for business strategies

  • A profound time for companies, those quick to adopt will gain a vital competitive edge and we look for still-high investment in a market enjoying a c30% CAGR

Prediction 2: TikTok the next king of social media advertising

  • TikTok is diverging with the social media peers, with advertising revenue set to almost triple, to $13.8bn, by 2026. One of the most used apps worldwide, with one billion users and growing – c20% of internet users – TikTok is changing the landscape for brands and creators

Prediction 3: Interactivity and channel selection advertising stream game-changers

  • M&A will increase next year for connected TV (CTV) related services, data/analytics, and tech providers. CTV blends everything for marketers: Brand building, targeted customer acquisition and sales, all with clear feedback for better ROI

Prediction 4: Energy-saving apps and next-gen batteries powering the tech race

  • The ongoing energy crisis will galvanise consumer demand for home energy-saving systems, with market CAGR estimates as high as c19%

Prediction 5: Tipping point of cybersecurity and broken circles of trust

  • 2023 will see a significant push towards consolidation in the cyber-security space, driven by the trend towards end-to-end Zero Trust capability from vendors across every piece of the cyber security stack. We view cybersecurity spending as a secular growth area

Prediction 6: Talent management building the future of the workplace

  • With remote/hybrid work, “The Great Reshuffle”, and inflationary forces, employee engagement is ever-critical with 40%+ of the global workforce thinking about leaving their job. We expect market consolidation and the creation of powerful integrated platforms in 2023

Prediction 7: Software driving sustainability

  • We predict increased funding in technologies that employ environmentally-friendly practices to improve sustainability, as well as companies with resource-efficient supply chain processes

Prediction 8: Robotics no longer sci-fi

  • We expect increased M&A in a well-funded industry, separating successfully scaling robotic companies from innovator-only players

Prediction 9: E-commerce, but make it social

  • Social media companies are pivoting from digital advertising to social commerce, which will reach a global market value of $3.8tn in 2030. In 2023, US and European companies will follow the example of Chinese companies Pinduoduo, Meituan Youxuan, and Jingxi PinPin by offering group buying (consumers jointly purchasing items in bulk at cheaper prices) and live shopping (buying products presented on influencer live streams) 

Prediction 10: Semis rule the world

  • The market expects a major downturn in semicap equipment spending, but we expect the battle for tech leadership, tech sovereignty, and structural demand shortage in trailing edge nodes to result in spending above market expectations

Enquiries
For enquiries, please contact: insights@gpbullhound.com

About GP Bullhound
GP Bullhound is a leading technology advisory and investment firm, providing transaction advice and capital to the world’s best entrepreneurs and founders. Founded in 1999 in London and Menlo Park, the firm today has 13 offices spanning Europe, the US and Asia. For more information, please visit www.gpbullhound.com.