Fintech and Commerce Will Get More SaaS-y

The LEAP Team
LEAP Insights
Published in
5 min readMar 9, 2023


In our recent LEAP 2023 Outlook, we highlighted the SaaSification of Fintech and Commerce as one of our key investment themes. We expect founders building applications across traditional financial services and commerce value chains to add more SaaS-type revenues to their offerings as both founders and funders seek higher revenue predictability. The recent wave of innovative Fintech and Commerce startups has done little to change the traditional revenue models of the sectors. Transaction-based models continue to dominate in account-based financial products and commerce applications, while interest-based models lead in credit-based financial products.

There are some structural barriers to adding more SaaS revenues to traditional financial services and commerce platforms (which we will address in future posts). Notwithstanding these structural challenges, we believe the trends of embedded fintech, open APIs, and the macro environment will push the industry to embrace SaaS revenue models over the long term.

In this analysis, we will primarily focus on fintech, as we believe that the public and private market shift towards SaaS is already underway. But we believe the same is true for commerce. Existing startups will seek to add more recurring revenues to their models and new startups will launch with SaaS monetization models from inception.

Near-term Opportunity: Pendulum Will Swing Heavily in Favor of Publicly Traded SaaS

Despite the dismal performance of publicly traded tech companies as a whole, public investors pay a premium for SaaS companies. We estimate that SaaS NTM Revenue multiples have contracted by 36% since 12/31/2021, with investors willing to pay 6.8x NTM revenue on average. This represents a 25% premium to the overall Tech industry, which is trading at a 5.4X NTM sales multiple (after a similar 35% contraction). Companies from all sectors are taking note of this investor preference. Social media companies like Twitter, Snapchat, and Facebook introduced membership pricing to diversify away from advertising revenues, which are highly cyclical and less predictable.

But perhaps nothing in the tech market has contracted as much as Fintech, which was one of the darlings of tech investments over the last decade and produced several IPOs in 2020/2021. The publicly traded fintech group saw its valuation multiple contract by 58% since 12/31/21, trading at an EV/NTM Sales Multiple of 3.3X.

Within this group, however, we have identified a select few that are Fintech SaaS companies (or “Fin-SaaS”for short). These are companies that generate most of their sales through recurring subscriptions and currently are mainly B2B payments platforms or companies that sell into the CFO stack. This Fin-SaaS group is trading at 5.9X NTM Revenue, a 60% premium to the broader Fintech index.

(As an aside, we are not giving any public investment recommendations here, but public investors may want to take note that this Fin-SaaS group was trading at a 40% premium to the broader SaaS group as of 12/31/21. Currently, that same Fintech-SaaS group trades at an 11% discount to the broader SaaS group. That’s a big swing…. and maybe something to double-click on.)

Investors are paying this premium for SaaS-based companies because these businesses typically have more predictable revenue, an attractive margin profile (if priced correctly), and healthy cash flow-generating potential across the economic cycle. Transaction-based and interest-sensitive companies tend to do very well in a bull market, where consumer spending and business spending are strong. But the converse is true in a bear market. Transaction-based models tend to do relatively poorly in an economic downturn, as consumers and businesses pull back on discretionary spending and investors gravitate towards predictable streams of revenue with a visible path to profitability. In the current macro environment, investors are paying a premium for predictability and less exposure to economic cycles.

Long-term opportunity: VC Investment in Fin-SaaS Is Just Getting Started

We believe this shift will also manifest itself in the private markets as VCs reassess their fintech strategy. In fact, in two recent acquisitions in the Fin-SaaS space, private equity investors paid ~8.7X NTM revenue for Avalara and 8.4X NTM revenue for Coupa. While these multiples were significantly lower than the all-time highs for each company, they represented premiums to the average multiple paid for cash acquisitions of $1BN+ over the last decade.

Given the public market comps and recent private equity acquisitions, we expect VC investment in Fintech to shift more towards Fin-SaaS. After all, as VC investors we ultimately invest in companies that we believe can navigate to either (a) an IPO or (b) M&A. As a result, trends like B2B payments, embedded fintech, and CFO tools will remain in focus. According to Pitchbook, for example, the CFO stack is one area where VC deal activity remained relatively robust within fintech.

While the current market dynamics will likely accelerate a near-term shift of VC investments into FinSaaS, we expect this shift to continue over the long term. In addition to the less cyclical nature of these businesses, the long-term potential of Fin-SaaS models is just scratching the surface. As a whole, we estimate that the Fin-SaaS group public market cap is approximately $62BN, less than 5% of the total Fintech market cap, which is dominated by transaction-based and interest spread-based business models. That doesn’t make a lot of sense when you consider how large some of the “low-hanging fruit” opportunities that these Fin-SaaS companies address (B2B payments, the CFO stack, embedded fintech). Fin-SaaS is just getting started.