From John Keenan, a response to some comments we received related to our earlier “What’s Wrong With Tech” blog post.

I track the performance of the publicly-traded SaaS vendors - with the recent IPO of LogMeIn, there are 28 pure-plays. I track the financial performance for the company’s last fiscal year and valuation performance on a quarterly basis (I use month ends of February, May, August and November).

Re: the financial performance, the story is growth and cash flow. For the last fiscal year, the SaaS vendors grew 31%, with on-demand revenue up 39%. I also track the 146 publicly-traded software vendors and their figures are total revenue up 16% and license revenue down 6.8% (all their growth is in maintenance and PS). It is clear that users are shifting their spend away from legacy perpetual models to SaaS models.

The 28 SaaS vendors averaged $160M in total revenue (14 were over $100M) and had an average operating loss of ($6.8M) - only 8 the vendors were profitable. However, their free cash flow was very strong and averaged $14.6M - 21 of the vendors were cash flow positive.

Spending on sales & marketing, R&D and G&A averaged 36.5%, 12.9% and 16.5% of revenue respectively.

Finally, while valuations have recovered in the past 6 months - interesting, the aggregate market cap for the 28 vendors is up about 29% in each of the last 2 quarters - they are down 10% from August 2008 and 26% from the market’s peak in October 2007.

Probably the most notable change is the reduction in valuations as a percentage of revenue. In August 2008, the valuations were about 6.1X trailing-twelve-months (TTM) revenue. As of August 2009, it’s about 4.2X TTM revenue. In October 2007, it was over 10X TTM revenue.

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