The fastest growing software category in the public markets is security. Data follows.
Security companies as a group average 29% expected revenue growth in 2024, compared to 23% for Data (or DaaS which stands for data-as-a-service). Fintech & SaaS (horizontal) average ten percentage points fewer expected growth.
Anticipation of this growth propels multiples. Security & data top the charts at on average 10x enterprise-value-to-forward-revenue, compared to 5x for the others.
These two software categories lead buyers’ priorities & are expected to grow at twice the pace of the overall software market.
Reviewing the data deeper, CrowdStrike, Palo Alto, SentinelOne, & ZScaler have seen significant multiple improvement. Only Okta lags a bit which is likely due to some of their internal security challenges.
For now, software buyers view security & data products as highest priority. As a result, these businesses project higher growth rates & fetch more attractive valuations in early 2024.
This dynamic will very likely cascade into the private markets as well with both acquisitions and financings in these categories priced at a premium.
