Topline Growth & Operational Efficiency
Accelerating the Pace of Innovation
Driving Growth & Efficiency in 2025

Accelerating the Pace of Innovation

Driving Growth & Efficiency in 2025

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https://www.iconiqcapital.com/growth/insights/accelerating-the-pace-of-innovation-driving-growth-efficiency-in-2025

Stay Ahead with ICONIQ Growth

As we step into 2025, companies continue to navigate the delicate balancing act between growth and efficiency. The lessons of the last few years–shaped by economic headwinds and shifting buyer priorities – offer valuable lessons for organizations navigating a successful course forward.  Key trends and strategies are emerging that can help businesses achieve sustainable growth in the face of persistent macroeconomic volatility.

Every quarter, we conduct a deep dive on both public company performance and proprietary metrics from private software companies, curating actionable insights for our internal teams and portfolio companies. For the first time, we’re excited to share some of these findings publicly to provide a snapshot of key trends shaping the software ecosystem today.

Reflecting on 2024: A Year of Trade-Offs

Coming into 2024 amidst macroeconomic headwinds, many organizations made meaningful adjustments to their cost structures, focusing on exceeding bottom-line expectations.

Our ICONIQ Growth Enterprise Five metrics revealed a mixed picture with moderated growth and in particular, a notable improvement in ARR per FTE stood out. This improvement underscores many companies’ commitment to efficiency and bottomline preservation.

The Valuation Equation: Growth vs Profitability in 2025

Data from Q4 2024 reveals a telling trend: revenue growth is approximately twice as impactful as profitability alone in driving valuations when we look at forward revenue multiples for the publicly traded software companies.  However, Rule of 40 remains highly correlated, signaling the power of profitable growth1.

To plan effectively in 2025, we expect companies will need to take multiple factors into account, including dynamics specific to their market, customer health, and business health. By doing so, they can help identify which levers across cost management and growth acceleration are needed.

To navigate these dynamics, many of the companies analyzed are adopting a dual approach:

Investing for Growth: Organizations are increasing their investments to reaccelerate topline growth. The median forecast for revenue growth in 2025 is a promising 38% YoY1, a significant improvement from the 29% YoY growth observed in 20241.

Improving Profitability: Companies are planning to invest in their organization and business while driving for better bottom-line margins, as indicated by projected operating expense growth rates at less than half of their topline growth plans, driven by more strategic and efficiency-oriented investments aimed at maximizing returns on spend1.

We expect these combined efforts to result in meaningful improvements in the Rule of 40—a critical benchmark for software and other subscription-based businesses. Many companies are projecting stronger Rule of 40 scores in 2025, well above where they ended in 2024, signaling a balanced focus on growth and profitability.

Growth Plans Demystified: Insights Across the Spectrum

While all segments anticipate topline reacceleration in 2025, differences emerge when dissecting growth plans by company scale and sector.

Growth-Stage Companies ($50M-$100M ARR): This segment is leading the charge in terms of spending reacceleration, particularly in sectors such as collaboration, operations, and GTM, likely as they double down on investments to capture market opportunities and fuel growth1.

AI-Driven Companies: Compared to traditional SaaS counterparts, AI-driven companies are generally forecasting more aggressive topline growth and overall OpEx spend, in particular driven by higher R&D spend as a percentage of revenue. This reflects the rapid evolution and adoption of AI technologies, as well as the need to maintain a competitive edge in this burgeoning space1.

Targeted Spending in 2025

Companies are fine-tuning their spending strategies to support growth while maintaining efficiency. The spend mix across G&A, R&D, and S&M is generally expected to remain consistent with 2024 levels, but with nuanced shifts1:

Sales & Marketing (S&M): Investment in S&M is set to grow at a median 22% YoY rate, reflecting its critical role in driving topline growth. Companies are leveraging targeted campaigns and optimized GTM strategies - one example being an increased focus on channel partnerships  - to expand their customer base and increase revenue.

Research & Development (R&D): R&D spending is forecasted to grow by a median of 19% YoY, underscoring the importance of innovation. For AI-driven companies in particular, this investment is essential to advancing capabilities and solidifying competitive advantages, with AI-native and AI-enabled companies forecasting a higher R&D spend as a % of revenue, on average, compared to traditional SaaS counterparts.

General & Administrative (G&A): While growth in G&A spend remains more modest, companies are finding ways to optimize back-office operations, ensuring that resources are allocated efficiently to strategic priorities.

The Path Forward: Strategic Takeaways for 2025

Based on these insights, here are some actionable takeaways for companies striving to balance growth and efficiency in the year ahead:

Prioritize Growth-Driven Investments: With revenue growth holding more weight in valuation dynamics, companies with relatively strong business and market health should prioritize initiatives that directly contribute to topline expansion. This may include strategic hires in sales and marketing, scaling GTM efforts, and exploring new product opportunities, as well as exploring inorganic growth opportunities such as strategic M&A.

Maintain a Focus on Efficiency: Even as growth takes centerstage, efficiency remains a critical lever. Continuously optimizing cost structures via levers like a global workforce strategy or AI-driven productivity improvements can help bolster resilience and profitability.

Leverage AI for Competitive Advantage: For AI companies, the emphasis on R&D spending highlights the importance of staying ahead in a rapidly evolving market. Investing in cutting-edge technologies and AI-driven solutions can unlock new growth opportunities. However, we recognize that the fully loaded costs associated with truly adopting this next generation of technology (talent required to implement it, compute costs, data governance, etc.) are significant and companies will need help quantifying those costs and other learnings related to AI implementation as buyers move away from experimental budgets and into a phase of truly embracing these technologies.

Adopt a Segmented Approach: Growth strategies should be tailored to the unique needs of each segment. Early-stage companies may need to focus on achieving sustainable growth, while growth-stage and AI-driven companies should likely capitalize on their momentum to scale aggressively.

Monitor Macroeconomic Trends: With ongoing volatility, staying agile and responsive to economic shifts will be crucial. Companies that can adapt their strategies in real time will be better positioned to navigate uncertainties and seize opportunities.

Conclusion

As we move into 2025, we believe the balancing act between growth and efficiency will define success for companies across sectors. By drawing on the lessons of 2024 and aligning strategies with evolving market dynamics, organizations can position themselves for sustainable growth in the face of uncertainty. With strategic investments, a commitment to efficiency, and a focus on innovation, the year ahead holds promise for those willing to embrace the challenge and we are excited to continue supporting you on this journey.

The ICONIQ Growth website does not present information relating to ICONIQ Capital, its investment funds, or its advisory business and should not be consulted for any advisory purposes. The ICONIQ Growth content is intended for the use of company founders and executives.

Notes

1 Quarterly operating and financial data from 75ICONIQ Growth portfolio companies where data was available across all periods. Data reflects companies in sectors across healthcare, fintech, consumer, vertical, and horizontal SaaS.

2 Quarterly data from 77 public software companies where data available in most recent quarter, using filings from CapIQ

Disclaimer

The views expressed in this presentation are those of ICONIQ Growth ("ICONIQ" or the "firm"), are the result of proprietary research, may be subjective, and may not be relied upon in making an investment decision. 

 This presentation is for general information purposes only and does not constitute investment advice.  This presentation must not be relied upon in connection with any investment decision.  The information in this presentation is not intended to and does not constitute financial, accounting, tax, legal, investment, consulting or other professional advice or services.  Nothing in this presentation is or should be construed as an offer, invitation or solicitation to engage in any investment activity or transaction, including an offer to sell or a solicitation of an offer to buy any securities which should only be made pursuant to definitive offering documents and subscription agreements, including without limitation, any investment fund or investment product referenced herein.  

Any reproduction or distribution of this presentation in whole or in part, or the disclosure of any of its contents, without the prior consent of ICONIQ, is strictly unauthorized.  

This presentation may contain forward-looking statements based on current plans, estimates and projections.  The recipient of this presentation ("you") are cautioned that a number of important factors could cause actual results or outcomes to differ materially from those expressed in, or implied by, the forward-looking statements.  The numbers, figures and case studies included in this presentation have been included for purposes of illustration only, and no assurance can be given that the actual results of ICONIQ or any of its partners and affiliates will correspond with the results contemplated in the presentation.  No information is contained herein with respect to conflicts of interest, which may be significant.  The portfolio companies and other parties mentioned herein may reflect a selective list of the prior investments made by ICONIQ.  

Certain of the economic and market information contained herein may have been obtained from published sources and/or prepared by other parties.  While such sources are believed to be reliable, none of ICONIQ or any of its affiliates and partners, employees and representatives assume any responsibility for the accuracy of such information.  

All of the information in the presentation is presented as of the date made available to you (except as otherwise specified), and is subject to change without notice, and may not be current or may have changed (possibly materially) between the date made available to you and the date actually received or reviewed by you.  ICONIQ assumes no obligation to update or otherwise revise any information, projections, forecasts or estimates contained in the presentation, including any revisions to reflect changes in economic or market conditions or other circumstances arising after the date the items were made available to you or to reflect the occurrence of unanticipated events.  

For avoidance of doubt, ICONIQ is not acting as an adviser or fiduciary in any respect in connection with providing this presentation and no relationship shall arise between you and ICONIQ as a result of this presentation being made available to you.  

ICONIQ is a diversified financial services firm and has direct client relationships with persons that may become limited partners of ICONIQ funds.  Notwithstanding that a person may be referred to herein as a "client" of the firm, no limited partner of any fund will, in its capacity as such, be a client of ICONIQ.  There can be no assurance that the investments made by any ICONIQ fund will be profitable or will equal the performance of prior investments made by persons described in this presentation. 

Any information in this presentation is directed at, and intended for, only persons who are experienced institutional or professional investors (“professional investors”) as defined by applicable law and regulation.  Any person that is not a professional investor is not an intended recipient of this presentation and the matters discussed herein.

ICONIQ Growth is a trading name of certain ICONIQ businesses, including ICONIQ Partners (UK) LLP. ICONIQ Partners (UK) LLP (Registration Number: 973080) is an appointed representative of Kroll Securities Ltd. (Registration Number: 466588) which is authorised and regulated by the Financial Conduct Authority. ICONIQ Partners (UK) LLP is a limited liability partnership whose members are ICONIQ Capital (UK) Ltd, Seth Pierrepont and Lou Thorne, and it is registered in England and Wales and has its registered office at 27 Soho Square, London W1D 3QR. ICONIQ Partners (UK) LLP acts as an adviser to ICONIQ Capital LLC

Unless otherwise indicated, the views expressed in this presentation are those of ICONIQ Growth (“ICONIQ" or the “Firm"), are the result of proprietary research, may be subjective, and may not be relied upon in making an investment decision. Information used in this presentation was obtained from numerous sources. Certain of these companies are portfolio companies of ICONIQ Growth. ICONIQ Growth does not make any representations or warranties as to the accuracy of the information obtained from these sources.

This presentation is for general information purposes only and does not constitute investment advice. This presentation must not be relied upon in connection with any investment decision. The information in this presentation is not intended to and does not constitute financial, accounting, tax, legal, investment, consulting or other professional advice or services. Nothing in this presentation is or should be construed as an offer, invitation or solicitation to engage in any investment activity or transaction, including an offer to sell or a solicitation of an offer to buy any securities which should only be made pursuant to definitive offering documents and subscription agreements, including without limitation, any investment fund or investment product referenced herein.

Any reproduction or distribution of this presentation in whole or in part, or the disclosure of any of its contents, without the prior consent of ICONIQ, is strictly unauthorized.

This presentation may contain forward-looking statements based on current plans, estimates and projections. The recipient of this presentation ("you") are cautioned that a number of important factors could cause actual results or outcomes to differ materially from those expressed in, or implied by, the forward-looking statements. The numbers, figures and case studies included in this presentation have been included for purposes of illustration only, and no assurance can be given that the actual results of ICONIQ or any of its partners and affiliates will correspond with the results contemplated in the presentation. No information is contained herein with respect to conflicts of interest, which may be significant. The portfolio companies and other parties mentioned herein may reflect a selective list of the prior investments made by ICONIQ.

Certain of the economic and market information contained herein may have been obtained from published sources and/or prepared by other parties. While such sources are believed to be reliable, none of ICONIQ or any of its affiliates and partners, employees and representatives assume any responsibility for the accuracy of such information.

All of the information in the presentation is presented as of the date made available to you (except as otherwise specified), and is subject to change without notice, and may not be current or may have changed (possibly materially) between the date made available to you and the date actually received or reviewed by you. ICONIQ assumes no obligation to update or otherwise revise any information, projections, forecasts or estimates contained in the presentation, including any revisions to reflect changes in economic or market conditions or other circumstances arising after the date the items were made available to you or to reflect the occurrence of unanticipated events. Numbers or amounts herein may increase or decrease as a result of currency fluctuations.

For avoidance of doubt, ICONIQ is not acting as an adviser or fiduciary in any respect in connection with providing this presentation and no relationship shall arise between you and ICONIQ as a result of this presentation being made available to you.

ICONIQ is a diversified financial services firm and has direct client relationships with persons that may become limited partners of ICONIQ funds. Notwithstanding that a person may be referred to herein as a "client" of the firm, no limited partner of any fund will, in its capacity as such, be a client of ICONIQ. There can be no assurance that the investments made by any ICONIQ fund will be profitable or will equal the performance of prior investments made by persons described in this presentation.

Any information in this presentation is directed at, and intended for, only persons who are experienced institutional or professional investors (“professional investors”) as defined by applicable law and regulation. Any person that is not a professional investor is not an intended recipient of this presentation and the matters discussed herein.

ICONIQ Growth is a trading name of certain ICONIQ businesses, including ICONIQ Partners (UK) LLP. ICONIQ Partners (UK) LLP (Registration Number: 973080) is an appointed representative of Kroll Securities Ltd. (Registration Number: 466588) which is authorised and regulated by the Financial Conduct Authority. ICONIQ Partners (UK) LLP is a limited liability partnership whose members are ICONIQ Capital (UK) Ltd, Seth Pierrepont and Lou Thorne, and it is registered in England and Wales and has its registered office at 27 Soho Square, London W1D 3QR. ICONIQ Partners (UK) LLP acts as an adviser to ICONIQ Capital LLC