PRIVATE SAAS COMPANY VALUATIONS: 2019
SaaS Capital is in a unique position to understand SaaS company valuations as we have witnessed 29 of our companies raise
equity or exit in the last 5 years. The exits have been a combination of strategic sales and private equity recaps and have
provided us an effective way to benchmark private SaaS valuation multiples against public data.
The SaaS companies in our valuation analysis ranged from $4 million to $45 million in revenue and covered a wide variety
of industries. With a few ‘unicorn’ exceptions, these were scale-up stage companies with a median growth rate of 26%, and
retention and burn rates in a narrow range around the average for companies their size.
Key Valuation DriVers
Not surprisingly, the two primary variables that drove the exit valuations of those companies more than any others were:
1. Public market valuations at the time
2. Revenue size and growth rate
There are dozens of other factors impacting valuation (all of which we will cover in an upcoming white paper), but these
two set the baseline.
Public saas comPany Valuations
Public company comparables are the classic starting point for valuation analyses because the data is easy to get and is
updated in real time.
As with all valuation approaches, the goal is to determine the risk-adjusted value of a company’s future cash flows. For
traditional companies, stock analysts start with a company’s earnings and apply a multiple based on expected growth and
risk. This is the Price/Earnings or P/E multiple. For SaaS businesses, however, earnings are generally understated for two
reasons: customer acquisition costs are expensed up front, and most SaaS companies are still in an aggressive growth stage.
For this reason, current earnings are not as good an indicator
of future cash flows as curren