Dear SaaStr: What Are SaaS Companies Generally Worth When They Are Acquired?

Dear SaaStr: What Are SaaS Companies Generally Worth When They Are Acquired?

A lot has changed over the years, and every situation is different.  And things did sometimes get a bit crazy in the boom times of 2H’20 into 2021.

But some rough yardsticks:

  • A slow growing, small (< $10m ARR) SaaS company is probably worth 2x-3x ARR (annual revenue run-rate)
  • After $10m ARR or so, most SaaS businesses with decent growth (40%-80%) are often valued at plus or minus 10x. At the low end if growth is slower (6x-8x), at the high end the closer you get to 100% annualized growth (8x-10x ARR). Slower growth is sort of death for valuations below $10m ARR, but above that, a PE firm or other acquirers see value even if growth is middling.
  • After $10m-$20m ARR, if you are growing > 100% a year, you’re often worth 20x ARR or more to a strategic acquirer that really wants you.

This is roughly true in any market, good or bad.

A great SaaStr discussion from the founder of Frame.io on how to maximize that multiple here:

 

Published on September 25, 2022

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