In SaaS, I believe roughly in Q4 we went through about a 50% multiple compression.  I.e., valuations sort of fell by half.  (Although it’s hard to see this from the headline #s around amounts raised, for the reasons noted below.)

And as part of that … VCs slowed down a lot.  They didn’t rush as quickly.

But … there’s still tons of capital out there.  Every VC firm has raised a new, larger fund in the past 6-15 months.  It’s just a lull.

More importantly, what really happened is the bar went up for the same valuation at each phase.

For example, in the summer, if you were Hot … to do a Hot SaaS Series A, you might need $1-$1.5m ARR growing 15% Month-over-Month or faster, to raise say an $8m+ Series A.

As you can see on Nasdaq, things peaked at a local maximum around July:

And then … things got choppy.

So today, you might need $2.5m ARR to achieve the same valuation you could have gotten in July at $1.25m ARR.  You’ll still get the $8m round done, at the same pre-money … you just may need as much as 2x the revenues to get that valuations.  And it may take a little longer.  Because VCs feel like they have more time.

That a 50% multiple compression in the early-ish stage VC markets for SaaS.  And as a cohort, public market comps have fallen over that time frame as well.

The multiples may re-expand at any time, however 🙂

And … look at the #1 market cap in SaaS … Salesforce.  It’s done just fine since the summer:

So some of this drama is a little made up IMHO.  At least a little tiny bit of it.

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