SaaS Multiples are back to 5x

At DAN Fund we monitor 47 publicly traded SaaS companies to determine where valuations are for SaaS businesses at the Series A/B level.  While it’s imperfect to use public company multiples to derive private SaaS company valuations for a variety of reasons (publics trade at a premium for size, liquidity, brand, cash flow, etc and trade at a discount for structure, growth, etc), it’s the best and most honest data available. 

 

After a very ugly Q4 2015 in which SaaS multiples fell to a median of 4.34x trailing twelve months revenue, Q1 2016 widened by more than half a turn to 4.94x.  The data is below and in a more detailed format at the following link.

https://www.dropbox.com/s/n1a4grbdb40ly6v/Article%20-%20SaaS%20Multiples.xlsx?dl=0

 

  TTM Market     Enterprise   Q1 2016 Q4 2015 Q3 2015 Q2 2015 Q1 2015 Q4 2014
Ticker Revenue Cap Debt Cash Value   Multiple Multiple Multiple Multiple Multiple Multiple
TWOU $163 $1,260 $0 $187 $1,073   6.58x 5.84x 5.56x 10.48x 8.83x 7.58x
ATHN $974 $5,090 $298 $101 $5,287   5.43x 5.49x 6.90x 6.51x 6.14x 6.26x
BV $197 $279 $57 $109 $227   1.15x 0.99x 1.62x 1.90x 2.15x 2.19x
BNFT $197 $1,020 $41 $38 $1,023   5.19x 5.02x 6.41x 6.46x 6.06x 7.63x
BOX $303 $1,410 $52 $193 $1,269   4.19x 4.54x 5.92x 6.29x 7.72x 8.14x
BSFT $296 $1,170 $191 $236 $1,125   3.80x 3.80x 3.95x 3.63x 4.16x 4.12x
CSLT $82 $340 $0 $121 $219   2.67x 1.92x 3.15x 6.59x 11.38x 12.16x
CSOD $365 $2,040 $232 $273 $1,999   5.48x 4.32x 5.93x 6.75x 6.20x 5.74x
CVT $199 $1,500 $0 $177 $1,323   6.65x 3.87x 7.22x 7.12x 6.91x 6.84x
DWRE $254 $1,600 $0 $196 $1,404   5.53x 4.11x 7.75x 9.79x 12.40x 12.43x
FIVN $137 $463 $45 $58 $450   3.28x 3.17x 2.38x 1.65x 2.33x 2.35x
FLTX $298 $1,510 $28 $186 $1,352   4.54x 4.28x 7.66x 6.13x 5.88x 6.56x
HDP $141 $591 $0 $125 $466   3.30x 3.84x 6.74x 11.26x 20.10x 16.16x
HUBS $203 $1,560 $1 $108 $1,453   7.16x 6.08x 14.04x 9.27x 13.77x 9.72x
IL $281 $448 $81 $38 $491   1.75x 1.70x 2.08x 2.24x 2.40x 2.44x
JIVE $199 $291 $3 $113 $181   0.91x 0.71x 1.47x 1.07x 1.72x 1.51x
LOCK $612 $1,090 $0 $202 $888   1.45x 1.32x 1.80x 0.79x 2.28x 2.18x
LNKD $3,210 $17,280 $1,140 $3,160 $15,260   4.75x 4.50x 10.68x 7.98x 9.40x 13.37x
LPSN $235 $341 $0 $45 $296   1.26x 0.90x 1.65x 1.96x 2.08x 2.69x
LOGM $290 $1,450 $53 $227 $1,276   4.40x 4.09x 5.66x 5.22x 5.84x 5.18x
MRIN $109 $85 $2 $36 $51   0.47x 0.69x 1.10x 0.85x 1.55x 1.58x
MKTO $226 $1,210 $2 $95 $1,117   4.94x 2.61x 6.08x 5.91x 7.09x 6.55x
MDSO $404 $2,420 $253 $324 $2,349   5.81x 4.87x 5.80x 7.19x 8.48x 7.60x
MOBL $154 $262 $0 $94 $168   1.09x 1.10x 1.56x 1.41x 2.60x 4.10x
N $793 $6,280 $283 $383 $6,180   7.79x 5.74x 9.61x 10.52x 12.40x 12.68x
NEWR $181 $1,280 $0 $191 $1,089   6.02x 6.91x 10.64x 10.84x 13.68x 13.99x
PFPT $287 $2,210 $351 $410 $2,151   7.49x 6.49x 10.79x 9.46x 10.64x 10.98x
QLYS $173 $937 $0 $206 $731   4.23x 3.83x 6.77x 5.44x 8.65x 10.43x
RP $486 $1,740 $124 $58 $1,806   3.72x 3.49x 3.56x 3.34x 3.66x 3.81x
RNG $317 $1,370 $18 $139 $1,249   3.94x 3.85x 5.23x 4.23x 4.46x 4.25x
CRM $6,670 $50,620 $2,060 $1,340 $51,340   7.70x 7.25x 8.85x 7.30x 9.13x 8.26x
NOW $1,100 $11,190 $483 $901 $10,772   9.79x 7.85x 13.58x 12.52x 15.64x 16.69x
SPLK $668 $6,250 $0 $1,010 $5,240   7.84x 6.63x 11.80x 13.40x 17.39x 14.37x
SPSC $167 $890 $0 $121 $769   4.60x 3.70x 7.02x 6.88x 7.18x 7.42x
TXTR $92 $683 $0 $82 $601   6.53x 4.37x 6.72x 7.70x 9.80x 10.08x
ULTI $660 $5,660 $10 $96 $5,574   8.45x 7.34x 9.83x 8.61x 9.02x 9.25x
VEEV $409 $3,580 $0 $346 $3,234   7.91x 7.10x 8.11x 7.76x 10.48x 9.36x
WIX $221 $1,050 $0 $113 $937   4.24x 3.16x 4.28x 4.06x 5.65x 4.36x
WDAY $1,160 $13,840 $507 $1,970 $12,377   10.67x 9.19x 14.00x 13.50x 20.34x 18.12x
ZEN $235 $2,160 $0 $254 $1,906   8.11x 6.38x 9.29x 8.98x 11.42x 13.65x
SCWX $340 $1,120 $28 $33 $1,115   3.28x --- --- --- --- ---
APPF $82 $428 $0 $21 $407   4.96x 9.69x --- --- --- ---
TEAM $421 $4,600 $0 $723 $3,877   9.21x 11.05x --- --- --- ---
INST $82 $500 $0 $70 $430   5.24x 6.40x --- --- --- ---
MB $111 $552 $16 $91 $477   4.30x 4.65x --- --- --- ---
SHOP $241 $2,140 $0 $189 $1,951   8.10x 11.59x --- --- --- ---
XTLY $76 $240 $16 $48 $208   2.74x 2.88x --- --- --- ---
                         
Average $521 $3,490 $136 $324 $3,301   5.08x 4.77x 6.58x 6.58x 8.18x 8.07x
Median $241 $1,280 $3 $139 $1,125   4.94x 4.34x 6.56x 6.67x 7.45x 7.59x

 

-Notice that while the median and average multiple improved substantially in Q1 2016 to 4.94x and 5.08x respectively, they’re still a far cry from Q3 2015 when the median was 6.56x and Q4 2014 when the multiple was 7.59x.

 

-Public multiples are in line with what we’re hearing from investment bankers on private transactions.  Recently we spoke to over 15 investment bankers as part of evaluating M&A for one of our companies, and they informed us that SaaS multiples for private M&A are 3x to 5x revenue. 

 

-The improvement in Q1 2016 to 4.94x is dramatic from Q4 2015, where the median was only 4.34x.  It doesn’t take too many 0.60x increases like that to get to the heady multiples experienced in mid-2015.  In our view, we’d be surprised if the market continues to make big jumps, but at the same time, we certainly didn’t expect the magnitude of multiples contraction we saw in Q4 2015, so you never know.  To be safe, DAN Fund and other non-West Coast VC are likely to continue to look for valuations that are 3x to 5x trailing twelve months revenue for companies at the Series A/B level with at least $1mm in revenue. 

 

In conclusion, SaaS multiples improved dramatically in Q1 2016 to 4.94x, so it’s reasonable to expect a value oriented, non-West Coast VC to look for a 3x to 5x multiple on SaaS valuations. 

 

 

 

 

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