SaaS Multiples are back above 6x

Every quarter we track the revenue multiples of publicly traded SaaS companies to get a sense of where valuations are and where they’re trending.  Q2 2016 proved to be a strong one for SaaS valuations, as revenue multiples on 45 publicly traded companies hit a median and average of 6.14x and 6.15x respectively. As importantly, it marked the third straight quarter of increasing SaaS valuations (in Q4 2015, the median was only 4.41x).  While we’re still a ways away from the peak shown below (7.50x in Q4 2014), overall valuations are moving in the right direction if you’re a SaaS entrepreneur.  A table of the data is below. 

 

    TTM Market     Enterprise   Q2 2016 Q1 2016 Q4 2015 Q3 2015 Q2 2015 Q1 2015 Q4 2014
Name Ticker Revenue Cap Debt Cash Value   EV/Rev EV/Rev EV/Rev EV/Rev EV/Rev EV/Rev EV/Rev
2U TWOU $177 $1,670 $0 $188 $1,482   8.38x 6.52x 5.84x 5.56x 10.48x 8.83x 7.58x
Athenahealth, Inc. ATHN $1,010 $5,000 $295 $134 $5,160   5.11x 5.26x 5.49x 6.90x 6.51x 6.14x 6.26x
Bazaarvoice, Inc. BV $200 $338 $42 $95 $286   1.43x 1.27x 0.99x 1.62x 1.90x 2.15x 2.19x
Benefitfocus, Inc. BNFT $212 $1,230 $75 $68 $1,237   5.82x 5.34x 5.02x 6.41x 6.46x 6.06x 7.63x
Box, Inc. BOX $327 $1,490 $56 $183 $1,363   4.16x 4.39x 4.54x 5.92x 6.29x 7.72x 8.14x
BroadSoft, Inc.  BSFT $314 $1,250 $195 $264 $1,180   3.77x 4.10x 3.80x 3.95x 3.63x 4.16x 4.12x
Castlight Health, Inc.  CSLT $82 $368 $0 $121 $247   3.01x 3.54x 1.92x 3.15x 6.59x 11.38x 12.16x
Cornerstone OnDemand, Inc. CSOD $389 $2,470 $234 $267 $2,437   6.26x 5.58x 4.32x 5.93x 6.75x 6.20x 5.74x
Cvent, Inc.  CVT $211 $1,360 $0 $177 $1,183   5.60x 6.70x 3.87x 7.22x 7.12x 6.91x 6.84x
Five9, Inc.  FIVN $145 $722 $44 $58 $707   4.87x 3.67x 3.17x 2.38x 1.65x 2.33x 2.35x
Fleetmatics Group PLC FLTX $311 $2,330 $23 $194 $2,159   6.95x 4.87x 4.28x 7.66x 6.13x 5.88x 6.56x
Hortonworks, Inc. HDP $155 $571 $0 $109 $462   2.99x 3.85x 3.84x 6.74x 11.26x 20.10x 16.16x
HubSpot, Inc. HUBS $225 $2,020 $1 $117 $1,904   8.47x 7.32x 6.08x 14.04x 9.27x 13.77x 9.72x
IntraLinks Holdings, Inc. IL $285 $490 $80 $39 $531   1.87x 1.72x 1.70x 2.08x 2.24x 2.40x 2.44x
Jive Software, Inc. JIVE $202 $312 $2 $108 $207   1.02x 0.93x 0.71x 1.47x 1.07x 1.72x 1.51x
Lifelock LOCK $632 $1,590 $0 $156 $1,434   2.27x 1.66x 1.32x 1.80x 0.79x 2.28x 2.18x
LinkedIn Corp. LNKD $3,430 $25,660 $1,150 $3,310 $23,500   6.85x 4.78x 4.50x 10.68x 7.98x 9.40x 13.37x
LivePerson Inc. LPSN $232 $420 $0 $52 $368   1.58x 1.47x 0.90x 1.65x 1.96x 2.08x 2.69x
LogMeIN, Inc. LOGM $309 $2,090 $45 $225 $1,910   6.19x 4.64x 4.09x 5.66x 5.22x 5.84x 5.18x
Marin Software, Inc. MRIN $108 $100 $2 $35 $67   0.61x 0.47x 0.69x 1.10x 0.85x 1.55x 1.58x
Marketo, Inc. MKTO $241 $1,580 $1 $100 $1,482   6.14x 5.25x 2.61x 6.08x 5.91x 7.09x 6.55x
Medidata Solutions, Inc. MDSO $421 $3,110 $256 $318 $3,048   7.24x 6.18x 4.87x 5.80x 7.19x 8.48x 7.60x
MobileIron, Inc. MOBL $158 $311 $0 $85 $226   1.43x 1.03x 1.10x 1.56x 1.41x 2.60x 4.10x
NetSuite Inc. N $846 $8,740 $286 $408 $8,618   10.18x 7.95x 5.74x 9.61x 10.52x 12.40x 12.68x
New Relic, Inc. NEWR $202 $1,800 $0 $196 $1,604   7.95x 6.56x 6.91x 10.64x 10.84x 13.68x 13.99x
Proofpoint, Inc. PFPT $313 $3,130 $356 $412 $3,074   9.82x 8.10x 6.49x 10.79x 9.46x 10.64x 10.98x
Qualys, Inc. QLYS $182 $1,110 $0 $214 $896   4.93x 4.99x 3.83x 6.77x 5.44x 8.65x 10.43x
RealPage, Inc. RP $514 $2,010 $124 $47 $2,088   4.06x 3.67x 3.49x 3.56x 3.34x 3.66x 3.81x
RingCentral, Inc. RNG $339 $1,690 $17 $148 $1,559   4.60x 4.00x 3.85x 5.23x 4.23x 4.46x 4.25x
salesforce.com, Inc.  CRM $7,070 $54,780 $2,070 $2,030 $54,820   7.75x 8.03x 7.25x 8.85x 7.30x 9.13x 8.26x
ServiceNow, Inc. NOW $1,190 $12,380 $491 $807 $12,064   10.14x 10.09x 7.85x 13.58x 12.52x 15.64x 16.69x
Splunk, Inc. SPLK $729 $8,330 $0 $1,020 $7,310   10.03x 9.26x 6.63x 11.80x 13.40x 17.39x 14.37x
SPS Commerce, Inc. SPSC $176 $1,120 $0 $128 $992   5.65x 4.66x 3.70x 7.02x 6.88x 7.18x 7.42x
The Ultimate Software Group, Inc. ULTI $700 $6,150 $10 $98 $6,062   8.66x 8.55x 7.34x 9.83x 8.61x 9.02x 9.25x
Veeva Systems Inc. VEEV $439 $5,240 $0 $457 $4,783   10.89x 9.37x 7.10x 8.11x 7.76x 10.48x 9.36x
Wix.com Ltd. WIX $241 $1,580 $0 $128 $1,452   6.03x 4.25x 3.16x 4.28x 4.06x 5.65x 4.36x
WorkDay, Inc. WDAY $1,260 $16,370 $514 $2,080 $14,804   11.75x 11.95x 9.19x 14.00x 13.50x 20.34x 18.12x
Zendesk, Inc. ZEN $261 $2,890 $0 $224 $2,666   10.22x 8.36x 6.38x 9.29x 8.98x 11.42x 13.65x
Secureworks SCWX $362 $1,140 $0 $124 $1,016   2.81x 3.37x --- --- --- --- ---
Appfolio, Inc. APPF $90 $637 $0 $22 $615   6.82x 5.43x 9.69x --- --- --- ---
Atlassian Corporation TEAM $457 $6,260 $0 $743 $5,517   12.07x 9.65x 11.05x --- --- --- ---
Instructure INST $92 $672 $0 $62 $610   6.64x 5.28x 6.40x --- --- --- ---
Mindbody, Inc MB $120 $1,020 $16 $88 $948   7.90x 4.06x 4.65x --- --- --- ---
Shopify SHOP $282 $3,300 $0 $180 $3,120   11.05x 9.40x 11.59x --- --- --- ---
Xactly XTLY $81 $424 $15 $46 $393   4.83x 3.39x 2.88x --- --- --- ---
                             
                             
                             
Average   $572 $4,383 $142 $357 $4,169   6.15x 5.35x 4.79x 6.55x 6.46x 8.02x 7.90x
Median   $282 $1,590 $2 $148 $1,482   6.14x 4.99x 4.41x 6.25x 6.55x 7.14x 7.50x

 

The link below will take you to the table directly. 

https://www.dropbox.com/s/3zc0zhvhxangzbv/Article%20-%20SaaS%20comps.xlsx?dl=0

So why are SaaS multiples increasing? In our view, the improving multiples are due mostly to a rise in the overall market: The S&P 500, NASDAQ, and DOW are at all-time highs as I write this.  While the appetite for tech investing seems healthy, rising multiples are more a function of macro factors (rock bottom interest rates, attractive US market relative to foreign markets, crashing Pound, weak Europe, unattractive yields, etc) than a desire by investors to weight tech more heavily than other sectors in their portfolio, as they did in the late 90’s. 

 

So what’s this mean for entrepreneurs? Even though the rise in multiples isn’t necessarily due to a desire by investors to overweight tech in their portfolios, it’s still good news if you’re raising money or selling your business.  So long as these trends continue for a few quarters, at some point entrepreneurs will be able to justify higher valuations when they’re raising money or selling their business.   So while you shouldn’t expect to justify higher multiples immediately, as they say, the trend is your friend.  

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