The Series A Report

During the month of May, we had conversations with 45 companies about leading or following their Series A rounds. Below is aggregate data on these 45 raises — figures like revenue, valuation, and round size are medians from the conversations. The valuations and revenue multiples presented aren’t necessarily what the founders got, but rather it’s what they asked for when talking to us.

SaaS. We’re generalists and tend to look at everything, but as you can see 18 of the companies we talked to were SaaS. The median revenue run rate was $2mm, the median round was just over $3mm, and the median pre-money valuation the founder was asking was $16mm. The result was a revenue multiple ask of 7.5x.

Transactional models. The next largest category was “transactional”, whereby a company gets paid for each transaction it completes. We talked to 9 companies in the space, and surprisingly these businesses were asking for valuations that were 7.8x revenue.

Marketplaces. We talked to 4 marketplaces. These are companies with 2 sets of customers and the company takes a cut of the transaction that occurs between the customers (similar to Airbnb, Uber, Lyft, etc). The ask there was a median 7.4x revenue.

Below is the geographic spread of the companies we spoke to. While we don’t target NYC and SF, 17 of the companies came from either of those two geographies.

So what’s our view? While the market continues to be elevated, the SaaS founders we spoke to on median were reasonable enough with their “asks” on valuation and revenue multiple. Public SaaS right now is trading at nearly 10x revenue so private Series A businesses asking for 7.5x is about right (in our view privates should trade well inside of publics). If you end up between 4x and 6x with a VC, you’ll be at market for private SaaS based on what we’ve seen and heard getting funded.

Founders of transactional models and marketplaces are asking for aggressive valuations in our view (for instance public marketplaces trade at ~4x revenue), and while some of the founders will get rounds done at these high asks, we believe most will have to revisit valuation.

Fundraising is hard and distracting. I’ve literally never heard a founder say “I love fundraising,” so make it easier on yourself by being reasonable with the ask. Remember, you’re partnering with an investor who is going to be with you for the next few years, not selling a car to a stranger you’ll never see again — treat the process like you’re entering a partnership and you’ll find the optimal investor and outcome sooner.