SaaS multiples have continued to show stability. Of the 116 SaaS companies we follow, the median public SaaS business is trading at 5.85x revenue while the average is 7.11x. The gap between the average and median is only 1.3x, meaning premium SaaS companies are getting slightly higher valuations, but that gap is tight relative to 2020 and 2021 when it was ~5.8x. There has been a correction in overvalued names.
Multiples for SaaS companies growing above the median of 21% are stronger: 8.08x on median and 9.47x on average. Only 26% of companies are trading at 10x revenue or greater, whereas the peak was 60% in Q4 2020. Three companies trade above 20xm whereas 35 traded above 20x in Q4 2020. The data is below.
Additional observations are as follows:
The stats. The median SaaS business had trailing twelve month revenue of $614mm, EBITDA of -$49mm, but positive operating cash flow of $54mm thanks to up-front collections on annual contracts. YOY growth is 21% and 22% on median and average. The median EBITDA margin is -11%. Debt is negligible. While 74 of the companies have negative EBITDA, only 33 have negative cash flow.
The trend. The chart below shows median revenue multiples we’ve collected since Q4 2014. During that period, the median SaaS multiple has ranged from 4.6x to 14.1x with an average of 8.10x.
Premium gets a premium. Premium SaaS businesses trade at premium multiples, but the number of premiums is shrinking. In the data set, 30 companies trade at greater than 10x+ revenue, 6 trade at greater than 15x, and only 3 trade greater than 20x.
Visit us at blossomstreetventures.com and email me directly at sammy@blossomstreetventures.com. All founders and funds welcome! We invest in companies with run rate revenue of $3mm to $30mm, with year over year growth of 20% to 50%+ depending on revenue. We lead or follow in growth rounds and special situations like inside rounds, small rounds, rushed rounds, corralling investors with our term sheet, bridges, inbetweeners, cap table clean up, and extensions. We can commit in 3 weeks and our check is $1mm to $4mm. Also visit https://blossomstreetventures.com/metrics/ for always up-to-date SaaS metrics.
