April 11, 2024 SaaS Capital : 2024 Private SaaS Company Valuations
As of March 31, 2024, the SCI median valuation multiple stands at 6.8 times current run-rate annualized revenue (we believe run-rate revenue is the most accurate measure of the current scale of the business). While the multiple has stabilized in the 6-7x range, it is down roughly 60% from its peak achieved in 2021. (read more…)
April 4, 2024 SaaStr : The 21 Top Excuses for Not Closing A Deal
Sales is hard. And not only is it hard, but you shouldn’t be closing every deal you are in. Why? Well, if you’re closing every deal you are in, you’re not being invited to the deals where your product has competition. Where it has gaps. You aren’t being invited to where you’ll want to be to grow, if you magically close every deal you are in. And closing every deal you are in is also generally a sign you the company itself isn’t doing enough marketing. Still, the best sales reps close so much more than mediocre ones. And what you hear a lot from the mediocre ones are … excuses. But hear these excuses too often from a rep, and you have the wrong rep. Even today, when sales for many of us is harder. Probably, especially today. (read more…)
CATEGORY: customer acquisition, product-market fit, resilience
April 1, 2024 SaaStr : The Most Important SaaS Metric of All: Net New Customer Growth
The leaders in SaaS and Cloud keep new customer count up in the double-digits … even at billions in ARR. The averages: + 14% new customer count growth + 23% ARR growth even at + 1.25B ARR on average But that’s the average. You want to do better than that, given that the average public SaaS company only trades at 6x ARR. So aim for 20%+ new customer growth at scale ($100m+), and 50%+ as you approach $50m ARR. Below that is just too low. Your present may be secure, but your future is at high risk. And try to keep your customer count growing at least 50% as fast as your NRR, higher if you are SMB. That ensures you have a future, and you aren’t overly reliant on upsells from the base. (read more…)
March 29, 2024 SaaStr : Can You Still Get Acquired for a Decent Price if Growth Has Slowed or Even Stopped? Yeah, Sometimes
Is a SaaS startup at $10m ARR growing basically 0% objectively worth $80m today? No. It might be worth close to nothing based on a DCD analysis. No VC would touch this startup for a Series B round. No VCs at all. Even a PE firm wouldn’t buy it with no growth at all, I don’t think. But even if you’re out of ideas for now, don’t give up all hope of a potentially decent M&A offer, especially if you are cash-flow neutral and haven’t raised too much (that’s important). If you’re in an important space, someone may still want you. Just keep doing what matters, and what keeps your customers happy. (read more…)
CATEGORY: leadership, resilience, valuation
March 19, 2024 SaaStr : What Are The Odds You Get Acquired Within 5 Years for a Good Price? Around 1%-1.5%
So my educated guess from this data: 1%-1.5% of startups have a “good” exit in the first 5 years. That sounds pretty tough, and I guess it is. But it also means just plan on going longer. A number of my best “exits” had no great M&A offer the first 5 years, and a number of others had soft offers that fell apart in the end. Go long. If something great comes up first, maybe take it. And be optimistic, too. But realize it may be years 6-10+ where you build the real value. 5 is fast in SaaS and B2B. (read more…)
CATEGORY: resilience, SaaS
March 14, 2024 SaaS Capital : The Rule of 40 is Dead… Long Live the Rule!
For companies at least 2 years away from an exit transaction, grow as sustainably fast as your expected access to capital will allow you in your chosen market, and burn as much cash as you can access. For companies with an exit horizon within 2 years, get to breakeven to own your destiny. (read more…)
CATEGORY: growth, resilience, SaaS
March 6, 2024 Claret Capital : What is the real cost of capital in Venture Debt?
To put it simply, the return Alternative Lenders need to make to justify their access to capital has increased, and therefore so has the cost for the borrower. However, venture debt providers have maintained the same cost of capital throughout, despite the increase in interest rates. (read more…)
CATEGORY: alternative financing, capital, debt
March 4, 2024 Business Insider : ‘2024 will be the year of the zombie VC reckoning.’
PitchBook says the number of VCs in US deals peaked at 18,504 in 2021 and fell to 9,966 last year. The term "zombie VC" first came into vogue after the Great Recession when a wave of firms slowly met their demise. But the destruction happening now will likely be much uglier considering the abundance of new VC funds started during the height of the tech boom from 2018 to 2022 — more than 1,100, according to PitchBook data. (read more…)
January 17, 2024 Sifted : M&A activity is likely to skyrocket in 2024 — how is financing changing?
“[Venture debt works for companies] looking at M&A as an option for bolting on additional solutions or expanding into new markets where there’s a certain level of predictability around payback periods [...] having debt to just sit on the balance sheet doesn’t always make sense. Debt can be useful when there are key drivers, identifiable roadblocks or cash requirements that you need in the future.
(read more…)December 1, 2023 Meritech Capital : Public SaaS Comparables Table
- 93% of companies have YoY Implied ARR growth <40%
- 74% of companies have FCF margin <20%
- 26% of companies are achieving Rule of 40
- 39% of companies have returned <1x since IPO
CATEGORY: profitability, SaaS, valuation