Don't use revenue multiples to value high growth companies
thedownround.substack.com
When people talk about the great 2020-2021 tech bubble and its subsequent implosion, much of the discussion centers around revenue multiples. Historically (at least in the time I’ve been investing) the standard ARR multiple for a private SaaS company financing was 10x, though perhaps more for a very hot company. My first SaaS deal was priced at 20x current year-end ARR, on the basis that this was “expensive in the short run but cheap in the long run”, as the company was growing at 300% so this really meant 5x next year’s ending ARR. “Expensive” and “cheap” were all relative to this 10x benchmark.
Don't use revenue multiples to value high growth companies
Don't use revenue multiples to value high…
Don't use revenue multiples to value high growth companies
When people talk about the great 2020-2021 tech bubble and its subsequent implosion, much of the discussion centers around revenue multiples. Historically (at least in the time I’ve been investing) the standard ARR multiple for a private SaaS company financing was 10x, though perhaps more for a very hot company. My first SaaS deal was priced at 20x current year-end ARR, on the basis that this was “expensive in the short run but cheap in the long run”, as the company was growing at 300% so this really meant 5x next year’s ending ARR. “Expensive” and “cheap” were all relative to this 10x benchmark.