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PRIVATE SAAS COMPANY VALUATIONS: 2019
SaaS Capital is in a unique position to understand SaaS company valuations as we have witnessed 29 of our companies raise
equity or exit in the last 5 years. The exits have been a combination of strategic sales and private equity recaps and have
provided us an effective way to benchmark private SaaS valuation multiples against public data.
The SaaS companies in our valuation analysis ranged from $4 million to $45 million in revenue and covered a wide variety
of industries. With a few ‘unicorn’ exceptions, these were scale-up stage companies with a median growth rate of 26%, and
retention and burn rates in a narrow range around the average for companies their size.
Key Valuation DriVers
Not surprisingly, the two primary variables that drove the exit valuations of those companies more than any others were:
1. Public market valuations at the time
2. Revenue size and growth rate
There are dozens of other factors impacting valuation (all of which we will cover in an upcoming white paper), but these
two set the baseline.
Public saas comPany Valuations
Public company comparables are the classic starting point for valuation analyses because the data is easy to get and is
updated in real time.
As with all valuation approaches, the goal is to determine the risk-adjusted value of a company’s future cash flows. For
traditional companies, stock analysts start with a company’s earnings and apply a multiple based on expected growth and
risk. This is the Price/Earnings or P/E multiple. For SaaS businesses, however, earnings are generally understated for two
reasons: customer acquisition costs are expensed up front, and most SaaS companies are still in an aggressive growth stage.
For this reason, current earnings are not as good an indicator
of future cash flows as current revenues, and that is why SaaS
company valuations are more highly correlated to their size than
their profitability. As a result, SaaS businesses trade on a price to
revenue basis, or “Revenue Multiple.”
reVenue multiPle Valuation trenDs
The chart to the right represents the median public SaaS
company Trailing Twelve Month (TTM) revenue multiple over
the last 5 years.
The data is from the same set of 21 companies over the 5 years
and is therefore not impacted by new entrants or exits. The
average value of a public SaaS company over this period has
been as low as 4.8 times revenue to as high as 9.9 times.
RESEARCH BRIEF 18: VALUATION
3x
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2015
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2019
Revenue Mul�pleSaaS Capital
Median TTM Revenue Valuation Multiple
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This provides data for the first step in determining
your valuation: understanding the value of public SaaS
companies at the time you sell equity. The two (primary)
remaining inputs are:
1. The discount between public company values and
private company values
2. The impact of your company’s specific growth rate
Let’s deal with the second one first.
the imPact of reVenue Growth on the Valuation
multiPle
It will not be news to you that the biggest driver of what
multiple of revenue will be applied to your business is
how fast it’s growing. This relates back to estimating
the potential future cash flows of the company. A higher
growth business will likely generate more cash in the
future relative to its size today than a slow growth
company of the same size. The chart below demonstrates
the strong relationship between growth and revenue
valuation multiples.
The chart is based on publicly traded SaaS company data
as of June 2019 and spreads the company growth rates
against their valuation multiples. As you can see, growth
matters. A lot. We have been analyzing SaaS companies
for over 12 years and there is no other specific factor as
important to determining a SaaS company’s valuation
multiple as growth rate. Not even close.
So, using the chart above, identify your company’s growth
rate in the vertical axis and then scan over to the dashed
line. That is what your company’s revenue multiple
would be if it were public (and all other valuation drivers
being equal).
So, the final missing data point is obviously the discount
your business will trade to its public counterparts.
the missinG linK: the PriVate to Public Discount
multiPle
There is a real discount from public to private valuations,
and it’s there for some very good reasons. The fact that
you can freely and easily trade these stocks drives up
their demand vs. private businesses. Also, these are
larger businesses that are statistically less likely to fail, so
investors will pay a premium for that safety.
We can derive the average public-to-private market
discount by overlaying the data from our portfolio of
private SaaS companies from 2014 to 2019 against public
valuations over that same period.
The blue dots in the following chart are the TTM revenue
valuation multiples for public companies with varying
growth rates. This is similar to the previous chart but
averaged over the last 5 years. The green dots are the
revenue multiples for private SaaS companies with similar
growth rates over the same period. The green and blue
lines are best-fit regressions for the respective series of
data.
The distance between the lines is about 2x TTM revenue,
and that remains fairly consistent across the range of
growth rates and multiples. So, the valuation discount for
being a private SaaS company vs. a public one is about 2
times revenue.
-20%
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Revenue Growth RateTTM Revenue Mul�ple
SaaS Capital
Revenue Multiple by Growth Rate
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Valua�on Mul�ple of TTM RevenueGrowth Rate
Private
Public
Linear (Private)
Linear (Public)
SaaS Capital
Public vs. Private Valuation Multiples
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ABOUT SAAS CAPITAL

SaaS Capital is the leading provider of long-term Committed Credit Facilities to SaaS
companies. Focusing exclusively on the SaaS business model, SaaS Capital delivers faster
decisions, more capital, and longer commitments. SaaS businesses have used SaaS Capital’s
Committed Credit Facilities, instead of equity, to finance growth and create hundreds of
millions of dollars in enterprise value without sacrificing significant ownership or control.
SaaS Capital has offices in Cincinnati and Seattle.
Visit www.saas-capital.com to learn more.
1311 VINE STREET | CINCINNATI, OH, 45202
7900 E GREENLAKE DRIVE NE, SUITE 206 | SEATTLE, WA 98103
IWWW.SAAS-CAPITAL.COM
TODD GARDNER | FOUNDER AND MANAGING DIRECTOR | TGARDNER@SAAS-CAPITAL.COM | 513-368-4814
ROB BELCHER | MANAGING DIRECTOR | RBELCHER@SAAS-CAPITAL.COM | 303-870-9529
how much is my saas business worth?
That’s the missing number: 2. To determine what your private SaaS company is worth:
1. Find the current revenue multiple of public SaaS companies growing at a similar rate
2. Subtract 2 to get the discounted private SaaS company multiple
3. Multiply your company’s trailing twelve month revenue by the discounted private SaaS company multiple
Is that overly simplistic? Of course. What about Total Addressable Market (TAM), retention, gross margins, and “synergies,”
you ask? All are important, and all those inputs help explain why all the dots in the chart are not on the straight lines. The
world is full of variability and nuance. However, if you step back and look, the formula will certainly give you “most of the
answer” and provide a good place to start an informed valuation discussion.
We believe the public to private discount is relatively stable over time, although we have seen it widen if there is a relatively
quick run-up in the public markets, and we have also seen it shrink in situations where large SaaS businesses that could be
public choose to remain private. There is little private discount for these firms.
We hope this data set and framework will help guide your thinking on the value of your SaaS business, and please keep
a lookout for our upcoming white paper and valuation tools which will tackle the impact of market size, gross margins,
retention, and several other factors.