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10-13x ARR isn't absurdly high at all
by moritzplassnig 8y ago
10-13x ARR isn't absurdly high at all
- zaroth 8y agoIt depends entirely on your growth rate. In my experience, a lifestyle business growing 20% YoY with 5% churn and 10% operating margin will sell for around 2.5-3x ARR.
- spullara 8y ago20% YoY is very low relative to most of these large SaaS startups that you see on here. The S-1 for Elastic had it at 75% YoY or so. Most of these companies also have absurdly high negative revenue churn. Gross margins approach 75% which become net margins when they stop growing so fast. See the 40% SaaS rule. https://saasholic.com/the-rule-of-40-for-saas-and-subscription-business-4bc2d7bcd868 https://saasholic.com/the-rule-of-40-for-saas-and-subscripti...
- zaroth 8y agoExactly! Every time you double your growth rate it also approximately doubles the Price / Revenue ratio. 20% growth will yield a 2-3x ratio. 40% growth 4-6x, and by 80% growth you’re looking at a valuation of 8-12x ARR.