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Ask HN: How would you value this SaaS Company?
Valuation of a SaaS company
For the sake of this exercise, let's assume Company X has $300k ARR, growth now and going forward is 200% year over year. All customers pay annually upfront.
Net churn going forward falls in the range 10% to -50% depending on how well we do our own CS job. Assume that each year, we get as much revenue from new business as we get from existing customers (renewals, churn, upgrades etc).
1) What would you say is the value of X is today?
Different types of investors would likely end up with different valuations - discuss the different potential approaches.
2) What ARR would we have in 3 years (in the best/worst case net churn scenarios mentioned above)
- ryansmccoy 7y agoA few thoughts: 1) You could use Relative and/or Absolute valuation. IMO, the easier would be relative since it's difficult to pin down a future growth rate. For relative, find some companies which you might be able to compare against, similar business model/size, growth trajectory, and that has raised $$. 2) There is no guaranteed method to predict the future and it depends on what you need the estimate for and, again, would try to find a comparative company to use as a guide for growth rate.
- findingnimo 7y agoOk thanks I will do that. But doesn’t a figure of 50% annual churn seem much too high? To calculate the new ARR would I subtract this percentage from the ARR? It would be such an immense help if you have some figures I could compare my answers to!