Sammy is the Managing Director and Cofounder of Blossom Street Ventures. Connect on LinkedIn or email him directly at firstname.lastname@example.orgSaaS comps have never been stronger: of the 98 SaaS companies we follow, the average public SaaS business is trading at 18.3x revenue while the median is 13.92x. Interestingly, the gap between the average and median tightened from last quarter (4.4 down from 8.5x), meaning premium SaaS companies have come down to earth a bit. 59% of companies are trading at 10x revenue or greater (all time high). The data is below.
The trend is still on. The chart in the picture shows median revenue multiples we’ve collected since Q4 2014. During that period, the median SaaS multiple has ranged from 4.6x to 14.1x with an average of 7.9x.
Premium gets a premium. Premium SaaS businesses trade at premium multiples. In the data set, 58 companies trade at greater than 10x revenue, 45 trade at greater than 15x, and 34 trade at greater than 20x.
SaaS businesses are healthy. There is almost no debt on these businesses (except McAfee) as banks don’t like ‘asset-lite’ businesses like software. Additionally, these companies have $455mm of cash on the balance sheet on median, plenty relative to annual burn (recall EBITDA is -$1mm). The number of years of cash on the balance sheet is less important given that these businesses are generally cash flow positive (median of $55mm; only 21 out of the 98 companies have negative cash flow. Note that 48 out of the 98 have negative EBITDA, but again that’s acceptable so long as the growth is present and cash flow overall is positive.