Transactional models. A transactional company is selling a tech product as needed to a customer; it’s not per a contracted, recurring contract. We talked to 41 companies in the space, and surprisingly these businesses were asking for valuations that were 7.8x revenue even though the business model is not as attractive as SaaS. We find that many companies that are currently transactional are trying hard to move to a SaaS model given the premium valuations for contracted recurring revenue.
Consumer products. We’ve spoken to 16 CPG companies since May. These are businesses with no tech that literally sell a food or beverage in grocery stores. The median ask here was a heady 5.1x revenue of $3.1mm.
So what’s our view? Don’t be surprised or offended if a VC pushes back hard on the ask. It’s ok to make a strong ask as most VC won’t be turned off, but be ready to compromise. Also recognize that asking for a higher valuation will lengthen the time you’re out fundraising; the higher your valuation, the fewer VC that will be a fit (valuation matters to most).