Dirk Sahlmer

saas.group

Head of Origination

M&A Manager

Associate

Analyst

TS Ventures

VC Investments

carlotta

Co-Founder

FKFS - Forschungsinstitut für Kraftfahrwesen und Fahrzeugmotoren Stuttgart

Research Assistant - Vehicle Aerodynamics

ALPINA Burkard Bovensiepen GmbH + Co. KG

Homologation Engineer - Vehicle Emissions Testing

Elektrobit (EB)

Test Driver - Advanced Driver Assistance Systems

Porsche

Quality Engineering Intern

Acquiring and growing SaaS companies @ saas.group

Engineer turned M&A professional after failing with his own startup. Now on the lookout for promising PLG SaaS companies between $1-10M ARR that are open to an exit.

Posting regularly here on LI and in my saas.fyi newsletter on SaaS and  M&A topics.

Reaction from VC investors when you ask them for concrete advice.


Video credit: @\_skillaz

David Pugh

When you go to a conference booth to grab some goodies and the sales guy wants to scan your badge.

Acquiring SaaS companies @ saas.group | saas.wtf Newsletter

What it takes for a SaaS company to be valued at >5x ARR


I don't know why,  but many SaaS founders I talk to think that their small SaaS business would be valued at ~5x ARR. They can't justify it, it's just a gut feeling.

Unfortunately, those days are over.

The current median TTM Revenue Multiple (not ARR!) in the private SaaS market according to Software Equity Group is 3.8x (Q1/24).

The average is 5.1x - but less meaningful as it is pulled up by a small number of strategic transactions at very high multiples.

Let's take a look at what it takes in the public market to be valued at more than 5x ARR...

The Meritech SaaS Index currently shows 13 companies that are valued between 5-6x ARR.

Their average numbers:

➡️ ARR: $933M
➡️ Growth (LTM): 17%
➡️ Gross Margin: 76%
➡️ FCF Margin: 14%
➡️ Rule of 40: 31%
➡️ Magic Number: 0.5
➡️ ACV: $142k
➡️ Net $ Retention: 110%
➡️ ARR/FTE: $391k

Given the current market environment, these are pretty good figures for mature SaaS companies with an average ARR of almost $1B.

As you can imagine, small SaaS businesses usually need to have better metrics to be valued at a similar multiple.  Even if you have similar traction and are <<$10M ARR, you'll probably have to factor in a certain discount.

The main valuation drivers have not really changed:

1. Growth
2. Quality of Revenue
3. Efficiency

Raza Hussain

En tant qu'entrepreneur tech, mon feed LinkedIn idéal pour progresser continuellement (merci, au passage, pour le temps que vous prenez à créer des contenus, articles et fiches de qualité) : 

- Philippe Silberzahn pour le regard stratégique
- Eliad Samoun pour toute la tactique financière (pro et perso)
- Violaine Schmidt - Avocate pour le droit 
- Charles Tenot pour la prospection et les KPIs
- Timothé Frin pour progresser sur le produit
- Stéphane Nasser pour assurer niveau levée de fonds
- Dirk Sahlmer pour bien comprendre les rouages du SaaS
- Manon Tournant pour la tranquilité d'esprit dans les moments diffciles

Des noms à proposer ?

Taplio

Dirk Sahlmer's Linkedin Analytics

Dirk Sahlmer

What is Dirk talking about?

Who is engaging with Dirk

Dirk Sahlmer's Best Posts (last 30 days)

Want to drive more opportunities from LinkedIn?

Taplio

.css-1jgreyo{background-image:linear-gradient(284deg, rgba(39,43,72,1) 0%, rgba(33,47,183,1) 100%);color:transparent;-webkit-background-clip:text;background-clip:text;}Dirk Sahlmer's Linkedin Analytics

Dirk Sahlmer

What is Dirk talking about?

Who is engaging with Dirk

Dirk Sahlmer's Best Posts .css-qqfgvy{font-size:var(--chakra-fontSizes-md);}(last 30 days)

Want to drive more opportunities from LinkedIn?

Dirk Sahlmer's Linkedin Analytics

Dirk Sahlmer's Best Posts (last 30 days)