Posted on by Phil

Some thoughts on valuing SaaS companies

When I worked in venture capital, I was lucky enough to have the opportunity to invest in some really great companies during their early rounds.  Now some of those companies are going public, and I find myself spending some time thinking about when to sell my stock in these companies.

I don’t think anyone has truly figured out the formula to value these companies.  There just aren’t enough examples of SaaS companies that have reached maturity and shown us what they really look like in the long term.  Salesforce still grows at 23% annually and trades at over 100x EBITDA!

Nonetheless, I thought it’d be an honest exercise for me to write some thoughts down and then review them in a few years.

I think that growth should be the number one factor in considering SaaS valuations (when I say valuation, I mean how much is the company worth on a revenue/gross profit/EBITDA/FCF multiple basis).  If a company can grow at 50% for 3 years, it’s topline will be nearly 3.4x higher!  That’s powerful.

If you’re a real SaaS company, this means you have 80+% gross margins and should start seeing nearly 40 cents/dollar of new revenue start to fall down to operating cash flows.  Assuming the company that grows at 50% annually was cash flow breakeven, that means your operating cash flow in three years is more than your current revenues.

No two companies are the same.  The top factors that would effect valuation are how scalable growth is (sales/marketing channels and economics), how long growth can go for (market size, competition), churn (and how it contributes to growth), and margin profile (gross and net), barriers to entry (that will protect current revenues and make sure new competition doesn’t chip into existing growth prospects)…there are some other things pretty important too, like management’s incentive system.

I think what a lot of investors have figured out is that if a company keeps growing, you can pay through the nose (relative to what most companies trade at) and still make a nice IRR.  I agree that growth is the most important aspect of valuation, and that most of the other factors are basically contributors to growth.  Even in these heady times of crazy valuations, I’d say that a lot of the public companies are undervalued!   The other main factor here is the margin profile.  If you can’t ever be profitable, then forget it.  And, in the case SaaS companies, it’s more like you have to be VERY profitable.

I don’t have time to look up various rules on making stock predictions for companies you own.  So, I’ll leave you with this very basic spreadsheet (SaaS valuations thoughts) that should illustrate that growth is key in valuation and how I think various companies should be valued (although I guess the numbers in blue are very much up to interpretation in most companies).  Enjoy.

10,288 Replies to “Some thoughts on valuing SaaS companies”

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    ไม่ว่าจะเป็น แทงบอล บาคาร่า สล็อตออนไลน์ ที่กำลังได้รับความนิยมของนักลงทุน โดยกล่าวว่า
    เว็บไซต์นี้มีทั้งสิ้น 3 เกมให้เล่น เว็บไซต์ไซด์เป็นเว็บไซต์คาสิโนออนไลน์อันดับแรกๆ สล็อตออนไลน์ชั้นแนวหน้าในตอนนี้มีให้เลือกมากไม่น้อยเลยทีเดียว บางเว็บจะเสนอบริการแยกต่างหาก
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  2. สำรวจเปอร์เซ็นต์การแบ่งโบนัสก่อนเล่น
    วิธีแรกในการเล่นสล็อตนั้นไม่ยุ่งยากต่อการติดตามและไม่อยากความเข้าใจมากนัก เพียงแค่สำรวจเปอร์เซ็นต์ของโบนัส และก็คิดแผนเกมให้ถี่ถ้วน ผลกำไรจะไหลเข้ากระเป๋าคุณมากกว่า 2 เท่า แนวทางเล่นสล็อตออนไลน์ ทำเงินโดยไม่ขาดทุน โดยมองจากกระบวนการออกโบนัสหรือหักเปอร์เซ็นต์ของโบนัสสล็อต
    คอยรอบการหมุนที่สมบูรณ์แบบเกมสล็อตเป็นเกมที่จำต้องหมุนเพื่อรับโบนัส แล้วก็ของขวัญต่างๆเยอะแยะ แล้วก็เพื่อให้ได้กำไรจากการเล่นสล็อตอย่างสมบูรณ์นั้น คุณต้องเริ่มที่รอบสปินที่เพอร์เฟ็คเสียก่อน โดยปกติของเกมสล็อตจะเป็นตัวกำหนดรอบการหมุนที่สมบูรณ์เหมาะกับความกระตือรือร้น โบนัสกระจายถูกตั้งไว้ที่ 30 รอบการเดิมพัน คุณจำต้องจำไว้ว่าให้หมุนสล็อตมากยิ่งกว่า 30 รอบ
    นักบุญจำนวนมากหรือผู้ที่บรรลุเป้าหมายในการเล่นสล็อตมาก จะใช้สูตรสล็อต
    PG แล้วเขาจะหมุนมากกว่า
    30 รอบ บางคราวการหมุนครั้งเดียวก็เป็นบวก สิ่งสำคัญอีกประการหนึ่งเป็น สร้างสมดุลงบประมาณกับรอบการหมุนเวียน ถ้าเกิดคุณกำลังจะวางเดิมพันอย่างน้อยที่ 10
    บาท

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