Public and Private SaaS Valuations November 2023

I regularly track SaaS valuations as a part of my consulting business. Tracking the valuations of public SaaS companies is easy, privately held SaaS companies are a bit more challenging, but not impossible. Year to date, the median public SaaS company valuation is up about 18.5%, while the overall Nasdaq is up 36.7%. In the past month, public SaaS company valuations have improved 9.4% versus 9.1% for the Nasdaq and 6.1% for the NYSE. Private company valuations have followed the same trends. The median EnterpriseValue/Revenue (ttm) multiple for public SaaS companies was 5.8x down from 16.4x in February 2021

In this article we will talk about

• Enterprise Value/Revenue (ttm) Multiples
• Trends in SaaS Valuations
• Valuations Vary by Software Category
• SaaS Valuations Vary By Company Size
• How Do You Determine the Value of a Private SaaS Company?

Enterprise Value/Revenue (ttm) Multiples

The most common way of describing the value of SaaS companies is the Enterprise Value/Revenue (ttm) Multiple. Generally speaking, Enterprise Value is equal to the value of a company’s equity (stock) minus the amount of cash/marketable securities plus debt. A simple way to look at EV is that it represents the net amount of cash to acquire a company without a premium. For public companies, most stock tracking platforms calculate EV every day. For example, the day this post was published Microsoft’s EV was $2.71 trillion. Its EV/Revenue ratio was 12.47x.

Calculating the Enterprise Value of a privately held company like OpenAI is more difficult. OpenAI’s stock is not publicly traded. It does not publicly release its financial statements or audit reports. There is a way to estimate OpenAI’s EV. Check out How to Calculate the Enterprise Value of a Private Company.

Trends in SaaS Valuations

SaaS valuations fluctuate over time. This chart from the Software Equity Group’s SaaS Index shows how the median SaaS EV/Revenue has varied over the past three years from a high of 16.4x in February 2021 to 5.8x in November 2023: