SaaS Valuation: An Alternative Approach

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themarketmogul.com – In the past four years, we have witnessed a new phenomenon. The valuation of publicly traded Software-as-a-Service companies has grown at a rapid pace, by 200 – 500% year on year, while the underlying business model and respective unit economics suffered no change. Not surprisingly, public SaaS/Cloud companies outperformed the major indices.

This resembles to a development last observed during the 2000’s Internet boom and crisis. According to the SEG SaaS Index (2012-2014) the average EV/Revenue multiples experienced dramatic spikes. Interestingly enough, from 2004 to 2011 publicly traded SaaS companies held a respective multiple of 3x to 6x. Nowadays, this number has been multiplied by 5x – 8x.

Therefore, Maximilian Bade proposes an alternative approach to valuing SaaS enterprises that can be read at themarketmogul.com

 

 

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