Thread by @state_xyz

0/ Those interested in SaaS investing and need a quick reference point on public market valuations, @MeritechCapital has just released v2 of their benchmarking (free) tool. Check it out!

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#software #SaaS #valuation #VentureCapital #privateequity

meritechcapital.com/benchmarking/v…

1/ The tool provides a perspective on what scaled listed SaaS companies look like in the US, in terms of growth, retention, sales efficiency and how these metrics correlate with valuation. US is the most relevant market as it sets the world price for such assets, viz. enterprises

2/ It’s based on non-GAAP financials and allows users to filter by SaaS type (infra, application, freemium / bottoms-up). The types of analysis (incl. charts, tables) the tool allows you to quickly undertake is organized as follows…

3/ Valuation metrics:
- A bivariate linear regression (allows you see 2-way correlation between a Y variable i.e. valuation and X variable. Refer below)
- IPO returns
- Market Cap
- EV multiples on revenue, annualized run-rate revenue (ARR), gross profit, adj. growth

4/ Operating metrics (business KPIs):
- Magic number / payback periods (sales efficiency)
- Implied customer sizes (larger account imply lower GTM velocity)
- Revenue / cost per full-time employee
- Net dollar retention (growth of existing customers, net of churn)
- Company age

5/ Financial metrics:
- ARR
- YoY growth
- Gross margins
- Key opex buckets (sales & marketing, research & development, general & admin)
- Free cash flows
- Rule of 40 (growth + margin)

6/ Trading metrics:
- Share price
- Multiples
- Trailing 12 months revenue growth
- Combined share price, valuation revenue multiples, revenue growth into a single chart. Refer below

7/ Trading comparables table: This summarizes all the underlying data into a neat single snapshot. Refer below

Wish this existed when I was an analyst! I do show it to my team. Thanks @MeritechCapital for this awesome tool!