VALUATIONS. (Obvious, but nice to see the data) —“The data reveals a consisten

http://techcrunch.com/2015/06/05/what-we-know-from-a-decade-of-saas/SAAS VALUATIONS.

(Obvious, but nice to see the data)

—“The data reveals a consistent valuation range between 4x and 6x revenue, with 5x revenue as the all-time median. Times of euphoria, such as late 2013 through early 2014, and periods of depression, such as late 2008 through late 2010, are also easy to identify.

Market cycles and company valuations will fluctuate, but we have over a decade of trading data on more than 50 companies that suggests a steady-state valuation of 4x to 6x revenue for the median public SaaS company. We believe most investors have internalized a 5x multiple as a benchmark for a steady-state SaaS company.

It is interesting to look at individual companies in the index and see if this rule of thumb applies to every company. Salesforce, the largest SaaS company in the world, trades at 7x today. It traded as low as 2x in late 2008 and up to 10x before settling where it is today, noticeably following the cycles of the index. In other words, while it may get a slight premium for its leadership position it still fits into the framework.”—