What kind of valuation multiples can be looked at for valuing a up & coming tech start up? Can we use Revenue based multiples instead of Net Revenue based multiples? WHat would be the cons of this?
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Generally you use revenue/ARR multiples. Right now, sought after but not one-of-a-kind companies are getting 8-10x, maybe 9-10x 2023 revenue. Obviously that number compresses as you get crummier companies or expands if you get companies with wild growth and somehow yet-to-be-tapped insanely large TAMs.
Typically use an ARR multiple, for specific transaction-based businesses you can also use Gross profit multiples.
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SaaS ARR valuation multiples in recent bull mkt were commonly 20-30x
Most SaaS companies sub $10M are valued at 4-6x ARR (for a typical GE shop). ARR growth, gross churn, and vertical move the valuation dial.
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