SaaS and Tech Company Valuations, with Ed Bryant
What’s your SaaS or Tech company worth?
That’s the million dollar question.
In this episode of the MetricStack podcast, part of our Moving the Needle series, we get to hear Ed Bryant’s perspective. Ed is President and CEO at Sampford Advisors.
During his career, Ed has raised over $20 billion in equity and debt capital and completed over $10 billion in M&A transactions. He clearly knows a thing or two about company valuation.
Few highlights here but make sure to listen to the full episode here:
https://www.klipfolio.com/metric-stack/episode/37/ed-bryant
First off, Ed explains there are financial buyers and strategic buyers.
Financials are companies like Private Equity firms, Venture Capital firms, Family Offices – those who invest for a living.
Strategics buy companies for the synergies they’ll bring. And more and more, they’re actually backed by financial players. So there’s a convergence here. Strategic deals are getting done more and more based on the numbers, and less based on emotion.
Which factors matter most in software and tech valuations?
- Scale – ie $1M, $5 – 10M ARR, > $10M ARR. Lower scale is discounted, but after 10M ARR, there’s generally no discount.
- Growth – revenue growth rate year over year, month over month
- Profitability – this is somewhat less important than the first two for VCs
- Customer and Revenue Retention – if this is low, why? Does your product not work? Do customers not get value after the first annual contract expires. This shows whether your product is good or not. This is where Gross and Net Revenue Retention factor in.
By moving the needle on these metrics, you move the needle on your company’s valuation.
What does the next 12 – 18 mos look like when it comes to valuations?
Ed sees a bifurcated view:
- Group of companies who raised a lot of cash but aren’t growing. They’ll get low multiples or close up shop.
- Group of companies performing well on the 4 factors above who will get good multiples. Maybe 20% off the peak of the market.
Who to follow to get great content on valuation?
Sampford Advisors Blog: https://www.sampfordadvisors.com/blog
Tomasz Tunguz: https://tomtunguz.com
