Premium SaaS doesnt get much premium anymore

Do “premium” SaaS companies still receive premium (higher) multiples? Historically the answer has varied, but today we clearly see premium companies are not getting the higher multiples that they did in 2020 and 2021. We measure multiple premium in a few ways: i) we look at the spread between median SaaS multiples and average SaaS multiples. The wider the difference between the two figures, the larger the premium; and ii) we look at the number of companies trading at premium multiples which we consider to be 10x+ ARR, 15x+ ARR, and 20x+ ARR. The overall dataset includes 111 publicly traded SaaS companies and the data goes back to 2014.

Below is the difference between the median and average SaaS multiple. As you can see, the spread is very tight at 0.8x. The tightness was last seen in 2018. Note that the average multiple is 6.44x and the median is 5.65x.

Next we look at the number of companies trading at premium multiples (10x+ ARR, 15x+ ARR, and 20x+ ARR). As you can see, the number of companies trading at a premium is at 2018 levels.

Are higher multiples for premium SaaS companies still out there? Of course. For instance, the median growth rate of all 111 companies is 19% YOY, but if we look at only those companies growing in excess of the median growth rate (there are 55 co’s), those companies trade at average and median multiples of 8.52x and 7.57x. So premium multiples still exist, but they’re harder to get and the spread between premium and ho-hum is tighter.

Thank you for your readership. Visit us at blossomstreetventures.com for more data.