The Series A Valuation Report

What valuations are founders asking for when they raise their Series A round? Since May 2018, we’ve had conversations with 179 companies about leading or following their Series A rounds. Below is aggregate data on these 179 raises with names redacted to preserve confidentiality. Figures like revenue, valuation, and round size are medians from conversations with founders. Remember the valuations and revenue multiples presented aren’t necessarily what the founders got, but rather it’s what they asked for when talking to VC like us.

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SaaS. We’re generalists and tend to look at everything, but as you can see 99 of the companies we talked to were SaaS. The median revenue run rate was $2.3mm, the median round was $4mm, and the median pre-money valuation the founder was asking was $22mm. The result was a revenue multiple ask of 9.6x. In July when we last released this report, there were 99 companies asking for 10.0x ARR.

Transactional models. The next largest category was “transactional”, whereby a company gets paid for each transaction it completes. We talked to 20 companies in the space, and surprisingly these businesses were asking for valuations that were 7.9x revenue even though the business model is not as attractive as SaaS.

Marketplaces. We talked to 11 marketplaces. These are companies with 2 sets of customers and the company takes a cut of the transaction that occurs between the customers (similar to Airbnb, Uber, Lyft, etc). The ask there was a median 12.8x revenue. In July, the ask was 10.8x, so founders are getting more aggressive.

Consumer products. We’ve spoken to 13 CPG companies since May. These are businesses with no tech that literally sell a food or beverage in grocery stores. The median ask here was a heady 5.3x revenue of $3.0mm.

E-commerce. The last major category we evaluate frequently is e-commerce. These businesses had median revenue of $2.45mm and were asking on median 5.1x revenue. This is up slightly from the 4.8x ask we surveyed in July.

So what’s our view? These asks are too aggressive. While this is like the barber telling you it’s time for a haircut (we’re VC after all), don’t be surprised or offended if a VC pushes back hard on the ask. It’s ok to make a strong ask as most VC won’t be turned off, but be ready to compromise. Also recognize that asking for a higher valuation will probably lengthen the time you’re out fundraising as it will take longer to find a VC that is forgiving on valuation.

Our advice to all founders: fundraising is hard and distracting. I’ve literally never heard a founder say “I love fundraising,” so make it easier on yourself by being reasonable with the ask. Remember, you’re partnering with an investor who is going to be with you for the next few years, not selling a car to a stranger you’ll never see again — treat the process like you’re entering a partnership and you’ll find the optimal investor and outcome sooner.

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