Valuation

Valuation

Updated July 13, 2022 The Software-as-a-Service (SaaS) model has fundamentally altered how enterprise software was delivered and maintained, its cost structure, and most importantly, how it was paid for.  Until the 2000s, software companies developed software and sold it to enterprises often with a substantial installation fee and an annual maintenance fee.  The customers received upgrades from time to time.  The software vendor incurred signifi...

Valuation

(updated July 9, 2022) When an exit is on the horizon, tech entrepreneurs need to come up with a way to value their company. Software as a Service (SaaS) companies are almost always valued using a Revenue Multiple. This is described in the companion article: Methods for Valuing Technology Companies. SaaS company valuation starts with the current average...

Valuation

Valuing technology companies by historical and projected financial performance requires different methods. Selecting the best method for your company depends on its stage of growth, profitability and many other factors. One size does not fit all. Further, there are many non-financial factors that can be used in very early tech company valuations. These factors can be used even before they generate revenue. Valuing pre-revenue tech companies is expl...

Valuation

Who Buys Technology Companies and When? Unless you plan to build a company over several decades, you should plan how your company will eventually exit. If you are not planning to take your company public, then you need to look for another company that will acquire you. There are many types of acquirers for technology companies: companies of all sizes (not just the big ones); private equity (PE) and similar funds; fa...

Valuation

Valuing a tech company today has to be done much differently than five or ten years ago. In the old days (like 5 or 10 years ago) tech companies were more often valued using old economy methods. These were usually multiples of key financial metrics like profit, revenue and growth rate. This article was written by our Emeritus Founder almost a decade ago. It's a good description of how tech company v...