SaaS Capital Blog

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SaaS Valuation Multiples: Understanding the New Normal

This post examines the distribution of SaaS company ARR multiples at various points in time. We find that both the overall spread of the multiples, and the “shape” of that spread, have varied distinctly over time, in ways that correspond to different phases of the industry’s lifecycle. While SaaS valuations in 2025, on average, have returned to the “low normal” level seen in 2016-2017, today the highs are higher, the lows are lower, and the “long tail” stretches to the right. It’s a “rich get richer” valuation environment, and merely being a SaaS company is no longer a ticket to premium ARR multiples.

Growth, Profitability, and the “Rule of 40” for Private SaaS Companies

The Rule of 40 is not a perfect metric, but it remains a useful lens on SaaS company performance. Growth continues to be the dominant driver, though profitability trends are shifting as equity-backed companies reduce burn. Bootstrapped companies still hold the edge on this metric, but the gap is narrowing.

2025 Revenue Per Employee Benchmarks for Private SaaS Companies

A common metric by which SaaS companies track their performance is annual recurring revenue (ARR) per employee. This 2025 update explores the median ARR per employee broken down by company size and funding type, equity-backed or bootstrapped.

Back to Normal: Section 174 Finally Fixed

The U.S. government has “fixed” Section 174 as of July 4, 2025, reversing the rule that forced companies to capitalize software development costs from 2022–2024. This update could have meaningful cash implications for SaaS businesses that paid income taxes or hope to qualify for QSBS treatment at exit. The blog breaks down the changes with a choose-your-own-adventure format to help founders quickly assess what, if anything, they need to do.

How SaaS Companies Should Report Multi-Year Contract Value on the Balance Sheet

It is okay to record total contract value as Deferred Revenue to keep track of future invoices, especially for companies that do not use a contract management tool. However, this should be done for internal tracking purposes only and it should not impact reporting on the Balance Sheet. That said, for SaaS companies with even slightly complicated contracts, we highly recommend a subscription revenue management platform.

What is the Average Deal Size for Private SaaS Companies?

While there’s no shortage of data on public SaaS companies thanks to their reporting requirements, those benchmarks often don’t reflect the reality of smaller, private businesses. Public company metrics tend to skew higher due to scale, funding, and market position. To provide more relevant benchmarks, SaaS Capital conducts an annual survey focused solely on private, B2B SaaS companies. Our 14th annual report includes data from over 1,000 respondents and highlights key trends in Annual Contract Value (ACV) across company sizes, retention levels, and funding types.

Breaking Down Committed Credit Facilities for B2B SaaS

If you’re newer to committed credit facilities, here’s a quick breakdown of how we typically structure them for SaaS companies. It’s not a one-size-fits-all model, but there are some consistent features that make the approach flexible and scalable for recurring revenue businesses.

AI Adoption Among Private SaaS Companies and Its Impacts on Spending and Profitability

Since the launch of ChatGPT in late 2022, AI has dominated both discourse and funding dollars in the SaaS industry. With opinions ranging from existential threat to limitless opportunity, we were keen to extend our annual survey to cover several questions on AI in order to glean just how it is being incorporated by private SaaS companies and what the impact has been to date on spend.

2025 Benchmarking Metrics for Bootstrapped SaaS Companies

SaaS Capital works with both VC-backed and bootstrapped SaaS companies and has seen the advantages of both approaches. However, one situation that is especially interesting is bootstrapped SaaS companies with $3M to $20M in Annualized Run Rate Revenue (ARR). Growing from a pre-revenue startup to $3M (scale-up phase) marks a significant shift and bootstrapping from $3M to $20M creates enormous value for owners. To help support bootstrappers during their scale-up, we wanted to focus on 2025 benchmarking metrics for scale-up stage bootstrapped SaaS companies.

GRRumbling About Retention Metrics, or, Pitfalls in Measuring SaaS Churn

Revenue retention – whether Gross Revenue Retention (GRR) or Net Revenue Retention (NRR) – is the most prominent SaaS-specific metric in our industry. At its best, retention can quickly paint a picture of the health of a SaaS company and give a useful view of both relative and absolute performance. A major goal with SaaS retention calculations is for you and outside stakeholders to be able to compare your performance meaningfully with other comparables.