Full Definition
A revenue multiple is a valuation method where a company's value is estimated as a multiple of its annual revenue. This is one of the most common methods used to value SaaS and technology companies, especially when a company is pre-profit.
Typical Revenue Multiples by Sector
- High-growth SaaS (100%+ growth): 15-30x ARR
- Moderate SaaS (50-100% growth): 8-15x ARR
- Slower SaaS (20-50% growth): 5-10x ARR
- E-commerce: 1-5x revenue
- Marketplace: 5-15x net revenue
Factors Affecting Multiples
- Growth rate (most important factor)
- Net revenue retention
- Gross margins
- Market size and competitive dynamics
- Public market conditions
Real-World Example
A SaaS startup with $3M ARR and 150% year-over-year growth is valued at $60M (20x ARR) in its Series A.
Related Terms
The estimated monetary worth of a company, determined through various methods and negotiations.
Predictable, recurring revenue from subscriptions, measured monthly (MRR) or annually (ARR).
The percentage increase in a key metric (revenue, users, etc.) over a specific time period.
The first major institutional venture capital funding round, typically following seed funding.
The value of a company before receiving new investment in a funding round.
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