Frequently Asked Questions

SaaS startup valuation depends on multiple factors including revenue, growth rate, margins, and market conditions. Pre-revenue startups typically range from $500K-$2M using methods like Berkus or Scorecard. Revenue-generating SaaS companies are often valued at 3-10x ARR depending on growth rate, retention, and profitability. Use our calculator to get a comprehensive valuation based on your specific metrics.

DCF (Discounted Cash Flow) is a valuation method that calculates the present value of future cash flows. It's best for SaaS companies with predictable revenue, positive or near-positive cash flow, and at least 12 months of operating history. DCF is ideal for Series A+ companies. For early-stage startups, consider Revenue Multiple or Berkus Method instead.

SaaS revenue multiples vary by growth rate and profitability. Fast-growing SaaS (>100% YoY) can command 10-15x ARR. Moderate growth (40-70%) typically sees 5-8x ARR. Slower growth (<30%) is valued at 2-4x ARR. Public SaaS companies average 7-10x revenue, while private companies often see 4-8x depending on stage and metrics.

Pre-revenue startups are valued using qualitative methods like Berkus Method (up to $2M based on risk factors), Scorecard Method (comparing to funded startups), or VC Method (working backward from exit value). Key factors include team experience, product stage, market size, traction (users, waitlist), and competitive advantage.

Pre-money valuation is your company's value BEFORE investment. Post-money valuation is value AFTER investment. Formula: Post-money = Pre-money + Investment. Example: $4M pre-money + $1M investment = $5M post-money. Investors get 20% equity ($1M / $5M). Understanding this distinction is critical for equity negotiations.

ARR (Annual Recurring Revenue) is your normalized annual subscription revenue. Calculate it as: ARR = MRR × 12, or sum all annual contract values. Only include recurring revenue (exclude one-time fees, services). ARR is the most important metric for SaaS valuation. Growing ARR by 100%+ YoY significantly increases your valuation multiple.

MRR (Monthly Recurring Revenue) is your predictable monthly subscription revenue. Calculate as: MRR = Number of Customers × Average Subscription Price. Track New MRR, Expansion MRR, Churned MRR, and Net New MRR monthly. MRR growth rate is a key indicator of business health and directly impacts valuation.

A healthy LTV/CAC ratio is 3:1 or higher. This means Customer Lifetime Value should be at least 3x your Customer Acquisition Cost. Ratios below 2:1 indicate unsustainable unit economics. Above 5:1 suggests you might be under-investing in growth. World-class SaaS companies maintain 3-5:1 while growing rapidly.

LTV = (ARPA × Gross Margin %) / Churn Rate. Example: $100/month ARPA, 80% margin, 5% monthly churn = ($100 × 0.80) / 0.05 = $1,600 LTV. Alternatively: LTV = ARPA / Churn Rate × Gross Margin. Include expansion revenue for more accurate calculations. Higher LTV allows for higher CAC spending.

CAC (Customer Acquisition Cost) = Total Sales & Marketing Expenses / Number of New Customers. Include salaries, advertising, tools, overhead allocated to growth. Calculate monthly, quarterly, and by channel. Best practice: aim for CAC payback period under 12 months. Compare CAC across channels to optimize spending.

Monthly churn benchmarks: Consumer SaaS: 5-7%, SMB SaaS: 3-5%, Mid-market: 1-2%, Enterprise: <1%. Annual churn: aim for <20% gross churn. Net Revenue Retention (NRR) above 100% means expansion offsets churn. World-class SaaS companies achieve 120%+ NRR through upsells and cross-sells.

Rule of 40 states: Growth Rate % + Profit Margin % ≥ 40%. Example: 50% growth + (-10%) margin = 40 (healthy). Or 20% growth + 25% margin = 45 (excellent). This metric balances growth and profitability. Public SaaS companies above 40% typically trade at premium multiples. It's a key investor benchmark.

Unit economics measure profitability per customer: how much you earn (LTV) vs. spend (CAC) per customer. Positive unit economics mean you make more than you spend acquiring customers. This is fundamental for sustainable growth. Investors evaluate LTV/CAC ratio, CAC payback period, and contribution margin to assess business viability.

CAC Payback Period is how long it takes to recover customer acquisition costs. Formula: CAC / (ARPA × Gross Margin %). Target: <12 months is good, <6 months is excellent. Longer payback requires more capital for growth. Enterprise SaaS can tolerate 12-18 months due to higher LTV and lower churn.

1) Reduce CAC: optimize marketing channels, improve conversion rates, implement referral programs. 2) Increase LTV: reduce churn, implement upsells/cross-sells, annual contracts, value-based pricing. 3) Improve margins: automate support, optimize infrastructure costs. Focus on the biggest lever first based on your metrics.

Burn rate is how much cash your company loses monthly. Gross Burn = Total monthly expenses. Net Burn = Revenue - Expenses. Example: $100K revenue, $200K expenses = $100K net burn. Track this monthly. Net burn increases as you invest in growth but should decrease toward profitability as you scale.

Cash runway is how long until you run out of money. Formula: Cash Runway = Cash Balance / Monthly Net Burn. Example: $600K cash, $50K monthly burn = 12 months runway. Maintain 12-18 months minimum. Start fundraising when you have 6-9 months left. Investors want to see a plan to profitability or next fundraise.

Base forecast on cohort analysis: New Customer Revenue + Expansion Revenue - Churned Revenue. Use historical growth rates, pipeline data, and market trends. Conservative: maintain current growth rate. Moderate: assume slight deceleration. Aggressive: assume growth acceleration with more investment. Model different scenarios (best/base/worst case).

Key metrics: 1) ARR & Growth Rate (>100% is impressive), 2) Gross Margin (>70% for SaaS), 3) LTV/CAC >3:1, 4) CAC Payback <12mo, 5) Rule of 40, 6) NRR >100%, 7) Cash Burn & Runway. Prepare a metrics dashboard showing trends over time. Be ready to explain any anomalies or concerning trends.

Our calculator uses industry-standard methodologies (DCF, Revenue Multiple, Berkus) with benchmarks from 1000+ SaaS companies. Accuracy depends on input quality and market conditions. Use it as a data-driven starting point for fundraising or M&A discussions. For final valuations, consult with financial advisors and consider qualitative factors like team, technology, and market position.

Basic: Current MRR/ARR, growth rate, customer count. Intermediate: CAC, LTV, churn rate, gross margin. Advanced: Monthly revenue projections, operating expenses, cash position. The more detailed your inputs, the more accurate your valuation. You can save calculations and return later to update data.

Yes! You can save calculations as JSON files to your device, reload them anytime, and export results. Email reports feature sends beautiful HTML reports to your inbox with all metrics, charts, and valuations. Pro tip: save calculations monthly to track your progress and valuation growth over time.

Absolutely. All calculations happen in your browser - no data is sent to our servers during calculation. Email reports are sent via Resend (SOC 2 compliant) and not stored. Saved calculations stay on your device. We use rate limiting and input validation for security. Your financial data remains confidential.

Ideal timing: 1) Product-market fit achieved, 2) Clear growth trajectory (>10% MoM), 3) Unit economics work (LTV/CAC >2:1), 4) 12-18 months runway remaining, 5) Clear plan for fund usage. Seed: Raise after proving initial traction. Series A: $1M+ ARR, 100%+ growth. Series B: $10M+ ARR, clear path to $100M.

Raise 18-24 months of runway to achieve next milestone. Calculate: (Monthly burn rate × 24) - (Revenue growth). Example: $100K burn, plan to reach $200K MRR, need $2.4M. Consider: round size norms for your stage, dilution target (15-20% per round), market conditions, and investor appetite.

Pre-seed/Seed: $2M-$10M. Series A: $10M-$40M. Series B: $40M-$100M+. Actual valuation depends on: ARR, growth rate, market size, team, competition. High-growth SaaS (>150% YoY) commands premium multiples. Use our calculator as a starting point, but expect negotiation. Strong metrics = stronger negotiating position.

ARR is actual contracted annual recurring revenue. Revenue Run Rate = Current MRR × 12 (annualizing one month). Run rate can be misleading if growth isn't consistent. Use ARR for contracts, Run Rate for trending. Investors prefer ARR as it represents committed revenue. Always clarify which metric you're discussing.

Depends on stage and market. Early stage (pre-Series A): prioritize growth to prove market fit. Growth stage (Series A-B): balance growth with improving unit economics (Rule of 40). Late stage: move toward profitability while maintaining growth. In tough markets, profitability becomes more important. Always maintain positive LTV/CAC ratio.

1) Improve onboarding: 90% of churn happens in first 90 days. 2) Deliver continuous value: regular feature releases. 3) Proactive support: reach out before they have issues. 4) Customer success: help them achieve goals. 5) Annual contracts: reduce voluntary churn. 6) Usage monitoring: intervene when engagement drops. Track cohort retention to measure improvements.

Excellent SaaS metrics: ARR growth >100%, Gross margin >75%, LTV/CAC >5:1, NRR >120%, Churn <5% annually, CAC payback <6 months, Rule of 40 >50, Magic number >1.0. These are top quartile metrics. Good (median): 50% growth, 70% margin, 3:1 LTV/CAC, 100% NRR, 10% churn, 12mo payback, Rule of 40 = 40.

NRR = (Starting ARR + Expansion - Downgrades - Churn) / Starting ARR. It measures revenue retention from existing customers. >100% = growth without new customers. Benchmarks: <90% (poor), 90-100% (acceptable), 100-110% (good), 110-130% (excellent), >130% (world-class). Top SaaS companies like Snowflake achieve 150%+ NRR.

Magic Number = Net New ARR (this quarter) / Sales & Marketing Spend (last quarter). Measures sales efficiency. <0.5 (poor), 0.5-0.75 (acceptable), 0.75-1.0 (good), >1.0 (excellent). Above 1.0 means you should invest more in S&M. Below 0.5 means fix your funnel before scaling. Track quarterly to optimize spending.

Realistic growth by stage: Year 1: $0-$100K ARR (foundation), Year 2: $100K-$1M (product-market fit), Year 3: $1M-$5M (scaling), Year 4: $5M-$15M (growth), Year 5: $15M-$50M (scale). Triple-triple-double-double-double rule (T2D3): 3x, 3x, 2x, 2x, 2x growth over 5 years to reach $100M ARR. Only ~1% of SaaS companies achieve this.