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How do you value a FinTech company?

Posted on July 10, 2021 by Author

Table of Contents

  • 1 How do you value a FinTech company?
  • 2 How do you value a small SaaS company?
  • 3 How do you value a financial service company?
  • 4 What is a good valuation multiple for a SaaS company?
  • 5 What are the most important SaaS metrics for investors?

How do you value a FinTech company?

Quantitative data such as financial and operating metrics have significant weight in estimating a FinTech company’s enterprise value. Key performance indicators such as revenue, expenses, profitability, growth, customer acquisition costs, and customer lifetime value have a key role in the company’s value estimation.

How do you value a small SaaS company?

There are three main ways to value a software-as-a-service company by examining the company’s earnings: SDE, EBITDA, and Revenue. Depending on your SaaS business’s profitability and maturity, you might pick one valuation method over another to give yourself a better multiplier.

What is a good growth rate for SaaS startup?

For businesses older than 13 years, the typical growth rate is around 20\% year-to-year. High growth is usually associated with high customer retention. The companies reach $1 million ARR approximately in 5 years.

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How do you value a high growth company?

The best way to value high-growth companies (those whose organic revenue growth exceeds 15 percent annually) is with a discounted cash flow (DCF) valuation, buttressed by economic fundamentals and probability-weighted scenarios.

How do you value a financial service company?

Two important ratios in evaluating the financial services sector are the price-to-book (P/B) ratio and the price-to-earnings (P/E) ratio. The P/B ratio compares the book value of a company to its market capitalization. The P/E ratio shows the relation of the company’s stock price to its earnings.

What is a good valuation multiple for a SaaS company?

A rule of thumb would be if your business is growing at twice the average rate, the valuation multiple would grow by 50\%. For example, a $3.0 million SaaS company growing at 100\% (twice the rate of its peers) would get a growth premium of 2.8 (50\% of the baseline multiple of 5.7), making it worth about 8.5 times revenue, or $26 million dollars.

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What is the growth rate of a SaaS company?

Similarly, a $60 million SaaS business growing at 50\% is also growing twice as fast as its peers, and would also garner a similar growth premium. There are four other metrics that will impact a company’s value beyond the current state of the public market and its growth rate.

How is the SaaS revenue index calculated?

The index is based on annualized current run-rate revenue (ARR), not trailing or projected revenue like other indices use. For more background on the SCI, please see our Q1 update and our valuation framework for private SaaS companies.

What are the most important SaaS metrics for investors?

Churn: It is well documented that customer metrics are of vital importance for SaaS business owners and consequently they are of great interest to investors. Churn, lifetime value (LTV) and customer acquisition cost (CAC) are analyzed by investors when appraising the customer base and by virtue the quality of the business’ revenue.

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