What Goes Into Valuing a SaaS Business? The 4 Factors That Determine Your Startup’s Worth

What Goes Into Valuing a SaaS Business? The 4 Factors That Determine Your Startup’s Worth

Funding. The day will come when you need it for your SaaS.

You’ve grown your startup, got a brilliant team and you’ve got a great product you can actually take to investors as proof.

Now it just needs that push.

But before you even think about trying to fundraise or approach investors, you’ll need to know how to value your SaaS and decide on how much you should raise.

Value isn’t a number you just pluck out of thin air. You’ve gotta think it through and value your SaaS correctly or else you might send those eager investors running away before you’ve even shown them your product demo.

I know this mistake all too well… 10 years ago with Flowtown, I was the one who was raising the money and I settled on a value of $700K on $7M pre-money. 

Why?

It sounded clever (I share the details behind that decision in this week’s video). But very quickly I realized my valuation was off and it was doing more harm than good.

Since then, I’ve met with a lot of remarkable people and got some much-needed advice to help me value properly, all which helped refine my skill of fundraising.

I’ve now been involved in 30+ investment rounds, and have helped other founders from all over the world raise over $200M in capital.

Wanna know how to do a proper valuation of your SaaS? I’ll walk you through the key steps in this week’s video:

Exclusive Download: Fundraising Like a Pro – Learn the 3 phases of fundraising and a 7 week process for starting & closing your next round of funding

These are the 4 factors you’ve got to investigate before you’re ready to value your SaaS:

  1. 409A Valuation
  2. Market Norms
  3. Competitive Process
  4. Strong Thesis

Arguably the hardest part of getting your valuation is attracting investors in the first place so they’re lined up and interested in your business.

Why does that matter?

The more interest you get, the more you can leverage that to increase your valuation.

Fundraising is all about preparation and timing. If you get these wrong, you can sell too much of your company to the wrong investor and screw everything up.

We could discuss fundraising for hours, or… you can check out my Fundraising Like a Pro training below this week’s video which will show you the 3 phases of fundraising that I learned directly from Travis Kalanick (Founder of Uber.com).

Get into it! After you devour it, you will be able to go through the whole process in less than 7 weeks (normally it takes founders months to get a round done).

Last time I raised money, I closed my round in 3 days.

Aim high!

 

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