The Compression in SaaS Valuations

SaaS company valuations experienced significant multiple compression in early 2015, declining from 9.2x NTM revenue in early 2014 to approximately 6.0x by August 2014, with nearly all public SaaS companies seeing declines of 1-60%. The market is consolidating toward a narrower valuation band of 5-10x NTM revenue, eliminating outlier valuations and suggesting investor consensus on appropriate multiples for growth-stage SaaS companies. Early-stage venture funding remains unaffected by this public market compression due to strong VC capital availability and investor appetite for high-growth companies, though later-stage growth rounds may increasingly incorporate protective structures.