SaaStr · 2023-05-25 · 1105d

SaaS Acquisition Strategy: Timing Sales at Local Maxima

Jason Lemkin advises SaaS founders to understand that attractive acquisition offers arrive at distinct phases of company growth, called 'Local Maxima.' Rejecting a good offer at these peaks may mean waiting 12-48 months for the next opportunity. The article maps acquisition valuation patterns across company stages from pre-revenue to scale, highlighting the 'MRR Multiple Trap' where growth stalls in valuation.

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Metrics in this report

ARR Valuation Multiple in MRR Trap

5-10x

may increase with very high growth

$2m-$10m ARR stage

Acquisition Offer at Initial Traction

$25-$100millions

range based on market heat

At $1-$1.5m ARR in hot spaces

First Local Maximum Revenue

$1-$1.5millions ARR

range

Initial Traction threshold when pre-revenue startups become interesting

Maximum Acquirer Price Threshold

$300-$400millions

absolute deal size limit

Beyond which few public tech companies will acquire SaaS companies

Monthly Growth Rate Example

10%

example rate

SaaS company growth referenced in valuation discussion

Pardot Exit Valuation

$100millions

exact

Sale to ExactTarget at Local Maximum with zero VC capital

Second Local Maximum Revenue

$10-$15millions ARR

range

Initial Scale threshold enabling nine-figure acquisition deals

Year-over-Year Growth at Scale Stage

100%

example rate

At $10m ARR stage enabling venture fundraising