kellblog.com · 2016-03-22 · 3726d

The Hype Factor: Quantifying SaaS Company Valuation Efficiency

Dave Kellogg introduces the Hype Factor, a metric that divides total capital raised by annual recurring revenue (ARR) to measure how efficiently SaaS companies convert funding into revenue. The framework suggests ratios of 1-2 are target, 2-3 are good, 3-5 indicate excess hype, and 5+ suggest minimal business substance. Kellogg applies this analysis to Domo, calculating a hype factor of 6.1, indicating the company generates marketing buzz more effectively than revenue.

15 metrics· Cited 0× in the knowledge base ·Open source ↗

Metrics in this report

Average SaaS ARR at IPO

100$M

average

SaaS companies going public

Average SaaS Quarterly Revenue at IPO

25$M

average

SaaS companies going public

Average Total Capital Raised Before IPO

100$M

average (includes all)

SaaS companies going public

Average Total Capital Raised Before IPO (Enterprise)

68$M

average (enterprise only)

Enterprise SaaS companies going public

Box Capital-to-ARR Ratio

1.8ratio

actual at IPO

Box at IPO

Cornerstone Capital-to-ARR Ratio

1.0ratio

actual at IPO

Cornerstone at IPO

Domo Contracted Revenue

100$M

reported

Domo as of March 2016

Domo Hype Factor (Excluding Latest Round)

4.8ratio

calculated

Domo as of March 2016

Domo Hype Factor (Including Latest Round)

6.1ratio

calculated

Domo as of March 2016

Domo Total Capital Raised

613$M

includes latest round

Domo as of March 2016

NetSuite Capital-to-ARR Ratio

1.3ratio

actual at IPO

NetSuite at IPO

Suspected Analytics Company Hype Factor

10ratio

estimated

Unnamed analytics company

Typical Capital-to-ARR Ratio at IPO

1.5ratio

calculated average

SaaS companies at IPO

Workday Capital-to-ARR Ratio

1.2ratio

actual at IPO

Workday at IPO

Xactly Capital-to-ARR Ratio

1.7ratio

actual at IPO

Xactly at IPO