      SaaStr · 2015-11-18
      · 3850d
    

SaaS Venture Investment Decline in Q4 2015: Valuation Compression Analysis

Jason Lemkin analyzes the venture capital market downturn in Q4 2015, revealing approximately 50% multiple compression in SaaS valuations. While VCs slowed their investment pace, substantial capital remained available and the primary impact was higher revenue requirements for equivalent valuations rather than reduced funding availability.

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Metrics in this report

Month-over-Month Growth Rate Requirement

15%

minimum

Hot SaaS Series A in summer 2015

Series A ARR Requirement Q4 2015

2.5$m

median

Same valuation as summer 2015

Series A ARR Requirement Summer 2015

1-1.5$m

range

Hot SaaS companies for $8m+ Series A

Series A Target Valuation

8$m

minimum

Hot SaaS companies pre and post compression

VC Fund Raise Recency

6-15months

range

Time since major VC firms raised new funds before Q4 2015

Valuation Multiple Compression

50%

approximate

SaaS industry Q4 2015