Dear SaaStr: What’s The Average Size at Which a SaaS company Will Typically Get Acquired?
Startups can be acquired for a lot of reasons that have little to do with the exact MRR/ARR — team, technology, acceleration of time-to-market. If a BigCo decides that buy makes more sense than build, and there is a lot of urgency … then sometimes they’ll buy something will relatively little revenue. Sometimes.
But …
If an acquisition is to acquire something with scale to build real revenue upon, most Big Cos (and not coincidentally, most Private Equity firms) aren’t too interested until you are past $8m-$10m in ARR, and ideally, reasonably capital efficient.
And these days, for many PE firms (Thoma Bravo, Vista, etc.) the bar is more like $20m ARR and efficiency. That’s the scale at which they feel they can confidently use their resources and playbooks to get to $200m ARR over time.
Those are the SaaS businesses BigCos and PE firms can add layers of management, marketing pushes, etc. beyond. The ones already with proven brands and go-to-market strategies.
The bar is probably more like $10m for a Big Tech Co to buy you. If you’ve gotten that far, you’re a leader (if not the leader) and they generally think there is enough of a framework to build a $100m, $1B+ ARR business on top of.
Most BigCos won’t see anything much below $8m-$10m in ARR as “proven” or having yet broken out in the market. So usually, they’ll wait … and see. Unless market forces force them to do otherwise.
More here: Acquisitions — If You Do Sell, Try to Make Sure It’s At a Local Maximum – SaaStr
The Power of Private Equity and a $1 Billion+ “Double Acquisiton”
Image from here
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Jason Lemkin, Khareem Sudlow
