CTO & CEO of Pismo

In an increasingly product-led world, traditional SaaS ratios/metrics are becoming outdated.

As part of this blog series’ discussion on the importance of focusing on Burn Productivity, a recap on incumbent analyses of financial ratios and metrics follows.

The previous post (link) in this analysis benchmarked median and top quartile financial ratios, and touted the importance of considering Gross Profit in these calculations.

Financial ratios (link) are partially helpful in allowing entrepreneurs and executives to benchmark SaaS companies by which to shape their own company’s growth.

The prior analysis showed that while valuation is nicely correlated to Magic Number and Rule of 40 as of 1Q 2020, the correlation hasn’t necessarily held up over time and as companies scale.

Venture Capitalists are renown for valuations that are often grounded in significant subjectivity that defy typical valuation methodologies — my Partner at e.ventures, Brendan Wales, has written extensively about the difference in the evolution from Perceived Value at the early-stage (i.e. pre Series B) to Intrinsic Value at the later stages (Series B onwards).

The world is different now. The startup valuations from yesteryear are out of the window. Why is this the case?

Brendan’s breakdown for the eight U.S. based Consumer Internet IPOs that occurred in 2019