I’m Grateful That Software Companies Are Valued On Multiples Of Revenue

by | Nov 30, 2021

As a warmup to next week’s holiday, here’s one thing I’m grateful for:

Software companies are valued on multiples of revenue.

That’s pretty darn amazing.

Most other companies are valued on multiples of their profit.

So SaaS companies are worth a lot more than other companies with the same revenues. Like 10x more.

I actually agree that recurring revenue software businesses with high growth rates and high margins are worth a lot more, even when they are not profitable.

But I know how amazingly rare it is to create businesses that are worth 5x, 10x, 20x of revenue to eager acquirers or public stock markets. It wasn’t always this way.

The software business has been great for me and so many of my friends, coworkers, and investors. Great for so many communities. And for our 401Ks.

I’m grateful to have started my career in the early software biz before it was big and cool. Then it got bigger and cooler again and again. Like 10x cooler and 100x bigger.

That is all.

Greg Head posted this on LinkedIn on November 30, 2021.

Check out the comments and join the discussion on LinkedIn.

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