What does it mean to be a top-performing SaaS startup?

For startups and investors alike, revenue is king. But even more crucial than headline revenue, is how efficient a company can be in generating revenue based on their resources. New analysis created in partnership with Flashpoint, shows the SaaS startup efficiency benchmarks in the market right now.

• Top decile startups produce ~ $150k-200k/employees across different funding and growth stages. (This means hitting $5M ARR with 25-33 people in the team)
• The top 10% show 3-4x more revenues per employee than the median.
• 2023-2024 are showing a focus on optimizing revenues per employee.
• The relation between VC funding/bootstrapping and revenue efficiency is not obvious. Typically, bootstrapped startups show more revenue per employee than companies with a modest amount of VC funding raised but less than the most funded ones.
• Valuations benchmark:
  Public: median 3-3/6x, top quartile 6x
  Private: median ~30x across stages, top quartile 240x at Seed decreasing to 50-70x at late stages

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Top decile startups typically show 3-4x more revenue per employee than the median across all stages.

The gap between the top and bottom decile is even starker at ~10x.

For companies in the early stages, 2021/2022 saw the least revenues for employees in recent years, likely driven by fast hiring and focus on growth in an abundant capital environment.
2022 and 2023 show a pivot back towards efficiency, with capital less abundant and the paradigm of growth at all costs ending.

However, looking at public software company multiples, profitability matters more than before, but growth is still the main driver of valuations. Bessemer’s Rule of X shows that valuations are mostly explained by a 3x growth factor and a 1x EBITDA factor. Let’s imagine your revenue growth rate is 20% (x3 = 60%) and your margin is 40%; this means you are at 100% and your revenue multiple is about 15x.

Investors still care more about growth than about profitability, as long as there is a path to profitability!

Relation between VC funding/bootstrapping and revenue efficiency

Bootstrapped companies show more revenue per employee than companies which raised modest VC funding amounts (<$5M), while more heavily funded startups show higher revenue per employee, especially for the top decile. 

Zooming in on companies with 20-50 employees, the same remains true.
Companies which raised the most ($5M+) also clearly show the widest spread of outcomes. They have the lowest bottom quartile (startups with strong growth potential) and the second-highest top quartile (most efficient companies).

Valuation references for SaaS founders

Dealroom valuation multiples deep dive provides guidance for SaaS founders to navigate their fundraising and strategic thinking.
Across the public market, SaaS companies trade at a median of 3-3.6x EV/revenue, with the top quartile around 6x (some exceptional companies trade at 15-20x).

In the private market, SaaS startups show a median EV/revenue of around 30x.
This refers to multiple actual annual revenues, which, in the case of fast-growing companies, differ substantially from the annualized current MRR. A multiple of 30x on annual revenues can be equivalent to 10-15x on MRR.

The earlier the stage, the higher the multiples. However, this is true especially for the top quartile (nearly unlimited upside for top startups at early stages), while the median and bottom quartile show much less variance.

A more detailed breakdown by categories is available in the full Multiples deep dive.

This is just the start in terms of private startup revenue analysis

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Notes and methodology

Dataset: European VC-backed SaaS companies with 1M+ in VC funding. Revenue data 2018+, mostly 2021-2022.
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Flashpoint MRR data from startups. SaaS startups, VC-backed and bootstrapped, revenue data 2019-2024

Where do the data come from, and what are the limitations?

Dealroom data have been collected primarily from regulatory company filings (trade registers, etc.) and company news, while Flashpoint data comes from information in their startup dealflow.

Backward-looking: Most Dealroom revenue data are from annual company filings, which are usually compiled months after the end of the financial year. Also, these revenues are full-year annual revenues, not annualized MRR, which can differ for fast-growing businesses.