Jason M. Lemkin explains why SaaS founders are resisting acquisition offers. Public SaaS companies trade at around 6x annual recurring revenue, down from peaks like Salesforce's 25x multiple for Slack. Low multiples make it harder to convince founders to sell.
You can look at the growth rates, the efficiencies, things are better but multiples aren't great. The average public SaaS company trades at 6x ARR. Now when Salesforce bought Slack, even Salesforce which is really old, I think it sold at like 25. It traded at 25x error. So when multiples are low, big big M and A is tough. It's tough because it seems very expensive and the targets don't want to sell cheap. They don't want, you don't want to sell. No one wants to sell for 6x ARR. No one that finally got to 8 million in revenue is like really excited to sell for 48 million after 12 years. Like they might do it but no one's woohoo. I think everything's much better in SaaS than a year ago. Not for everyone but for many things are better and that was my opener. Multiples are the big question mark. They're not great and this will dampen.
