B2B SaaS businesses targeting enterprise customers that want to be in good shape to raise their Series B during a downturn need to have a run rate of $7-10MM ARR, growing at 2-5X year over year, gross margins 75-85%, and an LTV to CAC ratio of 3-5X. That’s because multiples fell from 100 to 39 times ARR and the target valuation multiples for Series B is ~20X ARR.
- Many startups that raised at the peak of valuations may struggle to get to these levels and run out of cash
- Revenue multiples in public markets fell from 24x in 2021 to 10x in 2022
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In 2023, the average time between raising a Series A and Series B round increased to 31 months according to Crunchbase. With startup funding falling 67% in 2022, more startups could face a difficult time getting funding. Some predict startups will run out of cash in 2023 with the most fiscally conservative ones run out in 2025 unless conditions change.