According to a recent presentation by Redpoint, ARR multiples for Series B and C companies dropped sharply from the all-time-high in 2022 (100x) to a more sober 39x, representing a 4x premium compared to public markets.
- In public markets, revenue multiples fell from 24x in 2021 to 10x in 2022
- Running a startup during a recession
- If there continue to be as few deals getting done, the backlog of startups that raised in 2021 and 2022 will run out of cash starting end of 2023
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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.
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.