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SaaS Valuation: What Price is Right?
MGI Research, March 2011, Pages: 21
Software as a Service has become the dominant model for new software ventures, and publicly traded SaaS companies are highly valued relative to peers. By analyzing performance, operating efficiency, and valuation data for over 100 software companies (SaaS & Enteprise Software), this research note reviews SaaS valuation benchmarks, provides a formula for valuing SaaS companies today, and helps answer key questions like: Are SaaS companies over-valued today, and if so, by how much? What are the key valuation drivers for software companies (SaaS and Enterprise Software) today?, and how should executives, investors, and SaaS buyers evaluate SaaS companies today?
Valuations of leading Software-as-a-Service (SaaS) companies continue to set stock market records. Technology enterpreneurs, executives and investors are faced with critical questions of how to properly position their companies for optimal valuation. Should SaaS companies be focused on growth or profitability? Does size matter? What operational levers can generate the highest impact on valuation and stock market performance? What characteristics separate the best-in-class software firms from the average? Are the current multiples sustainable? What companies or segments of the SaaS sector are undervalued and why? This research report focuses on the key issues related to valuation, operating and market performance benchmarks of SaaS and Enterprise Software companies. Includes data on over 100 publicly trading software firms such as Salesforce.com (CRM), SuccessFactors (SFSF), Taleo (TLEO), Kenexa (KNXA), Concur (CNQR), Intuit (INTU) and many others. Contains a detailed analysis of factors that drive valuation for SaaS firms, including a simple formula for valuing SaaS companies.
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